TMI Blog1986 (5) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act, 1961 (hereinafter called " the Act "). The Tribunal refused to refer these questions. An application was made under section 256(2) of the Act asking for reference on those questions from the High Court. The High Court rejected the applications and refused to call for a statement of the case on those questions. This appeal by special leave is from the said decision of the High Court. It is not necessary to refer to all the questions that were pressed before the High Court because all these questions were not pressed before this court. The following questions were, however, canvassed before this court. " 1. Whether the findings of the Appellate Tribunal are vitiated in law by reason of it having ignored relevant and admissible evidence and having relied on incorrect facts and misstatement of facts? 2. Whether, on the facts and in the circumstances of the case, the conclusion of the Tribunal that the Kalinga Foundation Trust came into existence in 1947 and that it was distinct from the Trust created by the assessee in 1949 logically followed from the materials on record or it was perverse in the sense that no reasonable man could come to it on the said material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest on loans taken from Kalinga Foundation Trust and others and certain dividend transactions relating to the shares of Kalinga Tubes Ltd. While examining the evidence in support of these claims, the Incometax Officer issued a detailed letter dated October 17, 1965, to the assessee informing him about the evidence available with the Revenue against him and requesting him, inter alia, to produce evidence and prove (i) that the cash credits appearing in his account in the name of the Kalinga Foundation Trust were genuine, and (ii) that 39,000 shares of Kalinga Tubes Ltd. standing in the names of B. K. Mall, Smt. Swaran Oberoi, Shri K.C. Dalai Shri G. C. Patnaik, etc., were not really his own investment. After examining the assessee's evidence and on the basis of the documentary evidence and government records and on the basis of local enquiries made, the Income-tax Officer has come to the conclusion that no trust in the name of the Kalinga Foundation Trust really existed and even if it existed, it had no funds of its own and that the name " Kalinga Foundation Trust was used by the assessee as a camouflage to put through his unaccounted money. Accordingly, all cash credits app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by donations and consequently was in a position to lend the amounts found credited in the assessee's books and in the books of other concerns. The accounting , year followed by the said trust was the calendar year whereas the accounting year followed by the assessee was the financial year ending on March 31, 1962, March 31, 1963, and March 31, 1964, respectively, for the three years in question. One of the points urged on behalf of the assessee was that if it was intended to use the trust as a camouflage, the accounting year of the trust would have been the same as that of the assessee. It was further contended that the minute book and books, of account were maintained by the trust and that the trust had its own written constitution by way of memorandum and articles of association and rules. The funds of the trust were lying in trust with the Maharaja of Sonepur as he was the honorary treasurer of the trust. It was further pointed out on behalf of the assessee that eminent persons were members of the trust. On behalf of the Revenue, it was, however, contended before the Tribunal that on the basis of the facts emerging on an examination of the assessee's evidence and facts foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only holding an executive post in that trust. It was held by the Tribunal that seven persons who were designated by the Income-tax Officer as benamidars of the assessee for the purchase of the shares of M/s. Kalinga Tubes Ltd. were not benamidars and the money required for the purchase of these shares had been raised by themselves. The Tribunal held that the investments made by the trust in the assessee's group of industries or with the assessee were from its own resources and funds and such investments were guided by business expediency and prudence. The finding of the Tribunal is that the trust was comprised of persons of public repute and the control and management of the trust styled as " Kalinga Foundation Trust " were under the effective control of the board of trustees comprised of persons of public reputation. The Tribunal accordingly held that the income from interest, dividend or any other usufruct arising out of the investments made by the trust in the various concerns and the investments of the trust which were included in the assessments of the assessee in the years under reference should be excluded as appertaining to a separate and distinct entity and, therefore, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law and fact, but not to pure questions of fact. In the case of pure questions of fact, an inference from the facts is as much a question of fact as the appreciation of the facts. Ayyar J. noted that the observations contained in some judgments of the English courts that what inference was to be drawn from proved facts was a question of law referred to this distinction. The position that emerges from the decided cases was that: (i) When the point for determination was a pure question of law, such as construction of a statute or document of title, the decision of the Tribunal was open to reference to the court. (ii) When the point for determination was a mixed question of law and fact, while the finding of the Tribunal on the facts found was final, its decision as to the legal effect of those findings was a question of law which could be reviewed by the court. (iii) A finding on a question of fact was open to attack under reference under the relevant Act as erroneous in law when there was no evidence to support it or if it was perverse. (iv) When the finding was one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le men, could come to the conclusion to which they have come; and this was so even though the High Court would on the evidence have come to a conclusion entirely different from that of the Tribunal. In other words, such a finding could be reviewed only on the ground that there was no evidence to support it or that it was perverse. Further, when a conclusion had been reached on an appreciation of number of facts, whether that was sound or not must be determined, not by considering the weight to be attached to each single fact in isolation, but by assessing the cumulative effect of all the facts in their setting as whole. When a court of fact acted on a material partly relevant and partly irrelevant, it was impossible, this court observed, to say to what extent the mind of the court was affected by the irrelevant material used by it in arriving at its finding. Such a finding is vitiated because of the use of inadmissible material and thereby an issue of law arose. Likewise, if the court of fact based its decision partly on conjectures, surmises and suspicions and partly on evidence, in such a situation an issue of law arose. In CIT v. S. P. Jain [1973] 87 ITR 370, this court noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the name of Kalinga Foundation Trust did not belong to the assessee. The basic question is the next question whether the assessee had collected donations from the public. If the answer to that question is that it was from the public, the second aspect is whether the Revenue is bound to accept the decision of this court in S. P. Jain's case [1973] 87 ITR 370 as to the ownership of 39,000 shares, in view of the materials collected by the Income-tax Officer subsequent to the delivery of the judgment in this case. Apparently, the identity of the donors to the trust has not been established and a large amount of materials have been collected subsequent to the decision of this court in S. P. Jain's case [1973] 87 ITR 370 which had been adverted to by the Income-tax Officer and to which our attention was drawn. These did not appear to have received consideration by the Tribunal. We were taken through the evidence on record exhaustively about the foundation of the trust. We were taken through the evidence as to who were present at the time of the inauguration of the trust and whose evidence were there, there was a public meeting and whether this trust was separate from the other trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed to have been in existence from 1947, it did not apply for exemption under the Income-tax Act. (5) Although the funds were said to have been collected all over Orissa, yet there was no evidence of the money being brought from different places in Orissa to Cuttack. (6) There was no evidence of any receipt issued to the alleged donors. No lists of donors were maintained or supplied. These important factors were pointed out to the assessee and no explanation was offered by the assessee. The assessee had sought to give an appearance of truth to the explanation offered and relied on certain letters. But there appears to be no evidence as to who were the persons from whom the money was collected, how was the money received and how was the money invested? This in conjunction with other factors, in our opinion, raises a question whether the Tribunal bad acted without material evidence. It is not necessary nor it is proper at this stage for this court to express any opinion whether on these facts what conclusion should properly be drawn but the basic question, in our opinion, on the first aspect of the matter as to whether the donations alleged were given by the assessee were th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d into a public limited company and the articles of association were suitably amended. The company also made an application to the Controller of Capital Issues for the sanction of issue of further shares to the extent of Rs. 39,00,000 at the general meeting of the shareholders. The company decided to issue the new shares to the members of the public. Regarding the ownership of 39,000 shares in Kalinga Tubes Ltd. issued in 1958, this involved determination of two issues: (a) whether the ostensible holders of these 39,000 shares were real owners or benamidars and if they were benamidars, who were the real holders ? The company was incorporated as a private limited company in 1950. From 1950 to 1954, it was controlled by Shri Biju Patnaik and Shri Loganathan. In 1954, the company was in need of capital and these two persons came to be introduced to Shri S.P. Jain. There was some agreement between Shri Jain and the existing shareholders. The memorandum of agreement was drawn up in July, 1954. According to this agreement, Patnaik, Loganathan and Jain group were to be equal shareholders of the company. Early in 1956, the three groups considered the desirability of extending the busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " to the Income-tax Officer's order. The Income-tax Officer has categorically found that Shri Mall was not assessed to income-tax as an individual. He was assessed as a member of a joint family on an income of Rs. 15,000 to Rs. 17,000. The total wealth of the family was about half a lakh. It was not possible to purchase shares of the face value of Rs. 9 lakhs on his own. The shares from 1959 to 1964 had gradually appreciated in value. In other words, even after deducting the loan incurred by acquiring these shares, the net worth of these shares during 1959 to 1967 was Rs. 2-1/2 lakhs to Rs. 7-1/2 lakhs. Shri Mall never filed his wealth-tax return which clearly showed that nowhere the shares were treated as his own. These and other factors taken in conjunction led the Income-tax Officer to the conclusion that the 39,000 shares belonged to Shri B. Patnaik. In that view of the matter, the materials gathered by the Revenue subsequent to the decision in S. P. Jain's case [1973] 87 ITR 370 (SC) on the aforesaid lines should have been appreciated and considered by the Tribunal. In our opinion, therefore, on the principles enunciated by this court in several decisions mentioned hereinb ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
