1965 (11) TMI 3

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....r it stated that the amount of Rs.20,000 was advanced to one of the partners by his mother. The Income-tax Officer did not believe the statement and included the amount in the assessment as income from "undisclosed sources." The assessee preferred an appeal which was dismissed by the Appellate Assistant Commissioner. " Previous year " is the period of twelve months ending on the 31st day of March next preceding the assessment year, or if the accounts of the assessee have been made up to a date within the said twelve months in respect of an assessment year ending on any date other than the said 31st day of March, then, at the option of the assessee, the year ending on the date to which its accounts have been made up ; but, where in respect of a particular source of income an assessee has once been assessed, it cannot in respect of that source exercise the option so as to vary the meaning of the expression " previous year " except with the consent of the Income-tax Officer. If the assessee maintained no accounts in respect of the source concealed by him and from which the income of Rs. 20,000 was derived, the previous year in respect of the source was the financial year ending on Mar....

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....bunal dismissed the assessee's application under section 66(1) and this court called for a statement under section 66(2). The normal rule is that an appellant before the Tribunal must confine his arguments to the grounds taken in the memorandum of appeal ; if he wants to travel outside the memorandum of appeal, he must obtain the Tribunal's leave. He has no absolute right to the leave ; otherwise the provision regarding his obtaining the Tribunal's leave would become meaningless. If the leave had to be granted merely for the asking, no useful purpose is to be served by requiring the leave. As it is not an appellant's absolute right to have the leave, he has to make out a case for obtaining it, and if he fails to do so, the failure itself is ground for refusing the leave. If he makes out a case for the leave, it can still be refused if there are facts on account of which the leave should be refused. Now the only reason given by the assessee for asking for the leave was that the ground was wholly legal and did not require any facts other than those appearing on the record. This is not correct. What is a previous year relevant to a particular source of income is a question of fact.....

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....additional facts and, when the Tribunal found that the new ground was not absolutely a ground of law, it meant that no case was made out by the assessee for the grant of leave and this was full justification for the Tribunal's refusing the leave. Since the Tribunal did not find that the assessee had made out a case for the grant of leave, it may not be necessary to consider the grounds urged on behalf of the department for refusing the leave. Still we have considered them and I find that they cannot be ruled out as irrelevant. There is reason behind the ground (for refusing the leave) that thereby the disposal of the appeal would be delayed. If the entertainment of the ground calls for investigation of facts, it means delay in the completion of the assessment proceeding. As I said earlier, allowing the assessee to raise the ground would necessitate investigation of the facts what exactly was the source from which the income was derived, whether accounts in respect of that source were maintained by the assessee and if so to what date they were made up, and whether it had exercised any option in respect of the previous year for that source. It may be that after the matter has been....

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....cially, i.e., not arbitrarily. So long as it exercises it for reasons which have some logical connection with the way in which it is exercised, it cannot be said to have acted arbitrarily. It must act on the assumption of the correctness of the reasons found by it ; if the reasons are subsequently found by another authority to be incorrect, it cannot be said that the Tribunal acted arbitrarily, merely because the reasons on which it based its discretion were incorrect, provided it acted bona fide. It is required to act judicially and not correctly. Sri Gulati referred to us a number of authorities. In Commissioner of Income-tax v. P. Darolia & Sons the Patna High Court held that there is no presumption that an undisclosed income is from the disclosed business, that the question is one of fact to be decided upon the materials and that in the absence of any system of accounting adopted by an assessee and in the absence of any option on his part, it can be taxed only in the assessment for the next financial year. This decision supports the view that I take. It shows that the question is of fact, because only in the absence of a system of accounting and of an option, the financial y....