TMI Blog1969 (3) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... director) 10,000 5. Shrimati Rama Jain (wife of Shri Santi Prasad Jain) 10,000 6. Shri Alok Prakash Jain (son of Shri Shanti Prasad Jain), minor, up to 26-10-53. 10,000 7. Rishabh Investment Ltd. 5,000 8. Dalmia Jain Co. Ltd. 2,000 9. Universal Bank of India Ltd. 980 10. Ashoka Agencies Ltd. 2,00 -------------- 50,000 ------------- 50,000 shares of Rs. 10 each, fully paid. -------------------------------------------------------------------------------------------------------------------------------------------------- The point for consideration before the Income-tax Officer was whether the provisions of section 23A would be applicable to the dividends earned by this company. " Section 23A-company " has been defined under section 23A(1) and if the conditions specified therein are fulfilled in relation to the affairs of a company, the undistributed dividends are deemed to have been notionally distributed to the shareholders in accordance with the quantum of their shares and taxable as part of their total income. But this provision does not apply to a company the shares of which (not being shares entitled to a fixed rate of dividends whether with or without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be independent of one another, and members of the family of Shri Shanti Prasad Jain must not be lumped together as being under the control of Shri Shanti Prasad Jain. The Income-tax Officer, in his original order, dated the 25th of September, 1957, proceeded on the footing that, since, at least, 40,000 shares were held by a number of close relations of the managing director, they could not be regarded as shares held by the public. On appeal, however, the Appellate Assistant Commissioner set aside the order of the Income-tax Officer on the authority of the case of Raghuvanshi Mills Ltd. v. Commissioner of Income-tax in which it has been laid down that the mere fact that a shareholder is a relative of the director would not make such a shareholder ipso facto a person under the control of the director thus ceasing to be a member of the public. Reference was also made to the cases of jubilee Mills Ltd. v. Commissioner of Income-tax and Commissioner of Income-tax v. H. Bjordal. The case was remanded accordingly to the Income-tax Officer for a fresh finding. The Income-tax Officer, on this occasion, found a few more facts as follows : (i) One of the shareholders, Shri Alok Praka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also made to two transactions : (i) in hessian and (ii) in Indian Iron shares between the company, which was under the control of Shri Shanti Prasad Jain, and Shrimati Rama Jain, his wife. In the former transaction through Messrs. Kabra Co., the company incurred a loss of Rs. 2,02,500, and Shrimati Rama Jain made a profit of Rs. 2,02,500 and, in the latter transaction through Messrs. Bagla Co., the assessee-company incurred a loss of Rs. 22,563, and Shrimati Rama Jain made a corresponding gain. The Income-tax Officer described this coincidence as a step on the part of the managing director of the company so that Shrimati Rama Jain might make a personal profit at the cost of the company. Reference was also made to the fact that Shri Ashok Kumar Jain was made managing director on a salary of Rs. 6,000 per month at a time when he was still a minor, and this could not be so if be was not the son of Shri Shanti Prasad Jain who happened to be in control of the voting power of the shareholders the entire family holding 80 per cent. of the share capital of the company. It is not necessary to set out other facts : it is sufficient to state that, in the circumstances, it could not be hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case to the High Court under section 66(1) of the Act arising out of the order of the Tribunal, dated the 26th January, 1961, in I.T.As. Nos. 7407 and 7408 of 1959-60. The Tribunal was satisfied that a question of law did arise out of the order in question on the facts in those cases which are common. The two applications were consolidated, and a statement of case was drawn up and referred to this court. The question referred to by the Tribunal stands as follows : " Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that the provisions of section 23A of the Income-tax Act were not applicable to the assessee-company for the assessment years 1953-54 and 1954-55 ? " This court, however, by order dated the 9th of December, 1963, on a consideration of the two important cases, Raghuvanshi Mills Ltd. v. Commissioner of Income-tax and Commissioner of Income-tax v. Jubilee Mills Ltd. held that the Tribunal did not apply the correct test in finding out whether the assessee-company fulfilled the requirements of the Explanation to section 23A of the Act, to which the provisions of section 23A would not be applicable. The finding of the Tribunal was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court would accept it as binding and would not be competent to go behind it, the finding of fact, however, in the circumstances of the present case, could not have any binding force for the High Court in the reference inasmuch as, in the present case, the Tribunal has not answered the question which was referred to it for stating a supplementary case. The Tribunal has not reviewed the entire evidence because, in the first place, certain items of additional evidence were sought to be produced before the Tribunal which it refused to bring on record under the wrong impression in law that the High Court left it to the discretion of the Tribunal as to whether additional evidence would be taken, and, secondly, that the entire evidence was not considered by the Tribunal. Reliance was placed by the Tribunal on a decision of the Supreme Court in Keshav Mills Co. Ltd. v. Commissioner of Income-tax which related to the statement of a supplementary case. It was held in that case that, in drawing up a supplementary statement of case, such material evidence as might be already on record but which had not been taken into account in the statement of the case initially under section 66(1) alone sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances, to give further latitude to the department to bring these matters on the record once again to fill up the lacuna. In my opinion, the argument urged on behalf of the assessee is well-founded. The matter is covered by the decision of the Supreme Court in the above case and, if the High Court gave a positive direction to the Tribunal to adduce more evidence, the direction should have been differently worded, apart from the fact that such a direction would have been incorrect in view of the decision of the Supreme Court in Keshav Mills Co.'s case. It could well have been said that the Tribunal should allow the department to bring on record more evidence if it desired to do so. That, however, was not the direction and, in the circumstances, if the Tribunal declined to bring on record more evidence, the view of the Tribunal cannot be challenged as running counter to the direction of this court. The Tribunal also referred to the decision as already stated in the case of Keshav Mills Co. Ltd. v. Commissioner of Income-tax, in which it has been held that in calling for a supplementary statement of the case under section 66(4) of the Indian Income-tax Act, the High Court could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of Shrimati Rama Jain, causing detriment to the interest of the company. Mr. Pal, however, has urged in reply that the finding returned in the case by the Tribunal is purely a question of fact, having taken into consideration all these circumstances, and it cannot be interfered with on the ground of its being perverse. What is a perverse finding of fact has been considered in the following decisions : Bhikamchand Bagri v. Commissioner of Income-tax, Venkataswami Naidu (G.) and Co. v. Commissioner of Income-tax and Edwards v. Bairstow. In the case of Edwards v. Bairstow Lord Simonds observed that even a pure finding of fact may be set aside by the court " 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 stated that no misconception may appear on the face of the case but " it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. In those circumstances, too, the court may intervene. It has no option but to assume that there has been some misconception of the law a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , (vii) and (viii) do not bear on non-consideration of facts. In reply to this, Mr. Pal has referred to the cases of G. Venkataswami Naidu (G) and Co. v. Commissioner of Income-tax and Sri Meenakshi Mills Ltd. v. Commissioner of Income-tax, for the proposition that acting intelligently is not a legal test, and, even if the Tribunal did not arrive at the correct conclusion, the finding of fact recorded by it must nevertheless be held to be binding on the High Court. He has also referred in this connection to the decisions in Kshetra Mohan-Sannyasi Charan Sadhukhan v. Commissioner of Excess Profits Tax and Rasipuram Union Motor Service Private Ltd. v. Commissioner of Income-tax Special stress has been laid on the decision of the Supreme Court in the case of Bai Velbai v. Commissioner of Income-tax, in which it has been held that a finding of fact does not alter its character as one of fact merely because it is itself an inference from other basic facts ; but a finding on a question of fact is open to attack under section 66 of the Indian Income-tax Act, 1922, as erroneous in law when there is no evidence to support it or if it is perverse or has been reached without due considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken to be acting as a group in concert so that the shares held by them could not be regarded as shares held by the members of the family as a block. Since, however, it has been held by the Supreme Court in Raghuvanshi Mills' case, that the mere fact that the members of the family hold shares together in a company would not necessarily lead to the inference that they are acting in (concert, unless there be proof of such acts on their part so as to support the inference of their acting as a group, no adverse inference can be drawn against such shareholders of a company so as to apply to it the provisions of section 23A of the Act. The Tribunal has approached the question from this angle and since onus to prove such acting lies upon the income-tax department as referred to by the Tribunal, relying upon the case of Commissioner of Income-tax v. Gangadhar Banerjee and Co., and no evidence having been brought on record to that effect, the assessee could not be placed in the category of such company merely because of the close relationship of Shri S. P. Jain with Shri A. K. Jain and Shrimati Rama Jain. It is difficult to hold that the conclusion of the Tribunal, in the circumstances, is s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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