1967 (11) TMI 8 - SC - Income Tax

Tribunal omitted to consider the facts stated for the first time in petition for reference u/s 66(2)- Tribunal was right in law by basing their decision on a part of the evidence ignoring the statement made in petition for reference - High Court was incompetent to direct the Tribunal to state the case on the question which was directed to be referred and dealt with by the High Court - revenue s appeal is allowed and the order passed by the High Court is set aside

Issues Involved:
1. Reassessment of income for the assessment year 1945-46.
2. Credibility of the declaration made by Anusuya Devi regarding high denomination notes.
3. Tribunal's rejection of evidence and affidavits.
4. High Court's directive to the Tribunal to state a case.
5. The Tribunal's and High Court's handling of the evidence and statements.
6. The question of whether Rs. 5,84,000 was taxable in the assessment year 1945-46.

Issue-wise Detailed Analysis:

1. Reassessment of Income for the Assessment Year 1945-46:
Amritlal died on October 18, 1944, and his estate was assessed to tax on a total income of Rs. 22,160 for the assessment year 1945-46. Anusuya Devi, his widow, encashed high denomination notes worth Rs. 5,84,000 in January 1946, declaring that the amount was given to her by her deceased husband for the benefit of herself and her eight minor sons. The Income-tax Officer disbelieved this explanation and brought the amount to tax as income from an undisclosed source for the account year 1944-45. The Appellate Assistant Commissioner upheld this decision.

2. Credibility of the Declaration Made by Anusuya Devi:
Anusuya Devi filed an affidavit stating that her husband had given her cash presents over the years, amounting to Rs. 5,84,000, which she claimed as her stridhan property. The Tribunal admitted her affidavit but rejected another affidavit from her son, Gunvantary, as it introduced new facts not previously disclosed. The Tribunal found discrepancies in her statements and doubted the plausibility of all gifts being in high denomination notes, thus upholding the tax assessment on Rs. 5,84,000 as income from an undisclosed source.

3. Tribunal's Rejection of Evidence and Affidavits:
The Tribunal declined to accept the case presented by Anusuya Devi, noting discrepancies in her statements and the improbability of all gifts being in thousand-rupee notes. The Tribunal also observed that the statement about receiving 494 high denomination notes from a bank was made for the first time in a petition under section 66(2) and was not part of the original evidence before the Income-tax Officer or the Appellate Assistant Commissioner.

4. High Court's Directive to the Tribunal to State a Case:
The High Court directed the Tribunal to state a case on whether it erred in law by ignoring the statement about the withdrawal of Rs. 4,94,000 from a bank. The Tribunal noted that this statement was not presented during the appeal and was materially different from earlier statements. The High Court, bound by precedent, felt compelled to address the question despite doubts about its relevance.

5. The Tribunal's and High Court's Handling of the Evidence and Statements:
The Supreme Court found that the High Court's order could not be sustained. The statement about receiving 494 notes from a bank was not before the Tribunal, and the Tribunal's decision was based on the evidence available. The High Court was not competent to direct the Tribunal to state a case on an issue not arising from the Tribunal's order. The Supreme Court emphasized that the High Court should only answer questions directly related to the dispute and arising out of the Tribunal's order.

6. The Question of Whether Rs. 5,84,000 Was Taxable in the Assessment Year 1945-46:
The Supreme Court noted that the question of whether Rs. 5,84,000 was taxable in the assessment year 1945-46 was considered by the Income-tax Officer and the Appellate Assistant Commissioner. Both authorities found the explanation by Anusuya Devi to be an afterthought and rejected it. The Tribunal also concluded that the amount must be considered as income due to the lack of proof of its source. The Supreme Court held that the High Court could not address new questions not referred by the Tribunal and could not reframe questions to reopen closed inquiries.

Conclusion:
The Supreme Court allowed the appeal, setting aside the High Court's order. The answer to the referred question was in the negative. The Supreme Court expressed concern over the missing records in the income-tax department, highlighting gross negligence. No order as to costs was made for the High Court and Supreme Court proceedings.

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