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PETITIONER: HOMI JEHANGIR GHEESTA

       Vs.

RESPONDENT: THE COMMISSIONER OF INCOME-TAX, BOMBAY

DATE OF JUDGMENT: 22/09/1960

BENCH: DAS, S.K. BENCH: DAS, S.K. HIDAYATULLAH, M. SHAH, J.C.

CITATION:  1961 AIR 1135            1961 SCR  (1) 770  CITATOR INFO :  RF         1986 SC1849  (10)

ACT: Income tax-Assessment-Income from undisclosed source-Refusal by  Appellate  Tribunal to state a case-Summary  refusal  by High  Court to direct a reference-Question of law, when  can be  said  to  arise from the order  of  the  Tribunal-Indian Income-tax Act, 1922 (XI of 1922), s. 66(2).

HEADNOTE: The  appellant encashed high denomination currency notes  of the value of Rs. 87,5oo and was called upon by the Incometax Officer  to  submit  a return for the  relevant  year.   The appellant  made  three statements,  discrepant  in  material particulars,  at different stages as to how he received  the amount.  The Income-tax Officer held that the true nature of the  receipt  had not been disclosed, treated it  as  income from  an  undisclosed source and assessed  him  accordingly. The  Assistant Commissioner of Income-tax upheld that  order on  appeal.   On a further appeal,  the  Appellate  Tribunal reviewed  the  facts, considered the  discrepancies  in  the appellant’s  case and affirmed the order of assessment.   An application  for a reference to the High Court  having  been made under s. 66 of the Indian Income-tax Act, the  Tribunal held  that  no  question of law arose  from  its  order  and dismissed  the  same.  The High Court  thereafter  summarily dismissed  the  application made by the appellant  under  s. 66(2)  of the Act.  Against that order of summary  dismissal special leave to appeal was obtained from this court and the sole  question for determination in the appeal  was  whether the  order of the Tribunal on the face of it  disclosed  any question of law and if the High Court was right in summarily dismissing the application under s. 66(2) of the Act. Held,  that no question of law arose from the order  of  the Tribunal and the appeal must fail. In order to decide whether the principles laid down by  this court  in Dhirajlal Girdharilal v. Commissioner  of  Income- tax,  Bombay,  (1954) 26 I.T.R. 736 and Omar  Salay  Mohamed Sait v. Commissioner of Income-tax, Madras, (1959) 37 I.T.R. 151, applied to a particular case, it was necessary to  read the order of the Tribunal as a whole for determining whether

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or not it had properly considered the material facts and the evidence, for and against, in coming to its final conclusion and  whether  any  irrelevant  consideration  or  matter  of prejudice had vitiated such conclusion.  Those decisions  do not require that the order of the Tribunal must be  examined sentence by sentence so as to discover a minor lapse here or an  incautious  opinion  there and rest a  question  of  law thereon.                             771 Dhirajlal Girdharilal v. Commissioner of Income-tax, Bombay, (1954) 26 I.T.R. 736 and Omar Saley Mohamed Sait v.  Commis- sioner   of  Income-tax,  Madras,  (1959)  37  I.T.R.   151, explained. Although  a  mere rejection of an explanation given  by  the assessee  does  not  invariably establish the  nature  of  a receipt., where the circumstances of the rejection are  such as  to properly raise the inference that the receipt  is  an income, the assessing authorities are entitled to draw  that inference.  Such an inference is one of fact and not of law.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 24 of 1958. Appeal  by special leave from the judgment and  order  dated October  4, 1956, of the former Bombay High Court in  I.T.A. No. 49 of 1956. R.J.  Kolah,  S. N. Andley, J. B.  Dadachanji,  Rameshwar Nath and P. L. Vohra, for the appellant. K.N. Rajagopal Sastri and D. Gupta, for the respondent. 1960.   September  22.   The  Judgment  of  the  Court   was delivered by S.K. DAS J.-For the assessment year 1946-47 the appellant Homi Jehangir Gheesta was assessed to income-tax on a  total income of Rs. 87,500 under s. 23(3) of the Indian Income-tax Act,  1922.  The circumstances in which he was  so  assessed were the following. The appellant’s case was that M. H. Sanjana, maternal  grand father  of  the appellant, died on or about  May  10,  1920. There  was  litigation between his widow Cursetbai  and  Bai Jerbanoo,  Sanjana’s daughter by his first wife,  about  the validity  of a will left by Sanjana.  Bai Jerbanoo  was  the appellant’s mother.  The litigation was compromised and  the appellant’s mother got one-third share in the estate left by Sanjana  the  total  value of which  estate  was  about  Rs. 9,88,000.   Bai Jerbanoo died in 1933, leaving  her  husband Jehangirji  (appellant’s father), her son  Homi  (appellant) and a daughter named Aloo.  It was stated, though there  was no evidence thereof, that Bai Jerbanoo left an estate  worth about Rs. 2,10,000 when she died.  The appellant was a minor at the time of 772 his mother’s death.  He had two uncles then, Phirozeshaw and Kaikhusroo.   Phirozeshaw  was  the  eldest  member  of  the family.  On his mother’s death the appellant’s share of  the estate  was Rs. 70,000.  Phirozeshaw took charge of  it  and made   investments.    He  died  on   December   12,   1945. Kaikhusroo,  younger brother of Phirozeshaw and one  of  the executors  of  his  will,  took  charge  of  the  estate  of Phirozeshaw.  When he opened a safe belonging to Phirozeshaw he  found  a packet with the name of the  appellant  on  it. That  packet contained high denomination currency  notes  of the value of Rs. 87,500.  On January 24, 1946, the appellant tendered  those notes for encashment and made a  declaration which was then necessary and in the declaration he said:

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"Legacy from my mother who died in 1933 when I was minor and money  whereof was invested from time to time by  my  father and late uncle Phirozeshaw who recently died." When  the  appellant received a notice from  the  Income-tax Officer  to submit a return of his income for  the  relevant year,  he submitted a return showing " nil "  income.   When asked  about  the  high  denomination  notes  which  he  had uncashed,  he said in a letter dated January 7,  1947,  that his  uncle Phirozeshaw who used to manage his estate  during his  minority handed over to him and his father the  sum  of Rs. 87,500 sometime before his (i. e., Phirozeshaw’s)  death in  1945.   This was a story different from  the  one  later given,  about  the opening of the safe by  Kaikhusroo  after Phirozeshaw’s death and the finding of a packet there in the name  of  the  appellant.   The  appellant  also  filed   an affidavit  before  the Income-tax Officer on  September  29, 1949,  which also contained contradictory statements.  On  a consideration  of all the materials before him, the  Income- tax  Officer  did not accept the case of the  appellant  but came  to the conclusion that the true nature of the  receipt of  Rs. 87,500 was not disclosed.  He treated the amount  as appellant’s  income  from  some  source  not  disclosed  and assessed him accordingly. The appellant preferred an appeal to the Assistant                             773 Commissioner  of  Income-tax.  At the  appellate  stage  the statements of the appellant’s father and uncle were taken by the  Income-tax  Officer, D-11 Ward, Bombay, and  a  further statement  of the appellant’s uncle Kaikhusroo was taken  by the  appellate authority.  That authority came to  the  same conclusion as the Income-tax Officer had come to. Then  there  was  an  appeal  to  the  Income-tax  Appellate Tribunal,  which again reviewed the facts of the case.   The Tribunal  pointed out the following important  discrepancies in the case sought to be made out by the appellant: "(i)  Declaration dated 24-1-1946 by the assessee says  that mother’s  legacy  was invested " by my father  and  my  late uncle Phirozeshaw ". His letter dated 7-1-1947 says that his uncle  (i.  e., Phirozeshaw) only managed his  estate.   The object  of this variation is obviously to shield his  father from  inconvenient  examination.   The  uncle  had   already departed for his eternal home. (ii)Assessee’s  letter dated 7-1-1947 says that  the  uncle Phirozeshaw handed over money " to me and my father " before his  death.   The affidavit dated  29-9-1949  tells  another story,  viz., the executor Kaikhusroo handed over  money  to the assessee after Phirozeshaw’s death.  In another part  of the said affidavit it is said that the said executor  handed over  money to assessee’s father.  The affidavit assures  us that  the declaration regarding high denomination notes  was made  on  the  information given him  by  his  father.   The assessee-son  nowhere refers to any " packet ". Indeed,  the theory  of  "  packet  "  was  pronounced  by  the  Executor Kaikhusroo  only  when  he appeared  before  the  Income-tax Officer on 22-2-1952. (iii)  In his statement dated 22-2-1952 Mr. Kaikhusroo  says that  he  " found an envelope containing Rs. 87,500  1  took charge  of  this money and handed over the money  to  Homi." Before  the Appellate Assistant Commissioner H.  Range,  the same Mr. Kaikhusroo later on said: " I handed over the packets as they were.  I did 774 not  count  the Dotes or verify the contents." Some  of  the answers  given as to " receipts " and " inventory "  by  the executor  Kaikhusroo  show  that he did not  take  even  the

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reasonable  precautions that an ordinary person would  take, not to talk of an executor." The Tribunal then expressed its conclusion thus: " We have, in these circumstances, no hesitation whatever in holding  that the assessee has miserably failed  to  explain satisfactorily  the source of the sum of Rs. 87,500.  It  is properly taxed as income." It dismissed the appeal by its Order dated October 7, 1955. The  appellant  then  moved the Tribunal  to  refer  certain questions  of  law  to  the  High  Court,  which   questions according  to  the  appellant arose out  of  the  Tribunal’s order.  The Tribunal held that no question of law arose  out of  its order dated October 7, 1955, and by its order  dated March  8, 1956, dismissed the application of  the  appellant for a reference under s. 66 of the Income-tax Act, 1922. The appellant unsuccessfully moved the Bombay High Court  by means  of  a  petition under s. 66(2).   This  petition  was summarily  dismissed by the High Court on October  4,  1956. The  appellant  then filed a petition for special  leave  to appeal  to this Court.  By an order dated December 3,  1956, this  Court  granted Special Leave to Appeal to  this  Court from  the  order of the Bombay High Court dated  October  4, 1956,  but made no order at that stage on the  petition  for special  leave  to appeal from the orders  of  the  Tribunal dated  October  7,  1955, and March 8,  1956.   The  present appeal has been filed pursuant to the special leave  granted by this Court. The short point for consideration is this-was the High Court right in summarily rejecting the petition under s. 66 (2)  ? In other words, did the order of the Tribunal dated  October 7,  1955, on the face of it raise any question of law  ?  On behalf  of  the  appellant  it  has  been  argued  that  the principles laid down by this Court in Dhirajlal  Girdharilal v. Commissioner of Income-tax, Bombay (1) apply, because though the decision of the (1) (1954) 26 I. T. R. 736.                             775 Tribunal  is  final on a question of fact, an issue  of  law arises if the Tribunal arrives at its decision by  consider- ing  material  which  is irrelevant to the  enquiry,  or  by considering  material  which is partly relevant  and  partly irrelevant,  or  bases its decision partly  on  conjectures, surmises  and suspicions.  It is contended that on the  face of  it  the decision of the Tribunal suffers  from  all  the three defects mentioned above. Learned  Counsel for the appellant has made a  grievance  of that  part  of  the order in which  the  Appellate  Tribunal states:  " We were also not told why the deceased uncle,  if he took charge of the minor’s money, did not hand it over to Bai Aloo when she became major in 1939 or even when she  got married  in  1944  ".  It is  contended  that  this  was  an irrelevant  consideration,  and  Bai  Aloo  herself  made  a statement before the Income-tax Officer, D-II Ward,  Bombay, on  February  22,  1952, in which  she  indicated  the  cir- cumstances  how she also received a sum of Rs.  85,000  from her  uncle  Phirozeshaw  before  the  latter’s  death.   She further  stated  that  she also submitted a  return  to  the Income-tax  Officer but was not subjected to any  assessment on  the sum received.  The argument of learned  Counsel  for the appellant is that it was not a relevant consideration as to  why Phirozeshaw did not hand over the money to Bai  Aloo in 1939 or in 1944, and if Bai Aloo’s statements were to  be taken  into  consideration,  they  were  in  favour  of  the appellant  in as much as no assessment was made on Bai  Aloo in respect of the sum she had received.  We do not  consider

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that  the  circumstances  referred to  by  the  Tribunal  in connection with Bai Aloo’s statement were irrelevant.   What the  Tribunal  had  to  consider  was  the  correctness   or otherwise of a story in which the mother was stated to  have left Rs. 2,10,000 out of which the heirs got one third share each.  The Tribunal had to consider each aspect of the story in order to judge of its probability and from that point  of view  it was a relevant consideration as to why  Bai  Aloo’s money  was  not paid when she became major or when  she  got married.   It was also a relevant consideration as  to  what the father of the appellant did with his 776 share of the money and the Tribunal rightly pointed out that the father took cover tinder "mixing of investments ". These were relevant considerations for judging the probability  of the  story.  The Tribunal also rightly pointed out that  the fact  that Bai Aloo was not assessed did not make the  story any more probable. The  Tribunal stated in its order that a summons was  issued to the father by the Income-tax Officer to appear before the latter  on June 23, 1950.  The father failed to comply  with the  summons.  This circumstance, it is argued,  should  not have  been  used against the appellant, because  the  record showed that the summons was served on the father on June 22, 1950, for attendance on the next day and the father wrote  a letter stating that it was not possible for him to attend on the next day and, therefore, asked for another date.  We  do not  think that this circumstance vitiates the order of  the Tribunal  which was based on grounds much  more  substantial than the failure of summons issued against him.  The  father was  actually examined later and his statements  were  taken into consideration.  One point made by the Tribunal was that no  explanation  was forthcoming as to why  the  uncle  took charge  of  the share of the appellant and his  sister  when their father was alive and why the father allowed himself to be  effaced in the matter of custody and management  of  the funds  belonging  to his children.  We  consider  that  this circumstance  was also a relevant consideration, and if  the father  was in a position to give an explanation, he  should have  done so when he made his statement before the  Income- tax Officer, D-11 Ward, Bombay, on February 8,1952. The  Tribunal states: " We were also told that the  assessee was  taking his education between 1943 and 1950 and as  such he  bad no opportunity to earn any income.  In a place  like Bombay  and particularly in the family of a  businessman,  a person may earn even when he learns." These observations  of the Tribunal has been very seriously commented on by learned Counsel for the appellant.  Learned Counsel has stated  that certificates from the school, college and                             777 university authorities were produced by the appellant  right upto 1950 which showed that the appellant was a student till 1950  and after seeing the certificates the Tribunal  should not have said-" We were also told etc." According to learned Counsel  this showed that, the finding of the  Tribunal  was coloured by prejudice.  We are unable to agree.  Even if  it be  taken that the appellant satisfactorily proved  that  he was  a student till 1950, we do Dot think that it makes  any real difference as to the main question at issue, which  was whether  the appellant received the sum of Rs.  70,000  from the estate of his mother, later increased by investments  to Rs.  87,500 in 1945.  The Tribunal rightly pointed out  that no evidence was given of the value of the estate left by the mother,  though there was some evidence of what  the  mother received  from  the estate of her father  Sanjana;  nor  was

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there any evidence of the investments said to have been made which led to an addition to the original sum of Rs.  70,000. It has been argued that it was a mere surmise on the part of the Tribunal to say that in a place like Bombay a person may earn when be learns.  Even if the Tribunal is wrong in  this respect,  we  do  not  think that it  is  a  matter  of  any consequence. We  must  read  the  order of the Tribunal  as  a  whole  to determine  whether every material fact, for and against  the assessee, has been considered fairly and with the due  care; whether  the  evidence pro and con has  been  considered  in reaching  the final conclusion ; and whether the  conclusion reached  by  the Tribunal has been  coloured  by  irrelevant considerations or matters of prejudice.  Learned Counsel for the  appellant has taken us through the entire order of  the Tribunal  as  also  the relevant materials on  which  it  is based.  Having examined the order of the Tribunal and  those materials,  we are unable to agree with learned Counsel  for the appellant that the order of the Tribunal is vitiated  by any  of the defects adverted to in Dhirajlal Girdharilal  v. Commissioner of Income-tax, Bombay (1) or Omar Salay Mohamed Sait v. Commissioner of Income-tax, Madras(2).  We must make (1) (1954) 26 I.T.R. 736. (2) (1959) 37 I.T.R. 151 778 it  clear that we do not think that those decisions  require that the order of the Tribunal must be examined sentence  by sentence, through a microscope as it were, so as to discover a minor lapse here or an incautious opinion there to be used as  a peg on which to hang an issue of law.  In view of  the arguments advanced before us it is perhaps necessary to  add that in considering probabilities properly arising from  the facts  alleged or proved, the Tribunal does not  indulge  in conjectures, surmises or suspicions. It  has  also  been  argued  before  us  that  even  if  the explanation of the appellant as to the sum of Rs. 87,500  is not  accepted,  the Department did not prove by  any  direct evidence  that  the amount was income in the  hands  of  the appellant.   We  do not think that in a case  like  the  one before  us  the Department was required to prove  by  direct evidence that the sum of Rs. 87,500 was income in the  hands of  the appellant.  Indeed, we agree that it is not  in  all cases  that  by  mere rejection of the  explanation  of  the assessee,  the character of a particular receipt  as  income can  be  said  to  have  been  established;  but  where  the circumstances of the rejection are such that the only proper inference  is that the receipt must be treated as income  in the  bands  of  the assessee, there is  no  reason  why  the assessing  authorities  should not draw such  an  inference. Such an inference is an inference of fact and not of law. For  the  reasons  given above we are of the  view  that  no question of law arose from the order of the Tribunal and  we see no grounds for interference with the judgment and  order of the Bombay High Court, dated October 4, 1956.  The appeal accordingly fails and is dismissed with costs.                      Appeal dismissed. 779