JUDGMENT
DEKA C.J. (ACTING). - This is a reference under section 66 (2) of the Indian Income-tax Act by the Income-tax Appellate Tribunal, Calcutta Bench, for a decision of this Court. The points under reference are as follows :
"(1) Whether, under the facts and circumstances of the case, the receipt of Rs. 6,103 for the Assam Provincial Textile Co-operative Society by the assessee was exempt from taxation under the Income-tax Act as casual income of the assessee ?
(2) Whether, under the facts and circumstances of the case, and in view of the addition of Rs. 5,147, the Tribunal was justified in treating the amount of Rs. 3,150 as further income from undisclosed sources ?
(3) Whether under the facts and circumstances of the case, there was any material to hold that the cash credit of Rs. 11,000 standing in the accounts in the names of the son-in-law and the daughter of the assessee, was income of the assessee from undisclosed sources ?"
It is necessary to advert to the facts with a view to understand and decide the points under reference and I am taking recourse to the statements of facts made by the Income-tax Tribunal. The applicant, Nabadwip Chandra Roy, had a business in cloth and yarn. In the year of account he was also a Director of the Assam Provincial Textile Co-operative Society and was paid a sum of Rs. 6,103 as bonus in consideration of services rendered by him in that capacity. The amount was not disclosed in the return submitted by him for the assessment year 1950-51 but the Income-tax Officer held that the amount was taxable and added it to the total income of the assessee. The assessee admitted the receipt of the above amount as bonus in the capacity of a director of the Assam Provincial Textile Co-operative Society. Before the Appellate Assistant Commissioner the point taken by the assessee was that this was his capital receipt and was not assessable to income-tax. That contention was repelled. In the appeal filed before the Income-tax Tribunal, however, the applicant pressed his claim for exemption on the ground that the receipt in question representing the bonus was of a casual and non-recurring nature and was not assessable to income-tax, it having come within the provisions of section 4 (3) (vii) of the Income-tax Act. This contention, however, was rejected by the Tribunal on the view that this income represented a receipt by the assessee from a vocation, and, therefore, it could not come under the exemption provision as indicated above.
The second point refers to a sum of Rs. 3,150 which was shown as a deposit amounting to Rs. 3,150 in cash in favour of the son of the assessee in his books of account. The applicant admitted before the Tribunal that the amount represented his savings from income from two different sources; firstly, he was receiving compensation for the requisition of his house in East Pakistan, and, secondly, he had income from agricultural land. The Tribunal disbelieved the explanation given by the applicant as to the source of the cash credit and agreed with the departmental officers that the amount in question represented the income of the applicant from some undisclosed source. The second contention with regard to this point was that the Tribunal was not justified in taking the amount of Rs. 3,150 as further income of the applicant from some undisclosed source in view of the fact that the department had already added a sum of Rs. 5,147 as extra and hidden profits made by the applicant.
The third point is of some importance and it refers to a cash credit of Rs. 11,000 in the Amanat or deposit account of the assessee, namely, Rs. 1,000 in the name of assessees daughter, Srimati Suniti Bala, and Rs. 10,000 in the name of her husband, Nisi Kanta Saha. The applicant explained before the Income-tax Officer that the money had been deposited by his son-in-law, Nisi Kanta Saha, and he had deposited the same amount to his credit. The assessee produced before the Income-tax Officer a letter purported to be dated 6th of Baisakh 1355 B. S. alleged to have been written by his-in-law, Nisi Kanta Saha, and he (Nisi) was further examined by the Income-tax Officer, Shillong, in this connection. The witness deposed to have deposited this amount with his father-in-law and stated that he had collected that amount from some merchants in Calcutta with whom he carried on trade at the material time. The Income-tax Officer, however, rejected the explanation of the applicant as to the source of the cash credit and added the amount to the total income of the assessee as his income from some undisclosed source. The Appellate Assistant Commissioner as well as the Tribunal concurred in the view that it represented assessees income from some hidden source and the money actually did not belong to Nisi Kanta Saha as was alleged. On this view the assessment was held.
As to the first point much had been argued by both sides and Mr. Ghoses contention for the petitioner was that this income of Rs. 6,103, received as bonus, represented an income of a casual and non-recurring nature coming within section 4 (3) (vii) of the Income-tax Act, as had been the contention before the Tribunal. In support of this contention he placed before us the following authorities : Mahammad Faruq, In re, Commissioner of Income-tax v. M. Ahmad Badsha Saheb, and Commissioner of Income-tax v. V. P. Rao.
Mr. B. N. Choudhuri, appearing on behalf of the department, contended that the instant case was not covered by any of these decisions, and he urged that this income received as bonus was really an income from a vocation coming within section 10 of the Income-tax Act and it was assessable to income-tax. He argued that it was not of a casual and non-recurring nature; nor did it come within section 4 (3) (vii) of the Income-tax Act. In support of this contention he relied upon a Supreme Court decision, reported in P. Krishna Menon v. Commissioner of Income-tax, and a Calcutta case, reported in David Mitchell v. Commissioner of Income-tax.
In the case of Mahammad Faruq, it appeared that Pipraich Sugar Mills Co. Ltd. had allotted to the assessee fully paid up shares of the nominal value of Rs. 15,000 in lieu of the services rendered by him in the promotion of the company. The Assistant Commissioner of Income-tax found that as a matter of fact the assessee was in the employ of the person who had erected a sugar mill at Pipraich. He had no direct hand in the management of the organisation. The only thing he did was that he successfully canvassed for the promotion of the company, and the directors of the company in appreciation of his services allotted the fully paid up shares of the nominal value of Rs. 15,000, as indicated above. The court held that the receipt was of a casual and non-recurring nature within the meaning of section 4 (3) (vii) of the Income-tax Act and was exempt from assessment.
In Commissioner of Income-tax v. Ahmed Badsha Saheb the assessee dealing in hides agreed to act as an arbitrator and settle the differences between the heirs of a friend without any stipulation for remuneration but he received remuneration after obtaining sanction of the court for the services rendered as such arbitrator. It was held by the Madras High Court that the receipt of such remuneration did not amount to receipt of income, profits or gains which was liable to assessment under the Indian Income-tax Act, and it was considered not to be a receipt arising from business or the exercise of a profession, vocation or occupation. It was considered to be a receipt of a casual and non-recurring nature, and, as such, exempt from tax under section 4 (3) (vii) of the Income-tax Act. This was a judgment of the Chief Justice Lionel Leach and what his Lordships observed is of material value; it was : "There can be no rule laid down with regard to what is of a casual and non-recurring nature. Each case must be decided on its particular facts." Therefore, the facts in each case have to be considered.
The case reported in Commissioner of Income-tax v. V. P. Rao lends title supported to the assessees contention that the receipt was of a casual nature. This point is more aptly answered by the decision of the Calcutta High Court, reported in Commissioner of Income-tax v. V. P. Rao. In this case the promoters of a company engaged the services of a firm of chartered accountants to assist them in its flotation and the engagement was attended to by the assessee as a partner of the firm. After the company had been formed and the engagement of the firm terminated, and the firm had been fully remunerated for the services rendered by them, the promoters, as a token of appreciation for the assistance rendered to the promoters by the assessee made an unsolicited gift to the assessee of certain shares in the company. The question was whether in the circumstances the shares were given as a personal gift or they were given as remuneration or rather on account of what the assessee had done for the promoters in the exercise of his profession. The court held that the shares could be said to be profits or gains of the profession or vocation carried on by the assessee and did not constitute only a gift or a windfall; as such, did not come within the scope of section 4 (3) (vii) of the Income-tax Act. It was accordingly held that the value of the shares was an income receipt in the hands of the assessee and it fell to be assessed under section 10 of the Act. This view is in contradistinction to the view held in the case of Mahammad Faruq, In re, though of course the facts also bear some distinction. P. B. Chakravartti C.J. while discussing this point observed as follows :
"The test, therefore, confining ourselves to the present case, would be this : first, was the payment altogether unconnected with the service rendered by the assessee to the promoters in connection with the floatation of their company ? The answer to that primary question has been furnished by the assessee himself. It was not unconnected. Next, though connected with the assistance he had rendered in connection with the floatation of the company as a member of his firm, was it made to him merely out of admiration for his personal qualities displayed in course of the carrying out of the engagement or was it intended to confer a special benefit on him with respect to the services rendered so as to increase his earnings in the exercise of his profession ? I cannot imagine the promoters or Ramkumar Agarwalla having made the payment to the assessee merely as a present and as a token of their or his personal regard for him The appreciation, however, was, as the assessee himself makes clear, an appreciation of the assistance rendered by him and not an appreciation of his personality or character. It came not from third parties, but from persons who had received the benefit of his professional services In my view, the value of the shares was an income receipt in the hands of the assessee, as rightly held by the Tribunal, but that it fell to be assessed under section 10 of the Act and not under section 7."
This view finds support from the Supreme Court decision reported in P. Krishna Menon v. Commissioner of Income-tax. This was a case where the assessee after retirement was spending his time in studying Vedanta philosophy and expounding the same to such persons as were keen on understanding it. A number of disciples soon gathered about him and one of them was J. H. Levy of London. On 13th December 1941, Mr. Levy transferred the entire balance standing in his name in the Lloyds Bank, Bombay, to the credit of the assessee, amounting to Rs. 2,41,103 and odd, after getting an account opened in the name of the assessee in the same bank. He used to continue payment and finally in August, 1951, the payment amounted to Rs. 4,50,000, which was transferred to assessees bank from time to time. The assessee contended that this income should be exempted from income-tax; but, the High Court of Travancore-Cochin decided the point in favour of the department and on an appeal being preferred by the assessee, the Supreme Court affirmed the decision of that High Court. Their Lordships while discussing this point observed as follows :
" it is well established that it is not the motive of the person doing an act which decides whether the act done by him is the carrying on of a business, profession or vocation. If any business, profession or vocation in fact produces an income, that is taxable income and none the less because it was carried on without the motive of producing any income. This, we believe, is too well established on the authorities now to be questioned."
Applying this test, even though the bonus received might have been unexpected or the assessee did not work in his capacity as a director of the Assam Provincial Textile Co-operative Society, on a stipulation of any remuneration the money was earned by him in that capacity even though gained gratuitously, as has been the contention. It represented a part of his income from his status or vocation as a director of the said society and it was not a personal gift or a windfall, as has been the contention on behalf of the assessee. Therefore, in our opinion, this point should be answered in the negative and in favour of the department.
We now come to the second point under reference, namely, whether the sum of Rs. 3,150 could be assessed separately as his income in spite of the fact that the department had already assessed the assessee in that particular year to another hidden income from his business to a sum of Rs. 5,147. The departments contention was that this point was not specifically raised before the Tribunal, and, therefore, it does not necessarily arise on a reference. Looking into the facts of this case and from the statement of facts as made by the Tribunal, it appears that this income was credited to the name of the assessees son, but the explanation given by him on the other hand shows that it was his personal income. Therefore, in our opinion, the department was correct in assessing this amount as hidden income over and above the income assessed as hidden income of his business as profits in cloth, yarn and other articles, and, we, therefore, answer this point in the affirmative and hold that the department was justified in taking this amount as further income from undisclosed source.
In reference to the third point, however, we are of opinion that this question as framed should be answered in the negative and we hold that the department was not correct in assessing this amount as an income of the assessee from undisclosed source. The department did not seriously question the deposit of Rs. 1,000 in the name of the daughter of the assessee. The main question raised was to the deposit of Rs. 10,000, which the assessees son-in-law, Nisi Kanta Saha, claimed to be his, and who deposed accordingly before the Income-tax Officer, Shillong. Both parties relied on one of the decisions of the Patna High Court, reported in S. N. Ganguly v. Commissioner of Income-tax. What was held in that case was that when the assessee fails to prove positively the source and nature of a certain amount which he received in the accounting year, he revenue authorities are entitled to draw an inference that the receipts are of an income nature unless the assessee proves the source and nature of the particular receipt. The burden of proof in such a case is not upon the revenue authorities, but is upon the assessee to show that the item of receipt was not of an income nature. But, the position is different in regard to a sum which is shown in the assessees book in the name of a third party. In such a case the onus of proof is not upon the assessee to show the source or nature of the cash credit, but the onus shifts to the department to show by at least some material that the amount standing in the name of the third party does not belong to that individual but it belongs to the assessee. In this particular case, the third party, in whose name the credit amounting to Rs. 11,000 was shown was the wife of the assessee. The court held that the department failed to give due credit to the version set up by the assessee that the property belonged to his wife, and, accordingly ruled against the department in regard to the cash credit account showing the deposit of Rs. 11,000 in favour of the assessees wife. The same view was held in another case of the Patna High Court, in the case of Radhakrishna Behari v. Commissioner of Income-tax. If this principle be applied to the facts of the present case, as to the legality of which we have no doubt, the department had produced no material whatsoever counteracting the version given by the assessee. The assessee had further produced some materials in support of his statement that the money belonged to his son-in-law. There is no material by which the version is directly or indirectly negatived except that the department did not believe the materials produced by the assessee. This would only mean that the onus of proof was placed on the assessee and the department did not share it. There is no material to show that Nisi Kanta Saha, the alleged creditor, had not at the material time or even earlier carried on any business, nor had collected any amount. His letter also bore some testimony to the version given by the assessee. But, the department has not come forward with any material to show that the version is wrong. We must, therefore, hold that the department was wrong in assessing the assessee for a hidden income of Rs. 11,000 because of the cash credit entry. Mr. Choudhuri for the department had relied on a decision of this court in the case of Mangalchand Gobardhan Das v. Commissioner of Income-tax. There the decision was on the line that the finding of the Tribunal that the amount in question represented income from undisclosed source was a question of fact. There also it was observed that there must be some material before the taxing authorities before they could treat an item as income of the assessee, and that the onus rests on the taxing authorities. In that case it was found as a fact that the money belonged to the assessee though entered in the name of his wife, and, therefore, we do not think that this case is of much assistance, and the court had referred therein to the earlier Patna cases of Ramkinkar Banerjee v. Commissioner of Income-tax and S. N. Ganguly v. Commissioner of Income-tax as discussed above. We, therefore, decide the points under reference as indicated above and as either party has shared some amount of benefit, we do not propose to pass any order for costs.
MEHROTRA J. - I had the privilege of reading the judgment of my Lord and I am in complete agreement with the order proposed. The following questions of law have been referred to us for opinion :
"(1) Whether, under the facts and circumstances of the case, the receipt of Rs. 6,103 from the Assam Provincial Textile Co-operative Society by the assessee was exempt from taxation under the Income-tax Act as casual income of the assesse ?
(2) Whether, under the facts and circumstances of the case, and in view of the addition of Rs. 5,147, the Tribunal was justified in treating the amount of Rs. 3,150 as further income from undisclosed sources ?
(3) Whether under the facts and circumstances of the case, there was any material to hold that the cash credit of Rs. 11,000 standing in the accounts in the names of the son-in-law and the daughter of the assessee, was income of the assessee from undisclosed sources ?"
As regards question No. 1 the assessee contends that the receipt is of a casual and non-recurring nature and is therefore covered by section 4 (3) (vii) of the Income-tax Act. As will appear from the statement of the case the assessee had claimed exemption from taxation of this amount on the ground that it was a capital receipt, but that ground seems to have been given up. Before the Tribunal the exemption was claimed on the ground that it was of a casual and non-recurring nature. Section 4 (3) (vii) of the Income-tax Act reads as follows :
"4. (3) Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them -
(vii) Any receipts not being capital gains chargeable according to the provisions of section 12B and not being receipts arising from business or the exercise of a profession, vocation or occupation, which are of a casual and non-recurring nature or are not by way of addition to the remuneration of an employee."
The two main questions to be considered with regard to the item of Rs. 6,103 are firstly, whether the assessee carried on any vocation and secondly, if the receipt is in respect of the profits or gains of the said vocation. The assessee was nominated to the directorate of the Assam Provincial Textile Co-operative Society as he was the chairman of the Member Society of the Silchar Sub-divisional Co-operative Society. The assessee carried on textile business and in that capacity he was the Chairman of the Member Society. In the same capacity he was nominated as director of the Assam Provincial Textile Co-operative Society. It cannot, therefore, be disputed that the assessee was therefore carrying on a vocation and that the remuneration he got from the services rendered as the director was the income, gains or profits arising from the exercise of the said vocation. As I have already pointed out, the assessee was carrying on the textile business and in that capacity he was the chairman of the primary Society which made him eligible to be appointed a director of the Assam Provincial Textile Co-operative Society. The remuneration therefor which he got for the services rendered as director was nothing but a receipt arising from the exercise of the textile business, vocation or occupation carried on by him. Reliance was placed on the case of Mahammad Faruq, In re. That case has been fully dealt with by my Lord in his order and it is sufficient for me to point out that the case is distinguishable on the facts. It was held in that case that the assessee did not carry on the vocation of the promoter of the company. Once it is held that the receipt arose out of the business, vocation or occupation of the assessee, it will not be necessary to go into the question whether it is of casual or non-recurring nature. The case of the David Mitchell v. Commissioner of Income-tax, in my opinion, lays down the correct law. There the income of the assessee was held to be one arising from the vocation which was carried on by him. In his capacity as the partner of a Chartered Accountants firm, the petitioner was utilised by the company in promoting its objects and consequently the payment to him for his services rendered for the development of the company was regarded as the profit or gain arising from his vocation. As regards question No. 2 relating to the item of Rs. 3,150 the point urged by the assessee is that as Rs. 5,147 have already been added as extra profits made by the assessee, the Tribunal was not justified in treating the amount of Rs. 3,150 as further income of the assessee from some undisclosed sources. Reliance was placed on the case of Ramcharitar Ram Harihar Prasad v. Commissioner of Income-tax. In that case the assessee was a firm carrying on business in sugar, salt, kirana and other articles. The Income-tax authorities found that the trading account maintained by the assessee did not show the true profits and consequently they added a sum of Rs. 15,644 as extra estimated profits and further another sum of Rs. 85,000 shown as cash credit but found to be income from undisclosed sources. The High Court held that the amount of Rs. 85,000 included the amount of Rs. 15,644 and therefore the latter amount was not liable to be taxed. That case to my mind is distinguishable. Having once added a certain sum of money as undisclosed profits from a particular source, the assessing authorities cannot later on add another amount as the undisclosed profit from the same source. An assessee may be taxed on a certain income which he has made from a particular source. The assessing authorities may come to the conclusion that the account books do not disclose the real profit made out of certain source and add certain amount as the undisclosed profit from that source. There may be another receipt which may not have been properly explained by the assessee and the assessing authorities may regard that amount as an income from an undisclosed source. There is a distinction between an undisclosed income from a particular source and an income from an undisclosed source. These two are distinct facts. What the Patna High Court has laid down is that the assessing authorities cannot add twice certain undisclosed income from the same source but there is no bar to add separately undisclosed income from a particular source and income from undisclosed sources as income from any other source. Reference in this connection may be made to the case of Chenna Basappa v. Commissioner of Income-tax. The question No. 1 is, therefore, to be answered in the negative and question No. 2 in the affirmative.
Coming to the question No. 3 which deals with the cash credit of Rs. 11,000 entered in the name of the son-in-law of the assessee, Mr. Choudhuri contends that the department having rejected the explanation given by the assessee that the amount shown in the name of his son-in-law belonged to him, it was entitled to infer that it was an income of the assessee from other sources. It was a question of fact and if having regard to the entire material on the record the assessing authority came to the conclusion that it was an income from other sources of the assessee himself, the High Court will not examine the question of fact. It is not necessary to refer to the various authorities of the Supreme Court laying down the powers and scope of this court under section 66 of the Income-tax Act. It is sufficient to point out that the facts proved or admitted may provide evidence to support further conclusions to be deduced from them, which conclusions may themselves be conclusions of fact and such inference from facts proved or admitted could be matters of law. This court would be entitled to interfere if it appears that the fact finding authority has acted without any evidence or upon a view of the facts which could not reasonably be entertained or the facts founds are such that no person acting judicially and properly instructed as to the relevant law would have come to the determination in question. In the case of Mehta Parikh and Co. v. Commissioner of Income-tax, the question considered by the Supreme Court was whether there was any material to justify the assessment of Rs. 30,000 from out of the sum of Rs. 61,000 representing the value of high denomination notes which were encashed on the 18th day of January, 1946. It was held that the decision of the Tribunal should not rest on suspicion but on legal testimony and the conclusion of the Tribunal that it was impossible for the assessee to have sixty-one high denomination notes was pure surmise and had no basis in the evidence. The assessee having furnished a reasonable explanation for the possession of the high denomination notes, there was no justification for having accepted it in part and there was no material to justify the assessment. The case put forward by the assessee is that the authorities had not clearly kept in mind the question of burden of proof in such cases and there was no material before the income-tax authority to come to the conclusion that the money did not belong to the son-in-law of the assessee. In the account books of the assessee the amount is entered as a deposit by Nisi Kanta Saha, his son-in-law. An affidavit was sworn by him before the Appellate Assistant Commissioner in which he categorically stated that the amount was deposited by him. Shri Nisi Kanta Saha was interrogated by the Income-tax Officer, Shillong, presumably behind the back of the assessee and there also he reiterated that the amount belonged to him. No materials have pointed out by the departmental counsel which would go to show that the statement of Nisi Kanta Saha should not be believed. It was not for the assessee to prove by positive evidence the source by which Nisi Kanta Saha got the money. The reasoning of the Income-tax Officer is that as Nisi Kanta Saha had no source by which he could get the amount, it must be assumed that the money did not belong to him and must be the income of the assessee. The assessee placed material to support the entries in his account books. Nisi Kanta Saha has made a statement to the effect that he deposited the amount with the assessee and in the absence of any other material to disprove the fact that the money was deposited by Nisi Kanta Saha with the assessee, it cannot be said that the amount was the income of the assessee from some undisclosed source. If it is shown from the account books that a certain money has been received by the assessee during the assessment year, the burden lies on him to prove the source and the nature of the particular receipt. It is for the assessee to show that the receipt is not in the nature of an income, but in cases where the amount is shown to have been deposited by a third party, prima facie it cannot be regarded as a receipt by the assessee-much less a taxable income, and in that event it is for the department, if they want to tax it as an income of the assessee, to show by some materials that the amount standing in the name of the third party does not belong to that third party but belongs to the assessee. By merely holding that the assessee has not established the source of receipt of that amount by the third party, the department cannot contend that it has placed material which leads conclusively to the result that it was an income of the assessee from some undisclosed source. No other material has been pointed out to show that the amount was not deposited with the assessee by his son-in-law. Reliance was placed on the case of Mangalchand Gobardhan Das v. Commissioner of Income-tax. In that case the question as framed assumed that if it was established as a fact that the money did not belong to the third party, it was an income of the assessee from an undisclosed source. In that case also however it was laid down that there must be some material, before the taxing authorities could treat the amount as an income of the assessee. On the materials before them it was found in that case that the money belonged to the assessee. Here, as I have already pointed out, except the circumstance that Nisi Kanta Saha had no means to get that amount, there is no other material before the assessing authorities from which it could be inferred that the money belonged to the assessee and thus it was a taxable income from some other source. I would, therefore, answer question No. 3 in the negative.
Questions answered accordingly.