Income-tax---

----Income from undisclosed sources---Tribunal reducing addition of income after considering evidence---Reduction of addition was justified.

The assesssee was the Managing Director of a company and had a one-fourth share in firm. While completing the assessment for 1962-63, the Income-tax Officer made an addition of a sum of Rs.93,000 as income of the assessee from undisclosed sources. The Appellate Assistant Commissioner upheld the said addition of Rs.93,000. The sum of Rs.93,000 comprised: (1) Rs.78,000 credited in the assessee's favour by the firm in its accounts; and (2) repayment of Rs.15,000 by the assessee to one, F. In respect of the source of the sum of Rs.78,000 the case of the assessee was that he had borrowed approximately a sum of Rs.75,000 from his wife, K. K. explained that she had received a sum of about Rs.10,000 as a gift, at the time of her marriage in the year 1952 and further gifts and also that she was able to save the money given to her for running the household. The Tribunal held that a sum of Rs.5,000 was available with K out of a sum of Rs.10,000 stated by her to have been received as gift at the time of her marriage. Regarding the saving from amounts received towards household expenses the Tribunal held that though it was difficult to calculate as to what the actual household expenses would have been, having regard to the probabilities and the fact that K had been meeting all her personal expenses separately it could reasonably be held that K could have saved Rs.15,000 by the end of June, 1961, namely, before the credits in question started appearing in the books of P. Further, a sum of about Rs.31,000 was held to be available to her as commission received from insurance companies. In this view, the Tribunal held that the assessee had explained the source of Rs.51,000 out of Rs.78,000. The Tribunal reduced the income from undisclosed sources to Rs.42,000. On a reference:

Held that the plea of the assessee and the statement of K had to be judged in the light of the broad probabilities and the Tribunal having gone through the record came to the conclusion that the sum of Rs.51,000 had been explained. The finding of fact of the Tribunal was based on evidence.

B. Gupta for the Commissioner.

Nemo for the Assessee.

JUDGMENT

Y. K. SABHARWAL, J. ---The questions referred for decision of this Court under section 256(2) of the Income Tax Act, 1961, are these:

"(1)Whether, on the facts and in the circumstances of the case, the Tribunal had any evidence before it in reducing the income from undisclosed sources from Rs.93,000 to Rs. 42,000?

(2)Whether the order of the Tribunal is vitiated in ignoring or misreading the evidence on record and also basing its findings on irrelevant evidence?"

The assessment year in question is 1962-63. The assessee is a Managing Director of Pearl Cycle Industries Ltd. He also holds a one-fourth share in the registered firm named, E.S. Pearey Lal.

While completing the assessment, the Income-tax Officer made an addition of sum of Rs.93,000 as income of the assessee from undisclosed sources. In the appeal filed by the assessee, the Appellate Assistant Commissioner upheld the said addition of Rs.93,000. In further appeal filed by the assessee, the Tribunal reduced the income from undisclosed sources from Rs.93,000 to Rs.42,000.

The Sum of Rs.93,000 comprises: (1) Rs.78,000 credited in the assessee's favour by E.S. Pearey Lal in its accounts; and (2) repayment of Rs.15,000 by the assessee to Mr. Friedlein.

In respect of the source for the aforesaid sum of Rs.78,000 the case of the assessee was that he had borrowed approximately a sum of Rs.75,000 from his wife, Smt. Kumud Kumar. The Income-tax Officer had examined Ms. Kumar on oath. The gist of her statement was that she gave a sum of Rs.60,000 to her husband at different times. She had also advanced a loan of Rs.15,000 to one Shri Chaman Lal Gupta at the instance of the assessee which money was also retained by the assessee on being returned by the said Mr. Gupta. She admitted that she was not having an account with any bank but explained that she had received a sum of about Rs.10,000 as gift at the time of her marriage in the year 1952 and also further gifts and also that she was able to save out of the money given to her for running the household expenses. The assessee's explanation was disbelieved and as noticed above the amount was added as income from undisclosed sources.

With regard to payment of Rs.15,000 to Mr. Friedlein and the addition made on that basis all the authorities including the Tribunal have held that sum of Rs. 15,000 has been rightly added to the assessee's income.

On the question as to whether the wife of the assessee could possibly have any savings of her own, the Tribunal held that the matter had to be viewed in the light of her statement and in the light of broad probabilities of the case and the Tribunal did not accept the narrow view that she could not have saved anything at all from the amounts given to her for the purpose of household expenses. Taking into consideration the broad probabilities, the Tribunal held that a sum of Rs.5,000 was available with Mrs. Kumar out of a sum of Rs.10,000 stated by her to have been received as gift at the time of her marriage. Regarding the saving from amounts received towards household expenses, the Tribunal held that though it was difficult to calculate as to what the actual household expenses would have been but having regard to the probabilities and the fact that Mrs. Kumar had been meeting all her personal expenses separately the Tribunal found that it could reasonably be held that Mrs. Kumar could have saved a sum of Rs.15,000 by the end of June, 1961, namely, before the credits in question started appearing in the books of Pearey Lal. Further, a sum of about Rs.31,000 was held to be available to her as commission received from insurance companies. In this view, the Tribunal held that the assessee had explained the source of Rs.51,000 out of Rs.78,000.

Learned counsel for the Revenue has taken us through the statement of Mrs. Kumar, a letter written by the assessee, inter alia, stating that he had borrowed Rs.75,000 form Mrs. Kumar and the statement showing the amount paid to Mrs. Kumar from December 1, 1952, to March 31, 1962. The statement shows that from December 1, 1952, to December 31, 1958, Mrs. Kumar was being paid at the rate of Rs.250 per month and from January 1, 1959, at the rate of Rs.I,200 per month. Thus, the Tribunal found that a sum of Rs.18,250 received by Mrs. Kumar Between the period December 1, 1952, and December 31, 1958 would have been wholly spent without any savings. Out of the remaining sum, as noticed above, the Tribunal held that Mrs. Kumar could have saved Rs.15,000 by the end of June, 1961. Learned counsel for the Revenue vehemently contended that there was no evidence before the Tribunal to hold that Mrs. Kumar could have saved Rs.15,000 from household expenses and Rs.5,000 was available to her out of the gift amount given to her at the time of her marriage in the year 1952. We are unable to accept the contention. The plea of the assessee and the statement of Mrs. Kumar has to be judged in the light of the broad probabilities and the Tribunal having gone through the record came to the conclusion that a sum of Rs.51.000 had been explained. We are unable to accept the contention that there was no evidence before the Tribunal to reduce the income from undisclosed sources from Rs.93.000 to Rs.43,000. The finding of fact reached by the Tribunal cannot be said to be based on no evidence. It also cannot be held that the Tribunal has ignored or misread any evidence or that its findings are based on any irrelevant material.

The first question is, accordingly, answered in the affirmative in favour of the assessee and against the Revenue. The second question is answered in the negative against the Revenue and in favour of the assessee. The reference is answered accordingly. There will be no order as to costs.

M.B.A./1303/FC Reference answered.