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Northern Bengal Jute Trading Co. Ltd. Versus Commissioner of Income-Tax

[1968] 70 ITR 407 - Income-Tax Reference No. 119 of 1962 - Dated:- 25-1-1967 - B. N. Banerjee And S. A. Masud, JJ. For the Assessee : Dr. Debi Pal with A. K. Roy Chaudhuri For the Commissioner : B. L. Pal with B. K. Bachawat JUDGMENT S. A. Masud, J. The question required to be answered in this reference is stated as follows: "Whether there was any legal admissible evidence to justify the Tribunal's finding that the deposits of ₹ 1,40,000 were the assessee's income from undiscl .....

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28-10-46 40,000 In Darwani Books: 4. Satnarain Agarwalla 24-10-46 20,000 5. Debi Dutta Agarwalla 30-11-46 15,000 In Domar Books: 6. Banwarilal Oswal 3-12-46 20,000 7. Nripendra Chandra Roy 8-12-46 15,000 Total 1,40,000 The assessee was asked by the Income-tax Officer to explain the source of these amounts. The assessee's explanation before the Income-tax Officer was that the amount in question was received from the firm of M/s. Surajmull Nagarmull to which the assessee was an associate comp .....

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r, Darwani and Domar came out of the said amount. In the premises, the assessee contended that the amount belonged to the said firm and should not be added to the income of the assessee-company. The Income-tax Officer rejected the explanation of the assessee and the said sum of ₹ 1,40,000 was added as the income of the assessee-company from undisclosed sources. An appeal was filed by the assessee before the Appellate Assistant Commissioner without any success. The Appellate Tribunal also, .....

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not be a satisfactory explanation. On these facts, the above question was referred to this court. Dr. D. Pal (with Mr. A.K. Roy Choudhury) has contended before us that the finding of the Income-tax Officer to the effect that the said amount of ₹ 1,40,000 is the suppressed income of the assessee-company from undisclosed source is a finding arrived at without any evidence at all. The amounts credited in the books of account of the assessee-company are admitted in writting by M/s. Surajmull N .....

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igation Commission did admit that a sum of ₹ 16 lakhs remained as an idle cash of the firm. Further, it is urged that when M/s. Surajmull Nagarmull's identity is established and it is well-known that the said firm has means to pay, the department should not have refused the assessee's explanation without any materials. Thus, one onus to explain the receipt of the said sum of ₹ 1,40,000 has been discharged by the assessee and the department should not have included the said su .....

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or 1948-49 and 1947-48, he has asked us to hold that, although the assessee was given all the opportunities to the assessee and also M/s. Surajmull Nagarmull, no satisfactory evidence was made available by the assessee-company to the department (sic). He has therefore argued that the said sum being the income of the assessee-company from undisclosed source has rightly been included in the assessee-company's income and assessed. Several cases were referred to us by the learned counsel for the .....

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the Appellate Assistant Commissioner, however, the assessee produced affidavits from some persons to the effect that ₹ 43,000 were paid in one thousand rupee notes during the relevant period. The Appellate Assistant Commissioner did not accept the affidavits and confirmed the order of the Income-tax Officer. The Appellate Tribunal thereafter accepted the assessee's explanation as to ₹ 31,000, but rejected as to ₹ 30,000. The Bombay High Court confirmed the Tribunal's or .....

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thout any evidence or upon a view of the facts, which could not reasonably be entertained or the facts found are such that no person acting judicially and properly instructed as to the relevant law would have come to the determination in question." In the facts of that case, beyond the calculations of figures in general, no further scrutiny was made by the Income-tax Officer or the Appellate Assistant Commissioner of the entries in the cash book of the appellants. The cash book of the appel .....

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fied in challenging the correctness of the cash book entries on the statements made by those persons in their affidavits. Dr. Pal next cited Sreelekha Banerjee v. Commissioner of Income-tax [1963] 49 I.T.R. (S.C.) 112 and relied on the following observations of the Supreme Court at page 120: "It seems to us that the correct approach to questions of this kind is this. If there is an entry in the account books of the assessee which shows the receipt of a sum on conversion of high denomination .....

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f an income nature, the department cannot act unreasonably and reject that explanation to hold that it was income. If, however, the explanation is unconvincing and one which deserves to be rejected, the department can reject it and draw the inference that the amount represents income either from the sources already disclosed by the assessee or from some undisclosed source. The department does not then proceed on no evidence, because the fact that there was receipt of money is itself evidence aga .....

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have for convenience kept the whole or part of a particular sum in high denomination notes, the assessee prima facie discharges his initial burden when he proves the balance and that it might reasonably have been kept in high denomination notes. Before the department rejects such evidence, it must either show an inherent weakness in the explanation or rebut it by putting to the assessee some information or evidence which it has in its possession. The department cannot by merely rejecting unreas .....

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how that the disputed amount did not from part of the case balance and, the source of money not having been satisfactorily proved, the department was justified in holding it to be assessable income of assessee from some undisclosed source. The next case, Ram Kishan Das Munnu Lal v. Commissioner of Income-Tax [1961] 41 I.T.R. 452, 464, is a decision which was decided by the Allahabad High Court in favour of the assessee on the peculiar facts of that case. B.K. and R. were some of the members of a .....

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sessee family, in this case, could not be said to have received the amounts in question at all. In that case, the learned counsel for the income-tax department fairly conceded that there was no material other than the rejection of the explanation on which a finding could be legally based that the amounts were the income of the family. It was clear that the case credits were found in the books of account of a firm and it was also found that there was nothing to show that the assessee family recei .....

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ons in whose names the deposits were made were not the real owners of the money but that they belonged to the assessee family." Dr. Pal laid great emphasis on the following observations of the House of Lords in Bean (H.M. Inspector of Taxes) v. Doncaster Amalgamated Colliery Ltd. [1946] 27 Tax Cas. 296 at page 307: "Unless the Commissioners, having found the relevant facts and put to themselves the proper question, have proceeded to give the right answer, they may be said, on this view .....

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e Supreme Court followed the principles laid down in their earlier decision in Sree Meenakshi Mills Ltd. v. Commissioner of Income-tax [1957] 31 I.T.R. 28; [1956] S.C.R. 691. In that case two sums of ₹ 5 lakhs each were tendered in cash on different dates at the Burrabazar branch of the Central Bank and transferred to the head office at Bombay. Demand drafts for those amounts were issued by the Bombay office on its Jamnagar branch. A third remittance of ₹ 5 lakhs was made through the .....

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, which happened to be held in the name of S, was offered as a security for overdraft to a company, in the managing agency of which the partners of the assessee-firm had a controlling interest. The Appellate Tribunal came to the conclusion that the amounts deposited in the names of R and G represented secret profits of the assessee-firm, but the amount deposited in the name of S cannot be held to be the secret profits of the assessee-firm. There the Tribunal found no connecting link between the .....

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ibunal is open to reference to the court under section 66(1). (ii) When the point for determination is a mixed question of law and fact, while the finding of the Tribunal on the facts found is final, its decision as to the legal effect of those findings is a question of law which can be reviewed by the court. (iii) A finding on a question of fact is open to attack under section 66(1) as erroneous in law when there is no evidence to support it or if it is perverse. (iv) When the finding is one of .....

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sion of the Tribunal, may require the Appellate Tribunal to state a case and to refer it. But the High Court has no power to call upon the Tribunal to state a case, if there is some evidence to support the finding recorded by the Tribunal, even if it appears to the High Court that on reappreciation of the evidence, it might arrive at a conclusion different from that of the Tribunal." In that case, the Supreme Court held that the conclusion recorded by the Tribunal on the facts brought to th .....

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urden will lie on the assessee, though the entry is not in his own name, to explain satisfactorily the nature and source of that entry. Where the entry stands not in the name of any such person having a close relation or connection with the assessee, but in the name of an independent party, the burden will still lie upon him to establish the identity of the said party, and to satisfy the Income-tax Officer that the entry is real and not fictitious. When, however, in a case where the entry stands .....

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burden will 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 our opinion, when cash credit entry appears in the assessee's books of account in an accounting year, t .....

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ase. The surrounding circumstances to be considered must however be objective facts, evidence adduced before the taxing authorities, presumption of facts based on common human experience in life and reasonable conclusions. In holding a particular receipt as income from undisclosed source, the fate of the assessee cannot be decided by the revenue on the basis of surmises, suspicions or probabilities. Further, the High Court in deciding a reference can and should always intervene in the conclusion .....

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there is no proper relevant evidence and, as such, there is no evidence. Similarly, in those cases where there are materials on the basis of which the Tribunal has arrived at a conclusion to the effect that the disputed cash credits are the income of the assessee the High Court, in its advisory jurisdiction under section 66, cannot interfere with such conclusion, although it is possible for the High Court to come to a different conclusion on the re-examination of those very materials. Applying t .....

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um of ₹ 16 lakhs, as the idle cash of Messrs. Surajmull Nagarmull was never mentioned before the Commission and the link between the said sum of ₹ 16 lakhs and the cash credits in the assessee's books of account is, therefore, not necessarily established. Further, according to the assessee, the total sum of ₹ 1,40,000 was paid by way of loan by Messrs. Surajmull Nagarmull to the assessee-company, but no attempt was made to prove that these sums were actually drawn from the .....

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othing to show that the said memorandum was accepted by the department. Messrs. Surajmull Nagarmull is a well-known firm and there is no difficulty for the assessee, to adduce best evidence by calling somebody or producing documentary evidence from the said firm. It is true that, according to the assessee, the money belonged to the firm, and constituted parts of the firm's undisclosed income as admitted by them before the Investigation Commission and, therefore, their books of account would .....

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charged by mere production of a letter from a third party admitting such money as their money. Such a course will open wide the flood-gate of tax evasion. There is another point to be remembered. The Appellate Assistant Commissioner in his order (page 12 of the paper book) has stated: "The appellant's representative has admitted frankly that he has nothing to produce or to say beyond what has already been placed or urged before my predecessor." The reference to a predecessor relate .....

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hat the said deposits aggregating to ₹ 1,40,000, having been made between 24th October, 1946 to 8th December, 1946, the said sum could not be included in the assessee's total assessment for the assessment year 1948-49 and directed that the Income-tax Officer should proceed to assess the amount, according to law, in the assessment year 1947-48. In pursuance of the said direction, the Income-tax Officer proceeded with the assessment for 1947-48 and came to the same conclusion that the sa .....

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