Case: Commissioner of Income Tax, Bihar &amp; Orissa Vs. S.P. Jain

Bank in which were credited sum of about Rs. 38 lakhs got by the sale of those shares. Practically all these amounts were said to have been realised by the Rana by issuing bearer cheques in favour of a peon of Ashoka Marketing Co. who had been casually introduced to him. The Rana could not have been too big to go to the bank to collect these huge amounts, if he was the real owner of the money. He is said to have waited in the premises belonging to Sahu Jain Co. and sent these bearer cheques through the said peon. It is further said that with a view to see that the peon did not misappropriate the money. Rana used to send his own driver with him. If that was so, it is not explained why Rana did not give the bearer cheques to his driver himself if the driver was so trustworthy and it is not explained what the Rana did with the money so collected. The above enumerated circumstances are tell-tale. The only reasonable inference that can be drawn from those circumstances is that the Rana was a mere name lender. The conclusion reached by the Income-tax Officer and the Appellate Assistant Commissioner that the Rana was a mere name-lender is a reasonable conclusion. Neither the Tribunal nor the High Court has given any good reasons for rejecting those conclusions. 35. The next question is whether the department has established that the Rana was a benamidar for the assessee. As mentioned earlier, it is not sufficient if the department establishes that the Rana was the benamidar for somebody. It must go further and establish that the Rana was the benamidar of the assessee. There are good reasons to come to a conclusion that the Rana was the benamidar of the assessee. There are, as have been noted already :-1. The close association of the assessee with the Rana, which is evident from the record. It was the assessee who introduced the Rana to Nandlal who was a close associate of the assessee and it was Nandlal who introduced the Rana to the Allahabad Bank. Rana did not go to collect the money from the Allahabad Bank, but is said to have stayed in the premises of Sahu Jain Co., a company with which the assessee was closely associated and further a peon who gets the money from the bank was residing in the house of Sahu Jain. 11 Clive Row when the notice under Section 37 of the Act was served on him. According to this peon. A. C. Das, it was Dujaria who asked him to render that service to Rana. According to Dujaria it was the assessee Jain who introduced him to Rana and asked him to assist the Rana. It also appears from the evidence adduced on behalf of the assessee that the huge amount of about Rs. 38 lakhs collected by the Allahabad Bank was realised by the Rana by issuing bearer cheques to the above mentioned peon of Ashoka Marketing Co., an assessees concern. Further, it was the assessee who produced the so-called affidavit of the Rana but at the same time would not produce the Rana for examination for obvious reasons. 2. The D. J. C. Ltd. and M. C. Ltd., would not have sold suddenly the shares without any previous correspondence or without even informing the companys Secretary or Director, unless of course, there was intercession by some one who had influence over those companies. 3. There is no admissible evidence to establish that Rana brought a bagful of currency notes and gave it to the companies. Even if the Rana had paid the price in cash to the companies, the companies would have deposited those amounts in some bank. On the other hand, those companies are said to have given the entire price realised by the sale of the shares immediately as a loan to one Durga Prasad on the basis of the two promissory notes. In discussing this aspect we had pointed out the incongruity in the first and the second statement of Durga Prasad to show that the loan of Rs. 10,80,000/- was said to have been given to him by the vendor companies in one lump sum that he carried this huge amount from Calcutta to Nagpur and gave it to his Munim and that he never deposited that amount in any bank. There is also a total absence of any material to show how Durga Prasad had spent these amounts. All these circumstances would clearly indicate that the story is a fictitious one and that the alleged loan to Durga Prasad is a pure fabrication. It is therefore clear that Durga Prasad is no other than a mere puppet of the assessee. 4. The shares alleged to have been purchased by the Rana were found to be in possession of Ashoka Marketing Co. a concern practically owned by the assessee. Unless the assessee was the purchaser of those shares, the shares could not have been in the possession of the Ashoka Marketing Co. It is reasonable to assume that after the alleged sale, the assessee was in possession of the shares through Ashoka Marketing Company. 5. After the shares were sold the money was collected and brought from the bank as pointed out above by the peon A. C. Das of the Ashoka Marketing Co. on nine bearer cheques and according to A. C. Das he paid those amounts to the Rana in the premises of the assessee Sahu Jain at 11 Clive Row. 36. From the circumstances above enumerated, the Income-tax Officer and the Appellate Assistant Commissioner were fully justified in drawing an inference that the Rana was a name lender for the assessee. Neither the Tribunal nor the High Court has given good reasons for displacing the conclusions reached by the Income-tax Officer and the Appellate Assistant Commissioner. They had a duty to examine the reasons given by those authorities before rejecting them.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]17. In this case the revenue had in its application under Section 66 of the Act asked for specific reference on the question:"Whether on the facts and in the circumstances of the case the finding of the Tribunal that a sum of Rs. 10,80,000/- paid for the purpose of the shares was not assessees own income was a perverse finding having regard to the evidence on the record ?"This question was repeated in its application under Section 66 (2) but perhaps the High Court thought that questions 2 and 3 on which it directed the Tribunal to state a case would cover the scope and ambit of question 3 on which the revenue had asked for reference. We think that the two questions on which the reference has been made impugn the finding and the validity of the Tribunals conclusion that Rs. 10,80,000/- was not an income from undisclosed sources, but was the product of a genuine sale by the vendor companies. Though this question does raise the validity of the finding given by the Tribunal, we have to ask ourselves the question, in what circumstances will this Court interfere with the finding given by the Tribunal or arrive at a different conclusions to that arrived at by it18. In our view, the High Court and this Court have always the jurisdiction to intervene if it appears that either the Tribunal has misunderstood the statutory language, because the proper construction of the statutory language is a matter of law, or it has arrived at a finding based on no evidence or where the finding is inconsistent with the evidence or contradictory of it or it has acted on material partly relevant and partly irrelevant or where the Tribunal draws upon its own imagination, imports facts and circumstances not apparent from the record or bases its cosnclusions on mere conjectures or surmises or where no person judicially acting and properly instructed as to the relevant law could have come to the determination reached. In all such cases the finding arrived at are vitiated31. Another important factor to be considered is that after the shares were transferred in the name of Rana in 1955, Rana is said to have opened an account in his name in the Allahabad Bank and was said to be selling them in the market in lots and whenever their sale proceeds accumulated he would withdraw it by cheques. Nandan Lal Podar said, he introduced Rana to the Bank. It also appears that Podar was a Director and a close associate of the assessee. There is no discussion of this persons evidence by the Accountant Member though Judicial Member thought that it was unsatisfactory. In the course of one year i.e. from April, 1955 to 1956 Rana is alleged to have withdrawn large amounts by nine cheques aggregating to Rs. 38 lakhs. These cheques were said to have been sent for by Rana sitting at 11 Clive Row, Calcutta which is the address of the assessee and also of the Sahu Jain concerns. These cheques were bearer cheques for lakhs of rupees and encashed through one A. C. Das, peon of Ashoka Marketing Ltd. The letters of authorisation given to Das were typed in identical form bearing only the signature of Rana, the other entries having been filled up by someone else. These large amounts brought by A. C. Das in cash were handed over in the office of Sahu Jain concerns. A. C. Das states that he was directed to render this service for the Rana by T. D. Dujari, Dujari said that when he had gone to Jain (assessee) for office work the latter introduced him to Rana and asked Dujari to assist Rana if the latter so desired and that some days later Rana came to him with a request for a bearer to fetch money from the bank and that Rana himself handed the cheques to A. C. Das. The Judicial Member thought that this raises some doubt on the genuineness of Ranas transactions. The Accountant Member thought that the statement of A. C. Das was positive evidence and the Department had not produced any material to show that the moneys were actually withdrawn from the Bank and collected on behalf of the assessee. This again was an unreasonable assumption for the only way that fact could have been proved is to establish primary facts from which an inference that it was the assessee to whom the amount was paid could be drawn. It cannot be expected of A. C. Das, an employee of assessees concern and who was reluctant to appear before the Income-tax Officer to state that he in fact gave the money to the assessee. The Accountant Member however would have relied on that evidence for he says "if it had been established that A. C. Das was in the employ of Ashoka Marketing Ltd. in 1955-56, it would have cast a serious doubt about the acceptability of the evidence of A. C. Das". This observation overlooks the fact that A. C. Das in his deposition made on 18th December, 1962 stated that he used to receive pay from M/s. Ashoka Marketing Ltd. and in the Remand Report of I. T. O. dated 12th April 1963 it was observed that there was documentary proof that A. C. Das was an employee of the Ashoka Marketing Ltd. None of the contradictions in A. C. Dass evidence mentioned in the remand report dated 12th April, 1963 were adverted to or discussed by the Tribunal. It also did not notice that A. C. Das was really the assessees witness which is borne out by what was stated in that remand report that A. C. Das continued to be an employee of Sahu Jain Group of Companies, that he was ultimately found in the house of Sahu Jain at 11 Clive Row, Calcutta when a notice under Section 37 was served on him on 9th November 1962 asking him to appear on 12th November, 1962 and that he actually turned up on 17th November, 1962. Dealing with this aspect, the Income-tax Officer observed "this period of absence was rather meaningful." This has not been discussed or commented upon by the Tribunal nor has it considered any of the adverse circumstances referred to by the Income-tax Officer in his remand report in which he discussed the improbability of the story of the withdrawal of the moneys by A. C. Das as an agent of Rana32. We have already pointed out the improbability of the story of Durga Prasad that he received Rs. 10,80,000/- at the counter of the Allahabad Bank. The positive statement that the loan was given to him by the assessee and that he took this amount personally to Tumsar travelling in the Calcutta Mail, though retracted, was relied upon by the Income-tax Officer for the conclusion that this amount was lent by the assessee and it was income from undisclosed sources33. From the above discussion it is clear that the findings reached by the Tribunal are wholly vitiated. No judicial tribunal properly instructed could have arrived at those findings. We are therefore constrained to ignore those findings and re-examine the issues arising for decision on the basis of the material on record34. The question then is, whether the department has satisfactorily established that Rana was not the real purchaser of the shares and that he was a mere namelender.We have broadly stated the relevant facts earlier. We will now summarise the facts and circumstances - even at the risk of some repetition - which go to establish that the Rana was a mere namelender.They are :-1. There is no evidence to show that the Ranas financial position was such that he was in a position to purchase the shares in question. It is not shown that he had any bank balance either in this country or in any other country2. The Rana has not cared to appear before the authorities under the Act though several opportunities were afforded to him to do so for explaining the circumstances under which he purchased those shares3. The purchase price of the shares amounting to several lakhs of rupees was not paid by cheque or cheques. The same is said to have been paid in cash. This is a wholly improbable circumstance4. The Rana had not entered into any correspondence with the companies concerned for the purchase of the shares. He had not engaged the services of any brokers for making purchases. It is not shown how the Rana came to know that the companies in question were wanting to sell the shares5. It is not shown why the transaction in the said shares should have taken place in the presence of Wood. Wood had nothing to do with the transactions. Neither the Rana nor the companies which sold the shares had any dealings with the Allahabad Bank at the relevant time. The share scrips were not in the possession of the Allahabad Bank. The money was not paid through the Allahabad Bank. The letters of Wood on which considerable reliance was placed did not bear any office serial number. No copies of those letters were available in the Allahabad Bank. It is not explained how Wood came into the picture6. If Rana was the purchaser of the shares, he should have been in possession of the share scrips. They were his documents of title. We have earlier pointed out that the share scrips were in the possession of Ashoka Marketing Co. It is not explained how those scrips happened to be in the possession of the Ashoka Marketing Co7. Even after the alleged sale of the shares in favour of the Rana, Rana did not take any steps to have the shares registered in his name for nearly 11/2 years. This circumstance again is not explained8. The Rana did not care to collect the huge dividends that were declared in respect of those shares totalling about Rs. 2 lakhs for a year and half9. The Rana never cared to attend any general meeting of the company nor did he appoint any proxy on his behalf10. It was only when the price of those shares went up in the market and that when they had to be sold the Rana is said to have opened an account in the Allahabad Bank in which were credited sum of about Rs. 38 lakhs got by the sale of those shares. Practically all these amounts were said to have been realised by the Rana by issuing bearer cheques in favour of a peon of Ashoka Marketing Co. who had been casually introduced to him. The Rana could not have been too big to go to the bank to collect these huge amounts, if he was the real owner of the money. He is said to have waited in the premises belonging to Sahu Jain Co. and sent these bearer cheques through the said peon. It is further said that with a view to see that the peon did not misappropriate the money. Rana used to send his own driver with him. If that was so, it is not explained why Rana did not give the bearer cheques to his driver himself if the driver was so trustworthy and it is not explained what the Rana did with the money so collectedThe above enumerated circumstances are tell-tale. The only reasonable inference that can be drawn from those circumstances is that the Rana was a mere namelender.The conclusion reached by the Income-tax Officer and the Appellate Assistant Commissioner that the Rana was a mere name-lender is a reasonable conclusion. Neither the Tribunal nor the High Court has given any good reasons for rejecting those conclusions35. The next question is whether the department has established that the Rana was a benamidar for the assessee. As mentioned earlier, it is not sufficient if the department establishes that the Rana was the benamidar for somebody. It must go further and establish that the Rana was the benamidar of the assessee. There are good reasons to come to a conclusion that the Rana was the benamidar of the assessee. There are, as have been noted already :-1. The close association of the assessee with the Rana, which is evident from the record. It was the assessee who introduced the Rana to Nandlal who was a close associate of the assessee and it was Nandlal who introduced the Rana to the Allahabad Bank. Rana did not go to collect the money from the Allahabad Bank, but is said to have stayed in the premises of Sahu Jain Co., a company with which the assessee was closely associated and further a peon who gets the money from the bank was residing in the house of Sahu Jain. 11 Clive Row when the notice under Section 37 of the Act was served on him. According to this peon. A. C. Das, it was Dujaria who asked him to render that service to Rana. According to Dujaria it was the assessee Jain who introduced him to Rana and asked him to assist the Rana. It also appears from the evidence adduced on behalf of the assessee that the huge amount of about Rs. 38 lakhs collected by the Allahabad Bank was realised by the Rana by issuing bearer cheques to the above mentioned peon of Ashoka Marketing Co., an assessees concern. Further, it was the assessee who produced the so-called affidavit of the Rana but at the same time would not produce the Rana for examination for obvious reasons2. The D. J. C. Ltd. and M. C. Ltd., would not have sold suddenly the shares without any previous correspondence or without even informing the companys Secretary or Director, unless of course, there was intercession by some one who had influence over those companies3. There is no admissible evidence to establish that Rana brought a bagful of currency notes and gave it to the companies. Even if the Rana had paid the price in cash to the companies, the companies would have deposited those amounts in some bank. On the other hand, those companies are said to have given the entire price realised by the sale of the shares immediately as a loan to one Durga Prasad on the basis of the two promissory notes. In discussing this aspect we had pointed out the incongruity in the first and the second statement of Durga Prasad to show that the loan of Rs. 10,80,000/- was said to have been given to him by the vendor companies in one lump sum that he carried this huge amount from Calcutta to Nagpur and gave it to his Munim and that he never deposited that amount in any bank. There is also a total absence of any material to show how Durga Prasad had spent these amounts. All these circumstances would clearly indicate that the story is a fictitious one and that the alleged loan to Durga Prasad is a pure fabrication. It is therefore clear that Durga Prasad is no other than a mere puppet of the assessee4. The shares alleged to have been purchased by the Rana were found to be in possession of Ashoka Marketing Co. a concern practically owned by the assessee. Unless the assessee was the purchaser of those shares, the shares could not have been in the possession of the Ashoka Marketing Co. It is reasonable to assume that after the alleged sale, the assessee was in possession of the shares through Ashoka Marketing Company5. After the shares were sold the money was collected and brought from the bank as pointed out above by the peon A. C. Das of the Ashoka Marketing Co. on nine bearer cheques and according to A. C. Das he paid those amounts to the Rana in the premises of the assessee Sahu Jain at 11 Clive Row36. From the circumstances above enumerated, the Income-tax Officer and the Appellate Assistant Commissioner were fully justified in drawing an inference that the Rana was a name lender for the assessee. Neither the Tribunal nor the High Court has given good reasons for displacing the conclusions reached by the Income-tax Officer and the Appellate Assistant Commissioner. They had a duty to examine the reasons given by those authorities before rejecting them.