9911796707
TMI Blog1959 (3) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... tor thereof. For the assessment year 1948-49 (the accounting year being the year ending March 31, 1948), he submitted a return on September 7, 1948, in which he showed a net loss of Rs. 7,224 in his business under the head "business, profession or vocation." In the course of the investigation the Income-tax Officer, Madurai, found two cash credits in the books of account produced by the appellant showing a sum of Rs. 1,05,000 under date March 1, 1948, representing a draft from the Imperial Bank of India Ltd., Porbandar, and a sum of Rs. 53,199-12-6 under date March 15, 1948, representing a draft from the Porbandar State Bank through the Central Bank of India Ltd., Bombay, credited to the account of Yamna Bai Ahamed, the maternal grandmother of Kathija Bai Habib, wife of the appellant. The appellant was called upon to explain these entries and he made his statement on January 26, 1949, before the Income-tax Officer who recorded the same. His explanation was that the said two sums represented the sale proceeds of gold, jewellery and sovereigns which belonged to Yamnabai who was a native of Ranavav near Porbandar in Saurashtra. His case was that she was living in Ranavav but had com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b and her husband, the appellant, that besides the jewels given to her daughter and after her death to her granddaughter and the sum of Rs. 73,000 gifted to the said granddaughter in or about the year 1935, she had also with her jewels and sovereigns which were her own, gifted to her on various occasions, that when she had come to Madurai, which was with the intention of going back, she had left the jewels and sovereigns behind in her house at Ranavav, that as she had settled down there she wanted the jewels to be disposed of and invested in the business of her granddaughter's husband, that she accordingly gave a power of attorney to Omar Salay Mohamed, i.e., the appellant, on January 30, 1948, and instructed him to sell the same at Ranavav and bring down the cash to Madurai, that he went there personally, sold the same and brought the sale proceeds through bank drafts, that on account of the prevailing high prices he was able to get by sale Rs. 1,58,452-4-3, that these jewels and sovereigns belonged to her entirely and exclusively being gifts given to her on various occasions by her parents, her husband and other relations, that these monies had been invested in two instalments wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of her marriage with the appellant, a statement which was allegedly inconsistent with the statement contained in her affidavit dated February 24, 1949, and (2) that the jewellery and gold ornaments were very heavy in weight, an almost impossible burden for any woman to wear even if she be madly in love with jewels and there were Har Kanthas as many as eight in number which again was not easy to understand. Having thus rejected the explanation of the appellant on these grounds the Income-tax Officer proceeded to observe that besides the trade in piecegoods on a considerable scale the appellant also carried on speculation in shares and securities, that he had also got a yarn trade, that though the piecegoods business was carried on on a very large scale, no quantative particulars were kept, and that with his connections all over India and with innumerable businesses carried on by him either directly or indirectly it was nothing improbable for the appellant to have earned nearly Rs. 1,60,000 in the course of a year. Accordingly, he made the assessment order on date March 31, 1949, adding the sum of Rs. 1,58,200 which represented the cash credits in the account of Yamnabai and Rs. 1,04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd hence all the jewels, gold and sovereigns were held only within the State and those who wished to leave the State and go to British India used to come to him for disposing of their jewellery, gold and sovereigns and take cash from him, that he used to sell them on their behalf on commission basis and that he had sold lots of jewels, gold bars and sovereigns on commission basis. On the very same day, i.e., April 25, 1949, the appellant filed an appeal before the Appellate Assistant Commissioner against the order of the Income-tax Officer dated March 31, 1949, being I. T. A. No. 130 of 1949-50. During the pendency of this appeal the notice under section 28(1)(c) of the Income-tax Act was heard before the Income-tax Officer and the appellant appeared before him on May 7, 1949, through his advocate and showed cause against that notice. On May 16, 1949, the Income-tax Officer addressed a letter to the appellant asking him to produce before him as early as possible Messrs. Dadamiali, Jusub, Ebrahim and Kassam Shariff with all the account books and other evidence documentary or otherwise, on which they relied in support of the statements made by them in the affidavits as he wished to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s willingness to render every assistance and carry out the directions of the Income-tax Officer in all matters within his power. Nothing further transpired after May 30, 1949, till December 16, 1950, when the Additional Income-tax Officer, Madurai, addressed a letter to the Additional Income-tax Officer, Porbandar, asking him to make detailed enquiries in the matter and let him know at a very early date regarding the genuineness of the sale as also whether Yamnabai was sufficiently rich or owned those jewels and such other material particulars as the latter could gather to strengthen the case for penalty. He also referred to the affidavits made by Dadamiah, Jusub and Ebrahim who had stated in general terms that she belonged to a rich family, that her father carried on lucrative business in South Africa and that she had a lot of jewellery, gold etc. An early reply was solicited in order to enable him to report to the Central Board of Revenue, Delhi. We find on the record a reply dated January 9, 1951, addressed by the Income-tax officer, Ward B, Junagad, to the Additional Income-tax Officer, Madurai, which reported that Yamnabai's father and husband were said to have done very g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 15, 1951. Harjivan Trikamji confirmed that the appellant had gone to his firm to sell ornaments and he remembered that the appellant had said at that time that those ornaments belonged to his mother-in-law, and he had also possessed the power of attorney. He distinctly remembered that such a talk had taken place between the appellant and his proprietor because it was a transaction of a big amount and all these things were clarified with the appellant. When he was asked to say what the ornaments were like, he replied that the ornaments were of old time and were of old model which he knew very well. Jusub Abubucker stated that he had been asked by Yamnabai to keep watch over her house and household things during her absence from Ranavav as she went to Madurai for a short period, that she thereafter changed her mind about coming back to Ranavav on account of communal troubles and sent the appellant who was the son-in-law of her daughter to dispose of all the furniture and valuables lying in the house, that he was present at the time of the removal of valuables from an " old treasure " which was in the house, that he also witnessed the removal of the ornaments and the sovereigns, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 951. All the materials which had been collected by the Income-tax Officer and the Additional Income-tax Officer, Madurai, including the correspondence which had passed between the Additional Income-tax Officer, Madurai, and the Income-tax Officer, Ward B, Junagad, and the enclosures thereto were in the file of the appellant and on June 23, 1951, the Appellate Assistant Commissioner after hearing the parties and perusing all the documents allowed the appellant's appeal in regard to the said sum of Rs. 1,59,240 and reversed the order of the Income-tax Officer passed oh March 31, 1949. The appellant was in the result declared not liable to be taxed for 1948-49 and the tax, if paid, was ordered to be refunded. In his order dated June 23, 1951, the Appellate Assistant Commissioner set out all the facts leading to the assessment order and mooted the question whether the jewels etc., did really belong to Yamnabai, if not, whether the circumstances reasonably supported the Income-tax Officer's presumption that the appellant had converted his secret profits into jewellery, gold and sovereigns, with a view to camouflage his transactions and brought such profits in his accounts by re-sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t derive any support from the statements contained in that affidavit. The Appellate Assistant Commissioner further referred to the result of the subsequent enquiries made by the Income-tax Officer, Ward B, Junagadh, and observed that the departmental enquiries made at the other end substantially supported the appellant's claim that she was possessed of valuable jewellery etc., and such jewellery etc., were sold through the Porbandar Shroff merchants in 1948 by her duly authorised attorney (the appellant) and the sale proceeds transmitted to Madurai for credit to her account in the appellant's books. The Appellate Assistant Commissioner further observed that no defects (or any other suspicious feature) had been found by the Income-tax Officer in the accounts, that the past history of the appellant was good and, therefore, the suspicion of the Income-tax Officer was not based on any material. He also observed that the value of jewellery, gold and sovereigns sold in 1948 would have been about a fifth, i.e., about Rs. 30,000 or so in 1933 when she gifted her deceased daughter's jewels of considerable value to her granddaughter at the time of the latter's marriage, and that having regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fortable capital and that the available trading capital was not more than Rs. 40,000 out of which tangible and intangible assets took away a good portion leaving a small sum towards floating capital, though it was true that the appellant's wife's account showed a credit balance of over Rs. 1,33,000. This was the background against which the Tribunal stated that the transaction in question had to be considered and the most important point to see and find out was whether in the circumstances of the case, Yamnabai could have in her possession jewellery, etc., to the tune of Rs. 1,60,000. In this behalf the Tribunal laid stress on the statements made by her in her affidavit dated November 18, 1941, and interpreted the same to mean that she had given all her jewels and cash of Rs. 73,000 to the appellant's wife in 1933 and 1935 respectively and that therefore she could not have any other jewellery, gold and sovereigns in her possession in 1948. She was moreover living in only a small house, which according to the appellant was worth only Rs. 5,000 ; she did not have any money-lending business or investments or other immoveable properties in Porbandar State and it would be strange to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he considered necessary. The Department would have then tried to trace the sale, the actual remittance from two banks, the persons who remitted the money and would have also cross-examined the purchasers regarding the disposal of such a vast wealth and other connected matters. It is improper to look at the evidence partially and arrive at a conclusion." Although it was agreed by the parties before the Appellate Assistant Commissioner that the material which has been collected by the Income-tax Officer at Junagad be treated as evidence in the assessment proceedings, it was not considered by the Tribunal. The Tribunal also pointed out the following other loopholes, viz., (1) that there was no proof or evidence as to how Yamnabai kept this vast wealth and in whose safe custody it was kept ; (2) that the handwritten Patti given by M/s. Shariff Hassan & Bros., showed that the gold was given on two different dates, on February 21, 1948, 1,222 tolas and on February 25, 1948, 750 sovereigns and it was not explained why it was necessary to give gold ornaments, bars and sovereigns in two different instalments ; (3) that there was no specific entry in the appellant's books regarding his tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act, in the High Court of Judicature at Madras on September 21, 1953, and the High Court also by its order dated August 9, 1954, dismissed the petition observing that the finding of the Tribunal that the total credit of Rs. 1,59,240 in favour of Yamnabai appearing in the books of account of the appellant represented the income of the appellant was a finding of fact and that in their opinion there was certainly evidence on record to support that finding and the circumstances and the probabilities of the case were strongly in favour of the conclusion of the Tribunal. The appellant thereafter filed an application in the High Court on January 4, 1955, for leave to appeal to this court which was dismissed on March 31, 1955, with the result that the appellant filed in this court a petition for special leave to appeal under article 136 of the Constitution on August 22, 1955. By its order dated January 31, 1956, this court granted special leave to appeal against the order, dated August 8, 1952, of the Income-tax Appellate Tribunal, Madras, in I.T.A. No. 3254 of 1951-52 and that is how this appeal has come up for hearing and final disposal before us. We have set out th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... final its decision as to the legal effect of those findings is a question of law which can be reviewed by the court. (3) A finding on a question of fact is open to attack under section 66(1) as erroneous in law when there is no evidence to support it or if it is perverse. (4) When the finding is one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of fact." On the facts and circumstances of this case we shall have to determine whether the finding of fact reached by the Appellate Tribunal was vitiated inasmuch as it was unsupported by evidence or was unreasonable and perverse in nature having been arrived at by improper rejection of evidence available in the record of the proceedings or having been based partly on evidence and partly on conjectures, surmises and suspicions. Shri A. V. Vishwanatha Sastri for the appellant attacked the order of the Appellate Tribunal and the reasoning adopted by it as under : (A) The circumstances relied upon by the Appellate Tribunal, viz., that the wholesale and retail business of the appellant in cloth showed a turnover of Rs. 13.03 lakhs but gross profit of only 6 per cent. and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his business and an inference in that behalf was, it was submitted, merely based on suspicion and conjecture. (B) The next submission of the learned counsel was that the Appellate Tribunal appears to have relied on the circumstance that the appellant according to his books of account was having a trading capital of only Rs. 40,000 out of which tangible and intangible assets took away a good portion leaving a small sum towards floating capital. Even though a credit balance of over Rs. 1,33,000 was admittedly shown in the account of the appellant's wife that balance had not been taken into account at all. If that balance of Rs. 1,33,000 had been treated as available to the appellant, as it should have been, it would have shown a trading capital of about Rs. 1,73,000 which left a substantial amount towards floating capital even taking into account the tangible and intangible assets of the business. This sum of Rs. 1,33,000 represented the accumulation of the sum of Rs. 73,000 which had been given by Yamnabai to the wife of the appellant in the year 1938, as stated by her in her affidavit, dated November 18, 1941. This sum was the subject-matter of investigation by the income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1933 to the wife of the appellant on the occasion of her marriage and kept nothing to herself except jewellery worth about Rs. 12,000 which was with her, was based on a pure misreading of her affidavit, dated November 18, 1941. This misreading of the affidavit, it was contended, was really the root cause of the whole trouble and erroneous finding. The further circumstance which impressed the Appellate Tribunal was that Yamnabai had no near relative nor anybody to look after her in Ranavav, that she had a small house, which according lo the appellant was worth only Rs. 5,000 and that it was strange that she should keep jewellery, gold and sovereigns of the value of Rs. 1,70,000 tucked away in her house costing about Rs. 5,000 just not knowing when she would flicker away with the possibility of anybody claiming the moveable property which was said to be with her. The mere fact, however, of her staying alone at her native place at Ranavav in Kathiawar and not going to live with her granddaughter at Madurai was of no consequence. The house was no doubt of the value of about Rs. 5,000 but that appears to have been the value of the house as constructed and there was evidence to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e much danger of anybody finding these valuables from the "old treasure" unless she herself gave information to anyone in regard to the same. Jusub Abubucker in fact stated that he was present at the time of the removal of those valuables from the "old treasure" which was in the house and he also witnessed the removal of the ornaments and the sovereigns by the appellant. It was contended that this circumstance, therefore, was not such as to create any suspicion in the minds of the Income-tax Officer or the Appellate Tribunal and the suspicion, if any, entertained by them was absolutely unfounded. The Appellate Tribunal also appeared to have considered it strange that the appellant who was running a prosperous business in one of the most important cloth shops in Madurai would be suffering loss with "a Pandora box of gold lying at his disposal in the distant Kathiawar State beyond the reach of the then British Indian taxing authorities." It was difficult to understand what connection there was between the losses alleged to have been suffered by the appellant in his business "and the Pandora box of gold" lying at his disposal in Ranavav. The jewellery, gold and sovereigns were not w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r statement in his examination that the ornaments were of old type which she had inherited from her father and husband whose only heir she was. The conclusion, therefore, that the appellant had in his possession that much money and he managed to remit the same from Porbandar to Madurai to give a colouring of reality was, it was pointed out, absolutely without foundation and based on no evidence at all. (D) It was next contended that the criticism of the Appellate Tribunal in regard to the Appellate Assistant Commissioner's looking at the information gathered subsequently was equally without substance. That information had been gathered by the Additional Income-tax Officer, Madurai, after having duly communicated with the Additional Income-tax Officer, Porbandar, in connection with the penalty notice addressed to the appellant and the Income-tax Officer, Junagad, in pursuance of the instructions given to him in that behalf had conducted the inquiry at that end. He had examined several persons including Harjivan Trikamji, Jusub Abubucker and Haji Dada Abdul Kassam and also made a report on date March 17/31, 1951, and all this information was in the file of the appellant. The Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement of Jusub Abubucker, ibid.). In places like these in the interior of Kathiawar there was no question of any other safe custody. (2) No questions were addressed either to the appellant or to any other party in the course of the investigation as to why the gold was given on two different dates, i.e., February 21, 1948, and February 25, 1948. If enquiries had been made in this behalf the appellant might have furnished the necessary information in regard to the same. (3) The appellant was the sole proprietor of his firm and if he went to Ranavav from Madurai in February, 1948, armed with the power of attorney which was executed in his favour by Yamnabai on January 31, 1948, he had to go there via. Madras, Bombay and Porbandar. He would take whatever monies he required for the journey from his own firm, and the necessary entries in regard to the expenses actually incurred by him could be made only after his return to Madurai on or about March 2, 1948, and in fact such a consolidated entry was found in his books. It is no doubt true that he returned to Madurai, on or about March 2, 1948, and the second remittance of Rs. 53,282 was made by Messrs. Shariff Hassan & Bros. on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that lay in his power to help the income-tax authorities to arrive at the proper conclusion, that his conduct all throughout was honest and above board and that the whole of the decision of the Appellate Tribunal was vitiated inasmuch as it was based on mere conjectures, surmises and suspicions and not supported by any evidence whatever, on a misreading of the statements contained in Yamnabai's affidavit dated November 18, 1941, and on improper rejection of evidence appearing in the file of the appellant consisting of the correspondence between the Income-tax Officer, Madurai, and the Income-tax Officers at Junagad and Porbandar and the statements made by the witnesses before the latter. Shri Rajagopala Sastri for the respondent in fact wanted to reply to these arguments but we asked him before proceeding further to satisfy us in the first instance as to how he could justify the improper rejection of the evidence by the Appellate Tribunal as aforesaid. The only thing which he could point out was the passage from the order of the Appellate Tribunal which criticised the impropriety of the Appellate Assistant Commissioner's having looked into the evidence partially and arriving at h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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