ESTHURI ASWANTHIAH versus COMMISSIONER OF INCOME-TAX, MYSORE

Citation: [1967] 3 S.C.R. 681 · Decided: 18-04-1967 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Judgment (excerpt)

A 
ESTHURI ASWANTHIAH 
v. 
COMMISSIONER OF INCOME-TAX, MYSORE 
April 18, 1967. 
9 
(J. C. SHAH, S. M. S!KRI AND V. RAMASWAMI, JJ.J 
c 
D 
E 
F 
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Ind/an Income-tax Act, 1922-Cash credits-Income from undisclosed 
sources-Appellate Tribunal adding such income on concession 
from 
counsel-Duty 10- decide on evidence-Tribunnrs duty when dealing with 
case after receiving opinion of High Court in. reference. 
On July 1, 1949 the assessee who carried on business in Mysore State 
brought into his books of account an 
opening cash 
balance of 
Rs. 1,87,000. The Income-tax Officer held that out of the above sum 
Rs. 1,37,000 was the assessee's income from 
undisclosed sources. The 
assessee's explanations were rejected by 
the Income-tax Officer and in 
appeal by the Assistant Commissioner. The Appellate Tribunal 
con-
sidered that on the facts of tho case it was not unlikely that on the rel•· 
vant date the asseS'See had some cash but held Rs. S0,000 to be income 
from undisclosed sources observin~ : 
"[Counsel] for the assessee 
also 
stated that his client was prepared to be 
asses>ed on Rs. S0,000". In 
reference the High Court held that the Tribunal's conclusion was based 
on no evidence. The assessee appealed. 
HELD : The function of the Tribunal hearing an appeal is purely 
judicial. It is under a duty to decide all question of fact and law raised 
in the appeal before it : for that purpose it must consider whether on 
the materials relied upon by the assessee his plea is made out The Tribu· 
nal cannot make arbitrary decisions. 
Jts order in the present case without 
recording any reasons in support of _the estimate of unaccounted income 
could not, therefore, be sustained. There was 
also substance in tho 
assessee's plea that evidence in his favour had. not been properly consi-
dered and that his case had not been fairly tried. 
(6840.F; 685A·B) 
Income-tax Appellate Tribunal, 
Bombay <l Ors. v. S. C, Cambatta 
& Co. Ltd., 29 J.T.R. 118 and Rajkumar Mills Ltd. v. Income-ta.< Appel-
late Tribunal, 33 I.T.R. 750, referred to. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 631 of 
1966. 
Appeal by special leave from the judgment and order dated 
November 23, 1964 of the Mysore High Court in Income-tax 
Revision Petition 6 of 1964. 
K. Srinivasan and R. Gopalakrishnan, for the appellant. 
S. T. Desai, A. N. Kirpa/, S. P. Nayyar for R. N. Sachthev, 
for the respondent. 
The Judgment of the Court was delivered by 
Shah, .l.-The appellant a trader in groundnuts and other 
commodities in the State of Mysore was taxed under the Mysore 
Income-tax Act, 1923, for the assessment years ending with the 
assessment year 1949-50. 
On July 1, 1939, the l.\SSessee brought 
SUPREME COl!RT RllrORTS 
{1967] 3 S.C.R. 
into his books of account an opening cash balance of RsJ,87,000. 
In proceedings for assessment to tax for the year which ended 
June 30, 1950 the assessee was called upon to explain that entry 
and to produce his books of account of the earlier years. The as-
sessee pleaded that his book_s of account upto June 30, 1949, 
were Jost and that the amount of Rs. 1,87 ,000 
represented 
"cash brought from an iron safe kept in his house". 
The In-
come-tax Officer found that in each previous year when the 
asscssee was assessed under the. Mysore Income-tax Act, he 
had pleaded that his books of account were either Jost or stolen 
in the succeeding year. 
The Income-tax Officer was of the view 
that the assessee had probably an amount of Rs. 50,000 on hand 
representing a cash balance brought forward from the previous 
year. and that the balance of Rs. 1,37,000 was the assessee's 
income from undisclosed sources. 
The order passed 
by the 
I ncomc-tax Officer assessing to tax the incoine of the assessee for 
the y~ar 1951-52 was set aside by the Appellate Assistant Com-
mis•ioner on the ground that under s. 2 (11) of the Income-tax 
Act, 1922, the previous year for the income from other sources 
could only be the financial year ending March 31, 1950. Giving 
effect to this finding, the Income-tax Officer issued a notice of 
reassessment under s. 34 of the Indian Income-tax Act for bring-
ing to tax the amount disclosed by the books of account of the 
assessee for the assessment year 1950-51. 
The assessee submitted a petition to the High Court of Mysore 
for a writ declaring that the notice under s. 34 of the Act issued 
by the Income-tax Officer was without jurisdiction, and for an 
order quashing the notice and proceedings 

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