TMI Blog1964 (4) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to the High Court answered in the affirmative. Appeal allowed. - Civil Appeal No. 524, 525, of 1963 - - - Dated:- 27-4-1964 - Judge(s) : K. SUBBA RAO., J. C. SHAH., S. M. SIKRI JUDGMENT The judgment of the court was delivered by SIKRI J.--These are two appeals by way of special leave against the judgment and order of the Madras High Court, dated October 23, 1959, in a case referred to the High Court relating to the assessment years 1947-48 and 1948-49. The respondent, M. Ganapathi Mudaliar, hereinafter referred to as the assessee, joined the cloth business started by Ayyaru in Singapore, in the name of Thyagesan and Company. The assessee had married Ayyaru's sister. By an agreement dated September 23, 1940 (annexure "A") between Ayyaru and the assessee, the assessee was engaged as a manager for a period of three years from September 23, 1940. His remuneration was to be a fixed salary at the rate of $ 18 per month and a commission of 10% on the net profits of the business, to be calculated at the end of the said three years. He was also to be provided with free board and lodging. Clause 4 of the agreement provided that the net profits of the business shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a reply stating that the amount due by S. A. Md. Sahib was given to the assessee as per letter given by Ayyaru Mudaliar. The burden of proving the credit lies on the assessee as the amount has been credited in his accounts in the name of Ayyaru Mudaliar which account is only a bogus one has been noted before. By an order of the same date, for the year 1948-49, the Income-tax Officer estimated the remittance at Rs. 1,58,501. He found that enough profits out of the current year (Rs. 17,461), and out of the unassessed but unremitted profits of earlier years (Rs. 1,41,040) existed. The assessee appealed to the Assistant Commissioner against both the orders. In the appeal relating to the year 1947-48, the Assistant Commistioner disbelieved the story that the account books had been lost. He did not place any reliance on the affidavit of Ayyaru because the statements in the affidavit were at variance with the facts, as shown by the sale deed and entries of account. He found that the very description given by the sum of pound 87,500 in the books raises a strong suspicion about the nature of this credit. He agreed with the Income-tax Officer that the income declared by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per to evidence this transaction. There is, of course, the affidavit of Ayyaru Mudaliar speaking to the version put forward by the assessee, but we are not inclined to place any reliance upon it. Dealing with the question of remittances, it held as follows : " The intention with which the monies were sent to Pudukkottai is quite plain. It cannot be said that the income-tax department was wrong in concluding that the assessee would not have remitted monies to Pudukkottai, if the same were not his own profits. Even judging from another angle, the assessee's version cannot be believed. If the money was needed for business what need was there for putting the money as fixed deposit in Pudukkottai banks? Then again, the assessee says that he kept a sum of $ 87,500 belonging to Ayyaru Mudaliar to finance the business operation in Singapore. That obviously seems not to have been done. The purchase of properties soon after would only strengthen the conclusion of the department. We see no basis whatsoever for the assertion of the assessee that the purchases of properties were made from borrowings and that the fixed deposit was kept safe at Pudukkottai so that Ayyaru Mudaliar may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions. The assessee's case, it should be remembered, was that his 10 per cent. of the profits came to 11,000 dollars. If so, the total profit of Thyagesan and Company for five years should have been 1,10,000 dollars, which was the assessee's case. The Tribunal was not inclined to accept the claim of the assessee that his share of the profits amounted only to 11,000 dollars. In arriving at an estimate of the assessee's share of the profits, the Tribunal should also take into account what the total profits should have been and what the assessee's share of the profits was. " We may mention that a further statement of the case, with the directions reproduced above, was uncalled for. As held by this court in Petlad Turkey Red Dye Works Co. Ltd. v. Commissioner of Income-tax the supplemental statement of the case may contain such alterations or additions as the High Court may direct but the statement must necessarily be based on facts which are already on the record. The High Court had no power to ask for additional evidence to be taken. The Tribunal submitted a fresh statement of the case, and it stated that it had come to the following conclusion : " (i) that there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the questions. The appellant having obtained leave from this court, the appeals are now before us for disposal. As the High Court rightly observed, the real controversy between the assessee and the department was on the issue whether the sum of 87,500 dollars, which was credited to Ayyaru in the assessee's account on January 7, 1946, was Ayyaru's money, which had been borrowed by the assessee or, whether the entry was fictitious and the money really belonged to the assessee himself. This question is really one of fact and unless the finding of the Tribunal is vitiated, the High Court had no jurisdiction in a reference to reverse the findings. The High Court was cognizant of the limitations of its jurisdiction. The High Court, however, has held that the finding of the Tribunal that 87,500 dollars represented the accumulated income of the assessee was vitiated by a wrong approach of the Tribunal. It has been urged by Mr. Kapur, the learned counsel for the appellant that the Tribunal adopted the right approach. It was for the assessee to explain the credit of 87,500 dollars standing in his books, and he having failed to show that this sum was borrowed from Ayyaru, the conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries appear on January 7, 1946: ------------------------------------------------------------------------------ "Sale proceeds of balance of goods relating to the business carried on in the name of Thyagesan and Company (Old Thyagesan and Company)from 23rd September, 1940, to 29th September, 1945 87,500.00 Value of goods of old Thyagesan and Company, transferred to No. 180 12,035.15 Value of sundries of old Thyagesan and Company being the entire balance transferred to No. 180 6,807.95 Indian Overseas Bank balance of old Thyagesan and Company, taken over 5,114.19 Dr. amount due to the assessee as per agreement 10 per cent. of $ 1,10,000 of old Thyagesan and Company, for five years 11,000 ... Compassionate gift for troubles, tribulations, etc., undergone by the assessee during the Japanese occupation 25,000 ... ... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 10% during the whole period of five years for which the business of old Thyagesan and Company was carried on, but much more. The Tribunal noted the impossibility of believing the story that the assessee needed to borrow 87,500 dollars at interest from Ayyaru for business purposes, if all that sum together with all cash sales of 11,425 dollars was to be sent to Pudukkottai by January 12, 1946. Further, it rightly felt difficulty in believing that Ayyaru would lend 87,500 dollars without even a pronote and seeing it all being sent to Pudukkottai in the assessee's name. Once it is held that 86,500 dollars was the income of the assessee, it was not necessary for the revenue to locate its exact source. On this material, we cannot say that there is no evidence in support of the finding of the Tribunal. With great repect, the High Court did not appreciate the findings of the Tribunal, recorded in the supplementary statement. The Tribunal had accepted the earlier findings of the court, recorded in the order dated July 31, 1958, but in spite of discarding the theory of benami on the material before it, it came to the conclusion that no other conclusion except that 87,500 dollars was t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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