Homi Jehangir Gheesta Vs. The
Commissioner of Income-Tax, Bombay  INSC 160 (22 September 1960)
CITATION: 1961 AIR 1135 1961 SCR (1) 770
CITATOR INFO :
RF 1986 SC1849 (10)
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).
The appellant encashed high denomination
currency notes of the value of Rs. 87,5oo and was called upon by the Income tax
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
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
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. Commissioner
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.
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
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
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 grandfather 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
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:
"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 Incometax
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
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
" 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 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,
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 considering
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
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 circumstances 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 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
Incometax 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 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