1940 (12) TMI 22 - DSC - Income Tax

Summary

Issues Involved:
1. Existence of Head Office Accounts
2. Applicability of Section 23(4) vs. Section 23(3) of the Indian Income-tax Act, 1922
3. Validity of the Assistant Commissioner's findings based on circumstantial evidence
4. Burden of Proof and Sufficiency of Evidence

Detailed Analysis:

1. Existence of Head Office Accounts:
The primary issue referred to the court was whether there were any materials upon which the Assistant Commissioner of Income-tax could find that a Head Office set of accounts was in existence. The assessee, a firm consisting of five brothers, denied the existence of such accounts and claimed that the deposits shown in the personal account came from a private chest with no maintained accounts. The Assistant Commissioner, however, held that circumstantial evidence indicated the existence of these accounts, thus justifying the non-compliance with the notice issued under Section 22(4).

2. Applicability of Section 23(4) vs. Section 23(3) of the Indian Income-tax Act, 1922:
The Income-tax Officer made the assessment under Section 23(4) due to the non-production of the head office accounts and other discrepancies, such as the omission of certain transactions and the nonproduction of a stock book. The assessee argued that the assessment should have been made under Section 23(3), which would have allowed for a regular appeal. However, the court noted that this argument was not relevant to the present reference, which only concerned the proceedings under Section 27.

3. Validity of the Assistant Commissioner's Findings Based on Circumstantial Evidence:
The court examined whether the Assistant Commissioner's reliance on circumstantial evidence was valid. The Assistant Commissioner had dismissed the appeal based on the circumstantial evidence that the head office accounts existed. The court referred to several precedents, including the case of Lachman Prasad Babu Ram, which allowed for the presumption of the existence of accounts based on circumstantial evidence. The court concluded that there were indeed materials, primarily circumstantial, upon which the Assistant Commissioner could find that a head office set of accounts was in existence.

4. Burden of Proof and Sufficiency of Evidence:
The court discussed the burden of proof, emphasizing that the onus was on the assessee to establish that the accounts asked for were not maintained. The court noted that the evidence provided by the assessee, including the testimony of Benarsi Lal, was insufficient. The court highlighted that Kanhaiya Lal, who had special knowledge of the accounts, was not produced as a witness. The court also referenced several cases, including Abdul Bari Chowdhury and Commissioner of Income-tax, U.P., which supported the view that the sufficiency of evidence is a question of fact and not open to question in a reference on a point of law. The court concluded that there were materials upon which the Assistant Commissioner could find that a head office set of accounts was in existence.

Conclusion:
The court held that there were materials upon which the Assistant Commissioner could find that a head office set of accounts was in existence. The reference was answered accordingly, and the assessee was ordered to bear the costs of the Income-tax Department, with the fee for the learned Counsel fixed at Rs. 250.