1982 (1) TMI 49 - HC - Income Tax

Summary

Issues Involved:
1. Ownership of the fixed deposit made on January 25, 1945.
2. Capacity of Shivkaran to make such a deposit.
3. Beneficial interest in the fixed deposit amount.

Summary of Judgment:

1. Ownership of the Fixed Deposit:
The Tribunal framed the issue of who made the deposit with the bank on January 25, 1945. It found that Shivkaran did not own the moneys put in the fixed deposit, even though the receipt was obtained in the joint names of himself and Radheshyam. The Tribunal concluded that the ownership of the moneys was that of the assessee-firm, though at certain times the moneys were invested benami in the name of Shivkaran.

2. Capacity of Shivkaran to Make the Deposit:
The Tribunal examined whether Shivkaran had the capacity to make such deposits. It found that Shivkaran was an untruthful witness and it was not shown that he had made profits of Rs. 2 lakhs as alleged. The Tribunal noted that Shivkaran's books contained false entries, indicating that he did not have the capacity to make the fixed deposit.

3. Beneficial Interest in the Amount:
The Tribunal considered three circumstances to determine who had the beneficial interest in the amount:
- The assessee-firm had obtained overdraft facilities on the security of the fixed deposit.
- If the moneys belonged to Shivkaran, he would not have been satisfied with the small interest paid by the assessee.
- The moneys were shown to have been invested in Bedi & Co. as Shivkaran's capital, and there was evidence that the Thard family had a controlling interest in the limited company and Bedi & Co.

The Tribunal found that these circumstances proved that the ownership of the moneys was that of the assessee-firm.

High Court's Analysis:
The High Court scrutinized the Tribunal's reasoning and found it unsatisfactory. It held that merely because Shivkaran could not explain the source of the money, it did not necessarily prove that the money belonged to the assessee-firm. The Court emphasized that the burden of proof was on the department to establish a nexus between the fixed deposit amount and the assessee-firm, which was not done satisfactorily.

Conclusion:
The High Court concluded that the Tribunal's findings were not based on material evidence and could not reasonably lead to the conclusion that the moneys belonged to the assessee-firm. The question referred was answered in the negative and in favor of the assessee. The assessee was awarded the costs of the reference.