COMMISSIONER OF INCOME-TAX, CALCUTTA versus BIJU PATNAIK

Citation: [1986] 3 S.C.R. 26 · Decided: 09-05-1986 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
c 
D 
E 
F 
G 
H 
COMMISSIONER OF INCOME-TAX, CALCUTTA 
v. 
BIJU PATNAIK 
MAY 9, 1986 
[R.S. PATHAK AND SABYASACHI MUKHARJI, JJ.) 
Income Tax Act !961, s. 256(2)-Decision of Tribunal perverse 
and ignoring of all material and relevant facts-Scope of the jurisdiction 
of High Court in directing reference on question of law-High Court in 
error in not directing reference. 
The respondent-assessee claimed deductions in his assessments 
relating to the assessment years 1962-63 to 1964-65 in respect of pay-
ments of interest on loans taken from Kalinga Foundation Trust and 
others and certain dividend transactions relating to the shares of 
Kalinga Tubes, Ltd. The Income-Tax Officer issued a letter to the 
assessee requesting him, inter alia, to produce evidence and prove (i) 
that the cash credits appearing in his account in the name of Kalinga 
Foundation Trust were genuine; and (ii) that 39,000 shares of Kalinga 
Tubes Ltd. standing in the names of shareholders were not really his 
own investment. After examining the assessee's evidence and on the 
basis of documentary evidence and government records and on the basis 
of local enquiries made, the Income-Tax Officer came to the conclusion 
that no trust in the name of Kalinga Foundation Trust really existed 
and even if it existed, it had no funds of its own and that the name 
"Kalinga Foundation Trust'' was used by the assessee as a camouflage 
to put through his unaccounted money. Accordingly, all cash credits 
appearing in the books of accounts of the assessee himself or in the 
books of other concerns or persons or remittances of actual payments in 
the name of Trust were treated by the Income-Tax Officer as moneys 
coming out of the undisclosed sources of the assessee and accordingly 
assessed the same as his income from undisclosed sources. All interest 
and dividend received in the name of the Trust were included by the 
Income-Tax Officer in the assessment of the assessee as his own income. 
The Income-Tax Officer was also of the opinion that the moneys ad-
vanced in the name of the Trust to several persons in connection with 
the acquisition of 39,000 shares of Kalinga Tubes Ltd. which were 
' 
_, 
( 
CJ.T. v. B. PATNAIK 
27 
issued in 1958 actually belonged to the assessee. Accordingly, the 
dividend of the said shares was treated as the income of the assessee and 
the expenses incurred in that connection were allowed as deduction. 
The persons in whose names the 39,000 shares of Kalinga Tubes Ltd. 
stood, were treated by the Income-tax Officer as benamidars of the 
assessee. 
Against the orders of assessment, appeals were filed by the asses-
see before the Appellate Assistant Commissioner who set aside the as-
sessments for the years under consideration and remanded the matters 
back, to Income-tax Officer to frame issues and give due opportunity to 
the assessee to cross-examine the witnesses in the light of the observa-
tions made in the order. Again, against the order of the Appellate 
Assistant Commissioner, the appeals were filed. It was argued before 
the Tribunal on behalf of the appellant-assessee; (i) that on the basis of 
the facts emerging on an examination of assessee's evidence and facts 
found on the basis of documentary evidence, the Appellate Assistant 
Commissioner should have confirmed the assessments; (ii) that local 
inquiries and oral testimony had been used by the Income-tax Officer to 
support the conclusions already arrived at on an examination of asses-
see's own evidence and corroborated by documentary evidence and 
therefore the Appellate Assistant Commissioner should not have set 
aside the assessment on the ground that the persons who were examined 
by the Income-tax Officer should have been allowed to be cross-
examined by the assessee; (iii) that the gist of the enquiries had been 
communicated to the assessee to enable him to meet the case against him 
and it was for the assessee to produce before the Income-tax Officer the 
persons who had collected the funds for the Kalinga Foundation Trust 
as the Income-tax Officer was not bound by the technical rules of evi-
dence; (iv) that it had collected evidence to prove that these shares were 
purchased by the assessee benami in the names of the shareholders 
named; (v) that the assessee had created a private registered Trust in 
1949 out of his own properties having the same name as Kalinga Foun-
dation Trust and that a reference to Kalinga Foundation Trust in some 
of the doc

Excerpt shown. Read the full judgment & AI analysis in Lexace.