1956 (9) TMI 62 - HC - Income Tax

High Court rules no evidence for profit attribution to family, favors assessee in tax case.

JAINARAYAN BALABAKAS OF KHAMGAON Versus COMMISSIONER OF INCOME-TAX, MADHYA PRADESH

The High Court ruled that there was no legal evidence to support that the profits were earned by the assessee family rather than by Nandlal and Venilal ... - Issues Involved:1. Whether there was any legal evidence to hold that the profits of Rs. 6,484 and Rs. 5,970 were earned by the assessee family and not by Nandlal and Venilal respectively.2. Whether in the circumstances of the case there was evidence to hold that there has been concealment and deliberate furnishing of inaccurate particulars of income within the meaning of section 28(1)(c) of the Indian Income-tax Act.Issue-wise Detailed Analysis:1. Legal Evidence for Profits Earned by Assessee Family:The Tribunal was directed to state the case to the High Court regarding whether the profits of Rs. 6,484 and Rs. 5,970 were earned by the assessee family or by Nandlal and Venilal respectively. The assessee, a Hindu undivided family, carried on business in cotton and adat under the name Jayanarayan Nandlal. The transactions in question were entered into by Nandlal and Madanlal through Bhaidas Karsondas, a commission agent firm, resulting in profits credited to Nandlal and Venilal's personal accounts. The Income-tax Officer treated these profits as belonging to the assessee family, citing that the transactions were entered without deposits based on the family's credit and that Venilal was not paid his profits until long after the relevant accounting year.The Appellate Assistant Commissioner and the Tribunal upheld this view, stating that there was no satisfactory evidence to prove that the transactions were personal and not on behalf of the family. However, the High Court found that there was no presumption that a business carried on by a member of a joint Hindu family is a joint family business. It is for the Department to prove that the earnings were of the family. The High Court noted that the Tribunal did not provide specific evidence to support its conclusion and relied on conjectures rather than legal evidence.2. Evidence of Concealment and Deliberate Furnishing of Inaccurate Particulars:The second issue was whether there was evidence of concealment and deliberate furnishing of inaccurate particulars of income under section 28(1)(c) of the Indian Income-tax Act. The Income-tax Officer imposed a penalty of Rs. 4,375 on the assessee, stating that the assessee tried to show less income to escape with a lighter tax. The Appellate Assistant Commissioner and the Tribunal dismissed the appeals against the penalty, asserting that the assessee deliberately furnished inaccurate particulars of its income to reduce its tax liability.The High Court, however, found that the Tribunal's findings were based on conjectures and not on concrete evidence. The Tribunal failed to point out specific evidence to support the claim of deliberate concealment. The High Court emphasized that the burden of proof was on the Department to establish that the earnings were of the family and that there was deliberate concealment, which was not satisfactorily discharged.Conclusion:The High Court answered both questions in the negative, stating that there was no legal evidence to hold that the profits were earned by the assessee family and not by Nandlal and Venilal respectively, and there was no evidence to hold that there had been concealment and deliberate furnishing of inaccurate particulars of income. The costs of the application were to be borne by the non-applicant, with counsel's fees set at Rs. 150.