PETITIONER:
ROSHAN-DI-HATTI
Vs.
RESPONDENT:
COMMISSIONER OF INCOME TAX
DATE OF JUDGMENT08/03/1977
BENCH:
BHAGWATI, P.N.
SARKARIA, RANJIT SINGH
FAZALALI, SYED MURTAZA
CITATION:
1977 AIR 1605 1977 SCR (3) 153
1977 SCC (2) 378
ACT
Income Tax Act 1922--Sec. 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---Conclusion without any materi-
als-No person acting judicially and properly instructed as
to the relevant law would come to determination--Income tax
Appellate Tribunal--Whether Tribunal can ask questions to
assessee informally--Whether part of record--Income Tax
Appellate Tribunal Rules 29, 30 and 31.
HEADNOTE
The assessee, a Hindu Undivided Family, was carrying on
business in gold and jewellery 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. 12,094/-, Rs. 13,000/- and Rs. 6,000/- from
Lahore Banks to New Delhi Banks. He left Lahore and pro-
ceeded to Mussoorie in June, 1947. On his way, he stopped
at Amritsar for a few days and opened an account with the
Imperial Bank of India with a view to obtaining a locker in
the Safe Deposit Vault but a locker was not available and
hence he deposited a trunk which he had brought from Lahore
containing gold ornaments, jewellery and cash with the
Imperial Bank of India. The assessee came to Delhi in
October, 19.,7. and rented a house. In February, 1948. he
succeeded in securing business premises and started busi-
ness on 30.3.1948. The first entry in the books of account
on 30.3.1948 showed gold ornaments of Rs. 1,19,320/-, Gold
Rawa Rs. 1,69,020/- Stones worth Rs. 4,000/- Bank balance
with the Imperial Bank of India, Delhi Rs. 35,053/- Bank
Balance with Hindustan Commercial Bank. Delhi Rs. 221/- and
Cash of Rs. 2.800/. The assessee thus brought in an aggre-
gate capital of Rs. 3,33,414/- in the business on
30.3.1948. in 1957. it came to the notice of the Income
Tax Officer that the assessee had made considerable income
in his gold and jewellery business but had failed to pay any
tax on such income and hence issued a notice to the assessee
under s. 34(1)(a) of the Indian Income Tax Act, 1922, for
bringing the income of the assessee for the assessment year
1948-49 to tax. The assessee flied his return. In the
course of the assessment proceedings the I.T.O. called
upon the assessee to explain the nature and source of the
capital of Rs. 3,33,414/-.
The assessee contended 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 thereafter brought over to
Delhi and deposited in the Safe Deposit Vault of Hindustan
Commercial Bank at Delhi. When the business of the asses-
see was commenced,he surrendered the locker and brought the
entire gold, jewellery and cash into the business.
The assessee observed that till he started his business
in March 1948, neither the ,assessee nor Roshan Lal had
any other business or means of income from which the amount
of Rs. 3,33,414/- could have been earned. The assessee
examined some witnesses. The ITO also examined the broth-
ers 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/- to
his son Roshan Lal for starting gold and jewellery business
in 1935 and he had also subsequently lent some tooroes 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. 3.33,414/- out of income from the business carried
on. The Income Tax Officer gave credit for a sum of Rs.
20,000/- and treated the balance of Rs.
154
3,30,414/- as income of the assessee from undis-
closed source. On appeal,the Appellate Assistant Commis-
sioner allowed a further sum of Rs. 80,000./-on the follow-
ing grounds:
(1) That the assessee transferred a sum
of Rs.12,004/-,Rs./3,000/- and Rs. 6,000/-
from Banks as Lahore to the Bank at New
Delhi. This shows that the assessee was not a
man of very small means while he was at La-
hore.
(2) He was having accounts in 4 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. 22.000/-.
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. The
assessee stopped at Amritsar and opened an
account and took Safe Deposit Vault where he
deposited a sealed box. It is reasonable to
presume that there must have been something
quite valuable in the box.
A further appeal filed by the assessee to the Tribunal
failed. The tribunal, when the appeal came to be heard, put
a question to Roshan Lal as to how he had brought gold and
jewellery 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
weighed 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 Government of
India published in the Press Note in January
1952, requiring all evacuees to declare the
amounts of money brought by them from Paki-
stan.
(3) that the assessee did not file any income
tax returns in Lahore. The High Court con-
firmed the finding of the Tribunal in the
reference.
Allowing the appeal,
HELD: (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.
[160 E] A
A.Govindaralulu Mudaliar v. Commissioner of Income Tax
(1958) 34 ITR 807 and Commissioner of Income Tax, U.P. v.
Devi Prasad Vishwanath Prasad 72 ITR 194 followed.
(2) The conclusion of the Tribunal on a finding of fact can
be assailed only if it is shown that the Tribunal had acted
without any matenal 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.
[161 C-D].
Mehta Parikh & Co. v. Commissioner of Income-Tax Bombay
30 ITR 181, followed.
(3) 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 remem-
bered that the assessee was being called upon to prove the
extent of his business m a territory from which the member
of the Hindu undivided family had to .flee for their lives
and from where it was totally impossible to produce any
primary evidence.. The. finding of the AAC that the
assessee was doing fairly well m the business m Lahore was
not disturbed by the Tribunal.. The .AAC found that it was
reasonable to presume to at there Was something. quite
valuable m the box .and this finding was also not dissented
by the Tnbunal. There was no material to show that the
orna-
155
ments, jewellery and cash brought by the assessee and kept
in the sealed trunk were of the value of only 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 substan-
tial amount from Lahore. [161 D-G]
(4) 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
hearing of the appeal. It must be pointed out straightway
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 of the case. they should have followed this
procedure. The answers given by Roshan Lal disregarding the
perscribed procedure could not form part of the record and
the Tribunal was not entitled to rely upon the same. [162
H, 163 A-C]
(5) The Tribunal erred in relying on the Press Note be-
cause admittedly the assessee had brought a sum of Rs. 1 lac
to India and even that was not declared to the Government of
India. [163 E-F]
(6) There was no material on the basis of which the
Tribunal could come to the conclusion that the ornaments.
jewellery and cash were not worth than Rs. 1 lac. It was
not proved that Roshan Lal or the assessee had any business
or other means of income in India until 30.3.1948. The
genuineness of the entry of March 1948 was also not chal-
lenged. It is utterly improbably amounting almost to
impossibility that the assessee could have earned such a
large amount of Rs. 2.33.414/- as profit within a few months
in the disturbed conditions which then prevailed in India.
[164 B-E]
(7) The Tribunal acted without any material and in any
event, the finding of fact reached by the Tribunal was
unreasonable or such that no person acting judicially and
properly instructed as to the relevant law would come to
such finding. [164 F-G]
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal No.. 284 of 1972.
(From the Judgment and Order dated 3-5-1971 of the Delhi
High Court in I.T. Case No. 6-D of 1964)
A.K. Sen, V.S. Desai and Bishamber Lal, for the appellant.
G.C. Sharma and S.P. Nayar, for the respondent.
The Judgment of the Court was delivered by
BHAGWATI, J.--This is an appeal by special leave direct-
ed against the Judgment of the Delhi High Court answering in
favour of the Revenue a question which was directed to be
referred by the Tribunal under section 66(2) of the Indian
Income Tax Act, 1922. The controversy between the parties
arises out of an assessment made on the assessee as a Hindu
Undivided Family for the assessment year 1948-49, the corre-
sponding accounting year being the financial year 1947-48.
The assessee was at the material time a Hindu Undivided
Family with one Roshan Lal as its manager and karta. Till
June 1947 the assessee was carrying on business in gold and
jewellery at Chowk Surjan Singh in Lahore. In view of the
impending partition of India Roshan Lal decided to move out
of Lahore and accordingly he transferred a sum of Rs.
12,094/- from the account of the assessee with the Lahore
Branch of the Punjab National Bank Ltd. to the New Delhi
Branch of that bank in June 1947. He also transferred from
the Lahore
156
Branch of the punjab National Bank Ltd. to the branch of
that bank at New Delhi two sums of Rs. 13,000/- and Rs.
6,000/-, the former in his own name and the latter in the
name of his wife and obtained fixed deposit receipts for
these two amounts from the New Delhi Branch of the Bank in
July 1947. He left Lahore in June 1947 and proceeded to
Mussoorie but on his way he stopped at Amritsar for a few
days. He opened an account with the Amritsar Branch of the
Imperial Bank of India by depositing a sum of Rs. 300/- with
a view to obtaining a locker in the safe deposit vault where
he could deposit for sale custody a trunk which he had
brought with him from Lahore containing gold ornaments,
jewellery and cash. It seems that a locker was not avail-
able and hence he deposited the trunk in a sealed condition
with the Amritsar Branch of the Imperial Bank of India on
25th june, 1947. The sealed trunk, according to the asses-
see, contained gold ornaments of the value of Rs.
1,19,320/-, gold rawa of the value of Rs. 1,69,020/- and
stones of the value of Rs. 4,000/-. Roshan Lal then went to
Mussoorie via Haridwar and stayed at Mussoorie until about
October 1947. The case of the assessee was that during this
period Roshan Lal did not carry on any business nor did he
have any other means of income. In October 1947 Roshan Lal
came over to Delhi and rented a house in Kinari Bazar with a
view to settling down in Delhi. He started looking for
suitable premises for commencing business and it was only in
February 1948 that he succeeded in securing suitable prem-
ises at Dariba Kalan in Delhi. He then started gold and
jewellery business in these premises in the name and style
of Roshan-Di-Hatti on 30th March, 1948. The business was
joint family business of the assessee and the first entry
made in the books of account of the assessee was dated 30th
March, 1948 and it was as follows:
Gold Ornaments Rs. 1,19,320/-
Gold Rawa Rs. 1,69,020/-
Stones Rs. 4,000/-
Bank balance with the Imperial
Bank of India, Delhi Rs. 35,053/-
Bank balance with Hindustan
Commercial Bank, Delhi Rs. 221/-
Cash Rs. 2,800/-.
The assessee thus brought in an aggregate capital of Rs.
3,33,414/in the business on 30th March, 1948. It appears
that the assessee prospered in this gold and jewellery
business of Roshan-Di-Hatti but it did not file any return
of income nor paid any income tax. It came to the notice of
the Income Tax Officer some time in the beginning of 1957
that the assessee had made considerable income in its gold
and jewellery business but had failed to pay any tax on such
income and hence the Income Tax Officer issued a notice to
the assessee under section 34(1)(a) of the Indian Income Tax
Act, 1922 for bringing the income of the assessee for the
assessment year 1948-49 to tax. The assessee filed its
return of income and in the course of the assessment pro-
ceedings, the Income Tax Officer, called upon the assessee
to explain the nature and source of the capital of Rs.
3,33,414/- brought by it into the business on 30th March,
1948. The assessee pointed
157
out that gold rawa, ornaments and cash representing this
capital were brought by Roshan Lal when he migrated from
Lahore and they were kept in a sealed trunk with the Amrit-
sar Branch o[ the Imperial Bank of India and when Roshan Lal
came over to Delhi in October 1947, he. deposited the same
in a locker in the safe deposit vault of Hindustan Commer-
cial Bank at Delhi and when the business of the assessee was
commenced, he surrendered the locker and brought the entire
gold, jewellery and cash into the business. It was empha-
sised by the assessee as a supportive fact that after
Roshan Lal migrated from Lahore in June 1947 until the
assessee started the business of Roshan Di-Hatti on 30th
March, 1948, neither the assessee nor Roshan Lal had any
other business or means of income from which the assets of
Rs. 3,33,414/- could have been earned. This explanation was
given in the course of various statements made by the asses-
see from time to time before the Income Tax Officer. The
assessee also examined Hira Lal, Father-in-law of Roshan Lal
and filed affidavits of Mulk Ram, Bills Mal, Dalai, Wazir
Chand, Devidas Mehra and Panna Lal before the Income Tax
Officer for the purpose of showing that the assessee was
having a large gold and jewellery business in Lahore before
migration and that it did not carry on any business in India
before starting the business of Roshan-Di-Hatti on 30th
March, 1948. The Income Tax Officer also examined Prem Nath
and Kishan Chand, brothers of Roshan Lal. The statement of
Prem Nath was to the effect that their father 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/- to his son
Roshan Lal for starting gold and jewellery business in
1935 and he had also subsequently lent some monies to Roshan
Lal at nominal interest. Prem Nath deposed that for the
purpose of the business of the assessee, Roshan Lal was
occupying a shop belonging to his father but he was not
paying rent though demanded on the ground that he did not
have sufficient income to pay the rent It was also stated
by Prem Nath that before the partition of the country the
standard of living of Roshan Lal and his family was no
higher than that of Prem Nath who was getting a salary of
Rs. 150/- per month. The statement of Prem Nath was clear-
ly directed towards showing that the assessee did not have
any flourishing business or large income prior to partition.
The Income Tax Officer, on the basis of this material before
him, 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. 3,33,414/- out of income from the business
carried on by it in Lahore and since the nature and source
of the capital of Rs. 3,33,414/- credited in the books of
account of the business on 30th March, 1948 was not satis-
factorily explained, the Income Tax Officer, gave credit
only for a sum of Rs. 20,000/- and treated the balance of
Rs. 3,13,414/- as income of the assessee from undisclosed
sources.
The assessee appealed against this order of the Income
Tax Officer and on appeal, the Appellate Assistant Commis-
sioner took the view that, on the facts as disclosed by the
material placed on record in the proceedings, a much larger
allowance should have been made in respect of the capital
brought by the assessee from Lahore and he allowed a further
sum of Rs. 80,000/-. The reason given by the Appellate
158
Assistant Commissioner for taking this view are a little
material and they may be reproduced as follows:
"There is documentary evidence to show
that assessee transferred an amount of Rs.
12,094/- from the Punjab National Bank
account at Lahore to the same bank in New
Delhi in June 1947. It is also seen that he
also transferred two amounts Rs. 13,000/- in
his own name and Rs. 6,000/in his wife’s name
from the Punjab National Bank, Lahore, to the
same Bank at Minto Road, New Delhi and fixed
deposit receipts were taken for this total sum
of Rs. 19,000/from the Delhi Bank in July
1947. All these monies including the realised
fixed deposits later on went into the asses-
see’s account with the State Bank of India
which reveals a credit balance of Rs. 35,053/-
as on 30-3-1948. This at least shows that the
assessee was not a man of very small means
while he was at Lahore. He was having four
accounts in different banks at Lahore. The
particulars, however, are not available and
it is also stated that most of these accounts
were very small; but even then a man of very
modest means would not normally have so
many bank accounts. Moreover, while at
Lahore Shri Roshan Lal had taken life insur-
ance Policies Rs. 22,000/-. A number of
letters and receipts regarding business trans-
actions in Lahore were also filed which indi-
cate that the Lahore business was not as small
as the Income Tax Officer has taken it to be.
There are some papers which relate to deals
worth Rs. 10,000/- or more at one time. There
are also several vouchers relating to adver-
tisement charges paid at Lahore All these
things together with the fact that the asses-
see was in position to transfer a sum of Rs.
31,000/- approx. through banks indicate that
he was doing fairly well in the business at
Lahore. How he could have managed to evade
tax at Lahore for all these years, is a mys-
tery; but from the circumstances of the case
it appears that the assessee had certainly
assessable incomes while he was doing business
there during the pre-partition period.
There is another factor which has also
to be given its due weight. While leaving
Lahore and coming over to India in JUne
1947, the assessee stopped for few days at
Amritsar. There on the 25th June, 1947 he
deposited a sealed box with the State Bank of
India Amritsar Branch. This box was withdrawn
by him on the 20-10-47. These facts are
corroborated by the bank certificate. The
assessee claims that he had considerable
amount of jewellery and gold etc. (part of his
trading stock in Lahore) as well as cash, in
this box that is why he did not take the risk
of carrying. it with him on his way to Mussoo-
rie, but kept in deposit with the State Bank
at Amritsar till such time. as he was able to
settle down in India. The contents of the
seated box are unknown to the bank and so it
is not possible to ascertain what the box
actually contained. But it is reasonable to
159
presume that there must have been something
quite valuable in the box as otherwise the
assessee would not have kept it in the custody
of a bank like State Bank of India. It must
also be noted that as early as June, 1947,
the assessee hired a locker in the Hindustan
Commercial Bank Ltd., New Delhi. It is clear
therefore, that when in June, 1947, the asses-
see was leaving Lahore he must have had with
him quite a substantial amount either in the
form of jewellery etc., or cash, as otherwise
he would not have taken the precaution of
either depositing the sealed box with the
State Bank of India at Amritsar or opening a
locker in a New Delhi Bank.
Considering all the evidence discussed
above, I am of the opinion that the Income Tax
Officer’s allowance of Rs. 20,000/- only as
capital brought over from Pakistan is too low.
It is true that the capital disclosed in the
books as on 30-3-1948 is mostly unverifiable
and even assuming that the assessee was doing
reasonably well in his business at Lahore,
there are hardly any reasons to believe that
he could have accumulated so much capital and
could have brought all that capital safely
into India; but the circumstances of the case
do in my view justify a much larger allowance
for old capital than has been allowed by the
Income Tax Officer. In my opinion, a reduction
of the. assessment by Rs. 80’000/will meet the
requirement of the case."
The Appellate Assistant Commissioner thus reduced the figure
undisclosed income of the assessee to Rs. 2,33,414/-.
But this relief was not enough and the assessee pre-
ferred a further appeal to the Tribunal. When the appeal
came to. be heard by the Tribunal, Roshan Lal, who was
present at the hearing, was asked by the Members of the
Tribunal as to how he had brought gold and jewellery from
Lahore and he stated that it was brought in train in a box
of the size of 2-1/2’x l1/2’x 1’ and he was then asked what
was the weight of the box, to which he replied stating that
the weight of the contents of the box was about eight seers.
The Tribunal then, after hearing the arguments of the par-
ties, rejected the appeal. The main arguments which weighed
with the Tribunal in negativing the appeal of the assessee
were: first, if the weight of the contents of the box was
only eight seers, the value of gold and jewellery in the box
could not be more than Rs. 66,000/- at the then current rate
of gold at Rs. 90/- per tola; secondly, the Government of
India had issued a Press Note in January 1952 requiring all
evacuees to declare the amounts of money brought by them
from Pakistan and assuring them that in case they did so, no
further enquiries would be made from them as to how they had
earned the same and whether they had paid any tax on it and
yet the assessee had not declared ’before the Revenue au-
thorities until the commencement of the assessment proceed-
ings in 1957 that it had brought the capital of Rs.
2,33,414/- from Pakistan; thirdly, the assessee claimed to
have a flourishing business in Lahore in the course of which
it was supposed to have earned enough to enable it to save a
capital of Rs. 3,33,414/- and yet it had not filed
160
any income tax return nor was it ever assessed to income
tax in Lahore and fourthly, the depositions of Mulk Ram,
Billa Mal, Dalai, Wazir Chand, Devidas Mehra and Panna Lal
were vague and based on hearsay and they had no evidentiary
value in the absence of contemporaneous primary evidence.
The Tribunal, accordingly, held that the assessee could not
have brought assets worth more than Rs. 1,00,000/- from
Lahore and the estimate made by the Appellate Assistant
Commissioner did not call for any interference and in this
view, the Tribunal confirmed the assessment of the bal-
ance of Rs. 2,33,414/- as the undisclosed income of the
assessee for the assessment year 1948-49.
The assessee applied to the Tribunal for referring to
the High Court the question of law arising out of its order
but the Tribunal declined to make a reference on the ground
that in its opinion no question of law arose out of its
order. This led to the making of an application to the High
Court under section 66(2), but the High Court also took the
same view and rejected the application. The assessee there-
upon preferred an appeal to this Court by special leave and
in the appeal, an order was made by this Court referring the
following question for the opinion of the High Court:
Whether there was material for coming
to the conclusion that Rs. 2,33,414/-, out of
the capital of Rs. 3,33,414/credited in the
books of account of the assessee on 31st
March, 1948, represented income from undis-
closed source ?
Pursuant to this order the Tribunal stated a case for
the opinion of the High Court and the High Court answered
the question referred to it in favour of the Revenue by
holding that there was material on the basis of which the
Tribunal could come to the conclusion that Rs. 2,33,414/-
represented the undisclosed income of the assessee. Hence
the present appeal by the assessee with special leave ob-
tained from this Court.
Now, 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. If he disputes the liability for tax, it
is for him to show either that the receipt was not income or
that if it was, it was exempt from taxation under the provi-
sions of the Act. In the absence of such proof, the Revenue
is entitled to treat it as taxable income. This was laid
down as far back as 1958 when this Court pointed out in A.
Govindarajulu Mudaliar v. Commissioner of Income-tax (1)
that "there is ample authority for the position that where
an assessee fails to prove satisfactorily the source and
nature of certain amount of cash received during the ac-
counting year, the Income Tax Officer is entitled to draw
the inference that the receipts are of an assessable
nature". To put it differently, where the nature and source
of a receipt, whether it be of money or of other property,
cannot be satisfactorily explained by the assessee, it is
open to the Revenue to hold that it is the income of the
assessee and no further burden lies on the Revenue to show
that that income is from any particular source. Vide Com-
missioner of Income Tax, U.P. v. Devi Prasad Vishwanath
Prasad(2). Here,
(1) (1958) 34 I.T.R. 807.
(2) 72 I.T.R. 194.
161
in the present case, the assessee introduces in the books of
account of its business on 30th March, 1948, capital of Rs.
3,33,414/- which consisted of gold rawa, gold ornaments,
stones and cash. The burden of accounting for the receipt
of these assets was clearly on the assessee and if the
assessee failed to prove satisfactorily the nature and
source of these’ assets, the Revenue could legitimately hold
that these assets represented the undisclosed income of the
assessee. The assessee offered the explanation that these
assets had been brought by Roshan Lal when he migrated from
Lahore in June 1947 and they represented the entire savings
of the assessee in Pakistan. This explanation was disbe-
lieved. by the Tribunal which took the view that, on the
material on record, it was not possible to hold that the
assessee must have brought more than Rs. 1,00,000/- from
Lahore and hence the Tribunal added the balance of Rs.
2,33,414/- as undisclosed income of the assessee. This
conclusion reached by the Tribunal was clearly a finding of
fact and hence it could be assailed only if it was 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 judicial-
ly and properly instructed as to the relevant law would have
come to that determination. Vide Mehta Parikh & Co. v.
Commissioner of Income-Tax, Bombay(1).
Let us consider what were the primary facts established
by the material on record. The assessee was admittedly
carrying on the business of Roshan-Di-Hatti in Lahore from
1935 until June 1947 when Roshan Lal migrated from Lahore.
It is true that the assessee was not paying any Income tax
in Lahore but, as pointed out by the Appellate Assistant
Commissioner in his order, a number of letters and receipts
regarding business transactions in Lahore were filed by the
assessee which showed that the business in Lahore was not
small and there were documents and papers which referred
to. dealings involving Rs. 10,000/- or more at a time and
there were also several vouchers produced by the assessee
relating to advertising charges paid at Lahore. The busi-
ness carried on by the assessee at Lahore was, therefore, a
reasonably large business though its extent could not be
verified by any reliable material produced by the assessee.
The assessee undoubtedly filed affidavits of Mulk Ram, Billa
Mal, Dalai, Wazir Chand, Devidas Mehra and Panna Lal, but,
as commented upon by the Tribunal, these affidavits were
vague and could not be regarded as having much evidentiary
value. Still they did go to show that the Lahore business
of the assessee was a fairly large business. The Tribunal
was no doubt 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 its
business in a territory from which the members of the Hindu
Undivided Family had to flee for their lives and from where
it was totally impossible to produce any primary evidence.
Be that as it may, it was found as a fact by the Appellate
Assistant Commissioner and this finding was not disturbed by
the Tribunal that the assessee "was doing fairly well in the
business in Lahore". Roshan Lal, in anticipation of the
partition of the country which was soon to follow, decided
to move out of Lahore in June 1947 at a time when massacre
and holocaust had not yet started
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and he was in a position to remove his belongings. He
migrated from Lahore with all his belongings and came over
to Amritsar and he brought with him a trunk which he
wanted to keep in a locker in Safe Deposit Vault of the
Imperial Bank of India. He could not obtain a locker and
hence he deposited the sealed trunk with the Amritsar
Branch of the State Bank of India instead of carrying it
with him to Mussoorie. There is no documentary evidence to
show as to what were the contents of the sealed trunk but,
as pointed out by the Appellate Assistant Commissioner and
not dissented by the Tribunal, "it is reasonable to presume
that there must have been something quite valuable in the
box as otherwise the assessee would not have kept the custo-
dy of a bank like the State Bank of India". There can be no
doubt, as observed by the Appellate Assistant Commissioner,
and not disputed by the Tribunal that the assessee "must
have had with him quite a substantial amount either in the
form of jewellery etc. or cash, or otherwise he would not
have taken the precaution of either depositing the sealed
box with the State Bank of India, Amritsar opening a locker
in a New Delhi Bank". The clear finding of the Appellate
ASsistant Commissioner, affirmed by the Tribunal, therefore,
was that Roshan Lal did bring ornaments, jewellery and cash
with him when he migrated from Lahore in June 1947 and kept
the same in a sealed trunk with the Amritsar Branch of the
State Bank of India. If that be so, then on what material
could it be said that the ornaments, jewellery and cash
brought by the assessee and kept in the sealed trunk were of
the value of only Rs. 1,00,000/- and no more. What were the
materials on the basis of which the claim of the assessee
that Roshan Lal had brought gold, ornaments and cash of the
value of Rs. 3,33,414/- could be rejected ?
The only materials relied upon by the Tribunal was that
the assessee had never filed any income-tax return nor ever
paid any tax on the income of its business in Lahore and
the presumption must, therefore, be that the assessee did
not earn any assessable income before migration from Lahore.
Now, it is true that where an assessee has not paid income
tax, the presumption ordinarily must be that the assessee
had no assessable income, but here the fact remains that the
assessee transferred no less than an aggregate sum of Rs.
31,094/- from Lahore to New Delhi and also brought sub-
stantial amount either in the form of jewellery etc. or
cash" and deposited the same in a sealed trunk with the
Imperial Bank of India, Amritsar Branch in June 1947. This.
obviously the assessee could not have done unless it had a
reasonably large business in Lahore and, therefore, the fact
that the assessee did not pay income tax in Lahore cannot
have much evidentiary value. All that it would show is
that, as pointed out by the Tribunal, "the assessee has not
been very straightforward in his dealings with the
income-tax departments".
The Tribunal also relied upon certain answers given by
Roshan Lal when he was questioned by the Members of the
Tribunal at the hearing of the appeal. It must be pointed
out straight away that
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these answers given by Roshan Lal could not be relied upon
by the Tribunal for the purpose of coming to any conclusion
adverse to the assessee, because there is a procedure pre-
scribed 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 exam-
ine Roshan Lal on any aspects of the case they should have
followed this procedure. But unfortunately the Members of
the Tribunal, disregarding the prescribed procedure, put
questions to Roshan Lal in an informal manner unauthorised
by the Rules. The answers given by Roshan Lal could not in
the circumstances form part of the record and the Tribunal
was not entitled to reply upon the same in arriving at its
findings of fact. It may be noted that the High Court also
took the view that the procedure adopted by the Tribunal
was irregular and the answers given by Roshan Lal should be
left out of account.
One other circumstance on which the Tribunal relied was
that notwithstanding the Press Note issued by the Government
of India in January 1952 the assessee did not declare that.
it had brought assets of the value of Rs. 3,33,4/4/- from
Pakistan and this circumstance, according to the Tribunal,
cast considerable doubt on the version put forward by the
assessee. Now, the Press Note of Government of India
was not produced before us but we will assume that it did
promise a certain concession to the evacuees. who declared
the assets brought by them from Pakistan. Even so, we
fail to see how it could be utilised as a circumstance
militating against the explanation of the assessee. Both
according to the Appellate Assistant Commissioner as well as
the Tribunal, the assessee did bring assets worth Rs.
1,00,000/- from Lahore in June 1947 and these assets were
admittedly not disclosed by the assessee despite the Press
Note issued by the Government of India. Then, how could any
inference be drawn from the non-disclosure of the assets by
the assessee that the assessee must not have brought assets
represent in the balance of Rs 2,33 414/-9 Whether the
assets brought by the assessee were Rs 1,00,000/- or Rs.
3,33,414/- the fact remains that they were not disclosed
by the assessee despite the Press Note of the Government
of India and hence no adverse reference could be drawn from
the fact of non disclosure of the assets by the assessee.
It will, therefore, be seen that there was no mate-
rial on the basis of which the Tribunal could come to the
conclusion that though the assessee had a fairly large
business in Lahore and had brought its entire ornaments,
jewellery and cash from Lahore and deposited the same in a
sealed trunk with the Amritsar Branch of the Imperial Bank
of Inaia, these ornaments, jewellery and cash were worth not
more than Rs. 1,00,000/-. One may also ask the question
that if the assessee did not bring assets worth more than
Rs. l,00,000/- from Lahore, where and how did it get the
remaining assets of the value of Rs 2 33 414/-? Roshan Lal
had come away from Lahore as a refugee and conditions in
post-partition India were also highly unsettled and the
clear and undoubted evidence was that neither Roshan Lal
nor the assessee had any business or other means of
164
income in India until 30th March, 1948. In this situation,
it is impossible to believe that the assessee could have
earned such a huge amount of profit as Rs. 2,33,414/- within
a few months, even if it be assumed that some business was
started by it in October 1947 when Roshan Lal came down to
Delhi. The utter improbability, amounting almost to,
impossibility, of the assessee having earned such a large
amount of Rs. 2,33,414./- as profit within a few months in
the disturbed conditions which then prevailed in India was a
circumstance which ought to have been taken into account by
the Tribunal but which the Tribunal unfortunately failed to
do. It may be pointed out that it was not the case of the
Revenue that the books of account of the business were
subsequently written up and the entry crediting the capital
of Rs. 3,33,4.14/- on 30th March, 1948 was not a genuine
entry and the undisclosed profits of the subsequent years
were sought to be concealed by the showing a bogus entry
of Rs. 3,33,414/- as capital contribution on 30th March,
1948. If such had been the case, the present argument as to
the improbability of the assessee having earned such a huge
amount of Rs. 2,33,414/- within a few months, would not have
been available to the assessee. But the Revenue did not
dispute the correctness of the entry and accepted that
assets worth Rs. 3,33,414/- were introduced in the business
on 30th March, 1948 and sought to include the amount of Rs.
3,33,414/- representing the value of these assets as undis-
closed income of the assessee for the assessment year
194849. The only question could, therefore, be whether
these assets were brought by the assessee from Lahore in
June 1947 or they represented the concealed income earned by
the assessee during the period June 1947 to 30th March,
1948. The impossibility of the assessee having earned such
a huge amount of profit within a a few months immediately
after migration to India in the disturbed and unsettled
conditions which then prevailed must, therefore, necessarily
support the inference that the assessee must have brought
these assets from Lahore.
We are, therefore, of the view that in reaching the
conclusion that out of the capital of Rs. 3,33,414/- I
credited in the books of the assessee on 30th March, 1948,
assets of the value of Rs. 2,33,414/represented undisclosed
income of the assessee for the assessment year 1948-49, the
Tribunal acted without any material or in any event, the
finding of fact reached by the Tribunal was unreasonable or
such that no person acting judicially and properly instruct-
ed as to the relevant law would come to such finding. We
accordingly allow the appeal, set aside the order of the
High Court and answer the question referred by the Tribunal
in the negative. The ’Commissioner will pay the costs of
the appeal to the assessee.
P.H.P. Appeal allowed.
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