LACHMINARAYAN CHAURASIA Vs. COMMR OF INCOME TAX

JUDGEMENT

(1.) In this case the Income-tax Appellate Tribunal has referred the following question of law for the decision of the High Court under Section 66 (2) of the Indian Income-tax Act :-- "Whether in the facts and circumstances of the case, the two amounts of Rs. 5,000 and Rs. 20,500 are liable to be taxed by the Income-tax Department as secreted profits by the assessee."

(2.) The assessee had taken a lease of several forests from the Government and used to sell the timber. For the "assessment year 1945-40 the Income tax Officer found in the course of examination of 'the account books that there were cash credits to the extent of Rs. 61,000 in the capital account. It appears that on the 12th May 1944, the assessee had pledged gold coins with one Ghanshyamdas Gobardhandas of Banaras for securing a loan of Rs. 20,500. There was another sum of Rs. 5,000 obtained by the assessee on the 3rd November 1944, by pledging a gold necklace with one Nowarttandas Purusottamdas of village Barra. As regards the balance of Rs. 35,500 the case of the assessee was that the amount was raised on the mortgage of the zamindari income. The assessee filed a written explanation before the Income-tax Officer with regard to the source of these cash credits. It was alleged by the assessee that the gold coins used by him for securing the loan of Rs. 20, 500 were received from his wife and there is mention in the partition deed of the year 1912 about the allotment of the gold coins. As regards the amount of Rs. 5,000, the case of the assessee was that this amount was secured by pledging a gold necklace weighing about 60 tolas. This gold necklace belonged to the Chhoti Babu, the wife of Madho Prasad, and the ornament was given to the Chhoti Bahu as mentioned in the partition deed. The Income-tax Officer did not accept the explanation of the assessee and held that the entire amount of Rs. 61,000 should be taxed as the secreted income of the assessee. On appeal the Appellate Assistant Commissioner agreed with the views of the Income-tax Officer and confirmed the order of assessment. The matter was then taken upon appeal to the Income-tax Appellate Tribunal, and by its order dated the 10th March 1956, the Tribunal set aside the order of the Appellate Assistant Commissioner and remanded the case to him for the purpose of considering certain document produced by the assessee. The Appellate Assistant Commissioner made a detailed inquiry into the matter and found that the batwaranama was a genuine document. The finding of the Appellate Assistant Commissioner is based upon the affidavits sworn by Sri Mukundram, the only member of the panchayat who was alive. It appears that Mukundram was also examined on oath before the Appellate Assistant Commissioner, There was also an affidavit filed by Chandradhar Avasthi, Proprietor of the firm Ghanshyamdas Gobardhandas of Banaras, dated the 2nd June, 1950. The Appellate Assistant Commissioner also noticed that the transaction of pledging was recorded in the rokar bahi of the said Chandradhar Avasthi. With regard to the amount of Rs. 5,000, the Appellate Assistant Commissioner accepted the explanation of the assessee that the amount was borrowed on the pledging of the gold necklace. This transaction is noted in the rokar bahi of the assessee and moreover in the partition deed it is mentioned that a gold hasuli weighing 60 tolas has been allotted to the share of the Chhoti Bahu, namely, the wife o Madho Prasad. On these materials the Appellate Assistant Commissioner held that the explanation of the assessee was true and the amount of Rs. 5,000 represented the amount of the loan secured by the assessee on the pledging of the gold ornament. Against the order of the Appellate Assistant Commissioner there was an appeal taken by the Income-tax Department to the Appellate Tribunal. The Appellate Tribunal refused to believe the explanation of the assessee and held that the amount of Rs. 25,500 was liable to be taxed in the hands of the assessee" as secreted profits. The Tribunal, however, accepted the explanation of the assessee with regard to the amount of Rs. 35,500 said to have been raised by Madho Prasad by pledging his share of the zamindari income.

(3.) On behalf of the assessee the argument put forward by Mr. Mazumdar was that Tribunal had not applied its mind to certain important materials in the case before reaching the conclusion that the two amounts of Rs. 20,500 and Rs. 5,000 were secreted profits of the assessee from an undisclosed source and, therefore, were taxable in the hands of the assessee. Learned Counsel pointed out, in the first place, that the Tribunal came to a finding that the panchnama dated the 27th December, 1912, was not a genuine document but was an afterthought. It has been mentioned by the Tribunal in its judgment that "the award was not produced at the time of assessment and no mention of it was made at that time." This observation is unfounded because the record shows that before the Income-tax Officer Madho Prasad, the assessee, definitely stated that there was a panchnama which recorded the allotment of guineas and gold mohurs. Both the Judicial Member and the Accountant Member have not referred to the explanation of the assessee given before the Income-tax Officer. In the second place, there was the important fact that before the Income-tax Officer the assessee prayed for time to produce the receipt of the merchant Ghanshyamdas Gobardhandas, This receipt was actually produced by the assessee before the Appellate Assistant Commissioner after the case was remanded by the Tribunal when the case was heard by it on 10th March 1953. The receipt was accepted as a genuine document by the Appellate Assistant Commissioner. The panchnama was also produced before the Appellate, Assistant Commissioner who took the view that it was a genuine document. It appears that Sri Mukundram gave evidence before the Appellate Assistant Commissioner and also filed an affidavit on 2nd December 1950, consuming that he made the batwara along with the other members of the panch. The appellate Assistant Commissioner accepted the evidence of Sri Mukundram as genuine and held that the batwara was a very old piece of document and it must be accepted as genuine. The Appellate Tribunal has reversed the finding of the Appellate Assistant Commissioner, holding that the panchnama was not a genuine document, but the Tribunal has made no reference to the affidavit of Sri Mukundram nor to the evidence he gave before the Appellate Assistant Commissioner to the effect that he was present at the partition and that the panchnama was prepared in his presence. It appears that the Appellate Tribunal completely omitted to notice the evidence of Sri Mukundram and also his sworn affidavit. It is also important to notice that the Tribunal has not referred to the important fact that Chandradhar Avasthi had given a receipt with regard to the pledging of the gold coins and taking by the assessee of the loan of Rs. 20,500/-. The receipt is on the printed letter-pad of the firm, and the appellate Assistant Commissioner also noted that the transaction had been recorded in the rokar bahi of Ghanshyamdas Gobardhandas. The Appellate Tribunal has not referred to this important circumstance at all and no reason has been given by the Tribnnal why the receipt of Chandradhar Avasthi should be discarded. No reason has also been given by the Tribunal why the sworn statement of Sri Mukundram should be rejected on the question of the partition which took place on 27th December 1912. It is true that the Tribunal has stated that no share was allotted to the mother of Madho Prasad, and the view of the Tribunal is that in these circumstances the punchnama could not be a genuine document. But it does not appear from the order of the Income-tax Officer or the Appellate Assistant Commissioner or any part of the record of the case that there was an admission by the assessee that the mother was alive at the time of the alleged partition. On the contrary, the panchnama itself recites that the mother was dead before partition and, the mother had given her gold and silver ornaments, and gold coins to her two daughter-in-laws. It is obvious that the Tribunal has completely failed to notice that in the panchnama itself there is a reference to the death of the mother of Madho Prasad.