Tribunal's Decision on Income Treatment Upheld

The Tribunal's decision to treat the sum of Rs. 1,47,090 as income of the assessee was not justified as it was deemed hypothetical and uncertain. The Tribunal found evidence that Sonepur Coalfields Ltd. was in possession of the coal mines, supporting the revenue's position. The Tribunal was not justified in holding the assessee liable for assessment based on minimum royalty and interest as the claim was deemed tentative and unenforceable. Only a portion of the sum credited was considered assessable income for the year 1961, not the entire amount. The Tribunal's decision to tax only the relevant portion was upheld, favoring the assessee on some issues and the revenue on others.

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Issues Involved:
1. Whether the Tribunal was justified in treating the sum of Rs. 1,47,090 or any portion thereof as the income of the assessee.
2. Whether there was any evidence that Sonepur Coalfields Ltd. was in possession of the coal mines and/or seams.
3. Whether the Tribunal was justified in holding the assessee liable to be assessed on the income based on the minimum royalty and one year's interest.
4. Whether the amount credited as income from minimum royalty and interest could be considered assessable income for the year 1961.
5. Whether the Tribunal was correct in holding that only a portion of the sum credited should be taxed, not the whole amount.

Detailed Analysis:

Issue 1: Treatment of Rs. 1,47,090 as Income
The Tribunal initially included the sum of Rs. 1,47,090 in the assessee's income, considering it as a contingent claim based on the minimum royalty and interest. However, the Tribunal later agreed with the AAC that a mere book entry does not constitute income, referencing the Supreme Court case of CIT v. Shoorji Vallabhdas and Co. The Tribunal concluded that the amount was hypothetical and uncertain, as it might be decided through litigation. Therefore, the Tribunal's decision to treat the sum as income was not justified.

Issue 2: Evidence of Possession by Sonepur Coalfields Ltd.
The Tribunal found that the assessee had handed over possession of the land to the proposed sub-lessee, Sonepur Coalfields Ltd., implying that the sub-lessee was in possession. The Tribunal noted that the re-entry by the assessee into possession was pursuant to a notice served in January 1960. This finding was affirmed, supporting the revenue's position.

Issue 3: Assessment Based on Minimum Royalty and Interest
The Tribunal initially held that the assessee was liable to be assessed on the income based on the minimum royalty and one year's interest at 12% for the unpaid amounts. However, it was later determined that the assessee's claim was a tentative counter-claim without a contractual basis, as no sub-lease was executed. The claim was deemed inchoate and not enforceable, leading to the conclusion that the Tribunal was not justified in this assessment.

Issue 4: Assessable Income for the Year 1961
The Tribunal held that the entire amount of Rs. 1,47,090 credited in the books could not be considered as assessable income for the year 1961. The Tribunal reasoned that the amount represented a hypothetical income, not materialized, and only the portion related to the accounting year based on the minimum royalty and one year's interest should be taxed. This view was upheld, indicating that the whole amount was not assessable for that year.

Issue 5: Portion of Sum to be Taxed
The Tribunal decided that only the portion of the sum related to the accounting year based on the minimum royalty and one year's interest should be taxed, not the entire amount credited. The Tribunal's decision was based on the principle that income should be taken on an accrual basis, but hypothetical income should not be taxed. This approach was affirmed, supporting the assessee's position.

Conclusion:
- Income-tax Reference No. 10 of 1971:
- Question 1: Answered in the negative, in favor of the assessee.
- Question 2: Answered in the affirmative, in favor of the revenue.
- Question 3: Answered in the negative, in favor of the assessee.
- Income-tax Reference No. 19 of 1971: No answer required due to the answers in Reference No. 10 of 1971.

The references were disposed of without any order as to costs.

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