Judgment:
B.N. Kripal J.
1. In respect of the assessment year 1964-65, in pursuance of an order passed under section 256(2) by the Allahabad High Court, the Income-tax Appellate tribunal has stated the case and referred the following two question to this court :
'1. Whether, on the fact and in the circumstances of the case and in law, the Tribunal was right in sustaining an addition of Rs. 5,000 to the total income of the assessed for the alleged unaccounted expenditure incurred by the assessed during holiday in Kashmir
2. Whether, on the facts and in the circumstances of the case, section 69C of the Income-tax Act, 1961, was applicable to the instant case ?'
2. Briefly stated, the facts are that, pursuant to the reopening of the assessment under section 147(a) of the Income-tax Act, 1961, the Income-tax Officer added a sum of Rs. 10,000 on an estimated basis as representing the income of the assessed from undisclosed sources. According to the Income-tax Officer, the assessed with his wife, five children and two servants, went to Kashmir in May, 1963, and remained there for more than a month. The total expense which were shown in the book of account of M/s. Modi Spinning & Weaving Co. Ltd. including air travel, Rs. 1,863. That company had filed a letter indicating that all the expenses of the assessed and his family during their stay in Kashmir were incurred by the assessed himself. The Income-tax Officer found from the assessment record of the assessed and his wife that they had withdrawn only Rs. 1,500 and Rs. 600, respectively, during the month and, thereforee, the assessed must have met the holiday expenses from out of his income from undisclosed sources. Considering the standard of living of the assessed and his status and the fact that he and his family had stayed in a house boat and had made their own arrangement of food for a period of more than a month, the Income-tax Officer estimated the expenses of the assessed at Rs. 10,000 which was added to his income as income from undisclosed sources.
3. Appeal to the Appellate Assistant Commissioner having failed, the assessed filed a second appeal to the Income-tax Tribunal. The Tribunal partially allowed the appeal and held as follows :
'The fact stated by the Income-tax Officer and Appellate Assistant Commissioner in their order in this point were not disputed before us. The only plea is that the entire trip was financed within the monthly drawings of the assessed and his family members. From figures stated in paragraph 7 of the Appellate Assistant Commissioner's order, it seen that the monthly drawings of the assessed and his family members amounted in all to Rs. 2,750. Even if we accept the assessed's Explanationn that this was utilised or the Kashmir trip, and also take into account the amount of Rs. 1,863 sustained by us under the head 'perquisite' above, yet it would only partially cover the probable expenses of the holiday trip or a period of one month or 10 persons in Kashmir and their stay in a house boat. There is absolutely no evidence for the alleged saving out of the monthly drawing as contended by the assessed. However, we feel that the addition of Rs. 10,000 made by the Income-tax Officer is rather high and excessive. In our view, it would be fair and reasonable to estimate the expenses for the Kashmir trip at Rs. 10,000 and after deducting the two amounts of Rs. 1,863 retained under 'perquisite' above and the monthly drawing of Rs. 2,750, from the said amount, to sustain an addition of Rs. 5,000 only in round sum as for the unexplained portion of such expenses. Accordingly, we reduce the addition under this head to Rs. 5,000.'
4. Thereafter, when the Income-tax Tribunal did not allow the application under section 256(1), the Allahabad High Court directed the reference of the aforesaid two questions to this court.
5. It has been contended by learned counsel for the assessed that it was for the Income-tax Department to show the assessed had incurred any expenditure in excess of Rs. 2,750 and, thereforee, the addition of Rs. 5,000 was uncalled for.
6. The questions which have been referred are essentially questions of fact. In the instant case, seeing the size of the family and the fact that it had gone on a holiday to Kashmir or one month and had stayed in a house boat and made its own arrangement for boarding, the Income-tax Officer concluded that the expenses which were disclosed by the assessed were very low. This was obviously, a conclusion of fact which was upheld by the Income-tax Tribunal. The Implication of holding that the expenses of the assessed and members of his family were more than Rs. 2,750 obviously was that the Explanationn of the assessed was rejected. Thereafter, It was a question of estimating the expenses of the assessed. What could be the expenses is always a question of fact and the Tribunal had been lenient in the present case and has upheld the addition of only Rs. 5,000 instead of Rs. 10,000 which was added by the Income-tax Officer. The conclusion of the Tribunal is based on the facts on record and an addition has been made with the Explanationn of the assessed not having been accepted, it is obvious that the provisions of section 69C would be applicable.
7. We, thereforee, answer the questions of law in the affirmative and favor of the department.
8. There will be no order as to costs.