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Petitioner: VELJI DEORAJ & Co. VS Respondent: COMMISSIONER OF INCOME-TAX, BOMBAY CITY II
Court Name: Bombay High Court Judge(s): V. S. Desai, S. P. Kotwal Title: VELJI DEORAJ & Co. vs COMMISSIONER OF INCOME-TAX, BOMBAY CITY II Case No.: Income-tax Reference No. 71 of 1962 Date of Judgment:1967-09-13 Reported As: 1971 PTD 14 Result: orders made
JUDGMENT
JUDGMENT V. S. DESAI, J.-The following two questions, which arise out of the Tribunal's order relating to the reassessm ent of the assessee under section 34 of the Indian Income-tax Act in respect of the assessm ent year 1950-51, have been referred to this Court by the Tribunal on the requisition under section 66(2) of the Indian Income-tax Act: "(1) Whether, on the facts and under the circumstances of the case, the discretion of the Tribunal was judicially exercised in refusing to admit the important evidence in the form of the bank certificate produced by the assessee in respect of this case, that the moneys had been received by the assessee from Aden in approved manner? And (2) Whether there is any evidence on the record to justify the finding of the Tribunal to the effect that the sum of Rs. 95,483 (rupees ninety-five thousand four hundred and eighty---three) forming part of the moneys credited in the account of the non-resident, Maneklal Bhanji of Aden, in S. Y. 2005 in the assessee's books of account is the assessee's own money representing his income from an undisclosed source?" The assessee is a partnership firm consisting of a father and son as partners and is carrying on business as exporters and commission agents. One of the foreign parties to which goods are exported by the assessee-firm is a firm called "Maneklal Bhanji" at Aden. The assessment of the firm for the assessm ent year 1950-51, for which the relevant previous year was the S. Y. 2005 ending on 21st October 1949, was originally made by the Income-tax Officer on 14th June 1951, determining a total income of Rs. 46,836. The assessee-firm, it may be stated, is registered under section 26-A of the Indian Income-tax Act. During the assessment proceedings for the assessment year 1955- -56, corresponding to the previous year S. Y. 2010, the Income-tax Officer noticed that the account
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of Maneklal Bhanji of Aden in the account books of the assessee showed an opening credit balance of Rs. 95,483. He also found that no interest had been credited to this account. He, therefore, called upon the assessee to furnish statements of account of Maneklal Bhanji during the previous six years. In response thereto, the assessee furnished the statement of accounts as were required but produced the account books and the invoices, etc., only for the years subsequent to S. Y. 2005 and stated that the account books for the S. Y. 2005 were not available. The Income-tax Officer found that, so far as the accounts for the S. Y. 2006 to 2010 were concerned, they were quite satisfactory. He was not, however, satisfied with regard to the credit entries in favour of Maneklal Bhanji in the account for the S. Y. 2005, for which no account books were produced and had reason to believe that a part of the income of the assessee for the year, as represented by certain credits, had escaped assessm ent. After obtaining the necessary sanction from the Commissioner of Income-tax; he started re-assessme nt proceedings against the assessee under section 34(1) in respect of the assessm ent for the assessment year 1950-51. In the course of this assessment proceeding, the assessee was called upon to produce the account books for the S. Y. 2005 and for the subsequent years. The assessee declined to produce the account books for the S. Y. 2005 on the ground that the said account books were not traceable. The Income-tax Officer took the view that the explanation of the assessee that the account books were not traceable was not genuine and he was deliberately not producing the account books for the said year. He, therefore, decided to make the assessm ent under section 23(4) of the Act. By his letter dated 6th August 1956, he intimated to the assessee his intention to make an assessment under section 23(4) and called upon him to supply the explanation as to why an amount of Rs. 95,483 credited in the account of Maneklal Bhanji of Aden during the course of the assessment year should not be treated as the concealed income of the assessee himself. In the said letter the Income-tax Officer pointed out to the assessee that the statement of account which it has produced, when examined along with the account books for the S. Y. 2006 to 2010, showed that in the account of Maneklal Bhanji of Aden for the S. Y. 2005 there was a total debit of Rs. 1,90,211 as the price of the goods exported to him. These debits included the value of the goods amounting to Rs. 1,26,452, which were shipped at the end of the accounting year and for which the price was received from Maneklal Bhanji during the subsequent S. Y. 2006. For the remaining goods shipped during the year which were valued at Rs. 63,759 payments were received from Maneklal Bhanji during the course of the year. It was, however, shown in this account that the total credits in favour of Maneklal Bhanji during the S. Y. 2005 were Rs. 1,50,242. The total of credits in favour of Maneklal Bhanji, therefore, exceeded the price of the goods received by him during the course of the year by an amount of Rs. 95,483. It was pointed out to the assessee that at the time when these credits were made in favour of Maneklal Bhanji, there were exchange restrictions between India and Aden and it was not normally possible for the Aden party to remit monies to India except to the extent of the value of the goods exported to him. It was, therefore, likely that the excess of credits over the price of the goods exported to Maneklal Bhanji represented the deposit of the secret profits of the assessee in the account of the non-resident. The Income-tax Officer further pointed out to the assessee that, since no repayment out of this amount had been made to Maneklal Bhanji during the six years and no interest had been credited to the account for all these years, it may as well be that Maneklal Bhanji may be unaware of this excess credit in his account and it is also likely that to the extent to which this excess amount is credited in the said account, it is a benami account of the assessee. In conclusion, the Income-tax officer called upon the assessee to submit his explanation if any, with regard to the said credits of Rs. 95,483. In reply to this letter the assessee wrote to the Income-tax Officer on 11 August 1956, submitting its explanation for the queries made by him. As to the Income-tax officer's complaint that the account books for the S. Y. 2005 were being suppressed, it was stated that the said inference was incorrect and the truth of the matter was that the accountth
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books had not been traced by the assessee. It was pointed out in that connection that there was no reason for the assessee to suppress the account books and that the same had been produced before the Income-tax Officer on the earlier occasion when they were available. The assessee further stated that the amounts of credits totalling to. Rs. 95,483 appearing in the account of Maneklal Bhanji in the S. Y. 2005 really belonged to the said party; that all those amounts had been received after the 1st of September 1947, and could, therefore, have been received by it only in a manner approved under the Foreign Exchange Regulations. - Since part of the price of the .Goods supplied to the party during the course of the year was remitted during the subsequent year, the amounts sent by Maneklal Bhanji during the S. Y. 2005 may have had a reference to certain dealings made prior to S. Y. 2005. As to the Income-tax Officer's suspicion that the Aden party may not be aware of its credits in its account, the assessee, produced along with its reply a letter and an affidavit from the Aden party. As to the fact that no repayments had been made out of that account and the fact that no interest was charged on the amount the assessee replied that the repayments could not be made because of the exchange regulations and as to interest not being charged, it was because no interest was claimed by the assessee from the Aden party when there was a debit balance in the account of the Aden party and, therefore, no interest was credited for the excess credit in his favour. The Income-tax Officer was not satisfied with the explanation submitted by the assessee and did not accept the assessee's case that the amount belonged to the foreign party. According to him, having regard to the exchange regulations, it was not likely that the Reserve Bank would allow remittances in excess of the value of the goods shipped as mentioned in the invoices. The assessee no doubt has stated that these were remittances made in an approved manner, but it has not substantiated it by producing any proof. As to the explanation given by the assessee that remittances may have reference to payments for goads of earlier years, the' Income-tax Officer has held that the said explanation was absolutely untrue as at the beginning of S. Y. 2005 there was an opening credit balance in favour of the Aden party. Moreover, he has pointed out that the assessee in its explanation had submitted two contradictory explanations because, while at one stage it stated that some of the remittances may, have some connection with goods supplied during the earlier years, at another stage it stated that these payments were in respect of advance payments, which had remained to be repaid because of the exchange regulations and restrictions. The circumstance that the explanations given by the assessee were inconsistent and contradictory indicated, according to the Income-tax Officer, that neither of them was true. In the absence of the foreign party having been produced before him, the Income-tax Officer was not prepared to give any importance to the letter or the affidavit of the Aden party, which were sought to be produced by the assessee. Having regard to the facts and circumstances of the case, the Income-tax Officer held that the assessee had failed to satisfy him that the amount of Rs. 95,483 belonged to the Aden party and in view of the several circumstances discussed by him, he held that the said amount represented the concealed profits of the assessee and, therefore, liable to be included in the income of the assessee-firm. The decision of the Income-tax Officer was confirmed in appeal by the Appellate Assistant Commissioner. In the second appeal before the Tribunal, two contentions were raised by the assessee. One was that the assessm ent made under section 34(1) of the Indian Income-tax Act was invalid and the other was that inclusion of the amount of Rs. 95,483 in the income of the assessee as income from an undisclosed source was erroneous. The Tribunal negatived both these contentions and agreed with the decision taken by the Income-tax Officer and the Appellate Assistant Commissioner and dismissed the assessee's appeal. During the course of the appeal before the Tribunal the assessee sought to produce a certificate from the Amalgamated Bank of National & Grindlays, certifying that the entire amount of credits has been received from the Aden party through the bank during the S. Y. 2005. The admission of this additional evidence at the appellate stage was objected to by the
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Department and the Tribunal sustained the said objection and refused to admit the same. On the material on record the Tribunal held that the conclusion arrived at by the Income-tax Officer and the Appellate Assistant Commissioner with regard to the said amount of Rs. 95,483 was correct and agreeing with the Department it upheld the addition of Rs. 95,483 as the assessee's own money representing its income from an undisclosed source. It further held that the nature of this income from undisclosed source was also business income. The assessee applied under section 66(1) of the Indian Income-tax Act for a reference to this Court but the said application was rejected by the Tribunal on the ground that no question of law arose out of its order. The assessee then applied to this Court under section 66(2) requesting this Court to require the Tribunal to draw up a statement and refer to this Court a number of questions of law said to be arising out of the Tribunal's order. This Court, however, allowed the application only in respect of the two questions, which we have already set out above. Now, the first question is whether the Tribunal was justified in refusing to admit in the appeal before it the additional evidence which was sought to be produced by the appellant. It is contended by Mr. Mehta, the learned counsel for the assessee, that the certificate of the bank which the assessee sought to produce. Was a vital, important and clinching piece of evidence and it was necessary and proper in the interest of justice that the Tribunal should have allowed the same to be produced. Mr. Mehta has argued that the decision of the departmental authorities and the Tribunal that the amount of Rs. 95,483 is the income of the assessee and not of the Aden party is mainly based on the absence of satisfactory evidence to show that the money has been actually remitted from Aden to Bombay. The Income-tax Officer and the Appellate Assistant Commissioner have held that in view of the exchange regulations it was not possible for the Aden party to remit amounts in excess of the price of the goods received by them and consequently the case of the assessee that this is the amount remitted by the Aden party cannot be true. Mr. Mehta says that, if it is satisfactorily shown that this amount has actually come through the bank from Aden to Bombay, it would normally be the money of the Aden party and not of the assessee unless the Income-tax Officer is in a position to show that, although this purports to be the money of the Aden party remitted from Aden to Bombay, it is still the money of the assessee, which he has managed to send to Aden in the first place and thereafter got it back from there through an apparently legal process. At any rate, says Mr. Mehta that once the assessee is able to establish that this is the amount received from the Aden party and credited in the account of the Aden party, which is not a bogus account, the onus will be on the Income-tax Officer to show that it is the income of the assessee and not of the Aden party. Mr. Mehta has, therefore, argued that the certificate of the bank was almost a clinching piece of evidence which the assessee was seeking to produce and even though he might be at fault in not having produced it at an earlier stage, he should not have been dis--allowed to produce the same at the stage of the appeal before the Tribunal. Now, the power of the Tribunal to admit additional evidence in appeal is governed by rule 29 of the rules and orders relating to the Appellate Tribunal. That rule is similar in terms to Order XLI, rule 27 of the Code of Civil Procedure. Now, it is well settled that the admissibility of additional evidence in appeal under the provisions of Order XLI, rule 27 of the Civil Procedure Code is made to depend not upon the relevancy or materiality to the issue before the Court of the evidence sought to be admitted or upon the fact whether or not the applicant had sufficient opportunity of adducing the evidence at an earlier stage, but upon whether or not the appellate Court requires the evidence to enable it to pronounce judgment or for any other substantial cause. The admission of additional evidence at the appellate stage is not referable to any right of the party to produce the evidence but is dependent solely on the requirement of the Court and it is for the Court to decide whether for pronouncing its judgment or for any other substantial cause it is necessary to have the additional evidence before it. The mere fact that the evidence sought to be produced is vital and important
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does not provide a substantial cause to allow its admission at the appellate stage especially when the evidence was available to the party at the initial stage and had not been produced by him. As has been observed by the Privy Council in Parsotim v. Lal Mohar (1931 L R 58 I A 254), the rule is not intended to allow a litigant who has been unsuccessful in the lower Courts to patch up the weak parts of his case and fill up omissions in the Court of appeal. Mr. Mehta referred to the observations of Ameer A.I, J., in the Privy Council case, Indrajit Partap Bahadur Sahi v. Amar Singh (1923 L R 50 I A 183), viz., that the jurisdiction of an appellate Court under Order XLI, rule 27 of the Code of Civil Procedure, 1908, to admit additional evidence is not confined to cases in which the Court itself discovers a lacuna or defect and requires evidence to fill up or remedy it. Under the words "or for any other substantial cause" an appellate Court has a discretion to admit further evidence upon the application of a party. It may, however, be pointed out that these observations have been considered and discussed in the later decision of the Privy Council in Parsotim v. Lal Mohar where it has been held: "By the terms of Order XLI, rule 27(b), it is only where an appellate Court `requires' it (that is, finds it needful) that additional evidence can be admitted. It may be required to enable the Court to pronounce judgment, or for any other substantial cause but it must be, the Court that requires it. The power cannot be exercised on an application by a party before the appeal is heard." Referring to the earlier case, Indrajit Partap Sahi v. Amar Singh, their Lordships observed: "The question in that case was as to the power of the Board to admit additional documents which the High Court had rejected, and this power is not in any way restricted or governed by the provisions of the Code. If any incidental remarks appearing in this judgment have occasioned any doubt as to the meaning of the rules above referred to, or the conditions under which the discretion of the appellate Court is to be exercised, their Lordships desire to emphasize their view that the correct practice in the matter is as they have now defined it in accordance with the plain words of the Code." It would, therefore, be seen that the admission of the additional evidence in the appeal before the Tribunal is dependent upon the Tribunal having required it for the purpose of pronouncing its judgment or for the purpose of curing some inherent lacuna which it has itself discovered. In the present case the Tribunal found no difficulty in pronouncing its judgment on the material which was on record, nor did it discover any lacuna or defect, which it was necessary to cure, before judgment was pronounced in the case. Where parties to a litigation had proper opportunity to produce all the evidence available to them at the proper stage and have failed to avail of the said opportunity, they could not be enabled to have a further innings by asking the appellate Court to allow- additional evidence to be produced at that stage. Since in the present case the Tribunal did not find the additional evidence to be necessary, its refusal to allow the said additional evidence to be produced cannot in' any way be said to be illegal or improper and the assessee is not entitled to make any grievance in respect of the same. The first question, therefore, will have to be answered in the negative. Coming now to the other question, which is as to whether there was any evidence on record to justify the finding that the sum of Rs. 95,483 forming part of the moneys credited in the account of the non-resident, Maneklal Bhanji of Aden, in the assessee's books of account in the S. Y. 2005 was the assessee's own money representing its income from an undisclosed source, in our opinion, there was evidence on record relevant to the consideration of the said question and consequently the conclusion arrived at by the income-tax authorities and the Tribunal could not be said to have been based on no evidence. It may be pointed out in this connection that the statement of account of the Aden party for the S. Y. 2005 to 2010 which have been supplied by the assessee, show that in all these years the moneys received by the assessee from the Aden party were exactly equal to the price of the goods supplied to them by the assessee. The course of dealings show that
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for the goods exported in every year, part of the price was remitted from Aden during the course of the year and the balance in the subsequent year. It is only in the S. Y. 2005. That there is, apart from the price of the goods, an additional amount to the extent of Rs. 95,483 received from the .Aden party. There is no reason whatsoever why suddenly in one year such sum in excess of the price of the goods supplied by the assessee should have been remitted by the Aden party to the assessee. No satisfactory explanation as to the purpose for which this excess amount had been remitted by the Aden party, has been supplied by the assessee. The explanations which it sought to give were different at different stages. At the very initial stage when the Income-tax Officer, while making the assessm ent for the assessm ent year 1955-56, discovered this credit item and asked the assessee to submit an explanation, the explanation given by the assessee was to the effect that these were the amounts, which were sent for the purpose of being lent as sarafi loans and interest was credited in respect of this sum in the interest account. The explanations given by the assessee in the reopened assessm ent proceedings were varying and conflicting. It was said that the amounts may have reference to the price of the goods shipped in earlier years. It was also said that these amounts may be advance and excess payments made during the course of the dealings. It would thus be seen that the assessee was at a loss to give a satisfactory explanation as to the reason why the moneys should have come from the Aden party to him. The affidavit of the Aden party, which has been produced, stated that it was aware of the account and that the credit balance shown in the said account belongs to it. The said affidavit, however, does not state how and in what manner the credit balance has arisen in its favour nor does it speak of the amount having been remitted from Aden to Bombay. Although, therefore, the assessee has asserted that the amount belongs to the Aden party, it has not produced any satisfactory material in support of the said assertion and in view of the circumstances pointed out above, it is difficult to accept its assertion as true. The entry, being in the account books of the assessee itself, cannot advance its case any further. The other circumstances pointed out by the Tribunal and the income-tax authorities are also relevant and significant circumstances. In' the beginning of the assessment year, viz., S. Y. 2005, there was a small credit balance in favour of the Aden party. It may be pointed out that from 1947 onwards there were the exchange regulations between India and Aden and consequently remittances of money from one country to the other were governed by the said exchange regulations. In view of the fact that at the beginning of the S. Y. 2005, there was a small credit balance in favour of the Aden party, no part of the amount could be said to be attributable towards the price of the goods received earlier by the Aden party. Whether in spite of exchange regulations it was possible for the Aden party to send freely moneys in excess of the goods exported to it does not appear to be clear. The departmental authorities and the Tribunal have taken the view that in view of the said exchange regulations, it would not have been possible for the Aden party to send money in excess of the goods received by it. There is nothing on record to show that the said view taken by the departmental authorities and the Tribunal was not the correct view and that moneys were capable of being freely sent from Aden to Bombay by anybody who wanted to do so. The credits to the extent of Rs. -95,483 which have been received in the S. Y. 2005, have remained unpaid and no interest has also been charged on the said amount for several years thereafter. These circumstances again are not altogether irrelevant in considering the genuineness of the credits. In our opinion, therefore, there are certain circumstances on record relevant to the consideration of the question in issue and tending to raise an inference that the entry may not be reflecting the real situation and the amount entered in the account of the Aden party may not really be the amount belonging to the Aden party, but the concealed income of the assessee. Mr. Mehta has argued that since the account of the Aden party is a genuine account and since the entry appears in that account, it was…
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