Judgment

KHANNA, J.:- This appeal by special leave is directed against the judgment of Madhya Pradesh High Court whereby the High Court answered a number of questions referred to it under Section 44 of the Madhya Pradesh General Sales Tax Act, 1958 (hereinafter referred to as the Act) in favour of the revenue and against the assessee-appellant. At the time the special leave was granted, the leave was restricted to the answers given by the High Court to questions (1) (a) (1) (b), which read as under:

"(1) (a). Whether on the facts and the circumstances of the case, it was legal to treat Rs. 10,000/- an item of cash credit standing in the name of the wife of one of the partners of the assessee firm, as the profit or income out of concealed sales?

(1) (b). If the answer to (a) above is in the affirmative was the enhancement of the gross turnover of Rs. 1,00,000/- on the basis that the said Rs. 10,000/- represented ten per cent of the profit excessive or arbitrary?"

2. The appellant M/s. Girdhari Lal Manne Lal of Burhanpur is a partnership firm and is a dealer registered under the State Sales Tax Law. The appellant carries on the business of purchasing and selling cotton and cotton seeds. It also carried on business as a commission agent. While determining the taxable turnover of the appellant for the period from November 1, 1950 to October 31, 1951 the assessing authority took into account a sum of Rs. 10,000/- in respect of which there was a cash-credit entry in the account books of the appellant in the name of the wife of Kanji Deosi, partner of the appellant. The assessing authority treated that sum of Rs. 10,000 as income of the appellant out of concealed sales. Adopting ten per cent as the rate of profit, the turnover in this regard was determined to be rupees one lakh. The above amount of rupees one lakh was added to the turnover in computing the gross turnover of the appellant. In doing so the assessing authority rejected the plea of the assessee that rupees ten thousand represented the amount gifted by Kanji Deosi to his wife before marriage in order to obtain her consent to the second marriage in 1941.

3. The assessee firm went up in appeal and again raised the contention that the amount of rupees ten thousand had been given by Kanji Deosi partner of the appellant firm to his wife to obtain her consent for his second marriage in 1941. It was stated that the above amount had been lying with her, and had been deposited by her during the year in question with the firm. The appellate authority rejected this explanation. The same view was taken in second appeal by the Board of Revenue. At the instance of the assessee, the two questions reproduced above, along with some other questions, were referred to the High Court.

4. The High Court, while answering the above-mentioned questions against the assessee-appellant, referred to the fact that the explanation offered by the assessee in respect of the amount of rupees ten thousand was not reasonable. It was accordingly inferred that the amount reflected profits of the business of the assessee. Those profits, in the opinion of the High Court, arose out of the sales not shown in the account books.

5. In appeal before us, Mr. Subhagmal Jain on behalf of the assessee-appellant has contended that there is nothing to show that the amount of rupees ten thousand which had been entered in the account books of the assessee-firm in the name of the wife of one of the partners of the appellant-firm, represented the income of the appellant-firm. There was also nothing to show, according to learned counsel, that that amount represented the income realised as a result of sale transactions entered into by the appellant-firm. The mere fact that there was no satisfactory explanation regarding the source of that money would not lead to the conclusion that that amount represented the income of the appellant-firm derived as a result of undisclosed sale transactions. The above contentions have been controverted