TaxTMI 
TaxTMI 
1970 (2) TMI 45
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....visions of section 4(1)(b)(iii). The question arising is : Whether the amounts of those references or any part or parts thereof were liable to be so taxed. The assessee is an Iranian. His father died in Iran in 1925, when the assessee was about fifteen years old. The assessee came to India, for the first time, in 1934. The assessee took up service with Messrs. Zarthosti and Sons, Bombay, on a salary of Rs. 100 per month, which was from time to time increased till it reached Rs. 200 per month. In the summer of 1941 the assessee went to Iran and returned to India towards the end of 1943. In 1944 the assessee started his own business of export and import and in exchange of currency between Iran and India. For that purpose he established an office in Bombay and branch office at Yezd in Iran. So far as these two references are concerned, it will suffice to state that the remittances sought to be taxed have been credited by the assessee in his capital account, being account No. III in his books of accounts maintained at Bombay. It is, therefore, unnecessary to refer to the position as regards the assessee's other accounts. The aggregate of these remittances for the assessment year 1945....
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....the end of 1943 or the beginning of 1944, it is unnecessary to refer to the contents of other documents on this subject. The documents having a bearing on the assessee's case about Rs. 4,00,000 may now be referred to. It is the asseesee's case that his father did not do any business at all in Iran, but that he was the owner of vast immovable properties and some jewellery and that his father during his lifetime realised a sum of Rs. 4,00,000 by the sale of immovable properties. It is his further case that he alone inherited all the wealth of his father, that at that time there were no banking facilities in Iran in the part in which they were living, that the amount of cash was kept by the assessee with a friend of his father named Rustom M. Merwani and that the amount remained buried underground. It is his further case that even when the assessee came to India, the amount continued to remain with Merwani and Merwani continued to look after the immovable properties of the assessee. Annexed to the statement of the case in the first reference as annexure " B " is a copy of the statement of Merwani made on oath. He states that he knew the assessee and that out of the ancestral monies ....
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....t the price realised by the assessee's father by the sale of his immovable properties exceeded rials 4,000,000. The Tribunal has further pointed out that the details of the immovable properties have not been given. In spite of these discrepancies, the Tribunal has stated that at best the statement of Farsad can be taken as his oral testimony uncorroborated by any positive evidence whatsoever. The assessee also filed two affidavits, one of Khan Saheb Sarose K. Irani and the other of S. R. Ahrestani. Irani states that his father and the assessee's father were great friends and closely connected with each other in Iran till Irani left Iran for India and that even thereafter his father carried on correspondence with the assessee's father, that the assessee's father was a wealthy resident of Iran and " possessed of movable and immovable properties which a few years prior to his death he sold off and that the assessee, being the only son and the only heir of his father, inherited the estate of his father. According to Irani's affidavit, the assessee's father during his lifetime sold off all his movable and immovable properties, which it should be noted, is not even the case of the asses....
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....case about his father having sold the properties during his lifetime and collected Rs. 4,00,000 in cash which the assessee inherited. The assessee had made a statement of his total wealth and filed it before the Iranian authorities and the assessee produced a copy of it before the income-tax authorities, being annexure " F " to the statement of the case. The statement is a statement of wealth of the assessee at the time of the establishment of his Yezd office in 1944. The important thing to bear in mind is that the statement is dated some time in 1954-55 which means that it was filed during the later year but as of 1944. It shows, inter alia, that his wealth included, inter alia, " cash capital " of " 4,00,000 " without mentioning the unit of the currency. It thereafter mentions gold ornaments and jewelleries and ancestral immovable properties. The immovable properties have been serially noted and they numbered eleven. This statement was actually made by one Mehraban Goshtasbpoor on behalf of the assessee and it not signed by the assessee himself. Mr.Dastur pointed out that the Tribunal has, in its judgment, erroneously interpreted the amount of cash capital stated to be " 4,00,00....
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....eason why has evidence should be totally discarded. He says of his own knowledge that the assessee's father had during his lifetime sold at least some of his immovable properties. Irani's statement also suggests that the assessee's father must have sold at least some of his immovable properties, although Irani does not mention of what value. Ahrestani's statement is practically to the same effect, but he states that the sales fetched tomans 3,50,000 in the aggregate. We have agreed with the Tribunal in so far as it holds that it has not been proved that the sales fetched a sum of Rs. 4,00,000 in cash. But although the assessee's claim that the immovable properties sold by his father fetched Rs. 4,00,000 in cash cannot be accepted, in our opinion, the fact that the assessee's father did sell some of his immovable properties and realised some substantial amount in cash cannot be totally rejected. Of course, the evidence is not at all sufficient to establish what was the amount, even approximately, which was realised by the assessee's father by the sale of some of his immovable properties. In this connection it has to be borne in mind that the assessee's father died in about 1925 and ....
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.... first see the position about the immediately preceding assessment year 1945-46, corresponding to the accounting year of the assessee ending on 31st March, 1945. A copy of the Appellate Assistant Commissioner's order in respect of that year has been annexed as annexure " L " to the statement of the case in the second reference. The Appellate Assistant Commissioner accepted the story of the assessee that the assessee had Rs. 4,00,000 in cash as stated by him. That conclusion is, however, incorrect, in view of the judgment of the Tribunal in respect thereof in the two subsequent assessment years 1946-47 and 1947-48. But, what is of importance is that the Appellate Assistant Commissioner, because of his said conclusion, proceeded to ascertain the amount of profits which had accumulated in the hands of the assessee for the eleven years from 1st April, 1933, to 31st March, 1944, because remittances from Iran out of the profits accumulated up to 31st March, 1944, made during the accounting year 1st April, 1944, to 31st March, 1945, would be relevant to the assessment year 1945-46. The foreign business of the assessee commenced only in about the beginning of 1944 and its income for the la....
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....the said sum of Rs. 58,000 after deducting therefrom Rs. 30,000. He held that the sum of Rs. 9,800 was the income in Iran during the accounting year ended 31st March, 1945, composed of Rs. 5,000 for agricultural income and Rs. 4,800 for business income on the basis of the assessment to income-tax actually made in Iran in respect of that year. He held that the amount of Rs. 37,800 being the aggregate of the said two amounts of Rs. 28,000 and Rs. 9,800 was the only amount of accumulated profits and as it was less than Rs. 99,769 being the amount of remittances in that year only Rs. 37,800 could be brought to tax under section 4(1)(b)(iii) in the assessment year 1946-47. The order of the Appellate Assistant Commissioner in respect of the next assessment year 1947-48 proceeds on an identical basis. It should, however, be stated that the entire available income in Iran accumulated up to 31st March, 1945, had been exhausted in the assessment year 1946-47 and nothing out of it remained available for the assessment year 1947-48. Moreover, the assessee's income in Iran in the assessment year 1946-47 had actually been brought to tax in India as part of his taxable income and it did not ther....
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....s judgment in the second reference also deals with another contention urged by the assessee, but we will separately deal with it later on. Now section 4(1)(b)(iiii) is as follows : " 4. (1) Subject to the provisions of this Act, the total income of any previous year of any person includes all income, profits and gains from whatever source derived which- . . . . (b) if such person is resident in the taxable territories during such year- . . . . (iii) having accrued or arisen to him without the taxable territories before the beginning of such year and after the 1st day of April, 1933, are brought into or received in the taxable territories by him during such year, or ...... " The decision of the Tribunal has been reached on the basis that the burden of proof was on the assessee and that it was the assessee who had affirmatively to prove that the remittances were out of amounts other than accumulated profits and also to prove what was the exact amount of his accumulated profits at the relevant time. It is necessary to examine the position as regards the burden of proof in respect of the provisions of section 4(1)(b)(iii). In this connection a reference may be made to a judgment ....
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....a presumption of law but only of fact such as is contemplated by section 114 of the Evidence Act, that it would be a rebuttable presumption and that if the assessee is unable to show or explain that the remittance was not out of his profit, a presumption may be made that it represented wholly or in part such profit. It should further be observed that the burden is cast on the assessee in view of the provisions of section 106 of the Indian Evidence Act as the fact which is to be proved would be especially within the knowledge of the assessee. In the case of Commissioner of Income-tax v. R. M. Raja, Chief Justice Chagla, in delivering the judgment on behalf of a Division Bench of this court, has considered the judgment in Commissioner of Income-tax v. Jankidas and followed that judgment and stated that if remittances are made from a non-taxable territory into the taxable territories and if it is established that profits were available in the non-taxable territory, then a presumption would readily arise that the remittances were out of the profits and it would be for the assessee to rebut that presumption. The provisions of section 4(1)(b)(iii) were again considered by a Division Be....
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....ve that the remittances are not from profits, but are from capital or loans or any source other than accumulated profits. In all these three cases, however, the actual amount of the assessee's profits in the non-taxable territories was actually ascertained. In our case, material to ascertain the exact amount of the assessee's accumulated profits in Iran is not available. The Appellate Assistant Commissioner has, however, attempted to ascertain it on approximation. The Tribunal has, in the view which it took, not at all considered that aspect and held that the burden of establishing the assessee's case that he had Rs. 4,00,000 available in cash by way of his patrimony has not been proved and, as the burden lay on the assessee and the assessee did not discharge that burden, the presumption that the remittances were out of accumulated profits was not rebutted and, therefore, all the remittances must be held to be out of accumulated profits in Iran and, therefore, taxable under section 4(1)(b)(iii). Mr. Joshi, the learned counsel for the department, contended that it is true that the burden of proving that the assessee had accumulated profits in a non-taxable territory is on the depa....
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....example, if the department proves a source which would yield a very small amount of income at the relevant time, but the assessee fails to establish the exact amount of his accumulated profits and if there be remittances of very large amounts, it cannot be presumed that all these remittances were out of the assessee's accumulated profits. Although the burden would be on the assessee, yet if for some reason he fails to establish the exact amount of accumulated profits, and although there would be a presumption that there were accumulated profits, the provisions of section 114 of the Evidence Act require that the amount of such accumulated profits must be correlated to the source and the presumption would apply only to the extent of the probable amount of profits which that source would enable accumulation. Mr. Joshi relied upon the decision of the Supreme Court in Commissioner of Income-tax v. Kumbakonam Mutual Benefit Fund Ltd. In that case certain cash credits appearing in the books of account of the assessee were not accepted as having been borrowed by the assessee and were, therefore, treated as the income of the assessee. Mr. Joshi contended that similarly as the assessee's ca....
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....hat his income in Iran was during the relevant years after 1st April, 1933, and could not affirmatively establish the correct amount of accumulated profits, the Appellate Assistant Commissioner, in respect of all the three assessment years, ascertained in the best way he could the income and the accumulated profits of the assessee relevant for each of the said three assessment years. In this connection it is pertinent to note that the income of the assessee from his immovable properties in Iran as revealed by the statements of the Iranian income-tax officer never exceeded about Rs. 4,000 to Rs. 5,000 on an average, and in respect of the assessment year 1945-46 his business income in Iran has been assessed at Rs. 3,000 only. These amounts would not be sufficient to be the source of remittances which are of very large amounts aggregating to about Rs. 2,50,000 in the three years. It is true that the assessee has not produced his books of accounts. It must, however, be remembered that when the assessment proceedings were going on in about 1955 or so, the accounts required would be of a period as old as thirty to twenty years. Moreover, the assessee himself had not been in Iran during a....
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.... that it could not permit a legal and an illegal order to stand side by side because once the plea was allowed to be raised and it was accepted the entire order of the Appellate Assistant Commissioner would stand vitiated. The Tribunal refused to allow the assessee to raise and argue that ground because of such difficulty which the Tribunal felt would arise. Now there is no doubt that, as the assessee had already filed a voluntary return, the notice under section 34(1)(a) was wrongly issued and the proceedings of assessment which took place in pursuance of that notice are invalid. This is the ratio laid down by the Supreme Court in its said judgment in the case of Commissioner of Income-tax v. Ranchhoddas Karsondas Mr. Joshi has not disputed this position. The only question is whether the Tribunal was entitled in law to refuse to allow the assessee to urge that ground in the appeal before it. Now a Division Bench of this High Court in Commissioner of Income-tax v. Hazarimal Nagi & Co., after considering the relevant sections of the Income-tax Act and the relevant Rules made thereunder, held that the powers of the Appellate Tribunal are similar to the powers of an appellate court u....
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....ndent in appeal who had not filed cross-objection with regard to the portion of the decree which had gone against him to urge in opposition to the appeal of the plaintiff a contention which if accepted by the trial court would have necessitated the total dismissal of the suit, but the decree in so far as it was against him would stand. The judgment of the Tribunal in our case clearly shows that, although the assessee wanted to raise a new point as a ground of defence in the appeal, he specifically stated that he wanted to rely upon it only for the purpose of having the appeal by the department for enhancement in income-tax dismissed. But even if the assessee had not made such a statement, the above judgment shows that the assessee would be entitled to raise a new ground, provided it is a ground of law and does not necessitate any other evidence to be recorded the nature of which would not only be a defence to the appeal itself, but may also affect the validity of the entire assessment proceedings. If the ground succeeds, the only result would be that the appeal would fail. The acceptance of the ground would show that the entire assessment proceedings were invalid, but yet the Tribu....