1959 (3) TMI 2 - SC - Income Tax

Whether the circumstances reasonably supported the Income-tax Officer s presumption that the appellant had converted his secret profits into jewellery gold and sovereigns with a view to camouflage his transactions and brought such profits in his accounts by re-sale of such jewellery etc. and remittances through bank drafts? Whether in the circumstances of the case Yamnabai could have in her possession jewellery etc. to the tune of Rs. 1, 60, 000. Held that - The whole of the inference drawn by the Appellate Tribunal in this behalf was allegedly based on no material whatever and was submitted to be at best a suspicion or a conjecture which warped the reasoning of the Appellate Tribunal. The Income-tax Appellate Tribunal is a fact finding Tribunal and if it arrives at its own conclusions of fact after due consideration of the evidence before it this court will not interfere. The conclusions reached by the Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and if there are any circumstances which required to be explained by the assessee the assessee should be given an opportunity of doing so. On no account whatever should the Tribunal base its findings on suspicions conjectures or surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions conjectures or surmises and if it does anything of the sort its findings even though on questions of fact will be liable to be set aside by this court. Set aside the order of the Appellate Tribunal and remand the matter back to the Income-tax Appellate Tribunal Madras A Bench to reconsider the same in accordance with law in the light of the observations made above. Appeal allowed. Case remanded.

Issues Involved:
1. Legitimacy of the cash credits in the appellant's books.
2. Interpretation of affidavits provided by Yamnabai.
3. Evaluation of the appellant's business profits and capital.
4. Procedural propriety of the Income-tax Appellate Tribunal's decision.
5. Consideration of evidence and subsequent inquiries.

Issue-Wise Detailed Analysis:

1. Legitimacy of the Cash Credits in the Appellant's Books:
The appellant, a cloth merchant, claimed a reduction in his total income by Rs. 1,59,240, which was initially accepted by the Appellate Assistant Commissioner but later reversed by the Income-tax Appellate Tribunal. The Tribunal questioned the legitimacy of two cash credits in the appellant's books, amounting to Rs. 1,05,000 and Rs. 53,199-12-6, purportedly representing the sale proceeds of jewelry and gold belonging to Yamnabai, the appellant's wife's grandmother. The Tribunal doubted the genuineness of these transactions, suspecting them to be the appellant's undisclosed business profits.

2. Interpretation of Affidavits Provided by Yamnabai:
The Income-tax Officer and the Tribunal scrutinized two affidavits by Yamnabai. The first affidavit from 1941 stated that she had given all her jewels to the appellant's wife at the time of her marriage in 1933. The second affidavit in 1949 claimed she still possessed significant jewelry and gold, which were sold in 1948. The Tribunal interpreted the 1941 affidavit to mean Yamnabai had no remaining jewelry by 1948, contradicting her 1949 affidavit. The Appellate Assistant Commissioner, however, interpreted that the jewels referred to in the 1941 affidavit were different from those mentioned in 1949.

3. Evaluation of the Appellant's Business Profits and Capital:
The Tribunal noted the appellant's substantial business operations, with a turnover of Rs. 13.03 lakhs and a gross profit of 6%, but questioned the low trading capital of Rs. 40,000. The Tribunal speculated that the appellant might have earned undisclosed profits, which were not reflected in his accounts. The Appellate Assistant Commissioner, however, found no defects in the appellant's accounts and considered his past financial history to be good, suggesting the Income-tax Officer's suspicion lacked material support.

4. Procedural Propriety of the Income-tax Appellate Tribunal's Decision:
The Tribunal criticized the Appellate Assistant Commissioner for considering evidence gathered subsequently without giving the Department an opportunity to lead further evidence. The Tribunal suggested that the case should have been remanded for a more thorough investigation. The Supreme Court, however, found that the Tribunal improperly rejected relevant evidence and based its findings on conjectures and suspicions, which warranted a remand for reconsideration.

5. Consideration of Evidence and Subsequent Inquiries:
The appellant provided affidavits from several individuals attesting to Yamnabai's possession of jewelry and gold. The Tribunal dismissed these affidavits, citing the lack of cross-examination. However, the appellant had suggested alternative methods for verifying these affidavits, which were not pursued by the Income-tax authorities. Additionally, subsequent inquiries by the Income-tax Officer, Junagad, supported the appellant's claims but were disregarded by the Tribunal.

Conclusion:
The Supreme Court set aside the Tribunal's order, remanding the matter back for reconsideration. The Tribunal was instructed to consider all available evidence, including subsequent inquiries and any further evidence the parties might present. The Tribunal's findings should not be based on suspicions or improper rejection of evidence. Costs of the appeal were to abide by the Tribunal's final decision.

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