LexMESSRS. LALCHAND BHAGAT AMBICAL RAM versus THE COMMISSIONER OF INCOME-TAX, BIHAR & ORISSA
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
S.C.R. SUPREME COURT REPORTS 301 MESSRS. LALCHAND BHAGAT AMBICAL RAM v. THE COMMISSIONER OF INCOME-TAX, BIHAR & ORISSA (S. R. DAs, C.J., N. H. BHAGWATI, and M. HIDAYATULLAH, JJ.) Income-ta.<t-Assessment based on conjectures-Fact finding authority acting without evidenc~-Power of court to interfere-High Denomination Bank Notes (Demonetisation) Ordinance, z946 (Ordinance III of z946). The appellant a Hindu undivided family carryii:ig on business in grain kept its books of account according to the mercantile system and maintained in its cash books two accounts : one showing the cash balances from day to day and the other known as" Almirah account" wherein were kept large balances which were not required for the day-to-day working of the business. On January 12, 1946, on which date the High Denomination Bank Notes (Demonetisation) Ordinance, 1946, was promulgated, the cash balances of the appellant were Rs. 29,284 in its Rokar and Rs. 2,81,397 in the Almirah account. For the assessment year 1946-47 the appellant filed its Income-tax Return showing a loss of Rs. 46,415 in the business. The Income-tax Officer, in the course of the assessment, noticed that the appellant encashed high denomination notes of the value of Rs. 2,91,000 on January 19, 1946, and the explanation given by the appellant was that these notes formed part of its cash balances including cash balance in the Almirah account, but it was rejected by the Income-tax Officer relying on the following circumstances: (I) that the appellant's food grains licence had been cancelled for the accounting year for its failure to keep proper stock accounts, (2) that the appellant was prosecuted under the Defence of India Rules but had been acquitted having been given the benefit of doubt, (3) that the appellant was a speculator, and as such could easily have earned amounts far in excess of the value of the high denomination notes encashed, (4) that notwithstanding the fact that the period was very favourable to the food grains dealers the appellant had declared a loss for the assessment year 1944·45 up to 1946-47, though it had the benefit of a large capital on hand, and (5) that the appellant was one of the premier grain merchants of Sahibganj, a place which had gained sufficient notoriety for smuggling foodgrains. The Income-tax Officer came to the con- clusion that the appellant had all these probable sources from which it could have earned the sum of Rs. 2,91,000, and accordingly. he treated the sum as the appellant's secreted profits from business and included it in its total income. The Appellate Tribunal accepted the account books produced by the appellant I959 May I4. 302 SUPREME COURT REPORTS [1960(1)] x959 and examined the cash book and taking into consideration all the circumstances which had been adverted to by the Income-tax Lale/land Bhagat Officer took the view that the appellant might be expected to Ambi&al Ram have possessed as part of its business cash balance of at least v. . Rs. l,50,000 in the shape of high denomination notes on Tlte Commissioner January 12, 1946, when the Ordinance was promulgated, but that of Ineome-tru the nature of the source from which the appellant derived the remaining 141 high denomination notes of Rs. l,ooo each remained unexplained to its satisfaction. It accordingly reduced the amount considered as the secreted profits from Rs. 2,91,000 to Rs. l,41,000. On reference, the High Court held that the finding arrived at by the Tribunal was one of fact and that it could not be urged that it was based on no evidence. On appeal to the Supreme Court it was contended for the appellant that the finding arrived at by the authorities concerned, though it be one of fact, was vitiated by reason of the authorities indulging in conjectures, suspicions and surmises and basing the same on no material whatever which would go to support the same, and that, in any case, it was a preverse one which a reasonable body of men could not have arrived at on the material on the record. Held, that the Tribunal had been influenced by the suspicions, conjectures and surmises which were freely indulged in by the Income-tax Officer, and had arrived at its conclusion, as it were by a rule of thumb, without any proper materials before it and that its finding could not be sustained; that having accepted the appellant's books of account it was not open to the Tribunal to accept t
Excerpt shown. Read the full judgment & AI analysis in Lexace.