1972 (9) TMI 9
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....0. The assessee-firm, who is the respondent in these two appeals, is a registered firm consisting of six partners. The names of the partners and their shares are given below : Nandlal Bhuwalka 3 as. Girdharilal Bhuwalka 3 as. Shyamlal Bhuwalka 2 as. Bajranglal Bhuwalka 2 as. Rawatmal Nopany 3 as. Rameshwarlal Nopany 3 as. The respondent was carrying on business as dealers and commission agents in jute and other commodities. In addition to that, it did speculative business. The respondent also acted as procuring agent for rice and paddy in certain areas for the Government of Bengal and received commission on such procurements. The respondent was originally assessed on March 30, 1948, for the assessment year in question on the basis of an income of Rs. 4,71,752. On appeal, the income assessed was reduced to Rs. 4,28,448. On February 19, 1955, the Income-tax Officer issued notice under section 34 of the Act stating that he had reason to believe that the respondent's income assessable to income-tax had been under-assessed. He, accordingly, called upon the respondent to file return of income for the assessment year in question. In response to that notice, the respo....
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....eceipt in favour of Biswanath for Rs. 5,00,000 on November 21, 1944. On November 24, 1944, the respondent-firm opened an overdraft account with the Central Bank, Calcutta, for being operated up to a limit of Rs. 10,00,000. Letter of guarantee and letter of continuity were signed in that connection by Raghunath Prasad and Biswanath on December 2, 1944, at the Calcutta branch of the Central Bank along with a pronote signed by the respondent-firm for keeping the two fixed deposit receipts under lien of the bank against overdraft facilities granted to the respondent for an amount of Rs. 10,00,000. At first it was taken to be a clean overdraft without any security, but on investigation the income-tax authorities found that the overdraft facility had been granted to the respondent on the basis of the collateral security of the two fixed deposit receipts dated November 8, 1944, and November 21, 1944, issued by Jamnagar branch of the bank in favour of Raghunath Prasad and Biswanath respectively. No consideration was received by Raghunath Prasad and Biswanath for the accommodation that they extended to the respondent for giving their fixed deposit receipts in security for the overdraft faci....
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....rections to the Tribunal to refer certain additional questions to the High Court. As per order dated January 16, 1962, the High Court directed the Tribunal to draw a statement of case and refer the following question (hereinafter for sake of convenience mentioned as question No. 1) to the High Court : " Whether, on the facts and in the circumstances of the case, there was material before the Income-tax Appellate Tribunal to hold that the sum of Rs. 5,00,000 standing in the name of Raghunath Prasad Nopany and a sum of Rs. 4,50,000 out of a sum of Rs. 5,00,000 in the name of Biswanath Bhuwalka representing the fixed deposits were the concealed income of the assessee-firm for the relevant previous year for the assessment for the year 1946-47 ? " By another order made on the same day, viz., January 16, 1962, the High Court issued a direction to the Tribunal to draw up a statement of case and refer the following question (hereinafter mentioned as question No. 2) to the High Court : " Whether, on the facts and in the circumstances of the case, there was material before the Income-tax Tribunal to hold that the sum of Rs. 50,000 out of the sum of Rs. 5,00,000 standing in the name of ....
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....were assessable for the assessment year 1946-47. Both these questions were answered in favour of the department. The decision of the High Court in this respect is reported in [1967] 64 I.T.R. 593. We have earlier mentioned that there was a third fixed deposit receipt of Rs. 5,00,000 issued by the Central Bank, Jamnagar branch, in the name of S. P. Agarwal, son of Rameshwarlal, partner of the respondent-firm. This amount of Rs. 5,00,000 had also been tendered in cash in the Burrabazar Calcutta branch of the Central Bank in October, 1944, with instructions to remit the same to Jamnagar branch. The fixed deposit in the name of S. P. Agarwal was used as a security for overdraft facility to Shri Hanuman Sugar Mills Ltd., in the managing agency of which the partners of the respondent-firm had controlling interest. The Tribunal held that the amount of Rs. 5,00,000 in fixed deposit in the name of S.P. Agarwal did not represent the concealed income of the respondent-firm. An application was filed by the Commissioner of Income-tax to refer the question to the High Court as to whether in the facts and circumstances of the case the inference of the Tribunal that the fixed deposit of Rs. 5,00....
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....act acts on material partly relevant and partly irrelevant, it is impossible 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 arises. Likewise, if the court of fact bases its decision partly on conjectures, surmises and suspicions and partly on evidence, in such a situation an issue of law arises (See Dhirajlal Girdharilal v. Commissioner of Income-tax). In the case of Edwards (Inspector of Taxes) v. Bairstow, the House of Lords dealt with this aspect of the matter. Viscount Simonds in that case observed : " For it is universally conceded that, though it is a pure finding of fact, it may be set aside on grounds which have been stated in various ways but are, I think, fairly summarised by saying that the court should take that course if it appears that the Commissioners have acted without any evidence or upon a view of the facts which could not reasonably be entertained. " Lord Radcliffe expressed himself in the following words : " If the case contains anything ex facie which is bad law and which bears up....
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.... High Court. The explanation furnished about the source of Rs. 5,00,000 in fixed deposit in the name of Biswanath was that he had kept an amount of Rs. 4,50,000 with M/s. Soorajmal Nagarmal and Rs. 50,000 in deposit with Comilla Bank. The amount of Rs. 4,50,000 was stated to have been withdrawn by Biswanath from M/s. Soorajmal Nagarmal in January, 1941, while the other amount of Rs. 50,000 was withdrawn from Comilla Bank in March, 1942. The amount of Rs. 5,00,000 was then transferred by Biswanath to his native place, Ratangarh (Desh) in Rajasthan due to bombing panic in Calcutta. When war situation improved, the money was taken from Desh to Jamnagar for deposit. This explanation was found to be false in view of the admitted position that the amount of Rs. 5,00,000 in fixed deposit in the name of Biswanath in Jamnagar bank had been tendered at Burrabazar Calcutta branch of the Central Bank on November 15, 1944, and thereafter was transferred through Bombay head office of the bank to Jamnagar. There were also other circumstances which pointed to the falsity of the above explanation. The falsity of the above explanation of Biswanath, in the opinion of the High Court, did not warrant....
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....tor. The Tribunal has also referred to the fact that no consideration passed to Biswanath for offering the fixed deposit receipt as security for the overdraft facility to the respondent-firm. This circumstance, in our opinion, is of a neutral character and has no material bearing for determining the ownership of the amount in fixed deposit. Sureties quite often offer security without receipt of consideration from the principal debtor. So far as the present case is concerned, we cannot be obvious of the fact that Biswanath offered security for the overdraft facility to a firm of which his father was a partner. In the circumstances, the fact that Biswanath received no consideration for offering the fixed deposit receipt as security for the overdraft facility would not result in any inference against the respondent. Although the proceedings under section 34 of the Act in the present case were started in 1955, after the lapse of about nine years since the time Biswanath had offered the fixed deposit receipt as security for the overdraft facility to the respondent-firm, no material was brought on the record to show that the aforesaid sum of Rs. 5,00,000 in the name of Biswanath went t....
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....ry 22, 1946. Reference was also made by the Additional Solicitor-General to the order of the Appellate Assistant Commissioner. It is stated that the said order is much more elaborate and the Tribunal has made note of this fact. In this respect we find that the order of the Appellate Assistant Commissioner is vitiated by two factual inaccuracies. According to the said order, the amount of the fixed deposit receipt in the name of Biswanath was received in Calcutta on November 25, 1946, and was transferred to the credit of the respondent-firm against the overdraft with the bank. This observation was incorrect because there is ample material on record to show that the amount of the fixed deposit receipt was received, as mentioned earlier, on January 22, 1946, by Biswanath himself. He also, it would appear, got the interest due on the said amount. The other factual inaccuracy which crept into the order of the Appellate Assistant Commissioner was his assumption that the shares of the two groups of Nopanys and Bhuwalkas were equal. It was observed by the Appellate Assistant Commissioner : " The appellant-firm itself consists of two groups of partners, Nopany and Bhuwalka. Each group....