Case: Bhaichand Amoluk and Company Vs. Commissioner of Income Tax, Bombay City I

his mother, an employee and an agent of the firm, with the benefits of the partnership to his two minor sons, that the New India Assurance Company lent its support to a practice by which insurance business was being done, in addition to being an employee of the company, that Manibai, mother of Chhotalal, was not capable of taking any part in the business and had signed documents as desired by Chhotalal, and that the assessee perhaps attended to the business personally outside office hours. The Tribunal also stated that there was no reason why the goodwill of the firm was assigned to Manibai, whose only qualification was that she was Chhotalals mother. When the Tribunal rejected the application for a reference, it again adverted to some of these reasons, adding that Manibai was examined, hinting thereby that her statement was not satisfactory. When the High Court called for a reference, it presumably considered the finding of the Tribunal, which was recorded in the following words" In order to get over the legal difficulty, the assessee converted the old business into a partnership concern by taking the two employees as working partners. These employees were given only three annas share which perhaps at the material time was the approximate remuneration earned by them in a preceding year. It is in reality a partnership between the assessee, Premchand and Khambatta. Manibai and the two minor sons are bogus parties...."The High Court, therefore, raised the question whether the order of the Income-tax Officer could be restored in toto in view of this finding, because the Income-tax Officer had taken the whole of the income of the firm into Chhotalals individual assessment5. In this appeal, it is contended that the High Court was in error in not calling for a reference, because (a) there were no materials on which the finding that the firm seeking registration was a pretence, could be rested, and (b) in any event, the Tribunal having acted on suspicions, conjectures and surmises, its decision is erroneous, in view of the decisions of this court reported in Dhirajlal Girdharilal v. Commissioner of Income-tax, Omar Salay Mohamed Sait v. Commissioner of Income-tax, and Lalchand Bhagat Ambica Ram v. Commissioner of Income-tax. Reference was also made to Umacharan Shaw & Bros. v. Commissioner of Income-tax. The respondent relied upon a recent pronouncement of this court in Homi Jehangir Gheesta v. Commissioner of Income-tax6. Regarding the first ground, it is quite obvious that there was material on which the finding could be based. If Chhotalal withdrew from the business, his wife, Lalitabai, would be left as the sole proprietor. No mention of her interest whatever was made in the subsequent deed, and she seems to have disappeared completely. On the termination of the old firm and the setting up of the new firm, one would expect some adjustment entries in the books of account, and these were singularly lacking. One would also expect a communication by the new agents to the various insurance companies in writing about the change of principal agents and an appointment letter in the name of the new firm by them. The bank accounts would have been transferred to the new partnership firm, and the power-of-attorney in favour of Premchand and Khambatta would have been cancelled and the new firm would have been authorised to deal with the accounts. Without any such action, the decision of the Tribunal, that the firm which asked for registration was not a real firm, cannot be said to be founded on no materialIn so far as the addition of certain other reasons, which are characterised as surmises, conjectures and suspicions, is concerned, this court has observed in Gheestas case as follows" We must read the order of the Tribunal as a whole to determine whether every material fact, for and against the assessee has 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. Learned counsel for the appellant has taken us through the entire order of the Tribunal as also the relevant materials on which it is based. Having examined the order of the Tribunal and those materials, we are unable to agree with learned counsel for the appellant that the order of the Tribunal is vitiated by any of the defects adverted to in Dhirajlal Girdharilal v. Commissioner of Income-tax, or Omar Salay Mohamed Sait v. Commissioner of Income-tax. We must make it clear that we do not think that those decisions require that the order of the Tribunal must be examined sentence by sentence, through a microscope as it were, so as to discover a minor lapse here or an incautious opinion there to be used as a peg on which to hang an issue of law. In view of the arguments advanced before us it is perhaps necessary to add that in considering probabilities properly arising from the facts alleged or proved, the Tribunal does not indulge in conjectures, surmises or suspicions. "7. The Tribunal was trying to unravel the motive for the formation of the new firm with an old lady and two minor sons in place of Chhotalal, and what was observed by the Tribunal was in connection with the motive which suggested itself to it, and was not based on any material. Even if the Tribunal mentioned those suspicions, we do not think that they entered into the solution of the problem before it. Suspicions and surmises are best avoided ; but in the present case, the order of the Tribunal proceeded on such solid facts that the speculation about the motive of Chhotalal did not make any material difference to the finding reached, though we cannot help saying that the Tribunal would have been well-advised to leave speculation out altogether. We are of opinion that this case falls within the ruling in Gheestas case

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

Explanation:
0[ds]Regarding the first ground, it is quite obvious that there was material on which the finding could be based. If Chhotalal withdrew from the business, his wife, Lalitabai, would be left as the sole proprietor. No mention of her interest whatever was made in the subsequent deed, and she seems to have disappeared completely. On the termination of the old firm and the setting up of the new firm, one would expect some adjustment entries in the books of account, and these were singularly lacking. One would also expect a communication by the new agents to the various insurance companies in writing about the change of principal agents and an appointment letter in the name of the new firm by them. The bank accounts would have been transferred to the new partnership firm, and thein favour of Premchand and Khambatta would have been cancelled and the new firm would have been authorised to deal with the accounts. Without any such action, the decision of the Tribunal, that the firm which asked for registration was not a real firm, cannot be said to be founded on no materialIn so far as the addition of certain other reasons, which are characterised as surmises, conjectures and suspicions, is concerned, this court has observed in Gheestas case as follows" We must read the order of the Tribunal as a whole to determine whether every material fact, for and against the assessee has 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. Learned counsel for the appellant has taken us through the entire order of the Tribunal as also the relevant materials on which it is based. Having examined the order of the Tribunal and those materials, we are unable to agree with learned counsel for the appellant that the order of the Tribunal is vitiated by any of the defects adverted to in Dhirajlal Girdharilal v. Commissioner ofar Salay Mohamed Sait v. Commissioner ofWe must make it clear that we do not think that those decisions require that the order of the Tribunal must be examined sentence by sentence, through a microscope as it were, so as to discover a minor lapse here or an incautious opinion there to be used as a peg on which to hang an issue of law. In view of the arguments advanced before us it is perhaps necessary to add that in considering probabilities properly arising from the facts alleged or proved, the Tribunal does not indulge in conjectures, surmises or suspicions.Tribunal was trying to unravel the motive for the formation of the new firm with an old lady and two minor sons in place of Chhotalal, and what was observed by the Tribunal was in connection with the motive which suggested itself to it, and was not based on any material. Even if the Tribunal mentioned those suspicions, we do not think that they entered into the solution of the problem before it. Suspicions and surmises are best avoided ; but in the present case, the order of the Tribunal proceeded on such solid facts that the speculation about the motive of Chhotalal did not make any material difference to the finding reached, though we cannot help saying that the Tribunal would have beento leave speculation out altogether. We are of opinion that this case falls within the ruling in Gheestas case