TMI Blog1956 (5) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... esenting the value of the high denomination notes which were encashed on 18th January, 1946. In view of the above it is not necessary for us to go into the question whether the High Court ought to have answered the second referred question also. The answer to the first referred question being in the negative, the very basis for excess profits tax and business profits tax disappears and the second referred question becomes purely academical. Appeal allowed. - C.A. 81 OF 1954 - - - Dated:- 10-5-1956 - Judge(s) : BHAGWATI., S. R. DAS., VENKATARAMA AIYAR JUDGMENT The Judgment of S. R. Das, C.J., and Bhagwati, J., was delivered by BHAGWATI, J.--Two questions were referred by the Income-tax Appellate Tribunal to the High Court of Bombay under section 66(1) of the Indian Income-tax Act : (1) Whether there is any material to justify the assessment of Rs. 30,000 (Rupees thirty thousand) from out of the sum of Rs. 61,000 (Rupees sixty-one thousand) (for income-tax and excess profits tax and business profits tax purposes) representing the value of high denomination notes which were encashed on the eighteenth day of January one thousand nine hundred and forty-six ? and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, added the sum of Rs, 61,000 to the assessable income of the appellants from undisclosed sources. On appeal to the Appellate Assistant Commissioner the appellants produced before him affidavits of three persons to show that the appellants had received Rs. 20,000, in 1,000 rupees currency notes on 28th December, 1945, Rs. 15,000 in 1,000 rupees currency notes on 6th January, 1946, and Rs. 8,500 in 1,000 rupees currency notes (making Rs. 8,000) on 8th January, 1946, thus aggregating to Rs. 43,500 during the relevant period. The Appellate Assistant Commissioner did not accept the statements contained in the said affidavits and dismissed the appeal and confirmed the order of the Income-tax Officer. An appeal was taken by the appellants before the Income-tax Appellate Tribunal. The Tribunal after taking into consideration all the materials which had been placed before the Appellate Assistant Commissioner, including the said affidavits, was of the opinion that if it was to accept the appellants' contention, it would mean that practically every payment above Rs. 1,000 was received by the appellants in high denomination notes, which was almost impossible. The Tribunal cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by the appellants in their application for reference under section 66(1) of the Act and, therefore, it had no jurisdiction to ask the Tribunal to state a case on a particular question of law, where the appellants themselves had never asked the Tribunal to refer such a question to the High Court and that even though it had directed the Tribunal under section 66(2) to refer the said question, as it had no jurisdiction to ask the Tribunal to refer the said question, it was not open to it to answer the second question which had been raised by the Tribunal at its instance and refused to answer it. On a petition made by the appellants for leave to appeal to this court, the High Court granted a certificate that this was a fit case for appeal to this court and hence this appeal. It may be mentioned at the outset that the assessment of the appellants by the Income-tax Officer was under section 23(3) and section 26A of the Act. The books of account of the appellants were accepted by the Income-tax Officer and the only scrutiny made by the Income-tax Officer was whether at the relevant date, i.e., on 12th January, 1946, the appellants had in their cash 61 notes of high denomination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Eastern Bank. Both the Income-tax Officer and the Appellate Assistant Commissioner discounted this suggestion of the appellants by holding that it was impossible that the appellants had on hand on 12th January, 1946, the 61 high denomination currency notes of Rs. 1,000 each, included in their cash balance of Rs. 69,891-2-6. The calculations, which they made involved taking into account all payments received by the appellants from and after 2nd January, 1946, which were either multiples of Rs. 1,000 or were over Rs. 1,000. There was a cash balance of Rs. 18,395-6-6 on hand on 2nd January, 1946, which could have accounted for 18 such notes. The appellants received thereafter as shown in their cash book several sums of monies aggregating to over Rs. 45,000 in multiples of Rs. 1,000 or sums over Rs. 1,000, which could account for 45 other notes of that high denomination, thus making up 63 currency notes of the high denomination of Rs. 1,000 and these 61 currency notes of Rs. 1,000 each, which the appellants encashed on 18th January, 1946, could as well have been in their custody on 12th January, 1946. This was, however, considered impossible by both the Income-tax Officer and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cash book and the affidavits put in by the appellants before the Appellate Assistant Commissioner. The Tribunal also fell into the same error. It could not negative the possibility of the appellant being in possession of a substantial number of these high denomination currency notes. It, however, considered that it was impossible for the appellants to have had 61 such notes in the cash balance in their hands on 12th January, 1946, and then it applied a rule of the thumb treating 31 out of such 61 notes as within the bounds of possibility, excluding 30 such notes as not covered by the explanation of the appellants. This was pure surmise and had no basis in the evidence, which was on the record of the proceedings. The High Court treated this finding of the Tribunal as a mere finding of fact. The position in regard to all such findings of fact, as to whether they can be questioned in appeal, is thus laid down by the House of Lords in Cameron v. Prendergast (Inspector of Taxes) : " Inferences from facts stated by the Commissioners are matters of law and can be questioned on appeal. The same remark is true as to the construction of documents. If the Commissioners state the ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case. The attempt which was made by the High Court to probe into the mind of the Tribunal by trying to discard the affidavit of Govindprasad Ramjivan Nivetia in regard to the payment of Rs. 5,000 to the appellants in 15 currency notes of Rs. 1,000 each on 6th January, 1946, and thus reducing the aggregate sum of Rs. 43,500 to Rs. 28,500 and justifying the figure of Rs. 31,000 arrived at by the Tribunal was really far-fetched and contrary to the terms of the Tribunal's order itself, the Tribunal not having given any inkling, whatever, of what was at the back of its mind when it fixed upon the figure Rs. 31,000. Really speaking the Tribunal had not indicated upon what material it held that Rs. 30,000 should be treated as secret profit or profits from undisclosed sources and the order passed by it was bad. The appellants had furnished a reasonable explanation for the possession of the high denomination notes of the face value of Rs. 61,000 and there was no justification for having accepted it in part and discarded it in relation to a sum of Rs. 30,000. The case was analogous to the one before the Patna High Court in Chunilal Ticamchand Coal Co. Ltd. v. Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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