Case: Roshan-Di-Hatti Vs. Commissioner Of Income Tax

for taking additional evidence before the Tribunal and if the Members of the Tribunal wanted to examine Roshan Lal on any aspect of the case, they should have followed this procedure. But, unfortunately, the Members of the Tribunal, disregarding the prescribed procedure, put questions to Roshan Lal in an informal manner unauthorised by the rules. The answers given by Roshan Lal could not in the circumstances form part of the record and the Tribunal was not entitled to rely upon the same in arriving at its findings of fact. It may be noted that the High Court also took the view that the procedure adopted by the Tribunal was irregular and the answers given by Roshan Lal should be left out of accountOne other circumstance on which the Tribunal relied was that notwithstanding the Press Note issued by the Government of India in January, 1952, the assessee did not declare that it had brought assets of the value of Rs. 3, 33, 414 from Pakistan and this circumstance, according to the Tribunal, cast considerable doubt on the version put forward by the assessee. Now, the Press Note of the Government of India was not produced before us but we will assume that it did promise a certain concession to the evacuees who declared the assets brought by them from Pakistan. Even so, we fail to see how it could be utilised as a circumstance militating against the explanation of the assessee. Both according to the Appellate Assistant Commissioner as well as the Tribunal, the assessee did bring assets worth Rs. 1, 00, 000 from Lahore in June, 1947, and these assets were admittedly not disclosed by the assessee despite the Press Note issued by the Government of India. Then, how, could any inference be drawn from the non-disclosure of the assets by the assessee that the assessee must not have brought assets representing the balance of Rs. 2, 33, 414 ? Whether the assets brought by the assessee were Rs. 1, 00, 000 or Rs. 3, 33, 414, the fact remains that they were not disclosed by the assessee despite the Press Note of the Government of India and hence no adverse inference could be drawn from-the fact of non-disclosure of the assets by the assessee. 6. It will, therefore, be seen that there was no material on the basis of which the Tribunal could come to the conclusion that though the assessee had a fairly large business in Lahore and had brought its entire ornaments, jewellery and cash from Lahore and deposited the same in a sealed trunk with the Amritsar branch of the Imperial Bank of India, these ornaments, jewellery and cash, were worth not more than Rs. 1, 00, 000. One may also ask the question that if the assessee did not bring assets worth more than Rs. 1, 00, 000 from Lahore, where and how did it get the remaining assets of the value of Rs. 2, 33, 414 ? Roshan Lal had come away from Lahore as a refugee and conditions in post-partition India were also highly unsettled and the clear and undoubted evidence was that neither Roshan Lal nor the assessee had any business or other means of income in India until 30th March, 1948. In this situation, it is impossible to believe that the assessee could have earned such a huge amount of profit of Rs. 2, 33, 414 within a few months, even if it be assumed that some business was started by it in October, 1947, when Roshan Lal came down to Delhi. The utter improbability, amounting almost to impossibility, of the assessee having earned such a large amount of Rs. 2, 33, 414 as profit within a few months in the disturbed conditions which then prevailed in India was a circumstance which ought to have been taken into account by the Tribunal but which the Tribunal unfortunately failed to do. It may be pointed out that it was not the case of the revenue that the books of account of the business were subsequently written up and the entry crediting the capital of Rs. 3, 33, 414 on 30th March, 1948, was not a genuine entry and the undisclosed profits of the subsequent years were sought to be concealed by showing a bogus entry of Rs. 3, 33, 414 as capital contribution on 30th March, 1948. If such had been the case, the present argument as to the improbability of the assessee having earned such a huge amount of Rs. 2, 33, 414 within a few months, would not have been available to the assessee. But the revenue did not dispute the correctness of the entry and accepted that assets worth Rs. 3, 33, 414 were introduced in the business on 30th March, 1948, and sought to include the amount of Rs. 3, 33, 414 representing the value of these assets as undisclosed income of the assessee for the assessment year 1948-49. The only question could, therefore, be whether these assets were brought by the assessee from Lahore in June, 1947, or they represented the concealed income earned by the assessee during the period June, 1947, to 30th March, 1948. The impossibility of the assessee having earned such a huge amount of profit within a few months immediately after migration to India in the disturbed and unsettled conditions which then prevailed must, therefore, necessarily support the inference that the assessee must have brought these assets from LahoreWe are, therefore, of the view that in reaching the conclusion that out of the capital of Rs. 3, 33, 414 credited in the books of the assessee on 30th March, 1948, assets of the value of Rs. 2, 33, 414 represented undisclosed income of the assessee for the assessment year 1948-49, the Tribunal acted without any material or, in any event, the finding of fact reached by the Tribunal was unreasonable or such that no person acting judicially and properly instructed as to the relevant law would come to such a finding. 7.

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

Explanation:
1[ds]It is true that the assessee was not paying any income-tax in Lahore but, as pointed out by the Appellate Assistant Commissioner in his order, a number of letters and receipts regarding business transactions in Lahore were filed by the assessee which showed that the business in Lahore was not small and there were documents and papers which referred to dealings involving Rs. 10, 000 or more at a time and there were also several vouchers produced by the assessee relating to advertising charges paid at Lahore. The business carried on by the assessee at Lahore was, therefore, a reasonably large business though its extent could not be verified by any reliable material produced by the assessee. The assessee undoubtedly filed affidavits of Mulk Ram, Billa Mal, Dalal, Wazir Chand, Devidas Mehra and Panna Lal, but, as commented upon by the Tribunal, these affidavits were vague and could not be regarded as having much evidentiary value. Still they did go to show that the Lahore business of the assessee was a fairly large business. The Tribunal was no doubt right in commenting that primary evidence with regard to the extent of the Lahore business of the assessee was not forthcoming, but it must be remembered that the assessee was being called upon to prove the extent of its business in a territory from which the members of the Hindu undivided family had to flee for their lives and from where it was totally impossible to produce any primary evidence. Be that as it may, it was found as a fact by the Appellate Assistant Commissioner and this finding was not disturbed by the Tribunal, that the assessee "was doing fairly well in the business in Lahore". Roshan Lal, in anticipation of the partition of the country, which was soon to follow, decided to move out of Lahore in June, 1947, at a time when massacre and holocaust had not yet started and he was in a position to remove his belongings. He migrated from Lahore with all his belongings and came over to Amritsar and he brought with him a trunk which he wanted to keep in a locker in safe deposit vault of the Imperial Bank of India. He could not obtain a locker and hence he deposited the sealed trunk with the Amritsar branch of the State Bank of India instead of carrying it with him to Mussoorie. There is no documentary evidence to show as to what were the contents of the sealed trunk but, as pointed out by the Appellate Assistant Commissioner and not dissented from by the Tribunal, " it is reasonable to presume that there must have been something quite valuable in the box as otherwise the assessee would not have kept it in the custody of a bank like the State Bank of India ". There can be no doubt, as observed by the Appellate Assistant Commissioner, and not disputed by the Tribunal, that the assessee " must have had with " him quite a substantial amount either in the form of jewellery, etc., or cash, or otherwise he would not have taken the precaution of either depositing the sealed box with the State Bank of India, Amritsar, or opening a locker in a New Delhi bank ". The clear finding of the Appellate Assistant Commissioner, affirmed by the Tribunal, therefore, was that Roshan Lal did bring ornaments, jewellery and cash with him when he migrated from Lahore in June, 1947, and kept the same in a sealed trunk with the Amritsar branch of the State Bank of India. If that be so, then on what material could it be said that the ornaments, jewellery and cash brought by the assessee and kept in the sealed trunk were of the value of only Rs. 1, 00, 000 and no more. What were the materials on the basis of which the claim of the assessee that Roshan Lal had brought gold, ornaments and cash of the value of Rs. 3, 33, 414 could be rejected ?The only material relied upon by the Tribunal was that the assessee had never filed any income-tax return nor ever paid any tax on the income of its business in Lahore and the presumption must, therefore, be that the assessee did not earn any assessable income before migration from Lahore. Now, it is true that where an assessee has not paid income-tax, the presumption ordinarily must be that the assessee had no assessable income, but here the fact remains that the assessee transferred no less than an aggregate sum of Rs. 31, 094 from Lahore to New Delhi and also brought de substantial amount either in the form of jewellery, etc., or cash " and deposited the same in a sealed trunk with the Imperial Bank of India, Amritsar branch, in June, 1947. This obviously the assessee could not have done unless it had a reasonably large business in Lahore and, therefore, the fact that the assessee did not pay income-tax in Lahore cannot have much evidentiary value. All that it would show is that, as pointed out by the Tribunal, " the assessee has not been very straightforward in his dealings with the income-tax department "The Tribunal also relied upon certain answers given by Roshan Lal when he was questioned by the Members of the Tribunal at the hearing of the appeal. It must be pointed out straightaway that these answers given by Roshan Lal could not be relied upon by the Tribunal for the purpose of coming to any conclusion adverse to the assessee, because there is a procedure prescribed in rules 29, 30 and 31 of the Income-tax Appellate Tribunal rules for taking additional evidence before the Tribunal and if the Members of the Tribunal wanted to examine Roshan Lal on any aspect of the case, they should have followed this procedure. But, unfortunately, the Members of the Tribunal, disregarding the prescribed procedure, put questions to Roshan Lal in an informal manner unauthorised by the rules. The answers given by Roshan Lal could not in the circumstances form part of the record and the Tribunal was not entitled to rely upon the same in arriving at its findings of fact. It may be noted that the High Court also took the view that the procedure adopted by the Tribunal was irregular and the answers given by Roshan Lal should be left out of accountOne other circumstance on which the Tribunal relied was that notwithstanding the Press Note issued by the Government of India in January, 1952, the assessee did not declare that it had brought assets of the value of Rs. 3, 33, 414 from Pakistan and this circumstance, according to the Tribunal, cast considerable doubt on the version put forward by the assessee. Now, the Press Note of the Government of India was not produced before us but we will assume that it did promise a certain concession to the evacuees who declared the assets brought by them from Pakistan. Even so, we fail to see how it could be utilised as a circumstance militating against the explanation of the assessee. Both according to the Appellate Assistant Commissioner as well as the Tribunal, the assessee did bring assets worth Rs. 1, 00, 000 from Lahore in June, 1947, and these assets were admittedly not disclosed by the assessee despite the Press Note issued by the Government of India. Then, how, could any inference be drawn from the non-disclosure of the assets by the assessee that the assessee must not have brought assets representing the balance of Rs. 2, 33, 414 ? Whether the assets brought by the assessee were Rs. 1, 00, 000 or Rs. 3, 33, 414, the fact remains that they were not disclosed by the assessee despite the Press Note of the Government of India and hence no adverse inference could be drawn from-the fact of non-disclosure of the assets by the assesseeIt will, therefore, be seen that there was no material on the basis of which the Tribunal could come to the conclusion that though the assessee had a fairly large business in Lahore and had brought its entire ornaments, jewellery and cash from Lahore and deposited the same in a sealed trunk with the Amritsar branch of the Imperial Bank of India, these ornaments, jewellery and cash, were worth not more than Rs. 1, 00, 000. One may also ask the question that if the assessee did not bring assets worth more than Rs. 1, 00, 000 from Lahore, where and how did it get the remaining assets of the value of Rs. 2, 33, 414 ? Roshan Lal had come away from Lahore as a refugee and conditions in post-partition India were also highly unsettled and the clear and undoubted evidence was that neither Roshan Lal nor the assessee had any business or other means of income in India until 30th March, 1948. In this situation, it is impossible to believe that the assessee could have earned such a huge amount of profit of Rs. 2, 33, 414 within a few months, even if it be assumed that some business was started by it in October, 1947, when Roshan Lal came down to Delhi. The utter improbability, amounting almost to impossibility, of the assessee having earned such a large amount of Rs. 2, 33, 414 as profit within a few months in the disturbed conditions which then prevailed in India was a circumstance which ought to have been taken into account by the Tribunal but which the Tribunal unfortunately failed to do. It may be pointed out that it was not the case of the revenue that the books of account of the business were subsequently written up and the entry crediting the capital of Rs. 3, 33, 414 on 30th March, 1948, was not a genuine entry and the undisclosed profits of the subsequent years were sought to be concealed by showing a bogus entry of Rs. 3, 33, 414 as capital contribution on 30th March, 1948. If such had been the case, the present argument as to the improbability of the assessee having earned such a huge amount of Rs. 2, 33, 414 within a few months, would not have been available to the assessee. But the revenue did not dispute the correctness of the entry and accepted that assets worth Rs. 3, 33, 414 were introduced in the business on 30th March, 1948, and sought to include the amount of Rs. 3, 33, 414 representing the value of these assets as undisclosed income of the assessee for the assessment year 1948-49. The only question could, therefore, be whether these assets were brought by the assessee from Lahore in June, 1947, or they represented the concealed income earned by the assessee during the period June, 1947, to 30th March, 1948. The impossibility of the assessee having earned such a huge amount of profit within a few months immediately after migration to India in the disturbed and unsettled conditions which then prevailed must, therefore, necessarily support the inference that the assessee must have brought these assets from LahoreWe are, therefore, of the view that in reaching the conclusion that out of the capital of Rs. 3, 33, 414 credited in the books of the assessee on 30th March, 1948, assets of the value of Rs. 2, 33, 414 represented undisclosed income of the assessee for the assessment year 1948-49, the Tribunal acted without any material or, in any event, the finding of fact reached by the Tribunal was unreasonable or such that no person acting judicially and properly instructed as to the relevant law would come to such a finding.