Judgement

SHAH, J.: For the assessment year 1952-53 respondents M/s. Manick & Sons were assessed to tax in the status of a registered firm and their income was computed at Rs.15,331 inclusive of Rs. 15,000 being undisclosed Income. For the assessment year 1953-54 the respondents returned Rs. 40,887 as their income from business. The Income-tax Officer discovered an aggregate amount of Rupees 74,692 as "cash credits" which, in his view, were not satisfactorily explained by the respondents. The Income-tax Officer accordingly brought to tax a total income of Rs. 1,31,179 being Rs. 56,487 as income from business and Rs. 74,692 as income from "other sources" and assessed the respondents as an unregistered firm. The Appellate Assistant Commissioner in appeal reduced the income of the respondents from business to Rs. 38,420 and income from "other sources" to Rs. 46,620. In second appeal the Tribunal reduced the income from business to Rs. 28,820 and confirmed finding that the source of the cash credits aggregating to Rs, 46,620 had remained unexplained. But the Tribunal observed that "there were certain special features in the case which needed proper consideration in determining the final assessment." The Tribunal then aggregated the income for the assessment years 1952-53 and 1953-54 for the two years, which he rounded off at Rs. 1,00,000 and apportioned in equal shares in the two years. For the assessment year 1952-53 the Tribunal recorded that the respondents had given an undertaking to file a voluntary return for assessment on the basis of total income of Rs. 50,000.

2. At the instance of the Commissioner of Income-tax, four questions were referred to the High Court of Kerala:

"(1) Whether it was not beyond the jurisdiction of the Appellate Tribunal to reopen the conclude assessment for assessment year 1952-53 and to direct that the income should be revised in that year at Rs. 50,000 as against Rs. 15,331 already fixed?

(2) whether on the facts and circumstances of the case and the evidence on record, the Tribunal was justified in directing that any portion of the cash credits be assessed to income-tax in any year other than the assessment year 1953-54?

(3) Whether on the facts and circumstances of the case and evidence on record, the Tribunal was justified in finding that a portion of the cash credits was covered by the intangible additions made in 1952-53 and 1953-54 assessment?

(4) Whether on the facts and circumstances of the case and the evidence on record, the Tribunal was justified in directing that the income under the head business for the assessment year 1953-54 be reduced to Rs. 50,000?" The High Court declined to answer questions (1) and (2) and answered questions (3) and (4) in the affirmative. The Commissioner appeals with special leave.

3. The judgment of the Tribunal is not a reasoned decision on the questions arising before it: it is cryptic and in parts obscure, and gives no grounds for its conclusion. The judgment again lends countenance to a method of assessment which the Indian Income-tax Act does not warrant. In paragraph 5 of the order the Tribunal observe that the cash credits discovered by the Income-tax Officer aggregated to Rs. 74,692 which amount was reduced by the Appellate Assistant Commissioner to Rs. 50,620. (It is common ground that the correct figure should be Rs. 46,620). The Tribunal then observed that on the evidence on record "these residuary items must remain unexplained." But the Tribunal thought that because in the assessment year 1952-53 the total income of Rs. 15,331 was comparatively small compared to the income of the earlier years "some of that year s profits must have come into the" profits of the next year. The Tribunal then set out a consolidated statement of account for two years:

Rs.

"1. Trade profits assessed for assessment year 1952-53 15,331

2. Trade profits on the basis of books and without the estimates and additions impugned in this appeal (Rs. 56,487 less Rs. 45,600) 40,887

3. Tr