V. Bhargava, J.
1. This is an application under Section 21, Excess Profits Tax Act, read with Section 66(2), Income-tax Act, with a prayer that the Income-tax Appellate Tribunal be directed to state the case with reference to the following question of law arising in the case:
Q. Whether the main purpose of starting the new firm Jauhari Lal Khemraj was the avoidance or reductions of the liability to excess profits tax of the assessee firm Jetnmal Sadasukh within the meaning of Section 10-A of the Excess Profits Tax Act?'
2. The assessee, Firm Jethmal Sadasukh, carried on kirana business with headquarters at Lucknow and a branch at Kanpur in this firm Jauhari Lal had a one-third share. Swamp Chand and Sripal a none-third share and Kailash Chand minor had a one-third share. On 17-12-1942, another firm under the name and style of Jauhari Lal Khemraj was started at Kanpur to carry on the same kirana business and, in this firm, the three partners of the assessee firm each had a four-anna share.
In addition, two other persons, Tara Chand and Abid Ali, entered as partners and they each had a two-anna share. In the assessment years 1944-45, 1945-40, 1946-47 and 1947-48. the profits earned by this new firm Jauhari Lal Khemraj were added to the profits earned by the assessee firm by the Excess Profits Tax Officer under Section 10-A of the Excess Profits Tax Act on the ground that the transaction of starting this new firm had been entered into by the assessee firm with the main purpose of avoiding or reducing excess profits tax liability of the assessee firm.
The assessee appealed unsuccessfully before the Income-tax Appellate 'Tribunal. An application was made before the Tribunal for referring the case to this Court under Section 21, Excess Profits Tax Act read with Section 66(1), Income-tax Act, in respect of two questions of law. The first question of law has already been mentioned above. The second question sought to be referred was as to whether the Income-tax Appellate Tribunal was right in requiring that four separate applications for reference should be made to it for the four different assessment years.
3. The main question that has been urged in, this application before us is the first one by which the assessee challenges the decision of the Income-tax Appellate Tribunal that the main purpose of the transaction of starting the new firm Jauhari Lal Khemraj was the avoidance or reduction of the liability to excess profits tax of the assessee firm.
Learned counsel for the assessee urged that the question of law that arose was that this finding about the purpose given by the Income-tax Appellate Tribunal was without any evidence at all and the burden lay on the Department to prove the circumstances in which such a finding could be given. That the burden lay initially on the Department to prove the circumstances, on the basis of which a finding could be given that the main purpose of the transaction was the avoidance or reduction of the liability to excess profits tax, cannot be doubted.
The Income-tax Appellate Tribunal has, however, set out in its Appellate order the various circumstances found by it, from which the inference, as to the purpose pf the transaction was drawn by it. These circumstances are as follows:
1. That the partners of the assessee firm held a twelve-anna share in the newly constituted firm Jauhari Lal Khemraj and financed that firm to the extent of providing a capital of Rs. 29,5007-while the other two partners, Tara Chand and Abid Ali only invested Rs. 7,250/-. The financing of the new firm by the partners of the assessee firm was out of the finances of the assessee firm.
2. That the business of the newly constituted firm was the same as the business of the assessee firm.
3. That the branch business of the assessee firm at Kanpur was doing very good business before the new firm was constituted.
4. That the net income of the branch business of the assessee firm at Kanpur was Rs. 44,3217-in the chargeable accounting period Sambat 1998-99, and fell to Rs. 40,265 in the chargeable accounting period, Sambat 1999 to 2000, and, in the latter period, the newly constituted firm, which functioned for the first time, earned a profit of Rs. 20,451/-; and this reduction in the profits earned by the branch business of the assessee was a result of the functioning of the newly constituted firm.
5. That a portion of the business of the assessee's branch at Kanpur was diverted to the newly constituted firm inasmuch as some of the customers of the branch shop started doing their business with the newly constituted firm.
6. That the explanation given by the assesses that the new firm was constituted in order to take in new partners, Tara Chand and Abid Ali. who had experience as brokers in kirana business, had no importance as the partners of the assessee firm were already carrying on the business in the same line at Kahpur with efficiency.
4. The question arises as to whether, in view of these findings of fact given by the Income-tax Appellate Tribunal, it is at all possible to hold that there was no material on which the Tribunal could base its conclusion that the main purpose of starting the new firm Jauhari Lal Khemraj was the avoidance or reduction of liability to excess profits tax. In our opinion, the facts found by the Tribunal which have been enumerated, are all relevant to the question arising in the case and they constitute material on the basis of which the inference drawn by the Tribunal could follow.
This is, therefore, a case in which there were positive circumstances established before the Tribunal from which the inference drawn by the Income-tax Appellate Tribunal could be drawn justifiably, so that this case differs entirely from the three cases, relied upon by learned counsel, which are reported in Ganga Sahai Umrao Singh v. Commissioner of Excess Profits Tax, U. P., C. P. and Berar : 18ITR988(All) ; Mohamad Ibrahim & Co. v. Commissioner of Excess Profits Tax, Madras. : 22ITR324(Mad) and Bitthal Das v. State of U. P. : 30ITR647(All) . In the case of : 18ITR988(All) this Court found that the inference that the main object of the assessee firm in entering into the questioned transaction was to evade payment of the excess profits tax was drawn only from three circumstances. Two of those circumstances were the failure of the assessee to explain to the satisfaction of the members of the Income-tax Appellate Tribunal the reasons for two of the actions which had been taken by the assessee. The third circumstance was that the assessee firm knew that it would have to pay excess profits tax, if the amount of profits was in excess of Rs. 36,000/-.
The first two circumstances were not positive circumstances at all on the basis of which it could be held that the Department had discharged the burden which lay upon it to prove the main purpose of the transaction. The third circumstance was by itself considered insufficient to discharge that burden. It was held that the time factor was, no doubt, important and if a transacion was entered into after the Excess Profits Tax Act had been passed, that would be a relevant consideration but that by itself could not be the basis of any reasonable inference in the absence of other circumstances that the main purpose of the transaction was the avoidance or reduction of the liability to excess profits tax.
It is clear that the circumstances in the case before us are entirely different and include positive findings of fact from which the inference as to the main purpose can be drawn. The case of : 22ITR324(Mad) was a case very similar to the case of Ganga Sahai Umrao Singh (A) as. in that case also, it was found by the High Court that, except for the time factor, no other positive circumstance existed from which the Inference about the main purpose could have been drawn. In the third case of : 30ITR647(All) reliance was placed on the following view expressed by one of us who was a member of the Bench which decided that case:
'Now it appears to me to be at least arguable and that is I think all that it is necessary to say at this stage--that the facts and circumstances, upon which the Revision Board placed reliance do not justify the inference that the family had no intention to separate.'
That was a case under the U. P. Agricultural Income-tax Act and the question was whether the separation relied upon by the assessee was fictitious and collusive. The fictitious nature of the separation had been inferred by the Revision Board and it was in that connection that the view relied, upon above was expressed. Learned counsel urged that according to this view, this Court is competent to judge whether the facts and circumstances found do or do not justify the inference which was drawn by the Revision Board and it has been urged that, applying that principle, this Court should, in the present case, go into the question whether the facts found by the Tribunal do or do not justify the inference that the main purpose of starting the new firm was the avoidance or reduction of the liability to excess profits tax.
We do not agree that this was the principle intended to be laid down. In the paragraph Just preceding the paragraph from which learned counsel took the quotation the words 'justify the inference' were explained. It was said:
'I use the phrase 'justify the inference' in the sense in which I understand it to have been used by sir John Beaumont C.J., in Commissioner of Income Tax, Bombay v. Gokal Das Hukum Chand : 11ITR462(Bom) as referring to the quality and not to the quantity of the evidence.'
The words 'justify the inference' were thus used in that case in the sense that the facts and circumstances should be relevant to the inference sought to be drawn and not in the sense that the Court was competent to see whether the facts and circumstances, though relevant, were, in the opinion or the Court, sufficient or insufficient to draw the inference. If the facts were relevant and it was possible to draw the inference, the Court was not entitled to question the view taken by the appropriate authority acting under the In come Tax Law and substitute its opinion for the opinion of that authority.
Learned counsel also relied on some remarks made by the other member of the Bench in that case where it was said:
'In some cases, however, the material may be so obvious as to leave no doubt about the finding being sustainable. But unless the evidence is of such a nature, the proper course is to formulate a question and to state a case so that the Court may be in a position to examine the material and answer the question as to whether there is any material to support the finding.'
That view was expressed by the learned Judge on the special facts of that case. In that case, the finding as to the separation being fictitious and collusive was being questioned and the learned Judge felt that, in the absence of full materials, it was not possible to hold whether there was material which could justify the inference drawn, the justification, of the inference being judged in the sense mentioned above. In the present case, as we have already indicated above, a number of positive circumstances have been found by the Tribunal from which a reasonable inference can be drawn that the main purpose of the transaction of starting the new firm was the avoidance or reduction of the liability to excess profits tax and, consequently, we hold that this case raises no question of law on which a statement of the case can be called for from the Tribunal.
5. So far as the second question is concerned, it appears to be unnecessary to go into it, because, if no question of law at all arises, it is immaterial whether the assessee was entitled to make one single application for reference or- whether it wag necessary that four different applications be made.
6. The application fails and is dismissed withcosts which we assess at Rs. 200/-.