C.I.T. (CENTRAL) CALCUTTA versus DAULAT RAM RAWATMULL

Citation: [1973] 2 S.C.R. 184 · Decided: 12-09-1972 · Supreme Court of India · Bench: P. JAGANMOHAN REDDY · Disposal: Dismissed
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Judgment (excerpt)

184 
C.l.T. (CENTRAL) CALCUTTA 
v. 
DAULAT RAM RAWATMULL 
September 12, 1972 
[P. JAGANMOHAN REDDY AND H. R. KHANNA, JJ.J 
Jncome Tax-Trihunal-Findings of fac1-By use of inad111issihlc, irrr~ 
lev(lnt 1naterial an issue of la\v arises. 
The Tribunal based its decision that an amount of Rs. 5 Lacs in fixed 
depoSit in the name of B represented the concealed income of rcsponde~t 
firm on following circumstances : 
(a) Explanation furnished by B with regar<l to the source of Rs. 
5,00,000 in proceedings relating to his personal assessment "·as foun,j to 
be incorrect; (b) transfer of two amounts of Rs. 5 lacs each from Cal-
cutta to Bombay and thereafter to J amnagar and the issue of fixed deposit 
receipt by the bank in the name of the ~ons of partencrs of the respon-
dent firm; 
"'~d ( c) the use of the two receipts as collateral sec :rity for 
the overdraft facility of Rs. J0,00,000 afforded to the respondent firm. 
The High Court held that the above material was not safe for holding that 
the sum of Rs. 5,00,000 belonged to the respondent lirm and that the 
Tribunal had taken into consideration the material which was not relevant 
to the issue. 
Dismissing the appeal, 
HELD : No case has been made for interfering with the judgment 
of the High Court. 
( 1) Findings on questioos of fact arrived at by the Tribunal can be 
reviewed only on the ground that there is no evidence to support it or that 
it is perverse. Further, \Vhen a conclusion has been reached on an appre~ 
ciation of a number of facts, whether that is sound or not must be deter· 
mined not by consid·ering the weight to be attached to each single fact in 
isolation but by a;sessing the cumulative effect of all the facts in their 
[1957] 31 J.T.R. 28 reforred to. 
Sree Meenakshi MiAls Ltd, v. Conunissioner of lnco1ne Ta.t, Madras, 
[1957] 31 I.T.R. 28 reierred to. 
But, when a court of fact acts on material partly relevant and partly 
irrelevant, it is impossible to say to what extent the mind of the court 
wa.s affected by the irrelevant material used by it in arriving at its finding. 
Such a finding i':i vitiated because of the use of inadmissible material and 
thereby an issue of law arises. 
Likewise, if the court of fact bases its 
decision partly on conjectures, surprises 
and suspicion and partly on 
evidence, in such a situation '30 issue of 1aw arises. ri 91 F] 
Dhirailal Gridluirilal v. Commissioner of Income Tax, Bombay, [1954) 
26 J.T.R. 736, Ddwarda (Inspector of Taxes) v. Bairstow and Another, 
[1955] 28 J.T.R. 579 and Metha Parikh & Co. v. Co111111issio11er of !nwme 
fox, Bombay, (1956] 30 J.T.R. 181 referred to. 
' 
In the present case the question for determination v.'as not whether the 
A 
B 
c 
D 
E 
F 
G 
amount of Rs. 5,00,000 belonged to B, but whether it belonged to the 
rei;pondent firm. 
The fact that B has not been to give r. satisfactory .ex-
H 
·· 
planation regarding the source of Rs. 5,00,000 would not be decisive even 
·,. 
of the matter as to whether B was or was not the owner of that amount. 
From the 'imple fact that the explanation regarding the source of money 
A 
B 
c 
D 
E 
C.l.T. v. DAULAT RAM (Khanna, J.) 
185 
furni;hed by A in whose name the money is lying in deposit, has be.ln 
found to be false, it would be a remote and far fetched conclusion to 
hold that the money beyongs to B. 
There would be in such a case no 
direct nexus between the facts found and the conclusion drawn therefrom. 
The transfer of amount of Rs. 5,00,000 from Calcutta to Jamnagar (or 
fixed deposit in the name of Baand the use soon thereafter of the fixed 
deposit receipt as a security for overdraft, facility to the respondent firm 
did not justify the inference that the amount belonged to the respondent. 
The approach of the Tribun'al in this respect is 
nlanif~stly 
~rroneous 
because it is a colrimon feature of commercial and other transactions that 
securities are offered by other persons to guarantee the payment of the 
amount which may be found due from the principal debtor. The conc.:pt 
of security and ownership are different and it would he a wholly erroneous 
approach to hold that a thing offered in security by a third person to 
guarantee the payment of debt due from the principal debtor belongs not 
lo the surety but to the principal debtor. Further B offered security for the 
overdraft facility to a firm of which his father was a partner. In the 
circumstances, the fact that B received no consideration for offering fixed 
deposi
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