1949 (4) TMI 26 - HC - Income Tax

Court emphasizes burden of proof on assessee to rebut presumption of remittances as profits

The court held that the presumption of remittances as profits is a presumption of fact, not law. It emphasized the burden of proof on the assessee to show ... - Issues Involved:1. Presumption of remittances as profits.2. Applicability of the precedent set in Ramaswami Pillai v. Commissioner of Income Tax, Madras.3. Burden of proof regarding the nature of remittances.4. Taxability of the excess remittances over receipts.Analysis:1. Presumption of Remittances as Profits:The primary issue was whether the remittances received by the assessee from the Sambar Lake firm could be presumed to be profits. The court held that such a presumption is not a presumption of law but a presumption of fact as contemplated by Section 114 of the Indian Evidence Act. The court stated, 'Where an assessee having business connections abroad which may result in profit has received remittances from out of the funds of the business carried on by him or on his behalf in the foreign country and he is unable to show or explain that the remittance was not out of his share of the profit, a presumption may well be made that it represented wholly or in part such share.'2. Applicability of the Precedent Set in Ramaswami Pillai v. Commissioner of Income Tax, Madras:The court examined the precedent set in Ramaswami Pillai v. Commissioner of Income Tax, Madras, where it was held that the presumption that remittances are out of profits is a rebuttable one. The court noted, 'The presumption adverted to in the above-mentioned judgment is certainly not a presumption of law but is quite obviously a presumption of fact.' The court agreed with the principle that the presumption of remittances being profits is rebuttable and must be assessed based on the facts of each case.3. Burden of Proof Regarding the Nature of Remittances:The court emphasized that the burden of proof lies on the assessee to show that the remittances were not out of profits. It stated, 'Section 106 of the Indian Evidence Act provides that the onus of proving a fact which is especially within the knowledge of any party lies on such party.' The court further explained that it is reasonable for the Income Tax Department to presume remittances as profits unless the assessee provides evidence to the contrary.4. Taxability of the Excess Remittances Over Receipts:The court addressed the contention that the excess remittances over receipts should be presumed to be profits. It noted, 'In view of the particular facts of this case in which there were remittances on both sides-which remittances were almost equal in their extent-the Appellate Tribunal declined to hold that the sum of Rs. 43,531 out of the remittances received by the assessee was his share of the profits earned by the business carried on in Jaipur State under the name and style of Messrs. Jankidas Kaluram, Sambar Lake.' The court concluded that this was a pure question of fact and upheld the Tribunal's decision.Conclusion:The court concluded that no question of law arose from the Tribunal's order and answered the reference in the negative. The court stated, 'We think that on the case as stated and in view of the question as formulated we are not called upon to decide and indeed have no power to decide, if the sum of Rs. 7,162 being the excess of the remittances received by the assessee over the remittances made by him can be regarded as profits received during the account period and liable to tax.' The respondents were awarded costs of Rs. 250.