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Roshan Di Hatti Versus Commissioner of Income-Tax, Delhi

1977 (3) TMI 3 - SUPREME Court

Question Of Fact - question of explaining the sources for the credits in assessee's books is one of fact - High Court did not take into account relevant facts - High Court's order were reversed - Assessee's appeal is allowed - Dated:- 8-3-1977 - Judge(s) : S. MURTAZA FAZAL ALI., P. N. BHAGWATI. and R. S. SARKARIA. JUDGMENT The judgment of the court was delivered by BHAGWATI J.-This is an appeal by special leave directed against the judgment of the Delhi High Court answering in favour of the reve .....

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n gold and jewellery at Chowk Surjan Singh in Lahore. In view of the impending partition of India, Roshan Lal decided to move out of Lahore and, accordingly, he transferred a sum of Rs. 12,094 from the account of the assessee with the Lahore branch of the Punjab National Bank Ltd. to the New Delhi branch of that bank in June, 1947. He also transferred from the Lahore branch of the Punjab National Bank Ltd. to the branch of that bank at New Delhi two sums of Rs. 13,000 and Rs. 6,000, the former i .....

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had brought with him from Lahore containing gold ornaments, jewellery and cash. It seems that a locker was not available and hence he deposited the trunk in a sealed condition with the Amritsar branch of the Imperial Bank of India on 25th June, 1947. The sealed trunk, according to the assessee, contained gold ornaments of the value of Rs. 1,19,320, gold rawa of the value of Rs. 1,69,020 and stones of the value of Rs. 4,000. Roshan Lal then went to Mussoorie via Hardwar and stayed at Mussoorie un .....

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ess in these premises in the name and style of Roshan-di-Hatti on 30th March, 1948. The business was joint family business of the assessee and the first entry made in the books of account of the assessee was dated 30th March, 1948, and it was as follows : Rs. Gold ornaments 1,19,320 Gold rawa 1,69,020 Stones 4,000 Bank balance with the Imperial Bank of India, Delhi 35,053 Bank balance with Hindustan Commercial Bank, Delhi 221 Cash 2,800 The assessee thus brought in an aggregate capital of Rs. 3, .....

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) of the Indian Income-tax Act, 1922, for bringing the income of the assessee for the assessment year 1948- 49 to tax. The assessee filed its return of income and in the course of the assessment proceedings, the Income-tax Officer called upon the assessee to explain the nature and source of the capital of Rs. 3,33,414 brought by it into the business on 30th March, 1948. The assessee pointed out that gold rawa, ornaments and cash representing this capital were brought by Roshan Lal when he migrat .....

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ahore in June, 1947, until the assessee started the business of Roshan-di-Hatti on 30th March, 1948, neither the assessee nor Roshan Lal had any other business or means of income from which the assets of Rs. 3,33,414 could have been earned. This explanation was given in the course of various statements made by the assessee from time to time before the Income-tax Officer. The assessee also examined Hira Lal, father-in-law of Roshan Lal, and filed affidavits of Mulk Ram, Billa Mal, Dalal, Wazir Ch .....

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uced to penury by about 1940 and that he had given a sum of Rs. 2,000 to his son, Roshan Lal, for starting gold and jewellery business in 1935 and he had also subsequently lent some monies to Roshan Lal at nominal interest. Prem Nath deposed that, for the purpose of the business of the assessee, Roshan Lal was occupying a shop belonging to his father but he was not paying rent though demanded on the ground that he did not have sufficient income to pay the rent. It was also stated by Prem Nath th .....

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believe that the assessee had been able to accumulate capital to the extent of Rs. 3,33,414 out of income from the business carried on by it in Lahore and since the nature and source of the capital of Rs. 3,33,414 credited in the books of account of the business on 30th March, 1948, was not satisfactorily explained, the Income-tax Officer gave credit only for a sum of Rs. 20,000 and treated the balance of Rs. 3,13,414 as income of the assessee from undisclosed sources. The assessee appealed aga .....

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entary evidence to show that the assessee transferred an amount of Rs. 12,094 from the Punjab National Bank account at Lahore to the same bank in New Delhi in June, 1947. It is also seen that he also transferred two amounts of Rs. 13,000 in his own name and Rs. 6,000 in his wife s name from the Punjab National Bank, Lahore, to the same bank at Minto Road, New Delhi, and fixed deposit receipts were taken for this total sum of Rs. 19,000 from the Delhi bank in July, 1947. All these monies includin .....

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many bank accounts. Moreover, while at Lahore Shri Roshan Lal had taken life insurance policies for Rs. 22,000. A number of letters and receipts regarding business transactions in Lahore were also filed which indicate that the Lahore business was not as small as the Income-tax Officer has taken it to be. There are some papers which relate to deals worth Rs. 10,000 or more at one time. There are also several vouchers relating to advertisement charges paid at Lahore. All these things together wit .....

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ving Lahore and coming over to India in June, 1947, the assessee stopped for a few days at Amritsar. There, on the 25th June, 1947, he deposited a sealed box with the State Bank of India, Amritsar Branch. This box was withdrawn by him on October 20,1947. These facts are corroborated by the bank certificate. The assessee claims that he had considerable amount of jewellery and gold, etc. (part of his trading stock in Lahore), as well as cash in this box ; that is why he did not take the risk of ca .....

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ed that as early as June, 1947, the assessee hired a locker in the Hindustan Commercial Bank Ltd., New Delhi. It is clear, therefore, that when in June, 1947, the assessee was leaving Lahore he must have had with him quite a substantial amount either in the form of jewellery, etc., or cash, as otherwise he would not have taken the precaution of either depositing the sealed box with the State Bank of India at Amritsar or opening a locker in a New Delhi bank. Considering all the evidence discussed .....

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se do, in my view, justify a much larger allowance for old capital than has been allowed by the Income-tax Officer. In my opinion, a reduction of the assessment by Rs. 80,000 will meet the requirement of the case. The Appellate Assistant Commissioner thus reduced the figure of undisclosed income of the assessee to Rs. 2,33,414. But this relief was not enough and the assessee preferred a further appeal to the Tribunal. When the appeal came to be heard by the Tribunal, Roshan Lal, who was present .....

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ppeal of the assessee were : first, if the weight of the contents of the box was only eight seers, the value of gold and jewellery in the box could not be more than Rs. 66,000 at the then current rate of gold at Rs. 90 per tola ; secondly, the Government of India had issued a Press Note in January, 1952, requiring all evacuees to declare the amounts of money brought by them from Pakistan and assuring them that in case they did so, no further enquiries would be made from them as to how they had e .....

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to income-tax in Lahore and, fourthly, the depositions of Mulk Ram, Billa Mal, Dalal, Wazir Chand, Devidas Mehra and Panna Lal were vague and based on hearsay and they had no evidentiary value in the absence of contemporaneous primary evidence. The Tribunal, accordingly, held that the assessee could not have brought assets worth more than Rs. 1,00,000 from Lahore and the estimate made by the Appellate Assistant Commissioner did not call for any interference and, in this view, the Tribunal confir .....

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e application. The assessee thereupon preferred an appeal to this court by special leave and in the appeal, an order was made by this court referring the following question for the opinion of the High Court : Whether there was material for coming to the conclusion that Rs. 2,33,414, out of the capital of Rs. 3,33,414 credited in the books of account of the assessee on 31 st March, 1948, represented income from undisclosed source ? Pursuant to this order the Tribunal stated a case for the opinion .....

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isputes the liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the revenue is entitled to treat it as taxable income. This was laid down as far back as 1958 when this court pointed out in A. Govindarajulu Mudaliar v. Commissioner of Income-tax [1958] 34 ITR 807, 810 (SC) that : There is ample authority for the position that where an assessee fails to prove sa .....

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me is from any particular source. Vide Commissioner of Income-tax v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 (SC). Here, in the present case, the assessee introduced in the books of account of its business on 30th March, 1948, capital of Rs. 3,33,414 which consisted of gold rawa, gold ornaments, stones and cash. The burden of accounting for the receipt of these assets was clearly on the assessee and if the assessee failed to prove satisfactorily the nature and source of these assets, the .....

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re and, hence, the Tribunal added the balance of Rs. 2,33,414 as undisclosed income of the assessee. This conclusion reached by the Tribunal was clearly a finding of fact and, hence, it could be assailed only if it was shown that the Tribunal had acted without any material or upon a view of the facts which could not reasonably be entertained or the facts found were such that no person acting judicially and properly instructed as to the relevant law would have come to that determination. Vide Meh .....

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transactions in Lahore were filed by the assessee which showed that the business in Lahore was not small and there were documents and papers which referred to dealings involving Rs. 10,000 or more at a time and there were also several vouchers produced by the assessee relating to advertising charges paid at Lahore. The business carried on by the assessee at Lahore was, therefore, a reasonably large business though its extent could not be verified by any reliable material produced by the assesse .....

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it must be remembered that the assessee was being called upon to prove the extent of its business in a territory from which the members of the Hindu undivided family had to flee for their lives and from where it was totally impossible to produce any primary evidence. Be that as it may, it was found as a fact by the Appellate Assistant Commissioner and this finding was not disturbed by the Tribunal, that the assessee was doing fairly well in the business in Lahore . Roshan Lal, in anticipation of .....

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of the State Bank of India instead of carrying it with him to Mussoorie. There is no documentary evidence to show as to what were the contents of the sealed trunk but, as pointed out by the Appellate Assistant Commissioner and not dissented from by the Tribunal, it is reasonable to presume that there must have been something quite valuable in the box as otherwise the assessee would not have kept it in the custody of a bank like the State Bank of India . There can be no doubt, as observed by the .....

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and cash with him when he migrated from Lahore in June, 1947, and kept the same in a sealed trunk with the Amritsar branch of the State Bank of India. If that be so, then on what material could it be said that the ornaments, jewellery and cash brought by the assessee and kept in the sealed trunk were of the value of only Rs. 1,00,000 and no more. What were the materials on the basis of which the claim of the assessee that Roshan Lal had brought gold, ornaments and cash of the value of Rs. 3,33, .....

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e transferred no less than an aggregate sum of Rs. 31,094 from Lahore to New Delhi and also brought de substantial amount either in the form of jewellery, etc., or cash and deposited the same in a sealed trunk with the Imperial Bank of India, Amritsar branch, in June, 1947. This obviously the assessee could not have done unless it had a reasonably large business in Lahore and, therefore, the fact that the assessee did not pay income-tax in Lahore cannot have much evidentiary value. All that it w .....

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procedure prescribed in rules 29, 30 and 31 of the Income-tax Appellate Tribunal rules for taking additional evidence before the Tribunal and if the Members of the Tribunal wanted to examine Roshan Lal on any aspect of the case, they should have followed this procedure. But, unfortunately, the Members of the Tribunal, disregarding the prescribed procedure, put questions to Roshan Lal in an informal manner unauthorised by the rules. The answers given by Roshan Lal could not in the circumstances .....

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he value of Rs. 3,33,414 from Pakistan and this circumstance, according to the Tribunal, cast considerable doubt on the version put forward by the assessee. Now, the Press Note of the Government of India was not produced before us but we will assume that it did promise a certain concession to the evacuees who declared the assets brought by them from Pakistan. Even so, we fail to see how it could be utilised as a circumstance militating against the explanation of the assessee. Both according to t .....

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00 or Rs. 3,33,414, the fact remains that they were not disclosed by the assessee despite the Press Note of the Government of India and hence no adverse inference could be drawn from-the fact of non-disclosure of the assets by the assessee. It will, therefore, be seen that there was no material on the basis of which the Tribunal could come to the conclusion that though the assessee had a fairly large business in Lahore and had brought its entire ornaments, jewellery and cash from Lahore and depo .....

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evidence was that neither Roshan Lal nor the assessee had any business or other means of income in India until 30th March, 1948. In this situation, it is impossible to believe that the assessee could have earned such a huge amount of profit of Rs. 2,33,414 within a few months, even if it be assumed that some business was started by it in October, 1947, when Roshan Lal came down to Delhi. The utter improbability, amounting almost to impossibility, of the assessee having earned such a large amount .....

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