1960 (10) TMI 2 - SC - Income Tax

Whether there was any material before the Tribunal for the finding that the wages had been inflated? Held that - If the income-tax authorities chose not to accept these explanations as correct that does not mean that the finding as to inflation of wages at which they arrived was a finding based on no material. The materials were there ; what happened was that the income-tax authorities did not accept as correct the explanations offered by the assessee-company. We do not think that the non-acceptance of the explanations given by the assessee-company converts the question of the inflation of wages which is essentially a question of fact into a question of law. The High Court was therefore right in its answer to the first question. The Tribunal accepted some of the explanations as good explanations ; yet the Tribunal found that the defects in the keeping of acquittance rolls or the wages record indicated an inflation of wages and held that the Income-tax Officer was right in adding back 50, 000 in respect thereof. This finding of the Tribunal can have only one meaning namely that there was an inflation of wages. Therefore we are of opinion that it is idle on the part of the assessee-company to contend that no opportunity was given to it to explain the defects in the acquittance rolls.. Appeal dismissed.

Summary

Issues:
Assessment of income-tax and business profits tax based on inflated wages and salaries.

Analysis:
The case involved the assessment of income-tax and business profits tax for the year 1949-50 on an assessee-company, where the Income-tax Officer added back Rs. 50,000 due to suspected inflation of expenses under "wages and salaries." The company's explanation of the increase being due to dearness allowance and bonus was not accepted, leading to further investigations. The Appellate Assistant Commissioner and the Tribunal found evidence of inflated wages, with the Tribunal concluding that the original addition of Rs. 50,000 was sufficient. The company then sought a reference to the High Court, which upheld the findings of inflation. The company appealed to the Supreme Court, arguing lack of material for the inflation finding and denial of opportunity to explain defects in acquittance rolls.

The Supreme Court clarified that the scope of the appeal was not to review the assessments but to determine if there was sufficient material for the inflation finding. The Court agreed with the High Court that there was substantial evidence supporting the inflation of wages. The company's explanations for the wage increase were considered, but the failure to provide a comparative statement and unusual acquittance roll acknowledgments raised suspicions. The Court emphasized that the non-acceptance of explanations did not invalidate the inflation finding, as it was based on available evidence. Regarding the alleged denial of opportunity under section 23(3) of the Income-tax Act, the Court noted that the company had opportunities to present evidence, and the authorities had duly considered the explanations provided. The Tribunal's conclusion of wage inflation based on the evidence was upheld, leading to the dismissal of the appeal.

In conclusion, the Supreme Court affirmed the High Court's decision, stating that there was substantial material supporting the inflation of wages, and the company had adequate opportunities to address the issues raised. The appeal was dismissed, and costs were awarded to the respondent.