TMI Blog1970 (2) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... es the department sought to bring to tax Rs. 99,769 and Rs. 1,20,563, respectively, as being remittances from Iran, being a non-taxable territory, into India, being a taxable territory, under the provisions of section 4(1)(b)(iii). The question arising is : Whether the amounts of those references or any part or parts thereof were liable to be so taxed. The assessee is an Iranian. His father died in Iran in 1925, when the assessee was about fifteen years old. The assessee came to India, for the first time, in 1934. The assessee took up service with Messrs. Zarthosti and Sons, Bombay, on a salary of Rs. 100 per month, which was from time to time increased till it reached Rs. 200 per month. In the summer of 1941 the assessee went to Iran and returned to India towards the end of 1943. In 1944 the assessee started his own business of export and import and in exchange of currency between Iran and India. For that purpose he established an office in Bombay and branch office at Yezd in Iran. So far as these two references are concerned, it will suffice to state that the remittances sought to be taxed have been credited by the assessee in his capital account, being account No. III in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the case herein, which certifies that the assessee's office at Yezd was established in the year 1943-44. As there is no dispute that the assessee commenced doing business for the first time from about the end of 1943 or the beginning of 1944, it is unnecessary to refer to the contents of other documents on this subject. The documents having a bearing on the assessee's case about Rs. 4,00,000 may now be referred to. It is the asseesee's case that his father did not do any business at all in Iran, but that he was the owner of vast immovable properties and some jewellery and that his father during his lifetime realised a sum of Rs. 4,00,000 by the sale of immovable properties. It is his further case that he alone inherited all the wealth of his father, that at that time there were no banking facilities in Iran in the part in which they were living, that the amount of cash was kept by the assessee with a friend of his father named Rustom M. Merwani and that the amount remained buried underground. It is his further case that even when the assessee came to India, the amount continued to remain with Merwani and Merwani continued to look after the immovable properties of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first letter it is stated that the share of inheritance of the assessee was approximately rials 4,000,000 which comprised movable as well as immovable properties, whereas in the second letter it is stated that the price realised by the assessee's father by the sale of his immovable properties exceeded rials 4,000,000. The Tribunal has further pointed out that the details of the immovable properties have not been given. In spite of these discrepancies, the Tribunal has stated that at best the statement of Farsad can be taken as his oral testimony uncorroborated by any positive evidence whatsoever. The assessee also filed two affidavits, one of Khan Saheb Sarose K. Irani and the other of S. R. Ahrestani. Irani states that his father and the assessee's father were great friends and closely connected with each other in Iran till Irani left Iran for India and that even thereafter his father carried on correspondence with the assessee's father, that the assessee's father was a wealthy resident of Iran and " possessed of movable and immovable properties which a few years prior to his death he sold off and that the assessee, being the only son and the only heir of his father, inherit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and appreciation of their contents, but, in our opinion, the omission of the Tribunal to refer to them has caused no harm to the assessee because neither of the two affidavits supports this part of the assessee's case about his father having sold the properties during his lifetime and collected Rs. 4,00,000 in cash which the assessee inherited. The assessee had made a statement of his total wealth and filed it before the Iranian authorities and the assessee produced a copy of it before the income-tax authorities, being annexure " F " to the statement of the case. The statement is a statement of wealth of the assessee at the time of the establishment of his Yezd office in 1944. The important thing to bear in mind is that the statement is dated some time in 1954-55 which means that it was filed during the later year but as of 1944. It shows, inter alia, that his wealth included, inter alia, " cash capital " of " 4,00,000 " without mentioning the unit of the currency. It thereafter mentions gold ornaments and jewelleries and ancestral immovable properties. The immovable properties have been serially noted and they numbered eleven. This statement was actually made by one Mehraban Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upees in 1944 is also not supported by any credible evidence." In our opinion, the Tribunal was right in rejecting this contention. It must, however, be noticed that Farsad was a high Government officer. There is no reason why has evidence should be totally discarded. He says of his own knowledge that the assessee's father had during his lifetime sold at least some of his immovable properties. Irani's statement also suggests that the assessee's father must have sold at least some of his immovable properties, although Irani does not mention of what value. Ahrestani's statement is practically to the same effect, but he states that the sales fetched tomans 3,50,000 in the aggregate. We have agreed with the Tribunal in so far as it holds that it has not been proved that the sales fetched a sum of Rs. 4,00,000 in cash. But although the assessee's claim that the immovable properties sold by his father fetched Rs. 4,00,000 in cash cannot be accepted, in our opinion, the fact that the assessee's father did sell some of his immovable properties and realised some substantial amount in cash cannot be totally rejected. Of course, the evidence is not at all sufficient to establish what was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal in respect thereof in the two subsequent assessment years 1946-47 and 1947-48. But, what is of importance is that the Appellate Assistant Commissioner, because of his said conclusion, proceeded to ascertain the amount of profits which had accumulated in the hands of the assessee for the eleven years from 1st April, 1933, to 31st March, 1944, because remittances from Iran out of the profits accumulated up to 31st March, 1944, made during the accounting year 1st April, 1944, to 31st March, 1945, would be relevant to the assessment year 1945-46. The foreign business of the assessee commenced only in about the beginning of 1944 and its income for the last about three or four months of the assessee's accounting year ended 31 st March, 1944, was assessed at Rs. 3,000. The assessee did not have any other income from business in Iran. The Appellate Assistant Commissioner has observed, as a fact, that the assessee had not produced any accounts of his income at Yezd, whether the income be of the business or from the immovable properties, earned at any time up to 31st March, 1944. For the next year, being assessment year 1945-46, the Appellate Assistant Commissioner then took int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 769 being the amount of remittances in that year only Rs. 37,800 could be brought to tax under section 4(1)(b)(iii) in the assessment year 1946-47. The order of the Appellate Assistant Commissioner in respect of the next assessment year 1947-48 proceeds on an identical basis. It should, however, be stated that the entire available income in Iran accumulated up to 31st March, 1945, had been exhausted in the assessment year 1946-47 and nothing out of it remained available for the assessment year 1947-48. Moreover, the assessee's income in Iran in the assessment year 1946-47 had actually been brought to tax in India as part of his taxable income and it did not therefore survive for consideration as being-taxable under section 4(1)(b)(iii). As regards, the assessment year 1946-47 the Tribunal has, as seen earlier, rejected the assessee's contention that he had Rs. 4,00,000 in cash in Iran as his patrimony. Having reached that conclusion, what the Tribunal has held is that the actual source from which the remittances came to be made was within the assessee's special knowledge, that the assessee put forward a positive case which failed and that the departmental authorities would be j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the beginning of such year and after the 1st day of April, 1933, are brought into or received in the taxable territories by him during such year, or ...... " The decision of the Tribunal has been reached on the basis that the burden of proof was on the assessee and that it was the assessee who had affirmatively to prove that the remittances were out of amounts other than accumulated profits and also to prove what was the exact amount of his accumulated profits at the relevant time. It is necessary to examine the position as regards the burden of proof in respect of the provisions of section 4(1)(b)(iii). In this connection a reference may be made to a judgment of a Division Bench of the East Punjab High Court in Commissioner of Income-tax v. Jankidas Rewari. The question of presumption has been dealt with in the following passage occurring in the judgment of Achhru Ram J. appearing at page 412 of the report : " Where an assessee having business connections abroad which may result in profit has received remittances from out of the funds of the business carried on by him or on his behalf in the foreign country and he is unable to show or explain that the remittance was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he knowledge of the assessee. In the case of Commissioner of Income-tax v. R. M. Raja, Chief Justice Chagla, in delivering the judgment on behalf of a Division Bench of this court, has considered the judgment in Commissioner of Income-tax v. Jankidas and followed that judgment and stated that if remittances are made from a non-taxable territory into the taxable territories and if it is established that profits were available in the non-taxable territory, then a presumption would readily arise that the remittances were out of the profits and it would be for the assessee to rebut that presumption. The provisions of section 4(1)(b)(iii) were again considered by a Division Bench of this High Court in the case of Kalyanji Ukka Co. v. Commissioner of Income-tax. Chief Justice Tambe, who delivered the judgment on behalf of the Division Bench, analysed the provisions of section 4(1)(b)(iii) and observed that there were six essential conditions which had to be established and enumerated those conditions and stated that the burden of establishing those conditions would be on the department when it is seeking to tax income, profits and gains which had accrued or arisen to the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , not at all considered that aspect and held that the burden of establishing the assessee's case that he had Rs. 4,00,000 available in cash by way of his patrimony has not been proved and, as the burden lay on the assessee and the assessee did not discharge that burden, the presumption that the remittances were out of accumulated profits was not rebutted and, therefore, all the remittances must be held to be out of accumulated profits in Iran and, therefore, taxable under section 4(1)(b)(iii). Mr. Joshi, the learned counsel for the department, contended that it is true that the burden of proving that the assessee had accumulated profits in a non-taxable territory is on the department, but that that burden would be discharged if the department proves that the assessee had at the relevant time a source of income in the non-taxable territory. He contended that once the department proves the existence of such a source, the burden would then be on the assessee to establish whether there were any accumulated profits, and, if there were, what was the amount thereof because these facts would be in the exclusive and special knowledge of the assessee. He contended that it was because of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption that there were accumulated profits, the provisions of section 114 of the Evidence Act require that the amount of such accumulated profits must be correlated to the source and the presumption would apply only to the extent of the probable amount of profits which that source would enable accumulation. Mr. Joshi relied upon the decision of the Supreme Court in Commissioner of Income-tax v. Kumbakonam Mutual Benefit Fund Ltd. In that case certain cash credits appearing in the books of account of the assessee were not accepted as having been borrowed by the assessee and were, therefore, treated as the income of the assessee. Mr. Joshi contended that similarly as the assessee's case that the remittances were out of the said sum of Rs. 4,00,000 has not been accepted, all the remittances must be deemed to have been made out of the accumulated profits of the assessee. In our opinion, this decision has no relevance to the point under consideration. In the case before the Supreme Court, once the assessee's story of a loan was not accepted, the only other possibility was to hold that it was his income which was credited as a cash credit. In our case even if the story of a remittance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aled by the statements of the Iranian income-tax officer never exceeded about Rs. 4,000 to Rs. 5,000 on an average, and in respect of the assessment year 1945-46 his business income in Iran has been assessed at Rs. 3,000 only. These amounts would not be sufficient to be the source of remittances which are of very large amounts aggregating to about Rs. 2,50,000 in the three years. It is true that the assessee has not produced his books of accounts. It must, however, be remembered that when the assessment proceedings were going on in about 1955 or so, the accounts required would be of a period as old as thirty to twenty years. Moreover, the assessee himself had not been in Iran during a major part of the period for which the accumulations of profits were to be ascertained. The Appellate Assistant Commissioner has adopted the correct approach of assessing the amount which would be available out of the assessee's income in Iran, what the accumulated profits would be and limiting the presumption that the amounts of the remittances were out of the accumulated profits to the amount of profits so ascertained. As a matter of fact, the amount of accumulated profits so ascertained for the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings of assessment which took place in pursuance of that notice are invalid. This is the ratio laid down by the Supreme Court in its said judgment in the case of Commissioner of Income-tax v. Ranchhoddas Karsondas Mr. Joshi has not disputed this position. The only question is whether the Tribunal was entitled in law to refuse to allow the assessee to urge that ground in the appeal before it. Now a Division Bench of this High Court in Commissioner of Income-tax v. Hazarimal Nagi Co., after considering the relevant sections of the Income-tax Act and the relevant Rules made thereunder, held that the powers of the Appellate Tribunal are similar to the powers of an appellate court under the Civil Procedure Code. It has further held that the respondent in an appeal is undoubtedly entitled to support the decree which is in his favour on any grounds which are available to him, even though the decision of the lower court in his favour may not have been based on those grounds. It has further held that if the appellant in his challenge to the decree of the lower court is entitled to take a new ground not agitated in the court below by leave of the court, there appears to be no reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that he wanted to rely upon it only for the purpose of having the appeal by the department for enhancement in income-tax dismissed. But even if the assessee had not made such a statement, the above judgment shows that the assessee would be entitled to raise a new ground, provided it is a ground of law and does not necessitate any other evidence to be recorded the nature of which would not only be a defence to the appeal itself, but may also affect the validity of the entire assessment proceedings. If the ground succeeds, the only result would be that the appeal would fail. The acceptance of the ground would show that the entire assessment proceedings were invalid, but yet the Tribunal which hears that appeal would have no power to disturb or to set aside the order in favour of the appellant against which the appeal has been filed. The ground would serve only as a weapon of defence against the appeal. If the respondent has not himself taken any proceedings to challenge the order in appeal, the Tribunal cannot set aside the order appealed against. That order would stand and would have full effect in so far as it is against the respondent. The Tribunal refused to allow the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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