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Vijaya Kumar Machinery and Electrical Stores Vs. Alaparthi Lakshmikanthamma - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberAppeal No. 58 of 1964
Judge
Reported in[1969]74ITR224(AP)
ActsIndian Income Tax Act, 1922 - Sections 54, 54(1) and 54(2); Evidence Act
AppellantVijaya Kumar Machinery and Electrical Stores
RespondentAlaparthi Lakshmikanthamma
Appellant AdvocateG. Suryanarayana, Adv.
Respondent AdvocateA. Bhujanga Rao and ;M. Venkata Rao, Advs.
Excerpt:
direct taxation - maintainability of suit - sections 54, 54 (1) and 54 (2) of indian income tax act, 1922, section 214 (1) (a) (iii) of indian succession act and evidence act - suit filed by receiver (plaintiff) appointed by court to recover amount due under promissory note executed by manager of defendant firm - suit filed by plaintiff without producing promissory note and succession certificate - plaintiff showed suit debt as subsisting in balance sheet and return of income filed by manager - defendant contended that income tax documents are confidential and inadmissible as per section 54 - suit maintainability without production of promissory note and succession certificate - promissory note could not be submitted as were in possession of receivers relative who colluded with defendant.....sambasiva rao, j.1. this is an appeal from o. s. no. 66 of 1960 on the file of the subordinate judge's court, tenali. defendants nos. 1 and 2, against whom a decree was passed, preferred this appeal.2. the suit was filed by the receiver appointed by the court. it was to recover a sum of rs. 9,265 said to be due under two promissory notes dated 15th october, 1955, and 24th january, 1956, executed by the second defendant in favour of late alaparthi brahmayya. the first defendant was a firm and defendants nos. 2 and 3 were its partners. the second defendant was a manager of the firm. he borrowed on behalf of the firm two amounts from alaparthi brahmayya: (1) rs. 2,500 on 15th october, 1955, (2) rs. 4,000 on 24th january, 1956. he executed two promissory notes. the rate of interest stipulated.....
Judgment:

Sambasiva Rao, J.

1. This is an appeal from O. S. No. 66 of 1960 on the file of the Subordinate Judge's Court, Tenali. Defendants Nos. 1 and 2, against whom a decree was passed, preferred this appeal.

2. The suit was filed by the receiver appointed by the court. It was to recover a sum of Rs. 9,265 said to be due under two promissory notes dated 15th October, 1955, and 24th January, 1956, executed by the second defendant in favour of late Alaparthi Brahmayya. The first defendant was a firm and defendants Nos. 2 and 3 were its partners. The second defendant was a manager of the firm. He borrowed on behalf of the firm two amounts from Alaparthi Brahmayya: (1) Rs. 2,500 on 15th October, 1955, (2) Rs. 4,000 on 24th January, 1956. He executed two promissory notes. The rate of interest stipulated was 9 per cent. The payee, Brahmayya, died on 10th September, 1957, issueless and intestate. The receiver, who filed the suit, is the mother of Brahmayya. Brahmayya left behind him not only his mother, the plaintiff, but also his widow, Anasuyamma. The plaintiff filed O. S. No. 53 of 1958, in the Subordinate Judge's Court, Tenali, against Anasuyamma for partition of Brahmayya's properties and for possession of a half share therein. The present two promissory notes were shown in the 'C' schedule to the plaint as Brahmayya's outstandings. Anasuyamma, however, in her written statement denied the existence of those assets. Thereupon, the plaintiff filed I. A. No. 23 of 1960 in that suit for appointing her as receiver to collect the two outstandings. She also issued a notice to the second defendant dated 22nd April, 1959, exhibit A-2, about these two promissory notes. The second defendant did not send any reply to this notice. On 17th February, 1960, the plaintiff was appointed as receiver. Thereupon, she got issued another notice to defendants Nos. 1 to 3 on 11th August, 1960 (exhibit A-4), demanding payment of the two debts. The second defendant sent a reply dated 4th September, 1960 (exhibit A-7). Therein he admitted the execution of the promissory notes, but stated that they had been discharged even during the lifetime of Brahmayya. On 6th September, 1960, the plaintiff filed the present suit without producing the two promissory notes. She alleged that the promissory notes were not available, as they had gone into the possession of Anasuyamma, who was colluding with the defendants. The plaintiffs stated in her plaint that there was no bar of limitation to her suit, as the second defendant, as manager of the defendant-firm, had submitted a return of his income to the Income-tax Officer, Tenali, dated 12th December, 1957, and showed the suit debts, as subsisting, in the enclosure attached to the said return and signed thereunder. She, therefore, averred that it was an acknowledgment under Section 19 of the Indian Limitation Act and that, therefore, the suit was in time. The defence of defendants Nos. 1 and 2 was that the suit was not maintainable since the plaintiff did not produce a succession certificate. The suit was also not maintainable for the reason that the promissory notes on which the suit was based, which were negotiable instruments, were not produced. It was also alleged that the promissory notes had been discharged, even when Brahmayya was alive. The allegation of the plaintiff that Anasuyamma was colluding with the defendants was denied. Objection on the ground of limitation also was taken, contending that the enclosure to the income-tax return, was not an acknowledgment of a subsisting liability as on 12th December, 1957.

3. On the other hand, the third defendant averred that as per the terms of the agreement between him and the second defendant, dated 8th May, 1957, the second defendant had taken up the liability under the suit promissory notes and other debts of the firm and that he was not liable to pay any of those debts.

4. The lower court framed as many as 7 issues and held that the suit was maintainable, without the production of a succession certificate. It repelled the contention of the defendants that the suit was not maintainable for the reason that the suit promissory notes were not produced. It also rejected the case of discharge put forward on behalf of defendants Nos. 1 and 2. It further held that the income-tax return, dated 12th December, 1957, was sufficient to constitute an acknowledgment under Section 19 of the Indian Limitation Act and that the suit was within time. It, however, found that the third defendant was not liable for the suit claim. In the result, it decreed the suit, with costs against the second defendant personally and against the assets of the first defendant firm in the hands of the second defendant and dismissed the suit, without costs, against the third defendant. It also directed the plaintiff to execute an indemnity bond for the decretal amount before she executes the decree. Defendants Nos. 1 and 2 filed the appeal.

5. In appeal all the objections taken by defendants Nos. 1 and 2 to the plaintiff's claim were reiterated. In addition, it was also contended that the income-tax return, dated 12th December, 1957, was not admissible in evidence.

6. The first of the contentions is that, without filing a succession certificate, the plaintiff could not maintain the suit. Reliance was placed upon Section 214(1)(a)(iii) of the Indian Succession Act in support of this contention. The said provision reads:

'214. (1) No court shall-

(a) pass a decree against a debtor of a deceased person for payment of his debt to a person claiming on succession to be entitled to the effects of the deceased person or to any part thereof .......

except on the production, by the person so claiming, of--.........

(iii) a successsion certificate granted under part X and having the debt specified therein. . . .'

7. It is seen that the provisions of this section apply only to a person, who claims on succession to be entitled to the effects of the deceased person. The plaintiff in the present case filed the suit as a receiver appointed by the court in O.S. No. 53 of 1958 on the file of the Sub-Court, Tenali. The contention of the learned counsel was that the requirement of Section 214 would apply even to a receiver appointed by a court if that receiver happens to be one of the heirs. However, the learned counsel for the appellant did not press his objection after examining the decision of the Calcutta High Court in Harihar Mukherjee v. Harendranath Mukherji. It is a case where a receiver appointed by a court, though one of the heirs of the deceased person, was permitted to file the suit, without producing any succession certificate. Therefore, there cannot be any doubt, the requirement of Section 214(1)(a)(iii) of the Indian Succession Act has no application to the case. The lower court also took care in directing the plaintiff to execute an indemnity bond for the decretal amount before she executes the decree. That direction safeguards sufficiently the interests of the judgment-debtor.

8. The second contention is that the non-production of the two promissory notes is fatal to the plaintiff's suit. The provisions of Order 7, Rule 16, of the Civil Procedure Code were invoked in support of this contention. The said rule reads:

'Where the suit is founded upon a negotiable instrument, and it is proved that the instrument is lost, and an indemnity is given by the plaintiff, to the satisfaction of the court, against the claims of any otherperson upon such instrument, the court may pass such decree as it would have passed if the plaintiff had produced the instrument in court when the plaint was presented, and had at the same time delivered a copy of the instrument to be filed with the plaint.'

9. Two requirements must be satisfied before a plaintiff invokes this provision to his aid. They are (1) it has to be proved that the negotiable instrument upon which the suit is founded is lost; (2) an indemnity has to be given by him to the satisfaction of the court against the claims of any person upon such instrument. It has already been noticed that the lower court gave a direction to the plaintiff to give an indemnity bond. Therefore, this requirement was satisfied. What was, however, contended for the appellants was that there is no sufficient proof on record that the two promissory notes were lost.

10. The plaintiff sought to explain the non-production of the promissory notes by stating in paragraph 7 of her plaint that:

'On his death, all the pronotes and records of late Brahmayya, including the suit pronotes came into the possession of his wife. But colluding with the other defendants she has suppressed them and denied the suit debts. In the circumstances, the suit pronotes could not be filed along with the suit.'

11. The second defendant who filed the written statement on behalf of himself and the first defendant stated in paragraph 4 that:

'The plaintiff is not in possession of the pronotes referred to in the plaint. Admittedly two pronotes were executed by the 2nd defendant and as the plaintiff did not file them into court, the plaintiff cannot file the suit on the strength of the said pronotes as they are negotiable instruments. The plaintiff had strictly to prove the allegations made in paragraph 7 of the plaint. It is false to say that plaintiff's daughter-in-law suppressed the said pronotes and plaintiff had to prove strictly the same. The suit based on negotiable instruments had to be dismissed in limine.'

12. Thus the second defendant put the plaintiff to strict proof of the loss of the promissory notes. The plaintiffs filed her affidavit in I.A. No. 23 of 1960 in O. S. No. 53 of 1958 which she filed for the appointment of a receiver as exhibit A-9. That affidavit discloses that even at that stage, the plaintiff took the same stand that her daughter-in-law, Anasuyamma, was colluding with the defendants and suppressing the promissory notes. She undertook to file a suit on her own expense to recover the debts if she was appointed as a receiver. It was on that application that the plaintiff was appointed to recover the amounts, on the two promissory notes. This affidavit shows that right from the beginning the plaintiff's case was consistent that the promissory notes were with her daughter-in-law and that she was suppressing them. She also issued a notice to the second defendant on 22nd April,1959 (exhibit A-2), even before she was appointed as the, receiver. She clearly alleged therein that the promissory notes were secreted. The second defendant did not reply to this notice though he had received it. Again, before the institution of the present suit and after she was appointed as a receiver, she issued another notice on 11th March, 1960, to all the three defendants under exhibit A-4. Paragraphs 7 to 9 of the said notice are material. It was stated therein :

'My client (plaintiff) came to you along with Pavuri Koteswararao, younger brother of my client's daughter-in-law, Ravuru Krishna Rao, grandson of my client and Suryadevara Subbarao, and demanded the payment of the amounts due under the aforesaid promissory notes whereupon the 2nd individual of you (D-2) said that you would pay the same at the time of harvesting, if (my client) chose to wait till that time. Later on, they sent word through Vengala Seetharamaiah, son of Ankaiah, that they would execute promissory notes in favour of each towards the half share of each in respect of the aforesaid debts. Later on, due to the disputes that arose between my client on the one hand, and her elder daughter-in-law, Anasuyamma, on the other, with regard to partition, the said Anasuyamma, with the evil intention of causing loss to my client and of obtaining wrongful gain having colluded with you, suppressed the promissory notes where-under you owe money.

Not knowing whether you had executed the aforesaid promissory notes on your personal liability or on behalf of the firm, my client got a registered notice issued to the 2nd individual of you on 22nd April, 1959, demanding the payment of the amounts due under the aforesaid promissory notes. The second individual of you received the said notice on 23rd April, 1959, and has not given a reply for it. Nor has he repaid the debt.

Therefore, within a week of the receipt of this notice, you shall pay the amounts due under the aforesaid promissory notes to my client and obtain a proper receipt, failing which a suit will be filed against you and the amount will be realised from you together with costs. You are hereby again informed that you will be put to unnecessary expense and loss of time.'

13. It is seen from this notice that once again the plaintiff reiterated her case that her daughter-in-law colluded with the defendants and suppressed the promissory notes. To this notice the second defendant sent a reply under exhibit A-7 on 4th September, 1960, setting up a case of discharge of the promissory note debts even during the lifetime of the original payee and that the discharged promissory notes had been taken return of. That is why the plaintiff filed an application in the present suit in LA. No. 97 of 1961, whereunder she called upon the second defendant to produce the promissory notes, since in exhibit A-7 he claimed to have taken return of them after discharging debts. The second defendant, however, did not producethem. He examined himself as D.W. 5. He spoke about the endorsement on the promissory notes. He stated that Brahmayya himself had written the cancellation on the two suit promissory notes which were returned to his father. It is significant to note that in exhibit A-7 he merely stated that the discharged promissory notes were taken return of. But, in his evidence, he developed it by saying that the discharged promissory notes were returned to his father. He admitted in cross-examination that his father was alive when the suit was filed, but subsequently died. He stated :

'My father was alive when the suit was filed. 1 do not remember whether my father received the summons for producing the discharged pro-notes or not... My father said that he would produce them in court. I searched for them in the residence of my father. They were not traced out. My father died in June, 1961.'

14. His present case that the discharged promissory notes were returned to the father is a development over his statement in exhibit A-7. It is difficult to believe D.W. 5 when he stated that though the father was alive he did not take the promissory notes from him when he got the written statement prepared. It is also not possible to believe him that his father insisted that he himself would produce them in court without handing them over to D.W. 5. If really the promissory notes were discharged and returned to the father, it is not explained how they were not traced in the records of the father even though search was made for them. The plaintiff did what all she could in trying to secure the production of the promissory notes. She filed LA, No. 97 of 1961 to direct the second defendant to produce the discharged promissory notes, putting to test the claim made by him in exhibit A-7. They were not produced. There would be no purpose served by sending a similar notice to the daughter-in-law, Anasuyamma, because right from the beginning it was the plaintiff's case that the daughter-in-law was suppressing them. Under the circumstances, it cannot be held that the plaintiff did not do what all she could, to secure the production of the promissory notes into court. It is true that she did not examine herself to prove her case. But she examined her grandson as P.W. 2. P.W. 2 is Ravuri Krishna Rao, who is alleged under exhibit A-4 to have accompanied the plaintiff, in company of the daughter-in-law's younger brother, to demand from the second defendant, the payment of the amount due under the promissory notes. This witness stated in his evidence that:

'After the death of Brahmayya all his documents and records came into the custody of his wife, Anasuyamma. Within one month after his demise, P. Koteswara Rao, the younger brother of Anasuyamma, S. Subba Rao, and myself, went and demanded D-2 to pay the pronote debts due to the deceased, Brahmayya. P. Koteswara Rao brought the two pronotes withhim. D-2 said that he had no money and that he would pay after the crops were realised.'

15. In cross-examination he said that:

'Anasuyamma (daughter-in-law) asked me and her brother, Koteswara Rao, to demand D-2 to pay the debt due under 2 pronotes. She gave the 2 pronotes to her brother. I cannot say the reason why the fact of taking the 2 pronotes with us, when the demand was made, has not been mentioned byus in the notice issued to D-2.'

16. He added that 'the pronotes were re-delivered to Anasuyamma by her brother after demand was made.'

17. It also emerges from his evidence that when an inventory was taken by the Commissioner in O.S. No. 53 of 1958, the two suit pronotes were not found. The above evidence of this witness bears out the case of the plaintiff. It shows that the promissory notes were in the custody of Anasuyamma, Even after the demand was made for the payment, they were returned to the custody of Anasuyamma. The inventory also did not discover the promissory notes. This version spoken to by P.W. 2 is wholly consistent with the case of the plaintiff right from the beginning. Reliance was placed for the appellants on a decision of the Kerala High Court in K.K. Koran v. T. Tara Bai. But that case does not help the contention of the appellants because there the plaintiff clearly admitted that the promissory note was with her son. It should mean that it was available with her son. Therefore, the court held that the loss was not established. But, in the present case, as the above discussion discloses, the whereabouts of the promissory notes were not known, at any rate to the plaintiff. I am, therefore, satisfied that the plaintiff satisfactorily established that the promissory notes were lost as far as she was concerned and that she was not in a position to produce them. The lower court was, therefore, right in accepting this case of the plaintiff and repelling the objection of the defendants.

18. I will now take up the case of discharge set up by the second defendant. Briefly stated, the case of the second defendant in regard to discharge is as follows. The third defendant filed O.S. No. 99 of 1957 on the file of the District Munsiff's Court, Tenali, against the second defendant for dissolution and accounts. There was a mediation between the two defendants and Brahmayya, the payee under the promissory notes, was one of the mediators. On the advice of the mediators, the two partners settled their disputes and entered into a registered agreement on 8th May, 1957 (exhibit B-5). Brahmayya also attested the agreement. The second defendant undertook, under the agreement, to discharge all the liabilities of the partnership firm. Later, Brahmayya pressed for the repayment of the promissory notes. In order to meet that demand the second defendant approached his father,Ammayya. Since Brahmayya himself owed Rs. 1,000 to Ammayya Under a promissory note, that was set off against the debt the second defendant owed to Brahmayya. Ammayya borrowed Rs. 2,000 under a promissory note dated 13th May, 1957, from one Hanumayyamma and paid the amount to Brahmayya. He also borrowed from D.W. 1 another sum of Rs. 4,000 under exhibit B-1 dated 20th May, 1957, and paid the amount to Brahmayya. With this payment both the promissory notes were completely discharged on 20th May, 1957. Endorsements of cancellation also were made on the promissory notes and the discharged promissory notes were returned.

19. I have already adverted to the failure of the second defendant to produce the discharged promissory notes. The production of the discharged promissory notes would have been the clearest proof of discharge pleaded by the second defendant. But they were not produced. The case that was set up in the present suit is that the second defendant's father took return of the two promissory notes after endorsements of discharge had been made thereon by Brahmayya himself. But this specific case was not set up in exhibit A-7 which is the second defendant's 'reply to the plaintiff's' notice, exhibit A-4. This is clearly a development and embellishment made by the second defendant in the present suit, in his written statement and evidence. As I have already observed, it is difficult to believe that the father, who was alive, when the suit was filed, did not hand them over to the second defendant, when he got the written statement prepared. If we are to accept the case of the second defendant that his father had gone to the extent of incurring debts in order to discharge the liability of the second defendant, it is difficult, even impossible, to believe that he did not hand over the discharged promissory notes to the defendant when the suit was filed, claiming on the promissory notes which had already been discharged. It is also very difficult to believe that the promissory notes could not be traced in the records of the father when they were searched. All this throws considerable doubt on the version of the second defendant in regard to discharge.

20. In any event, the evidence about the actual discharge of the debts of the two promissory notes is unsatisfactory and unreliable. It is stated by the second defendant that the discharge was made by father Ammayya, by raising funds in three ways. The first of them is by setting off the promissory note of Ammayya, executed in his favour by Brahmayya himself, for Rs. 1,000. It is stated that this amount was set off, in partial discharge of the debt which the second defendant owed to Brahmayya. The discharged promissory note was not filed. There is only the evidence of D.W. 1 and of the second defendant as D.W.5 in support of this set-off. The evidence of D.W.5 cannot be accepted as it is the evidence of the party himself. The evidence of D.W.1 also cannot be given any credence. He is admittedly a relation of the second defendant. The second defendant's wife is a grand-daughter of his paternal aunt. Moreover, there was no occasion or necessity for him to accompany the second defendant or his father, when they went to Brahmayya to discharge the debts. Moreover, the second defendant had not produced any accounts to show the set-off. As I have stated, there is no other evidence excepting the oral evidence of D.Ws.1 and 5. I cannot, therefore, accept this case of set-off,

21. The second step in the case of discharge is that Ammayya borrowed Rs. 2,000 from one Hanumayamma on 13th May, 1957, and paid the amount to Brahmayya. The promissory note, which is said to have been executed by Ammayya to Hanumayamma, was not produced. Her brother, however, was examined as D.W. 3. He stated that the purpose of the loan was not noted in the promissory note, executed in favour of Hanumayamma. He did not remember how the money of Hanumayamma was available for lending it to Ammayya. He did not know how Ammayya utilised the amount borrowed from Hanumayamma. I am not at all impressed by the evidence of this witness, nor the lower court, which had the opportunity of watching his demeanour. There is no other evidence in support of this borrowing by Ammayya or that Ammayya utilised this amount to pay it to Brahmayya. In the absence of any supporting evidence, I am not prepared to place reliance upon the sole evidence of D.W. 3. Therefore, I cannot uphold this payment of Rs. 2,000 to Brahmayya.

22. The third payment is claimed to be of Rs. 4,000. The second defendant claims that his father borrowed this amount under the promissory note, exhibit B-1, dated 20th May, 1957, from D.W. 1. There are two endorsements of payments on this promissory note. They are exhibits B-2 and B-4. Exhibit B-2 is of Rs. 3,000, dated 1st March, 1957. Exhibit B-4 is of Rs. 2,170-5-0, dated 1st September, 196.1. In support of this debt and the latter payment, the second defendant produced exhibit B-3, dated 1st September, 1961, which is a sale deed executed by him in favour of D.W. 1. Under this sale deed, the second defendant purported to have sold certain lands to D.W. 1 for Rs. 10,000. As a part payment of the consideration thereunder, a sum of Rs. 2,170-5-0, which was said to be still due on the promissory note, exhibit B-1, is recited to have been adjusted. But, it should be noted that this sale deed came into existence nearly one year after the suit was filed. Therefore, much reliance cannot be placed on the recitals therein. I have already given my reasons for not placing any credence on the evidence of D.W. 1. It is true that the scribe of exhibit B-1 was examined as D.W. 1 and an attestor as D.W. 2 (who) was the sole attestor on the promissory note. Admittedly, the second defendant and D.W. 1 are related to him. He also admitted that the police launched prosecution against him for gambling. It also emerges from his evidencethat he purchased the material and machinery of the first defendant-firm from the second defendant. It is suggested that exhibit B-1 had been concocted and due to his relationship with the second defendant he attested it and that his evidence is false, Though he denied the suggestion, I am not much impressed by the evidence of this witness. Similarly, the evidence of the scribe, D.W. 4 is, to my mind, unacceptable. He does not own any property. For some time, he worked as a pleader's clerk and he lives by writing documents. He was an accused in a case of murder. It was suggested to him that he was a stock witness in several cases and that he was working as a tout. It was further suggested to him that exhibit B-1 had been concocted with ante-date and with fictitious recitals. Though he denied this suggestion, it is not possible to place any reliance upon this untrustworthy evidence. In the state of this evidence, I cannot accept the payment of Rs. 4,000 either. Therefore, the case of discharge set up by the second defendant falls to the ground. The lower court gave very cogent reasons for rejecting the case of discharge. I am satisfied that the lower court was right in its conclusion. I, therefore, hold against the defendant in regard to discharge.

23. The next contention I will take up for consideration is as to the admissibility of exhibit A-1. Exhibit A-1 is not an income-tax return as such. It is a trial balance-sheet enclosed with the income-tax return sent by the second defendant in the year 1956-57. It was filed into court by the plaintiff and was marked by consent. P.W. 2, who conducted the suit on behalf of the plaintiff, explained how he had come into custody of this trial balance-sheet filed by the second defendant on behalf of the first defendant-firm. He stated that:

'D-3 gave me that copy of the income-tax return, exhibit A-1, for the year 1956-57, when I enquired about it from him, as the pronotes were not available.'

24. In cross examination, he further clarified the position by stating that:

'D.3 gave me exhibit A-1 in August or September, 1960. I do not know about such income-tax return till exhibit A-1 was given to me by D-3.'

25. It should be noted that D-3 himself was a partner of the first defendant-firm and exhibit A-1 is a copy of the trial balance-sheet of the firm filed along with its income-tax return. It is thus evident that the plaintiff did not obtain a copy of the trial balance-sheet from the income-tax department. It was the third defendant, who was a partner of the firm, that has obtained exhibit A-1. The objection to the admissibility of exhibit A-1 was sought to be based on Section 54 of the Income-tax Act, 1922. Section 54(1) lays down:

'All particulars contained in any statement made, return furnished or accounts or documents produced under the provisions of this Act, or in any evidence given, or affidavit or deposition made, in the course of any proceedings under this Act other than proceedings under this Chapter, or in any record of any assessment proceedings, or any proceeding relating to the recovery of a demand, prepared for the purposes of this Act, shall be treated as confidential, and notwithstanding anything contained in the Indian Evidence Act, 1872 (1 of 1872), no court shall, save as provided in this Act, be entitled to require any public servant to produce before it any such return, accounts, documents or record or any part of any such record, or to give evidence before it in respect thereof.'

26. Section 54(2) prescribes certain penalties for disclosing any particulars regarding income-tax statements made by public servants. The argument for the appellants is that all particulars contained in the income-tax documents are confidential and no court shall require any public servant to produce before it any such return or document. Exhibit A-1 is a part of such return and it is, therefore, inadmissible. Before I deal with the actual merits of this contention it should be noted that the objection as to the admissibility of exhibit A-1 was not raised in the lower court. In fact, the document was marked by consent'. It has already extracted the relevant passages in the evidence of P.W. 2 wherein he explained how he had come into possession of exhibit A-1. The second defendant himself, as D.W. 5, referred to exhibit A-1 in his evidence. In his chief-examination itself he referred to exhibit A-1 and stated that:

'Exhibit A-1 is the copy of the balance-sheet of D-1 firm for the year 1956-57 sent by me to the income-tax authority. In exhibit A-1 I have shown against the No. 196 a sum of Rs. 6,483 as due to Alaparthy Brahmayya. That was the amount due to Brahmayya from the firm (which) was dissolved.'

27. Since he chose to speak about exhibit A-1 in his examination-in-chief itself, he was cross-examined on this aspect. He stated there that:

'I signed in the income-tax return, the original of exhibit A-1. The account books which were produced by me yesterday were in my custody from the beginning. I have been bringing them to court for every hearing of this suit. I have shown only the debts subsisting by the date 27th April, 1957, in the return, exhibit A-1. There was no note made in the return that subsequently some debts were discharged. The khata of A. Brahmayya has not been shown as closed in the account books of the firm. No debit entries have been made in the account books showing the discharge of the debts due to him.'

28. In the light of this evidence of D.W. 5, it was contended for the plaintiff-respondent that D.W. 5 must be deemed to have waived theprivilege as to the income-tax return and his objections, if any, to the admissibility of exhibit A-1. There is considerable force in this argument. The attitude of the second defendant in the lower court lends considerable support to this contention. In the first instance, he did not take any objection in the lower court as to the admissibility of exhibit A-1. Indeed it was marked by consent. He did not rest content with it. As D. W. 5, he took the initiative and spoke in the examination-in-chief itself about exhibit A-1 and its contents. He was naturally cross-examined about it by the plaintiff and in the cross-examination also he spoke about exhibit A-1. This attitude is clearly indicative of waiver on the part of the second defendant of the privilege associated with his income-tax return and also as to its admissibility. Moreover, having failed to raise any objection as to the admissibility of exhibit A-1 in the lower court, the second defendant should not be permitted to raise it, for the first time, in appeal.

29. That apart, the objection on merits does not seem to be sound. A reading of Section 54(1) of the Indian Income-tax Act shows that, by itself, it does not lay down any embargo on the admissibility of an income-tax return or any statement made therein. It only declares that no court shall be entitled to require any public servant to produce before it any such return. In the instant case, the court did not require any public servant to produce exhibit A-1 before it. It is not in dispute that exhibit A-1 is a copy of the trial balance-sheet obtained by the third defendant. The right of the third defendant, who was a partner of the first defendant-firm, to obtain a copy of the return or any statement annexed thereto cannot be denied. As a partner of the firm, he was certainly entitled to apply for and obtain a copy thereof. The third defendant, as partner, was certainly entitled to waive the privilege and file the document. Had the third defendant himself, who was a party to the suit, filed exhibit A-1 into court there could not be any objection as to the privilege or the admissibility of exhibit A-1. Instead of himself filing the document, he gave it to the plaintiff. She produced it into the court. I do not, therefore, see any tenable basis for the objection as to the admissibility of exhibit A-1.

30. Moreover, as I have stated earlier, Section 54 of the Act does not by itself lay down any embargo on the admissibility of any income-tax return or a statement connected therewith. One has to travel to the rules laid down by the law of evidence to see whether the income-tax return is made inadmissible in evidence. No such rule was brought to my notice. I cannot, therefore, hold that exhibit A-1 is inadmissible in evidence.

31. The learned counsel for the appellant referred me to a large number of decisions. His main emphasis was, however, on the Bench decision of the Madras High Court in Mythili Ammal v. Janaki Ammal. The principalquestion that arose for decision in that case was, whether income-taxreturns can be proved by secondary evidence. Construing the provisions of Section 65 and Section 74 of the Evidence Act and Section 54 of the Income-tax Act, the learned judges took the view that an income-tax return is not a public document within the meaning of Section 74 of the Evidence Act. The learned judges, therefore, concluded that income-tax returns cannot be proved by evidence under Section 65 of the Evidence Act.

32. This view of the Division Bench was overruled by a Full Bench of the Madras High Court in Katikineni Venkata Gopala Narasimha Rama Rao v. Chitluri Venkataramayya. The Full Bench held that a profit and loss statement and a statement showing the details of net income filed by an assessee in support of his return of income, furnished under Section 22 of the Income-tax Act, are public documents within the meaning of Section 74 of the Evidence Act, and certified copies thereof would be admissible under Section 65(e) of the Evidence Act.

33. However, the learned counsel for the appellant sought to rely upon a passage in the decision of the Division Bench in Mythili Ammal v. Janaki Ammal which is :

'From the fact that certified copies of the returns made by Janaki have been tendered in evidence in the present case, we presume that the granting of certified copies is in certain circumstances permissible by some rule made under the Income-tax Act. Most probably they can be granted to the person who has made the return for his own private information since that would not come under the head of disclosure under Section 54(2). But that does not mean that a third party who has, in some way, come into possession of the certified copies can use them to his own advantage.'

34. It is this last sentence that was very much emphasised before me in support of the contention that the plaintiff could not use exhibit A-1. Reading that sentence out of its context may lend some support to the contention of the appellants. But, apart from the consideration that this is an overruled decision, the passage above extracted, taken as a whole, does not affect the merits of the present case. The learned judges there noticed that copies can be granted to the person who has made the return. That must necessarily extend to all the partners of a firm, whose return was filed before the Income-tax Officer. When a partner, as the third defendant in the present case, is entitled to get a copy, there is no bar against his handing it over to a stranger. I cannot read the decision in Mythili Ammal v. Janaki Ammal, as laying down a prohibition against an assessee or one of the assessees to waive the privilege and to hand over his copy of the income-tax return to another party in the suit to which he is also a party.

35. I do not, therefore, think that this decision renders any assistance to the appellants.

36. That one of the partners can obtain a certified copy of a return or order of assessment, containing statements by other partners, and file it into court is beyond dispute. In Pentapathi Venkataramana v. Pentapathi Varahalu, a Bench of the Madras High Court held that:

'A court is not precluded by Section 54 from admitting in evidence a certified copy of an order of assessment which has been given to one of the partners by the income-tax authorities and which contains certain statements by other partners when those statements are otherwise relevant under the provisions of the Evidence Act. The provisions of Section 26A indicate that it was not the policy of the legislature to preclude from the cognizance of the court an information regarding the aforesaid statements contained in the order of assessment.'

37. It was also observed, that the use of the word 'disclosure' in Clause (2) of Section 54 implies that the disclosure must be to a stranger and not to the party who made the statement. Where one partner makes a statement on behalf of the partnership, it is not possible to hold that the grant of copies of that statement to other members of the partnership is illegal. It is, therefore, clear that the third defendant was entitled to obtain a copy of the income-tax return and statements filed by the second defendant on behalf of the first defendant-firm and that the court is not precluded by Section 54 of the Act from admitting such copies. The assertion of P. W. 2 that exhibit A-1 was given to him by the third defendant was not disputed, I do not, therefore, see any valid objection to the admissibility of exhibit A-1.

38. In Nagammai Achi v. Alamelu Achi, it was observed that:

'Section 54 of the Income-tax Act is not concerned with the admis-sibility of documents referred to therein but only directs that they should be treated as confidential and prevents the compulsory production of those documents by the income-tax department. If those documents are available in court, then, the question whether they are admissible in evidence or not must be determined with reference to the provisions of the Evidence Act.'

39. As in the case before the Madras High Court, exhibit A-1 is available in court. Its admissibility has to be examined and determined with reference to the provisions of the Evidence Act. As I have already observed there is no rule of the Evidence Act, at any rate no such rule was brought to my notice, making this document inadmissible in evidence. Under the circumstances, I cannot uphold the objection to the admissibility of exhibit A-1.

40. Though a number of other decisions were cited before me, I do not propose to deal with them as they are not directly concerned with the admissibility of income-tax returns and the statements therein.

41. The contention that still remains for decision is that exhibit A-1 is not an acknowledgment within the meaning of Section 19 of the Limitation Act, 1908.

42. Some material particulars relating to exhibit A-1 should be noted in this context. Exhibit A-1 is a copy of the balance-sheet annexed with the income-tax return of the first defendant-firm in the year 1956-57. It was for the period from 1st April, 1956, to 27th April, 1957. The second defendant signed this trial balance-sheet on 12th December, 1957. The suit was, however, filed on 6th September, 1960. Even if the period is reckoned from 27th April, 1957, the suit filed on 6th September, 1960, would be barred by limitation. The plaintiff, however, contended that since the second defendant as the managing partner of the first defendant-firm signed it on 12th December, 1957, the period of limitation should be reckoned from that date.

43. There was no dispute that the original of exhibit A-1 did certainly constitute an acknowledgment within the meaning of Section 19. Item 196 in the balance-sheet shows that the firm owed Alaparthi Brahmayya of Angalakuduru a sum of Rs. 6,483. But the argument of the contesting defendant-appellants is that the income-tax return and the balance-sheet were for the period from 1st April, 1956, to 27th April, 1957. The balance-sheet does not disclose any transaction after 27th April, 1957 and does not acknowledge any debt subsisting after 27th April, 1957. Though the second defendant signed it on 12th December, 1957, it was not an acknowledgment of any liability as subsisting on 12th December, 1957. It was merely an acknowledgment of a debt as subsisting on 27th April, 1957. It was, therefore, contended that exhibit A-1 did not constitute an acknowledgment of a subsisting liability as on 12th December, 1957, and would not, therefore, save the suit from the bar of limitation.

44. The relevant provisions of Section 19 may be noted here. Section 19(1) reads:

'Where, before the expiration of the period prescribed for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by some person through whom he derives title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.....

Explanation I.--For the purposes of this section an acknowledgment may be sufficient though it omits to specify the exact nature of the propertyor right, or avers that the time for payment, delivery, performance or enjoyment has not yet come, or is accompanied by a refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to a set-off, or is addressed to a person other than the person entitled to the property or right.'

45. A large number of decisions were cited at the bar, in order to show that the acknowledgment contemplated by Section 19 is of a subsisting liability. That position was not disputed by the plaintiff-respondent either. In fact, the position is now placed beyond all pale of doubt by two decisions of the Supreme Court. In view of those authoritative pronouncements of the Supreme Court, it is not necessary to advert to the extensive case law that was cited for the appellants in support of the proposition that the acknowledgment under Section 19 should be one of a subsisting liability.

46. I will now refer to the two decisions of the Supreme Court. The first of them is Shapoor Fredom Mazda v. Durga Prasad Chamaria. Gajendragadkar J., speaking for the court, observed in paragraph 6:

'It is thus clear that acknowledgment as prescribed by Section 19 merely renews debt; it does not create a new right of action. It is a mere acknowledgment of the liability in respect of the right in question; it need not be accompanied by a promise to pay either expressly or even by implication. The statement on which a plea of acknowledgment is based must relate to a present subsisting liability though the exact nature or the specific character of the said liability may not be indicated in words. Words used in the acknowledgment must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear, then the intention to admit jural relationship may be implied from it. The admission in question need not be express but must be made in circumstances and in words from which the court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. In construing words used in the statements made in writing, on which a plea of acknowledgment rests, oral evidence has been expressly excluded but surrounding circumstances can always be considered. Stated generally, courts lean in favour of a liberal construction of such statements though it does not mean that, where no admission is made, one should be inferred, or where a statement was made clearly without intending to admit the existence of jural relationship such intention could be fastened on themaker of the statement by an involved or farfetched process of reasoning. Broadly stated that is the effect of the relevant provisions contained in Section 19, and there is really no substantial difference between the parties as to the true legal position in this matter.'

47. The following rules emerge from the above observations of the Supreme Court:

(1) The acknowledgment must relate to a present subsisting liability.

(2) The exact nature of the liability need not be indicated in words but the words used must indicate the existence of the relationship of debtor and creditor between the parties.

(3) The admission need not be express but can be inferred, if the words employed permit such an inference.

(4) In construing the words so employed oral evidence is expressly included but the surrounding circumstances can always be considered. This decision was followed and the same principles were reiterated by the Supreme Court in its recent decision in Tilakram v. Nathu.

48. The question, therefore, is to what extent the statement in exhibit A-1 satisfies those requirements. As I have already observed there is no dispute between the parties that the statement in exhibit A-1 is an acknowledgment. But the point of difference is whether that statement is an acknowledgment of a liability subsisting on 12th December, 1957. Therefore, the question now is in a narrow compass and it is whether the fact of the second defendant signing the trial balance-sheet on 12th December, 1957, as the managing partner of the firm would start a fresh period of limitation from that date, though the period for which the balance-sheet as actually prepared was from 1st April, 1956, to 27th April, 1957. Three cases may be usefully considered in this context.

49. The first of them is that of a Bench of the Madras High Court in Rajah of Vizianagaram v. Official Liquidator, Vizianagaram Mining Company Ltd. One of the appeals considered therein was a case of a balance-sheet presented at an annual general meeting of the company. The relevant discussion is contained in paragraph 33 of the said judgment. A certain amount was claimed in the case. The objection as to bar of limitation in regard to the claim, was sought to be got over by relying upon the inclusion of the item in the balance-sheet presented to the annual general meeting of the limited company. The balance-sheet was signed by the agents of the company and it was also found that the amount claimed was included in the balance-sheet. Reliance was placed upon the decision in Jones v. Bellegrove Properties Ltd. Therein the Court of Appeal took the view that when abalance-sheet was presented to the annual general meeting, it was an acknowledgment that the debt was due on the date of the annual general meeting. This view of the Court of Appeal was approved and followed by the learned judge of the Madras High Court. The principle that follows is that the date on which the balance-sheet was signed and presented is also material and that the presentation of the balance-sheet either to the general meeting of the company or to the income-tax authorities would constitute an acknowledgment of a subsisting liability as on the date of the signature and presentation of the balance-sheet.

50. The Punjab High Court also took a similar view in Lahore Enamelling and Stamping Co. Ltd. v. A.K. Bhalla. In paragraph 37 it was laid down as follows :

'Debts due to creditors not mentioned by name but included in the item relating to 'loans (unsecured)' or as due to 'sundry creditors' mentioned in the balance-sheet amount to an acknowledgment within the provisions of Section 19 of the Indian Limitation Act, so as to extend the period of limitation with effect from the date of the signing of the acknowledgment.'

51. In coming to this conclusion, the learned judge of the Punjab High Court relied on the Madras decision in Rajah of Vizianagaram v. Vizianagaram Mining Co. Ltd. Thus, the Punjab High Court also took the view that the period of limitation is extended from the date of the signing of the balance-sheet.

52. The Calcutta High Court also expressed a similar view. In Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, a Bench of the Calcutta High Court, in paragraph 11 of its judgment, held, after a review of the case law on the point, as follows:

'The natural inference to be drawn from the balance-sheets is that the closing balance due to the creditor at the end of the previous year will be carried forward as the opening balance due to him at the beginning of the next year. In each balance-sheet there is thus an admission of a subsisting liability to continue the relation of debtor and creditor, and a definite representation of a present intention to keep the liability alive until it is lawfully determined by payment or otherwise.' There is necessarily a time lag between the date of signing of the balance-sheet and the end of the previous year. The balance-sheet contains no admission of the amount due on the date of the signature. That amount may be and often is different from the amount shown as due at the end of the previous year, but that fact alone does not take the amount out of the purview of Section 19. Take the caseof a banker and its depositor. Suppose the banker sends to the depositor a monthly statement of account made for the month of February, 1961, and signed on 15th March, 1961. The statement gives the balance due on 28th February, 1961. The amount due on 15th March may be quite different ; the banker might have made payments for the customer ; nevertheless the statement amounts to a sufficient acknowledgment under Section 19.'

53. In that view the learned judges expressed their disagreement with the view taken in Jwala Prasad v. Jwala Bank Ltd.

54. I follow these decisions. The Bench decision in Rajah of Vizianagaram v. Official Liquidator, Vizianagaram Mining Company Ltd. is binding on me. What emerges from a consideration of the above decision is that the date of signing the balance-sheet by the second defendant started a fresh period of limitation. In that view the suit was filed within three years from 12th December, 1957, the date on which the balance-sheet was signed by the second defendant. The suit was, therefore, filed within time.

55. I am thus satisfied that the view taken by the lower court is right.

56. Thus, there are no merits in the appeal. The result is that the appeal is dismissed with costs of the contesting plaintiff-respondent.


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