Roshan Di Hatti Vs CIT on 8.3.1977 Decided by the Hon’ble Supreme Court of India , Justice P.N.Bhagwati 1977 SCC (2) 378
Income tax Act , 1922, Section 34(1)(a), Escaped Income , Reassessment , Burden of Proof about source of Income , Finding of facts of the tribunal can be interfered under what circumstances , Conclusions without any material , No person acting judicially and properly instructed as to the relevant law would come to the determination , Income tax Appellate tribunal , whether Tribunal can ask questions to the assessee informally , whether part of the record , ITAT rules 29,30,31
Head Note of the case
Assessee was a Hindu Undivided Family . It was carrying on business in Gold and Jewellry in Lahore till June 1947 . In view of the impending partition of India Roshan Lal decided to move out of Lahore and accordingly transferred sums of Rs. 12094.00 , Rs. 13000.00 and Rs. 6000.00 from Lahore Banks to New Delhi Banks . In June 1947 he left Lahore and proceeded to Mussoorie in India . On his way he stopped at Amritsar for a few days and open an account with the imperial Bank of India in order to obtain a locker in the safe deposit vault but unfortunately locker was not available . He deposited a trunk which he had brought from Lahore containing Gold ornaments , jewelry and cash with the Imperial bank of I ndia .
The assessee came to Delhi in October 1947 and started to live in a rented house . In February 1948 , he succeeded in securing business premises and started business on 30.03.1948 . The first entry in the books of accounts on 30.03.1948 showed gold ornaments of Rs. 119320.00 , Gold Rawa Rs. 169020.00 , Stones worth Rs. 4000.00 , Bank balance with the imperial bank of India , Delhi Rs. 35053.00 , Bank balance with Hindustan Commercial Bank , Delhi Rs. 221.00 and cash of Rs. 2800.00 .
The assessee thus brought in an aggregate capital of Rs. 333414.00 in the business on 30.03.1948
In 1957 , it came to the notice of the Income tax Officer that the assessee had made considerable income in his gold and jewelry business but had failed to pay any income tax on such income and hence issued a notice u/s 34(1)(a) of the Indian Income Tax Act , 1922 for bringing the the income of the assessee for the AY 1948-49 to tax . In response to the notice assessee filed his return . In the course of assessment proceedings the ITO called upon the assessee to explain the nature and source of capital of Rs. 333414.00
The assessee contented that he brought the gold rawa , ornaments and cash representing the capital when he migrated from Lahore and they were kept in a sealed trunk with the bank at Amritsar and therafter brought over to Delhi and deposited in the safe deposit vault of Hindustan Commercial Bank at Delhi .when the business of the assessee was commenced , he surrendered the locker and brought the entire Gold , jewelry and cash in to the business .
The ITO observed that till he started his business in March 1948 , neither the assessee ( HUF ) nor Roshan Lal had any other business or means of income from which the amount of Rs. 333414.00 could have been earned . The ITO examined some witnesses . The ITO also examined the brother of Roshan Lal who stated that the father of Roshan Lal was a man of ordinary means who was almost reduced to penury by about 1940 and that he had given a sum of Rs. 2000.00 to his son Roshan Lal for starting gold and jewelry business in 1935 and he had also subsequently lent some moneies to Roshan Lal on nominal interest .
The Income Tax Officer rejected the explanation offered by the assessee and came to the conclusion that it was not possible to believe that the assessee had been able to accumulate capital to the extent of Rs. 333414.00 out of income from business carried on . The Income tax officer gave credit for a sum of Rs. 20000.00 and treated the balance of Rs. 313414.00 as income of the assessee from undisclosed sources .
On appeal by the assessee to the Appellate Asstt. Commissioner of Income Tax allowed a further sum of Rs. 80000.00 on the following grounds .
(1) That the assessee transferred a sum of Rs. 12004.00 , Rs. 3000.00 and Rs. 6000.00 from Banks at Lahore to the Bank at New Delhi . This shows that the assessee was not a man of very small means while he was at Lahore .
(2) He was having accounts in four different banks and a man of very modest means would not have normally so many bank Accounts .
(3) While at Lahore , Roshan Lal had taken Life Insurance Policies worth Rs. 22000.00
(4) A Number of letters and receipts regarding business transactions in Lahore indicated that the Lahore business was not as small as the Income Tax Officer had taken it to be .
(5) The assessee stopped at Amritsar and opened an account and took safe deposit vault where he deposited a sealed trunk . It is reasonable to presume that there must have been something quite valuable in the box.
Being not satisfied wioth the order of the ACIT (Appeals ) , the assessee filed further appeal to the ITAT but he failed . The Tribunal , when the appeal came to be heard , put a question to Roshan Lal as to how he had brought Gold and Jewellry from Lahore and enquired about the weight of the box . The Tribunal after hearing the arguments of the parties rejected the appeal .
The main arguments which weighted with the tribunal were .
(1) That the weight of the box was too less .
(2) That the assessee did not disclose his assets under the scheme of the Govt. of India published in the Press note in January 1952 , requiring all evacuees to declare the amounts of money brought by them from Pakistan .
(3) That the assessee did not file any Income Tax returns in Lahore
High Court confirmed the finding of the Tribunal in the reference .
On being approached SC by the assessee , the SC allowed the appeal of the assessee on the following grounds .
(1) the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him .
Judgements followed by the Supreme Court
A. Govindaralulu Mudaliar VS. CIT (1958) 34ITR 807 and CIT ,UP Vs. Devi Prasad Vishwanath Prasad 72ITR 194
(2) The conclusion of the Tribunal on a finding of fact can be assailed only if uit is shown that the Tribunal had acted without any material or upon a view of the facts which could not reasonably be entertained or the facts found were such that no person acting judicially and properly instructed as to the relevant law would have come to that determination .
SC followed the following judgement
Mehta Parikh & Co. Vs. CIT , Bombay 30ITR 181
(4) The Tribunal was right in commenting that primary evidence with regard to the extent of the Lahore Business of the assessee was not forthcoming but it must be remembered that the assessee was being called upon to prove the extent of his business in a territory from which the members of the HUF had to flee for their lives and from where it was it was totally impossible to produce any primary evidence . The finding of the AAC that the assessee was doing fairly well in the business in Lahore was not disturbed by the Tribunal . The AAC found that it was reasonable to presume at there was something quite valuable in the box and this finding was not dissented by the Tribunal .
There was no material to show that the ornaments , jewelry and cash brought by the assessee and kept in the sealed trunk were of the value of Rs. 1 Lac and not more . The circumstances that the assessee had not filed any income tax return could be of no avail to the revenue because admittedly the assessee had brought substantial amount frpom Lahore .
The Tribunal was wrong in relying upon certain answers given by Roshan Lal , about the weight of the sealed box when he was questioned by the Tribunal at the time of hearing of the appeal . It must be pointed out straightaway that the answer given by Roshan Lal could not be relied on by the Tribunal because there is a procedure prescribed in rules 29, 30 , and 31 of the Income Tax Appellate Tribunal Rules for taking additional evidence before the tribunal and if the members of the Tribunal wanted to examine Roshan Lal on any aspects , they should have followed the prescribed procedure .The answers given by Roshan Lal disregarding the prescribed procedure could not form part of the record and Tribunal was not entitled to rely upon the same .
The Tribunal erred in relying on the Press Note because admittedly the assessee had brought a sum of Rs. 1 lac to India and even that was not declared to the Govt. of India .
There was no material on the basis of which the Tribunal could come to the conclusion that the ornament jewelry and cash were not worth than Rs. 1 lac . It was not proved that Roshan Lal or the assessee had any other business or other means of Income in India until 30.03.1948 . The genuineness of the entry of March 1948 was also not challenged . It is utterly improbably amounting almost to impossibility that the assessee could have earned such a large amount of Rs. 233414.00 as profit within a few months in the disturbed conditions which than prevailed in India .
The tribunal acted without any material and in any event , the finding of fact reached by the Tribunal was unreasonale or such that no person acting judiciously and properly instructed as to the relevant law would come to such finding .
The Appeal of the assessee was allowed.