1. The assessee is a registered firm having four partners, one of whom is one Durga Dutt Anantram. three partners including Durga Dutt belong to the Thard family and are related to each other. The fourth partner, Rukmanand, is however, said to be a stranger.
2. ON January 25, 1945, a sum of Rs. 2 lakhs was put in fixed deposit with the Indian Bank Ltd., at Bombay and the amount was later sent by mail transfer to the bank's branch at Pudukottah, then an Indian State. The fixed deposit receipt which was issued in the joint names of Shivkaran Thard and Radheshyam Thard on January 29, 1945, however, bears the date January 25, 1945. Shivkaran is Durga Dutt's son and Radheshyam is said to be the name of the son of Shivkaran. The address of the depositors was, 'care of Durga Dutt Anantram, Thard Bungalow, Malad, Bombay'. The fixed deposit receipt which was initially for a period of one year was renewed for another year and for a further period of three months. It matured on April 25, 1947. Shivkaran received the amount due on the receipt amounting to Rs. 2,10,227. Even though the deposit stood in the joint names of Shivkaran and Radheshyam in the bank at Pudukottah, on the security of the fixed deposit the assessee-firm obtained overdraft facilities with effect from March 28, 1945.
3. During the assessment year 1948-49 the amount of Rs. 2,10,227 was credited to the account of Shivkaran in the books of the assessee. Shivkaran already had an account with the assessee. At the end of S.Y. 2007, corresponding to 1952-53, the total amount standing to the credit of Shivkaran was Rs. 2,51,121. however, in the following year, the balance shown in the account of Shivkaran was Rs. 56,001. A sum of Rs. 2 lakhs was transferred (by Shivkaran) from the said account to the account of a firm, Bedi & Co., in which Shivkaran who described himself as 'Shivkaran & Radheshyam carrying on business under the name and style of M/s. Shivkaran Radheshyam at Indore' had become a partner along with Thard Brother Ltd., and Bedi & Co., as the other two partner, some time in 1951. Shivkaran's father, Durga Dutt, on behalf of Thard Brothers Ltd., was the financial controller of the firm, Bedi & Co., by virtue of an irrevocable power-of-attorney executed in his favour.
4. The ITO having reasons to believer that the fixed deposit of Rs. 2,04,500, which was inclusive of interest on the principal sum after the initial period of one year, belonged to the assessee-firm and the sum was not accounted for in the books, reopened the assessment of the assessee-firm for the year 1945-46. According to the original assessment made on June 30, 1947, the assessee-firm was assessed on a total income of Rs. 44,760. It was the case of the firm that the fixed deposit belonged exclusively to Shivkaran. This story was, however, rejected by the ITO as he found that Shivkaran was a young boy of about 18 years when he claimed to have embarked upon business and there was no proof of he having made any profit in the business alleged to have been carried on at Ganga Sagar in the former State of Bikaner and then at Indore. The ITO further found that the fixed deposit was at all times under the control of the assessee and the assessee had a beneficial interest in the fixed deposit though it stood in the name of Shivkaran. The ITO, therefore, included the amount of Rs. 2 lakhs as the assessee's income from undisclosed sources in the financial year corresponding to April, 1, 1945, to March 31, 1946, as the previous year.
5. In appeal, the matter was referred back to the ITO to enable him to examine all the accounts of Shivkaran Radheshyam from October 28, 1943 on wards and decided the matter afresh and make a report to the AAC. On remand, the ITO recorded the statement of Shivkaran, Durga Dutt and other persons but again rejected the story that Shivkaran had made the fixed deposit. He once again came to the conclusion that the assessee's firm was the real owner of the moneys and the moneys were the assessee's income from undisclosed sources. He accordingly sent his report to the AAC. The AAC took the view that the story of Shivkaran that he had earned huge profits was plausible and Shivkaran was the real owner of the fixed deposit as claimed by him. He further held that only for the reason that the assessee enjoyed overdraft facilities on the security of the fixed deposit, the assessee could not be said to have been the owner of the moneys. The appeal was, therefore, allowed.
6. When the matter was brought in appeal before the Appellate Tribunal by the ITO, the Tribunal framed three issues for its decisions, viz :
(1) Who made the deposit with the bank on January 25, 1945 ?
(2) Had Shivkaran who has come to won the said deposit the capacity to make such deposits and
(3) Who had enjoyed the beneficial interest in the amount ?
7. After considering the material on record the Tribunal found that Shivkaran was an untruthful witness and it was not shown that he had made profits of Rs. 2 lakhs as alleged, out of which the alleged fixed deposit was said to have been made and that Shivkaran's books contained a false entry inasmuch as the books showed a withdrawal as on January 25, 1945, at Indore while the fixed deposit was made at Bombay on January 25, 1945. The Tribunal found as a fact that Shivkaran did not own the moneys put in the fixed deposit, though the receipt was obtained by him in the joint names of himself and Radheshyam. The Tribunal has specifically mentioned in the order that these findings were not challenged before the Tribunal when the present reference was sought.
8. Considering the questions as to whether the moneys did not belong to Shivkaran and could be said to belong to the assessee-firm, the Tribunal considered three circumstances, viz., (1) The assessee having obtained overdraft on the security of the fixed deposit had the use of the moneys at all material times, (2) If the moneys which came back to the firm after the maturity of the fixed deposit really belonged to Shivkaran, he would not have been satisfied with the small interest paid by the assessee, and (3) The moneys had subsequently been shown to have been invested in Bedi & Co. as Shivkaran's capital as partner and there was evidence to show that the Thard family, to which three of the partners of the assessee-firm belonged, had a controlling interest in the limited company and Durga Dutt Anantram, a partner of the assessee-firm, not only managed the finance of the limited company but was also looking after the affairs of Bedi & Co. and thus, once again the moneys were in the control of the assessee-firm even while lying with Bedi & Co.
9. Accordingly, the Tribunal found that it was proved that the ownership of the moneys was that of the assessee though at certain times the moneys were invested benami in the name of Shivkaran. The Appellate Tribunal, therefore, reversed the order of the AAC and restored that of the ITO.
10. Arising out of this order of the Tribunal, the following question had been referred at the instance of the assessee under s. 66(2) of the I.T. Act, 1922.
'Whether there was any material on record for the finding that the sum of Rs. 2 lakhs in questions belonged to the applicant firm ?'
11. Mr. Munim, appearing on behalf of the assessee, had contended that the fact that the money did not belong to Shivkaran was the sole material before the Tribunal and it did not necessarily lead to a conclusion that the moneys belonged to the partnership firm. The learned counsel contended that the concepts of security and ownership are different concepts, and that it would be erroneous to hold that the security is not owned by the surety but by the principal debtor. It was contended by Mr. Munim that the onus was on the department to show how the assessee was connected with the amount of Rs. 2 lakhs and that there was no material on record which established a nexus between the fixed deposit amount and the assessee. Mr. Munim had heavily relied on the decision of the Supreme Court in CIT v. Daulat Ram Rawatmull : 87ITR349(SC) .
12. Mr. Joshi, on behalf of the revenue, has contended that in appreciating the finding recorded by the Tribunal that the amount of the fixed deposit belonged to the assessee-firm the totality of the circumstances found by the Tribunal had to be considered an, according to the learned counsel the finding recorded by the Tribunal cannot be said to be based on suspecious, surmises or conjectures. The learned counsel contended that the facts of the decision in Daulat Ram's case are distinguishable inasmuch as, while in that case the amount of security deposited on maturity remained with the person in whose name the deposit was made, in the instant case the money has found its way back into the funds of the assessee-partnership firm in the form of a deposit in the name of Shivkaran, thus, once again placing those funds at the disposal and under the control of the assessee-firm. We shall later refer to the Supreme Court decision in some detail. For the purposes of this reference we must proceed on the finding that the money deposited in fixed deposit did not belong to Shivkaran. The question, however, is whether it must necessarily follow from this finding that the moneys belonged to the partnership firm. In our view, it is difficult to hold that merely on the finding that the money did not belong to Shivkaran or that it was not established that Shivkaran was in a position to deposit such a large amount in fixed deposit, a finding must necessarily follow that the moneys belonged to the partnership even though no nexus is established between the money and the partnership firm. As observed in Daulat Ram's case : 87ITR349(SC) , where it was contended what was apparent was not real, the burden to establish this is on the person who alleges this. Therefore, when it is contended on behalf of the revenue that the amount kept in fixed deposit though it stood in the name of Shivkaran, really belong to the assessee-firm, the burden will be on the department to establish that the moneys belonged to the assessee-firm. Now, while it is not possible in such a case to get any direct evidence establishing a nexus between the assessee-firm and the moneys, and that it is open to the revenue to establish its case by circumstantial evidence, the nexus is not automatically established merely on the finding that money did not belong to Shivkaran. The Tribunal was conscious of this nature of approach and it has referred to three or four circumstances in support of its finding that the moneys belonged to the assessee-firm, If these three or four circumstances relied upon by the Tribunal are capable of reasonably leading to the conclusion which it has assessee but if any of these circumstances are such that they could not be relied upon for reaching the finding recorded by the Tribunal, the question will have to be answered in favour of the assessee. Dealing with the approach to be adopted in a case where a question of the kind that is referred in this reference arises, the Supreme Court has in Daulat Ram's case : 87ITR349(SC) quoted with approval the proposition laid down in Mehta Parikh and Co. v. CIT  30 ITR 181 in the following word :
'It follows, therefore, that facts proved or admitted may provided evidence to support further conclusions to be deduced from them,. which conclusions may themselves be conclusions of fact and such inferences from facts proved or admitted could be matters of law. The court would be entitled to intervene if it appears that the fact-finding authority has acted ably be entertained or the facts found are such that no person acting judicially and property instructed as to the relevant law would have come to the determination in question.'
13. Bearing this principle in mine, it is enough it we scrutinise the reasons given by the Tribunal in para. 22 of the order in which the Tribunal deals with the questions as posed by it, as follow :
'Now it only remains to see how, if Shivkaran did not make the deposit and Shivkaran did not own the moneys, can it be said that it is the assessee who made the deposit and it is the assessee who owned the moneys.
The Tribunal firstly found that at all times it was the assessee who had control over the funds because, according to the Tribunal, as long as the overdraft continued, the deposit could not have been released. The Tribunal then further found that after the deposit was released in April, 1947, the assessee once again obtained control over these funds, and if the money really belonged to Shivkaran he could not have satisfied with the small interest given by the firm, and the third circumstances, as already pointed out, was that even though the moneys were shown to have been paid to Bedi & Co. as the capital contribution of Shivkaran, that was still under the control of the partners of the assessee-firm. As a cumulative effect of these three circumstances, according to the Tribunal, 'it can be taken as proved that the ownership of the moneys was of the assessee though at certain times the moneys were invested in the benami name of shivkaran....'
14. In connection with the first circumstances, Mr. Munim has relied on the observations of the Supreme Court in Daulat Ram's case : 87ITR349(SC) , where the Supreme Court had held that a person can still be held to be an owner of a sum of money, even though the explanation furnished by him regarding the source of money was found to be not correct, and the simple fact that the explanation furnished by one in whose name the money is lying in deposit has been found to be false, it would be a remote and far-fetched conclusion to hold that the money belonged between the facts found and the conclusions drawn therefrom. The Supreme Court also further observed that it was a common feature of commercial and other transactions that securities were offered by other persons to guarantee the payment of the amount which may be found to be due from the principal debtor and the concepts of security and ownership are different and it would be a wholly erroneous approach to hold that a thing offered in security by a third person to guarantee the payment of a debt due from the principal debtor belongs not to the surety but to the principal debtor. With these observations of the Supreme Court, it would be difficult to reject the argument advanced by Mr. Munim that even though Shivkaran has not been satisfactorily able to explain the source of the amount of Rs. 2 lakhs, it did not necessarily proved that the money did not belong to Shivkaran and the fact that the fixed deposit was allowed to be used as a security for the overdraft facility to the assessee-firm did not necessarily show that the security itself belonged to the assessee-firm. Therefore, the two circumstances which were relied upon by the Tribunal, must not be considered in view of the decision of the Supreme Court in Daulat Rams' case : 87ITR349(SC) as not material for determining the questions as to whether the money belonged to the assessee-firm. If these circumstances are left out of consideration, the question of control of the partnership firm over the funds also does not arise.
15. Now, so far as the last circumstances is concerned, it appears to us that the reasoning of the Tribunal is rather unsatisfactory. Admittedly Rs. 2 lakhs which was standing to the credit of Shivkaran in the account books of the assessee have been transferred to Bedi & Co. Bedi & Co. is a partnership firm having three partners. One is the Thard Brothers Ltd., the other is Bedi & co. Ltd., and Shivkaran is the third partner. The partnership firm, Bedi & Co., had obtained a contract from the Hosing Commissioner and was in need of funds. Thard Brothers Ltd., which is a company registered under the Companies Act and is different from the partnership firm but which no doubt included three partners of the assessee-firm, had financed the firm, Bedi & Co. Now, what the Tribunal holds is that the amount of Rs. 2 lakhs standing in the name of Shivkaran must also be treated as a finance supplied by the partnership firm in the name of Shivkaran in the same manner as Thard Brothers Ltd., had done. The Tribunal then mentioned that Durga Dutt, Shivkaran's father, a partner of the assessee-firm, had full control over the affairs of the firm of Bedi & Co, and, therefore, once again the alleged capital contribution of Shivkaran was under the control of the partners of the assessee-firm. It appears that the Tribunal had been largely influenced by the fact that Durga Dutt, the father of Shivkaran, was the main person in the assessee-firm as well as in the company, Thard Brother Ltd., and he also power-of-attorney. Now, it is difficult to see how the mere fact that Durga Dutt was a common person would lead to the conclusion that the money is belonged to the partnership firm. These circumstances were, therefore, not relevant and in any case, could not reasonably lead to the conclusion that the moneys belonged to the partnership firm.
16. Now, the distinguishing feature to Which Mr. Joshi wanted to draw attention is that in Daulat Ram's case : 87ITR349(SC) , one of the persons in whose name the fixed deposit was made was the son of a partner and that on maturity of the deposit, the moneys were withdrawn by him and remained with him. this does not affect the ratio of the Supreme Court decision that some nexus had to be established between the fixed deposit and the person who is alleged by the department to be the owner of the fixed deposit, though the fixed deposit stands in a different person's name.
17. Having regard to the decision in Daulat Ram's case and the view which we have taken above, the questions referred to has to be answered in the negative and in favour of the assessee. The questions is accordingly get the costs, of the reference.