Full Judgment Text
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PETITIONER:
C.I.T. (CENTRAL) CALCUTTA
Vs.
RESPONDENT:
DAULAT RAM RAWATMULL
DATE OF JUDGMENT12/09/1972
BENCH:
ACT:
Income Tax-Tribunal-Findings of fact-By use of inadmissible,
irrelevant material an issue of law arises.
HEADNOTE:
The Tribunal based its decision that an amount of Rs. 5 Lacs
in fixed deposit in the name of B represented the
concealed income of respondent firm on following
circumstances :
(a) Explanation furnished by B with regard to the source of
Rs. 5,00,000 in proceedings relating to his personal
assessment was found to be incorrect; (b) transfer of two
amounts of Rs. 5 lacs each from Calcutta to Bombay and
thereafter to Jamnagar and the issue of fixed deposit
receipt by the bank in the name of the sons of partners of
the respondent firm; and (c) the use of the two receipts as
collateral security for the overdraft facility of Rs.
10,00,000 afforded to the respondent firm. The High Court
held that the above material was not safe ’for holding that
the sum of Rs. 5,00,000 belonged to the respondent firm and
that the Tribunal had taken into consideration the material
which was not relevant to the issue.
Dismissing the appeal,
HELD : No case has been made for interfering with the
judgment of the High Court.
(1) Findings on questions of fact arrived at by the
Tribunal can be reviewed only on the ground that there is no
evidence to support it or that it is perverse. Further,
when a conclusion has been reached on an appreciation of a
number of facts, whether that is sound or not must be deter-
mined not by considering the weight to be attached to each
single fact in isolation but by assessing the cumulative
effect of all the facts ’in their [1957] 31 I.T.R. 28
referred to.
Sree Meenakshi Mills Ltd. v. Commissioner of Income Tax.
Madras, [1957] 31 I.T.R. 28 referred to.
But, when a court of fact acts on material partly relevant
and partly irrelevant, it, is impossible to say to what
extent the mind of the court was affected by the irrelevant
material used by it in arriving at its finding. Such a
finding is vitiated because of the use of inadmissible
material and thereby an issue of law arises. Likewise, if
the court of fact bases its decision partly on conjectures,
surprises and suspicion and partly on evidence, in such a
situation an issue of law arises. [191F]
Dhirailal Gridharilal v. Commissioner of Income Tax, Bombay,
[1954] 26 I.T.R. 736, Ddwarda (Inspector of Taxes) v.
Bairstow and Another, [1955] 28 I.T.R. 579 and Metha Parikh
JUDGMENT:
I.T.R. 181 referred to.
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In the present case the question for determination was not
whether the amount of Rs. 5,00,000 belonged to B, but
whether it belonged to the respondent firm. The fact that B
has not been to give a satisfactory explanation regarding
the source of Rs. 5,00,000 would not be decisive even of the
matter as to whether B was or was not the owner of that
amount. From the simple fact that the explanation regarding
the source of money
185
furnished by A in whose name the money is lying in deposit,
has been found to be false, it would be a remote and far
fetched conclusion to hold that the money beyongs to B.
There would be in such a case no direct nexus between the
facts found and the conclusion drawn therefrom.
The transfer of amount of Rs. 5,00,000 from Calcutta to
Jamnagar for fixed deposit in the name of Band the use soon
thereafter of the fixed deposit receipt as a security for
overdraft, facility to the respondent firm did not justify
the inference that the amount belonged to the respondent.
The approach of the Tribunal in this respect is manifestly
erroneous because it is a common feature of commercial and
other transactions that securities are offered by other
persons to guarantee the payment of the amount which may be
found due from the principal debtor. The concept of
security and ownership are different and it would be a
wholly erroneous approach to hold that a thing offered in
security by a third person to guarantee the payment of debt
due from the principal debtor belongs not to the surety but
to the principal debtor. Further B offered security for the
overdraft facility to a firm of which his father was a
partner. In the circumstances, the fact that B received no
consideration for offering fixed deposit receipt as security
for the overdraft facility would not result in any inference
against the respondent. [194C]
(3) As it was the department which claimed that the amount
of fixed deposit receipt belonged to the respondent firm
even though the receipt had been issued in the name of B,
the burden lay on the department to prove that the
respondent was the owner of the amount.
A simple way of discharging the onus and resolving the
controversy was to trace the source and origin of the amount
and find out its ultimate destination. So far as the source
is concerned there was no material on the record to show
that the amount came from the coffers of the respondent
firm, As regards the destination of the amount there was
nothing to show that it went to the coffers of the
respondent. Thus both as regards the source as well as the
destination of the amount, the material on the record gave
no support to the claim of the department.
&
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1133 and
1134 of 1969.
Appeal by special leave from the judgment and order date#
April 1, 1966 of the Calcutta High Court in Income-tax Refe-
rences Nos. 53 and 54 of 1961.
F. S. Nariman, Additional Solicitor-General of India, B.
B. Ahuja S. P. Nayar and R. N. Sachthey, for the appellant.
B. Sen, N. R. Khaitan, O. P. Khaitan and B. P. Maheshwari,
for the respondent.
The Judgment of the Court was delivered by
KHANNA , J. This judgment would dispose of civil appeals No.
1133 and 1134 of 1969 which have been filed by special leave
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by the Commissioner of Income Tax against the judgment of
the Calcutta High Court in two references under section 66
of the Indian Income Tax Act, 1922 (hereinafter referred to
as the Act) and the question which arises for determination
is whether
186
there was relevant material before the Income Tax Appellate
tribunal to hold that the sum of Rs. 5,00,000 in fixed
deposit in the name of Biswanath Gupta (Bhuwalka) was the
concealed income of the, respondent firm for the previous
year corresponding to the assessment year 1946-47. Appeal
No. 1133 relates to the sum of Rs. 4,50,000 out of the above
sum of Rs. 5,00,000, while appeal No. 1134 relates to the
remaining sum of Rs. 50,000 out of the sum of Rs. 5,00,000.
The assessee firm, who is the respondent inthese two
appeals, is a registered firm consisting of six partners.The
names. of the partners and their shares are given below
Nandlal Bhuwalka /3/-
Girdharilal Bhuwalka /3/-
Shyamlal Bhuwalka /2/-
Bajranglal Bhuwalka /2/-
Bawatmal Nopany /3/-
Ranieshwarlal Nopany -/3/-
The respondent was carrying on business as dealers and
commission agents in jute and other commodities. In
addition to that it did speculative business. The
respondent also acted as procuring agent for rice and paddy
in certain areas for the Government of Bengal and received
commission on such procurements. The respondent was
originally assessed on March 30, 1948 for the assessment
year in question on the basis of an income of Rs. 4,71,752.
On appeal, the income assessed was reduced ’to Rs. 4,28,448.
On February 19, 1955 the Income Tax Officer issued notice
under section 34 of the Act stating that he had reason to
believe that the respondent’s income assessable to income
tax had been under-assessed. He accordingly called upon the
respondent to file return of income for the assessment year
in question. In response to that notice, the respondent
filed a return showing income in accordance with the
original assessment as reduced in appeal, namely, Rs.
4,28,448. The Income Tax Officer thereafter examined the
matter afresh and made reassessment. It was found by the
Income Tax Officer that the respondent had obtained
overdraft to the extent of Its. 10,00,000 from the, Central
Bank of India Ltd. (hereinafter referred to as the Central
Bank), Calcutta upon the security of two fixed deposit
receipts of Rs. 5,00,000 each in the Central Bank, Jamnagar
branch One of those fixed deposit receipts was dated Novem-
ber 8, 1944 in the name of Raghunath Prasad Agarwal, who is
the same person as Raghunath Prasad Nopany and is son of
Rawatmal Nopany, partner of the respondent firm. The other
fixes deposit receipt was dated November 21, 1944 in the
name
187
of Biswanath Gupta (B. N. Gupta), who is the same person as
Biswanath Bhuwalka and is son of Bajranglal, partner of the
respondent firm. There was a third fixed deposit receipt of
Rs. 5,00,000 issued by Central Bank Jamnagar branch in the
name, of S. P. Agarwal, son of Rameshwarlal, partner of the
respondent firm, but we are not much concerned with that
receipt.
Alhough the present appeals relate to the fixed deposit of
Rs. 5,00,000 in the name of Biswanath, we may also set out
them facts concerning the fixed deposit receipt in the name
of Raghunath Prasad in so far as they are essential for
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appreciating the point of controversy. On November 2, 1944
an amount of Rs. 5,00,000 in cash was tendered to the
Burrabazar Calcutta branch of the Central Bank for being
transferred to Bombay head office of the Bank. The Bombay
head office of the Bank issued thereafter demand draft No.
36 for the amount of’ Rs. 5,00,000 on- the Jamnagar branch
of the Bank. On the basis of that demand draft, a fixed
deposit receipt was issued by the Jamnagar branch of the
Central Bank on November 8, 1944 in the name of Raghunath
Prasad. Jamnagar was at that time a ,part of the Indian
princely State of Nawanagar. Another amount of Rs. 5,00,000
was tendered to Central Bank Burrabazar Calcutta branch on
November 15, 1944 for being transferred to,, Bombay head
office. The head office of the, Bank issued demand draft
No. 41 in favour of Biswanath (B. N. Gupta) on its Jamnagar
branch. On the basis of that demand draft, the Jamnagar
branch of the Bank issued a fixed deposit receipt in favour
of Biswanath for Rs. 5,00,000 on November 21, 1944. On
November 24, 1944 the respondent firm opened an overdraft
account with the Central Bank Calcutta for being operated up
to a limit of Rs. 10,00,000. Letter of guarantee and letter
of continuity were signed in that connection by Raghunath
Prasad and Biswanath on December 2. 1944 at the Calcutta
branch of the Central Bank along with a promote signed by
the respondent firm for keeping the two fixed deposit
receipts under lien of the Bank against overdraft
facilities granted to the respondent for an, amount of Rs.
10,00,000. At first it was taken to be a clean overdraft
without any security, but on investigation the Income Tax
authorities found that the overdraft facility had been
granted to the respondent on the basis of the collateral
security of the two fixed deposit receipts dated November 8,
1944 and November 21, 1944 issued by Jamnagar branch of the
Bank in favour of Raghunath Prasad and Biswanath
respectively. No consideration, was received by Raghunath
Prasad and Biswanath for the accommodation that they
extended to the respondent for giving their fixed deposit
receipts in security for the overdraft facility.
188
Both Raghunath Prasad and Biswanath in their individual
assessments for the assessment year 1947-48 claimed that the
amount of Rs. 5,00,000 deposited by each of them in Jamnagar
branch belonged to them.
The Income Tax Officer held in the order of assessment dated
February 20, 1958 made under section 34 read with section 23
of the Act that the amount of Rs. 10,00,000, consisting of
the two items of Rs. 5,00,000 each in fixed deposit in the
names of Raghunath Prasad and Biswanath, was the concealed
profit of the respondent firm. The amount of Rs. 10,00,000,
besides several other amounts with which we are not
concerned. was added to the total income of the respondent.
On appeal the Appellate Assistant Commissioner as per order
dated May 12, 1958 held that the respondent firm had been
able to explain the source of Rs. 50,000 out of the fixed
,deposit of Rs. 5,00,000 in the name of Biswanath. The
Appellate Assistant Commissioner, therefore, reduced the
addition in this respect by Rs. 50,000. The Appellate
Assistant Commissioner, however, maintained the addition to
the total income of ’the respondent of Rs. 9,50,000, out of
the sum of Rs. 10,00,000 ,on account of the two fixed
deposit receipts. Two cross appeals were filed before the
Income Tax Appellate Tribunal against the order of the
Appellate Assistant Commissioner, one by the assessee and
the other by the department. In the appeal filed by the
assessee the Tribunal, as per order dated August 11, 1959/
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December 15, 1959, agreed with the Appellate Assistant
Commissioner that the fixed deposit receipt of Rs. 5,00,000
in the name ,of Raghunath Prasad and the sum of Rs. 4,50,000
out of the fixed deposit of Rs. 5,00,000 in the name of
Biswanath in Jamnagar branch of the Central Bank represented
the concealed pro-fits of the assessee firm. In the appeal
filed by the department, which related to the deletion of
the sum of Rs. 50,000, the Tribunal held, as per order dated
July 29, 1960, that the sum of RS. 50,000 also out of the
amount of Rs. 5,00,000 in fixed deposit in the name of
Biswanath, represented the concealed income of the
respondent firm. Certain questions were thereafter referred
under section 66(1) of the Act by the Tribunal to the High
Court. The Tribunal, however, declined to refer some other
questions. Applications were thereafter filed under section
66(2) of the Act in the High Court for directions to the
Tribunal to refer certain additional questions to the High
Court. As per order dated January 16, 1962 the High Court
directed ’the Tribunal to draw a statement of case and refer
the following question (hereinafter for sake of convenience
mentioned as ,question No. 1 ) to the High Court
189
"Whether on the facts and in the.
circumstances of the case, there was material
before the Income Tax Appellate Tribunal to
hold that the sum of Rs 5,00,000/- standing in
the name of Raghunath Prasad Nopany and a sum
of Rs. 4,50,000,/- out of a sum of Rs.
5,00,0001- in the name of Biswanath Bhuwalka
representing the fixed deposits were the
concealed income of the assessee firm for the
relevant previous year for the assessment for
the year 1946-47."
By another order made on the same day, viz., January 16,
1962, the High Court issued a direction to the Tribunal to
draw a statement of case and refer the following question
(hereinafter mentioned as question No. 2) to the High Court:
"Whether on the facts and in the circumstances
of the case, there was material before the
Income Tax Tribunal to hold that the sum of
Rs. 50,000/- out of the sum of Rs. 5,00,0001-
standing in the name of Biswanath Gupta
(Bhuwalka) representing the fixed deposit was
the concealed income of the assessee firm for
the relevant year for the assessment year
1946-47. "
In the reference relating to question No. 1 about the sum of
Rs. 5,00,000 in fixed deposit in the name of Raghunath
Prasad and Rs. 4,50,000 out of Rs. 5,00,000 in the name of
Biswanath, the High Court held that there was material
before the tribunal to hold that the sum of Rs. 5,00,000
sanding in the name of Raghunath Prasad was the concealed
income of the respondent firm for the relevant previous year
for the assessment year 1946-47. The High Court in this
connection took note of the fact that Raghunath Prasad died
in August 1945 and after his death the amount of Rs.
5,00,000 was not paid to his heirs but was adjusted against
the overdraft of the respondent firm. As regards the other
sum of Rs. 5,00,000 in fixed deposit in the name of
Biswanath, the High Court held that there was no material
before the Tribunal to hold that it was the concealed income
of the respondent for the relevant previous year for the
assessment year 1946-47. The answer to the later part of
question No. I as well as to question No. 2 was thus given
in favour of the respondent firm.
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The respondent, it may be stated, filed an appeal in this
Court to assail the finding of the High Court ’in answer to
question No-. 1 that there was material before the Tribunal
to hold that the sum of Rs. 5,00,000 in fixed deposit in the
name of Raghunath Prasad was the concealed income of the
respondent for the previous year in question. The aforesaid
appeal, No. CA 1035/67, was dismissed by this Court as per
judgment dated January 18, 1971. The present two appeals,
as stated earlier, relate to the finding of
190
the High Court that there was no material before the
Tribunal to hold that the sum of Rs. 5,00,000 in fixed
deposit in the name of Biswanath was the concealed income of
the respondent for the relevant previous year.
It may also be stated that in the reference which was made
under section 66(i) of the Act by the Tribunal to the High
Court, the High Court as per judgment dated April 1, 1966,
went into the question as to whether the income tax officer
was justified in reopening the assessment under section 34
of the Act and whether on the facts and circumstances of the
case, cash credits and fixed deposits in question were
assessable for the assessment year 194647. Both these
questions were answered in favour of the department. The
decision of the High Court in this respect is reported in
(1967)64 I.T.R. 593:
We have earlier mentioned that there was a third fixed
deposit receipt of Rs 5,00,000 issued by the Central Bank
Jamnagar branch in the name of S. P. Agarwal, son of
Rameshwarlal, partner of the respondent firm. This amount
of Rs. 5,00,000 had also been tendered in cash in the
Burrabazar Calcutta branch of the Central Bank in October
1944 with instructions to remit the name to Jamnagar branch.
The fixed deposit in the name of S. P. Agarwal was used as a
security for overdraft facility to Shri Hanuman Sugar Mills
Ltd., in the managing agency of which the partners of the
respondent firm had controlling interest. The Tribunal held
that the amount of Rs. 5,00,000 in fixed deposit in the
name of S. P. Agarwal did not represent the concealed income
of the respondent firm. An application was filed by the
Commissioner of Income Tax to refer the question to the High
Court as to whether in the facts and circumstances of the
case the inference of the Tribunal that the fixed deposit of
Rs. 5,00,000 in the name of S. P. Agarwal did not represent
the concealed income of the assessee firm was justified in
law. The Tribunal rejected the application. The
Commissioner then applied to the High Court of Calcutta for
an order calling upon the Tribunal to state a case and refer
the above question to the High Court, The High Court
rejected the application. The Commissioner filed an appeal
to this Court against the above order of the High Court.
The appeal of the Commissioner was dismissed by this Court
on March 26, 1964. The judgment of this Court is reported
in (1964)53 I.T.R. 575.
In the appeal before us the learned Additional Solicitor
General has taken us through the various orders which were
made in the case and has contended that there was relevant
material before the Tribunal to hold that. the sum of Rs.
5,00,000 in fixed deposit in the name of Biswanath wag the
concealed income of the
191
respondent firm. The High Court, it is urged, was not
justified in interfering with the finding in this respect of
the Tribunal. As against that Mr. Sen on behalf of the
respondent submits that there was no relevant material
before the Tribunal to hold that the sum in question was the
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concealed income of the respondent. the answers given by the
High Court, according to the learned counsel, should
therefore be sustained.
Before dealing with the facts of this case, we may advert to
the principles which should govern the decisions of the
court in such like cases. Findings on questions of pure
fact arrived at by the Tribunal are not to be disturbed by
the High Court on a reference unless it appears that there
was no evidence before the Tribunal upon which they, as
reasonable men, could come to the conclusion to which they
have come; and this is so, even though the High Court would
on the evidence have come to a conclusion entirely different
from that of the Tribunal. In other words, such a finding
can be reviewed only on the ground that there is no evidence
to support it or that it is perverse. Further, when a
conclusion has been reached on an appreciation of a number
of facts, whether that is sound or not must be determined,
not by considering the weight to be attached to each single
fact in isolation, but by assessing the cumulative effect of
all the facts in their setting as a whole [Sree Meenakshi
Mills Ltd. v. Commissioner of Income Tax, Madras(1)].
When a court of fact acts on material partly relevant and
partly irrelevant, it is impossible to say to what extent
the mind of the court was affected by the irrelevant
material used by it in arriving at its finding. Such a
finding is vitiated because of the use of inadmissible
material and thereby an issue of law arises. Likewise, if
the court of fact bases its decision partly on conjectures,
surmises and suspicions and partly on evidence, in such a
situation an issue of law arises [see Dhirajlal Girdharlal
v. Commissioner of Income Tax, Bombay(1) In the case of
Edwards (Inspector of Taxes) v. Bairstow and Another(3), the
House of Lords dealt with this aspect of the matter.
Viscount Simonds, in that case observed :
"For it is universally conceded that, though
it is a pure finding of fact, it may be set
aside on grounds which have been stated in
various ways but are, I think, fairly
summarised by saying that the court should
take that course if it appears that the
Commissioners have acted without any evidence
or upon a view of the facts which could not
reasonably be entertained."
(1) [1957] 31 T.T.R. 28.
(2) [1954] 26 I.T.R. 736.
(3) [1955] 28 I.T.R. 579.
192
Lord Radcliffee expressed himself in the. following words
"If the case contains anything ex facie which
is bad law and which bears upon the
determination, it is obviously erroneous in
point of law. But, without any such
misconception appearing ex facie, it may be
that the facts found are such that no person
acting judicially and properly instructed as
to the relevant law could have come to the
determination under appeal. In those
circumstances, too, the court must intervene."
The above observations were relied upon by Bhagwati J.
(speaking for the majority) in the case of Mehta Parikh &
Co. v. Commissioner of Income Tax, Bombay(1). The following
proposition was laid down in that case :
"It follows, therefore, that facts proved or
admitted may provide evidence to support
further conclusions to be deduced from them,
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which conclusions may themselves be
conclusions of fact and such inferences from
facts proved or admitted could be matters of
law. The Court would be entitled to intervene
if it appears that the fact finding authority
has acted without any evidence or upon a view
of the facts, which could not reasonably be
entertained or the facts found are such that
no person acting judicially and properly
instructed as to the relevant law would have
come to the determination in question."
Keeping the principles enunciated above in view, let us
examine the facts of the present case. The Tribunal in
arriving at the conclusion that the amount of Rs. 5,00,000
in fixed deposit in the name of Biswanath was the concealed
income of the respondent firm based its decision on the
following circumstances
(1) Explanation furnished by Biswanath with
regard to the source of Rs. 5,00,000 in
proceedings relating to his personal
assessment was found to be incorrect.
(2) The transfer of the two amounts of Rs.
5,00,000 each from Calcutta to Bombay and
thereafter to Jamnagar and the issue of fixed
deposit receipts by the Bank in the name of
the sons of the partners of the respondent
firm.
(3) The use of the above mentioned two
receipts as collateral security for the
overdraft facility of Rs. 10,00,000 afforded
to the respondent firm.
(1) (1956) 30 I.T.R. 181
193
The High Court took the view that the above material was not
sufficient for holding that the sum of Rs. 5,00,000 belonged
to the respondent firm and that the Tribunal had taken into
consideration material which was not relevant to the issue.
We have given the matter our consideration and are of the
opinion that no case has been made for interfering with the
judgment of the High Court.
The explanation furnished about the source of Rs. 5,00,000
in fixed deposit in the name of Biswanath was that he had
kept an amount of Rs. 4,50,000 with M/s Soorajmal Nagarmal
and Rs. 50,000 in deposit with Comilla Bank. The amount of
Rs. 4,50,000 was stated to- have been withdrawn by
Biswanath from M/s Soorajmal Nagarmal in January 1941, while
the other amount of Rs. 50,000 was withdrawn from Comilla
Bank in March 1942. The amount of Rs. 5,00,000 was then
transferred by Biswanath to his native place Ratangarh
(Desh) in Rajasthan due to bombing panic in Calcutta. When
war situation improved, the money was taken from Desh to
Jamnagar for deposit. This explanation was found to be
false in view-of the admitted position that the amount of
Rs. 5,00,000 in fixed deposit in the name. of Biswanath in
Jamnagar bank had been tendered at Burrabazar Calcutta
branch of Central Bank on November. .15. 1944 and
thereafter was transferred through Bombay head office’ of.
the Bank, to Jamnagar. There were also,. other
circumstances which pointed to falsity of the above
explanation. The falsity the above explanation of
Biswanath, in the opinion of the High Court. did not warrant
the conclusion that the amount of Rs. 5,00,000 lakhs
belonged to the assessee. We can find no flaw or infirmity
in the above reasoning of the High Court. The question
which arose for determination in this case was not whether
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the amount of Rs. 5,00,000 belonged to Biswanath, but
whether it belonged to the respondent firm. The fact that
Biswanath has not been able to give a satisfactory
explanation regardIng the source of Rs. 5,00,000 would not
be decisive, even of the matter as to whether Biswanath was
or was not the owner of that amount. A person can still be
held to be the owner of a sum of money even though the
explanation furnished by him regarding the source of that
money is found to be not correct. From the simple fact that
the explanation regarding the source of money furnished by
A, in- whose name the money is lying in deposit, has been
found to be false, it ’would be a remote and far fetched
conclusion to hold that the money belongs to B. There would
be in such a case no direct nexus between the facts found
and the conclusion drawn therefrom.
We also see no cogent ground to take a view different from
that of the High Court that the other circumstances, namely,
the
4--L348SupCI/73
194
transfer of the amount of Rs. 5,00,000 from Calcutta to
Jamnagar for fixed deposit in the name of Biswanath and the
use soon thereafter of the said fixed deposit receipt as
security for the overdraft facility to the respondent firm
did not justify the inference that the amount belonged to
the respondent. The material on record indicates that the
facility of overdraft on the security of the fixed deposit
receipt in the name of Biswanath was enjoyed by the assessee
firm for a little over a year. The Tribunal in this context
observed that "it is difficult to see how the firm could
obtain an overdraft upon a fixed deposit by B. N. Gupta
(Biswanath)". The, approach of the Tribunal in this
respect, in our opinion was manifestly erroneous because it
is a common feature of commercial and other transactions
that securities are offered by other persons to guarantee
the payment of the amount which may be found due from the
principal debtor. The. concept of security and ownership
are different and it would be a wholly erroneous approach to
hold that a thing offered in security by a third person to
guarantee the payment of debt due from the principal debtor
belongs not to the surety but to the principal debtor. the
Tribunal has, also referred to the fact that no con-
sideration passed to Biswanath for offering the fixed
deposit receipt as security for the overdraft facility to
the respondent firm. This circumstance, in our opinion, is
of a natural character and has no material bearing for
determining the ownership of the amount in fixed deposit.
Sureties quite often offer security without receipt of
consideration from the principal debtor. So far as the
present case is concerned, we cannot be oblivious of the
fact that Biswanath offered security for the overdraft
facility to a firm of which his father was a partner. In
the circumstances, the, fact that Biswanath received no
consideration for offering the fixed deposit receipt as
security for the overdraft facility would not result in any
inference against the respondent.
Although the proceedings under section 34 of the Act in the
present case were started in 1955, after the lapse of about
nine years since the time Biswanath had offered the fixed
deposit receipt as security for the overdraft facility to
the respondent firm, no material was brought on the record
to show that the aforesaid sum of Rs. 5,00,000 in the name
of Biswanath went to the coffers of the respondent firm or
was adjusted towards its liability as was done in respect of
the amount of Rs. 5,00,000 which had been deposited in the
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name of Raghunath Prasad. Had the sum of Rs. 5,00,000
deposited in the name of Biswanath been ultimately utilised
by the respondent firm, the income tax authorities must have
brought material on record about that.
The onus to prove that the apparent is not the real is on
the party who claims it to be so. As it was the department
which
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claimed that the amount of fixed deposit receipt belonged to
the respondent firm even though the receipt had been issued
in the name of Biswanath, the burden lay on the department
to prove that the respondent was the owner of the amount
despite the fact that the receipt was in the name of
Biswanath. A simple way of discharging the onus and
resolving the controversy was to trace the source and origin
of the amount and find out its ultimate destination. So far
as the source is concerned, there is no material on the
record to show that the amount came from the coffers of the
respondent firm or that it was tendered in Burrabazar
Calcutta branch of the Central Bank on November 15, 1944 on
behalf of the respondent. As regards the destination of the
amount, it has already been mentioned that there is nothing
to show that it went to the coffers of the respondent. On
the contrary, there is positive evidence that the amount was
received by Biswanath on January 22, 1946. It would thus
follow that both as regards the source as well as the
destination of the amount. the material on the record gives
no support to the. claim of the department.
Learned Additional Solicitor General has urged that the
close proximity of time between the transfer of the amount
of Rs. 5,00,000 from Calcutta for the issue of fixed deposit
receipt in the name of Biswanath at Jamnagar and the opening
of overdraft account of respondent firm in Calcutta with the
said fixed deposit receipt constituting security for the
overdraft account would show that the said amount in fact
belonged to the respondent. We find it difficult to accede
to this submission because the benefit received by the
respondent by the use of the said receipt as a collateral
security for overdraft facility was only of a temporary
nature. The receipt remained in the name of Biswanath and
it was he who got the amount of the receipt on January 22,
1946.
Reference was also made by the Additional Solicitor General
to the order of the Appellate Assistant Commissioner. It is
stated that the said order is much more elaborate and the
Tribunal has made note of this fact. In this respect we
find that the order of the Appellate Assistant Commissioner
is vitiated by two factual inaccuracies. According to the
said order, the amount of the fixed deposit receipt in the
name of Biswanath was received in Calcutta on November 25,
1946 and was transferred to the credit of the respondent
firm against the overdraft with the Bank. This observation
was incorrect because there is ample material on record to
show that the amount of the fixed deposit receipt was
received, as mentioned earlier, on January 22, 1946 by
Biswanath himself. He also, it would appear, got the
interest due on the said amount.
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The other factual inaccuracy which crept into the order of
the, Appellate Assistant Commissioner was his assumption
that the shares of the two groups of Nopany’s and Bhuwalkas
were equal. It was observed by the Appellate Assistant
Commissioner :
"The appellant firm itself consists of two
groups of partners Nopany and Bhuwalka. Each
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group had equal shares. Raghunath Prasad
belongs to the Nopany group and Biswanath to
the Bhuwalka group. The amount offered for
fixed deposits therefore corresponds to the
profit sharing proportion of each group. This
mass of evidence and circumstances could not
be upset merely because the fixed deposits
stood in two particular names."
The above factual assumption regarding the equality of
shares- of the two groups was incorrect because it is the
common case of the parties that the share of Bhuwalka group
was 10 annas in a rupee and that of Nopany was 6 annas in a
rupee.
The Appellate Assistant Commissioner also took into account
the fact that the office of the Central Bank in Burrabazar
Calcutta is in the same building in which there are the
business premises of the respondent firm. This was, in our
opinion, a wholly extraneous and irrelevant circumstance for
determining the ownership of Rs. 5,00,000 which had been
deposited in fixed deposit in the name of Biswanath. There
should, in our opinion, be some direct nexus between the
conclusion of fact arrived at by the authority concerned and
the primary facts upon which that conclusion is based. The
use of extraneous and irrelevant material in arriving at
that conclusion would vitiate the conclusion of fact because
it is difficult to predicate as to what extent the
extraneous and irrelevant material has influenced the
authority in Arriving at the conclusion of fact.
No case, in our opinion, has been made for interfering with
the judgment of the High Court. The appeals consequently
fail and are dismissed with costs. On hearing fee.
K.B.N. Appeals dismissed
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