Order

The respondent-assessee is a private limited company. In the proceed­ings for assessment of tax for the year ending 30.6.1964 relevant to the assessment year 1965-66, the assessee transferred a sum of Rs. 3,45,000/- out of the suspense account running from 1946-47 to 1948-49 to the capital reserve account. The Income Tax Officer found that an amount of Rs. 1,29,000/- was with reference to the deposits and ad­vances which had been paid back and he included a sum of Rs. 2,56,529/- under Section 41 of the Income Tax Act in the total income of the assessee. The assessee went on appeal before the Appellate Assistant Commissioner and the order of the I.T.O. was confirmed. The assessee carried the matter to the Tribunal. The Tribunal accepted the contention of the assessee and held that its unilateral entry in the accounts transferring the amount to the capital reserve account would not bring the matter within the scope of Section 41 of the Income Tax Act and consequently held in favour of the assessee. The decision of the Tribunal was challenged before the High Court. The High Court observed:

“The transfer of an entry is a unilateral act of the assessee, who is a debtor to its employ