HOMI JEHANGIR GHEESTA versus THE COMMISSIONER OF INCOME TAX, BOMBAY

770

SUPREME COURT REPORTS

[1961]

Seplember a~

HOMI JEHANGIR GHEESTA v. THE CO~fMISSIONER OF INCOME-TAX, BOMBAY

(S. K. DAs, M. HmAYATULLAH and J.C. SHAH, JJ.)

lllcome tax-Assessment-Income from undisclosed source Refusal by Appellate Tribunal lo state a case--Sumrnary refusol by High Court lo direct a reference-Q11estion of law, when can be said to arise from the order of the Tribunal-Indian Income-tax Act, r922 (XI of r922), s. 66(2).

The appellant encashed high denomination currency notes d1 the value of Rs. 87,500 and was called upon by the Income tax Officer to submit a return for the relevant year. The appel lant made three statements, discrepant in material particulars, at different stages as to h'tl"w 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 Commis sioner 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 !ram 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 ques tion 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 applica tion 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 dow~ 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 brcome-tax, Madras, (1959) 37 l.T.R. 151, applied to a particular case, it was necessary to read the order of the Tribunal as a whole for determining whether or not it had pro perly 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 Jaw thereon.

,

1 S.C.R. SUPREME COURT REPORTS

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 l.T.R. lSI, 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 Tle Commissioner .raise the inference that the receipt is an inco1ne 1 the assessing of Income-tax, authorities are entitled to draw that inference is one of fact and not of law.

inference. Such an

Bombay

1y60

I/omi jellangfr Ghcesta v.

CIVIL APPELLATE

No. 24 of 1958.

JURISDICTION: Civil Appeal

Appeal by special leave from the judgment and order dated October 4, 1956, of the former Bombay High Court in LT.A. No. 49 of 1956.

·

R. J. Kol,ah, S. N. Andley, J. B. Dadachanji, Rame8hwar Nath and P. L. Vohra, for the appellant. K. N. Rajagopal Sastri and D. Gupta, for the res

pondent.

1960. September 22. The Judgµient 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-t~x Act, 1922. The circumstances in which .he was so assessed were the following.

The appellant's ca.se was that M. H. Sanjana, mater nal grand father of the appellant,· died on or about May 10, 1920, There was litigation between his widow Cursetba.i and Bai Jerbanoo, Sanjana's da.µghter by his first· wife, a.bout the validity of a. will left by Sa.nja.na. Bai Jerba.noo 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 wa.s no evidence thereof, that Bai J er ba.noo left a.n estate worth about Rs. 2,10,000 when 'il'he appellant wa.s a minor a.t the time of she died.

S. !(. Das J.

772

SUPJlE:\IE COURT REPORTS

[ 1961)

i96o

llo"'b"Y

<;hecsta v.

his mother's c\\lath. He had two uncles then, Phiroze- shaw and K'afli.husroo, fhirozesha.w was the eldest Homi f'"""l;, member of the family;> On his mother's death the appellant's share . of the estate was Rs. 70,000. Tiu Comnd•,ionn Phirozl'Shaw took charge of it and ma.de investments. of lncomc.1ax. He died on DccPmbcr 12, 1945. Kaikhusroo, younger brother of .Phirozeshaw and one of the executors of his will, took charge of the estate of Phirozeshaw. s. K. Das J. When he opened a safe belonging to Phirozesha.w he found a packet with the name of the appellant on it. That packet contained high denc>mination currency notes of the value of Rs. 87,500. On January 24, 1946, the appellant tendered those not~s for encash ment and made a declaration which was then neces sary and in the declaration he said :

1•

"Legacy from my mother who died in 1933 when I wa.s minoc :i.nd money whereof was invested from time to time by my father and late uncle Phirozeshaw who recently died." 'Vhen the appellant reetiived a. notice from the Income ta.x Officer to 8ubmit a return of his income for the relevant year, he submitted a return showing "nil" income. When asked a.bout the high denom;nation notes which he had enc&shed, he said in a letter dated January 7, 1947, that his uncle Phirozesha.w who used to manage his estate during his minority handed over to him and his father the sum of Rs. 87,500 sometime befor11 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 Phirozesha.w's death a.nd 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 contradic the tory statements. On material~ before him, tho Income-tax Officer did not accept the case of the appellant but ca.me to the con clusion that the true nature of the receipt of Rs. 87,500 wa.s not disclosed. He treated the a.mount a.s appel lant's income from some source not disclosed a.nd assessed him accordingly.

a. consideration of a.II

The appellant preferred au a.ppea.l to the Aasista.nt

1 S.C.R. SUPREME COURT REPORTS

773

1 Commissioner of Income- tax. At the appellate stage the statements of the appellant's father and uncle H omi j ehangiY were taken by the Income-tax Officer, D-II Ward, Bombay, and a further statement of the appellant's uncle Kaikhusroo was taken by the appellate autho- The Commissionor rity. That authority came to the same conclusion as of Income-tax. the Income-tax Officer had come to.

Ghecsta v.

z96o

1

Bombay s. K. Das].

Then there was an appeal to the Income-tax Appel- late Tribunal, which again reviewed the facts of the case. The Tribunal pointed out the following import- ant discrepancies in the case sought to be made out by the appellant:

"(i) Declaration dated 24-1-1946 by the assessee !ays that mother's legacy was invested "by my father and my late uncle Phirozeshaw ". His letter dated 7-1-19!7 says that his uncle (i.e., Phirozeshaw) only managed his estate. The object of this variation is inconvenient obviously to shield his father from examination. The uncle had already departed for his eternal home.

(ii) Assessee'ipletter 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 asses see's father. The affidavit assures us that the decla ration regarding high denomination notes was made on the information given him by his father. The assessee-son nowhere refers to any " packet ". In deed,. the theory of " packet " was pronounced by the Executor Kaikhusroo only when he appeared before the Income-ta~ Officer on 22-2-1952.

(iii) In his statement dated 22-2-1952 Mr. Kaik husroo says that he "found an envelope containing Rs. 87,500 I took charge of this money and handed over the money to Homi." Before the Appellate Assistant Commissioner H. Range, the same Mr. Kai- khusroo later on said :

" I handed over the packets as they were.

I did

99

·--...,

774

SUPREME COURT REPORTS

[1961]

1 960

Hom1 jeliangir Ghtest•

v.

not count the notes or verify the contents." Some of the answers given a.s to "receipts" a.nd "inventor.v" by the executor Kaikhusroo show tha.t he did not ta.ke even the rea.sona..blo precautions t.ha.t a.n ordinary

The c,.,,,,i.<Sion" person would take, not to t.a.lk of a.n executor."

01 income-tax, The Tribunal then expressed its concluRion thus:

Bombay

"We ha.ve, in these circumstances, no hesitation s. K. Das J. whatever in holding tha.t the a.6~esseo ha.s miserably failed to ox pla.in sa.tisfa.ctorily tho source of the sum of Rs. 87,500. It dismissed the a.ppea.l by its Order da.ted Octo ber 7, 1955.

It is properly ta.xed a.s income."

The a.ppella.nt then moved the Tribunal to refer certain questions of la.w to the High Court, which ·questions according to the a.ppolla.nt a.rose out of the Tribunal's order. Tho Tribunal held that no question of law a.rose out of its order dated October 7, 1955, a.nd by its order dated Ma.rch 8, 1956, dismissed the appli cation of tho appellant for a. reference under s. 66 of the Income- ta.x Act, 1922.

The a.ppella.nt unsuccessfully moved the Bombay High Court by mea.ns of a. petition under s. 66(2). This petition wa.s summarily dismissed by the High Court on October 4, 1956. The appellant then filed a. petition for special lea.ve to a.ppea.l t-0 this Court. By a.n order da.ted December 3, 1956, this Court granted Special Lea.ve to Appeal to this Court from tho order of the Bombay High Court da.ted October 4, 1956, but made no order a.t that stage on tho petition for special leave to appeal from the orders of the Tribunal da.ted October 7, 1955, and Ma.rch 8, 1956. The present a.ppca.l ha.s been filed pursuant to tho special leave granter! by this Court.

The short point for consideration is this-wa.s the High Court right in summarily rejecting the petition under s. 66 (2) ? In other words, did the order of the Tribunal da.ted October 7, 1955, on the fa.co of it ra.ise a.ny question of la.w? On beba.lf of the appellant it has been argued that the. principles la.id down by this Court in Dhirajlal Girdharilal v. Commissioner of Income-tax, Bombay(') a.pply, because though the decision of the

l,1) (19~) a6 L T. R. ?tf>·

1 S.C.R. SUPREME COURT REPORTS

775

Tribunal is final on a question of fact, an issue of law arises if the Tribunal arrives at its decision by consider- H omi ] ehangir 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 con- The Commissioner jectures, surmises and suspicions. It is contended that 0! In,omi-tax, on the face of it the decision of the Tribunal suffers from all the three defects mentioned above.

Bombay s. K. Das J.

Gheesta v.

196o

Learned Counsel for the appellant has made a grievance of th11-t 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 marri ed 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, a_nd if ~ai Aloo's stat~ments were to be ta.kel\_jnt~ con Blderat10n, they were m favour of the appellant m as much as no assessment was made on Bai Aloo in .respect of the sum she had received. We do not con sider that the circumstances referred to by the Tribu nal '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 Tribu nal 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 pa.id when she became major oi: when she got married. It was also a relevant consideration as to what the father of the .appellant did with hill

776

SUPREME COT:RT REPORTS

[1961]

r96o

Homi .ftha,,gi, Ghecsta v.

share of the money and the Tribunal rightly point~d out that the father took cover under "mixing of investments", Theso were relevant considerations for judging tho probability of the story. The Tribunal The Commi.,soo"" also rightly pointed out that the fact that Bai Aloo of 1'ico..,,., • ., was not assessed did not mako the stcry any more

probable.

Bo••bay

S. K. Das]. ,

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 circum stance, it is argued, should not have been used against the appellant, because the record showed that the summons was sen•ed on the father on June 2~, 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 tht>ir father was alive and why the father allowed himself to be effaced in the matter of cu~tody and management of the funds belonging to his children. \Ve 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-II 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 had 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 appelfant. Learned Counsel has stated that certificates from the school, college and

f

•

•

l s.c.R: SUPREME COURT REPORTS

777

Gheesta

Bombay

1960 .

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 Hom• Jehancir Tribunal should not have said-" We were also told etc." According to learned Counsel this showed that The c0 ;;;;,,ission1r the finding of the Tribunal was coloured by prejudice. of Income-ta>, We are unable to agree. Even if it be taken that the appellant satisfactorily proved that he was a student till 1950, we do not 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, thcrogh there was some evidence of what the mother received from the estate of her father Sanjana; nor was 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 he learns. Even if the Tribunal is wrong in this respect, we do not think that it is a matter of any consequence.

s. K. Das J. ·

We must read the order of the Tribunal as a whole to determine whether every material fact, for and against the assessee, bas been considered fairly ~nd with the due care; whe~her the evidence pro and con ·bas been considered in reaching the final conclusion ; and whether the conclusion reached by the Tribunal has been coloured by irrelevant cor.siderations or matters of prejudice. Learned Counsel for the appel lant ha.s. taken us through . the entire order of tlle 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 Dkirajlal Girdkarilal v. Commissioner o/Jncome tax, Bombay(') or Omar Salay.Mohamed Bait v. Com missioner of Income-tax, Madras('). We must make

{t} (1954~26 l.T.R. 736.

(2) (1959) 37 l.T.R. ''':

778

SUPREME COURT REPORTS

[1961]

z96o

Homi j1Jia"gir GA"''" v.

it clear that we do not think that those decisions require that the order of the Tribunal m'ust be ex&· mined sentence by sentence, through & microscope as it were, so a.a to discover a. minor lapse here or an Tl• Commission" incautious opinion there to be used a.s & peg ou which to hang a.n issue of la. w. In view of the arguments advanced before us it is perhaps necessary to add that in considering probabilities properly a.rising from the facts alleged or proved, the Tribunal does not indulge in conjectures, surmise9 or Ruspicions. It ha.a also been argued before us

of Income-tax, Bombay s. K. Das J.

that even if the explanation of the appellant a.s to the sum of Rs. 87,500 is not accepted, the Department did not prove by any direct evidence that the a.mount was income in the hands of the appellant. We do not think that in a case like the one before us the Depa.rt. ment 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 ca.sea that by mere rejection of the explanation of the a.sses see, the character of a particular receipt a.s income can be said to have been established; but where the circumstances of the rejection a.re such that the only proper inference is that the receipt must be treated a.s income in the hands of the a.ssessee, there is no reason why the assessing authorities should not draw such a.n inference. Such an inference is an inference of fa.ct and not of law.

For the reasons given above we a.re of the view that no question of law a.rose 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 dismi&&ed.