Back
SUPREME COURT OF INDIA
13th November, 1958
T.L. VENKATARAMA AYYAR, P.B. GAJENDRAGADKAR AND A.K. SARKAR, JJ.
M/s. Lakhmichand Baijnath, Appellant
Versus
Commissioner of Income Tax West Bengal, Respondent.
Civil Appeals Nos. 271-272 of 1955. 342
Advocates Appeared
Mr. A. V. Viswanatha Sastri, Senior Advocate (M/s. A. K. Dutt, S. K. Kapur and Sukumar Chose, Advocates, with him), for Appellant ; Mr. C. K. Daphtary, Solicitor General of India (M/s. R. Ganapathy Iyer, R. H. Dhebar and D. Gupta, Advocates, with him), for Respondent.
INCOME TAX - Assessment - Partition of Hindu undivided family - Income-tax Officer holding partition true and family divided into five groups - Dispute relating to six sums aggregating to Rs. 2,30,346 shown in accounts as sale proceeds of ornaments - Appellant claiming that jewels of family sold in six lots and price realised therefrom invested in business - Income-tax Officer rejecting explanation and including said amount in taxable income - Appellate Assistant Commissioner confirming findings of Income-tax Officer - Appellate Tribunal refusing to receive proceedings book in evidence and holding that sum of Rs. 2,30,346 was not proceeds of family jewels sold but secret profits made by appellant in business - Whether Appellate Tribunal was bound by findings of fact of Income-tax Officer relating to nature and division of assets at 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 Rs. 2,30,346 (Rupees two lakhs thirty thousand three hundred and forty six) represented undisclosed profits of the accounting year in question ?
Fact of the Case:
The appellant, a Hindu undivided family, claimed that there had been a partition in the family on April 24, 1945. The Income-tax Officer held that the partition was true, and that the family had become divided into five groups. As regards the income assessable under S. 23, the dispute related to six sums aggregating to Rs. 2,30,346 shown in the accounts as the sale proceeds of ornaments. The appellant's case 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 and included the said amount in the taxable income.
Finding of the Court:
The Appellate Tribunal was not bound by the findings of fact of the Income-tax Officer relating to the nature and division of assets at the joint family in question which he arrived at in his enquiry under Section 25A (1) of the Indian Income-tax Act. There was 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.
Issues: 1. Whether the Appellate Tribunal was bound by the findings of fact of the Income-tax Officer relating to the nature and division of assets at 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 ?
Ratio Decidendi: 1. An order under S. 25A only decides that there was partition in the family and that it has no bearing on the issues which arose for decision in the assessment proceedings. 2. The finding that the sum of Rs. 2,30, represents concealed profits was reached by the Income-tax Officer and by the Appellate Assistant Commissioner by ignoring the very material evidence furnished by the proceedings book and that the Appellate Tribunal had erroneously refuse to receive the book in evidence. 3. The Appellate Tribunal was not bound by the findings of fact of the Income-tax Officer relating to the nature and division of assets at the joint family in question which he arrived at in his enquiry under Section 25A (1) of the Indian Income-tax Act. 4. There was 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.
Final Decision: The appeals fail and are dismissed with costs.
Judgement
T. L. YENKATARAMA AIYAR, J. : The appellant was a Hindu undivided family carrying on business as piece goods 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 S. 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 enquired into both these matters, the factum of partition and the quantum of income chargeable to tax, and pronounced orders thereon on June 30, 1945. On the petition under S. 25A, he held that the partition was true, and that the family had become divided into five groups. As regards the income assessable under S. 23, the dispute related to six sums aggregating to Rs. 2,30,346 shown in the accounts as the sale proceeds of ornaments. The case of the appellant with reference to these sums 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 according to the partition agreement Ex. A was 3422 tolas, the weight of gold which was actually sold to the purchaser was 3133 tolas. The explanation given by the appellant for this discrepancy was that the jewels in question had come down to the family through several generations, and were not pure. The Income-tax Officer rejected this explanation, because he held that the weight which was actually deducted for impurities in the accounts of the purchaser was almost negligible, and that what 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 accordingly held that the story of sale of family jewels was not true, and that the sum of Rs. 2,30,346 represented concealed profits of the business, and he included the said amount in the taxable income. He also followed it up by an order imposing tax on the appellant under the Excess Profits Tax Act.
2. The appellant took both these orders in appeal to the Appellate Assistant Commissioner who again went into the matter fully, and observed that the appellant had been changing his version as to the true character of the sales from time to time. Dealing with the discrepancy of 289 tolas between the weight shown in the partition agreement Ex. 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 jewels was pure gold. He did not accept this explanation as, in his opinion, the jewels which were stated to have been in existence for three or four generations should have contained much more of alloy than was shown in the accounts of the purchaser. He also considered that the sale of gold in round figures of 250 or 500 tolas was a circumstance which threw considerable doubt as to the truth of the appellant s version. In the result, he confirmed the findings of the Income-tax Officer, and dis
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
