Bombay High Court
Smt. Panna Devi Chowdhary (Legal ... vs Commissioner Of Income-Tax on 22 March, 1994
Equivalent citations: [1994]208ITR849(BOM)
Author: Sujata V. Manohar
Bench: Sujata V. Manohar
JUDGMENT Dr. B.P. Saraf, J.
1. In compliance with the order of the Supreme Court dated January 21, 1980, in Civil Appeal No. 168 (NT) of 1980, the Income-tax Appellate Tribunal has referred the following of law to this court for opinion under section 66(2) of the Indian Income-tax Act, 1922 ("the Act") :
"Whether the finding of the Tribunal that the sum of Rs. 4,00,000 was the assessable income of the assessee was unreasonable or perverse or not sustainable in law on the material before the Tribunal ?"
2. This reference pertains to the assessment year 1951-52. The assessee, Saligram B. Choudhary (since deceased and represented by his widow, Smt. Panna Devi), was an individual. At the material time, he was the general manager of one Bombay Gas Co. Ltd., Bombay. The said company and some other companies, viz., Bengal Jute Mills Co Ltd., Madaripur Trading Co., and Hindustan Mercantile Bank belonged to Messrs. Surajmal Nagarmal Group. One C. L. Bajoria was a senior partner of Messrs. Surajmal Nagarmal and also one of the directors of Bengal Jute Mills Ltd. For the assessment year 1951-52, the assessee had filed his return on May 29, 1952, showing an income of Rs. 15,759. The said return was revised on March 30, 1955. In the revised return an income of Rs. 27,306 was disclosed by the assessee. In the course of the assessment proceedings for the year under consideration, the Income-tax Officer noticed that an amount of Rs. 2,00,000 stood credited to the account of the assessee with the Hindustan Mercantile Bank Ltd., Bombay, on November 2, 1950. The assessee was called upon to explain the nature and source of the said credit. The assessee submitted his explanation and stated that a telegraphic transfer had been received from Messrs. Bengal Jute Mills Co. Ltd., Calcutta, for Rs. 4,00,000 out of which Rs. 2,00,000 was paid in cash and the balance Rs. 2,00,000 was lying in his account. A certificate to the said effect from Surajmal Nagarmal was also furnished to the Income-tax Officer alone with the above reply. The assessee sent another letter to the Income-tax Officer on February 16, 1966. Along with the said letter, the original memo dated October 31, 1950, received from the bank was also enclosed. The above memo showed that the Bombay branch of the bank had received the above T. T. from its Calcutta office instructing it to pay Rs. 4,00,000. It was reiterated by the assessee that out of the said amount, a sum of Rs. 2,00,000 had been paid by the assessee to the representative of the sender and the balance amount of Rs. 2,00,000 was lying in the accounts. The Income-tax Officer also made enquiries from Messrs. Surajmal Nagarmal, managing agents of Bengal Jute Mills Co. Ltd., Calcutta. Messrs. Surajmal Nagarmal, by their letter dated February 4, 1956, explained the remittance of Rs. 4,00,000 to the assessee as under :
"The reason for T. T. to Mr. Saligram Chowdhary was that as we were not well acquainted with the Bombay party, we thought it safe to make the payment to the Bombay party through our representative, Mr. Saligram Chowdhary and, hence, the T. T. sent to Mr. Chowdhary. The amount was payable and was paid after the amount of T. T. was realised by Mr. Chowdhary to Messrs. Yafi and Sons, Churchgate, St. Fort, Bombay. The date of the payment of the amount referred to cannot be easily given by us it must be some date after the T. T. was realised by Mr. Saligram Chowdhary. The amount was sent direct to the party concerned as we thought that this was a big amount and we thought it safe to pay it through our representative in Bombay, Mr. Saligram Chowdhary. These amounts were sent to Bombay on account of Messrs. G. Yafi and Sons or their principal. We have no copy of the amount of this party in our books of account. The fact is that the agent of this party paid similar amount to Madaripur Trading Co. Ltd., at Narayangunj and, in our turn, we paid them this amount in Bombay. As such, there are no accounts of this party in our books of account. We confirm that nothing was received or nothing was due to Mr. Saligram Chowdhary out of the sum of Rs. 4 lakhs."
3. In the course of the assessment proceedings, on January 16, 1956, the Income-tax Officer also examined the assessee and his assistant, one Anandkar, in the Bombay Gas Co. Ltd. The Income-tax Officer also issued noticed under sections 23(2) and 22(4) of the Indian Income-tax Act, 1922, to the assessee calling upon him to file, inter alia, his total wealth statement (wealth in his own name and in the name of his wife and in the name of the children as on March 31, 1956). In reply thereto, the assessee by his letter dated February 14, 1986, stated that as for the last 30 years or so his income was mainly from salary, no accounts regarding his occasional investments had been kept. In the absence of such account, he expressed his inability to give his exact wealth position as on March 31, 1956. This explanation was not accepted by the Income-tax Officer and he made a summary assessment under section 23(4) of the Act. In the process, he added the said sum of Rs. 4,00,000 to the total income of the assessee as income from undisclosed sources.
4. The assessee applied under section 27 of the Act for cancellation of the summary assessment. The assessee also appealed to the Appellate Assistant Commissioner of Income-tax against the order of assessment and challenged the addition of Rs. 4,00,000 to his income. The application of the assessee for cancellation of the assessment was rejected. The appeal was, however, allowed by the Appellate Assistant Commissioner. In the course of hearing of the appeal, the assessee also produced additional evidence in support of his contention that the addition was not justified. The Appellate Assistant Commissioner admitted the additional evidence and on consideration of the same, remanded the case of the Income-tax Officer for his report. The Income-tax Officer considered the additional evidence pursuant to the direction of the Appellate Assistant Commissioner and submitted the remand report, vide his order dated May 4, 1961. The Appellate Assistant Commissioner on consideration of the remand report and the objections of the assessee in regard thereto, being of the opinion that it was necessary to examine certain persons, issued a commission to the Income-tax Officer requiring him to examine Mr. C. L. Bajoria, partner of Messrs. Surajmal Nagarmal and director of Messrs. Bengal Jute Mills Co. Ltd., and one Mr. Bhandari in whose presence the money was said to have been paid to Messrs. G. Yafi and Sons. Mr. Bhandari could not be examined as his whereabouts could not be traced. Mr. Bajoria was duly examined by the Income-tax Officer on commission. On receipt of the report of the Income-tax Officer on commission and on the consideration of the facts of the case in the light of the evidence of Mr. C. L. Bajoria, the Appellate Assistant Commissioner by his order dated March 27, 1965, deleted the addition of Rs. 4,00,000 made by the Income-tax Officer to the income of the assessee.
5. Against the above order of the Appellate Assistant Commissioner, the Revenue appealed to the Tribunal. The Tribunal by its order dated July 12, 1972, set aside the order of the Appellate Assistant Commissioner and remanded the case for deciding it afresh in accordance with law. Accordingly, the Appellate Assistant Commissioner took up the matter for fresh determination. The assessee also filed an affidavit on September 12, 1973, before the Appellate Assistant Commissioner. However, this time the Appellate Assistant Commissioner took a different view and confirmed the addition of Rs. 4,00,000 made by the Income-tax Officer. Aggrieved by the above order of the Appellate Assistant Commissioner, the assessee appealed to the Tribunal.
6. The Tribunal, on consideration of the submission of the parties, observed that the preponderance of probability was that though the source of the amount of Rs. 4,00,000 had been established, the preponderance of evidence on record was against the case set up by the assessee that the said amount was received by him for payment of Messrs. G. Yafi and Sons at Bombay, that it was sent to the assessee by Shri Bajoria on behalf of Bengal Jute Mills Co, Ltd. for payment of that amount to Messrs. Yafi and Sons on account of Madaripur Trading Co. Ltd. in Narayangunj (then situated in East Pakistan) and it was beyond comprehension as to why Shri Bajoria should send the amount to the assessee at Bombay for payment to Messrs. G. Yafi and Sons when the concern had its main office at Calcutta. In view of the above observations, the Tribunal came to the conclusion that the assessee failed to prove that the amount of Rs. 4,00,000 in question received by him had been paid to Messrs. G. Yafi and Sons as claimed by him. The Tribunal, therefore, confirmed the addition of Rs. 4,00,000 to the income of the assessee as his income from undisclosed sources. The assessee applied for reference under section 66(1) of the Indian Income-tax Act, 1922, which was rejected by the Tribunal. The application of the assessee to the High Court under section 66(2) of the Act for directing the Tribunal to refer the question of law proposed by him was also rejected by the High Court. The assessee approached the Supreme Court. The Supreme Court accepted the contention of the assessee and by its judgment and order dated January 21, 1980, directed the Tribunal to refer the question of law set out above the High Court. The Tribunal has, accordingly, referred the above question of law to this court.
7. The contention of the assessee is that the finding of the Tribunal that the sum of Rs. 4,00,000 was the income to the assessee is unreasonable and perverse and is not sustainable in law. Counsel for the assessee, Mr. Dastur, drew our attention to the evidence on record, in particular, to the statement of Shri Bajoria made on oath before the Income-tax Officer in the course of his examination on commission, clearly admitting the remittance of the said amount of Rs. 4,00,000 to the assessee for payment to G. Yafi and Sons at Bombay and the payment of the same by the assessee to G. Yafi and Sons. The submission of counsel is that the Tribunal itself having accepted the source of the amount of Rs. 4,00,000 there was no basis and/or justification for inclusion of the said amount in the hands of the assessee. The case of the assessee, in other words, is that the amount having been remitted by Messrs. Bengal Jute Mills Co. Ltd., Calcutta, which is a genuine assessee of long standing and the said fact having been clearly admitted by the director of the said company who was also the partner of Surajmal Nagarmal, the managing agents of the said company, the source of the money is clearly established. Shri Bajoria had also confirmed the statement of the assessee that the amount of Rs. 4,00,000 was remitted to Bombay for payment of Messrs. G. Yafi and Sons at Bombay and that services of the assessee were taken only to safeguard the payment to the proper party. That apart, both the remittance of the money as well as its payment by the assessee in terms of the instructions of the party remitting the same having been admitted, nothing remained with the assessee which could not be considered for inclusion in his income. To put it differently, the submission is that the amount which was received from Messrs. Bengal Jute Mills Co. Ltd., having been paid in terms of its instructions, no money was left with the assessee the nature of which might require consideration. Accordingly to the assessee, the Tribunal proceeded on a completely erroneous assumption and thereby arrived at a conclusion which is perverse and not sustainable in law.
8. We have carefully considered the above submissions. We have also heard at length learned counsel for the Revenue. We have pursued the order of the Tribunal and the various documents annexed to the paper book. We have also carefully gone through the evidence of Shri Bajoria. We find that the Tribunal itself was fully satisfied about the source of the money. The Tribunal has accepted the fact that the money came from Messrs. Bengal Jute Mills Co. Ltd., Calcutta, to Bombay Messrs. Bengal Jute Mills Co. Ltd., Calcutta, stated before the Income-tax Officer in no less clear terms that it had remitted the same to Bombay by T. T. for payment to some party on its behalf. The services of the assessee were availed of only for the limited purpose of ensuring payment of the proper person. In such a situation, there is no justification to treat the same as undisclosed income of the assessee. If the Income-tax Officer had any doubt or suspicion about the identity of the person to whom the money was paid or the purpose for which it was paid, then it was the Calcutta company who would be accountable to the concerned Income-tax Officer for the same. The assessee admittedly being a broker of the Calcutta company who was entrusted merely with the task of assisting the Calcutta company in remitting the amount to a particular firm in Bombay after proper verification, cannot be saddled with the liability of income-tax without there being anything on record to show that the said amount or any part thereof remained with the assessee. The question of the nature of the receipt arises only when there is a receipt. In the instant case, the admitted position being that the Calcutta party remitted the money to the bank in Bombay for payment on their behalf to a Bombay party and the money having been paid as per their instructions, nothing remained with the assessee which could be considered for assessment in his hands. There is, therefore, no justification for including the said amount in the income of the assessee as income from undisclosed sources.
9. It may be pertinent to note that the very same amount of Rs. 4,00,000 was also sought to be added to the income of Messrs. Bengal Jute Mills Co. Ltd., Calcutta, in its assessment for the assessment year 1951-52. The contention of the Revenue was that the above amount remitted by it to Bombay for payment to Messrs. G. Yafi and Sons through Shaligram Chowdhary was different and distinct from the transaction recorded in its books of account showing payment of Rs. 4,00,000 to Madaripur Trading Co. Ltd. The contention of the assessee was that it was not so. According to the assessee Rs. 4,00,000 were sent by it to Shaligram Chowdhary of Bombay by telegraphic on October 30, 1950, through Hindustan Mercantile Bank who paid the same Messrs. G. Yafi and Sons of Bombay who in turn paid the said amount to Madaripur Trading Co. Ltd., in cash. The matter went up to the Tribunal. The Tribunal in its order dated December 13, 1974, noted that through the entry in the books of account of the assessee made on October 31, 1950, read as"
"Paid in cash to Madaripur Trading Co. Ltd., against advance as per voucher - Rs. 4 lakhs."
and the voucher read as under :
"Debit Madaripur Trading Co. account - advance Rs. 4 lakhs only being the amount paid to them as advance as per memo attached."
10. The memo referred to in the above voucher read as under :
"In accordance with your request, we have despatched a telegraphic message (using our cypher code as required) to our Bombay office to pay the sum of Rs. 4 lakhs to Shaligram Chowdhary."
11. On a careful perusal of the above entry along with the voucher and the memo set out above, the Tribunal held that :
"There is no doubt in our mind that there was only one transaction of Rs. 4 lakhs on October 30, 1950, and not two transactions of Rs. 4 lakhs each as held by the income-tax authorities. The oral examination given by the assessee the income-tax authorities might have created suspicion in their minds but that would not justify us to make an addition of Rs. 4 lakhs as done in the present appeal. The books of account maintained by the assessee as well as the voucher and memo in question are all contemporaneous evidence and cannot be doubted. As we are fully satisfied with the evidence on behalf of the assessee that there was in fact only one transaction of Rs. 4 lakhs on October 30, 1950, we delete the sum of Rs. 4 lakhs treated by the income-tax authorities as the assessee's income from 'undisclosed sources'."
12. The above order of the Tribunal in the case of Bengal Jute Mills Co. Ltd., who had remitted the amount involved in the present case to the assessee for payment to Messrs. Yafi and Co., confirms the conclusion arrived at by us that no amount whatsoever was received by the assessee which could be considered for inclusion in his assessment as undisclosed income. The assessee merely acted as an agent of the Calcutta company for payment of the amount to Messrs. G. Yafi and Co. at Bombay.
13. The controversy can be looked at from another angle also. The Income-tax Act imposes a liability to tax upon income. It does not provide that whatever is received by a person can be regarded as his income liable to tax. In all cases in which a receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision. It is only in a case where the receipt is in the nature of income, that the burden of proving that it is not taxable lies upon the assessee. As observed by the Supreme Court in Parimisetti Seetharamamma v. CIT [1965] 57 ITR 532, where the case of assessee is that a receipt did not fall within the taxing provision, the source of the receipt is disclosed by the assessee and there is no dispute about the truth of that disclosure, the income-tax authorities are not entitled to raise an inference that the receipt is assessable to income-tax on the ground that the assessee has failed to lead all the evidence in support of his contention that it is not within the taxing provision. To the same effect is the decision of this court in Dilip Kumar Roy v. CIT [1974] 94 ITR 1, where also it was held that in all cases in which a receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision. Merely because an assessee carries on a vocation there is no presumption in law that any amount received by him is income subject to tax. The test in such cases is to find out if the sum is paid to the assessee in respect of his services and accrues to him by virtue of his office. On the facts of the case before it, it was held in the above case that as no evidence was produced by the Revenue to show that the amounts in question constituted the income of the assessee and as the veracity of the statement in the affidavit had not been challenged or dispute, the Tribunal was not justified in its conclusion that the amount was income liable to tax in the hands of the assessee. Reference may also be made in this connection to the decision of the Supreme Court in Kishinchand Chellaram v. CIT [1980] 125 ITR 713. In this case, certain telegraphic transfers were made by an employee of one office of the assessee to an employee of another office of the assessee. An inference was sought to be drawn by the Department that the amount was income of the assessee. The Supreme Court held that from the facts that remittance was made by an employee of the assessee from Madras and received by its another employee at Bombay, it did not follow that it was on behalf of the assessee. It was held that the burden was on the Department to prove that the money belonged to the assessee by bringing proper evidence on record and the assessee could not be expected to call the concerned persons in evidence to help the Department to discharge the burden that lay upon it. The Supreme Court held that there was no evidence on the basis of which the Tribunal could come to a finding that the sum remitted by its employee was remitted by the assessee and it represented the undisclosed income of the assessee.
14. The facts of this case are very much identical to the facts of the present case. In this case also, the only fact that the amount was remitted by the Calcutta company to the assessee is not sufficient to hold that the amount belonged to the assessee or that it constituted the income of the assessee, more so, in the face of the categorical statement of the Calcutta company that the said amount belonged to it. We are, therefore, of the clear opinion that the finding of the Tribunal in this case is perverse and unreasonable and not sustainable in law.
15. In the premises aforesaid, we answers the question referred to us in the affirmative, i.e., in favour of the assessee and against the Revenue. Under the facts and circumstances of the case, we made no order as to costs.