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TMI Blog1967 (9) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 95,483 (Rupees ninety-five thousand four hundred and eighty-three) forming part of the moneys credited in the account of the non-resident, Maneklal Bhanji of Aden, in S.Y. 2005 in the assessee's books of account is the assessee's own money representing his income from an undisclosed source ? " The assessee is a partnership firm consisting of a father and son as partners and is carrying on business as exporters and commission agents. One of the foreign parties to which goods are exported by the assessee-firm is a firm called " Maneklal Bhanji " at Aden. The assessment of the firm for the assessment year 1950-51, for which the relevant previous year was the S.Y. 2005 ending on 21st October, 1949, was originally made by the Income-tax Officer on 14th June, 1951, determining a total income of Rs. 46,836. The assessee-firm, it may be stated, is registered under section 26A of the Indian Income-tax Act. During the assessment proceedings for the assessment year 1955-56, corresponding to the previous year S.Y. 2010, the Income-tax Officer noticed that the account of Maneklal Bhanji of Aden in the account books of the assessee showed an opening credit balance of Rs. 95,483. He also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e value of the goods amounting to Rs. 1,26,452, which were shipped at the end of the accounting year and for which the price was received from Maneklal Bhanji during the subsequent S.Y. 2006. For the remaining goods shipped during the year which were valued at Rs. 63,759 payments were received from Maneklal Bhanji during the course of the year. It was, however, shown in this account that the total credits in favour of Maneklal Bhanji during the S.Y. 2005 were Rs. 1,59,242. The total of credits in favour of Maneklal Bhanji, therefore, exceeded the price of the goods received by him during the course of the year by an amount of Rs. 95,483. It was pointed out to the assessee that at the time when these credits were made in favour of Maneklal Bhanji, there were exchange restrictions between India and Aden and it was not normally possible for the Aden party to remit monies to India except to the extent of the value of the goods exported to him. It was, therefore, likely that the excess of credits over the price of the goods exported to Maneklal Bhanji represented the deposit of the secret profits of the assessee in the account of the non-resident. The Income-tax Officer further pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty and, therefore, no interest was credited for the excess credit in his favour. The Income-tax Officer was not satisfied with the explanation submitted by the assessee and did not accept the assessee's case that the amount belonged to the foreign party. According to him, having regard to the exchange regulations, it was not likely that the Reserve Bank would allow remittances in excess of the value of the goods shipped as mentioned in the invoices. The assessee no doubt has stated that these were remittances made in an approved manner, but it has not substantiated it by producing any proof. As to the explanation given by the assessee that remittances may have reference to payments for goods of earlier years, the Income-tax Officer has held that the said explanation was absolutely untrue as at the beginning of S.Y. 2005 there was an opening credit balance in favour of the Aden party. Moreover, he has pointed out that the assessee in its explanation had submitted two contradictory explanations because, while at one stage it stated that some of the remittances may have some connection with goods supplied during the earlier years, at another stage it stated that these payments were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce was also business income. The assessee applied under section 66(1) of the Indian Income-tax Act for a reference to this court but the said application was rejected by the Tribunal on the ground that no question of law arose out of its order. The assessee then applied to this court under section 66(2) requesting this court to require the Tribunal to draw up a statement and refer to this court a number of questions of law said to be arising out of the Tribunal's order. This court, however, allowed the application only in respect of the two questions, which we have already set out above. Now, the first question is whether the Tribunal was justified in refusing to admit in the appeal before it the additional evidence which was sought to be produced by the appellant. It is contended by Mr. Mehta, the learned counsel for the assessee, that the certificate of the bank which the assessee sought to produce, was a vital, important and clinching piece of evidence and it was necessary and proper in the interest of justice that the Tribunal should have allowed the same to be produced. Mr. Mehta has argued that the decision of the departmental authorities and the Tribunal that the amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enable it to pronounce judgment or for any other substantial cause. The admission of additional evidence at the appellate stage is not referable to any right of the party to produce the evidence but is dependent solely on the requirement of the court and it is for the court to decide whether for pronouncing its judgment or for any other substantial cause it is necessary to have the additional evidence before it. The mere fact that the evidence sought to be produced is vital and important does not provide a substantial cause to allow its admission at the appellate stage especially when the evidence was available to the party at the initial stage and had not been produced by him. As has been observed by the Privy Council in Parsotim v. Lal Mohar, the rule is not intended to allow a litigant who has been unsuccessful in the lower courts to patch up the weak parts of his case and fill up omissions in the court of appeal. Mr. Mehta referred to the observations of Ameer Ali J. in the Privy Council case, Indrajit Pratap Bahadur Sahi v. Amar Singh, viz., that the jurisdiction of an appellate court under Order 41, rule 27, of the Code of Civil Procedure, 1908, to admit additional evidence i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case the Tribunal did not find the additional evidence to be necessary, its refusal to allow the said additional evidence to be produced cannot in any way be said to be illegal or improper and the assessee is not entitled to make any grievance in respect of the same. The first question, therefore, will have to be answered in the negative. Coming now to the other question, which is as to whether there was any evidence on record to justify the finding that the sum of Rs. 95,483 forming part of the moneys credited in the account of the non-resident, Maneklal Bhanji of Aden, in the assessee's books of account in the S.Y. 2005 was the assessee's own money representing its income from an undisclosed source, in our opinion, there was evidence on record relevant to the consideration of the said question and consequently the conclusion arrived at by the income-tax authorities and the Tribunal could not be said to have been based on no evidence. It may be pointed out in this connection that the statement of account of the Aden party for the S.Y. 2005 to 2010 which have been supplied by the assessee, show that in all these years the moneys received by the assessee from the Aden party were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self, cannot advance its case any further. The other circumstances pointed out by the Tribunal and the income-tax authorities are also relevant and significant circumstances. In the beginning of the assessment year, viz., S.Y. 2005, there was a small credit balance in favour of the Aden party. It may be pointed out that from 1947 onwards there were the exchange regulations between India and Aden and consequently remittances of money from one country to the other were governed by the said exchange regulations. In view of the fact that at the beginning of the S.Y. 2005, there was a small credit balance in favour of the Aden party, no part of the amount could be said to be attributable towards the price of the goods received earlier by the Aden party. Whether in spite of exchange regulations it was possible for the Aden party to send freely moneys in excess of the goods exported to it does not appear to be clear. The departmental authorities and the Tribunal have taken the view that in view of the said exchange regulations, it would not have been possible for the Aden party to send money in excess of the goods received by it. There is nothing on record to show that the said view taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he department to find that notwithstanding the fact that these moneys were actually brought in, they did not represent the moneys of the partners but they represented the undisclosed profits of the firm which left the firm earlier and returned through the intermediary of the partners. If the department was not satisfied with the explanation given by the partners then it was legitimate for the department to draw an inference that the amounts represented undisclosed profits of the partners and to assess them in their own individual assessment. " Now this case, in our opinion, is easily distinguishable from the case before us. There the fact that the moneys had actually been transmitted from an outside place by the partners themselves was established. The question was whether the moneys which were so transmitted were the moneys of the partners or the moneys of the firm brought through the intermediary of the partners. The circumstance that the partners were unable to explain the source of the money was not a circumstance which conclusively showed that the moneys belonged to the firm. The absence of the explanation on the part of the partners could as well be that they were the undis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t entries were made and the said cash credits could as well belong to the wife in whose name they were entered. Unless the departmental authorities were in a position to show that these cash credits, though appearing in the name of the assessee's wife, did not belong to her but belonged to the assessee, it was not possible for them to treat it as the assessee's income from an undisclosed source. It may be pointed out that in that case it could not be said that it was impossible for the wife to bring her own money, may be from an undisclosed source, into her account. Inasmuch as the possibility of the money being brought in by the wife as a matter of fact could not be ruled out, it was held in that case that it was not possible to come to the conclusion that it represented the assessee's income from an undisclosed source. In the present case, however, the possibility of the Aden party being in a position to remit moneys to Bombay was, according to the department, ruled out by the existence of the exchange regulations. The possibility of the money having been remitted by the Aden party was again rendered unlikely because of the fact that at no subsequent time has any such practice be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not make it real or genuine. In the present case, having regard to the restrictions on the transfer of money from Aden to India, it was necessary to show that this was a remittance received from Aden and the entry has been made in accordance with the said remittance. That fact, as we have already pointed out, has not been established by the assessee. Although, therefore, the account of the third party in the assessee's books of account may be a real account and although the third party may be a real and not a fictitious party, the further fact that the entry is a real entry and not a fictitious entry still remained to be established. We do not, therefore, think that this case also helps Mr. Mehta. In the result, therefore, there was, in our opinion, material on record in support of the finding of the Tribunal relating to the sum of Rs. 95,483 and the second question, therefore, must be answered in the affirmative. Mr. Mehta has complained about the observations of the Tribunal that the nature of this income from undisclosed source is business income. According to him, there was no evidence before the Tribunal to come to that conclusion and the said observation, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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