THANIKKACHALAM J.

At the instance of the Department, the Tribunal referred the following two questions for the opinion of this court under section 256(1) of the Income-tax Act, 1961

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Appellate Assistant Commissioner was justified in confining the income under the head ' Other sources ' to Rs. 3, 54, 110 as found in the capital account of the assessee instead of the peak credit of Rs. 4, 47, 471 as per books ?

(2) Whether the Appellate Tribunal's view that the Income-tax Officer having rejected the books of account while determining the income from business, should not have relied upon the same books of account for the purpose of making addition towards unexplained credit under the head ' Other sources ' is sustainable in law ?" *

The assessee is an individual. The assessment relates to the year 1973-74. The accounting year is the year ended March 31, 1973. The assessee failed to comply with the notice issued by the Income-tax Officer under section 142(1). Accordingly, assessment was completed under section 144. The assessee had earlier returned a loss of Rs. 5, 65, 654 being his share income from the firm, East Coast Sea Food Corporation, Madras. The Income-tax Officer found that in the assessment for 1972-73, the assessee became its own proprietor and as such he was carrying on the business in his individual capacity from February 6, 1972, onwards. Hence, the Income-tax Officer held that the assessee carried on the business in the name and style of East Coast-Sea Food Corporation, Madras. The statements were filed along with the return for the purpose of computing the income of the assessee. The Income-tax Officer assessed the business at Rs. 3, 75, 000. Thereafter, under the head of "Other sources", he found that in the capital account as per the balance-sheet there was a credit of Rs. 3, 54, 110. But as per the seized books the book credit worked out to Rs. 4, 47, 741. Since no explanation has been offered for this credit, the Income-tax Officer added this to the income return. The Income-tax Officer also found that a sum o Rs. 75, 000 was deposited on March 28, 1973, in Dena Bank and the assessee was unable to explain as to how this amount came to be deposited in his name in Delhi. The Income-tax Officer, therefore, added this also to the incomeOn appeal, the Appellate Assistant Commissioner found that, as far as the addition of Rs. 4, 47, 741 was concerned, the Income-tax Officer had relied on the seized books whereas for the purpose of estimating the business income he held that as the accounts were not properly closed and adjusted, the assessee's books seized could not be relied upon. In the opinion of the Appellate Assistant Commissioner, since the Income-tax Officer had not relied on the books seized from the assessee's premises for the purpose of estimating the business income, there was no reason why he should depend upon these books for working out the peak credit. The Appellate Assistant Commissioner, therefore, held that the cash credit as found in the capital account of the assessee as per the balance-sheet, i.e., Rs. 3, 54, 110, should be taken for the purpose of considering it as income of the assessee under "other sources". In that view of the matter, he gave a reduction of Rs. 93, 631 being the difference between Rs. 4, 47, 741 and Rs. 3, 54, 110

Aggrieved by the order of the Appellate Assistant Commissioner, the Department preferred an appeal before the Appellate Tribunal. The Tribunal confirmed the order passed by the Appellate Assistant Commissioner

Learned standing counsel appearing for the Income-tax Department submitted that the Tribunal was not correct in stating that the Income-tax Officer went wrong in relying on the account books for the purpose of taking the peak credits while the said account books were rejected for the purpose of ascertaining the business income. According to learned