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PATNA HIGH COURT
V.Ramaswami and Choudhary JJ.
M.L.Tewary
Versus
Commissioner Of Income Tax
Miscellaneous Judicial Case No. 266 of 1952 ;
Decided On : SEPTEMBER 01, 1954
INCOME TAX - Assessment - Concealed income - Burden of proof - Assessee failed to prove the source and nature of the amount of Rs. 73,000 which represented the value of the high denomination notes encashed after the promulgation of the Demonetization Ordinance - Tribunal's finding that the Ruler of Sakti has not given true evidence is based on material - High Court has no jurisdiction to interfere with the finding of the Tribunal on the question of fact.
Fact of the Case:
The assessee, a Managing Director of a private limited company, encashed 78 high denomination notes of the value of Rs. 1000 each on 26-1-1946. He declared that the amount was his personal saving kept in the safe custody of the Ruler of Sakti State when there was panic in the year 1942 and there was danger of bombing of Jamshedpore. The Income-tax Officer did not accept the explanation and added the amount to the assessee's income. The Appellate Assistant Commissioner remanded the case to the Income-tax Officer for taking the evidence of the Ruler of Sakti. The Tribunal, after examining the evidence, found that the Ruler of Sakti has given false evidence and that the amount of Rs. 73,000 was the concealed income of the assessee which was liable to be taxed.
Finding of the Court:
The Tribunal's finding that the Ruler of Sakti has not given true evidence is based on material. The assessee has not discharged the onus of proving the source of the amount of Rs. 73,000 and that amount was rightly added by the Income-tax Officer to the income of the assessee for the assessment year as being liable to be taxed.
Issues: 1. Whether the Tribunal had jurisdiction to take fresh evidence and consider the correctness of the assessment on the merits; 2. Whether, in the circumstances of the case, there is material for holding that the sum of Rs. 73,000, the value of the high denomination notes, encashed on 26-1-1946, was concealed income?
Ratio Decidendi: 1. Under Sec.33(4), Income-tax Act, the Tribunal has the authority "to pass such orders as it thinks fit" upon the appeal and the only condition precedent to the exercise of this power is that the Tribunal should give an opportunity to both the parties to the appeal to be heard in the matter. 2. The onus is upon the assessee to prove positively the source and nature of the money which was received during the accounting year. In the absence of any explanation of the assessee the Revenue authorities are entitled to draw the inference that the receipt is of an income nature.
Final Decision: The question referred to the High Court must be answered against the assessee and in favour of the Income-tax Department. The assessee must pay the cost of the reference.
1. In this case the assessee is the Managing Director of a private limited company doing Automobile business, in which his joint family had a controlling interest.
The assessee has been taxed as an individual for the assessment year 1946-47. The accounting year corresponds to the period from 1-4-1945 to 31-3-1946 and for this accounting year the assessee made a return of income showing Rs. 16,661 as salary and Rs. 3000 as dividend.
It appears that on 26-1-1946 the assessee encashed 78 high denomination notes of the value of Rs. 1000 each. In the declaration which is required to be made under the Ordinance the assessee said that the amount was his personal saving kept in the safe custody of the Ruler of Sakti State when there was panic in the year 1942 and there was danger of bombing of Jamshedpore.
Before the Income-tax Officer the assessee produced a certificate from the Ruler of Sakti dated 2-4-1947. The certificate was to the following effect
"With reference to your letter enclosing & request for a certificate for Mr. S.M. Patnaik, Income-tax Officer, Chaibasa, regarding the amount of Rs. 73,000 deposited by you with me in the year 1942 in my personal keeping, I have pleasure in confirming that you had deposited the amount in question with me in 1942 when you were on your way to Jubbulpore."
The Income-tax Officer did not accept the explanation of the assessee on the ground that the high denomination notes were not put into circulation in the year 1942 but were put into circulation for the first time in the year 1943. The assessee took an appeal to the Appellate Assistant Commissioner against the order of the Income-tax Officer.
In the course of the appeal the assessee produced a second certificate from the Ruler of Sakti wherein it was mentioned that the assessee made the deposit of Rs. 73,000 in 1942 not in high denomination notes but in currency notes of much smaller amount. The ruler admitted in this certificate that he himself converted the money into high denomination notes after the assessee had made the deposit.
The Appellate Assistant Commissioner set aside the order of assessment and remanded the case to the Income-tax Officer for taking the evidence of the Ruler of Sakti and after ascertaining the actual fact to make fresh assessment. Against this order the Income-tax Department preferred an appeal to the Appellate Tribunal and contended that the Appellate Assistant Commissioner was wrong in remanding the case to the Income-tax Officer and in setting aside the assessment made upon the assessee. After hearing the parties the Tribunal issued a commission to the Income-tax Officer of Raigarh to examine the Ruler of Sakti and submit report.
After the evidence of the Ruler of Sakti was taken on commission the Tribunal heard the parties again and reached the finding that the Ruler of Sakti has given false evidence and that the amount of Rs. 73,000 was the concealed income of the assessee which was liable to be taxed.
2. As ordered by the High Court the Tribunal has stated a case on the following questions of law--
" (1) Whether in an appeal directed against the order of remand passed by the Appellate Assistant Commissioner, it was open to the Tribunal to take fresh evidence and consider the correctness of the assessment on the merits; and
(2) Whether, in the circumstances of the case, there is material for holding that the sum of Rs. 73,000, the value of the high denomination notes, encashed on 26-1-1946, was concealed income?"
3. With respect to the first question the argument addressed on behalf of the assesses was that the Tribunal had no authority to take the evidence of the Ruler of Sakti on commission and consider the correctness of the assessment imposed upon the assessee on merits.
Mr. Dutt pointed out that in the petition of appeal-made before the Tribunal the Income-tax Department mentioned only two grounds-- (1) that the Appellate Assistant Commissioner has erred in remanding the case for examination
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