TMI Blog1970 (3) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... up capital of Rs. 2,00,000 divided into 2,000 ordinary shares of Rs. 100 each. This reference relates to the accounting year ending March 31, 1946, the assessment year being 1946-47. In August, 1945, the whole of the share capital of the company belonged to six shareholders, but as on March 31, 1946, two of the shareholders with a small holding had transferred their shares and the whole of the share capital belonged to four persons. Out of the 2,000 shares, one Lachhmandas Gaddarmal was the owner of 1,880 shares. Deviprasad Khandelwal was owner of 70 shares. For the first assessment year 1944-45, the assessee-company disclosed a loss, Rs. 16,000. For the assessment year 1945-46, it returned the income-profit of Rs. 2,529, but was assessed for the income of Rs. 5,514. In the assessment year 1946-47, the original assessment was only made on an income of Rs. 20,593. Prior to October 4, 1954, the Income-tax Officer began inquiries in connection with the reassessment of the assessee-company under section 34. He served the assessee-company with a letter dated October 4, 1954, containing several queries. This letter indicated that the questions raised related to the ledger account standin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Khandelwal Bros. Rs. 87,464 being the price and/or value of the quantity of gold mentioned above and delivered to Ramsaran Pyarelal. The Income-tax Officer served reminders in respect of his above letter dated October 4, 1954, on the assessee-company, but did not receive any reply till February 28, 1955. On that day, the Income-tax Officer received the letter dated February 26, 1955, from the assessee-company giving point by point reply to the questions raised by the Income-tax Officer in his letter. In connection with Ramsaran Pyarelal, it was stated that he was residing at London and his London address was given. It was stated that he was an employee of Khandelwal Ltd. in London. It was further stated that tax was not deducted in respect of profits of Rs. 29,000 and odd, because, at the material time, Ramsaran was a non-resident. In this reply, the assessee-company also gave facts relating to the above ledger account of Ramsaran Pyarelal and the forward transactions in gold effected in the account of Ramsaran Pyarelal. It stated that at the relevant time the address of Ramsaran Pyarelal was Johari Bazar, Jaipur, and the same was the address of Jaipur Finance Corporation. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e findings of the Income-tax Officer. In the appeal of the assessee-company before it, the Income-tax Appellate Tribunal, in the first instance, made a remand order dated January 6, 1958, directing that the Appellate Assistant Commissioner should examine Deviprasad and Ramprasad and, if possible, Ramsaran Pyarelal. The department should also ascertain the financial position of Jaipur Finance Corporation Ltd. and Ramsaran Pyarelal by reference to the Income-tax Officer, Jaipur. The Tribunal was furnished with a remand report which is annexure " D " to the statement of the case. Ramsaran Pyarelal who was out of India could not be examined. He had in his letter dated August 25, 1958. stated that extensive business in ready and forward gold was done by him at Jaipur up to the year 1948 through Inderchand Juniwal and other parties of Jaipur. That business was closed in the year 1948. The business was the business of the family of Ramsaran Pyarelal. The Jaipur Finance Corporation had gone into liquidation on June 21, 1948. By its order dated April 28, 1960, the Appellate Tribunal referred to the relevant facts and evidence on record and in paragraph 10 of the order held that the prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntentions advanced by Mr. Joshi on behalf of the revenue may be summarised as follows : The settled position in law was that, if a cash credit entry in the books of accounts of an assessee is not explained away to the satisfaction of the Income-tax Officer by the assessee, the amount in the entry should be treated as income of the assessee from undisclosed sources. In support of that proposition, Mr. Joshi relied upon the observations of the Supreme Court in Govindarajulu Mudaliar v. Commissioner of Income-tax, Lakhmichand Baijnath v. Commissioner of Income-tax, Kale Khan Mohammed Hanif v. Commissioner of Income-tax and Sriram Jhabarmull (Kalimpong) Ltd. v. Commissioner of Income-tax. Mr. Joshi's submission was that having held that the profits in the above ledger account of Ramsaran Pyarelal belonged to the assessee-company, the Appellate Tribunal was bound to make a finding that the whole of the account was benami account of the assessee-company. The capital with which the business in the account was shown to have been done should have been held to be of the ownership of the assessee-company. He submitted that the Appellate Tribunal's finding that the capital used in this accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash credit entry represents the assessee's income from undisclosed sources. The submission was that after the tax authorities reject the explanation submitted by the assessee, the further question that must always arise for decision would be : " Whether it could justly in the facts and circumstances of the case, be held that the unexplained cash credit was the income of the assessee." In that connection, he relied upon Chaturbhuj Co. v. Commissioner of Income-tax and Orient Trading Co. Ltd. v. Commissioner of Income-tax, which last decision is a decision of a Division Bench of this court. His submission was that, after rejecting the explanation of the assessee-company in respect of the cash credits in its books for Rs. 1,35,000, the Tribunal rightly applied as a last fact-finding Tribunal its mind to the question of including this amount in the assessable income of the assessee-company. The Tribunal was within its jurisdiction to hold that it was not satisfied that this amount was not income of the ownership of the assessee-company. The reasons mentioned by the Tribunal in that connection, whether reasons of facts and/or inferences, were not liable to be reconsidered by this cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try stands in the name of a third party the assessee satisfies the Income-tax Officer as to the identity of the third party and also supplies such other evidence which will show, prima facie, that the entry is not fictitious the initial burden which lies on him can be said to be discharged by him. It will not, thereafter, be for the assessee to explain further how or in what circumstances the third party obtained money and how or why he came to make a deposit of the same with the assessee. The burden will then shift on to the department to show why the assessee's case cannot be accepted and why it must be held that the entry, though purporting to be in the name of a third party, still represents the income of the assessee from a suppressed source. In order to arrive at such a conclusion, however, the department has to be in possession of sufficient and adequate material." In the case of Chaturbhuj Co. v. Commissioner of Income-tax the Allahabad High Court referred to the decision of the Supreme Court in the case of Govindarajulu Mudaliar v. Commissioner of Income-tax and observed : " The money in the books of account in that case, as we have stated earlier, showed these money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Tribunal on behalf of the revenue for a reference under section 66(1) a contention that the finding of the Tribunal was arrived at without there being any evidence on record and was perverse was not made. In that application, the question intended to be raised was mentioned in the same terms as the question before us. It is however true that in the application made under section 66(2) to this court, it was alleged that the finding of the Tribunal was perverse. On inquiries repeatedly made by us, Mr. Joshi has not been able to submit that in connection with the question of the cash credit in respect of the sums of Rs. 1,00,000 and Rs. 35,000 evidence was not on record. He was unable to state that the finding of the Tribunal rejecting the inclusion of the sum of Rs. 1,35,000 in the assessable income of the assessee-company was not in respect of a question of fact. His main submission was that the above finding of the Tribunal was mainly based on its inference that the above money might belong to one or the other of the shareholders. The above money might belong to Lachhmandas Gaddarmal. In his submission, this inference which was the basis of the finding made by the Tribunal, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve at findings of fact contrary to those of the Appellate Tribunal .... A finding of fact may be defective in law if there is no evidence to support it or if the finding is unreasonable or perverse, but it is not open to the assessee to challenge such a finding of fact unless he has applied for a reference of the specific question under section 66(1). It is for the party who applies for a reference to challenge those findings of fact first by expressly raising the question about the validity of the findings of fact, and if he has failed to do so, he is not entitled to urge before the High Court that the findings of the Appellate Tribunal are vitiated for any reason. " These observations of the Supreme Court in the case of Commissioner of Income-tax v. Greaves Colton Co. Ltd. are wholly applicable to the contentions made by Mr. Joshi. The revenue failed to raise any question about the findings of the Tribunal having been arrived at without any evidence on record or being perverse in the application under section 66(1). As the revenue had failed to do so, it was not permissible for Mr. Joshi to raise these questions indirectly in support of the case of the revenue on the question ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
