9911796707
TMI Blog1972 (9) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... th February, 1958, a revised return was filed including therein property income amounting to Rs. 550. The Income-tax Officer completed the assessment on 30th September, 1958, on a total income of Rs. 21,15,845 which included a sum of Rs. 10,80,000 treated as the assessee's income from undisclosed sources " for investment in shares in the name of Sri Kalyan Shum Shere J. B. Rana " (hereinafter referred to as " the Rana "). The assessee disputed the inclusion of this amount of Rs. 10,80,000. The Income-tax Officer treated this amount as income from undisclosed sources for the following reasons : From the statement of case, it would appear that on July 1, 1952, the assessee sold 50,000 ordinary shares of Rhotas Industries Ltd. (R.I. Ltd.) to Dalmia Jain Collieries Ltd. (D.J.C. Ltd.). Another 10,000 shares of R.I. Ltd. were sold on the same day to Maheshpur Collieries (M.C. Ltd.). He also sold 40,000 and 35,000 ordinary shares of S. K. G. Sugar Ltd., the former to D.J.C. Ltd. and the latter to M.C. Ltd. on the same day, viz., 31st July, 1952. Thereafter, in the year 1953, the two vendor-companies are alleged to have sold these shares for a sum of Rs. 10,80,000, to one Rana as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rana did not take steps to have the same recorded as the registered shareholder and to collect the dividends. (vi) The Rana opened a current account in the Allahabad Bank in April, 1955, with a cash deposit of Rs. 500 and the dividends were then collected by the bank. During April to December, 1955, deposits were over Rs. 22 lakhs and withdrawals Rs. 20 lakhs. During the calendar year 1955, the deposits were Rs. 14.97 lakhs and withdrawals Rs. 16.85 lakhs ; in the calendar year 1957, there was one deposit of Rs. 1,30,125 and withdrawal of Rs. 1,41,000. All these deposits were by cheques and withdrawals involving over Rs. 38 lakhs in the three years were all by bearer cheques and endorsed in favour of Ananta Chandra Das. Along with the cheques, letters of authorisation were also issued in his favour. Excepting for the signatures of the Rana, the other entries in the cheques were in different handwriting and the authorisation letters were all typed in identical form. Ananta Chandra Das was found to be a representative of Sri B. D. Dujari, Accountant of Ashoka Marketing Ltd. and one of the lieutenants of the assessee. (vii) The vendor-companies and the companies whose shares were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remand reports in which he made out the following salient points : (1) The assessee did not avail of the opportunity of producing the Rana. (2) The Income-tax Officer visited Nepal and found that the present position and antecedents of the Rana were modest. (3) Ananta Chandra Das was found to be an employee of Ashoka Marketing Ltd. Later, the Income-tax Officer succeeded in contacting Ananta Chandra Das whose statement was also recorded. (4) The statement of Onkarmal Dalmia recorded on 9th December, 1958, showed that the share scrips of the two companies involved, which were stated to have been purchased by D. J. C. Ltd. and Maheshpur Collieries Ltd., were found to have been in the custody of the accountant of the Ashoka Marketing Ltd. (5) The principal officer of the two companies, Shri H. D. Bisoni, did not know about the transactions in question. (6) Sri Durga Prasad changed his earlier statement and said that the loans received by him were from the two companies concerned. (7) The sale to Rana was made at Patna below the market rates. (8) Some details regarding the movement of the shares were noted by the Income-tax Officer but their subsequent history was not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tenant of 22, Circus Avenue, Calcutta. He had given his address as " Thapathali Darbar Nepal, C/o. Smt. Pooku Maiya Saheba, 22, Circus Avenue, Calcutta ". In 1956, Rana seems to have been present at Calcutta and this fact had been confirmed in a letter to the Income-tax Officer dated 27th July, 1956, by General Baber Shamshir J. B. Rana who stated that the Rana left his home (Nepal) some months back for treatment in India but he did not know Rana's address. The department had commenced its enquiries early in 1956 and at that time the Rana had substantial cash balance left in the Allahabad Bank. Since Rana never claimed to be a tenant and the departmental enquiries did not result in a positive finding that the Rana never stayed at No. 22, Circus Avenue, Calcutta, no adverse inference could be drawn against the assessee from the failure to contact the Rana. If it was a fact that the Rana had given a bogus address, his financial standing and credit could be assailed. As the facts stood the fact that the Rana could not be contacted at 22, Circus Avenue, could not warrant an inference that the Rana was a benamidar. (4) That the assessee had produced at the remand stage a letter dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery companies nor the Rana were constituents of the Allahabad Bank, yet the General Manager of the bank actually handed over the purchase price and the share scrips respectively to the vendors and the purchaser and no reference could be found in the official records of the bank ; (4) the unsatisfactory nature of the evidence given by Nandlall Poddar ; and (5) lastly, the manner of withdrawal of nearly Rs. 37 lakhs in cash from the Allahabad Bank. Although the department has been able to point out the circumstances which raise an element of doubt as to the genuineness of the transaction of the purchases of these shares in 1953 by the Rana, in my opinion, the assessee has successfully rebutted any positive evidence produced by the department. I have a feeling that if the department had acted in time, it could possibly have unearthed materials and evidence to strengthen and support this case. In spite of the serious misgivings in my mind I am constrained to hold that the department has failed to establish beyond reasonable doubt that the Rana acted merely as a benamidar in the purchase of these shares and also that he so acted on behalf of the assessee ; Sri S. P. Jain. I, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of fact reached by the Tribunal are liable to be interfered with on any of the grounds recognised by law ? and 2. Whether the department has been able to establish that the shares alleged to have been purchased by the Rana were actually purchased by the assessee and that the Rana was a mere benamidar for the assessee ? The findings reached by the Tribunal are, prima facie, findings of fact. Before rejecting those findings, we must be satisfied that there are grounds in this case recognised by law which empower us to interfere with those findings. If the department succeeds in crossing this hurdle, it has to further establish not merely that the Rana was not the real purchaser of those shares but that he was the benamidar of the assessee. The question which naturally arises on the very threshold is whether it is permissible for this court to go behind the findings of fact as found by the Tribunal upon which it had come to the conclusion that the Rana was the real purchaser. In Karnani Properties Ltd. v. Commissioner of Income-tax this court (consisting of one of us, Hegde J., and Grover J.) had indicated the limitations imposed on the High Court and this court from interfering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t perhaps the High Court thought that questions Nos. 2 and 3 on which it directed the Tribunal to state a case would cover the scope and ambit of question No. 3 on which the revenue had asked for reference. We think that the two questions on which the reference has been made impugn the findings and the validity of the Tribunal's conclusion that Rs. 10,80,000 was not an income from undisclosed sources, but was the product of a genuine sale by the vendor-companies. Though this question does raise the validity of the finding given by the Tribunal, we have to ask ourselves the question, in what circumstances will this court interfere with the finding given by the Tribunal or arrive at a different conclusion to that arrived by it. In our view, the High Court and this court have always the jurisdiction to intervene if it appears that either the Tribunal has misunderstood the statutory language, because the proper construction of the statutory language is a matter of law, or it has arrived at a finding based on no evidence or where the finding is inconsistent with the evidence or contradictory of it, or it has acted on material partly relevant and partly irrelevant or where the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. It is for this reason that I thought it right to set out the whole of the facts as they were found by the commissioners in this case. For, having set them out and having read and re-read them with every desire to support the determination if it can reasonably be supported, I find myself quite unable to do so. The primary facts, as they are sometimes called, do not, in my opinion, justify the inference or conclusion which the commissioners have drawn : not only do they not justify it but they lead irresistibly to the opposite inference or conclusion. It is, therefore, a case in which, whether it be said of the commissioners that their finding is perverse or that they have misdirected themselves in law by a misunderstanding of the statutory language or otherwise, their determination cannot stand. " Whether we adopt the extended view advanced by Lord Radcliffe or the view of Lord Simonds, what h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings, even though on questions of fact, will be liable to be set aside by this court. " These observations were again referred to and adopted in Lalchand Bhagat Ambica Ram v. Commissioner of Income-tax. See also Sree Meenakshi Hills v. Commissioner of Income-tax, where Venkatarama Ayyar J. summed up the position emerging on the several decisions referred to by him : " It appears to us that apart from the circumstances to which we have referred justifying an interference with the findings set out in the statement of the case, what has to be considered in all those cases is, whether on the materials on record, the true and the only reasonable conclusion is the one which is contrary to that found by the Tribunal : The Tribunal, in our view, has failed to take into account the relevant material on record in arriving at its findings. It has further acted on inadmissible evidence and also based its conclusion on conjectures, surmises and wrong facts. It had further failed to consider the probabilities of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty of the assessee to produce correspondence if there was any, but for that omission no blame can attach to the Income-tax Officer. That apart, Wood was not produced and there is nothing to show that these letters were written by him. It is also apparent that these letters though written on the official note paper of the Allahabad Bank Ltd., Calcutta, give no reference number nor are there any office copies of those letters in the bank. In fact the case of the assessee is that the sales on behalf of the vendor-companies were effected in May and August, 1953. In respect of the transactions, on each of these occasions it is said that there are two letters of Wood dated the 30th May, 1953, and 28th August, 1953. One letter of 30th May, 1953, is addressed to M. C. Ltd., intimating to them that 35,000 ordinary shares in S. K. G. Sugar Co. Ltd. were duly delivered to Rana against payment of Rs. 2,80,000 which amount has been paid to Durga Prasad. The other letter on the same day was addressed to D.J.C. Ltd. in respect of which 40,000 ordinary shares in S. K. G. Sugar Co. Ltd. were duly delivered to Rana against payment of Rs. 3,20,000 which amount was also said to have been paid to Dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y doubt on the genuineness of the letters in the absence of evidence to establish any fraud or forgery ". There is absolutely no evidence or suggestion to justify the statement that the four letters of Wood were typed on the bank's typewriter. An example of the manner in which the Tribunal speculated is illustrated by the following : " The two colliery companies were also not called upon to explain how the transaction was actually finalised. In these circumstances, we can only speculate on how the Rana came to make a definite offer, and actually purchased the shares across the counter of the Allahabad Bank Ltd. We must assume that having promised to arrange the loan of Rs. 10,80,000 to Sri Durga Prasad, the assessee might have explored the means of keeping up the promise. Evidently he should have suggested to the two colliery companies to dispose of their holdings to R.I. Ltd. and S.K.G. Ltd. especially when the companies would be making a profit of nearly Rs. 3,00,000 by the sale of the shares at the market price. It is quite conceivable that if the assessee had met the Rana before the Rana might have talked to the assessee about his intention to make some investments to the tun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see about securing a loan to expand his business and the assessee assured him that he would help him. When he went to Calcutta, he met the assessee there and the assessee granted him the loan of Rs. 10,80,000. He says that the sum was received by him in currency notes at the counter of the Allahabad Bank Ltd., Calcutta and that he took the cash in person, travelled to Tumsar in the Calcutta Mail and handed it over to his munshi, Kesheoreo, who entered it in the cash book. He admits that he did not deposit it in any bank. Later, after the remand, he changed his statement and said that the assessee never agreed to arrange for the loan and it was not true that he promised to grant the loan to him personally and that the loan was arranged from the D.J.C. Ltd. and M.C. Ltd. from out of the sale proceeds of shares, that there were two loans in May and August, 1953, that the sums were disbursed by the general manager of the bank on behalf of the companies and that the Nepali Rana was present in the general manager's room. Even so, the statement that he received Rs. 10,80,000 at the counter of the Allahabad Bank, that he got the whole amount in one day and took it to Tumsar would itself be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried as an after-thought to explain away his previous statement saying that the shares of R. I. Ltd. and S. K. G. Sugar Ltd. were not shown to the auditors at that time and that evidently what he stated was a mistake as by August or September the respective companies had already sold away those shares. The Income-tax Officer had rejected this latter statement of Dalmia and the Tribunal has not taken this fact into consideration. It cannot be said that the Income-tax Officer or the Appellate Assistant Commissioner were not justified in rejecting the explanation and acting on his first statement. According to the Accountant Member the statement of Dalmia of his having seen the share scrips in the Ashoka Marketing Co. was one among those he considered irrelevant. But such a conclusion appears to us to be incomprehensible and totally unwarranted. It is an important circumstance if established and in our view it has been so held to have been established. The further observations that Dalmia's statement was due to some confusion is merely to have recourse to special pleadings for neutralising a vital circumstance. The Tribunal has also not taken into consideration another circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Besides, according to it, that statement would be irrelevant once it is admitted that there has been a real sale by the two companies in May and August, 1953. In this connection it further observed that the factum of sale of the shares by the two companies has not been challenged nor the fact that the sale took place in the presence of Wood been questioned, irrespective of whether the Rana was acting on his own account or as name-lender of anybody else. This entire conclusion is based on an unwarranted assumption and a wrong reading of the Income-tax Officer's finding. The case of the department throughout has been that there was no sale of shares at all to Rana and that the real purchaser is the assessee. The non-examination of Rana is also a significant fact and a great many excuses have been given for the omission to examine him. Whether Rana was a person who had substantial means or not need not be considered but his evidence was essential for the assessee's case. The department gave every opportunity to the assessee to examine him. The assessee as well as Podar, with whom the assessee was concerned, gave at least two different addresses at which not only was Rana not foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jari to assist Rana if the latter so desired and that some days later Rana came to him with a request for a bearer to fetch money from the bank and that Rana himself handed over the cheques to A. C. Das. The Judicial Member thought that this raises some doubt on the genuineness of Rana's transactions. The Accountant Member, thought that the statement of A. C. Das was positive evidence and the department had not produced any material to show that the moneys were actually withdrawn from the bank and collected on behalf of the assessee. This again was an unreasonable assumption for the only way that fact could have been proved is to establish primary facts from which an inference that it was the assessee to whom the amount was paid. It cannot be expected of A. C. Das, an employee of the assessee's concern and who was reluctant to appear before the Income-tax Officer, to state that he in fact gave the money to the assessee. The Accountant Member, however, would have relied on that evidence for he says " if it had been established that A. C. Das was in the employ of Asoka Marketing Ltd. in 1955-56, it would have cast a serious doubt about the acceptability of the evidence of A. C. Das " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise the facts and circumstances--even at the risk of some repetition--which go to establish that the Rana was a mere name-lender. They are : 1. There is no evidence to show that the Rana's financial position was such that he was in a position to purchase the shares in question. It is not shown that he had any bank balance either in this country or in any other country. 2.The Rana has not cared to appear before the authorities under the Act though several opportunities were afforded to him to do so for explaining the circumstances under which he purchased those shares. 3. The purchase price of the shares amounting to several lakhs of rupees was not paid by cheque or cheques. The same is said to have been paid in cash. This is a wholly improbable circumstance. 4. The Rana had not entered into any correspondence with the companies concerned for the purchase of the shares. He had not engaged the services of any brokers for making purchases. It is not shown how the Rana came to know that the companies in question were wanting to sell the shares. 5. It is not shown why the transactions in the said shares should have taken place in the presence of Wood. Wood had nothing to do wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that can be drawn from those circumstances is that the Rana was a mere name-lender. The conclusion reached by the Income-tax Officer and the Appellate Assistant Commissioner that the Rana was a mere name-lender is a reasonable conclusion. Neither the Tribunal nor the High Court has given any good reasons for rejecting those conclusions. The next question is, whether the department has established that the Rana was a benamidar for the assessee. As mentioned earlier, it is not sufficient if the department establishes that the Rana was the benamidar for somebody. It must go further and establish that that Rana was the benamidar of the assessee. There are good reasons to come to a conclusion that the Rana was the benamidar of the assessee. These are, as have been noted already : 1. The close association of the assessee with the Rana, which is evident from the record. It was the assessee who introduced the Rana to Nandlal who was a close associate of the assessee and it was Nandlal who introduced the Rana to the Allahabad Bank. Rana did not go to collect the money from the Allahabad bank, but is said to have stayed in the premises of Sahu Jain Co., a company with which the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. Unless the assessee was the purchaser of those shares, the shares could not have been in the possession of the Ashoka Marketing Co. It is reasonable to assume that after the alleged sale, the assessee was in possession of the shares through Ashoka Marketing Company. 5. After the shares were sold the money was collected and brought from the bank as pointed out above by the peon, A.C. Das, of the Ashoka Marketing Co. on nine bearer cheques and according to A. C. Das he paid those amounts to the Rana in the premises of the assessee, Sahu Jain at 11, Clive Row. From the circumstances above enumerated, the Income-tax Officer and the Appellate Assistant Commissioner were fully justified in drawing an inference that the Rana was a name-lender for the assessee. Neither the Tribunal nor the High Court has given good reasons for displacing the conclusions reached by the Income-tax Officer and the Appellate Assistant Commissioner. They had a duty to examine the reasons given by those authorities before rejecting them. For the reasons stated above, we answer questions Nos. 2 and 3 referred to the High Court in the negative and in favour of the revenue. The answer to question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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