TaxTMI 
TaxTMI 
TaxTMI 
1986 (5) TMI 2
X X X X Extracts X X X X
X X X X Extracts X X X X
....sary to refer to all the questions that were pressed before the High Court because all these questions were not pressed before this court. The following questions were, however, canvassed before this court. " 1. Whether the findings of the Appellate Tribunal are vitiated in law by reason of it having ignored relevant and admissible evidence and having relied on incorrect facts and misstatement of facts? 2. Whether, on the facts and in the circumstances of the case, the conclusion of the Tribunal that the Kalinga Foundation Trust came into existence in 1947 and that it was distinct from the Trust created by the assessee in 1949 logically followed from the materials on record or it was perverse in the sense that no reasonable man could come to it on the said materials ? 3. Whether, on the facts and in the circumstances of the case, in arriving at the finding that the Kalinga Foundation Trust had acquired property from donations from the public, the Tribunal erred in law in not giving due consideration to the several matters relevant for determination of the points which had been considered by the Income-tax Officer in the assessment order ? 4. Whether, on the facts and in the ci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the cash credits appearing in his account in the name of the Kalinga Foundation Trust were genuine, and (ii) that 39,000 shares of Kalinga Tubes Ltd. standing in the names of B. K. Mall, Smt. Swaran Oberoi, Shri K.C. Dalai Shri G. C. Patnaik, etc., were not really his own investment. After examining the assessee's evidence and on the basis of the documentary evidence and government records and on the basis of local enquiries made, the Income-tax Officer has come to the conclusion that no trust in the name of the Kalinga Foundation Trust really existed and even if it existed, it had no funds of its own and that the name " Kalinga Foundation Trust was used by the assessee as a camouflage to put through his unaccounted money. Accordingly, all cash credits appearing in the books of accounts of the assessee himself or in the books of other concerns or persons or remittances of actual payments in the name of the trust were treated by the Income-tax Officer as moneys coming out of the undisclosed sources of the assessee and accordingly assessed the same as his income from undisclosed sources. All interest and dividend received in the name of the trust were included by the Income-tax O....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alf of the assessee was that if it was intended to use the trust as a camouflage, the accounting year of the trust would have been the same as that of the assessee. It was further contended that the minute book and books, of account were maintained by the trust and that the trust had its own written constitution by way of memorandum and articles of association and rules. The funds of the trust were lying in trust with the Maharaja of Sonepur as he was the honorary treasurer of the trust. It was further pointed out on behalf of the assessee that eminent persons were members of the trust. On behalf of the Revenue, it was, however, contended before the Tribunal that on the basis of the facts emerging on an examination of the assessee's evidence and facts found on the basis of the documentary evidence, the Appellate Assistant Commissioner should have confirmed the assessments. It was further stated by the Revenue that local inquiries and oral testimony had been used by the Income-tax Officer to support the conclusions already arrived at on an examination of the assessee's own evidence and corroborated by documentary evidence and, therefore, the Appellate Assistant Commissioner should ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h the assessee were from its own resources and funds and such investments were guided by business expediency and prudence. The finding of the Tribunal is that the trust was comprised of persons of public repute and the control and management of the trust styled as " Kalinga Foundation Trust " were under the effective control of the board of trustees comprised of persons of public reputation. The Tribunal accordingly held that the income from interest, dividend or any other usufruct arising out of the investments made by the trust in the various concerns and the investments of the trust which were included in the assessments of the assessee in the years under reference should be excluded as appertaining to a separate and distinct entity and, therefore, directed the Income-tax Officer to exclude these amounts from the assessments of the assessee in all these three years. The Revenue did not accept the findings of the Tribunal as correct as mentioned hereinbefore and has sought reference to the High Court on several questions. Before the questions involved in these appeals are considered, it is necessary to bear in mind the scope of the jurisdiction of the High Court in directing a r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... When the point for determination was a pure question of law, such as construction of a statute or document of title, the decision of the Tribunal was open to reference to the court. (ii) When the point for determination was a mixed question of law and fact, while the finding of the Tribunal on the facts found was final, its decision as to the legal effect of those findings was a question of law which could be reviewed by the court. (iii) A finding on a question of fact was open to attack under reference under the relevant Act as erroneous in law when there was no evidence to support it or if it was perverse. (iv) When the finding was one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of fact. In Gouri Prasad Bagaria v. CIT [1961] 42 ITR 112, this court held that when the assessee's statement was believed in a particular case and the finding of the Tribunal was based on that, then there was obviously material on which the finding of the Tribunal could be based; and to seek for other material was tantamount to saying that a statement made by an assessee was not material on which a finding could be given. The Tribunal h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 whole. When a court of fact acted on a material partly relevant and partly irrelevant, it was impossible, this court observed, 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 arose. Likewise, if the court of fact based its decision partly on conjectures, surmises and suspicions and partly on evidence, in such a situation an issue of law arose. In CIT v. S. P. Jain [1973] 87 ITR 370, this court noted that the questions referred to the High Court did not challenge the validity of the findings in that case given by the Tribunal, as the Tribunal had failed to take into account the relevant material on record in arriving at its finding and had further acted on inadmissible evidence and misread the evidence and based its conclusion on conjectures and surmises, the court could ignore the findings of the Tribunal and re-examine the issues arising....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ax Officer subsequent to the delivery of the judgment in this case. Apparently, the identity of the donors to the trust has not been established and a large amount of materials have been collected subsequent to the decision of this court in S. P. Jain's case [1973] 87 ITR 370 which had been adverted to by the Income-tax Officer and to which our attention was drawn. These did not appear to have received consideration by the Tribunal. We were taken through the evidence on record exhaustively about the foundation of the trust. We were taken through the evidence as to who were present at the time of the inauguration of the trust and whose evidence were there, there was a public meeting and whether this trust was separate from the other trust or not, whether particular persons were present or not; they are all set out in the orders of the Tribunal as well as the Income-tax Officer. It is not necessary at this stage for the purpose of disposing of these appeals to exhaustively discuss this. The Revenue has pointed out to the Tribunal as appears in para. 22 at page 159 of the Tribunal's order that there was omission or adjustment of entries. The Tribunal has held that the Income-tax Of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xplanation was offered by the assessee. The assessee had sought to give an appearance of truth to the explanation offered and relied on certain letters. But there appears to be no evidence as to who were the persons from whom the money was collected, how was the money received and how was the money invested? This in conjunction with other factors, in our opinion, raises a question whether the Tribunal bad acted without material evidence. It is not necessary nor it is proper at this stage for this court to express any opinion whether on these facts what conclusion should properly be drawn but the basic question, in our opinion, on the first aspect of the matter as to whether the donations alleged were given by the assessee were the moneys raised by the Trust as donations from various people or not remains. That question, in our opinion, should be considered in its proper perspective but does not seem to have been done. This is the most material portion and in not appreciating the material portion and discussing the evidence in respect of the same, in our opinion, there was non-consideration of a relevant factor on a factual aspect and on this, the questions, firstly, whether the Tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f two issues: (a) whether the ostensible holders of these 39,000 shares were real owners or benamidars and if they were benamidars, who were the real holders ? The company was incorporated as a private limited company in 1950. From 1950 to 1954, it was controlled by Shri Biju Patnaik and Shri Loganathan. In 1954, the company was in need of capital and these two persons came to be introduced to Shri S.P. Jain. There was some agreement between Shri Jain and the existing shareholders. The memorandum of agreement was drawn up in July, 1954. According to this agreement, Patnaik, Loganathan and Jain group were to be equal shareholders of the company. Early in 1956, the three groups considered the desirability of extending the business and obtaining loan from the Industrial Finance Corporation. The Industrial Finance Corporation did not give loan to private limited companies and, therefore, the company was converted into a public limited company in January, 1957. In September, 1956, when the company was still a private company, a request was made to the Controller of Capital Issues for raising the capital of the company. It is further stated that at a meeting held on March 29, 1958, Shrim....