JUDGMENT
1. The assessee in this case is Mahanth Harihar Gir of Bodh Gaya. The accounting year is 1354 fasli when ended in September 1947. For this accounting year, the assessee showed a return of income from money lending business to the extent of Rs. 1,934. The total income shown in the return from all sources was Rs. 15,940. During the assessment proceeding, the Income-tax Officer held that the Toshakhana Bahi did not represent the correct account of the funds remaining in the Toshakhana. The Income-tax Officer estimated that a sum of Rs. 25,000 should be added to the return as income from money lending business. The Income-tax Officer also relied upon the judgment of the Appellate Tribunal for 1943-44 and 1945-46 assessments wherein the Appellate Tribunal made the observation that the assessee must have some independent account of the Toshakhana.
For the accounting year, the opening balance of the Toshakhana account was Rs. 3,36,000 and a further sum of Rs. 2,45,000 was added to the Toshakhana from the Roznamcha. A sum of Rs. 32,000 was withdrawn from the Toshakhana during the year and the balance was a sum of Rs. 5,49,000. The view taken by the Income-tax Officer was that this amount in the Toshakhana was not kept idle but must have been put to some remunerative purpose. An appeal was taken on behalf of the assessee to the Appellate Assistant Commissioner but the appeal was dismissed on the ground that the account books produced by the assessee for the Toshakhana and for Roznamcha were incomplete. The assessee appealed to the Appellate Tribunal who affirmed the order of the Income-tax Officer and held that the amount of Rs. 25,000 was rightly added to the income of the assessee from money lending business.
2. In these circumstances, the Appellate Tribunal has referred the following question of law for being : determined by the High Court :
“Whether in the circumstances of the case there are materials to justify the adding up of Rs. 25000/- to the assessable income as money-lending income.?”
3. Mr. Mazumdar on behalf of the assessee put forward the argument that the addition ofl Rs. 25,000 as income of the assessee from money lending business was wholly without justification. The contention is that the Income-tax authorities have proceeded upon suspicion. We do not agree with this argument. Two reasons have been given. by the Appellate Tribunal for disbelieving the Toshakhana Bahi. For the year 1354 fasli, the Toshakhana account shows the opening balance to be Rs. 3,38,000 and the amount withdrawn from the Roznamcha during the year to be Rs. 2,45,000, the total amount being Rs. 5,81,000. A sum of Rs. 32,000 is shown to be withdrawn from the Toshakhana and the net balance at the end of the year is shown to be Rs. 5,49,000.
The view of the Assistant Commissioner which has been accepted by the Appellate Tribunal is that it was not reasonable to think that this huge amount of over Rs. 5,00,000 in the Toshakhana would be kept in an idle state without earning any interest. We are not prepared to say that the reason given by the Appellate Tribunal and by the Appellate Assistant Commissioner has no bearing or relevance in determining the issue involved. It must be remembered in this connection that the assessee carries on business in money lending and for the year in question he returned a sum of Rs. 1,934 as interest from money lending. If that interest is capitalised at the rate of 9 per cent per annum, the amount invested by the assessee would be roughly about Rs. 20,000. Mr. Mazumdar, however, said that the account of the assessee showed that a sum of Rs. 1,700 was invested newly in the accounting year and the rest of the interest shown in the return was interest from the money lent in the previous years. Whatever be the correct position, the fact remains that out of the balance of over five lacs in the Toshakhana the assessee has shown only a fractional amount as having been invested in the accounting year. In these circumstances we are not prepared to say that the view taken by the Income-tax authorities that the amount of reserve in the Toshakhana was not kept idle but was put to some remunerative use, is not a reasonable view.
It was suggested by Mr. Mazumdar on behalf ofl the assessee that possibly the amount was kept by the assessee in the Toshakhana for meeting public demands like payment of land revenue, agricultural income tax, and so on. The submission of the learned counsel was that these public demands would be roughly about four lacs per year. But the Toshakhana account for 1354 fasli does not admittedly show that any amount was withdrawn for the payment of public demands. The amount shown as withdrawn is only Rs. 32,000. On this point Mr. Mazumdar conceded that for the year 1354 fasli the payment of public demands amounting to four lacs was made not from the Toshakhana but from the Roznamcha which was the daily cash book.
So far as the present accounting year is concerned, there is no point in the argument that the amount of over five lacs was kept by the assessee in the Toshakhana for the payment of any public demand. In our opinion the Income-tax authorities were entitled to take into account the circumstances that it was unreasonable conduct on the part of the assessee to have kept a large sum of over five lacs and odd in the Toshakhana without earning interest or return.
This is a strong circumstance against the asses-see and in our opinion this circumstance is a proper material upon which the Income-tax authorities have proceeded to make assessment of the estimated sum of Rs. 25,000 as interest earned from the money lending business. Another reason also has been given by the Income-tax Appellate Tribunal in support of their view. For three previous years (1944-45, 1946-47 and 1947-48), the books produced by the assessee have been unanimously disbelieved by the Income-tax authorities and income has been estimated for all these years in view of the incomplete accounts for the year 1944-45 a sum of Rs. 30,000 was added to the return of the assessee and similarly for 1946-47 and 1947-48 a sum of Rs. 20,000 and Rs. 30,000 respectively were added.
It is admitted that the assessee preferred appeal to the Income-tax Appellate Tribunal for all these three years and these appeals were dismissed. The Appellate Tribunal was entitled to take this circumstance also into account in holding that for the assessment year 1948-49 a sum of Rs. 25,000 should be added as money lending income (see the observation of the Judicial Committee in –‘Commissioner of Income-tax, U. P. and C. P. v. Badridas Ramrai Shop‘, AIR 1937 PC 133 at p. 138 (A)).
4. In the course of his argument Mr. Mazum-dar strongly relied upon — ‘Commissioner of Income-tax v. Bombay Trust Corporation Ltd.’, AIR 1936 PC 269 (B) and upon — ‘Nilkantha Narayan Singh v. Commissioner of Income-tax, B. and O.’, AIR 1951 Pat 165 at p. 171 (C). Learned counsel submitted that the Income-tax authorities have not proceeded on evidence but merely acted on suspicion that the assessee must have invested the amount of the Toshakhana in some remunerative manner. We do not think that there is any justification for this argument. It is true that the Income-tax authorities must not act on mere suspicion or on speculation; but we have shown that there was circumstantial evidence before the Income-tax authorities upon which they could have taken the view that the amount of the money in the Toshakhana of over five lacs was employed on remunerative basis and that the income of money lending business of the assessee should be increased by Rs. 25,000 for the accounting year.
Therefore the principle laid down in the two cases upon which Mr. Mazumdar has relied has no application to the present case. The High Court has of course jurisdiction to interfere with the decision of the Income-tax authorities if that decision is not supported by any material or if the decision proceeds upon speculative or on a capricious basis. But that is not the situation in the present case for we have shown that there was material in the shape of circumstantial evidence before the Income-tax authorities upon which they could have taken the view that the amount of Rs. 25,000 was earned by the assessee from money lending business for the accounting year In question.
5. For the reasons we have expressed we hold that there were materials to justify the adding up of Rs. 25,000 to the assessable income of the assessee as money lending income and that the question referred to the High Court must be answered in favour of the Income-tax Department. The assessee must pay the cost of this reference : hearing fee Rs. 250.