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Lakhmichand Baijnath Versus Commissioner Of Income-Tax, West Bengal

1958 (11) TMI 3 - SUPREME Court

Whether the Income-tax Appellate Tribunal was bound by the findings of fact of the Income-tax Officer relating to the nature and division of the assets of the joint family in question which he arrived at in his enquiry under section 25A(1) of the Indian Income-tax Act ? - Whether there was any material or evidence upon which the taxing authorities could legally hold that the amount of ₹ 2,30,346 (Rupees two lakhs thirty thousand three hundred and forty-six) represented undisclosed prof .....

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he appellant. Nor could such a finding be implied therein, when regard is had to the scope of the proceedings under section 25A and to the fact that the order under section 23(3) holding that the sum of ₹ 2,30,346 did not represent the value of the family jewels sold was passed on the same date as the order under section 25A and by the very same officer. - There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amo .....

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AIYAR, J.-The appellant was a Hindu undivided family carrying on business as piecegoods merchants in the city of Calcutta. The present proceedings relate to the assessment of its income for the year 1946-47, the previous year thereto being June 12, 1944, to April 24, 1945. In the course of the assessment, the appellant filed a petition under section 25A of the Income-tax Act, 1922, claiming that there had been a partition in the family on April 24, 1945. On May 27, 1945, the Income-tax Officer .....

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ms was that at the partition the jewels of the family were sold in six lots, that the price realised therefrom was invested in the business, and that the credits in question related thereto. The Income-tax Officer declined to accept this explanation. He observed that while the books of the appellant showed that what was sold was ornaments, the accounts of Chunilal Damani to whom they were stated to have been sold showed sale of gold. He also pointed out that while the weight of the ornaments acc .....

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at was sold was thus pure gold and not gold in old family jewels. He also remarked that the sales were in round figures of 500 tolas, and that if the assessee had been taking old ornaments broken or unbroken for sale it is inconceivable that on three occasions out of six he took gold weighing 500 tolas in round figure. He also referred to the fact that there was no list of the family jewels, and that there was nothing in the family accounts to show what jewels were held by the family. He accordi .....

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character of the sales from time to time. Dealing with the discrepancy of 289 tolas between the weight shown in the partition agreement, exhibit A, and that appearing in the accounts books of Chunilal Damani, he remarked that while the explanation of the appellant before the Income-tax Officer was that it was due to alloy and brass in the jewels, before him the position taken up was that it was due to pearls and stones which had been removed from the jewels, and that the gold contained in the je .....

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ed the appeals. Against these orders, the appellant appealed to the Appellate Tribunal. There, he sought to rely on a certain proceedings book as showing that the family jewels were really broken up, and that what was sold to Chunilal Damani was the gold thus separated. As this proceedings book forms the real sheet anchor of the appellant s contentions before us, it is necessary to refer to the facts relating thereto in some detail. On February 20, 1945, the members of the family entered into an .....

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the jewels were to be removed and divided among the members, and that a goldsmith called Inderban was engaged for the purpose of breaking up the jewels. Then we have the minutes of a meeting held on February 28, 1945, and therein it is recited that the weight of the pearls, stones and copper removed was, again in round figure, 289 tolas, and deducting this out of 3,422 tolas, being the weight of the jewels set out in exhibit A, the gold which was available for partition was 3,133 tolas. It is re .....

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2,30,346. Quite naturally, therefore, the appellant applied to the Tribunal to receive the proceedings book in evidence, and the ground given in support of the application was that it had been filed before the Income-tax Officer but had not been considered by him. Then the question was raised as to whether the proceedings book was, in fact, produced before the Income-tax Officer. The argument of the appellant was that the decision taken at the meeting dated April 21, 1945, which forms the concl .....

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, 1945, were genuine, there was no certainty that when it was shown to the Income-tax Officer it was contained in the book now produced, that such minutes could have found a place in another book as well, and that, therefore, the book which was sought to be admitted before it in evidence was not proved to be the book which was produced before the Officer. It was also of the opinion that the minutes of the previous meetings could not have been shown to the Officer. It accordingly refused to recei .....

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and that as, according to the appellant, the partition consisted in the division, inter alia, of family jewels weighing 3,422 tolas the Income-tax Officer must be held to have decided that the family was in possession of the jewels mentioned in exhibit A and had divided them in the manner set out in exhibit B, and that as that order had become final, it must conclude the present question in favour of the appellant. The Tribunal repelled this contention on the ground that the order under section .....

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he nature and division of the assets of the joint family in question which he arrived at in his enquiry under section 25A(1) of the Indian Income-tax Act ? (2) Whether there was any material or evidence upon which the taxing authorities could legally hold that the amount of Rs. 2,30,346 (Rupees two lakhs thirty thousand three hundred and forty-six) represented undisclosed profits of the accounting year in question ? The reference was heard by Chakravartti, C. J., and Lahiri, J., who by their jud .....

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the Department to contend that the sum of Rs. 2,30,346 does not represent the value of family jewels. (2) The finding of the Income-tax authorities that the said amount represents concealed profits of business is not supported by legal evidence and is, in any event, perverse. (3) There is no evidence that the amount in question represents profits of business, and it was therefore not chargeable to tax under the provisions of the Excess Profits Tax Act. (1) On the first question, the appellant r .....

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oups of members. The question as to what the income of the family assessable to tax under section 23(3) was would be foreign to the scope of an enquiry under section 25A. That section was, it should be noted, introduced by the Indian Income-tax (Amendment) Act, 1928 (3 of 1928), for removing a defect which the working of the Act as enacted in 1922 had disclosed. Under the provisions of the Act as they stood prior to the amendment, when the assessee was an undivided family, no assessment could be .....

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t escaped tax altogether. To remove this defect, section 25A enacted that until an order is made under that section, the family should be deemed to continue as an undivided family. When an order is made under that section, its effect is that while the tax payable on the total income is apportioned among the divided members or groups, all of them are liable for the tax payable on the total income of the family. What that tax is would depend on the assessment of income in proceedings taken under s .....

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hat the order under section 23(3) holding that the sum of Rs. 2,30,346 did not represent the value of the family jewels sold was passed on the same date as the order under section 25A and by the very same officer. (2) The next question is-and that is what was really pressed before us-whether the sum of Rs. 2,30,346 represents the price of family jewels sold or whether it is concealed business profits. That clearly is a question of fact which is open to attack in a reference under section 66 only .....

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oceedings book which was produced before the Tribunal the book which was produced before the Income-tax Officer ? (ii) if it was, were the minutes of the meeting prior to April 21, 1945, relied on by the appellant before the Income-tax Officer ? Whatever view one might be inclined to take on the former question, so far as the latter is concerned, it is perfectly plain that they were not. On May 27, 1947, the enquiry was held on both the petitions under section 25A and on the quantum of income as .....

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l Damani, copies of which have been filed. (iii) Roker of Chunilal Damani containing entries for purchase of gold, sold by the assessee family along with Surajrattan Bagri the accountant of Chunilal Damani. (iv) Statement of Lakhmichand Bhiwaniwalla and Pannalal Bhiwaniwalla, member of the assessee family. This statement is signed by the counsel for the appellant. It is clear from the above that the proceedings book was not relied on as evidence on the character of the receipts making up the sum .....

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minutes of the meetings prior to April 21, 1945, and that they were not even translated, as was the record of the meeting dated April 21, 1945. The obvious inference is that they were not relied on by the appellant and were therefore not considered by the Officer. It is also significant that the order of the Income-tax Officer refers to sale of ornaments broken or unbroken. The story that the gold which was separated from the jewels after removing the pearls and stones was melted and sold in qu .....

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ld have failed to consider it if it had been pressed before him. It is also to be noted that the appellant who had obtained a return of the proceedings book from the Income-tax Officer did not file it before the Appellate Assistant Commissioner, nor did he move for its admission in evidence. Apart from taking the grounds to which we were referred, the appellant appears to have presented his case before the Appellate Assistant Commissioner precisely on the same lines on which he pressed it before .....

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