The Tribunal's findings of fact are generally binding on the High Court, unless they are based on no evidence or are unreasonable or arbitrary.

Headnote:
INCOME TAX - Assessment year 1947-48 - Encashment of high denomination notes - Whether income from undisclosed sources - Whether liable to excess profits tax and business profits tax.
Fact of the Case:

The assessee encashed high denomination notes of Rs. 61,000 on 18-1-1946. The Tribunal held that Rs. 30,000 out of this amount was income from undisclosed sources.
Finding of the Court:

The Tribunal's finding that Rs. 30,000 was income from undisclosed sources was justified by the circumstances, including the fact that the assessee's total receipts during the relevant period exceeded its payments by about Rs. 60,000.
Issues: 1. Whether the Tribunal was justified in holding that Rs. 30,000 of the high denomination notes encashed by the assessee was income from undisclosed sources? 2. Whether the assessee was liable to pay excess profits tax and business profits tax on the said sum of Rs. 30,000?
Ratio Decidendi: 1. The Tribunal's finding was based on reasonable inferences drawn from the circumstances of the case, and was not based on mere suspicion. 2. The Court did not have jurisdiction to answer the second question, as the assessee had not requested the Tribunal to refer it under Section 66(1) of the Income Tax Act.
Final Decision: 1. The Tribunal's finding that Rs. 30,000 was income from undisclosed sources was upheld. 2. The Court declined to answer the second question, as it lacked jurisdiction to do so.

Judgment - Chagla, C.J.

1. Though Mr. Kolah has argued this reference with considerable heat and warmth, it raises a very short and Simple question. The assessment year is 1947-48 and the accounting year is the calendar year 1946. It apears that on 18-1-1946, the assessee encashed high denomination notes of the face value of Rs. 61,000. The books of account of the assessee showed that there was an opening cash balance on that day of Rs. 72,863-13-3. On 20-12-1945, the opening cash balance was Rs. 14,318. On 2-1-1946, the opening cash balance was Rs. 18,396. On 12-1-1946, the cash balance was Rs. 69.891. 12-1-1946, is an important date because that was the date on which the High Denomination notes Ordinance came into force.

What has been held by the taxing authorities is that the sum of Rs. 61,000 was the income of the assessee from undisclosed sources and the high denomination notes did not represent the business receipts of the assessee. The Tribunal has concurred in this decision to the extent of Rs. 30,000, and the question that arises before us is whether there was any material which justified the Tribunal in coming to the conclusion that it did.

2. Now, prima facie, one would have thought that the decision of the Tribunal is a decision on a question of fact, and this Court has no jurisdiction to interfere with the findings of fact arrived at by the Tribunal. There is only a limited class of cases in which this Court can interfere with the findings of fact arrived at by the Tribunal and those are cases where this Court is satisfied that there was no evidence on which the Tribunal could have based its decision. Evidence may be direct evidence or it may be circumstantial evidence. It would be open to tha Tribunal to infer a fact from circumstances established before it and it would not be open to the Court to disagree, with the finding of fact of the Tribunal merely because there was no direct evidence to justify that finding, and the Court would also not interfere with the inference drawn by the Tribunal from the circumstances established unless the Court came to the conclusion that the inference was unreasonable, arbitrary or capricious or that it was impossible for any Tribunal to raise that particular inference from the circumstances established.

3. In our opinion, the Tribunal hag relied on circumstances which fully justified it in raising the inference that it has. In the order that it passed dismissing the appeal of the assesses, it has pointed out a very important circumstance and that circumstance is this that from 20-12-1945, to 18-1-1946, the assessees total receipts amounted to about a lakh of rupees. During this very period he made payments of about Rs. 40,000. Therefore, over this period the assessees receipts exceeded the payments by about Rs. 60,000, and the Tribunal points out that if the assessees contention were to be accepted, it would mean that practically every payment above Rs. 1,000 was received by him. in high denomination notes and it stated that this fact cannot be accepted because according to it it was an impossible fact.

Mr. Kolah has relied on the fact that the Tribunal accepts the cash balance of Rs. 72,863-13-3 on 18-1-1946, as correct cash balance, but we do not understand how that fact helps Mr. Kolah, because what the Tribunal has held is that although the assessee did have cash on 18-1-1946, to the extent of Rs. 72,863-13-3, in that cash balance there were not and could not be high denomination notes of the value of Rs. 61,000, but these notes or part of them were substituted for the ordinary notes which came into the business in the course of its dealings. Therefore, the high denomination notes did not belong to the business, they did not come into the business in the ordinary course of dealings, but these high denomination notes represented the income of the assessee through other sources, and in order that the assessee should get them cashed he substituted these high denomination notes for

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Judicial Analysis