1971 (2) TMI 21 - HC - Income Tax

Whether there was any material evidence to justify the findings of the Tribunal that the amount remitted by an employee of the Madras branch to an employee of the Bombay branch was the income of the assessee-firm, Kishinchand Chellaram, from undisclosed sources - since no explanation regarding the remittance was given, Question is answered in the affirmative

Summary

Issues Involved:
1. Whether there was any material evidence to justify the findings of the Tribunal that the amount remitted by an employee of the Madras branch to an employee of the Bombay branch was the income of the firm, Kishinchand Chellaram, from undisclosed sources?

Issue-wise Detailed Analysis:

1. Material Evidence Justifying Tribunal's Findings:
The primary issue in this case was whether the amount of Rs. 1,07,350 remitted by telegraphic transfer from Madras to Bombay on 15th October 1946, received on 16th October 1946, was the income of the firm, Kishinchand Chellaram, from undisclosed sources. The Income-tax Officer initiated enquiries based on information received in 1955, and the Punjab National Bank confirmed the remittance from Madras by Messrs. Kishinchand Chellaram. The firm, however, could not trace any such entries in their books and denied remitting the amount.

2. Findings of the Income-tax Officer:
The Income-tax Officer found that the telegraphic transfer was encashed by Nathirmal, an employee of the assessee, who was identified by a bank officer. Nathirmal was also known as N. V. Bani, an employee of the assessee. The Officer concluded that the amount represented the income of the assessee.

3. Appeal to the Appellate Assistant Commissioner:
The Appellate Assistant Commissioner upheld the Income-tax Officer's findings, noting that the remittance was made by an employee to another employee of the assessee, and the assessee failed to explain and prove the nature and source of the remittance. The Commissioner remarked that the employees were "stooges in the appellant's hands," a statement contested by the assessee.

4. Tribunal's Confirmation:
The Tribunal confirmed the orders of the tax authorities, relying on four key circumstances:
- The remittance of Rs. 1,07,350 from Madras was received by an employee of the assessee in Bombay.
- An employee at Madras bore the same name as the person who remitted the amount.
- The assessee could not show that the respective employees were capable of remitting such a large sum on their own.
- The assessee did not examine the bank officers to disprove the bank's statement.

5. Assessee's Arguments:
The assessee argued that there was no evidence to prove that the amount belonged to the firm, suggesting it could be related to private dealings of the employees or third parties. They contended that they were unaware of the remitter and payee's names until later stages, making it difficult to counter the evidence. They also pointed out discrepancies in the bank manager's letters and the original telegraphic transfer application.

6. Department's Arguments:
The department argued that the findings were based on relevant material and evidence, and the assessee had been given adequate opportunity to counter the evidence. They emphasized that the Tribunal's findings were factual and not subject to interference.

7. Court's Conclusion:
The court found that the letters from the Punjab National Bank manager were relevant evidence indicating that the amount remitted belonged to Messrs. Kishinchand Chellaram. The court noted that the remitter and payee were employees of the assessee, the addresses given were of the assessee's business premises, and the amount was substantial, likely beyond the employees' capacity to remit. The court dismissed the argument that the remittance could be related to the employees' private dealings, given the lack of evidence supporting such a claim.

8. Adequate Opportunity and Natural Justice:
The court addressed the contention that the assessee was not given an adequate opportunity to counter the evidence, noting that the assessee had not raised this issue before the Tribunal. The court found that the Appellate Assistant Commissioner had provided the assessee with copies of the relevant documents, giving them an opportunity to respond.

9. Acceptance of Account Books:
The court rejected the argument that the acceptance of the assessee's account books in the original assessment precluded the reopening of the case. The court emphasized that the reopening was based on the discovery of undisclosed income, and the acceptance of account books in the original assessment did not negate the possibility of undisclosed income.

10. Final Decision:
The court concluded that the Tribunal's findings were based on relevant material and evidence, and there was no failure to observe the rules of natural justice. The court answered the question in the affirmative, holding that the amount remitted represented the assessee's income from undisclosed sources. The assessee was ordered to pay the costs of the Commissioner, with no order as to costs for the notice of motion dated 15th November 1963.