TMI Blog1972 (6) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... ck singer and as such connected with the film world. On 23 rd August,1960, she purchased a flat in " Prabhu Kunj " at Peddar Road in Bombay for a sum of Rs. 45,000. She had another flat at Walkeshwar in Bombay, which she sold off on 12th October, 1960, to one Vasantrai Prabhudas Jobanputra. While enquiring into the purchase and sale the Income-tax Officer found entries pertaining to a sum of Rs.95,000 in the books of the assessee. A sum of Rs. 95,000 was alleged to have been borrowed by her on hundi loans. The Income-tax Officer called upon her to explain these alleged loans. In answer to that requisition the assessee filed her account books. They appear at exhibit " B " in which there appear entries of borrowings from as many as ten different persons said to be financiers or bankers of hundi loans. The Income-tax Officer decided to check these alleged borrowings. Therefore, he summoned the 10 persons named, under section 131 of the Income-tax Act, but when the summonses were sent by registered post they were returned with the remark " Not claimed " even though they were directed to the addresses given by the assessee herself, except in one case, namely, of the financier Shamdas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brokers." The assessee's chartered accountants also enclosed with the said letter a supporting letter of Messrs. Thakoredas Co. dated 29th November, 1962, in which the solicitors stated: "We, therefore, hereby confirm that we had arranged for hundi loans of a sum of Rs. 50,000 through M/s. Nichani Co., hundi brokers of Bombay, on interest at the rate of one per cent. per mensem." Two things may be noted regarding this letter of 4th March, 1963, firstly, that the assessee disclosed for the first time that these transactions of borrowings going to make up a sum of Rs. 95,000 reflected in her account, were not by her directly but by her solicitor, the said Shantikumar. Secondly, by producing the letter of the solicitor for the first time the assessee also disclosed that the solicitor had arranged a sum of Rs. 50,000 through Messrs. Nichani Co., hundi brokers of Bombay. Expectedly, the Income-tax Officer called upon the assessee by a letter of 8th March, 1963, to produce the parties from whom she had borrowed the money with their books of account " with the help of her solicitor ". He pointed out that he had reason to believe that the hundi bankers from whom she had borrowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the same time the Income-tax Office also enclosed the statement of Kanayalal, the proprietor of M/s. Nichani Co., and told the assessee that he would like to give her a final opportunity to show cause as to why the amount of Rs. 95,000 should not be treated as her income from undisclosed sources. By reply dated 14th October, 1963, on her behalf her chartered accountants expressed some surprise at the conclusion which the Income-tax Officer proposed to draw and themselves requested the Income-tax Officer " to issue summons to the said Shri Kanayalal Hiranand, asking him to produce his books of accounts, duplicate of his bills for brokerage, his hand pass book and certified copy of a statement or Statements referred to by him in reply to question No. 7 ". On 24th October, 1963, however, the same chartered accountants on behalf of the assessee wrote to the Income-tax Officer attacking the evidence of Kanavalal Hiranand saying that " the testimony of this witness should be entirely discredited since he had lied about several material facts ". On 21st November, 1963, again similarly the same chartered accountants on behalf of the assessee wrote a long letter to the Income-tax Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned." Question No. 22 is further relevant as to this pleading. It was as follows? Question No. 22 : " What is the evidence available with you to prove that you received interest and brokerage from Smt. Lata and her mother and passed on to the broker? " Answer : " There is no documentary evidence." As regards the repayment of these loans he stated that the assessee and her mother returned the amounts in cash to his firm. He was asked what was the evidence regarding these loans and he repeated : " As regards Rs. 45,000 the same was deposited in our clients' account with the Central Bank of India Ltd., and as regards Rs. 50,000 there is no documentary evidence." Even as regards the amount of Rs. 30,000 the third item (with which we are not really concerned here) he admitted that there was no entry in his books of account. To question No. 28 : " Can you establish the fact that this money passed through you ? " his answer was : " No evidence except my oral evidence ". He was asked whether the transactions of Rs. 30,000 and Rs. 30,000 were not passed through his books particularly when all other transactions had been entered in his clients' account and his answer was : " It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anayalal and it was at that stage that the solicitor changed his case and for the first time disclosed that he had never dealt with Kanayalal at all but he had dealt with two other persons, Hariram and Khiaram (vide answer to question No. 2). According to him " there were three persons in that firm, M/s. Nichani Co." He was asked whether Kanayalal was not the proprietor of Nichani Co. and his answer was " Hariram or Khiaram used to come to my office and they brought the brokerage vouchers. Kanayalal rarely came to my office and generally all transactions were put through Hariram or Khiaram ". He has not said in so many words that Hariram and Khiaram were partners of Nichani Co. but suggested vide answer to question No. 5 that they had some sort of a representative capacity on behalf of Nichani Co. It was put to him that the brokerage slips were not signed by anybody on behalf of Nichani Co. and his answer was : " Generally the brokerage slips are never signed " He has stated that Kanayalal was not telling the truth. Thereafter, Kanayalal was again examined and he has denied that Hariram and Khiaram were his partners though he knows Hariram and Khiaram. They are brokers do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kers that he procured the alleged loans from 10 persons mentioned in the account of the assessee. In the assessee's account books the names of all the financiers alone appear, neither the names of the solicitor nor Nichani Co. appear. It is the solicitor's case that he dealt only with Nichani Co. It then remains unexplained where the assessee got the names from. (3) In his own account also the solicitor has mentioned so far as the amount of Rs. 45,000 is concerned, the names of the five financiers from whom Rs. 45,000 were borrowed. What is still more surprising is that the name of Nichani Co. through whom this amount was borrowed nowhere appears in the account books of the solicitor. (4) Furthermore, the account books of the solicitor show that Rs. 45,000 were borrowed on 23rd August, 1960, from the five parties mentioned in the account and on the same day Messrs. Tolani Co. had sold to the assessee the flat in Prabhu Kunj. (5) Then according to the solicitor's account a sum of Rs. 45,000 was received from Smt. Dinanath Mangeshkar in repayment of the loan borrowed from the five parties and on the very next day, i e., 14th October, 1960, the five parties were paid off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clients. Why then was the amount of Rs. 50,000 not mentioned in his books while the amount of Rs. 45,000 appears in his books, stands unexplained. His explanation that the amount of Rs. 45,000 was entered in the books because it was paid by cheque and the amount of Rs. 50,000 was not entered because it was paid in cash, has only to be stated to be rejected. We are not surprised therefore that the Tribunal has disbelieved him and rejected his explanation. (9) But, the most important circumstance is that in this case in order to explain where these amounts were obtained it was the solicitor who disclosed that they were obtained through the brokers, Nichani Co., and it was he who furnished the address which was communicated by the assessee to the Income-tax Officer. When, however, the assessee summoned the proprietor of Nichani Co., namely, Kanayalal, the latter totally denied having anything to do with these transactions or having these alleged loans. It was after Kanayalal made this statement that the solicitor was further examined and it was at that stage that the solicitor came up with the names of Hariram and Khiaram as being the persons who dealt with him on behalf of Nich ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solicitor's admissions as to his conduct, vis-a-vis the transactions, leave much to be desired. He has admittedly received the sum of Rs. 50,000 from his clients as clients, but has not entered it in his books of account. Such entries as are found in the books of account regarding the total sum of Rs. 45,000 do not support the story which was subsequently told in the witness box. His account books do not tally with the account books of the assessee. Generally we are somewhat surprised with the conduct of this solicitor who has admitted that he procured finances from certain unknown brokers who in spite of the best efforts of the department are still not found and could not be examined and that he lent himself to such transactions does not speak much in his favour. In some he has merely lent his name and official position as a solicit or to cover up the shady transactions of the assessee. It is between such a person and Kanayalal on the other hand that the Tribunal had to choose and in the circumstances the Tribunal decided to believe Kanayalal's story and disbelieve that of Shantikumar Gandhi (vide paragraph 19 of their order). It is clearly a finding based upon a pure appreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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