ivil Appeal Nos
10574 10583 of 1983
From the Judgment and Order dated 771980 of the Alla habad High Court in ITR No 948 of 1975
VGourishanker BV Desai SK Aggarwal and Ms Vinita Gharpade for the Appellants
SC Manchanda BBAhuja Manoj Arora and Ms A Subha shini NP for the Respondent
The Judgment of the Court was delivered by RANGANATH MISRA CJ
Radhasoami Satsang an assessee under the Income Tax Act in these appeals by special leave assails the decision of the Allahabad High Court on refer ence under Section 256 of the Income tax Act
The following question had been referred by the Tribunal to the High Court Whether on the facts and in the circumstances of the case Tribunal is justified in holding that the income derived by the Radha Swami Satsang a religious institution is entitled to exemption under sections 11 and 12 of the income Tax Act 1961   The ambit and purport of the question would not be properly appreciated unless the background is indicated
The assessee is the Radhasoami Satsang Agra
This sect was founded by Swami Shiv Dayal Singh in 1861
The tenets of this faith inter alia accept the position that God is represented on earth by a human being who is called the Sant Satguru
The first of such gurus was the thunder himself and he was popularly known as Soamiji Madharaj  The second Satguru 1889 1898 was Rai 315 Bahadur Salig Ram and he was known as Bazoor Maharaj 
The third sant Satguru was Pandit Brahma Shanker Misra 1898 1907 and was widely known as Maharaj Sahib 
These three Satgurus have been regarded as the real exponents of the creed
Out of donations and offerings made to the Satgurus large funds were built up and properties were acquired over the years
During the time of the third Satguru in 1902 the members of the creed at a largely attended convention established a Central Council and the right title and interest of all the properties movable and immovable which had by then been collected were vested in the Council under the directions of Maharaj Sahib
In June 1904 the constitution and bye laws of the Central Council of Radhasoami Satsang were drawn up in a formal way and a body by the name Radhasoami Satsang Trust  was set up
A trust deed was executed by some members of the Central Council in October 1904
A set of bye laws were also framed
On the death of third Satguru which took place in Octo ber 1907 the oread split into two and came to be known as Swami Bagh Sect and the Dayal Bagh Satsangis respectively
Disputes arose as to the management of the shrines and the administration of the properties which had vested in the trustees under the Trust Deed of 1904
The Dayal Bagh Sat sangis claimed that all the properties were held in a trust for a public purpose of a charitable and religious nature and prayed for a decree by going to the Civil Court The litigation had started in the form of an application under section 3 of the Charitable and Religious Trusts Act 1920 but was converted into a regular suit and eventually ended with the decision of the Privy Council in the case of Patel Chhotahhai and Ors
vs Jnan Chandra Basic and Ors AIR 1935 Privy Council 97
The Judicial committee reversed the deci sion of the High Court and held that even if the trust came into existence it was difficult to hold that it was of a public charitable or religious character as contemplated by the Charitable and Religious Trust Act 1920
The question of assessing the income for the first time arose in the assessment year 1937 38
The Income Tax Officer relied upon the observations of the Privy Council and com pleted assessments for two years being 1937 38 and 1938 39 treating the then Satguru Sri Madho Prasad Sinha as the assessee
He was a retired Assistant Accounts Officer and was earning a pension
His pension as also the income from the institution were tagged together for assessment
The Appellate Assistant Commissioner confirmed the assessments
Assessee then filed applications under section 662 of the Income tax Act of 1922 for reference
The Commissioner took the view that the offerings though made to the Satgurus were not used for their personal benefit and held that even though no formal 316 trust had been created by the donors in respect of offer ings the guru impressed the offerings with trust character at the time of receipt and treated the offerings as held in trust
He was therefore of the view that such offerings were exempt under section 431 of the Income tax Act 1922 and directed that the offerings be deleted from the assessment for the two years
He accordingly held that no reference under Section 662 was necessary to be made
an application under section 35 of the Act was later filed for ratification by pointing out that offerings received by the Satgurus consisted of interest income property income and income derived from sale of books and photographs etc
and the same should also be excluded
On 8121945 the Commis sioner directed deletion thereof
For the year 1939 40 the income tax Officer did not grant exemption under section 431 of the Act but the appeal challenging the assessment was accepted by the Appel late Assistant Commissioner in September 1947 upholding the assessee s claim of exemption
Nothing substantial happened until the assessment year 1963 64
During this period refund applications of the Satsang were accepted by the department on the basis that the income was exempt and as tax had been deducted at source the same was refundable
For the first time claim for refund in the years 1964 65 1965 66 and 1966 67 was not allowed and the assessee was treated as an association of persons and taxed subsequentiy for the assessment years 1966 67 1967 68 and 1968 69 and 196970 assessments were also com pleted
The Income tax Officer did not accept the assessee s claim of exemption and proceeded to hold that the donations and contributions had been received voluntarily and had been limited to religious use but there was no obligation to do so
The assessee appealed but the appellate authority upheld the assessments for the years referred to above
The asses see then appealed to the Tribunal
The Tribunal examined the matter from various aspects and held So far as the Radhasoami sect is concerned its properties were held only for the further ance of the object of the Satsang and this object was to propagate the religion known by the name of Radhasaomi
This was a purely religious purpose as held by the Privy Council and therefore the objects of the assessee are clearly religious objects
 While the Tribunal did not accept that the words held under trust  merely meant a consideration of the factual position and that if the income had been applied for reli gious purpose it was unnecessary to find out whether in law a trust had been created or not
But the Tribunal was of 317 the opinion that the words legal obligation were much wider and the activities of the Satsang could be brought within the purview of that expression
It finally held that the assessee was entitled to the exemption claimed under section 11
The High Court did not accept the conclusions of the Tribunal by heavily relying upon the revocability of the trust as clearly specified in the document and accepting the stand of the Revenue that exemption under section 11 was subject to the provisions of ss60 to 63 of the Act and on the finding that the trust was revocable it upheld liability Section 111 of the Act as far as relevant provides Subject to the provisions of sections 60 63 the following income shall not be included in the total income of the previous year of the person in receipt of the income a income derived from property held under trust wholly for charitable or religious purposes to the extent to which such income is applied to such purposes in India and Co where any such income is accumulated or set apart for application to such purposes in India to the extent to which the income so accumulated or set apart is not in excess of 25 of the income from such property  The conditions which have to be satisfied to entitle one for exemption therefore are a the property from which the income is derived should be held under trust or other legal obligation
b the property should be so held for charitable or religious purposes which enure for the benefit of the public
It is well settled that no formal document is necessary to create a trust
The reference itself accepts the position that the assessee is a religious institution
There has been some amount of debate in the forums below as to whether Radha soami Satsang is a religion
This Court in Acharya Jagdish waranand Avadhuta  Ors
vs Commissioner of Police Calcut ta  Anr
  while examining the claim of Anand Marg is to be treated as a separate religion indicat ed The words religious denomination  in Article 25 of the Constitution must take their colour from the word religions  and 318 this be so the expression religious denomina tion must also satisfy three conditions i it must be a collection of individu als who have a system of beliefs of doctrines which they regard as conductive to their spiritual well being that is a common faith ii common organisation and iii designation by a distinctive name In that case Anand Marg was held to be a religious denomination  within the Hindu religion
It is not necessary for us to decide whether Radhasoami Satsang is a denomina tion of the Hindu religion or not as it is sufficient for our purposes that the institution has been held to be reli gious and that aspect is no more in dispute in view of the frame of the question
The question of assessment to income tax arose only following the decision of the Privy Council in the dispute between the two factions
The Judicial Committee found that the properties which were the subjectmatter of the suit were acquired with the moneys presented to the Sant Satguru in the form of bhents or other contributions by the followers of the Radhasoami faith
The Judicial Committee found that it was almost inconceivable that the followers of the faith when making their gifts to the Sant Satguru intended to create a trust within the meaning of the Act 14 of 1920 of which they the donors and the worshippets should be the beneficiaries
The Privy Council further also found that it could not be said that the donors of the gifts were the authors of the alleged public trust
The question was exam ined keeping the provisions of the 1920 Act in view
The requirements of section 11 of the Income Tax Act are considerably different from what the Judicial Committee of the Privy Council was required to consider
We have already pointed out that after 1907 the denomi nation got divided
The claim of Dayalbagh group for exemp tion under the IncomeTax Act came for consideration before the Allahabad High Court in the case of The Secretary of State for India in Council vs Radha Swami Sat Sang There it was found that the offerings made by the Dayalbagh Satsangis to Sahebji Maharaj and the property which had grown out of them and which admittedly stood in the name of the Sabha and the property which at all material times had stood in the name of the Sabha vested in the Sabha for the benefit of the Satsangis and Sahebji Maharaj had no beneficial or personal interest in that
What has been found for the Dayalbagh Satsangis on this score is fully applica ble so far as the assessee is concerned There is no dispute that the properties of the assessee are 319 also recorded in the name of the Sabha Central Council and there is no personal interest claimed by the Sant Satguru in such property
Ever the years the Satguru has never claimed any title over or beneficial interest in the properties and they have always been utilized for the purpose of the religious community
The test applied by the Privy council in the case of A 11 India Spinners  Association vs Commis sioner of Income Tax
Bombay is indeed applica ble to the facts of the present case and the result would then be in favour of the assessee
We would like to point out that even if the trust was revocable the property was not to go back to the Satguru on revocation
The constitu tion and the bye laws on record indicate in clause 1b 1
The constitutional powers of the Central Council Radhasoami Satsang     are as below b to collect preserve and administer the properties movable and immovable that have been or may hereafter be dedicated to Radha soami Dayal or that may be acquired for or presented to the Radhasoami Satsang for the furtherance of the objects of the Satsang
 This envisages that where the property was given to the Sant Satguru it was intended for the common purpose of further ing the objects of the Sant Satguru and the Central Council had the authority to manage the property
Clause 9 of the document stipulated that the properties would vest in the trust and clause 25 provided that the trust shall be revoca ble at the discretion of the Council and the trustees shall hold office at its pleasure
Upon revocation the property was not to go back to the Satguru and at the most
in place of the trust the Central Council would exercise authority
It is on record that there has been no Satguru long before the period of assessment under consideration
As a fact therefore the Tribunal was justified in holding that the property was subject to a legal liability of being used for the religious or charitable purpose of the Satsang
This aspect had not been properly highlighted before the High Court
One of the contentions which the learned senior counsel for the assessee appellant raised at the hearing was that in the absence of any change in the circumstances the Revenue should have felt bound by the previous decisions and no attempt should have been made to reopen the question
He relied upon some authorities in support of his stand
A full Bench of the Madras High Court considered this question in TMM Sankaralinga Nadar  Bros  Ors vs Commissioner of Income Tax Madras After dealing with the con cession the Full Bench expressed the following opinion 320 The principle to be deducted from these two cases is that where the question relating to assessment does not vary with the income every year but depends on the nature of the property or any other question on which the rights of the parties to be taxed are based eg whether a certain property is trust property or not it has nothing to do with the fluctua tions in the income such questions if decided by a Court on a reference made to it would be res judicata in that the same question cannot be subsequentiy agitated
 One of the decisions referred to by the Full Bench was the case of Hoystead Ors
vs Commissioner of Taxation Speaking for the Judicial Committee Lord Shaw stat ed Parties are not permitted to begin fresh litigations because of new views they may entertain of the law of the case or new versions which they present as to what should be proper apprehension by the Court of the legal result either of the construction of the document or the weight of certain circum stances
If this were permitted litigation would have no end except when legal ingenuity is exhausted
It is a principal of law that this cannot be permitted and there is abun dant authority reiterating that principle
Thirdly the same principle namely that of setting to rest rights of litigants applies to the case where a point fundamental to the decision taken or assumed by the plaintiff and traversable by the defendant has not been traversed
In that case also a defendant is bound by the judgment although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken
 These observation were made in a case where taxation was in issue
This Court in Parashuram Pottery Works Co Ltd vs Income Tax Officer Circle 1 Ward A Rajkot at p 10 stated At the same time we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversite as it must in other spheres of human activity
 Assessments are certainly quasi judicial and these observations equally apply
321 We are aware of the fact that strictly speaking resjudi cata does not apply to income tax proceedings
Again each assessment year being a unit what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order it would not be at all appropriate to allow the position to be changed in a subsequent year
On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter and if there was not change it was in support of the assessee we do not think the question should have been reopened and contrary to what had been decided by the Com missioner of Income Tax in the earlier proceedings a dif ferent and contradictory stand should have been taken
We are therefore of the view that these appeals should be allowed and the question should be answered in the affirma tive namely that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was enti tled to exemption under sections 11 and 12 of the Income Tax Act of 1961
Counsel for the Revenue had told us that the facts of this case being very special nothinng should be said in a manner which would have general application
We are inclined to accept this submission and would like to state in clear terms that the decision is confined to the facts of the case and may not be treated as an authority on aspects which have been decided for general application
We direct the parties to bear their respective costs
VPR Appeals allowed


Summary:
The appellant was an Advocate practising in Bombay
Respondent No1 the complainant made a complaint to the Bar Council of Maharashtra alleging professional misconduct against the appellant
His case was that he was a proprietor of a firm engaged in a business of manufacturing
He was in need of financial accommodation and a financier impressed upon him that on examination of his papers by a solicitors  firm run by the appellant he would be given loan
He was also told that the appellant was also one of the investors
The complainant on such representation agreed to get loan through the financier
On inspection of properties of the complainant the financier told him that a loan upto Rs7 lakh would be advanced to him provided he would pay at the rate of 5 12 on the advance of amount of loan towards legal and other expenses
In a meeting held at the residence of the appellant in connection with the proposed loan the appellant told the complainant that he was an advocate of a certain firm and he worked only for the genuine financiers and would look to the interests of the loan seekers
He also told that he was himself a member of the internal group of the financiers
The appellant induced the complainant to part with certain money for legal expenses and in formed him 688 that out of 5 12 of the amount of loan required to be paid by him by way of legal expenses the appellant would keep 3 12 for the stamp duty payable to the Government
He also told that the disbursement could be expedited only if the complainant paid cash to the financier before certain date
On the stipulated date the complainant paid RS25000 to the financier
He also paid the balance of Rs13500 to the appellant
Thereafter the appellant made all attempts to delay the disbursement and asked the complainant to pay Rs10000 more which the latter paid
However the proposed loan was not disbursed and instead of it the financier made a complaint against the complainant in the Social Security Branch
The complainant made a complainant to the CID Branch of Bombay Police against the financier and the appellant
The financier was chargesheeted
On the advice of the police the complainant made an application to the Maharashtra Bar Council
He also alleged that the appellant had indulged in fraudulent activities in respect of other persons and at tached a list of witnesses to the complaint
The appellant challenged the proceedings before the High Court but the Write Petition was dismissed and the proceedings before the State Bar Council continued
The complaint before the State Bar Council could not be disposed of within the statutory period and the case stood transferred to the Disciplinary Committee of the Bar Council of India
Meanwhile the financier died
The Disciplinary Committee analysing the evidences dispassionately and considering the affidavits filed on behalf of both the parties as also the affidavits filed by some witnesses alleging that they had also become the victim of fraudulent action and cheating by the financier and the appellant held that there was a racket for defrauding andor cheating to aspirant loanees and the financier and the appellant advocate were parties to such racket that the appellant in connivance with the financier defrauded the complainant in receiving large sum of money on the pretext of legal expenses and other incidental costs for advancing the proposed loan to the complainant but such loan was never advanced to him that the appellant had received Rs10000 from the complainant that a case of professional misconduct under section 35 of the had been established against the appellant
The Committee therefore ordered the name of the appellant to be removed from the State Roll of the Bar Council of Maharashtra
689 In the appeal to this Courtit was contended on behalf of the appellant that he had no role in the matter of alleged fraudulent activities of cheating by the financier andor some other persons as he was engaged by the financier for preparing the document of mortgage after inspection of records of the complainant for advancing the proposed loan and he had only rendered the professional service as an advocate in a fair and proper manner that the appellant had only received his professional fees from the financier and did not receive any amount from the complainant that the finding of the Disciplinary Committee that the appellant had been a member of the racket and had taken part in defrauding and cheating the complainant was based on surmises and conjectures and that the Disciplinary Committee committed a grave error in law in considering the evidence of witnesses who were total strangers to the case of alleged fraud and cheating
Dismissing the appeal this court HELD 11
The appellant advocate has not only misused the trust reposed in him but has played an active part in defrauding or cheating the complainant who on the basis of the false representation of the appellant had to part with substantial amount to his serious loss and prejudice
p704 E G 12 A perusal of the entire evidence placed on record leads to the irresistible conclusion that the appellant was not only having full knowledge about the racket but was also an active member of such racket and was getting substantial financial advantage
The appellant was not a silent spectator merely giving his legal advice but was an important link in the modus operandi of running a racket by the financier
p 704 C D 13
The evidence of many other applicants seeking loan showing that they were also duped and met the same fate as the complainant speaks volumes against the conduct of the appellant
p 704 B 14
An advocate indulging in such nefarious activities is not entitled to continue as a member of legal profession which is based on the implicit faith and confidence in the mind of the client
p 704 B C 690 15
It is not the case of a lapse to take appropriate steps by and advocate andor a case of negligence in discharging the duties so that any lenient view may be taken against the concerned advocate
p An advocate enrolled under the  having a licence to represent the case of litigants is expected to maintain a high standard of morality and unimpeachable sense of legal and ethical propriety
p704E 2
The complainant specifically alleged that there was a racket to which the appellant and the financier were parties
He indicated the modus operandi by which he became victim of the fraudulent activities of the said members of the racket
To bring home the case of racket the deposi tions of other persons who had also approached the financier for advancement of loan and had been dealt with by him and the appellant in similar manner and though they had to part with substantial amount towards legal and other expenses for getting the proposed loan such loan had not been ultimately sanctioned to them became relevant and necessary to be looked into
p 701 B D 31
It is always permissible to draw reasonable infer ence from the facts established in a proceeding and such reasonable inference cannot be termed as finding based on surmises and conjectures
There is no manner of doubt that in any proceeding judicial or quasi judicial there is requirement of proof and such requirement cannot be substi tuted by surmise and conjecture
But proof may be estab lished directly on the basis of the evidence adduced in the proceeding or the allegation of fact may be established by drawing reasonable inferences from other facts established by evidence
p 703 B D 32
In the instant case the Committee has referred to the admitted facts and also the facts established in evidence and on a proper analysis of the facts so established andor admitted it has drawn reasonable inference
The Committee was alive to various aspects of the case and has taken care in meticulously scrutinising and analysing the evidence on record and the materials and the Committee has based its finding by giving cogent reasons and the inferences drawn from the established facts also appear quite reasonable
The Disciplinary Commit tee deserves commendation in disposing of the complainant s case fairly and dispassionately
In the matter of imposition of punishment the Disciplinary Committee 691 has referred to the relevant decisions of this Court and has imposed the penalty by recording good reasons for the same
p703 A D E Re P an Advocate  and M Veerbhadra Rao vs Tak Chand   referred to