Case: Parimisetti Seetharamamma Vs. Commissioner Of Income-Tax, Hyderabad

Sita Devi, and that she was described as the Private Secretary to Sita Devi in a "bill" issued by the Bombay garage Ltd., and that in any event it was for the appellant to prove her case of gift. The Tribunal then observed that the word "income" is not precisely defined in the Act and the Act seeks to bring to tax all income, profits and gains from whatever source derived and inasmuch as receipt of amounts and jewellery in question had been admitted it was for the appellant to establish that it was not liable to be taxed under the Act. Observing then that the appellant had not placed "all the cards on the table which will go to show the real nature of the receipt of the amounts and the jewellery and had declined to produce the correspondence which passed between her and Sita Devi, but merely offered to produce the correspondence which passed between her and Sita Devi, but merely offered to produce certain extracts from the letters which the Income-tax Officer refused to admit, it was open to the Income-tax authorities to raise an inference that the receipts were income. when ample opportunity was given to the assessee to explain the nature of the receipts and since the appellant had not chosen to do so, she was not entitled to the exemption under S. 1(3) (vii).10. The conclusion of the Tribunal recorded on this process of reasoning was open to grave challenge in point of law. It does not appear that any serious attempt was made by the appellant to prove that the receipts under discussion were exempt from tax, because they were casual and of a non-recurring nature. The appellants case primarily was that the receipts were not taxable because they were not income chargeable to tax. The Tribunal rightly observed that the information collected by the Department from different sources which consisted of record of ex parte statements of certain persons about the relation between Sita Devi and the appellant, which they even declined to give in writing, could have not value in establishing the case of the Department. There remained two pieces of evidence on which the Tribunal relied - (i) admission made by the appellant that she acted as the local agent in Nuzvid for disbursing salary to servants of Sita Devi and (ii) in a "bill" issued by the Bombay Garage Ltd. the appellant was described as "Private Secretary to Princess Sita Devi." But these circumstances could not establish that what was given to her by Sita Devi was remuneration for services rendered or to be rendered. Realizing this infirmity, the Tribunal observed that the burden of proving that the receipts were not income lay upon the appellant. The Tribunal did not infer that as remuneration for disbursing salary to Sita Devis servants she was given large amounts of money and jewellery. Description of the appellant in the cash-memo issued by the Bombay Garage Ltd. as "Private Secretary to Princess Sita Devi" could have no evidentiary value. It is not claimed that there was evidence on the record that this was the general repute of the appellant. Description of the appellant as Private Secretary of Sita Devi in a stray cash-memo issued by a third party about the source of whose knowledge there is not an iota of evidence, could not evidence a relationship of master and servant: mush less could it prove that what was given by Sita Devi to the appellant was remuneration for service rendered. The conclusion of the Tribunal is therefore based on matters which may at the highest create some suspicion, and upon its view that the burden of proving that the receipts were not taxable lay upon the appellant. But a conclusion recorded by the Tribunal by wrongly throwing the burden of proof upon the assessee cannot be regarded as binding upon the High Court in a reference under S. 66 of the Income-tax Act.11. Counsel for the Commissioner contended that beside the two circumstance relied upon by the Tribunal there were other circumstances on which the conclusion of the Tribunal could be sustained. These circumstances, counsel submitted, are on the record and must have weighed with the Tribunal in arriving at its finding that the receipts by the appellant were of the nature of income. These were (a) that the appellant belonged to a family of Dasis who are generally employed in the ruling family of Pittapuram in a menial capacity (b) that the appellant was receiving a salary of Rs. 8 per month from the Maharaja of Pittapuram; (c) that the appellant was associted with Sita Devi for at least 8 years before the earliest year of account relevant in these appeals; (d) that large amounts in cash and also jewellery were given to the appellant from time to time after Sita Devi married the Gaekwad of Baroda, (e) that the gifts commenced immediately after Sita Devi married the Gaekwad of Baroda; (f) that the appellant assisted Sita Devi in securing divorce from the Yuvaraja of Vuyyur and in getting married to the Gaekwad of Baroad; (g) that the appellant lived with Sita Devi in London in the year 1949-50 and also at Baroda; and (h) that similar gifts were given to one Narsinghrao "associate of the appellant" and to the daughters of the appellants sisters. There is no evidence in support of (f), and the circumstances (a) to (c) and (g) cannot possibly lead to the conclusion that property of large value was given to the appellant by Sita Devi as remuneration for performance of service circumstance (h) is irrelevant.12. On the first part of the two questions it must be recorded that what the assessee received in the relevant years of account was not assessable to tax. It is unnecessary to record, as already obsered, a finding on the second branch of the question, viz. whether S. 34 of the Income-tax Act could properly be invoked in regard to those receipts.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]9. In the view of the Income-tax Appellate Tribunal, in determining the question whether receipts by the appellants represented income liable to be brought to tax under the Income-tax Act, it could not be said that there were no materials justifying the Department in treating the assessee as being an employee of Sita Devi, for apart from the information the Department had collected from various sources, there were clear indications that the assesses was acting as the local agent of Sita Devi in Pittapuram for disbursing salary to various servants of Sita Devi, and that she was described as the Private Secretary to Sita Devi in a "bill" issued by the Bombay garage Ltd., and that in any event it was for the appellant to prove her case of gift. The Tribunal then observed that the word "income" is not precisely defined in the Act and the Act seeks to bring to tax all income, profits and gains from whatever source derived and inasmuch as receipt of amounts and jewellery in question had been admitted it was for the appellant to establish that it was not liable to be taxed under the Act. Observing then that the appellant had not placed "all the cards on the table which will go to show the real nature of the receipt of the amounts and the jewellery and had declined to produce the correspondence which passed between her and Sita Devi, but merely offered to produce the correspondence which passed between her and Sita Devi, but merely offered to produce certain extracts from the letters which the Income-tax Officer refused to admit, it was open to the Income-tax authorities to raise an inference that the receipts were income. when ample opportunity was given to the assessee to explain the nature of the receipts and since the appellant had not chosen to do so, she was not entitled to the exemption under S. 1(3) (vii).10. The conclusion of the Tribunal recorded on this process of reasoning was open to grave challenge in point of law. It does not appear that any serious attempt was made by the appellant to prove that the receipts under discussion were exempt from tax, because they were casual and of a non-recurring nature. The appellants case primarily was that the receipts were not taxable because they were not income chargeable to tax. The Tribunal rightly observed that the information collected by the Department from different sources which consisted of record of ex parte statements of certain persons about the relation between Sita Devi and the appellant, which they even declined to give in writing, could have not value in establishing the case of the Department. There remained two pieces of evidence on which the Tribunal relied - (i) admission made by the appellant that she acted as the local agent in Nuzvid for disbursing salary to servants of Sita Devi and (ii) in a "bill" issued by the Bombay Garage Ltd. the appellant was described as "Private Secretary to Princess Sita Devi." But these circumstances could not establish that what was given to her by Sita Devi was remuneration for services rendered or to be rendered. Realizing this infirmity, the Tribunal observed that the burden of proving that the receipts were not income lay upon the appellant. The Tribunal did not infer that as remuneration for disbursing salary to Sita Devis servants she was given large amounts of money and jewellery. Description of the appellant in the cash-memo issued by the Bombay Garage Ltd. as "Private Secretary to Princess Sita Devi" could have no evidentiary value. It is not claimed that there was evidence on the record that this was the general repute of the appellant. Description of the appellant as Private Secretary of Sita Devi in a stray cash-memo issued by a third party about the source of whose knowledge there is not an iota of evidence, could not evidence a relationship of master and servant: mush less could it prove that what was given by Sita Devi to the appellant was remuneration for service rendered. The conclusion of the Tribunal is therefore based on matters which may at the highest create some suspicion, and upon its view that the burden of proving that the receipts were not taxable lay upon the appellant. But a conclusion recorded by the Tribunal by wrongly throwing the burden of proof upon the assessee cannot be regarded as binding upon the High Court in a reference under S. 66 of the Income-tax Act.Counsel for the Commissioner contended that beside the two circumstance relied upon by the Tribunal there were other circumstances on which the conclusion of the Tribunal could be sustained. These circumstances, counsel submitted, are on the record and must have weighed with the Tribunal in arriving at its finding that the receipts by the appellant were of the nature of income. These were (a) that the appellant belonged to a family of Dasis who are generally employed in the ruling family of Pittapuram in a menial capacity (b) that the appellant was receiving a salary of Rs. 8 per month from the Maharaja of Pittapuram; (c) that the appellant was associted with Sita Devi for at least 8 years before the earliest year of account relevant in these appeals; (d) that large amounts in cash and also jewellery were given to the appellant from time to time after Sita Devi married the Gaekwad of Baroda, (e) that the gifts commenced immediately after Sita Devi married the Gaekwad of Baroda; (f) that the appellant assisted Sita Devi in securing divorce from the Yuvaraja of Vuyyur and in getting married to the Gaekwad of Baroad; (g) that the appellant lived with Sita Devi in London in the year 1949-50 and also at Baroda; and (h) that similar gifts were given to one Narsinghrao "associate of the appellant" and to the daughters of the appellants sisters. There is no evidence in support of (f), and the circumstances (a) to (c) and (g) cannot possibly lead to the conclusion that property of large value was given to the appellant by Sita Devi as remuneration for performance of service circumstance (h) is irrelevant.On the first part of the two questions it must be recorded that what the assessee received in the relevant years of account was not assessable to tax. It is unnecessary to record, as already obsered, a finding on the second branch of the question, viz. whether S. 34 of the Income-tax Act could properly be invoked in regard to those receipts.It is not necessary to consider whether theOfficer was competent to issue a notice under S. 34 of theAct for the years1, for in our view the property received by the appellant was not remuneration given to her by Sita Devi for services rendered or to be rendered by her.