1980 (9) TMI 3 - SC - Income Tax

Whether there was any material evidence to justify the finding that a sum of Rs. 1, 07, 350 was remitted by the assessee from Madras to Bombay and that it represented the undisclosed income of the assessee - set aside the judgment of the High Court and answer the question referred by the Tribunal in favour of the assessee and against the revenue

Summary

Issues Involved:
1. Whether there was any material evidence to justify the finding that a sum of Rs. 1,07,350 was remitted by the assessee from Madras to Bombay.
2. Whether the amount represented the undisclosed income of the assessee.

Issue-wise Detailed Analysis:

1. Material Evidence for Remittance:
The primary question was whether there was any material evidence to support the finding that Rs. 1,07,350 was remitted by the assessee from Madras to Bombay. The Income Tax Officer (ITO) relied on a letter dated 18th February 1955 from the manager of Punjab National Bank Ltd., which stated that the amount was remitted by M/s. Kishinchand Chellaram from Madras and received in Bombay. However, this letter was not disclosed to the assessee at any stage of the proceedings. The Tribunal and the High Court also relied on this letter without providing the assessee an opportunity to cross-examine the bank manager or to contest the statements made in the letter. The Supreme Court noted that the letter was based on hearsay and lacked personal knowledge or supporting documents. Moreover, the primary evidence, i.e., the telegraphic transfer application, was signed by Tilok Chand in his own name, not on behalf of the assessee. This indicated that the remittance was made by Tilok Chand personally and not by the assessee firm.

2. Undisclosed Income:
The Tribunal concluded that the amount represented the undisclosed income of the assessee based on the letters from the bank manager and the fact that the remittance was not recorded in the assessee's books. However, the Supreme Court found that the burden of proof was on the revenue to establish that the amount belonged to the assessee. The revenue failed to rule out the possibility that Tilok Chand had his own resources to remit the amount. Additionally, neither Tilok Chand nor Nathirmal was in the service of the assessee at the time of reassessment, making it unreasonable to expect the assessee to produce them as witnesses. The Supreme Court held that there was no material evidence to support the finding that the amount was the concealed income of the assessee.

Conclusion:
The Supreme Court allowed the appeal, set aside the judgment of the High Court, and answered the question in favor of the assessee, stating that there was no material evidence to justify the finding that the amount of Rs. 1,07,350 was remitted by the assessee from Madras and that it represented the concealed income of the assessee. The revenue was ordered to pay the costs of the assessee throughout.