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TMI Blog1944 (2) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 53,120? (4) Is there material to justify the finding that the beneficial interest in the Fazilka property passed to the assessee so as to justify the Income-tax authorities in including the value of this property, in the assessable income of the creditor? Facts of the case.-The assessee is a Hindu undivided family getting income from house rent, interest on securities, dividends and business in money-lending, gold, silver, furniture, etc. For the year 1932-33 he filed a return of income on the 10th of October, 1932, showing a gross receipt of ₹ 29,149-13-6 from all sources and claiming a deduction of ₹ 17,332-14-6 on account of various expenses. The Income-tax Officer then summoned the accounts under the provisions of Sections 23(2) and 22(4) and examined them. In the course of this examination he noticed that the ledger account of Messrs. Dittu Mall Narasingh Dass, to whom the assessee had lent a large sum in the year 1921, was still kept open though there was information on record before him to the effect that this loan had been realized in the accounting year by the assessee's purchasing some of the debtor's properties. When asked about this, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be examined before the assessee. The Income-tax Officer thereupon initiated proceedings under Section 34 by his order dated 18th March 1934. In response to this the assessee filed a return of income on the 18th April, 1934, practically repeating the entries made by him in his original return dated 10th October, 1932, referred to above. He however made a foot-note in it to the effect that the decree against Messrs. Dittoo Ram Narsingh Dass was settled finally during the previous year but as some expenses against the same are to be still adjusted the amount has not been shown in the return . The Income-tax Officer then summoned the assessee personally and put to him orally the information he had received. He followed this up by a written letter dated 27th March, 1935, addressed to the assessee, in which he specifically put the points on which he required his explanation in the light of the information before him. The assessee denied the truth of the allegation and contended that the terms of the written document were true and that he had no concern whatever with the purchase of the property and ginning factory at Fazilka by his relation, Lala Murari Lal, vide his statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Costs awarded by Court ... 3,828 Total ... 3,00,651 According to the assessee some mediators intervened at that stage and settled the debt for ₹ 2,00,000 for which, as stated previously, he alleged that he took certain lands valued at ₹ 2,25,000 and that he therefore paid in cash the balance of ₹ 25,000 to square the account. On the other hand, the information before the Income-tax Officer was that in addition to the lands referred to above the assessee was given the ginning factory and property at Fazilka and that with a view to avoiding proper income-tax and stamp duty, etc., he arranged that there should be two separate deeds, one in the name of the assessee and the other benami in the name of his relation, L. Murari Lal, and that the sums of ₹ 25,000 and ₹ 20,000 did not actually reach the debtor. As the assessee flatly denied this version, the Income-tax Officer summoned the debtor, R.S. Madan Gopal, and examined him on oath on 23rd March, 1933. His statement is printed as Appendix 'B'. He examined his son, L. Jas Raj, on oath on 16th April, 193 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under valuation and that its value would be at least ₹ 53,000. He accepted the valuation of the agricultural land at Khippanwali and Odanwali at ₹ 2,00,000. On a consideration of all the facts he revised the assessment by means of his order dated 16th March, 1936, printed as Appendix E to this reference, which resulted in the levying of an extra tax of ₹ 16,737-8-0. The assessee's appeal to the Assistant Commissioner was dismissed for the reasons given in his order dated 19th October, 1938 (printed as Appendix 'F '). He thereupon put in an application under Section 66 (2) to my predecessor which he rejected for the reasons given in his order dated 14th November, 1939 (printed as Appendix 'G'). The assessee then moved the High Court under the provisions of sub-section (3) of Section 66, in response to which I have been directed to refer the questions of law mentioned in the first paragraph of this reference. Opinion of the Commissioner.--Question No. 1--The statement of the informer was used by the Income-tax Officer only as information on which to initiate proceedings under Section 34 ; he did not treat it as in any way conclusive agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be in the negative. Question No. 2--This is connected with the first question. The materials which were before the Income-tax Officer have been referred to in the previous paragraph. So far as the sum of ₹ 25,000, alleged to have been paid by the assessee in respect of lands in Khippanwali and Odanwali villages is concerned, it is a case of either believing the assessee and his accounts, or believing the debtor and his accounts. The Income-tax Officer believed the latter after personally examining the parties on oath and scrutinizing the accounts. So far as the sum of ₹ 20,000 alleged to have been paid by L. Murari Lal to the debtor in respect of the property and ginning factory at Fazilka is concerned, the Income-tax Officer drew an adverse inference from the conduct of L. Murari Lal and from the fact that there was no entry in respect of the receipt of this amount in.the debtor's accounts. The question of sufficiency of material is, I respectfully submit, a matter of opinion. It is certainly not a case of no material. I invite your Lordships' attention to the remarks of Scrutton, L.J., in Currie v. Commissioners of Inland Revenue** where it was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ohammad, J., at page 485 in 1937 I.T.R. 464 (Ganga Ram Balmokand v. Commissioner of Income-tax, Punjab) the Income-tax Officer is not a party to the case in the sense in which an ordinary party to a civil litigation is, and he cannot be expected to be in possession of such evidence as would be required from an ordinary litigant to refute the case of his adversary . The Act does not impose any burden upon the Income-tax authorities to prove by positive evidence the correctness of the assessment.*** The decision in the case of Nathu Ram v. Commissioner of Income-tax, Punjab# is also authority for the proposition that circumstantial evidence is sufficient in certain cases to support the conclusion arrived at by the Income-tax Officer. In Kanhaiya Lal Umrao Singh v. Commissioner of Income-tax## the learned Judges of the Allahabad High Court have held that circumstantial evidence or general probabilities are good evidence in income-tax matters. The assessee apparently does not contest the valuation of the machinery at ₹ 15,600. Some time later, one of the houses has been sold for ₹ 4,500 to a third party. If it is contended that ₹ 20,000 was a fair price for the who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rai Sahib Madan Gopal was incorporated in a registered document dated the 6th January 1932. By this date the debt due to the creditor-assessee amounted in all to a sum of ₹ 3,00,651. The assessee's version of this settlement was as follows. The debt was settled for ₹ 2,00,000, in payment of which some lands belonging to the debtor at Piplanwali and Odianwali valued at ₹ 2,25,000 (which were already under attachment) were transferred to the assessee as decreeholder. The excess amount of ₹ 25,000 was adjusted as follows : ₹ 4,000 was paid by the assessee-creditor as stamp duty on the registered document, while ₹ 21,000 was paid in cash to the judgment-debtor at the time of registration.. On the same date and at the same time another transaction occurred which according to the assessee was no concern of his. Certain property of the same debtor at Fazilka, consisting of a factory and a house, which had also been attached under the decree, was released and was sold by the debtor to Rai Sahib Murari Lai, a close relation of the decree-holder for ₹ 20,000 the amount being paid in cash before the Registrar allegedly to the debtor. The total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he beneficial interest passed to the assessee in the settlement of the debt and this was the subject of the fourth question formulated by the mandamus Bench. We agree with the learned Commissioner of Income-tax that there was undoubtedly material to justify a finding that the beneficial interest passed to the assessee in settlement of his debt. Apart from other reasons given by the learned Commissioner of Income- tax the matter is made clear by the statement of benamidar, L. Murari Lai, himself who admitted that he borrowed the money mainly on the security of G. P. notes belonging to the assessee and that immediately afterwards the factory was leased out to the assessee who has spent considerable sums of money on improvements and additions. It is a fair inference in these circumstances that the beneficial interest passed to the assessee as stated above. The answer, therefore, to this question must be in the affirmative. It will be convenient next to deal with the third question which relates to the valuation of the agricultural land at Piplanwali and Odianwali and of the Fazilka property. So far as the valuation of the agricultural lands at Piplanwali and Odianwali is concerned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds to conduct himself in accordance with the rules of justice, equity and good conscience. Again, in Commissioner of Income-tax, Bombay v. Khemchand Ramdas**, it was pointed out that provided the course of natural justice is observed, and the assessee is informed of the substance of the information on which the Income-tax Officer proposes to act and of the case against him and he is given a reasonable opportunity to meet that case, we think it is open to an Income-tax Officer, and that the nature of his work makes it inevitable, to act on private and confidential information in a work which is of a strictly private and confidential nature without disclosing the names of his informants . We are in full agreement with this observation. Now, in the present case it is clear that the Income-tax authorities have not relied only on the statement of the undisclosed informer. On the contrary they have, without disclosing the name of the informant, which they were fully entitled to withhold, given the substance of the information to the assessee and also allowed him ample opportunity to rebut it. Quite apart from the statement of the undisclosed informer, the Income-tax Officer relied on a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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