Patna High Court
Chunilal Rastogi vs Commissioner Of Income-Tax, Bihar & ... on 19 October, 1954
Equivalent citations: [1955]28ITR341(PATNA)
JUDGMENT
CHOUDHARY, J. - In this case the assessee has been assessed in the status of a Hindu undivided family for the assessment year 1947-48. The accounting year is the Diwali Year 2002-2003 corresponding approximately to the period 24th October, 1945, to 23rd October, 1946. The assessee is a zamindar and apart from the agricultural income from the zamindari the derives non-agricultural income from that zamindari as well as income from house property and money-lending. For the assessment year in question the assessee returned a total income of Rs. 3 only. He showed in his return the income of house property at Rs. 423 and deducted a sum of Rs. 420 out of it as being business loss. After the passing of the High Denomination Bank Notes (Demonetization) Ordinance, 1946, the assessee encashed 73 high denomination notes of Rs. 1,000 each on the 19th of January, 1946, which falls within the accounting period. The Income-tax Officer estimated the income from house property at Rs. 1,200 and from other sources at Rs. 1,000. The business income estimated by him amounted to Rs. 2,06,082. This sum included the amount of Rs. 73,000 representing the value of the high denomination notes encashed by the assessee. We are concerned only with this amount of Rs. 73,000 in this case.
In the form of declaration that had to be made under section 6 of the aforesaid Ordinance against column No. 16 as to when and from what source the declarant came in possession of bank notes now tendered the assessee noted "not rememberable because of above being kept with female inmates of the family" and against column No. 15 as to the reasons for keeping above amount in high denomination notes rather than in current account, fixed deposit or securities, he noted "kept with the female inmates of the family privately." In the verification of that declaration, however, the assessee declared that the bank notes tendered belonged to him and were not benami holdings. On being required by the Income-tax Officer to explain the nature and source of the high denomination notes encashed by him, the assessee stated that out of the above sum of Rs. 73,000, a sum of Rs. 55,000 was the money given to his daughter-in-law on the occasion of his sons marriage and the balance of Rs. 18,000 represented the savings of his wife. It may be noted that the assessee never put forward a case that the aforesaid notes formed part of the cash balance of his zamindari income. In his statement recorded under section 37 of the Income-tax Act the assessee stated that the sum of Rs. 55,000 had been given to his daughter-in-law by her grandfather, Lala Raghubir Dayal of Rastogi Tola, Lucknow. With regard to the sum of Rs. 18,000, the assessee could not give any account as to how his wife could be in possession of that sum. He, however, stated that that amount might be her personal savings. The Income-tax Officer, thereafter, made a reference to the Inspecting Assistant Commissioner of Income-tax, Lucknow, and requested him to verify the truth of the assessees version about the payment of Rs. 55,000 by Lala Raghubir Dayal to the assessees daughter-in-law. The statement of Brij Gopal, son of the aforesaid Lala Raghubir Dayal, recorded under section 37 of the Act, shows that the said Lala Raghubir Dayal did not take any active part in the marriage and that the presents at the time of marriage consisted only of cash of Rs. 5000 and of clothes and ornaments worth Rs. 8,000 to 10,000. The assessee being confronted with the statement of Brij Gopal put forward a different claim as regards the source of those notes. The case that he put forward was that the notes had been encashed in his name in order to oblige one Mr. N. K. Mishra, who was the manager of the Bank of Bihar. No satisfactory proof having been given, the Income-tax Officer refused to accept this belated version. Therefore, as the assessee could not disclose the nature and source of those notes, the Income-tax Officer treated the entire sum of Rs. 73,000 as the assessees secreted income and included it in his total income. On appeal being preferred by the assessee the Appellate Assistant Commissioner accepted the assessees version that the notes belonged to Mr. N. K. Misra and had been encashed on his behalf in the name of the assessee. He, however, took the view that the assessee, in having the notes encashed in his name, might have been given a share in the profit and he estimated his share of profit at Rs. 7,500. He, therefore, excluded the balance of Rs. 65,500 from the assessment. The Income-tax Officer went in appeal to the Tribunal who gave an opportunity to the assessee to produce Mr. N. K. Misra for examination. Mr. Dutt who appeared for the assessee before the Tribunal, however, frankly admitted that Mr. N. K. Misra was not likely to support the assessees version and, therefore, he could not examine him. The Tribunal accepted the departments contention and held that the aforesaid notes were not encashed on behalf of Mr. N. K. Misra. The Tribunal, however, held that it was not unlikely that the assessee who was a zamindar and moneylender could have some notes of high denomination with him as part of his savings and estimated such savings at Rs. 20,000. The Tribunal, therefore, excluded this sum of Rs. 20,000 from the assessment and confirmed the inclusion of the balance of Rs. 53,000 in the assessees total income from secreted sources. An application before the Appellate Tribunal by the assessee to refer to the High Court certain questions of law having failed, the assessee filed an application in this Court under section 66(2) of the Income-tax Act to require the Income-tax Appellate Tribunal to state a case on questions enumerated therein. In this state of facts the Appellate Tribunal on being required by this Court referred the following question of law for the opinion of the High Court :
"Whether on the facts of this case there is any material for holding that the amount of Rs. 53,000 representing the value of high denomination notes was income assessable to income-tax received during the accounting period."
In paragraph 7 of the statement of facts the Appellate Tribunal has stated certain principles which guide the Tribunal in treating the value of the high denomination notes. The relevant portion of paragraph 7 runs as follows :
"We may state here the principles which guide the Tribunal in treating the value of the high denomination notes encashed by an assessee as his secreted profits. The assessees version regarding the source of the notes is examined. If it is found to be true then the source of the high denomination notes would have been proved and no part of the value of the high denomination notes will be included in the assessment. If the assessees version as to the source of the high denomination notes is not proved or is found to be false, it would follow that to the extent to which the source of the high denomination notes had not been proved, there is an increase in the assessees wealth."
Mr. Baldeva Sahay appearing for the assessee has not challenged the correctness of this principle. But his argument is that when an assessee has both taxable and non-taxable income, there is no presumption that the increase in the assessees wealth was from taxable income and not from non-taxable income. The argument put forward by the counsel is that the assessee in this case is possessed of agricultural income from the zamindari and the increase in his wealth might be due to income from his zamindari which cannot be taxed. His further contention is that in this case no investigation has been made as to whether the said sum of Rs. 53,000 could represent his savings from his zamindari income and in that view of the matter, the order of the Appellate Tribunal treating this sum of Rs. 53,000 as assessees secreted profits is wrong in law. His other contention is that in this case the order of the Appellate Tribunal is wrong in law also on the ground that there being no material on the record the fixation of only a sum of Rs. 20,000 as representing the savings of the assessee is arbitrary. In my opinion, both the points raised by the counsel are unsound.
It is by now an established principle of law that the onus is on the assessee to prove positively the source and nature of an amount received by him in the accounting year, and if he fails to discharge that onus, the Income-tax authorities are entitled to draw an inference that the amount received was of an income nature. In S. N. Ganguly v. Commissioner of Income-tax, Bihar and Orissa, a Bench of this Court held as follows :
"When the assessee fails to prove positively the source and nature of a certain amount which he received in the accounting year, the revenue authorities are entitled to draw an inference that the receipts are of an income nature, unless the assessee proves the source and nature of the particular receipt. The burden of proof in such a case is not upon the revenue authorities, but the burden of proof is upon the assessee to show that the item of receipt was not of an income nature."
In support of their view their Lordships in that case relied on the cases of Jadunandan Sahu Deokisanram v. Commissioner of Income-tax, Bihar and Orissa and G. M. Madappa v. Commissioner of Income-tax, Madras. The same view was reaffirmed in Manindranath Das v. Commissioner of Income-tax, Bihar and Orissa, where a Bench of this Court held that if the assessee receives a certain amount in the course of the accounting year, the burden of proof is upon the assessee to show that the item of receipt is not of an income nature; and if the assessee fails 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; in other words, the burden of proof is upon the assessee to show that the item of receipt is not of an income nature. On the above principle of law the question that arises to be determined in this case is whether the assessee has discharged the onus of showing that this amount of Rs. 53,000 was not liable to be taxed.
In this case, as already observed, the assessee never put forward a claim that the high denomination notes formed part of his zamindari income. The explanations that he has given are prevaricating. Different explanations have been put forward by the assessee at different times. On the very first occasion when he had to make a declaration under section 6 of the High Denomination Bank Notes (Demonetization) Ordinance, 1946, he declared that though the said notes were kept with the female inmates of the family privately, they belonged to him and were not benami holdings. When he was required by the Income-tax Officer to give his explanation as to how he could be in possession of those notes, he changed his version and definitely stated that they did not belong to him and put forward a different case that out of the above sum of Rs. 73,000, a sum of Rs. 55,000 belonged to his daughter-in-law as having been given to her by her grandfather at the time of her marriage and the balance of Rs. 18,000 belonged to his wife as being her personal savings. When any gift of this amount to his daughter-in-law was denied by Brij Gopal, the father of his daughter-in-law, the assessee came out with a new case that the entire sum of Rs. 73,000 belonged to one Mr. N. K. Misra who encashed the notes in his name. No material was placed before the Income-tax Officer to support the explanation. Mr. N. K. Misra was not examined, and, as already observed, Mr. Dutt appearing for the assessee conceded before the Appellate Tribunal that N. K. Misra might not support the assessees version. Thus, the authorities were left only with the contradictory versions of the assessee on the point of the explanation as to how he could be in possession of those high denomination notes and they were, therefore, perfectly justified and within their rights to refuse to accept the explanation given by the assessee. The assessee not having satisfactorily proved the source and nature of the aforesaid amount of Rs. 73,000 which he encashed in the accounting year, the revenue authorities were perfectly justified in drawing an inference that the said sum was of an income nature. As the assessee never put forward the case of having got the said amount or any part thereof as being part of his zamindari income, the argument of Mr. Sahay that the increase in wealth could not only be from the taxable income but could also be from the zamindari income which was not taxable, has to be rejected as being without any substance.
The other point, namely, that the fixation of only Rs. 20,000 as representing the assessees savings is arbitrary, is also without any merit. Mr. Sahay has contended that the Appellate Tribunal has given no reason for coming to the conclusion that a sum of Rs. 53,000 represented the assessees secreted profits and the order of the Tribunal is, therefore, bad in law. In support of his argument he has placed reliance on an unreported Bench decision of this Court in Chunilal Ticamchand Coal Co., Ltd. v. Commissioner of Income-tax Bihar and Orissa decided on the 2nd of March, 1954. In that case also the assessee had encashed high denomination notes amounting to Rs. 68,000 which was sought to be added to his income. On appeal the Appellate Tribunal took the view that out of the sum of Rs. 68,000 a sum of Rs. 35,000 only should be treated as coming out of the cash balance of the business and the balance of Rs. 33,000 should be treated as secreted profits of the assessee liable to be taxed. The argument put forward in this Court was that no reasons had been given by the Tribunal for making apportionment and the Tribunal had not stated on what ground the amount of Rs. 33,000 should be treated as secreted profits. This contention was accepted by this Court as being well founded. Mr. Sahay has put forward an argument that in the present case also the contention accepted in that case applies in all respects. I do not think Mr. Sahay is right in this contention. In that case, there were materials on the record which showed that the intention of the assessee was always to keep in his hands a sum of at least over Rs. 63,000 as emergency reserve and his habit was to keep the reserve as far as possible intact and to take out money from the current account of various banks for meeting the day to day expenditure of the colliery business. The contention that their Lordships accepted in that case depended on the particular facts of that case. Moreover, in the present case, the Appellate Tribunal has given reasons for coming to the finding as to why only a sum of Rs. 20,000 out of the aforesaid amount of Rs. 73,000 should be excluded from being taxed. The following passage occurring in paragraph 5 of the order of the Appellate Tribunal is of importance in this case :
"He (the assessee) has not produced any evidence apart from that of himself to prove that the monies belonged to the ladies. We have nevertheless to consider the assessees status in life and the habits of a person so placed. It is in the nature of things for people like the assessee to keep some high denomination notes. The question is how much and what would be an estimate of such notes of high denomination that the assessee could have held. Admittedly, there is no evidence as to these and we have to make an estimate taking into consideration the expenses of the assessee and his status, etc. Considering all aspects, we feel that the assessee would have had Rs. 20,000 in high denomination notes and excluding this from Rs. 73,000 the balance is to be added as being the amount unexplained by the assessee."
Thus, it appears that the Appellate Tribunal has considered the status, habits and expenses of the assessee and on consideration of those aspects it has come to the conclusion that a sum of Rs. 53,000 should be added as being the amount unexplained by the assessee. On the materials that were placed before the Tribunal it could have very well come to the conclusion in agreement with the Income-tax Officer that the entire sum of Rs. 73,000 represented the taxable income. The assessee, therefore, cannot have any grievance if without his having discharged the onus that lay on him to prove the source and nature of the aforesaid high denomination notes and without there being any material on the record the Tribunal excluded the sum of Rs. 20,000 from his taxable income. The question that fell to be decided by the Appellate Tribunal was a question of fact; the onus lay on the assessee as already observed to prove the source and nature of the money which he miserably failed to discharge. The Appellate Tribunal was perfectly entitled to decide this question of fact by drawing an adverse inference against the assessee because of his failure to discharge the onus that lay on him and where the question has not passed from the region of fact into the region of law, the High Court has no authority to interfere with the finding of the Tribunal. In the present case I am satisfied that the Appellate Tribunal has not committed any error of law in coming to the finding on the question referred. Thus it follows that the High Court has no jurisdiction to interfere with the conclusion reached by the Appellate Tribunal. The question referred to the High Court, therefore, must be answered against the assessee and in favour of the Income-tax department. The assessee must pay costs of the reference. Hearing fee Rs. 250.
RAMASWAMI, J. - I agree.
Reference answered accordingly.