1977 (3) TMI 3 - SC - Income Tax

Question Of Fact - question of explaining the sources for the credits in assessee s books is one of fact - High Court did not take into account relevant facts - High Court s order were reversed - Assessee s appeal is allowed

Summary

Issues Involved:
1. Source and nature of the capital introduced by the assessee.
2. Determination of whether Rs. 2,33,414 out of the capital of Rs. 3,33,414 represented undisclosed income.
3. The validity of the Tribunal's findings and the High Court's affirmation of those findings.

Detailed Analysis:

1. Source and Nature of the Capital Introduced by the Assessee:
The primary issue was whether the capital of Rs. 3,33,414 introduced by the assessee into its business on 30th March 1948 was satisfactorily explained. The assessee claimed that this capital, consisting of gold ornaments, gold rawa, stones, and cash, was brought from Lahore when Roshan Lal migrated to India in June 1947. The Income-tax Officer, however, did not accept this explanation and treated Rs. 3,13,414 as income from undisclosed sources, allowing only Rs. 20,000 as satisfactorily explained.

2. Determination of Whether Rs. 2,33,414 Represented Undisclosed Income:
The Appellate Assistant Commissioner allowed a further sum of Rs. 80,000, reducing the undisclosed income to Rs. 2,33,414. The Tribunal, however, upheld the Income-tax Officer's view, concluding that the assessee could not have brought assets worth more than Rs. 1,00,000 from Lahore. The Tribunal's reasoning included:
- The weight of the gold and jewellery could not exceed Rs. 66,000.
- The assessee did not declare the assets brought from Pakistan despite a Press Note issued by the Government of India in January 1952.
- The assessee had not filed any income-tax returns in Lahore, suggesting no assessable income.
- The affidavits provided by the assessee were vague and lacked evidentiary value.

3. Validity of the Tribunal's Findings and the High Court's Affirmation:
The High Court affirmed the Tribunal's findings, concluding there was material for the Tribunal to hold that Rs. 2,33,414 represented undisclosed income. However, the Supreme Court found that:
- The burden of proving the source of the capital was on the assessee, but the assessee's explanation was not satisfactorily disproven by the revenue.
- The Tribunal's reliance on Roshan Lal's answers during the hearing was irregular and not in accordance with the prescribed procedure.
- The non-declaration of assets despite the Press Note could not be used to infer that the assessee did not bring the assets from Lahore.
- The improbability of earning Rs. 2,33,414 within a few months in post-partition India was not considered by the Tribunal.

The Supreme Court concluded that the Tribunal acted without material or reached an unreasonable finding. Therefore, the appeal was allowed, the High Court's order was set aside, and the question referred by the Tribunal was answered in the negative. The Commissioner was ordered to pay the costs of the appeal to the assessee.

Conclusion:
The Supreme Court held that there was no material basis for the Tribunal's conclusion that Rs. 2,33,414 out of the capital of Rs. 3,33,414 represented undisclosed income. The appeal was allowed, and the High Court's order was set aside.