1962 (2) TMI 7 - SC - Income Tax

High Court upholds Tribunal's decision on income addition for commission agents in forward transactions

The High Court of Judicature at Bombay affirmed the Income-tax Appellate Tribunal's decision to add specific sums to the total income of the assessees, ... Whether on the facts and in the circumstances of the case the Tribunal was justified in law in adding to the total income of the assessee the sum of ₹ 1,45,706 and/or ₹ 48,185 or any part thereof ? Whether there was any material on record to support the finding that ₹ 1,45,706 and/or ₹ 48,185 or any part thereof represent the income of the assessee ? Held that:- It was open to the Tribunal in appreciating the evidence to rely upon the statements made by Achaldas and Poonamchand before the Income-tax Officer and to disbelieve the statements made by them before the Appellate Assistant Commissioner. The jurisdiction of the High Court under section 66 of the Income-tax Act is merely advisory. The High Court does not sit in appeal over the judgment of the income-tax authorities : it is not concerned to decide whether the conclusion of the Tribunal on appreciation of evidence is correct. There was apparently a mass of evidence on which the conclusion of the Appellate Tribunal could be founded and the question which fell to be determined by it was purely one of fact. It is true that a finding of fact which is not supported by any evidence or is unreasonable and perverse may be open to challenge on the ground that it is not supported by any material on the record, but, as we have already observed, there was material on which the Income-tax Tribunal could reasonably arrive at the conclusion which it did. The High Court was, therefore, right in recording the answers to the two questions submitted to it. Appeal dismissed. Issues:1. Justification of adding specific sums to the total income of the assessee.2. Existence of material supporting the finding that the sums in question represent the income of the assessee.Analysis:The High Court of Judicature at Bombay answered affirmatively to the questions referred by the Income-tax Appellate Tribunal regarding the justification of adding specific sums to the total income of the assessee and the existence of material supporting the finding that these sums represent the income of the assessee. The assessees, engaged in business as commission agents and brokers, were involved in forward transactions in various commodities. During the assessment proceedings for the year 1947-48, certain entries in the assessees' books of accounts were questioned by the Income-tax Officer. These entries pertained to payments made to specific parties, which the assessees claimed were related to speculative transactions. The Income-tax Officer deemed these entries as fictitious and disallowed the claims regarding these amounts. The Appellate Assistant Commissioner, after examining the parties involved, concluded that the transactions were not genuine and directed the exclusion of a specific amount from the total income of the assessees. However, the Income-tax Appellate Tribunal overturned this decision and reinstated the Income-tax Officer's order, leading to a reference to the High Court.Upon review, the High Court found that there was substantial material supporting the Tribunal's findings regarding the nature of the transactions and the income involved. The Tribunal's findings highlighted several key points: firstly, the absence of prior transactions between the assessees and the parties in question raised suspicions about the sudden large transactions; secondly, the entries in the books appeared irregular and out of the ordinary course of business; thirdly, the consistent gains shown in transactions with the specific parties without any losses seemed unrealistic; fourthly, statements from the partners of the firms involved indicated that the transactions were bogus; fifthly, the parties had encashed cheques issued by the assessees and later returned the amounts, albeit inconsistently in their statements.The High Court emphasized that the statements made by the involved parties before the Income-tax Officer were crucial evidence, and the Tribunal had the authority to rely on these statements, despite contradictions in later statements made before the Appellate Assistant Commissioner. The High Court clarified that its role under section 66 of the Income-tax Act was advisory, not appellate, and it upheld the Tribunal's findings based on the substantial evidence available. The judgment dismissed the appeal, affirming the Tribunal's decision and the High Court's advisory role in such matters.