1972 (9) TMI 9 - SC - Income Tax

Fixed deposits - fact that the holder of the deposit could not gift satisfactory explanation regarding the sales would not be decisive. The material on record did not support the claim of the department that the amount belonged to the firm - No case in our opinion has been made for interfering with the judgment of the High Court. The appeals consequently fail and are dismissed

Issues Involved:
1. Whether there was relevant material before the Income-tax Appellate Tribunal to hold that the sum of Rs. 5,00,000 in fixed deposit in the name of Biswanath Gupta (Bhuwalka) was the concealed income of the respondent-firm for the assessment year 1946-47.

Detailed Analysis:

Issue 1: Material Before the Tribunal
The primary issue was whether the Tribunal had relevant material to conclude that the fixed deposit of Rs. 5,00,000 in Biswanath Gupta's name was concealed income of the respondent-firm. The Tribunal based its decision on three main circumstances:
1. False Explanation by Biswanath: The Tribunal noted that Biswanath's explanation regarding the source of Rs. 5,00,000 was found to be incorrect.
2. Transfer of Amounts: The transfer of Rs. 5,00,000 each from Calcutta to Bombay and then to Jamnagar, resulting in fixed deposit receipts in the names of the sons of the partners of the respondent-firm.
3. Use of Receipts as Collateral: The fixed deposit receipts were used as collateral security for an overdraft facility of Rs. 10,00,000 to the respondent-firm.

The High Court found this material insufficient to conclude that the sum belonged to the respondent-firm, stating that the Tribunal considered irrelevant material. The Supreme Court agreed with the High Court's reasoning, emphasizing that the falsity of Biswanath's explanation did not necessarily imply that the amount belonged to the respondent-firm. The Court noted that the burden of proof was on the department to show that the apparent ownership was not real, which they failed to do.

Analysis of the High Court's Judgment:
1. False Explanation: The High Court reasoned that the false explanation by Biswanath did not automatically mean the money belonged to the respondent-firm. The Court emphasized that a false explanation by the individual in whose name the money is deposited does not directly imply ownership by another party.
2. Transfer of Amounts: The High Court found that the mere transfer of amounts and the use of fixed deposit receipts as collateral did not justify the conclusion that the amount belonged to the respondent-firm. The Court highlighted that offering security by a third person does not equate to ownership by the principal debtor.
3. Use of Receipts as Collateral: The High Court noted that the security offered by Biswanath for the overdraft facility was a common commercial practice and did not indicate ownership by the respondent-firm. The absence of consideration for the security was deemed a neutral factor, especially given the familial relationship between Biswanath and the firm's partners.

Additional Points:
- The High Court's decision was supported by the fact that the amount in the fixed deposit was ultimately received by Biswanath, not the respondent-firm.
- The onus was on the department to prove that the fixed deposit belonged to the respondent-firm, which they failed to do by not tracing the source and destination of the amount effectively.
- The Supreme Court reiterated that findings of fact by the Tribunal can only be disturbed if there was no evidence to support them or if they were perverse.

Conclusion:
The Supreme Court upheld the High Court's judgment, concluding that there was no sufficient material before the Tribunal to hold that the fixed deposit of Rs. 5,00,000 in the name of Biswanath was the concealed income of the respondent-firm. The appeals were dismissed with costs, affirming the High Court's decision.

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