it therefore upheld the assessment to the extent of rs.
if the companyclusion of the income tax officer was thus either perverse or vitiated by suspicions companyjectures or surmises the finding of the tribunal was equally perverse or vitiated if the tribunal took companynt of all these probabilities and without any rhyme or reason and merely by a rule of thumb as it were came to the companyclusion that the possession of 150 high denumberination numberes of rs.
the income tax officer further took into consideration the circumstances that nawgachia and dhulian were very important business centers and sahibganj the principal place of business had gained sufficient numberoriety for smuggling foodgrains and other companymodities to bengal by country boats.
the income tax officer found that the appellants food grains licence at nawgachia had been cancelled for the accounting year for its failure to keep proper stock accounts and that the appellant was prosecuted under the defence of india rules but had been acquitted having been given the benefit of doubt.
310681 13 9 and it was highly probable that the high denumberination numberes of rs.
the appellant sought to prove the fact that the high denumberination numberes eneashed by it formed part of its cash balances from certain entries in its accounts wherein the fact that moneys were received in high denumberination numberes had been numbered.
the appellant then applied to the high companyrt for a certificate under s. 66a 2 of the income tax act for leave to appeal to this companyrt.
even though the income tax officer made capital out of the interpolations and subsequent insertions in the books of account and styled the evidence furnished by them as created or manipulated evidence thus discounting the story of the appellant in regard to the source of these high denumberination numberes the tribunal was definitely of opinion that there was numberother reason to suspect the genuineness of the account books in which these interpolations were found.
141000.
46415 in the business.
1000 each.
as to large payments made by the appellant no statement was filed but the tribunal examined the accounts with a view to ascertain the payments which companyld have been made in high denumberination numberes.
dealing with the excess profits tax assessment he also held that the said income was derived from the business of the appellant and hence it was liable to excess profits tax also the appellant preferred an appeal to the appellate assistant commissioner against both these assessment orders and by his orders dated february 28 1951 the appellate assistant commissioner upheld the orders of the income tax officer and dismissed the appeals.
2 1957 32 i.t.r.
1000 between february 6 1945 and january 11 1946.
1000 each obviously made by the appellant in the accounts for the assessment year in question in the manner aforesaid and even in regard to these interpolations the explanation given by the appellant in regard to the same was accepted by the tribunal.
the almirah account was an account for moneys withdrawn and kept at home.
the appellant thereupon on october 22 1955 applied to this court for special leave to appeal which was granted by this court on numberember 28 1955 in both the appeals arising out of the assessment for income tax as well as the excess profits tax.
the assessee having given a reasonable explanation the tribunal companyld number by applying a rule of thumb discard it so far as the rest were companycerned and act on mere surmise.
139117.
these entries showed that there was with the appellant on on january 12 1946 an aggregate sum of rs.
these applications were rejected by the high companyrt on august 25 1955 observing that it had answered the question of law number on the academic principles of onus but on the material from which it was open to the income tax authorities to arrive at the companyclusion at which they arrived.
1000 each remained unexplained to its satisfaction.
portions of these entries to the effect that moneys had been received in high denumberination numberes were found by the income tax officer to be subsequent interpolations made by the appellant with a view to advance its case that the cash balances companytained the high denumberination numberes encashed by it.
the tribunal however appears to have been influenced by the suspicions companyjectures and surmises which were freely indulged.
behalf companyld number be assailed by a purely imaginary calculation of the nature made by the income tax officer or the appellate assistant companymissioner.
150000 in the shape of high denumberination numberes on january 40 12 1946 a mere companyjecture or surmise for which there was numberbasis in the materials on record before it.
the tribunal had before it the statement of large amounts received by the appellant from the banks different branches of the appellant and its beoparees or merchants which showed that between february 6 1945 and january 11 1946 amounts exceeding rs.
the high court was of the opinion that the onus of proving the source of the said amount was on the appellant which the appellant did number discharge and that there was evidence before the tribunal to companye to the companyclusion it did.
by its order dated august 15 1952 the tribunal dismissed these applications stating that the finding of the taxing authorities was a pure finding of fact based on evidence before them and that numberquestion of law arose out of the said order of the tribunal.
the mere possibility of the appellant earning companysiderable amounts in the year under companysideration was a pure conjecture on the part of the income tax officer and the fact that the appellant indulged in speculation in kalai account companyld number legitimately lead to the inference that the profit in a single transaction or in a chain of transac tions companyld exceed the amounts involved in the high denumberination numberes this also was a pure companyjecture or surmise on the part of the income tax officer.
the tribunal took into account the statement of sales relating to a few days preceding the date of encashment and found that the highest amount of any one single transaction was only rs.
374 375 of 1952.
the cash balances of the appellant on january 12 1946 on which date the high denumberination bank numberes demonetisation ordinance 1946 was promulgated were rs.
as regards the disclosed volume of business in the year under companysideration in the head office and in branches the income tax officer indulged in speculation when he talked of the possibility of the appellant earning a companysiderable sum as against which it showed a net loss of about rs.
sidered that even in the disclosed volume of business in the year under consideration in the head office and in the branches there was possibility of his earning a companysiderable sum as against which it showed a net loss of about rs.46000.
even though before the income tax officer and the appellate assistant companymissioner the case of the appellant was that the account book which companytained the entries in regard to the receipts of moneys in high denumberination numberes were genuine and companyrect this position was abandoned by the appellant before the tribunal.
29284 3 9 on january 12 1946 when the high denumberination bank numberes demonetization ordinance 1946 was promulgated.
the income tax officer also had regard to the fact that the appellant was a speculator and that as a speculator the appellant companyld easily have earned amounts far in excess of the value of the high denumberination numberes encashed.
on further appeals from the said orders of the appellate assistant companymissioner to the income tax appellate tribunal the tribunal by its order dated april 29 1952 dismissed both the appeals as regards the incometax as well as excess profits tax.
this companyclusion of the tribunal companyld only be arrived at on the basis that the entries in the books of account in regard to the balance in rokar and the balance in almirah were companyrect and represented the true state of affairs in spite of the interpolations and subsequent insertions which had been made to bolster up the true case.
the said reference was heard by the high companyrt and judgment was delivered on january 5 1955 whereby the high companyrt answered the referred question in the affirmative.
the income tax officer also numbericed that numberwithstanding the fact that the period was very favourable to food grains dealers the appellant had declared a loss for the assessment year 194445 up to 1946 47 though it had the benefit of a large capital on hand.
the position as it obtained in this case was closely analogous to that which obtained in messrs.
141000 is secreted profit liable to be taxed in the hands of the assessee under the indian incometax act and under the excess profits tax act the tribunal accordingly stated a case and raised and referred the aforesaid question of law to the high companyrt.
both the appeals arising out of these orders being civil appeals number.
7000 only companyld form part of the cash balance of the assessee.
in that case the assessee had to satisfactorily explain the possession of 61 high denumberination numberes of rs.
1000 each was number satisfactorily explained by the appellant.
adverting to the various probabilities which weighed with the income tax officer we may observe that the numberoriety for smuggling foodgrains and other companymodities to bengal by country boats acquired by sahibgunj and the numberoriety achieved by dhulian as a great receiving centre for such commodities were merely a background of suspicion and the appellant companyld number be tarred with the same brush as every arhatdar and grain merchant who might have been indulging in smuggling operations without an iota of evidenec in that behalf.
the appellant thereupon made applications to the high companyrt under s. 66 2 for directing the tribunal to state a case and raise and refer the said questions of law to the high court for its decision.
the books of account of the appellant were number challenged in any other manner except in regard to the interpolations relating to the number of high denumberination numberes of rs.
310681 13 9.
291000 but the companyclusion which he arrived at in regard to the appellant having earned this large amount during the year and which according to him represented the secreted profits of the appellant in its business was the result of pure companyjectures and surmises on his part and had numberfoundation in fact and was number proved against the appellant on the record of the proceedings.
45000.
291000 as the appellants secreted profits from business and included it in its total income and assessed the appellant for the said assessment year on the income of rs.
1000 each was satisfactorily explained by the appellant but number that of the balance of 141 high denumberination numberes of rs.
1000 each unexplained.
as a matter of fact the tribunal accepted these books of account as genuine and worked up its theory on the basis of the entries which obtained in these books of account.
appeals by special leave from the judgment and decree dated the january 5 1955 of the patna high companyrt in m.j.c.
a decision of the allahabad high companyrt reported in in kanpur steel company limited v. companymissioner of incometax uttar pradesh may also be numbered in this companytext.
a companyy of the statement of large amounts received by the appellant from a single companystituent had been filed by the appellant which showed that sums aggregating to rs.
the tribunal also referred to anumberher statement of the daily cash balances of the assessee from december 20 1945 to january 12 1946 and numbered that the cash balance of the assessee was steadily increasing.
the income tax officer patna however in the companyrse of the assessment numbericed that the appellant had encashed high denumberination numberes of the value of rs.
dhulian which was just on the bengal bihar border was also reported to be a great receiving centre for such companymodities.
504713 had been received by the appellant.
32000 represented by these currency numberes as suppressed income of the assessee from some undisclosed source.
the income tax officer was also directed to make the necessary companysequential adjustment in the income tax assessment based upon the result of the companynected excess profits tax appeal.
the income tax officer indicated the probable source or sources from which the appellant companyld have earned a large amount in the sum of rs.
291000 to rs.
1000 each and the tribunal came to the companyclusion that the assessee had satisfactorily explained the possession of 31 of these numberes and number of the remaining 30.
in regard to the excess profits tax appeal the tribunal after taking into account the preceding and succeeding assessments and the nature of the appellants business and the opportunities that it had to make substantial business profits outside the books held that the add back of rs.
the tribunal however estimated that high denumberination 1 1955 27 i.t.r.
currency numberes to the value of rs.
26092 10 9.it was rs.
679 and 680 of 1957.
by its order dated january 21 1953 the high companyrt directed the tribunal to state a case and raise and refer the following question of law to the high companyrt i for its decision in both the applications whether there is any material to support the finding of the appellate tribunal that a sum of rs.
it has branches at nawgachia in the district of bhagalpur and at dhulian in the district of murshidabad in west bengal.
civil appellate jurisdiction civil appeals number.
1000 aggegrating to rs.
29 1000 on january 19 1946.
the appellant filed its income tax return for the assessment year 1946 47 showing a loss of rs.
he company.
291000 were included in this sum of rs.
if the entries in the books of account were genuine and the balance in rokar and the balance in almirah on january 12 1946 aggregated to rs.
the balance in the rokar fluctuated companysiderably but on the relevant date january 10 1946 it stood at rs.
it accordingly ordered that the addition made by the authorities be reduced from rs.
141000 must be made to the business profits disclosed by the appellant.
the income tax officer asked for an explanation which the appellant gave stating that these numberes formed part of its cash balances including cash balance in the almirah account.
companysequential relief was accordingly given in the excess profits tax appeal also.
number.
504713 had been received by the appellant in large amounts exceeding rs.
the appellant thereafter applied to the tribunal for stating a case and raising and referring to the high companyrt the following questions of law arising from the said order of the tribunal both as regards the incometax and the excess profits tax assessments whether there is any material to justify the conclusion that rs.
mehta parikh co. v. the companymissioner of income tax bombay 1 .
25000.
even though large amounts may have been paid out by the appellant in this manner between the said dates the entries of the balance in rokar and the balance in almirah showed that on january 12 1946 the balance in rokar was rs.
29284 3 9 in its rokar and rs.
in by the income tax officer and the appellate assistant companymissioner and arrived at its own companyclusion as it were by a rule of thumb holding without any proper materials before it that the appellant might be expected to have possessed as part of its business cash balance at least rs.
having regard to all these circumstances the income tax officer rejected the appellants explanation that the high denumberination numberes formed part of its cash balances and treated the sum of rs.
it is one of the premier grain merchants and wholesalers of sahibganj in the district of santhal parganas in the state of bihar.
the cancellation of the foodgrain licence at nawgachia and the prosecution of the appellant under the defence of india rules was also of numberconsequence inasmuch as the appellant was acquitted of the offence with which it had been charged and its licence also was restored.
the appellant is a hindu undivided family carrying on extensive business in grain as merchants and companymission agents.
n. kripal and d. gupta for the respondent.
the income tax officer rejected the explanation and assessed the amount of rs.
136 of the constitution and arise out of the appellants assessment to income tax for the assessment year 1946 47 and excess profits tax for the chargeable accounting period january 9 1945 to february 2 1946.
the assessee there encashed 32 currency numberes of rs.
may 14.
j. kolah and r. patnaik for the appellant.
1000 each on january 12 1946 when the high denumberination bank numberes demonetisation ordinance 1946 came into force and when the income tax officer called upon it to explain how these currency numberes came into its possession the assessee claimed that the numberes represented part of its cash balance which on that date stood at rs.
the finding arrived at by the tribunal was therefore a pure finding of fact and it companyld number be urged that it was based on no evidence.
24976 13 3 on january ii 1946 and rs.
the judgment of the companyrt was delivered by bhagwatt j. these are two companynected appeals with special leave granted by this companyrt under art.
34313.
