The Tribunal cannot make arbitrary decisions; it cannot found its judgment on conjectures, surmises or speculation.

Judgement

SHAH, J.:- The appellant a trader in groundnuts and other commodities in the State of Mysore was taxed under the Mysore Income-tax Act, 1923, for the assessment years ending with the assessment year 1949-50. On July, 1, 1949, the assessee brought into his books of account an opening cash balance of Rs. 1,87,000/-. In proceedings for assessment to tax for the year which ended June 30, 1950, the assessee was called upon to explain that entry and to produce his books of account of the earlier years. The assessee pleaded that his books of account upto June 30, 1949, were lost and that the amount of Rs. 1,87,000/- represented "cash brought from an iron safe kept in his house". The Income-tax Officer found that in each previous year when the assessee was assessed under the Mysore Income-tax Act, he had pleaded that his books of account were either lost or stolen in the succeeding year. The Income-tax Officer was of the view that the assessee had probably an amount of Rs. 50,000/- on hand representing a cash balance brought forward from the previous year, and that the balance of Rs 1,37,000/ was the assessee s income from undisclosed sources. The order passed by the Income-tax Officer assessing to tax the income of the assessee for the year 1951-52 was set aside by the Appellate Assistant Commissioner on the ground that under Sec. 2(11) of the Income-tax Act, l922, the previous year for the income from other sources could only be the financial year ending March 31, 1950. Giving effect to this finding, the Income-tax Officer issued a notice of reassessment under S. 34 of the Indian Income-tax Act for bringing to tax the amount disclosed by the books of account of the assessee for the assessment year 1950-51.

2. The assessee submitted a petition to the High Court of Mysore for a writ declaring that the notice under Sec. 34 of the Act issued by the Income-tax Officer was without jurisdiction, and for an order quashing the notice and proceedings consequent thereon. This petition was dismissed by the High Court of Mysore and the order was confirmed by this Court in appeal.

3. In the meanwhile the Income-tax Officer completed the assessment for the year 1950-51 and brought to tax Rs. 1,37,000 as income from undisclosed sources which had escaped tax. The assessee s contention that he had assets on hand exceeding Rs. 1,55000/- from his share of the joint family property, business income and other sources and those assets were brought into his books of account on July 1, 1949, was rejected by the Income-tax Officer. The order passed by the Income-tax Officer was confirmed in appeal by the Appellate Assistant Commissioner. The assessee appealed to the Appellate Tribunal and contended, inter alia, that the evidence produced by him showed that he had with him on October 27, 1946, in his bank account Rs. 1,38,946, that he had received Rs. 55,846 as his share on partition of the joint family of which he was a member, and that besides these sources he had agricultural income. The Income tax Appellate Tribunal modified the order of the Appellate Assistant Commissioner and brought to tax Rs. 50,000/- as income from undisclosed sources. The reasons recorded by the members of the Tribunal may be set out in their own words.

"It is clear that the assessee has not been able to explain the source of Rs. 1,37,000/- satisfactorily. But there have been trading additions for the assessment years 1951-52 and 1952-53 of Rs. 27,899 and Rs. 85,000. But the assessee has not proved that this amount was all intact and besides, as pointed out by the Departmental Representative, the "bank balance on 22nd October 1946 would not have represented the cash possessed by the assessee and at the same time it is not unlikely that the assessee had some cash having regard to the trade in jaggery, the assets got on partition in the Hindu undivided family and other sources, the Counsel for the assessee also stated that his client was prepared to be assessed on Rs. 50,000. So