1. This appeal by the assessee relates to the assessment year 1975-76 and is directed against the inclasion of interest income of Rs. 920 on speculative profit of Rs. 9,200 earned in 1965 and included in the assessee's income for the assessment year 1966-67. The point has now come up before this Special Bench as the assessee contends that it is not assessable as his income on the basis of a decision of a Calcutta Bench of the Tribunal in the case of B.K. Birla [IT Appeal No. 533 (Cal.) of 1974-75, dated 23-9-1975].
2. The facts of the present case are as follows : The assessee, Shri Nar HariDalmia, has been deriving income by way of dividends. On 10-1-1966 Shri Nar Hari Dalmia purporting to act on behalf of his minor daughter, Kumari Archana, contracted to purchase 10,000 shares of Indian Iron & Steel. Co. Ltd. at the rate of Rs. 23.65/23.67 per share.
On 13-1-1966 those shares were sold by Shri Nar Hari Dalmia again purporting to act on behalf of his daughter at the rate of Rs. 24.58 per share. These transactions were entered into and completed through the share brokers S. Bhaltia & Bros. of Calcutta. On 7-2-1966 the share brokers sent to Kumari Archana a cheque for Rs. 9,200 on the Punjab National Bank. This cheque was deposited in the bank account of Kumari Archana with Devkaran Nanaji Banking Co. Ltd. and after deduction of bank charges, the actual amount credited by the bank in Kumari Archana's account was Rs. 9,19,425. Kumari Archana had at the relevant time a credit balance of Rs. 50,000 approximately. No security was taken by the brokers for this deal stating that it was not the general practice in the market in the cases of well-known parties and they had much business dealings with the assessee, Shri Nar Hari Dalmia, who was a well-known figure in the business circles.
3. On the above facts, in the assessment of Shri Nar Hari Dalmia for the assessment year 1966-67, the ITO held that the income from the transaction in the name of Kumari Archana really belonged to him and included the amount of profit of Rs. 9,200 in his total income. The assessee's appeal to the AAC having failed he appealed to the Tribunal.
The Delhi Bench 'A' upheld the assessment of the amount in the hands of Shri Nar Hari Dalmia for the detailed reasons given in paragraph 5 of their order dated 4-8-1971 in IT Appeal No. 238 of 1971-72 which is extracted below : We are inclined to uphold the action of the income-tax authorities in treating the amount of Rs. 9,200 as profit belonging to Shri Nar Hari Dalmia. The circumstances which we consider decisive in determining this issue is the circumstance that Archana did not have sources at the time the transaction was struck, which would have justified Shri Nar Hari Dalmia undertaking the transaction on her behalf or which have induced the brokers to accept the transaction as entered on her behalf. The lot of shares contracted for was worth Rs. 2,37,000 and it is common ground that Archana did not have funds exceeding Rs. 50,000 at her disposal. It is, therefore, clear that Shri Nar Hari Dalmia could not have entered into this transaction on behalf of Archana as a reasonable business proposition apart from the consideration that as a wise father he would not have undertaken such a risk on behalf of a minor daughter. The transaction is all the more implausible from the point of view of the brokers if considered as a transaction entered into on behalf of the minor. It is inconceivable that the broker would have entered into a void contract of such a large magnitude. It could only be explained on the assumption that the broker also took it for granted that the transaction really belonged to Shri Nar Hari Dalmia and that the name of the daughter was only a camouflage. This is made abundantly clear by the certificate of the brokers which stated that security was not taken from well-known parties and that Shri Nar Hari Dalmia was well-known to them. The gist of the certificate, therefore, is that the security in respect of the transaction was not taken because the transaction related to Shri Nar Hari Dalmia. It is only on that footing that conduct both of the brokers and Shri Nar Hari Dalmia can be satisfactorily explained. The transaction when it was entered into was capable of resolving itself either into a profit or into a loss and the eventuality of the loss could not have been ignored by either party. Keeping in mind such an eventuality, Shri Nar Hari Dalmia could not reasonably have entered into this transaction on behalf of his minor daughter and the brokers would not have reasonably conceived of it except on the footing that the real person concerned was Shri Nar Hari Dalmia. It is this aspect of the matter which leaves us in no doubt about the real nature of the transaction. The argument of the learned counsel that the speculation profit did not require such risk did not satisfactorily explain this aspect. In fact if it was a mere speculation, it is all the more difficult to understand how prudent businessman would enter into such a transaction on behalf of a minor child and how a prudent broker would accept it as such. In fact if the transaction was a pure speculative transaction it could only be explained on the footing that it was entered into at the risk of Shri Nar Hari Dalmia and it was accepted as such by the brokers. Once we determine the real nature of the transaction, the formalities, viz., the contract notes, the issue of the cheque and the credit in the account have to be put in their proper perspective. All these formalities are consistent both with the transaction being genuinely pn behalf of and for the benefit of minor daughter and with the transaction being really by Shri Nar Hari Dalmia. For considerations detailed earlier, we are of the view that the transactions could not have been entered into except at the risk of and for the benefit of Shri Nar Hari Dalmia. The superimposition of the name of Archana to the transaction is a mere camouflage and and the receipt of cheque in her name is a mere application of the surplus in fact earned by Shri Nar Hari Dalmia. We would, therefore, confirm the addition of this amount in the assessment of Shri Nar Hari Dalmia and exclude the amount from the assessment of Archana Dalmia.
4. Against the above order of the Tribunal, the assessee filed a Reference Application No. 238 of 1971-72, which was rejected by the same Delhi Bench 'A' of the Tribunal vide order dated 10-3-1972 for the following reasons : 5. We are unable to accede to the request of the assessee. The questions proposed by the assessee seek to attack the finding of the Tribunal which is essentially a finding of fact. This will be clear from the extract from the order of the Tribunal given in the earlier paragraph. The learned representative for the assessee at the time of hearing of the application contended that Archana Dalmia had adequate resources because she had Rs. 50,000 and in speculative business she did not require the full value of the shares dealt in.
He also contended that the certificate from the brokers supported the assessee's claim. Both these contentions related to the factual aspect of the question before the Tribunal and both these questions have been decided against the assessee by the Tribunal on weighing of the factual pros and cons. There is no question here of applying any provision of law or of interpreting the same. There is no question also of determining the legal effect of any facts. The only question to be determined by the Tribunal was about the actual ownership and risk bearing of certain transactions and this question had necessarily to turn on the appreciation of facts. The decision of the Tribunal, therefore, would not give rise to any question of law in the manner suggested by the applicant.
5. This point was again raised by the assessee in his appeals for the assessment years 1967-68 to 1969-70 being IT Appeal Nos. 2337 to 2339 of 1970-71. In each of those years interest income of Rs. 920 was received on the investment of the said profit of Rs. 9,200 which had escaped assessment in the original assessments of the assessee. In order to assess the said interest income, proceedings were initiated under Section 147 of the Income-tax Act, 1961 ('the Act') and reassessments were completed including the income of Rs. 920 in each of these three years. The assessee's appeals to the AAC failed.
Accordingly, the assessee came up in further appeal to the Tribunal. It was contended for the assessee that the Tribunal had come to an erroneous conclusion by improper appreciation of facts and the facts that were brought on the record did not justify the conclusion that the sum of Rs. 9,200 belonged in truth to the assessee. It was submitted that the income of Rs. 9,200 was earned by entering into some sale of shares, of Rs. 2,37,000 and the contract notes issued by the brokers disclosed that those transactions were entered into by the assessee as a guardian of his daughter Kumari Archana and it was common ground that the minor daughter had funds of Rs. 50,000 of her own. It was urged that on these facts it was not possible to deduce the conclusion that the profit belonged to the assessee and not to Kumari Archana. The Tribunal'rejected the above contentions and dismissed the assessee's appeals with the following observations : We have carefully considered the matter in all its aspects, gone through the order of the Tribunal and also perused the evidence produced. The evidence that was now produced before us was the same as led before the Income-tax Officer for the earlier year considering which, the Tribunal reached the conclusion to which it did. As there is no improvement in the evidence and as this evidence has already been considered by the Tribunal and a finding against the assessee has been recorded, we respectfully following the order of the Tribunal hold that the sum of Rs. 9,200 belonged to the assessee and not to the his minor daughter. It is no doubt true that a father can enter into a transaction to benefit his minor daughter and it is also no doubt true that the onus to prove lies on that person who asserts that the apparent is not the real and in that view of the matter, the department has to discharge the primary onus. The Tribunal felt that that onus had been discharged and taking into consideration the normal human conduct, it held that the transactions could not have been put through on behalf of the minor daughter. We are, therefore, unable to see any misdirection in the order of the Tribunal as is sought to be made out by the learned counsel for the assessee.
5. As a consequence of our agreement with the view expressed by the Tribunal in the order referred to above, it must be held that the income of Rs. 920 arising out of the employment of Rs. 9,200 accrued to the assessee and was, therefore, rightly included in his assessment in these three years. These appeals, therefore, fail and are dismissed.
In the subsequent years 1970-71 to 1974-75 no data has been placed before us by the assessee of any appeal have been filed by him to the Tribunal.
6. The assessment year now under appeal is 1975-76. In this year, the ITO found that the facts were the same on this point as in the earlier years, in which he had held that the profit of Rs. 9,200, earned by the assessee in the name of his minor daughter in fact belonged to him and his finding was confirmed by the Tribunal. Accordingly, he included the interest income of Rs. 920 in the assessee's total income for this year.
7. On appeal, the AAC confirmed the action of the ITO with the following observations : The only objection taken is in regard to the inclusion of a sum of Rs. 920 as interest income by estimating income on investment of profit of Rs. 9,200. The facts regarding the assessment, of Rs. 920 are discussed in the order by the ITO. This matter was considered in the earlier year and on the basis of the order passed by the Tribunal, the ITO rejected the claim of the assessee. For the year in question, the learned counsel contended that the facts of the case remained the same and the arguments advanced before the ITO are reiterated.
2. After looking into the details and discussion of the learned counsel, I see no justification to interfere. The appeal is, therefore, dismissed.
8. The assessee has come up in further appeal to the Tribunal. The assessee's learned counsel, Shri G.C. Sharma, contends that the assessee's case for the assessment year 1966-67 was decided by the Tribunal on an erroneous appreciation of the facts and law. The submission is that the circumstance that Kumari Archana did not have resources at the time the transaction was struck, which would have justified Shri Nar Hari Dalmia in undertaking the transaction on her behalf, taken by the Tribunal as a decisive circumstance, was not only not decisive but also irrelevant. It has been argued that in a speculative transaction it is not necessary that the contracting party should have funds equal to the value of the shares purchased and, therefore, merely because the credit balance of Kumari Archana was Rs. 50,000 as against the shares of Rs. 2,37,000 purchased on her behalf would not show that the transaction was not entered into on her behalf.
It is also argued that the Tribunal erroneously stated that the contract was void because according to the correct legal position, the contract was voidable only at the instance of the minor through her guardian or herself after attaining majority. The learned counsel has further submitted that there is no law which prohibits a minor from earning income and his/her guardian to assist in doing so and entering into contracts on his/her behalf for earning income. In the present case it is stated that Shri Nar Hari Dalmia entered into a speculative transaction of purchase and sale of shares only to produce income for his daughter and it could not be treated as his income. The learned counsel has urged that it was immaterial that the transaction, when entered into, was capable of resolving itself either into a profit or into a loss because in case of loss it was to be borne by Shri Nar Hari Dalmia and his daughter was to get only the profit, if any, resulting from the transaction. Thus, the counsel contends that the minor was not subjected to any risk of loss. He heavily relies on the decision of the Calcutta Bench of the Tribunal in the case of B.K. Birla (supra) and submits that there Shri Birla entered into a similar speculative transaction in the name of his minor daughter and the profit resulting from that transaction was treated by the Tribunal as income of the minor and directed to be assessed in her hands.
9. On behalf of the revenue, Shri C.V. Gupte submitted that in the assessment year 1966-67, the ITO gave a finding that the speculative transaction entered into by Shri Nar Hari Dalmia ostensibly on behalf of his minor daughter was sham. He submitted that the finding of the ITO was upheld by the Tribunal in that year and that order of the Tribunal became final and was followed in all the subsequent assessment years. The inclusion of the interest income on the said profit of Rs. 9,200 in the assessee's income was said to be consequential only. The learned departmental representative distinguished the decision of the Calcutta Bench of the Tribunal on facts and submitted that the facts there being different, the assessee cannot derive any assistance therefrom, It was also urged by the learned departmental representative that, on the same facts, the assessee cannot legitimately ask for a different decision from the Tribunal.
10. We have carefully considered the submissions of the parties and gone through the entire record. The point at issue in this case, at first, arose in the assessment year 1966-67. The Tribunal upheld the action of the income-tax authorities in treating the speculative profit of Rs. 9,200 as profit belonging to Shri Nar Hari Dalmia. The facts on which the Tribunal came to the said conclusion are admittedly the same in this year. It is so stated both by the ITO and the AAC and the counsel for the assessee did not dispute either before the AAC or before us that the facts on this point have remained the same since the year 1966-67 and no fresh facts have been found by the assessee. The assessee's reliance mainly is on the decision of the Calcutta Bench of the Tribunal in the case of B.K. Birla (supra). In this connection it has to be borne in mind that it is now settled law that although the ITO is not bound by the rule of res judicata or estoppel by record, yet he can reopen a question previously decided only if fresh facts come to light which, on investigation, would entitle the officer to come to a conclusion different from the one previously reached or if the earlier decision had been rendered without taking into consideration the material evidence. These principles govern as much the decisions of the Tribunal as that of the ITO. In view of this, even though it is open to the assessee to challenge the decision of the Tribunal for the earlier assessment year, as that decision does not operate as res judicata or work as an estoppel in respect of the assessment year under appeal, but ordinarily the assessee has to show some fresh facts on the basis of which he wants the Tribunal to come to a different conclusion. In the present case no fresh facts have been brought to light by the assessee.
The facts admittedly are the same as were in the assessment year 1966-67. The contention of the assessee's learned counsel that in that year the appreciation of facts and evidence was erroneous, has earlier also been considered by the Tribunal in the assessee's appeals for the assessment years 1967-68 to 1969-70 and negatived vide order dated 20-4-1972. Nevertheless, we have looked into the whole matter again. In our opinion, the decision in the assessment year 1966-67 turned on the finding of the Tribunal that the transaction of purchase and sale of shares entered into by Shri Nar Hari Dalmia in the name of his daughter Kumari Arch ana was a benami transaction and in actual fact it was his own transaction. The Tribunal came to this conclusion not merely because Kumari Archana had funds of Rs. 50,000 only as against purchase of shares of Rs. 2,37,000 but also on the basis of other equally important considerations. The. learned counsel for the asse ssee has vehemently argued that this facts was not only a decisive circumstance but also irrelevant. In our opinion, if it were so, it would have been a good ground for taking a reference to the High Court on the point against the earlier decision. It is significant to find that no such question was raised in the reference application filed by the assessee against the earlier decision of the Tribunal. Only a general question was raised and the Tribunal declined to refer the same on the ground that it was based on appreciation of evidence. Nevertheless, the argument appears to have no force even on merits. It is true that in such a transaction the full value of the shares is not needed to back the purchase at the stock exchange, but the question would then arise whether a prudent businessman would enter into a mere speculative transaction on behalf of his minor child. It was this aspect of the question which was considered by the Tribunal in 1966-67 and answered in the negative as follows : In fact if it was a mere speculation, it is all the more difficult to understand how prudent businessman would enter into such a transaction on behalf of a minor child and how a prudent broker would accept it as such. In fact if the transaction was a pure speculative transaction it could only be explained on the footing that it was entered into at the risk of Shri Nar Hari Dalmia and it was accepted as such by the brokers.
11. It has further to be seen that no security was taken by the share brokers in respect of this speculative transaction even though it is ordinarily taken in all such deals. On the other hand, the brokers had certified that no security was considered necessary because Shri Nar Hari Dalmia was a leading businessman and well-known in these business circles. The Tribunal, in our opinion, rightly took into account this circumstance in coming to the conclusion that it could be explained only on the basis that the brokers took it to be the transaction of Shri Nar Hari Dalmia himself. The third circumstance which weighed with the Tribunal was that the transaction when entered into was capable of resolving itself into either profit or loss and the eventuality of loss could not have been ignored by either party. It was this aspect of the matter which left the Tribunal in no doubt about the real nature of the transaction which was taken to be as of Shri Nar Hari Dalmia himself.
The learned counsel for the assessee, however, argued that loss was to be borne by Shri Nar Hari Dalmia and only profit was to go to the minor daughter. The argument is not well founded for the reason that there was no such stipulation in the contract and, consequently, even if it was assumed to be at the back of the mind of Shri Nar Hari Dalmia, it could not be present to the mind of the other party. We do not think that a prudent businessman or guardian can be expected to impose on the minor the risk or liability of a purely speculative business. In fact the Privy Council has held in the case of Sanyasi Char an Mandalv.Krishnadhan Banerji AIR 1922 PC 237 that the manager of a joint family cannot impose upon a minor member of the family the risk and liability of a new business started by himself and the other adult members. It follows from this decision of the Privy Council that a new speculative trade by the father cannot bind the interest of his minor son or minor daughter. That being so, it was evident that the other party to the contract could not recover anything from the minor in case of loss and, therefore, would not have entered into this contract unless they undurstood it to be a contract by Shri Nar Hari Dalmia himself. It is all the more so when we find that no security was taken by the brokers which also points to the conclusion that the transaction was entered by Shri Nar Hari Dalmia not on behalf of his minor daughter but on his own behalf. The Tribunal had emphasised in the original order for the assessment year 1966-67 that if it was a mere speculative transaction it was all the more difficult to understand how a prudent businessman could enter into such a transaction on behalf of his minor child and how a prudent broker could accept it as such. The Tribunal's conclusion that if the transaction was a pure speculative transaction, it could only be explained on the footing that it was entered into at the risk of Shri Nar Hari Dalmia and it was accepted as such is based on appreciation of the circumstances of the case and the material before the Tribunal. In disposing of the appeals for the subsequent assessment years 1967-68 to 1969-70, the Tribunal after considering the circumstances de novo, came to the conclusion that they were unable to see any misdirection in the order of the Tribunal as was sought to be made out by the learned counsel for the assessee. It was essentially a question of fact and two successive Benches of the Tribunal have already come to the conclusion that the sum of Rs. 9,200 belonged to the assessee and not to his minor daughter Kumari Archana. On the same facts we are unable to come to a different conclusion. The argument that there is no prohibition in law against a minor earning income through his guardian has no force in the context of the facts of this case discussed above. The argument that the contract was voidable and not void is also of no assistance to the assessee for the reason that the benami nature of the transaction was held to have been established on the facts of the case as found by the Tribunal and not on the basis that the contract was void.
12. As regards the decision of the Calcutta Bench in the case of B.K.Birla (supra) we are of the opinion that it is distinguishable on facts. It is true that in that case also the profit was earned by Shri Birla in consequence of a speculative transaction entered into by him on behalf of his minor daughter Kumari Manjushni Birla. In that case, however, it was not brought out in the order how much was the credit balance in the name of Kumari Manjushni Birla and whether it was sufficient to enable Shri Birla to enter into a transaction of this nature on behalf of his minor child. The basis of addition by the ITO in that case was that Shri Birla had applied his own labour and skill in doing the speculation business. This basis was rejected by the Tribunal. Furthermore, there was also evidence in the form of statements of the brokers who made the contract on the instructions of the assessee. It was found by the Tribunal on the facts of that case that the transaction was entered into by the assessee on behalf of his minor daughter. As a matter of fact, the Tribunal Was at pains to distinguish the facts of that case from another case of M.M. Mehta in IT Appeal No. 5535 (Cal.) of 1973-74 in which a contrary conclusion was recorded. The Tribunal then came to the conclusion that the facts of that case were similar to the case of one Smt. Parmadevi wherein the Tribunal had held that the income earned by the guardian from the speculative business carried on by the guardian in the name of the minor belonged to the minor. It is, therefore, clear that the decision of the Calcutta Bench of the Tribunal relied on for the assessee proceeded on the peculiar facts of that case. The facts in the present case are different. Hence, the assessee cannot derive any assistance from the said decision of the Calcutta Bench of the Tribunal.
13. After considering the totality of the facts and circumstances of the case before us, we are of the opinion that the Tribunal's decision in this case for the assessment year 1966-67 did not proceed on any irrelevant material but had proceeded on appraisal of the evidence on the record and the circumstances of the case. We do not find any compelling reason to come to a conclusion different from what the Tribunal did in 1966-67 and in the subsequent years 1967-68 to 1969-70.
We, therefore, endorse the earlier conclusions of the Tribunal.
14. Before parting with this case, we may mention that the assessee has taken a ground in the grounds of appeal before us that the AAC had erred in holding that the speculation profit of Rs. 9,200 in 1965 was the assessee's income and Kumari Archana was the assessee's nominee and he misconceived the provisions of Sections 60 to 64 of the Act and the provisions of the Indian Contract Act, 1872. On looking into the record, we find that the AAC while deciding the assessee's appeal for the assessment year 1966-67 referred to in Section 64 and Section 11 of the Indian Contract Act. That order of the AAC, however, merged into the order of the Tribunal for that year. We have considered all the arguments advanced on behalf of the assessee before us and endorsed the conclusion of the Tribunal for the assessment year 1966-67. The Tribunal's decision did not proceed on the basis of Section 64 or any provision of the Indian Contract Act. The Tribunal came to the conclusion that the profit was in fact earned by the assessee and his daughter Kumari Archana was merely benatnidar and that was essentially a question of fact. We, therefore, reject this ground of appeal.
15. As a result of the above findings, we have to held that the interest income of Rs. 920 has rightly been included in the assessee's total income for the assessment year under appeal. Accordingly, the assessee's appeal fails and the same is dismissed.