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1977 (3) TMI 3

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 revenue a question which was directed to be referred by the Tribunal under section 66(2) of the Indian Income-tax Act, 1922. The controversy between the parties arises out of an assessment made on the assessee as a Hindu undivided family for the assessment year 1948-49, the corresponding accounting year being the financial year 1947-48. The assessee was at the material time a Hindu undivided family with one Roshan Lal as its manager and karta. Till June, 1947, the assessee was carrying on business in 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 Natio .....

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assessee had made considerable income in its gold and jewellery business but had failed to pay any tax on such income and hence the Income-tax Officer issued a notice to the assessee under section 34(1)(a) 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 migrated from Lahore and they were kept in a sealed trunk with the Amritsar branch of the Imperial Bank of India and when Roshan Lal came over to Delhi in October, 1947, he deposited the same in a locker in the safe deposit vault of Hindustan Commercial Bank at Delhi and when the business of the assessee was commenced, he surrendered the locker and brought the entire gold, jewellery and cash into the business. It was emphasised by the assessee as a supportive fact that after Roshan Lal migrated fr .....

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he balance of Rs. 3,13,414 as income of the assessee from undisclosed sources. The assessee appealed against this order of the Income-tax Officer and, on appeal, the Appellate Assistant Commissioner took the view that, on the facts as disclosed by the material placed on record in the proceedings, a much larger allowance should have been made in respect of the capital brought by the assessee from Lahore and he allowed a further sum of Rs. 80,000. The reason given by the Appellate Assistant Commissioner for taking this view are a little material and they may be reproduced as follows : There is documentary 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 including the realised fixed deposits later on went into the assessee s account with the State Bank of I .....

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noted 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 above, I am of the opinion that the Income-tax Officer s allowance of Rs. 20,000 only as capital brought over from Pakistan is too low. It is true that the capital disclosed in the books as on March 30, 1948, is mostly unverifiable and even assuming that the assessee was doing reasonably well in his business at Lahore, there are hardly any reasons to believe that he could have accumulated so much capital and could have brought all that capital safely into India ; but the circumstances of the case 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 require .....

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the assessment year 1948-49. The assessee applied to the Tribunal for referring to the High Court the question of law arising out of its order but the Tribunal declined to make a reference on the ground that in its opinion no question of law arose out of its order. This led to the making of an application to the High Court under section 66(2), but the High Court also took the same view and rejected the 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 of the High Court and the High Court answered the question referred to it in favour of the revenue by holding that there was material on the basis of which the Tribunal could come to the conclusion that Rs. 2,33,414 represented the undisclosed income of the assessee. Hence, the present appeal b .....

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ssailed 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 Mehta Parikh & Co. v. Commissioner of Income-tax [1956] 30 ITR 181 (SC). Let us consider what were the primary facts established by the material on record. The assessee was admittedly carrying on the business of Roshan-di-Hatti in Lahore from 1935, until June, 1947, when Roshan Lal migrated from Lahore. It is true that the assessee was not paying any income-tax in Lahore but, as pointed out by the Appellate Assistant Commissioner in his order, a number of letters and receipts regarding business 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 .....

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ndia, Amritsar, or opening a locker in a New Delhi bank . The clear finding of the Appellate Assistant Commissioner, affirmed by the Tribunal, therefore, was that Roshan Lal did bring ornaments, jewellery 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. 3,33,414 could be rejected ? The only material relied upon by the Tribunal was that the assessee had never filed any income-tax return nor ever paid any tax on the income of its business in Lahore and the presumption must, therefore, be that the assessee did not earn any assessable income before migration from Lahore. Now, it is true that where an assessee has not paid income-tax, the presumption ordinarily must be that the assessee had no assessable income, but here the fact remains that the ass .....

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ld be utilised as a circumstance militating against the explanation of the assessee. Both according to the Appellate Assistant Commissioner as well as the Tribunal, the assessee did bring assets worth Rs. 1,00,000 from Lahore in June, 1947, and these assets were admittedly not disclosed by the assessee despite the Press Note issued by the Government of India. Then, how, could any inference be drawn from the non-disclosure of the assets by the assessee that the assessee must not have brought assets representing the balance of Rs. 2,33,414 ? Whether the assets brought by the assessee were Rs. 1,00,000 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 deposited the same in a sealed trunk with the Amritsar branch of the Imperial Bank of India, these o .....

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