Bombay High Court
Bhojraj Kishanchand vs Commissioner Of Income-Tax on 30 September, 1993
Equivalent citations: [1994]209ITR500(BOM)
JUDGMENT D.R. Dhanuka, J.
1. By this reference under section 256(1) of the Income-tax Act, 1961, the Income-tax Appellate Tribunal has referred the following question to this court for its opinion :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee's explanation as regards the nature and source of the sum of 3,57,000 Hong Kong dollars appearing as his capital in his Hong Kong balance-sheet as on March 31, 1969, was not satisfactorily explained and, consequently, the said sum was assessable as his income from undisclosed sources for the assessment year 1959-60 ?"
2. In our opinion, the question referred to us is a question of fact and not a question of law. In the reference jurisdiction, it is not open to this court to reappreciate the evidence an record findings of fact. It is well-settled that the Tribunal is the final fact-finding authority. We are, therefore, inclined to return the reference unanswered. Learned counsel for the assessee has, however, requested the court to examine the matter from a limited pint of view, viz., as to whether there was any material before the Tribunal so as to warrant the finding of fact referred to in the above question. In alternative to our abovereferred conclusion, we shall do so. In our opinion, the Tribunal had material before it on the basis of which it could arrive at the conclusion referred to in the question and even from this point of view there is no merit in the grievance made on behalf of the assessee.
3. Bhojraj Kishanchand is the assessee before us. The reference relates to the assessment year 1959-60. The assessee use to be one of the partners in the firm of Messrs. Bhagchand Bishandas, Bombay (hereinafter referred to as "the Bombay firm"), until June 15, 1958. On June 15, 1958 the assessee retired from the said Bombay firm. On June 13, 1958, the assessee executed a general power of attorney in favour of his uncle, Shri Khubchand Chellaram Gulwani, who continued to be a partner of the abovereferred Bombay firm. It is recited in the said power of attorney that the assessee had decided to start a business in textiles of all kinds in the style of Messrs. B. Kishinchand and Co. at Hong Kong. The assessee was the sole proprietor of the abovereferred Hong Kong business. The said Hong Kong firm had also a branch at Singapore. The assessee field his income-tax returns for the period commencing from May 1, 1957, to April 30, 1958, and May 1, 1958, to June 15, 1958, without making any reference or disclosure whatsoever in respect of the abovereferred Hong Kong business carried on in the name of Messrs. B. Kishinchand and Co. as its sole proprietor, The original assessment proceedings were duly completed by the passing of assessment orders under section 23(3) of the Indian Income-tax Act, 1922.
4. Some time in the year 1963, the premises of the abovereferred Bombay firm were raided by the Enforcement Directorate. During the course of the search, a typed copy of the balance-sheet concerning the proprietary business of the assessee at Hong Kong carried on in the name of B. Kishinchand and Co. was seized by the Enforcement Directorate. The above referred balance-sheet pertaining to the Hong Kong business of the assessee prepared on the instructions of the assessee as on March 31, 1959, disclosed the following :
"Capital account - 3,57,000 Hong Kong dollars."
5. The Enforcement Directorate handed over the said balance-sheet to the income-tax authorities.
6. As regards the nature and source of the abovereferred amount of 3, 57,000 Hong Kong dollars shown in the balance-sheet as capital of the assessee as on March 31, 1959, the proceedings for the assessment year 1959-60 were reopened. On December 31, 1968, a notice was issued by the Income-tax Officer concerned under section 148 read with section 147(a) of the Income-tax Act, 1961. The assessee field a writ petition in this court impugning the said notice. In the writ proceedings, a stay order was granted by this court on March 9, 1969. As a result of the stay order, the said reassessment proceedings could not be resumed or completed. The said writ petition was ultimately withdrawn by the assessee on August 30, 1974.
7. During the course of the reassessment proceedings, ample opportunity was granted by the Income-tax Officer to the assessee to explain the nature and source of the abovereferred amount of 3,57,000 Hong Kong dollars shown as "capital" as on March 31, 1969. The statement of the assessee were recorded by the Income-tax Officer on November 21, 1967, February 27, 1969, and August 28, 1977. The statement of Shri Khubchand, uncle and authorised agent of the assessee, was also recorded by the Income-tax Officer. Most of the answers given by the assessee to the questions put by the Income-tax Officer are vague and unconvincing. The said answers are not supported by cogent documentary evidence. Khubchand filed his own affidavit. Several other documents were also filed with the authorities by or on behalf of the assessee as reflected in the paper book pertaining to this reference.
8. The assessee did not disown the said balance-sheet of Honk Kong business of the assessee taken charge of during the course of raid and seizure by the Enforcement Directorate and relied on by the Department during the course of reassessment proceedings. During the course of reassessment proceedings, the assessee contended that the abovereferred balance-sheet as on March 31, 1959, was got prepared by the assessee for the purpose of obtaining certain bank facilities and did not represent the truth. The assessee contended that the said amount of Hong Kong dollars 3,57,000 in fact represented unpaid price of goods and two loans. The story of loans was put forward by the assessee at a subsequent stage and not in the initial statement of the assessee. The draft assessment order, i.e. reassessment order, for the assessment year 1959-60 was served on the assessee calling upon the assessee to submit his written explanation in respect the nature an source of the abovereferred item of 3,57,000 Hong Kong dollars. It was the tentative view of the Income-tax Officer that the said amount represented income which had escaped income-tax assessment and the said amount appeared to be the income of the assessee from undisclosed sources. The assessee was called upon to produce the books of account of the Hong Kong business as well as the Singapore business of the assessee for verification. The assessee informed the Income-tax Officer that the books of account had been destroyed by the assessee some time in April, 1961. The Income-tax Officer was not convinced. As against the draft assessment order (meaning thereby the draft reassessment order), the assessee through his advocates, Messrs. D. M. Harish and Co., filed his objections and showed cause in respect of the draft assessment order referred to hereinabove. In the reply letter dated September 24, 1977, containing the assessee's objections to the draft assessment order, it was stated by and on behalf of the assessee that "it was not possible for the assessee to produce complete documentary evidence in support of the explanation". As regards the principal incriminating evidence, i.e. the balance-sheet of the Hong Kong business as on March 31, 1959, which was seized during the course of the raid, it was stated in the explanation of the assessee as under :".... that this was only a balance-sheet drawn up as on March 31, 1959, for the purpose of obtaining bank facilities." By the said letter of explanation, the assessee contended that the amount of Hong Kong doller 3,57,000 in reality represented the liabilities of the assessee to the suppliers as well as in respect of loans. The assessee now put forward a copy of another balance-sheet of the Hong Kong firm as on April 30, 1959. The assessee produced the so-called "confirmation letters" from the alleged creditors of the Hong Kong business. The Tribunal has summarised the contentions of the assessee as under :
"Coming then to the explanation, on the merits, the assessee's case before the Departmental authorities as well as before the Tribunal was, -
(i) that the assessee was making purchases on credit from Indian parities for its Singapore branch :
(ii) that after the goods were sold, the Singapore branch was remitting the monies to the head office, i.e., the Hong Kong office;
(iii) that the head office, i.e., the Hong Kong office, used to remit the necessary amounts to the Singapore branch for the purpose of retiring the documents from the Indian parties on due dates; and
(iv) that the amount of 3,57,000 Hong Kong dollars appearing as capital of the assessee in the balance-sheet as on March 31, 1958, in fact represented the unpaid sale price of the three Indian parties and the balance represented loans taken by the assessee from two persons (who are father and son) and since the father is no more, the son has certified from Philippines both the credits."
9. By his order dated October 20, 1977, the Income-tax Officer passed the assessment order for the assessment year 1959-60 by treating the abovereferred sum of 3,57,000 Hong Kong dollars, i.e., Rs. 2,85,600, being the equivalent amount thereof as the income of the assessee from undisclosed sources. The Income-tax Officer was not satisfied with the explanation given by the assessee concerning the nature and source of the abovereferred amount. The assessee's explanation was not supported by cogent documentary evidence. Since the balance-sheet in respect of the Hong Kong business as on March 31, 1959, clearly showed that a sum of 3,57,000 Hong Kong dollars was brought in by the assessee as and by way of capital, the onus was on the assessee to explain the nature and source of the said amount and to lead reliable evidence in support of his explanation. By an order dated March 27, 1979, the Commissioner of Income-tax (Appeals) dismissed the appeal of the assessee. By its order dated March 22, 1980, the Income-tax Appellate Tribunal, after careful assessment of all the material facts and evidence on record, came to the conclusion that it was not possible to accept the explanation of the assessee in respect of the abovereferred amount of 3,57,000 Hong Kong dollars. In our opinion, the Income-tax Appellate Tribunal appreciated and analysed the material on record with due and in great detail. The view taken by the Income-tax Appellate Tribunal is a reasonably possible view and is supported by material on record. It is not for the reference court to reappreciate the evidence and arrive at fresh findings of facts. The findings of fact arrived at by the authorities below are not perverse.
10. The assessee had suggested a large number of questions to the Income-tax Appellate Tribunal for being referred to this court under section 256(1) of the Income-tax Act, 1961, Question No. 6 sought for on behalf of the assessee was as under :
"Whether, in facts and circumstances of the case, the finding of the Tribunal that capital account of 3,57,000 Hong Kong dollars was income of the assessee from undisclosed sources was based on mere surmises, conjectures and suspicion and on a failure to consider the relevant evidence on record?"
11. This question was not referred to the High Court as desired by the assessee. On a bare perusal of the question referred to this court, duly extracted in the opening part of this order, it is obvious to us that the question referred to this court is not a question of law but it is a pure question of fact. As soon as the hearing commenced, learned counsel for the assessee was requested to make submissions kin this aspect of the matter. We did not get a satisfactory reply. Learned counsel for the assessee submitted that the court should examine the question from a limited angle, i.e. as to whether there was any material before the Tribunal to come to the conclusion that the explanation of the assessee in respect of the above amount was unsatisfactory and the abovereferred amount was liable to be treated as income of the assessee from undisclosed sources. The question as framed does not require us to deal with the controversy even from this angle. However, the alternative, we have learned counsel for the assessee at length and gone through the record in detail from this point of view.
12. The copy of the balance-sheet as on March 31, 1959, concerning the proprietary business of the assessee at Hong Kong carried on in the name of B. Kishinchand and Co. seized by the Enforcement Directorate constitutes relevant material on the subject against the assessee. The explanation given by the assessee contains several improbabilities and missing links and is not supported by reliable documentary or other evidence. The answers given by the assessee as well as Shri Khubchand to the questions put to them by the Income-tax Department are vague and unconvincing. There was a shift in the stand of the assessee from time to time. The story of loans taken from two parties and the amount of alleged loan having been included in the amount of Hong Kong dollars 3,57,000 was put forward by the assessee in a subsequent statement. If the abovereferred amount represented loans, were the loans ever repaid. No reply is forthcoming. In the letter of explanation dated September 24, 1977, addressed by Messrs. D. M. Harish and Co., advocates, on behalf of the assessee, it was stated that the said balance-sheet as on March 31, 1959, seized by the Enforcement Directorate was drawn up at the instance of the assessee only for the purpose of obtaining bank facilities and did not represent the truth. The assessee did not produce the books of account pertaining to the Hong Kong and Singapore business. It was for the Income-tax Officer, in the first instance, and the Tribunal in the last instance, as final fact-findings authority, to evaluate the material placed before them and record findings the fact as to whether the explanation given by the assessee in respect of the nature and source of the abovereferred amount was satisfactory or not. We are not at all satisfied with the submission made by learned counsel for the assessee that there was no material before the authorities below on the basis of which the findings referred to in the questions set out in the opening part of this order could have been recorded. The reference court is not the first appellate court. In a reference under section 256 of the Income-tax Act, 1961, it is not open to the High Court to embark upon a reappraisal of the evidence. Even the question of sufficiency of evidence cannot be gone into in a reference made under section 256 of the Income-tax Act, 1961. The view taken by the Tribunal is clearly a reasonably possible view and is supported by the evidence on record. The Tribunal was entitled to reach its own conclusion while scrutinizing the explanation of the assessee in respect of the above item of addition to the income of the assessee and draw inferences as deemed fit and reasonable. It is enough to state that the finding recorded by the Tribunal is not perverse and is supported by evidence on record. We need not refer to each and every piece of evidence on record and discuss the facts in greater detail.
13. In view of the above discussion, we answer the question referred to us in the affirmative, i.e., in favour of the Revenue and against the assessee.
14. Having regard to the facts and circumstances of the case, there shall be no order as to costs.