1964 (3) TMI 14 - SC - Income Tax

Whether in the facts and circumstances of this case the inference drawn by the Tribunal that the fixed deposit of ₹ 5 lakhs in the names of S. P. Agarwalla did not represent the concealed income of the assessee firm was justified in law? Held that - We are not in this case called upon to consider whether any question of law arises from the finding of the Tribunal in respect of the two deposit receipts in the names of Raghunath Prasad Agarwalla and B. N. Gupta, but it would be impossible to hold that the finding of the Tribunal in respect of the deposit made on October 11, 1944, in the name of Sheo Prasad Agarwalla was so perverse that no reason able body of persons properly instructed in the law could have reached it. The circumstances relied upon by Mr. Sastri do raise suspicion, but suspicion cannot take the place of evidence. Appeal dismissed.

Summary

Issues:
Assessment of firm under Indian Income-tax Act, 1922 for the account year 2001-2002, reassessment under section 34 of the Act, inclusion of certain fixed deposit amounts as "secreted profits," appeal by the assessee against the addition of such amounts, differing views of the Tribunal on the nature of the deposits, application by the Commissioner of Income-tax under section 66(1) for reference to High Court, rejection of the application by the Tribunal and High Court, appeal by the Commissioner to the Supreme Court challenging the Tribunal's decision.

Analysis:
The Supreme Court judgment involved a case where a firm was assessed under the Indian Income-tax Act, 1922 for the account year 2001-2002 and later reassessed under section 34 of the Act. The Income-tax Officer added certain fixed deposit amounts as "secreted profits" of the firm, leading to an appeal by the assessee. The Appellate Assistant Commissioner modified the order, adding a significant amount as "secreted profits." The Tribunal, however, had differing views on the deposits made in the names of the partners' sons, ultimately excluding one deposit from the total assessable income based on lack of evidence linking it to the firm's income.

The Commissioner of Income-tax sought a reference to the High Court under section 66(1) of the Act, which was rejected by the Tribunal and the High Court. The Commissioner appealed to the Supreme Court, arguing that the Tribunal's decision was based on a question of law. The Court outlined the principles guiding references under section 66, emphasizing that findings of fact by the Tribunal are final unless unsupported by evidence or perverse. The Court rejected the contention that the deposit in question represented the firm's "secreted profits," highlighting the lack of direct evidence linking the firm to that specific deposit.

The Court held that the Tribunal's conclusion was not perverse, as there was some evidence supporting it. The Court emphasized that suspicion alone cannot replace concrete evidence in tax matters. The judgment affirmed the Tribunal's decision to exclude the specific deposit from the firm's assessable income, dismissing the Commissioner's appeal and upholding the costs against the Commissioner.

In conclusion, the Supreme Court's judgment provided a detailed analysis of the case, focusing on the nature of the deposits, the Tribunal's findings, and the legal principles governing tax assessments and references. The Court's decision underscored the importance of evidence and the limitations of suspicion in establishing tax liabilities, ultimately upholding the Tribunal's decision in this matter.