1944 (2) TMI 14 - HC - Income Tax

Court Validates Income-tax Findings, Rejects Arbitrary Addition to Property Valuation

DAL CHAND AND SONS Versus COMMISSIONER OF INCOME-TAX, PUNJAB

DAL CHAND AND SONS Versus COMMISSIONER OF INCOME-TAX, PUNJAB - [1944] 12 ITR 458 (Lah) Issues Involved:1. Admissibility of the statement of the 'undisclosed informer' and its impact on the finding regarding the deed of settlement.2. Sufficiency of material for the finding that certain sums were not paid or were returned.3. Justification of the valuation of agricultural land and Fazilka property by the Income-tax authorities.4. Justification of the finding that the beneficial interest in the Fazilka property passed to the assessee.Issue-wise Detailed Analysis:1. Admissibility of the Statement of the 'Undisclosed Informer':The court examined whether the statement of the 'undisclosed informer' was admissible in evidence and if its use vitiated the finding that the deed of settlement did not represent the true facts of the transaction. The court concluded that the statement was used by the Income-tax Officer as information to initiate proceedings under Section 34 of the Indian Income-tax Act and was not treated as conclusive evidence against the assessee. The Income-tax Officer corroborated the informant's version with other evidence, including statements from the debtor and his son, and entries in the debtor's accounts. The court held that the Income-tax Officer was entitled to use such information provided the course of natural justice was observed, and the assessee was given a reasonable opportunity to meet the case. The court, therefore, answered this question in the negative, holding that the finding was not vitiated.2. Sufficiency of Material for the Finding on Sums Paid:The court assessed whether there was sufficient material for the finding that the sums of Rs. 20,000 and Rs. 25,000 were either not paid by the creditor to the debtor or, if paid, were returned to the creditor. The Income-tax Officer believed the debtor's accounts over the assessee's after examining the parties on oath and scrutinizing the accounts. The court noted that the debtor's accounts had a clear previous history, while the assessee's accounts showed evidence of manipulation. The court referenced the principle that if there is any material from which the conclusion could be reasonably drawn, the fact that someone else might come to a different conclusion is irrelevant. Thus, the court answered this question in the affirmative, supporting the sufficiency of material for the Income-tax Officer's finding.3. Justification of Valuation by Income-tax Authorities:The court reviewed the valuation of agricultural land at Rs. 2,00,000 and the Fazilka property at Rs. 53,120. The court found that the valuation of the agricultural lands was supported by material, including the debtor's and assessee's earlier valuations. The court noted that the valuation of the Fazilka property was a finding of fact based on material evidence, except for an arbitrary addition of Rs. 4,350 for fittings and accessories, which was not justified. The court ordered this sum to be deducted from the estimated valuation. Thus, the court answered this question affirmatively, with the exception of the Rs. 4,350 addition.4. Justification of the Finding on Beneficial Interest in Fazilka Property:The court evaluated whether there was material to justify the finding that the beneficial interest in the Fazilka property passed to the assessee. The court agreed with the Income-tax authorities that the transaction was benami and the beneficial interest passed to the assessee. This conclusion was supported by statements from the benamidar, L. Murari Lal, who admitted borrowing money on the security of the assessee's G.P. notes and leasing the factory to the assessee. The court found this evidence sufficient to justify the finding and answered this question in the affirmative.Conclusion:The court upheld the findings of the Income-tax authorities on all issues except the arbitrary addition of Rs. 4,350 to the valuation of the Fazilka property. The answers to the questions were as follows:1. Negative, the finding was not vitiated.2. Affirmative, there was sufficient material for the finding.3. Affirmative, except for the Rs. 4,350 addition.4. Affirmative, the beneficial interest passed to the assessee.