9911796707
TMI Blog1973 (2) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... ames of the members of the family. In the return, the assessee claimed speculation loss of Rs. 58,722 on account of Gur Phagun Khata and the said amount was credited to the account of M/s. Sagarmal Ganeshilal of Hapur. In support of this claim of loss, the assessee produced confirmation letters and original bills from M/s. Sagarmal Ganeshilal of Hapur. The assessee also produced some other evidence which will be referred to a little later. The Income-tax Officer also obtained a report from the Income-tax Officer, Meerut. The Income-tax Officer also called for the explanation of the assessee vide his letter dated November 23, 1961. A notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922 (hereinafter referred to as " the Act ") was issued by the Income-tax Officer to the assessee to produce the original sauda nakal in connection with the speculative transactions, which, according to the Income-tax Officer, was not produced by him earlier, and the one produced by him was a faked one. The assessee's plea was that there was no other sauda nakal which had been retained by him and in fact the one produced by him before the Income-tax Officer was the original one, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder under section 27 of the Act and vide his order of the same date, separately passed, dismissed the appeal of the assessee on merits in respect of the loss of Rs. 58,722 though he allowed substantial relief to the assessee on other items to which the assessee was assessed to income-tax by the Income-tax Officer. As regards the loss of Rs. 58,722 claimed by the assessee, the order of the Income-tax Officer was upheld by the Appellate Assistant Commissioner and it was held by him that the books produced by the assessee before the Income-tax Officer were not genuine. The assessee then preferred two appeals before the Income-tax Tribunal and the Tribunal disposed of both the appeals by a consolidated order dated March 16, 1968. The Tribunal disallowed the claim of loss of Rs. 58,722 to the assessee and the assessment under section 23(4) of the Act was held to be a legal and valid assessment. The assessee then made two applications requiring the Tribunal to state the case and refer the same for the decision of this court as certain questions of law arose out of the consolidated order of the Tribunal dated March 16, 1968. The Tribunal formed the opinion that some questions of law, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the said order, which, he prayed, should be referred for the opinion of this court : " (i) Whether, in the context of the facts of the case and law involved, the assessment under section 23(4) of the Indian Income-tax Act, 1922, was illegal and invalid ? (ii) Whether, in the circumstances of the case especially in the context of the acceptance of the speculation profits and losses other than the loss in gur phagun Hapur account as per accounts of the applicant, the finding of the Tribunal that the applicant had proved the payment of Rs. 58,722 on account of losses in gur phagun Hapur account to M/s. Sagarmal Ganeshilal, Hapur, the disallowance of the said loss of Rs. 58,722 was warranted and sustainable ? (iii) Whether, in the circumstances of the case, the Tribunal could disallow the speculation loss of Rs. 58,722 in gur phagun Hapur account on the premises that it was not proved that the resultant loss of the applicant of speculative transactions was a loss of Rs, 58,722 when the authorities below neither disallowed nor based the disallowance in question on those premises? (iv) Whether, in the circumstances of the case and the evidence on the record, there is any m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion that question No. 1 claimed by the assessee was included in the questions referred to in Reference Application No. 592 of 1968-69 and, therefore, the same need not be referred to this court. As regards the other four questions, the Tribunal came to the conclusion that the said questions had given rise to the questions of law arising out of the order of the Tribunal and according to the Tribunal, the said four questions are included in the following question framed by the Tribunal, which has been referred to this court by the Tribunal for opinion : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in sustaining the disallowance of the loss of Rs. 58,722 aforesaid ? " Aggrieved by the order of the Tribunal, not referring questions Nos. 1 and 2 in appeal from the proceedings under section 27 of the Act, the assessee has approached this court, by this application under section 66(2) of the Act, for the issue of a mandamus directing the Tribunal to refer the said two questions of law to this court for opinion. Keeping in view the facts and circumstances of the case, we thought it proper to first hear and dispose of the mandamus ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee from Lahore. The Income-tax Officer held that the assessee had only brought assets of the value of Rs. 20,000 on migration from Lahore to Delhi and on that footing treated the balance of the capital introduced into the business on March 31, 1946, as income from undisclosed sources. The Appellate Assistant Commissioner rejected the contention that there being at the date of the order of assessment no Hindu undivided family in existence, the order of assessment was unauthorised. The Appellate Assistant Commissioner, however, estimated the assets brought by the assessee from Lahore at Rs. 1,00,000 and modified the order of assessment and directed assessment of Rs. 2,33,414 as income from undisclosed sources. The Income-tax Appellate Tribunal, on appeal by the assessee, confirmed the order of the Appellate Assistant Commissioner without deciding whether there was disruption of the joint status of the assessee-family as claimed by the assessee. The Tribunal, at the instance of the assessee, referred the following question to the High Court of Punjab under section 66(1) of the Act : " Whether, in all the facts and circumstances aforesaid, the assessment was validly made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld give rise to a question of law, the court must read the order of the Tribunal as a whole to determine whether every material fact for and against the assessee had been considered fairly and with due care ; whether the evidence pro and con has been considered in reaching the final conclusion and whether the conclusion reached by the Tribunal has been coloured by irrelevant considerations or matters of prejudice. In Rai Bahadur Lala Jodha Mal Kuthiala v. Commissioner of Income-tax, which is a Bench decision of this court, it was held that when the Income-tax Tribunal merely upheld the order of the Appellate Assistant Commissioner and that there was no basis for the decision of the Appellate Assistant Commissioner and the Tribunal having failed to rely on the evidence on record, the Tribunal's decision was not a finding of fact and the Tribunal was bound to refer the case to the High Court under section 66(2) of the Act. In another Bench decision of this court in Rattan Cloth House v. Commissioner of Income-tax, it was held that the finding of the Income-tax Appellate Tribunal even though on questions of fact will be liable to be set aside by the High Court on a reference if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed. As to what will be the effect of the said evidence, will be a matter which will be determined after the questions sought to be referred to this court, are referred to this court and opinion is given. I have already stated the brief facts of the case but it may be repeated for clarity's sake that the assessee claimed a loss of Rs. 58,772 on account of the speculation business. The Income-tax Officer went into this matter and disallowed this claim of the assessee. This order of the Income-tax Officer is annexure " E " with the paper book. The Income-tax Officer held as follows in this connection : " The assessee was called upon to prove the genuineness of this loss. In reply the assessee has produced the following pieces of evidence : (i) confirmation letters issued by M/s. Sagarmal Ganeshi Lal, Hapur, to whom the said loss was alleged to have been paid. (ii) bill in original from the said party. (iii) request for examining the said party under section 37." Assessee's request was granted and accordingly commission was issued to the Income-tax Officer, A-Ward, Meerut, for examining M/s. Sagarmal Ganeshi Lal, Hapur, under section 37. Report from the Income-tax Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on December 11, 1956, remains an unsolved problem. It may be pointed out that Shri Ram Chander is brother-in-law (Loser) of Shri Lachhi Ram. The other two gentlemen have not been produced. As such all these three entries on the receipts side are equally fictitious. It may be seen that the total of the payments side has been overwritten from Rs. 38,565-11-0 to Rs. 48,565-11-0. It was obviously done after planting the fictitious payment of Rs. 10,000. (ii) Dasawar Khata On page 12 appears gur phagun Hapur khata (M/s. Sagar Mal Ganeshilal, Hapur). Its scrutiny reveals that for all the five transactions appearing on the credit side nakal page 1 has been given. These entries are being shown to have taken place on five different dates. that is, Asuj Badi 10, Maghar Sudi 4, Poh Bedi 1, Pho Bedi 10 and Magh Bedi 9. Similarly nakal panna has been given to the first two and the last 4 transactions. For the third and fourth transactions nakal panna 2 and 29 have been given respectively. All these transactions range over the whole year. Similarly, on page 14 appears khata of Shri Subhash Chand, on the debit side nakal panna 1 has been given for all the five transactions which range ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as admittedly part and parcel of the order of the Income-tax Officer passed by him rejecting the application of the assessee, filed under section 27 of the Act, because in the said order, copy of which is annexure " B " with the paper-book, the Income-tax Officer recorded a finding that he had already pointed out numerous entries which conclusively prove that such sauda naund was maintained and that sauda naund produced by the assessee was cooked up later. In the appeal of the assessee to the Appellate Assistant Commissioner, which was rejected vide his order dated November 3, 1968, annexure " K ", the Appellate Assistant Commissioner went into this question and recorded the following findings : " The reasons for the Income-tax Officer's view have been stated in detail in the assessment order., The appellant showed a loss of Rs. 58,721 in gur phagun Hapur khata. Gur phagun Hapur khata on page 12 of dasawar khata, produced at the time of assessment, showed that for five transactions appearing on the credit side the nakal page mentioned was page 1 although those transactions were spread over a long period of the year, the dates of the transactions being Asuj Bedi 10, Maghar Sudi 4, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducing it before the Income-tax Officer. The Income-tax Officer's order under section 27 refusing to reopen the assessment made under section 23(4) is upheld. " The Income-tax Appellate Tribunal in its order, annexure " M ", went into the question as to whether or not there were any basis for holding that the real dasawar nakal book has been withheld by the assessee and held as follows : " 6. We will first take up the question as to whether or not there was any basis for holding that the real dasawar nakal book had been withheld by the assessee. The decision on this point will cover the appeal against the order under section 27 also. Now admittedly the dasawar nakal book produced did not contain the entries at its page 1, which in accordance with the ledger should have been found at that page. This mistake could be a clerical mistake also and could be explained away on that ground but the position in the instant case was somewhat different. This mistake had not crept up in respect of various other transactions in gur phagun Hapur account as had been noted by the departmental authorities : in their orders. There were 5 transactions on the credit side of dasawar ledger in gur pha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Shri Desraj, a copy of which has been made available to us, that in fact there has been a good deal of litigation between the assessee and that person and in fact such litigation was still going on even at the time when his deposition was recorded. We cannot, therefore, accept such statement of Desraj as are directly adverse to the assessee's interest as correct without having any independent evidence corroborating his statement. We cannot just go upon his words that the entries were all fictitious or that the books of account were fictitious but then even if we mere to discard the evidence of Desraj, the question still remains unanswered as to why the page number of dasawar nakal regarding the aforesaid five transactions and certain others as given in the ledger was page 1 whereas none of those transactions were found at page 1 of the dasawar nakal book produced before the Income-tax Officer. Desraj had not become inimical to the assessee when dasawar nakal book was being ledgerised by him and there is no evidence of the fact that Desraj was secretly harbouring inimical feelings towards the assessee even at the time. There does not, therefore, appear to be any reason as to why s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sauda nakal bahi was correctly referred to in the ledger and since the original sauda nakal bahi was not produced, therefore, those entries were not to be found at page 1. It was pleaded by the assessee and the relevant evidence was also produced by the assessee to prove that the transactions relating to the said entries regarding the Hapur parties were in fact genuine transactions and there being no other entry in the ledger book regarding the speculation business of the assessee, therefore, the contention of the assessee that it was a clerical mistake that a reference to page 1 of the sauda nakal bahi was made, was correct. It was also pleaded that sauda nakal bahi is a day-book on which the transactions of each day have to be recorded after they are entered into. Therefore, keeping in view the dates of the transactions with the Hapur parties, the entries regarding the said transactions of sauda nakal bahi could not be in any case entered at page 1 of the sauda nakal bahi (day book). It may be mentioned here that the transactions with the Hapur parties entered into by the assessee, as would be clear from annexure " A-1 ", are : May 5, 1956 ; May 19, 1956 ; November 21, 1956 ; D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at all these transactions had been entered through the Chamber of Commerce, Hapur. The only question to be seen is whether all this material evidence and other circumstances which have been referred to above, have been taken into consideration by the Tribunal while arriving at the finding of fact as to whether the assessee had withheld the original sauda nakal bahi and thus failed to comply with the notice issued to him by the Income-tax Officer. In my opinion, the answer to this question is bound to be in favour of the assessee. The reference to page 1 of the sauda nakal bahi in the ledger produced by the assessee regarding the transactions with the Hapur party could either be by a mistake as is pleaded by the assessee or on the other hand the assessee failed to produce the original sauda nakal bahi on which it be presumed that such entries did exist in that account. Before arriving at a conclusion as to whether it was a mistake to mention page 1 in the ledger book or whether the original sauda nakal bahi had been withheld, the pros and cons of the case, taking into account the evidence led in support of both these propositions, have to be taken into consideration and then alone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d through a broker who was also an assessee and the facts that Messrs. Sagarmal Ganeshilal who are the regular assessees of the income-tax department had already produced their accounts before the assessing authority at Meerut and the same were accepted and the said accounts were produced before the Income-tax Officer long before the present dispute arose and the assessment at Hapur for the assessment year 1957-58, was completed three years before, etc., etc., were not taken into consideration by the Tribunal at all. It is quite interesting to note that the Tribunal while passing the order on the appeal filed by the assessee in the regular assessment proceedings, recorded the following findings: " In the instant case as stated above, the assessee no doubt produced its dasawar nakal book but then it has been found that that book is not the genuine book. Naturally, therefore, the only conclusion to which we can arrive at is that the assessee has not placed all its cards on the table to prove that the resultant of all its speculative transactions was a loss of Rs. 58,736. In our opinion, therefore, even though the assessee has been able to prove that it had to pay a sum of Rs. 58,73 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uda nakal, the book of prime entry, produced was not the real one especially when the relevant transactions in the ordinary course, considering the dates involved, could not appear or be entered on page 1 of the sauda nakal ? 2. Whether, in the circumstances and the facts of the case there is any material to warrant the finding that there was a default in compliance with the provisions of notice under section 22(4) justifying the completion and maintenance of ex parte assessment under section 23(4)? " Before I part with the judgment, I may briefly refer to a few authorises relied upon by the learned counsel for the revenue, Mr. D.N. Awasthy. The said authorities are Purshottam Laxmidas v. Commissioner of Income-tax, Venkateswara District Motor Service v. Commissioner of Income-tax and Commisssioner of Income-tax v. Daulatram Rawatmull. In my opinion none of these authorities is helpful to the learned counsel for the revenue. These are cases totally different on their own facts and have no bearing on the facts of the present case which give rise to the questions of law. In Purshottam Laxmidas's case, it was held that the court is not concerned in the slightest degree with the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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