JUDGMENT
RAJAGOPALAN J. – The assessee was the Hindu undivided family which consisted of Virupaksha Chettiar and his two sons, Gopal Padmanabha and Vishnukantham. The vilasam adopted for the photographic business was that of the younger son, Vishnukantham, but it was managed by the elder son Gopal Padmanabha. The father does not appear to have had anything to do with the business, though admittedly the family was undivided. the Department and the Tribunal declined to accept the plea of Gopala Padmanabha, that the father carried on a brokers business on his own; but it was apparently not the case of any one that the father in any way participated in the business carried on by the sons. Virupaksha died in August, 1946. On 11th October, 1944, one Singaravelu executed a deed of mortgage for Rs. 7,750 in favour of Virupaksha. Rs. 5,000 was realised on 8th August, 1947; and this was shown as a credit in the capital account of the business.
In proceedings under section 34 of the Income-tax Act, the Department held that this item of Rs. 7,750 was liable to be assessed as income during the accounting year ending with 31st March, 1945, “from sources not disclosed to the Department.” The Tribunal sustained the addition. the question that the Tribunal referred under section 66(1) of the Act was “whether there was any material for assessing the sum of Rs. 7,750 in the hands of the assessee”.
The reference came on for hearing before us, and by our order dated 8th February, 1957, we called for a further statement of the case from the Tribunal. We pointed out that there was no specific finding in the appellate order of the Tribunal or even in the statement of the case it had submitted, that this sum of Rs. 7,750 was income and that it was income that accrued to the assessee family in the year of account 1944-45. We further called on the Tribunal to state the grounds on which it relied to hold (i) that the amount of Rs. 7,750 was income, and (ii) that it was income that accrued during the accounting year to the joint family.
We are constrained to remark that the further statement that the Tribunal has submitted is, to say the least, unhelpful. The Tribunal has recorded “….. such a finding was not given in its order as on the facts and in the circumstances of the case the amount in question could be nothing but the income of the year. In the absence of a specific direction from their Lordships to do so in these proceedings such a finding is also omitted to this reference.” We fail to appreciated the significance of these remarks. We required the Tribunal to record its findings on these two points and also to state the grounds in support of those findings.
The position is that even now there are no findings on the two very relevant questions. Obviously unless Rs. 7,750 was in fact income that accrued to or was received by the joint family in the year of account 1944-45, it could not be assessed to tax in the relevant assessment year 1945-46. Considering the fact that the amount was advanced as a loan on 11th October, 1944, it should be equally obvious that, if the amount in question were to be treated as part of the income of the assessee in 1944-45, there must be evidence to show that the sum had been received as income between 1st April, 1944, and 10th October, 1944. In the original assessment for the assessment year 1945-46, the assessee was found to have had an income of Rs. 3,000 from its business and Rs. 410 from other sources. There was nothing in the evidence on record to indicate whether either or both these sources could have yielded a further sum of Rs. 7,750 during the first half of the accounting year 1944-45. There was no investigation and no evidence to verify if the assessee had any other possible source of income in the relevant year.
As we said there was no finding on the two relevant questions that arose for consideration. Learned counsel for the Department urged for acceptance the view put forward by the Tribunal in its further statement of the case, that from the fact that the amount was assessed, it could be implied that the Tribunal had found against the assessee on both the questions. We are unable to agree. When calling for a further statement of the case, we pointed out that these aspects did not appear to have been considered at all by the Tribunal. There was no evidence either to support any possible finding, whether express or implied, that the amount in question was income that accrued to the assessee in the relevant period, 1st April, 1944, to 11th October, 1944. The Tribunal could have been fair to the assessee and helpful to the court by stating so, when it was given an opportunity to submit a further statement of the case.
We answer the question referred to us in the negative and in favour of the assessee. The assessee will be entitled to the costs of this reference. Counsels fee Rs. 250.
Reference answered in the negative.