TMI Blog1972 (9) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... eposit in the name of Biswanath Gupta (Bhuwalka) was the concealed income of the respondent-firm for the previous year corresponding to the assessment year 1946-47. Appeal No. 1133 relates to the sum of Rs. 4,50,000 out of the above sum of Rs. 5,00,000, while Appeal No. 1134 relates to the remaining sum of Rs. 50,000 out of the sum of Rs. 5,00,000. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat time a part of the Indian princely State of Nawanagar. Another amount of Rs. 5,00,000 was tendered to the Central Bank, Burrabazar, Calcutta branch on November 15, 1944, for being transferred to Bombay head office. The head office of the bank issued demand draft No. 41 in favour of Biswanath (B. N. Gupta) on its Jamnagar branch. On the basis of that demand draft, the Jamnagar branch of the bank issued a fixed deposit receipt 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the sum of Rs. 50,000 also out of the amount of Rs. 5,00,000 in fixed deposit in the name of Biswanath, represented the concealed income of the respondent-firm. Certain questions were thereafter referred under section 66(1) of the Act by the Tribunal to the High Court. The Tribunal, however, declined to refer some other questions. Applications were thereafter filed under section 66(2) of the Act in the High Court for directions 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant previous year. It may also be stated that in the reference which was made under section 66(1) of the Act by the Tribunal to the High Court, the High Court as per judgment dated April 1, 1966, went into the question as to whether the Income-tax Officer was justified in reopening the assessment under section 34 of the Act and whether, on the facts and circumstances of the case, cash credits and fixed deposits in question 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there is no evidence to support it or that it is perverse. Further, when a conclusion has been reached on an appreciation of a number of facts, whether that is 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 a whole (Sree Meenakshi Mills Ltd. v. Commissioner of Income-tax ). When a court of fact 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the overdraft facility of Rs. 10,00,000 afforded to the respondent-firm. The High Court took the view that the above material was not sufficient for holding that the sum of Rs. 5,00,000 belonged to the respondent-firm and that the Tribunal had taken into consideration material which was not relevant to the issue. We have given the matter our consideration and are of the opinion that no case has been made for interfering with the judgment of the 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... common feature of commercial and other transactions that securities are offered by other persons to guarantee the payment of the amount which may be found due from the principal debtor. The concept of security and ownership are different and it would be a wholly erroneous approach to hold that a thing offered in security by a third person to guarantee the payment of debt due from the principal debtor belongs not to the surety but to the principal debtor. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said fixed deposit receipt constituting security for the overdraft account would show that the said amount in fact belonged to the respondent. We find it difficult to accede to this submission because the benefit received by the respondent by the use of the said receipt as a collateral security for overdraft facility was only of a temporary nature. The receipt remained in the name of Biswanath and it was he who got the amount of the receipt on January 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 earl ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
