BAI VELBAI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This is an appeal by special leave. The appellant is the widow of one Kanji Jadhavji. Kanji Jadhavji had extensive business such as stevedoring, coal hauling, freight brokerage, clearing and forwarding of goods, loading and unloading of steamers, chartering of steamers, etc. These business the widow inherited on the death of her husband. For the assessment year 1947-48, the relevant accounting year being the calendar year 1946, the appellant was assessed on a total Income of Rs. 3,69,371 which was subsequently reduced to Rs. 2,99,471 by the Appellate Assistant Commissioner. While assessing the appellant, the Income-tax Officer concerned added a sum of Rs. 1,38,000 being the amount of certain high denomination notes encashed by the appellant, as income from undisclosed source. Being aggrieved by this addition, the appellant appealed to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner asked the Income-tax officer to prepare from the records in the possession of the department statements of the income returned and income assessed in the hand of the appellant for the years 1931 to 1945. These statements were duly prepared. The Income-tax Officer also prepared statements of the capital accounts in the different books of the appellant and the amounts withdrawn by her therefrom, for the assessment years 1936-1937 to 1946-1947. No books of account were, however, available for the year 1944-1945 and for the first four months of 1945-1946, some of these books, it was stated, were destroyed as a result of an explosion which took place in the Bombay docks on April 14, 1944. By the time the appeal was heard the Appellate Assistant Commissioner who had called for the aforesaid statement was transferred. His successor-in-office who dealt with the appeal held that the Income-tax Officer was justified in adding Rs. 1,38,000 as income from undisclosed sources. The appeal was accordingly dismissed. Then, there was an appeal to the Income-tax Appellate Tribunal, Bombay. By its order dated May 6, 1959, the Appellate Tribunal held that there was no positive and tangible proof to correlate the encashment of high denomination notes worth Rs. 2,38,000 with any previous saving or withdrawals of the appellant. It, therefore, dismissed the appeal. It may be stated here that the appellant had encashed 246 high denomination currency notes of the total value of Rs. 2,46,000 at the time when the High denomination Notes (Demonetisation) Ordinance was promulgated in January, 1946. At that time the appellant made a declaration to the effect that the sources from which she had come into possession of the high denomination notes were (1) movable and immovable properties including cash left by her husband, (2) the profits which she was made from the business of her husband inherited by her, (3) rents and income from her landed propertied, (4) the moneys she had withdrawn from the said business from time to time and (5) three fixed deposits which the appellant had in three banks, these deposits having been withdrawn in 1942 when there was a panic arising out of the Second World War. Out of the aforesaid 246 notes the Income-tax Officer held that eight notes formed part of day-to-day cash balance of the business of the appellant. As regards the remaining 238 notes, the Income-tax Officer held that a sum of Rs. 1,00,000 could at most be treated as representing the saving of the appellant from all source; therefore, he held that the remaining sum of Rs. 1,38,000 was the appellants income from undisclosed sources.

(2.) The appellant then moved the Tribunal for referring certain questions of law which according to her arose out of the Tribunals order dated May 6, 1959, to the High Court under section 66(1) of the Income-tax Act, 1922. In her true scope and effect the questions really were three in number : (1) whether there was any evidence or material to support the finding of the Tribunal that the Sum of Rs. 1,38,000 represented the appellants income from undisclosed sources; (2) whether the conclusion arrived at by the Tribunal that the sum of Rs. 1,38,000 was the appellants income from undisclosed sources was perverse in the sense that no reasonable man could come to it on the materials on record; and (3) whether the said conclusion was based on conjecture, surmise or suspicion and on a failure to consider relevant evidence in the record.

(3.) The Tribunal rejected the application holding that no question of law arose out of its order dated May 6, 1959. The appellant then moved the High Court under section 66(2) of the Act for an order directing the Tribunal to state a case on the questions of law which according to the appellant arose out of the Tribunals order. This application was summarily dismissed by the High Court on March 27, 1961. The appellant then moved this court for special leave to appeal from the order of the High Court dated March 27, 1961. This court granted special leave and the present appeal has been preferred in pursuance of the leave so granted.