9911796707
TMI Blog1970 (3) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... company belonged to six shareholders, but as on March 31, 1946, two of the shareholders with a small holding had transferred their shares and the whole of the share capital belonged to four persons. Out of the 2,000 shares, one Lachhmandas Gaddarmal was the owner of 1,880 shares. Deviprasad Khandelwal was owner of 70 shares. For the first assessment year 1944-45, the assessee-company disclosed a loss, Rs. 16,000. For the assessment year 1945-46, it returned the income-profit of Rs. 2,529, but was assessed for the income of Rs. 5,514. In the assessment year 1946-47, the original assessment was only made on an income of Rs. 20,593. Prior to October 4, 1954, the Income-tax Officer began inquiries in connection with the reassessment of the assessee-company under section 34. He served the assessee-company with a letter dated October 4, 1954, containing several queries. This letter indicated that the questions raised related to the ledger account standing in the name of one Ramsaran Pyarelal of Jaipur in the books of the assessee-company in the above accounting year. Now, the facts about this account may be summarised as follows : Prior to August 22, 1945, according to the case of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee-company, but did not receive any reply till February 28, 1955. On that day, the Income-tax Officer received the letter dated February 26, 1955, from the assessee-company giving point by point reply to the questions raised by the Income-tax Officer in his letter. In connection with Ramsaran Pyarelal, it was stated that he was residing at London and his London address was given. It was stated that he was an employee of Khandelwal Ltd. in London. It was further stated that tax was not deducted in respect of profits of Rs. 29,000 and odd, because, at the material time, Ramsaran was a non-resident. In this reply, the assessee-company also gave facts relating to the above ledger account of Ramsaran Pyarelal and the forward transactions in gold effected in the account of Ramsaran Pyarelal. It stated that at the relevant time the address of Ramsaran Pyarelal was Johari Bazar, Jaipur, and the same was the address of Jaipur Finance Corporation. At the end of the transaction, gold was delivered to a munim of Ramsaran Pyarelal. They promised to dig out and produce correspondence of instructions given by Ramsaran and also similarly the cash book for the relevant period. The cash book was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examine Deviprasad and Ramprasad and, if possible, Ramsaran Pyarelal. The department should also ascertain the financial position of Jaipur Finance Corporation Ltd. and Ramsaran Pyarelal by reference to the Income-tax Officer, Jaipur. The Tribunal was furnished with a remand report which is annexure " D " to the statement of the case. Ramsaran Pyarelal who was out of India could not be examined. He had in his letter dated August 25, 1958. stated that extensive business in ready and forward gold was done by him at Jaipur up to the year 1948 through Inderchand Juniwal and other parties of Jaipur. That business was closed in the year 1948. The business was the business of the family of Ramsaran Pyarelal. The Jaipur Finance Corporation had gone into liquidation on June 21, 1948. By its order dated April 28, 1960, the Appellate Tribunal referred to the relevant facts and evidence on record and in paragraph 10 of the order held that the profit of Rs. 29,742 had not been shown to have been made by the assessee-company by getting instructions from Ramsaran Pyarelal and the profit had not been shown to have been paid over to the customer. These profits were the profits of the assessee-co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer by the assessee, the amount in the entry should be treated as income of the assessee from undisclosed sources. In support of that proposition, Mr. Joshi relied upon the observations of the Supreme Court in Govindarajulu Mudaliar v. Commissioner of Income-tax, Lakhmichand Baijnath v. Commissioner of Income-tax, Kale Khan Mohammed Hanif v. Commissioner of Income-tax and Sriram Jhabarmull (Kalimpong) Ltd. v. Commissioner of Income-tax. Mr. Joshi's submission was that having held that the profits in the above ledger account of Ramsaran Pyarelal belonged to the assessee-company, the Appellate Tribunal was bound to make a finding that the whole of the account was benami account of the assessee-company. The capital with which the business in the account was shown to have been done should have been held to be of the ownership of the assessee-company. He submitted that the Appellate Tribunal's finding that the capital used in this account was of the ownership of one or the other of the shareholders of the assessee-company was an inference without any supporting evidence on record. The inference was accordingly entirely unwarranted and unreasonable and/or perverse. For this reason, accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could justly in the facts and circumstances of the case, be held that the unexplained cash credit was the income of the assessee." In that connection, he relied upon Chaturbhuj & Co. v. Commissioner of Income-tax and Orient Trading Co. Ltd. v. Commissioner of Income-tax, which last decision is a decision of a Division Bench of this court. His submission was that, after rejecting the explanation of the assessee-company in respect of the cash credits in its books for Rs. 1,35,000, the Tribunal rightly applied as a last fact-finding Tribunal its mind to the question of including this amount in the assessable income of the assessee-company. The Tribunal was within its jurisdiction to hold that it was not satisfied that this amount was not income of the ownership of the assessee-company. The reasons mentioned by the Tribunal in that connection, whether reasons of facts and/or inferences, were not liable to be reconsidered by this court. The power and jurisdiction that the Tribunal had to include this amount in the income of the assessee-company included the power to refuse to do so. Here also, Mr. Dastur repeated that the question was only a question of fact. In connection with his ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be said to be discharged by him. It will not, thereafter, be for the assessee to explain further how or in what circumstances the third party obtained money and how or why he came to make a deposit of the same with the assessee. The burden will then shift on to the department to show why the assessee's case cannot be accepted and why it must be held that the entry, though purporting to be in the name of a third party, still represents the income of the assessee from a suppressed source. In order to arrive at such a conclusion, however, the department has to be in possession of sufficient and adequate material." In the case of Chaturbhuj & Co. v. Commissioner of Income-tax the Allahabad High Court referred to the decision of the Supreme Court in the case of Govindarajulu Mudaliar v. Commissioner of Income-tax and observed : " The money in the books of account in that case, as we have stated earlier, showed these moneys as belonging to the assessee-partner and to have been received by the firm from him. No inference was drawn by the Supreme Court that the amounts deposited represented revenue receipts of the (assessee) firm ...... The amounts having been found to belong to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as mentioned in the same terms as the question before us. It is however true that in the application made under section 66(2) to this court, it was alleged that the finding of the Tribunal was perverse. On inquiries repeatedly made by us, Mr. Joshi has not been able to submit that in connection with the question of the cash credit in respect of the sums of Rs. 1,00,000 and Rs. 35,000 evidence was not on record. He was unable to state that the finding of the Tribunal rejecting the inclusion of the sum of Rs. 1,35,000 in the assessable income of the assessee-company was not in respect of a question of fact. His main submission was that the above finding of the Tribunal was mainly based on its inference that the above money might belong to one or the other of the shareholders. The above money might belong to Lachhmandas Gaddarmal. In his submission, this inference which was the basis of the finding made by the Tribunal, is not warranted on the evidence on record. The finding having been arrived at on the basis of this inference, which was not warranted, must be held to be perverse. We find it extremely difficult to accept this submission made by Mr. Joshi In refusing to hold this sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unless he has applied for a reference of the specific question under section 66(1). It is for the party who applies for a reference to challenge those findings of fact first by expressly raising the question about the validity of the findings of fact, and if he has failed to do so, he is not entitled to urge before the High Court that the findings of the Appellate Tribunal are vitiated for any reason. " These observations of the Supreme Court in the case of Commissioner of Income-tax v. Greaves Colton & Co. Ltd. are wholly applicable to the contentions made by Mr. Joshi. The revenue failed to raise any question about the findings of the Tribunal having been arrived at without any evidence on record or being perverse in the application under section 66(1). As the revenue had failed to do so, it was not permissible for Mr. Joshi to raise these questions indirectly in support of the case of the revenue on the question raised before us. In the case of Commissioner of Income-tax v. Smt. Anusuya Devi, the Supreme Court observed: " There is also no ground for restricting that power (to decline to answer the question) when by an erroneous order the High Court has directed the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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