The Commissioner of Income-Tax, Bombay v. Homi Jehangir Gheesta

770 SUPREME COURT REPORTS [1961] _**Seplember**_ a~ ###### THE CO~fMISSIONER OF INCOME-TAX, HOMI JEHANGIR GHEESTA ###### _v._ BOMBAY ###### (S. K. DAs, M. HmAYATULLAH and J.C. SHAH, JJ.) _lllcome_ _tax-Assessment-Income_ _from undisclosed_ _source-_ _Refusal_ _by_ _Appellate Tribunal_ _lo_ _state_ _a case--Sumrnary refusol_ _by_ _High Court_ _lo_ _direct a reference-Q11estion of law,_ _when_ _can_ _be_ _said to arise from_ _the_ _order_ _of the_ _Tribunal-Indian Income-tax Act,_ _r922_ _(XI of r922),_ _s._ _66(2)._ The appellant encashed high denomination currency notes _d1_ the value of Rs. 87,500 and was called upon by the Income tax Officer to submit a return for the relevant year. The appellant made three statements, discrepant in material particulars, at different stages as to h'tl"w he received the amount. The Income-tax Officer held that the true nature of the receipt had not been disclosed, treated it as income from an undisclosed source and assessed him accordingly. The Assistant Commissioner of Income-tax upheld that order on appeal. On a further appeal, the Appellate Tribunal reviewed the facts, considered the discrepancies in the appellant's case and affirmed the order of assessment. An application for a reference to the High Court having been made under s. 66 of the Indian Income-tax Act, the Tribunal held that no question of law arose !ram its order and dismissed the same. The High Court thereafter summarily dismissed the application made by the appellant under s. 66(2) of the Act. Against that order of summary dismissal special leave to appeal was obtained from this court and the sole question for determination in the appeal was whether the order of the Tribunal on the face of it disclosed any question of law and if the High Court was right in summarily dismissing the application under s. 66(2) of the Act. _Held,_ that no question of law arose from the order of the Tribunal and the appeal must fail. In order to decide whether the principles laid dow~ by this court in _Dhirajlal Girdharilal_ v. _Commissioner of Income-tax,_ _Bombay._ (1954) 26 I.T.R. 736 and _Omar_ _Salay_ _Mohamed_ _Sait_ v. _Commissioner_ _of brcome-tax,_ _Madras,_ (1959) 37 l.T.R. 151, applied to a particular case, it was necessary to read the order of the Tribunal as a whole for determining whether or not it had properly considered the material facts and the evidence, for and against, in coming to its final conclusion and whether any irrelevant consideration or matter of prejudice had vitiated such conclusion. Those decisions do not require that the order of· the Tribunal must be examined sentence by sentence so as to discover a minor lapse here or an incautious opinion there and rest a question of Jaw thereon. ###, ###### 1 S.C.R. SUPREME COURT REPORTS 771 _Dhirajlal Girdharilal_ v. _Commissioner_ _of Income-tax,_ _Bombay,_ _1y60_ (1954) 26 I.T.R. 736 and. _Omar_ _Saley_ _Mohamed_ _Sait_ v. _Commis-_ _sioner_ _of Income'tax,_ _Madras,_ (1959) 37 l.T.R. lSI, explained. · _I/omi_ _jellangfr_ Although a mere rejection of an explanation given by the _Ghcesta_ assessee does not invariably establish the nature of a receipt, v. where the circumstances of the rejection are such as to properly _Tle_ _Commissioner_ .raise the inference that the receipt is an inco1ne 1 the assessing _of_ _Income-tax,_ authorities are entitled to draw that inference. Such an _Bombay_ inference is one of fact and not of law. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 24 of 1958. Appeal by special leave from the judgment and ###### order dated October 4, 1956, of the former Bombay High Court in LT.A. No. 49 of 1956. · _R._ _J._ _Kol,ah,_ _S._ _N._ _Andley,_ _J._ _B. Dadachanji,_ ###### Rame8hwar Nath and P. L. Vohra, for the appellant. K. N. Rajagopal Sastri and D. Gupta, for the res pondent. ###### 1960. September 22. The Judgµient of the Court was delivered by ##### S. K. DAs J.-For the assessment year 1946-47 the appellant Homi Jehangir Gheesta. was assessed to ###### income-tax on a total income of Rs. 87,500 under s. 23(3) of the Indian Income-t~x Act, 1922. The ###### circumstances in which .he was so assessed were the following. The appellant's ca.se was that M. H. Sanjana, maternal grand father of the appellant,· died on or about May 10, 1920, There was litigation between his widow Cursetba.i and Bai Jerbanoo, Sanjana's da.µghter by ###### his first· wife, a.bout the validity of a. will left by Sa.nja.na. Bai Jerba.noo was the appellant's mother. The litigation. was compromised and the appellant's ###### mother got one.third share in the .estate left by Sanjana. the total value of which estate was about Rs. 9,88,000. Bai Jerbanoo died in 1933, leaving her husband Jehangirji (appellant's father), her son Homi #### (appellant) and a. daughter named Aloo. It was stated, ###### though there wa.s no evidence thereof, that Bai J er ba.noo left a.n estate worth about Rs. 2,10,000 when ###### she died. 'il'he appellant wa.s a minor a.t the time of _S._ _!(._ _Das_ _J._ 772 SUPJlE:\IE COURT REPORTS [ 1961) _i96o_ his mother's c\\lath. He had two uncles then, Phirozeshaw and K'afli.husroo, fhirozesha.w was the eldest _Homi_ _f'"""l;,_ member of the family;> On his mother's death the _**<;hecsta**_ _v._ appellant's share . of the estate was Rs. 70,000. _Tiu_ _Comnd•,ionn_ Phirozl'Shaw took charge of it and ma.de investments. _of_ _lncomc.1ax._ He died on DccPmbcr 12, 1945. Kaikhusroo, younger _llo"'b"Y_ brother of .Phirozeshaw and one of the executors of his will, took charge of the estate of Phirozeshaw. _s._ _K._ _Das_ _J._ When he opened a safe belonging to Phirozesha.w he found a packet with the name of the appellant on it. That packet contained high denc>mination currency ###### notes of the value of Rs. 87,500. On January 24, 1946, the appellant tendered those not~s for encashment and made a declaration which was then necessary and in the declaration he said : "Legacy from my mother who died in 1933 when I wa.s minoc :i.nd money whereof was invested from 1 [• ] time to time by my father and late uncle Phirozeshaw who recently died." 'Vhen the appellant reetiived a. notice from the Income ta.x Officer to 8ubmit a return of his income for the ##### relevant year, he submitted a return showing "nil" income. When asked a.bout the high denom;nation notes which he had enc&shed, he said in a letter dated January 7, 1947, that his uncle Phirozesha.w who used to manage his estate during his minority handed over to him and his father the sum of Rs. 87,500 sometime befor11 his (i.e., Phirozeshaw's) death in 1945. This was a. story different from· the one later given, about the opening of the safe by Kaikhusroo after Phirozesha.w's death a.nd the finding of a. packet there in the name of the appellant. The appellant also filed an affidavit before the Income-tax Officer on September 29, 1949, which also contained contradic tory statements. On a. consideration of a.II the material~ before him, tho Income-tax Officer did not accept the case of the appellant but ca.me to the con###### clusion that the true nature of the receipt of Rs. 87,500 wa.s not disclosed. He treated the a.mount a.s appellant's income from some source not disclosed a.nd assessed him accordingly. The appellant preferred au a.ppea.l to the Aasista.nt **1** S.C.R. SUPREME COURT REPORTS 773 Commissioner of Income-tax. At the appellate stage _z96o_ [1 ] 1 the statements of the appellant's father and uncle _**H**_ _omi_ _**j**_ _**ehangiY**_ ###### were taken by the Income-tax Officer, D-II Ward, Ghecsta Bombay, and a further statement of the appellant's v. uncle Kaikhusroo was taken by the appellate autho- _The Commissionor_ ###### rity. That authority came to the same conclusion as of Income-tax. the Income-tax Officer had come to. _Bombay_ Then there was an appeal to the Income-tax Appel- _s._ _K._ _Das]._ late Tribunal, which again reviewed the facts of the _s._ _K._ _Das]._ case. The Tribunal pointed out the following import###### ant discrepancies in the case sought to be made out by the appellant: ###### "(i) Declaration dated 24-1-1946 by the assessee !ays that mother's legacy was invested "by my father and my late uncle Phirozeshaw ". His letter dated ###### 7-1-19!7 says that his uncle (i.e., Phirozeshaw) only managed his estate. The object of this variation is obviously to shield his father from inconvenient examination. The uncle had already departed for his eternal home. ###### (ii) Assessee'ipletter dated 7-1-1947 says that the uncle Phirozeshaw handed over money "to me and my ###### father" before his death. The affidavit dated 29-9-1949 tells another story, viz., the executor .Kaikhusroo handed over money to the assessee after Phirozeshaw's ###### death. In another part of the said affidavit it is said that the said executor. handed over money to asses- see's father. The affidavit assures us that the decla ration regarding high denomination notes was made on the information given him by his father. The assessee-son nowhere refers to any " packet ". Indeed,. the theory of " packet " was pronounced by the Executor Kaikhusroo only when he appeared before the Income-ta~ Officer on 22-2-1952. ###### (iii) In his statement dated 22-2-1952 Mr. Kaik- husroo says that he "found an envelope containing Rs. 87,500 I took charge of this money and handed over the money to Homi." Before the Appellate ·--..., Assistant Commissioner H. Range, the same Mr. Kaikhusroo later on said : " I handed over the packets as they were. I did 99 ###### 774 SUPREME COURT REPORTS [1961] _1_ _960_ not count the notes or verify the contents." Some of the answers given a.s to "receipts" a.nd "inventor.v" _**Hom1**_ _**jeliangir**_ _Ghtest•_ by the executor Kaikhusroo show tha.t he did not ta.ke v. even the rea.sona..blo precautions t.ha.t a.n ordinary _The c,.,,,,i.<Sion"_ person would take, not to t.a.lk of a.n executor." _0_ _1_ _income-tax,_ The Tribunal then expressed its concluRion thus: ###### Bombay "We ha.ve, in these circumstances, no hesitation _s._ _K._ _Das_ _J._ whatever in holding tha.t the a.6~esseo ha.s miserably failed to ox pla.in sa.tisfa.ctorily tho source of the sum ###### of Rs. 87,500. It is properly ta.xed a.s income." It dismissed the a.ppea.l by its Order da.ted Octo ber 7, 1955. The a.ppella.nt then moved the Tribunal to refer certain questions of la.w to the High Court, which ·questions according to the a.ppolla.nt a.rose out of the Tribunal's order. Tho Tribunal held that no question of law a.rose out of its order dated October 7, 1955, a.nd by its order dated Ma.rch 8, 1956, dismissed the application of tho appellant for a. reference under s. 66 of the Income- ta.x Act, 1922. The a.ppella.nt unsuccessfully moved the Bombay High Court by mea.ns of a. petition under s. 66(2). This petition wa.s summarily dismissed by the High Court on October 4, 1956. The appellant then filed a. petition for special lea.ve to a.ppea.l t-0 this Court. By a.n order da.ted December 3, 1956, this Court granted Special Lea.ve to Appeal to this Court from tho order of the Bombay High Court da.ted October 4, 1956, but made no order a.t that stage on tho petition for special leave to appeal from the orders of the Tribunal da.ted October 7, 1955, and Ma.rch 8, 1956. The present a.ppca.l ha.s been filed pursuant to tho special leave granter! by this Court. The short point for consideration is this-wa.s the High Court right in summarily rejecting the petition under s. 66 (2) ? In other words, did the order of the Tribunal da.ted October 7, 1955, on the fa.co of it ra.ise a.ny question of la.w? On beba.lf of the appellant it has been argued that the. principles la.id down by this Court in _Dhirajlal Girdharilal_ v. _Commissioner of Income-tax,_ ###### Bombay(') a.pply, because though the decision of the l,1) (19~) a6 L T. R. _**?tf>·**_ ###### 1 S.C.R. SUPREME COURT REPORTS 775 Tribunal is final on a question of fact, an issue of law _196o_ arises if the Tribunal arrives at its decision by consider_**H**_ _omi ]_ _**ehangir**_ ing material which is irrelevant to the enquiry, or by _Gheesta_ ###### considering material which is partly relevant and v. partly irrelevant, or bases its decision partly on con- The Commissioner ##### jectures, surmises and suspicions. It is contended that 0 ! In,omi-tax, on the face of it the decision of the Tribunal suffers _Bombay_ from all the three defects mentioned above. _s._ _K. Das_ _J._ Learned Counsel for the appellant has made a ###### grievance of th11-t part of the order in which the Appellate Tribunal states: "We were also not told why the deceased uncle, if he took charge of the minor's money, did not hand it over to Bai Aloo when she became major in 1939 or even when she got marri###### ed in 1944 ". It is contended that this was an irrelevant consideration, and Bai Aloo herself made a statement ###### before the Income-tax Officer, D-II Ward, Bombay, on February 22, 1952, in which she indicated the circumstances how she also received a sum of Rs. 85,000 from her uncle Phirozeshaw before the latter's death. She further stated that 'She also submitted a return to ###### the Income-tax Officer but was not subjected to any assessment on the sum received. The argument of learned Counsel for the appellant is that it was not a relevant consideration as to why Phirozeshaw did not hand over the money to Bai Aloo in 1939 or in 1944, a_nd if ~ai Aloo's stat~ments were to be ta.kel\_jnt~ conBlderat10n, they were m favour of the appellant m as ###### much as no assessment was made on Bai Aloo in .respect of the sum she had received. We do not con###### sider that the circumstances referred to by the Tribu nal 'in connection with Bai Aloo's statement were ###### irrelevant. What the Tribunal had to consider was the correctness or otherwise of a. story in which the mother was stated to have left Rs. 2,10,000 out of which the heirs got one third share each. The Tribunal had to consider each aspect of the story in order ###### to judge of its probability and from that point of view it was a relevant consideration as to why Bai. Aloo's money was not pa.id when she became major oi: when ##### she got married. It was also a relevant consideration ###### as to what the father of the .appellant did with hill ###### 776 SUPREME COT:RT REPORTS [1961] _r96o_ share of the money and the Tribunal rightly point~d ###### out that the father took cover under "mixing of _**Homi**_ _.ftha,,gi,_ _Ghecsta_ investments", Theso were relevant considerations for _v._ judging tho probability of the story. The Tribunal ###### The Commi.,soo"" also rightly pointed out that the fact that Bai Aloo _of 1'ico..,,., • .,_ was not assessed did not mako the stcry any more _Bo••bay_ probable. The Tribunal stated in its order that a summons _S. K._ _Das]._ , was issued to the father by the Income-tax Officer to appear before the latter on June 23, 1950. The father failed to comply with the summons. This circumstance, it is argued, should not have been used against ###### the appellant, because the record showed that the summons was sen•ed on the father on June 2~, 1950, for attendance on the next day and the father wrote ###### a letter stating that it was not possible for him to attend on the next day and, therefore, asked for ###### another date. We do not think that this circumstance vitiates the order of the Tribunal which was based on grounds much more substantial than the failure of summons issued against him. The father was actually examined later and his statements were taken into consideration. One point made by the Tribunal was ###### that no explanation was forthcoming as to why the uncle took charge of the share of the appellant and f his sister when tht>ir father was alive and why the father allowed himself to be effaced in the matter of cu~tody and management of the funds belonging to his children. \Ve consider that this circumstance was also a relevant consideration, and if the father was in a position to give an explanation, he should have done so when he made his statement before the Income-tax Officer, D-II Ward, Bombay, on February 8, 1952. ###### The Tribunal states: "We were also told that the assessee was taking his education between 1943 and 1950 and as such he had no opportunity to earn any income. In a place like Bombay and particularly in the family of a businessman, a person may earn even when he learns." These observations of the Tribunal has been very seriously commented on by learned Counsel for the appelfant. Learned Counsel has ###### stated that certificates from the school, college and ## • # • ###### l s.c.R: SUPREME COURT REPORTS 777 university authorities were produced by the appellant _1960_ ###### right upto 1950 which showed that the appellant was . . a student till 1950 and after seeing the certificates the _Hom•_ _Jehancir_ ##### Tribunal should not have said-" We were also told Gheesta etc." According to learned Counsel this showed that The c0 ;;;;,,ission1r ###### the finding of the Tribunal was coloured by prejudice. of Income-ta>, We are unable to agree. Even if it be taken that the _Bombay_ ###### appellant satisfactorily proved that he was a student till 1950, we do not think that it makes any real s. K. Das J. · difference as to the main question at issue, which was ###### whether the appellant received the sum of Rs. 70,000 from the estate of his mother, later increased by investments to Rs. 87,500 in 1945. The Tribunal rightly pointed out that no evidence was given of the value of the estate left by the mother, thcrogh there was some evidence of what the mother received from ###### the estate of her father Sanjana; nor was there any evidence of the investments said to have been made ###### which led to an addition to the original sum of #### Rs. 70,000. It has been argued that it was a mere ###### surmise on the part of the Tribunal to say that in a place like Bombay a person may earn when he learns. ##### Even if the Tribunal is wrong in this respect, we do ###### not think that it is a matter of any consequence. We must read the order of the Tribunal as a whole to determine whether every material fact, for and against the assessee, bas been considered fairly ~nd with the due care; whe~her the evidence pro and con ###### ·bas been considered in reaching the final conclusion ; and whether the conclusion reached by the Tribunal has been coloured by irrelevant cor.siderations or matters of prejudice. Learned Counsel for the appel###### lant ha.s. taken us through . the entire order of tlle Tribunal as also the relevant materials on which it is ###### based. Having examined the order of the Tribunal and those materials, we are unable to agree with learned Counsel for the appellant that the order of the ###### Tribunal is vitiated by any of the defects adverted to in _Dkirajlal Girdkarilal_ v. _Commissioner o/Jncome-_ _tax, Bombay(')_ or _Omar Salay.Mohamed Bait_ v. _Com-_ _missioner of Income-tax, Madras(')._ We must make {t} (1954~26 l.T.R. 736. (2) (1959) 37 l.T.R. ''': ###### 778 SUPREME COURT REPORTS [1961] z96o it clear that we do not think that those decisions require that the order of the Tribunal m'ust be ex&· _**Homi**_ _**j1Jia"gir**_ ###### GA"''" mined sentence by sentence, through & microscope as v. it were, so a.a to discover a. minor lapse here or an Tl• _Commission"_ incautious opinion there to be used a.s & peg ou which ###### of Income-tax, to hang a.n issue of la. w. In view of the arguments Bombay advanced before us it is perhaps necessary to add s. K. Das J. that in considering probabilities properly a.rising from the facts alleged or proved, the Tribunal does not indulge in conjectures, surmise9 or Ruspicions. ##### It ha.a also been argued before us that even ###### if the explanation of the appellant a.s to the sum of Rs. 87,500 is not accepted, the Department did not ###### prove by any direct evidence that the a.mount was income in the hands of the appellant. We do not think that in a case like the one before us the Depa.rt. ment was required to prove by direct evidence that ###### the sum of Rs. 87,500 was income in the hands of the appellant. Indeed, we agree that it is not in all ca.sea ###### that by mere rejection of the explanation of the a.sses see, the character of a particular receipt a.s income ###### can be said to have been established; but where the circumstances of the rejection a.re such that the only proper inference is that the receipt must be treated a.s income in the hands of the a.ssessee, there is no reason why the assessing authorities should not draw such ###### a.n inference. Such an inference is an inference of fa.ct and not of law. ###### For the reasons given above we a.re of the view that no question of law a.rose from the order of the Tribunal and we see no grounds for interference with ###### the judgment and order of the Bombay High Court, dated October 4, 1956. The appeal accordingly fails ###### and is dismissed with costs. _.Appeal dismi&&ed._