BRIJLAL GUPTA J. - This is an income-tax reference which has come to this court on a requisition on application under section 66(2) of the Act. The questions which have been referred for the opinion of the court ar :
'1. Whether on the facts and in the circumstances of the case the proceedings under section 34 were valid
2. Whether there were materials to justify the assessment of Rs. 9,45,000 as income of the assessee from undisclosed source in respect of the assessment year 1942-43?'
So far as the first question is concerned no argument was addressed to us by the learned counsel for the assessee. He submitted that he could not challenge the validity the proceedings under section 34 or usefully take our time the same. We have examined the order of the income-tax authorities and the income-tax Appellate Tribunal for ourselves and apart from the concession made by the assessees counsel we also cannot find any ground to invalidate the proceedings under section 34. Accordingly, we answer the first question in the affirmative.
So far as the second question is concerned, the material facts ar : that during the course of proceedings under the Income-tax Investigation Commission Act in the case of M/s. Isphani Ltd. of Calcutta a sum of Rs. 9,45,000 was found credited in the account of Mr. Mirza Ahmad Isphani, a director of M/s. M. M. Isphani Ltd., as a loan from the assessee to that gentleman. The entry was of a date in September 1941. The amount was shown as having been withdrawn by the assessee in three instalments subsequently. The assessee was examined by the Investigation Commission on August 8, 1950, in which he admitted that the money belonged to him and that he had advanced the same as a loan to Mr. Mirza Ahmad but that he did not maintain any account books or record to show how and wherefrom the said sum of Rs. 9,45,000 was given to Mr. Mirza Ahmad. The Income-tax Investigation Commission appear to have communicated these facts to the Income-tax Officer concerned and the said officer called for the account books of the assessee for the year ending September 13, 1942, and also examined the assessee on August 19, 1950, in regard to the nature and source of the amount and the particulars of the alleged loan. There were no entries relating to the advance of Rs. 9,45,000 in the account books of the assessees estate. It may be mentioned that the assessee is a prominent taluqdar of Avadh. In due course the Income-tax Officer on January 27, 1951, issued a notice to the assessee under section 34 and by another notice under section 23(3) dated June 16, 1951, required the assessee to explain the nature and the source of the said amount. The assessee furnished a reply to the said notice on August 20, 1951, alleging that the source of the amount in question was the privy purse of his grandmother and his mother and also the income of his estate. Statements were also filed regarding the privy purse of these two ladies from which it appeared that the grandmother had receipts amounting to Rs. 7,39,991 between 1278F. to 1328F. and the mother had receipts amounting to Rs. 7,39,992 between 1319F. to 1347F., the total of the receipts of the two ladies amounted to Rs. 14,79,913.
It was further submitted that the expenses of the said two ladies were met out of the assessees estate and some statements in regard to their expenditure were also filed in the case of the grandmother of expenses amounting to Rs. 2,84,706 during the period 1300F. to 1318F. and in the case of the mother of Rs. 4,76,576 for the period from 1319F. to 1347F. The grandmother died in 1328F. and the mother in 1940.
The case of the assessee was that the entire amount of the receipts of Rs. 14,79,913 was kept intact and on the death of his mother in 1940, the assessee came into possession of the same which according to him amounted to Rs. 15 1/2 lakhs. In addition to the above another statement was filed to show that the assessee had an approximate saving of Rs. 5,84,401 over a period from 1278F. to 1315F. The assessee stated that the registers in respect of these receipts were not traceable. The assessee also relied on past income amounting to Rs. 6,46,107 for the period 1342F. to 1350F. to show that he was in possession of sufficient money out of which the amount of the advance of Rs. 9,45,000 could have come. Lastly, it was stated that the assessee had no other source of income besides those disclosed above.
In support of his case the assessee requested the Income-tax Officer to examin : (1) Mr. Mirza Ahmad Isphani (as he had migrated to Pakistan he could not be examined); (2) Mr. S.M.I. Kintoori (maternal uncle of the assessee); and (3) Maharaj Kumar Amir Haidar Khan (brother of the assessee).
After a consideration of the entire evidence the Income-tax Officer held that no accounts whatsoever were available as to how the money alleged to have been paid out to the two ladies had been handled by them, and that the entire money had been kept intact. So far as the alleged receipt of Rs. 5,84,401 by the assessee himself was concerned he rejected it as being without any supporting evidence. The Income-tax Officer also relied on the circumstances that in October, 1941, the assessee had applied for being allowed to pay income-tax dues amounting to Rs. 41,000 for the assessment year 1941-42 in instalments. He reasoned that if the assessee had been left as large an amount of money as 15 1/2 lakhs by his grandmother and mother, and even though he may have loaned Rs. 9 lakhs odd out of that money there would still be left 6 lakhs of rupees in his hands and an application for payment, in instalments, of a comparatively small amount of money like Rs. 41,000 could not have been made. The story of the receipt of the money by the ladies was, therefore, not true. The evidence of the Maharaj Kumar and of Mr. Kintoori was rejected by him, as also the affidavit of Mr. Isphani a the latter had not been produced for cross-examination. In the result he treated the amount of Rs. 9,45,000 as the income of the assessee from some undisclosed source.
The assessee went up in appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner also relied upon the fact that it was improbable that the two ladies had kept such a large amount of money intact, and further on the circumstance that there were numerous female issues of the grandmother of the assessee, and the assessees mother had also daughters and another son, and these female issues were married to 'commoners', and as such it was not possible to believe that all the money of the two ladies was allowed to devolve on the assessee alone. He further observed that during the war fortunes were made by people in business and in speculation, and Isphani being a particular friend of the assessee, and being in business on a large scale, it is possible that the assessee may have earned the amount of Rs. 9,45,000 from business dealings in partnership with Isphanis and entered in their books as a loan from the assessee. He further held that as entry regarding this amount was towards the end of the accounting period ending 30th June, 1941, it was rightly treated by the Income-tax Officer as the income of the assessee from a source which the assessee was not prepared to disclose. In the result the Appellate Assistant Commissioner dismissed the assessees appeal.
The Income-tax Officer and the Appellate Assistant Commissioner both also held that proceedings under section 34 were valid. This view was upheld by the Income-tax Appellate Tribunal also in further appeal.
On the merits the Income-tax Appellate Tribunal also rejected the assessees story regarding the receipt of Rs. 15 1/2 lakhs from the privy purse of the grandmother and the mother. The Tribunal did not find it possible to believe that the amounts which were not given to the ladies in a lump sum but in instalments and presumably therefore for maintenance and expenses were all kept intact by them over a long period of time from 1920 to 1940. The Tribunal also referred to the subsequent conduct of the assessee in making an application to the Income-tax Officer for instalments for payment of Rs. 41,000 and held that for this reason also it could not be believed that he had in his hands a large sum of money as a balance out of the alleged amount of Rs. 15 1/2 lakhs after the alleged advance of Rs. 9,45,000 to the Isphanis. The Tribunal also refrred to the difference in the veision of the assessee regarding the source out of which the sum of Rs. 9,45,000 came in the statement of the assessee before the Investigation Commission and the statement made by him subsequently before the Income-tax Officer. Upon an interpretation of those statements the Tribunal pointed out that whereas before the Investigation Commission the assessee had stated that the amount came out of the savings of his wife, before the Income-tax Officer, later on he had stated that it came out of the savings of his grandmother and mother, out of his own savings, and conducted that the version that the amount came out of the savings of his grandmother and mother was clearly an afterthought. The Tribunal also observed that the assessee had admittedly accounts in a large number of banks and it was unbelievable that a person having accounts in several banks, and thus knowing the value and the worth of money would keep a huge sum of money like Rs. 15 1/2 lakhs from May 1940, when he alleged to have got it from his mother on her death, till 24th September, 1941, when he alleged to have loaned it to M/s. Isphani Ltd. that is to say, for a period of about 15 months. For these reasons and further also for the reason that on their interpretation of the statement of the assessee before the Commission they understood that statement to mean that the assessee had taken the amount of Rs. 9,45,000 to Calcutta personally to advance it to M/s. Isphani Ltd., they found it to be unbelievable that a person of the position and status of the assessee would carry such a large amount of money personally to Calcutta from Lucknow. Lastly, they found it difficult to believe that it being admitted that both the grandmother and the mother had daughters who were married to commoners and who were financially not as affluent as the assessee nothing would be given to them, and the entire amount would be allowed to devolve upon the assessee. For all these reasons the Tribunal did not believe the explanation of the assessee regarding the nature of the source of the amount. They also held that the entry in the accounts being only six days before the close of the accounting year relevant to the assessment year 1942-43 and having regard to the status and the position of the assessee, and the large funds at his disposal for earning income, and his potential capacity to earn income, it was rightly included in the income of that year and was assessable in that year. In the result they dismissed the appeal.
An application under section 66(1) of the Income-tax Act made to the Tribunal failed. The case has been referred to us on an application under section 66(2) as required by this court.
Learned counsel for the assessee has argued that the Tribunal misread and misinterpreted the evidence of the assessee before the Investigation Commission in two respect : (1) that the money in question came from his wife and (2) that he had taken the money to Calcutta. Learned counsel has urged that the correct interpretation of the statement is that the money referred to there was not the sum of Rs. 9,45,000, but two other sums of money, namely, Rs. 65,000 and Rs. 70,000 with which certain shares were purchased in the Commercial Corporation Ltd. Sri Gopal Behari, learned counsel for the income-tax department, conceded that in this respect the Tribunal made a mistake. Learned counsel for the assessee also urged that because Mr. Mirza Ahmad Isphani had migrated to Pakistan it was not possible to produce him, and the income-tax authorities should not have rejected his affidavit on the ground that he was not produced for cross-examination. Another argument which he has addressed is that the money left by the two ladies was found mostly in notes of Rs. 10 thousand denomination, from which fact the authorities below inferred that it not having been shown when and through whom the exchange of smaller notes or of smaller amounts was made for notes of Rs. 10 thousand denomination, the assessee must have been dealing with the ladies money and the money could not, therefore, be held to be the exclusive savings of the ladies, if they were the savings of the ladies at all. This according to counsel was surmise. On the basis of these submissions learned counsel argued that the conclusion reached by the Tribunal has been vitiated. He has relied on a decision of the Supreme Court in Dhirajlal Girdharilal v. Commissioner of Income-tax.
As regards the first argument all that is necessary to say is that the Tribunal was the final arbiter of facts. Inferences drawn from evidence on questions of fact cannot give rise to any question of law. The point was squarely before the Tribunal as to the meaning and effect of the statement of the assessee before the Income-tax Investigation Commission in respect of the source of the amount in question, and the manner in which it was taken to Calcutta. The argument of the assessee was also before the Tribunal that the money, the source of which assessee pointed out in the statement before the Commission, was not the money in question, but other sums of moneys for the purchase of the shares, and also the other argument that the money which the assessee admitted to have taken to Calcutta personally was not the money in question but the money for the purchase of the shares. Both arguments were considered by the Tribunal. They may have reached a wrong conclusion and may have drawn wrong inferences, but this cannot give rise to any question of law, which would entitled this court to sit in judgment over the inferences or the conclusions of the Tribunal drawn from the statement of the assessee vide Deity Pattabiramaswamy v. S. Hanymayya the concession made by Sri Gopal Behari cannot also convert a question of fact into a question of law.
As regards the point that it was not possible for the assessee to produce Mr. Mirza Ahmad Isphani for cross-examination, it is sufficient to say that the difficulty of producing evidence cannot be a substitute for evidence. The fact remains that the averments in the affidavit could not be tested by cross-examination and such it is not possible to say that the authorities below acted illegally in disregarding the statement in that affidavit.
Lastly, as to the argument regarding the inferences to be drawn from the conversion of the savings into notes of Rs. 10,000 denomination, and the probabilities envisaged by the Tribunal, it is not possible to say that the Tribunal was indulging merely in conjectures or surmises or speculation. Thus, on the basis of the three principal arguments of the learned counsel for the assessee, it cannot be held that the conclusion reached by the Tribunal on a pure question of fact is vitiated in law.
There were numerous 'solid facts' which have been pointed out above, viz., that there was no entry about the advance of Rs. 9,45,000 anywhere in the account books of the assessee. The Tribunal was right in thinking that the absence of entries was a very damaging circumstance if the loan was a genuine transaction. It also seems to be clear that in the absence of an account of the dealings by the ladies with the alleged savings, and having regard to their status and position and their other issues and their way of life and the possibility of gifts and expenses by them it is not consistent with probabilities that the entire amount could have been kept intact for nearly 20 years. It was also surprising that neither the ladies, nor the assessee, after he had received the amount, should have deposited it in banks, when admittedly he had accounts in a large number of banks. It was also quite impossible to believe that the entire amount should come to the assessee and not to the other daughters and son, when those daughters and son were not in as affluent circumstances as the assessee himself. Lastly, there was the fact that the assessee asked for instalments for payment of a comparatively small amount of Rs. 41,000. If his case were to be believed, he had nearly 6 lakhs of rupees in his hands out of the savings themselves, not taking into account over 5 lakhs of rupees, which he alleged to be his own savings. No serious argument was addressed to us in regard to these facts except to say that having regard to the status of the assessee and his grandmother and mother it was not impossible that they might have been in possession of a very large sum of money, and that some money might have come to the assessee alone. These, however, are all facts and circumstances on which the Tribunal alone was competent to pronounce judgment.
As regards the case cited by learned counsel for the assessee and noticed by us above, there are two subsequent decisions of the Supreme Court in Homi Jehangir Gheesta v. Commissioner of Income-tax and Bhaichand Amoluk & Co. v. Commissioner of Income-tax, from which the proposition is derivable that provided that there are solid facts and circumstances to warrant a certain conclusion on a question of fact the finding of the Tribunal is not necessarily vitiated merely because the Tribunal may have taken into consideration certain facts and circumstances which may be in the nature of conjectures or surmises or may not be strictly relevant. Having regard to all the facts and circumstances of this case, it appears to us that the case falls within the rule laid down in the last of the cases mentioned above.
The result is that the second question referred to us must also be answered in the affirmative and against the assessee. The reference shall be returned to the Income-tax Appellate Tribunal, Allahabad Bench, with the above answers under the seal of the court and the signature of the Registrar. The department shall be entitled to its costs assessed at Rs. 200.