AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
1972 (9) TMI 10
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....ies, rents from house properties, dividends, etc. In the year 1954-55 for which the previous year is 1st November, 1952, to 31st October, 1953, the assessee filed a return on 28th February, 1955, declaring a total income of Rs. 2,60,737. On 24th February, 1958, a revised return was filed including therein property income amounting to Rs. 550. The Income-tax Officer completed the assessment on 30th September, 1958, on a total income of Rs. 21,15,845 which included a sum of Rs. 10,80,000 treated as the assessee's income from undisclosed sources "for investment in shares in the name of Sri Kalyan Shum Shere J. B. Rana" (hereinafter referred to as "the Rana"). The assessee disputed the inclusion of this amount of Rs. 10,80,000. The Income-tax Officer treated this amount as income from undisclosed sources for the following reasons : From the statement of case, it would appear that on July 1, 1952, the assessee sold 50,000 ordinary shares of Rhotas Industries Ltd. (R.I. Ltd.) to Dalmia Jain Collieries Ltd. (D.J.C. Ltd.). Another 10,000 shares of R.I. Ltd. were sold on the same day to Maheshpur Collieries (M.C. Ltd.). He also sold 40,000 and 35,000 ordinary shares of S. K. G.....
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....s in May and August, 1953, the Rana had never attended any general meeting of the shareholders nor appointed any proxy to attend in the general meeting on his behalf. (v) R.I. Ltd. declared dividends on 2nd June, 1954, and S.K.G. Ltd. on 23rd April, 1954. The dividends in all amounted to Rs. 21 lakhs but the Rana did not take steps to have the same recorded as the registered shareholder and to collect the dividends. (vi) The Rana opened a current account in the Allahabad Bank in April, 1955, with a cash deposit of Rs. 500 and the dividends were then collected by the bank. During April to December, 1955, deposits were over Rs. 22 lakhs and withdrawals Rs. 20 lakhs. During the calendar year 1955, the deposits were Rs. 14.97 lakhs and withdrawals Rs. 16.85 lakhs ; in the calendar year 1957, there was one deposit of Rs. 1,30,125 and withdrawal of Rs. 1,41,000. All these deposits were by cheques and withdrawals involving over Rs. 38 lakhs in the three years were all by bearer cheques and endorsed in favour of Ananta Chandra Das. Along with the cheques, letters of authorisation were also issued in his favour. Excepting for the signatures of the Rana, the other entries i....
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....ner further directed the Income-tax Officer to examine the assessee and also to investigate the physical movement of the shares in question during the period covered by the transactions and the subsequent history including their ultimate disposal. It would appear from the Appellate Assistant Commissioner's order that the Income-tax Officer submitted two remand reports in which he made out the following salient points : (1) The assessee did not avail of the opportunity of producing the Rana. (2) The Income-tax Officer visited Nepal and found that the present position and antecedents of the Rana were modest. (3) Ananta Chandra Das was found to be an employee of Ashoka Marketing Ltd. Later, the Income-tax Officer succeeded in contacting Ananta Chandra Das whose statement was also recorded. (4) The statement of Onkarmal Dalmia recorded on 9th December, 1958, showed that the share scrips of the two companies involved, which were stated to have been purchased by D. J. C. Ltd. and Maheshpur Collieries Ltd., were found to have been in the custody of the accountant of the Ashoka Marketing Ltd. (5) The principal officer of the two companies, S....
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.... obtaining the promissory notes. It was not the department's case that Sri. S. P. Jain had advanced Rs. 10,80,000 to Sri Durga Prasad. The vendor-companies did not have cash to make the advances except after the sale of the shares. From the facts recorded it followed that the two vendor-companies effected the actual sale of shares in question and made the loans aggregating to Rs. 10,80,000 to Shri Durga Prasad. (3) Rana did not claim to be a tenant of 22, Circus Avenue, Calcutta. He had given his address as "Thapathali Darbar Nepal, C/o. Smt. Pooku Maiya Saheba, 22, Circus Avenue, Calcutta". In 1956, Rana seems to have been present at Calcutta and this fact had been confirmed in a letter to the Income-tax Officer dated 27th July, 1956, by General Baber Shamshir J. B. Rana who stated that the Rana left his home (Nepal) some months back for treatment in India but he did not know Rana's address. The department had commenced its enquiries early in 1956 and at that time the Rana had substantial cash balance left in the Allahabad Bank. Since Rana never claimed to be a tenant and the departmental enquiries did not result in a positive finding that the Rana never stayed at....
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....ese shares by the Rana : (1) that there was no evidence of any negotiation for the sale of this huge lot of shares by the two colliery companies to the Rana. Certainly no brokers were involved ; (2) that the two large sums of Rs. 6 lakhs and Rs. 4,80,000 were handed over in cash by the Rana on 30th May, 1953, and 28th August, 1953, though admittedly the Rana had no bank account and no residence of his own in Calcutta where the cash could be kept in safety ; (3) that though neither of the two colliery companies nor the Rana were constituents of the Allahabad Bank, yet the General Manager of the bank actually handed over the purchase price and the share scrips respectively to the vendors and the purchaser and no reference could be found in the official records of the bank ; (4) the unsatisfactory nature of the evidence given by Nandlall Poddar; and (5) lastly, the manner of withdrawal of nearly Rs. 37 lakhs in cash from the Allahabad Bank. Although the department has been able to point out the circumstances which raise an element of doubt as to the genuineness of the transaction of the purchases of these shares in 1953 by the Rana, in my o....
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....es by the vendor companies to Rana on the date when it is alleged to have taken place was a sham and bogus one ; and if it was, and that Rana was merely a name-lender, whether the loan alleged to have been advanced by the vendor companies to Durga Prasad of Tumsur was in fact advanced by the assessee. Both are inter-linked and unless the connection of the assessee with the loan is established, the assessment in respect of that amount as income from undisclosed sources cannot be substained. 15. The two primary questions that arise for decision in these appeals are: 1. Whether the findings of fact reached by the Tribunal are liable to be interfered with on any of the grounds recognised by law? and 2. Whether the department has been able to establish that the shares alleged to have been purchased by the Rana were actually purchased by the assessee and that the Rana was a mere benamidar for the assessee? 16. The findings reached by the Tribunal are, prima facie, findings of fact. Before rejecting those findings, we must be satisfied that there are grounds in this case recognised by law which empower us to interfere with those findings. If the department succeeds....
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....stated in the statement of the case would form the basis on which the legality or otherwise of the assessment would alone require to be considered by the High Court. 18. In this case the revenue had in its application under section 66 of the Act asked for specific reference on the question : "Whether, on the facts and in the circumstances of the case, the findings of the Tribunal that a sum of Rs. 10,80,000 paid for the purpose of the shares was not the assessee's own income was a perverse finding having regard to the evidence on the record?" 19. This question was repeated in its application under section 66(2), but perhaps the High Court thought that questions Nos. 2 and 3 on which it directed the Tribunal to state a case would cover the scope and ambit of question No. 3 on which the revenue had asked for reference. We think that the two questions on which the reference has been made impugn the findings and the validity of the Tribunal's conclusion that Rs. 10,80,000 was not an income from undisclosed sources, but was the product of a genuine sale by the vendor-companies. Though this question does raise the validity of the finding given by the Tribunal, we h....
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....themselves because they are dealing with cases that arise out of facts found by commissioners. Their duty is no more than to examine those facts with a decent respect for the tribunal appealed from and if they think that the only reasonable conclusion on the facts found is inconsistent with the determination come to, to say so without more ado." This statement goes further than what has been adopted by this court. On the other hand Viscount Simonds confined the interference to the view which has so far been prevailing in references under the tax laws. At page 586, he observed : "For it is universally conceded that, though it is a pure finding of fact, it may be set aside on grounds which have been stated in various ways but are, I think, fairly summarised by saying that the court should take that course if it appears that the commissioners have acted without any evidence or upon a view of the facts which could not reasonably be entertained. It is for this reason that I thought it right to set out the whole of the facts as they were found by the commissioners in this case. For, having set them out and having read and re-read them with every desire to support the determin....
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.... with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them and what were the findings reached on the evidence on record before it. The conclusions reached by the Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and if there are any circumstances which required to be explained by the assessee, the assessee should be given an opportunity of doing so. On no account whatever should the Tribunal base its findings on suspicions, conjectures or surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings, even though on questions of fact, will be liable to be set aside by this court." 24. These observations were again referred to and adopted in Lalchand Bhagat Ambica Ram v. Commissioner of Income-tax. See also Sree Meenakshi Hills v. Commissioner of Income-tax, where Venkatarama Ayyar J. summed up the position emerging ....
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....Allahabad Bank, Calcutta. The force of this omission was felt by the Tribunal which was also of the view that "there should have been some kind of correspondence before the Rana agreed to purchase the block of shares from the two collieries". It, however, slurred over the lacuna by seeking to put the blame for the omission on the Income-tax Officer who, it thought, ought to have questioned the assessee and called on the vendor-companies to explain how the transactions were actually finalised. When, as we will see, an official of the vendor-companies was called, he said that they were kept in the dark about the transactions for merely two years, who else could the Income-tax Officer examine ? It was the duty of the assessee to produce correspondence if there was any, but for that omission no blame can attach to the Income-tax Officer. That apart, Wood was not produced and there is nothing to show that these letters were written by him. It is also apparent that these letters though written on the official note paper of the Allahabad Bank Ltd., Calcutta, give no reference number nor are there any office copies of those letters in the bank. In fact the case of the assessee is that the ....
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....or-companies was paid to Durga Prasad at the bank counter by him. The Tribunal states that the department has not questioned the fact that the share scrips were handed over to Rana against the receipt of cash or that when the cash was received, it was advanced as loan to Durga Prasad. In fact it asserts that "where the factum of sale of shares by the two companies has not been challenged the fact that they took place in the presence of Mr. J. F. Wood cannot be questioned irrespective of whether the Rana was acting on his own behalf or as name-lender of anybody else". It further states: "once the signature is genuine and the letters are found to have been typed from the bank's typewriter we cannot cast any doubt on the genuineness of the letters in the absence of evidence to establish any fraud or forgery". There is absolutely no evidence or suggestion to justify the statement that the four letters of Wood were typed on the bank's typewriter. An example of the manner in which the Tribunal speculated is illustrated by the following : "The two colliery companies were also not called upon to explain how the transaction was actually finalised. In these circumstances, we....
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.... in thinking that the department had not questioned either the letters of Wood or the fact that the share scrips were handed over to the Rana against the receipt of cash or that when the cash was received, it was advanced as a loan to Durga Prasad. In fact, it was stated that Durga Prasad had admitted to have received the money in the bank. This would imply that Durga Prasad received Rs. 10,80,000 on two occasions once on the 30th May and the other on 28th August, 1953, and both the times at the Allahabad Bank. According to the first statement of Durga Prasad dated 21st December, 1956, which was produced before us, it appears that before going to Calcutta on some business he had already had a talk in Delhi with the assessee about securing a loan to expand his business and the assessee assured him that he would help him. When he went to Calcutta, he met the assessee there and the assessee granted him the loan of Rs. 10,80,000. He says that the sum was received by him in currency notes at the counter of the Allahabad Bank Ltd., Calcutta and that he took the cash in person, travelled to Tumsar in the Calcutta Mail and handed it over to his munshi, Kesheoreo, who entered it in the cash....
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.... August or September, 1953, and obtained the shares from Mr. B. D. Dujari, accountant of Ashoka Marketing Ltd., and took them for inspection to the auditors after which he returned the shares to Mr. B. D. Dujari. The shares which were alleged to have been sold to the Rana and delivered to him in May and August, 1953, were in fact lying in Ashoka Marketing Ltd. which is a concern of the assessee and this family. This company is debited with not only the personal expenses and the salaries of domestic servants, etc., but also with the assessee's salary of Rs. 8,000 a month. 29. The statement of Onkar Mal Dalmia was recorded on 9th December, 1958, and 50 days thereafter even though he admitted that he received copies of his statement tried as an after-thought to explain away his previous statement saying that the shares of R. I. Ltd. and S. K. G. Sugar Ltd. were not shown to the auditors at that time and that evidently what he stated was a mistake as by August or September the respective companies had already sold away those shares. The Income-tax Officer had rejected this latter statement of Dalmia and the Tribunal has not taken this fact into consideration. It cannot be said t....
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....s name and why were they allowed to remain in the possession of Ashoka Marketing Company when a large sum of Rs. 2,00,000 which even a rich man, assuming that Rana was a substantial person, would not take steps to receive immediately and would forgo a substantial income from interest thereon for a whole year. 31. Dealing with the earlier statement of Onkar Mal Dalmia, the Tribunal states that if the Income-tax Officer wished to adhere to that statement, which would imply that D. J. C. Ltd. and M. C. Ltd. advanced Rs. 10,80,000 to Durga Prasad from out of their own secreted profits on the footing that there was no sale of shares to R. I. Ltd. and S. K. G., Ltd. held by them, no question would arise of treating the Rana as the benamidar of the assessee. Besides, according to it, that statement would be irrelevant once it is admitted that there has been a real sale by the two companies in May and August, 1953. In this connection it further observed that the factum of sale of the shares by the two companies has not been challenged nor the fact that the sale took place in the presence of Wood been questioned, irrespective of whether the Rana was acting on his own account or as name-l....
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....gregating to Rs. 38 lakhs. These cheques were said to have been sent for by Rana sitting at 11, Clive Row, Calcutta, which is the address of the assessee and also of the Sahu Jain concerns. These cheques were bearer cheques for lakhs of rupees and encashed through one A. C. Das, peon of Ashoka Marketing Ltd. The letters of authorisation given to Das were typed in identical form bearing only the signature of Rana, the other entries having been filled up by someone else. These large amounts brought by A. C. Das in cash were handed over in the office of Sahu Jain concerns. A. C. Das states that he was directed to render this service for the Rana by T. D. Dujari. Dujari said that when he had gone to Jain (assessee) for office work, the latter introduced him to Rana and asked Dujari to assist Rana if the latter so desired and that some days later Rana came to him with a request for a bearer to fetch money from the bank and that Rana himself handed over the cheques to A. C. Das. The Judicial Member thought that this raises some doubt on the genuineness of Rana's transactions. The Accountant Member, thought that the statement of A. C. Das was positive evidence and the department had n....
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....d that he took this amount personally to Tumsar travelling in the Calcutta Mail, though retracted, was relied upon by the Income-tax Officer for the conclusion that this amount was lent by the assessee and it was income from undisclosed sources. 35. From the above discussion it is clear that the findings reached by the Tribunal are wholly vitiated. No judicial tribunal properly instructed could have arrived at those findings. We are, therefore, constrained to ignore those findings and re-examine the issues arising for decision on the basis of the material on record. 36. The question then is, whether the department has satisfactorily established that the Rana was not the real purchaser of the shares and that he was a mere name-lender. We have broadly stated the relevant facts earlier. We will now summarise the facts and circumstances--even at the risk of some repetition--which go to establish that the Rana was a mere name-lender. They are : 1. There is no evidence to show that the Rana's financial position was such that he was in a position to purchase the shares in question. It is not shown that he had any bank balance either in this country or in any other count....
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....s got by the sale of those shares. Practically all these amounts were said to have been realised by the Rana by issuing bearer cheques in favour of a peon of Ashoka Marketing Co. who had been casually introduced to him. The Rana could not have been too big to go to the bank to collect these huge amounts, if he was the real owner of the money. 37. He is said to have waited in the premises belonging to Sahu Jain Co. and sent these bearer cheques through the said peon. It is further said that with a view to see that the peon did not misappropriate the money, the Rana used to send his own driver with him. If that was so, it is not explained why the Rana did not give the bearer cheques to his driver himself if the driver was so trustworthy and it is not explained what the Rana did with the money so collected. 38. The above enumerated circumstances are tell-tale. The only reasonable inference that can be drawn from those circumstances is that the Rana was a mere name-lender. The conclusion reached by the Income-tax Officer and the Appellate Assistant Commissioner that the Rana was a mere name-lender is a reasonable conclusion. Neither the Tribunal nor the High Court has given any g....
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....the shares immediately as a loan to one Durga Prasad on the basis of the two promissory notes. In discussing this aspect we had pointed out the incongruity in the first and the second statement of Durga Prasad to show that the loan of Rs. 10,80,000 was said to have been given to him by the vendor-companies in one lump sum, that he carried this huge amount from Calcutta to Nagpur and gave it to his munim and that he never deposited that amount in any bank. There is also a total absence of any material to show how Durga Prasad had spent these amounts. All these circumstances would clearly indicate that the story is a fictitious one and that the alleged loan to Durga Prasad is a pure fabrication. It is, therefore, clear that Durga Prasad is no other than a mere puppet of the assessee. 4. The shares alleged to have been purchased by the Rana were found to be in possession of Ashoka Marketing Co., a concern practically owned by the assessee. Unless the assessee was the purchaser of those shares, the shares could not have been in the possession of the Ashoka Marketing Co. It is reasonable to assume that after the alleged sale, the assessee was in possession of the shares through....