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Commissioner of Income-tax, Kerala Vs. Dr. K. George Thomas. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference Nos. 22 to 25 of 1975
Reported in[1977]108ITR1024(Ker)
AppellantCommissioner of Income-tax, Kerala
RespondentDr. K. George Thomas.
Cases ReferredAmarendra Lal Khan v. Commissioner of Agricultural Income
Excerpt:
.....as the high court judgment for those two years, the receipt of funds was by the assessee himself and not, as in this assessment year, credited in the accounts of india gospel mission, maintained by the assessee. it was of the view that so long as the receipt of the amount depended on the good wishes of the donors in america it was receipt of a non-recurring nature even though the assessee might have received the amounts on various occasion. the appellate tribunal shall, within one hundred and twenty-days of the receipt of such application, draw up a statement of the case and refer it to the high court :provided that the appellate tribunal may, if it is satisfied that the applicant was prevented by sufficient cause from presenting the application within the period hereinafter specified,..........questions about the income nature and the eligibility for exemption under section 4(3)(vii) of the indian income-tax act, 1922, the amounts being receipts of casual and non-recurring nature not arising from business or the exercise of a profession or occupation, were referred to the kerala high court, that court, subsequent to the decision of the tribunal for this assessment year 1962-63, by their judgment in i.t.r. nos. 32 & 33 of 1971 on the file the high court dated 19th july, 1973 (now reported as commissioner of income-tax v. dr. k. george thomas : [1974]97itr111(ker) ), had answered those questions in favour of the department, thus finding that the assessment years 1960-61 and 1961-62 the amounts are chargeable to tax. but there, as seen from the facts stated in the order of the.....
Judgment:

GOPALAN NAMBIYAR, ACTG. C.J. - The references under section 256 of the Income-tax Act raise a common question in regard to the assessability to tax and the penalty of the same assessee, common to all these cases. I.T.R. Case No. 22 of 1975 is in respect of the assessment year 1962-63; I.T. R. Case No. 23 of 1975 raise the question of the legality and correctness of the levy of penalty for the having submitted the return for the same assessment year, viz., 1962-63; ITR Case No. 24 of 1975 is in respect of the assessment for the year 1963-64; and ITR Case No. 25 of 1975 is in respect of the assessment for the assessment year 1969-70.

The statement of facts sent up in I.T.R. Case No. 22 of 1975 may be taken as sufficient to indicate the point in controversy in the other cases also. The said statement reads as follows :

'By this application presented under section 256(1) of the Income-tax Act, 1961, the Commissioner of Income-tax, Kerala, Ernakulam, requires the Tribunal to refer to the High Court of Kerala certain question of law arising out of the order of the Tribunal in I.T.A. No. 148/ (Coch) / 72-73 which was an appeal preferred by the Income-tax Officer and which was dismissed by the Tribunal and to which order, one of us, the Judicial Member, was a party. Inasmuch as, in our opinion, certain question of law do arise out of the aforesaid order, we are hereby drawing up a statement of the case.

2. The statement of the case relates to assessment year 1962-63. The assessee is individual in status. He runs a printing press known as 'Kerala Dwani' and also a Malayalam Daily newspaper of the same name. The assessee filed a return of income declaring a loss of Rs. 3,37,183. As per the account maintained by the assessee, according to the Income-tax Officer, in his alleged capacity as the vice-President of the India Gospel Mission, there were various remittances from the United State of America credited in that account, which receipts amounted in this year to Rs. 5,85,637. The assess had two bank accounts with the Indian Overseas Bank, Kottayam, Of two accounts, one is in the name of the assessee and the other is in the name of India Gospel Mission of which the assessee claims to be the vice-President. The credit of Rs. 5,85,637 appears in the account of India Gospel Mission. An examination by the Income-tax Officer of the utilisation of the funds credited in that account revealed that a major part of funds have been turned over to the newspaper Kerala Dwani, a sizable portion of household expenses -purchase of cow, payment of house rent of father, personal trips of Bombay, etc., purchase of property by the assessee, providing loan facilities to the assessees close relatives like father, brothers, etc., without interest. The personal expenses met from out of these funds and the amounts utilised for the purchase of properties in the names of the assessee and his five brothers are claimed by the assessee as loans taken by him in his individual capacity to be repaid in subsequent years. The Income-tax Officer found that no interest is seen charged on such drawings, that the account showed that the assessee has been operating these funds in an independent manner not covered by any stipulated principles or directions, the purchases, the advance made for the purchase of properties, etc., find a place in the balance-sheet prepared for the India Gospel Mission. At one stage the assessee claimed that the newspaper Kerala Dwani had been taken over by the India Gospel Mission and he has nothing to do with it. But the Income-tax Officer found that the statutory declarations that are to be published by every newspaper every year show that the assessee in his individual capacity is the owner of the press and the newspaper, and do not show at any place the India Gospel Mission or himself as the vice-President of the India Gospel Mission as connected with the newspaper at all. The Income-tax Officer observed that an examination of the whole case revealed that the funds have been received mostly for assisting the assessee in running the newspaper. On these fact the Income-tax Officer found that the funds of the India Gospel Mission and the newspaper 'Kerala Dwani' have all been mixed up into one unit and that the assessee has been operating upon all these as individual owner of both the newspaper and the funds. He also observed that there is no doubt that the remittances that came to the assessee are entirely connected with his business activities and have been entirely utilised for the business and personal activities of the assessee. He inferred that the entire receipts of cash from the U.S.A. is relatable to the business activities of the assessee and is assessable to tax as the assessees income. So he came to the conclusion that the assessee is only trying to explain away the utilisation of funds for his own purposes as loans taken in his personal capacity from his own self as the vice-President of the India Gospel Mission. Following the judgment of the Supreme Court in the case in P. Krishna Menon v. Commissioner Income-tax : [1959]35ITR48(SC) , he brought the amount of Rs. 5,85,637 shown as received from India Gospel Mission as per the ledger maintained by the assessee in the name of India Gospel Mission to tax as income of the assessee.

A copy of the assessment order is hereto annexed, marked annexure 'A', and forms part of the statement of the case.

3. In appeal, the Appellate Assistant Commissioner stated that the case of the assessee was that these remittances from abroad were by various donors in the U.S.A. through an organisation called 'Indian Christian Crusade' for spreading the work of the India Gospel Mission Inc., Seattle, Washington, of which the assessee claims to be the vice-president and which was engaged in a movement for the spread of religion and for fighting the forces of atheism and the political ideologies which favoured atheism, that the donations received through the India Christian Crusade were not for any services rendered by the assessee nor as a remuneration or consideration for anything done by him but only for meeting the expenses of the above movement in India, that those could not be considered as the assessees income in any sense of the word and that the diversion of the receipts for his personal expenses was only as loans to be repaid by him to the Mission. One of the ground raised before the Appellate Assistant Commissioner in the grounds of Appeal was that the Income-tax Officer erred in treating the receipt of Rs. 5,85,637 of the India Gospel Mission as the income of the assessee. No definite finding was given on that question or of the loan nature of the utilisation of the funds for the personal use of the assessee. The Appellate Assistant Commissioner then found that the dispute between the assessee and the department regarding the nature of the receipts from abroad had already been decided in favour of the assessee by the Income-tax Appellate Tribunal, Cochin Bench, in the appeals preferred by the assessee against assessments for assessment years 1960-61 and 1961-62 in which years also there were similar remittance brought to tax by the Income-tax Officer. So, following that decision of the Tribunal, he held that the amount received by remittances from abroad is not taxable because receipts cannot be considered as arising from the vocation of the assessee.

A copy of the order of the Appellate Assistant Commissioner, which is a consolidated order for this year and for the subsequent assessment year 1963-64, is hereto annexed, marked annexure 'B', and forms part of the statement of the case.

4. The Income-tax Officer appealed before the Tribunal. It was argued before the Tribunal that as the nature and source of the receipts are not explained, it can be inferred that it is the income of the assessee, that user for personal purposes indicated that it is the income of the assessee and that it is not non-recurring in nature because of the receipts of similar amounts in the prior two assessment years. The Tribunal rejected all these arguments and found, following the Tribunals order for assessment years 1960-61 and 1961-62, that the receipts from aboard, even assuming that these are received by the assessee in the manner found by the Income-tax Officer, are not the income of the assessee and that if it is income those are receipts of a casual and non-recurring nature not arising from business or the exercise of a profession or occupation. In that manner, The Tribunal upheld that the order of the Appellate Assistant Commissioner.

5. Incidentally, it may be stated that when at the instance of the Commissioner of Income-tax, Kerala, appropriate questions about the income nature and the eligibility for exemption under section 4(3)(vii) of the Indian Income-tax Act, 1922, the amounts being receipts of casual and non-recurring nature not arising from business or the exercise of a profession or occupation, were referred to the Kerala High Court, that court, subsequent to the decision of the Tribunal for this assessment year 1962-63, by their judgment in I.T.R. Nos. 32 & 33 of 1971 on the file the High Court dated 19th July, 1973 (now reported as Commissioner of Income-tax v. Dr. K. George Thomas : [1974]97ITR111(Ker) ), had answered those questions in favour of the department, thus finding that the assessment years 1960-61 and 1961-62 the amounts are chargeable to tax. But there, as seen from the facts stated in the order of the Tribunal as well as the High Court judgment for those two years, the receipt of funds was by the assessee himself and not, as in this assessment year, credited in the accounts of India Gospel Mission, maintained by the assessee.

A copy of the order of the Tribunal for assessment year 1962-63 and a copy of the order of the Tribunal for assessment years 1960-61 and 1961-62 (consolidated order for two years) which the Tribunal followed for this assessment year 1962-63 are hereto annexed, marked respectively as annexures 'C' and 'D' and form part of the statement of the case.

6. On these facts and in the circumstances of the case, the following questions of law arise and the same are hereby referred under section 256(1) of the Income-tax Act, 1961, to the High Court of Kerala :

(1) Whether, on the facts and circumstances of the case, the Tribunal was right in finding that the amount of Rs. 5,85,637 assessed by the Income-tax Officer was not assessable as the income for assessment year 1962-63 (2) Whether, on the facts and circumstances of the case, the Tribunal was right in finding that the amount of Rs. 5,85,637 are receipts of a casual and non-recurring nature not arising from business or exercise of a profession or occupation within the meaning of section 10(3) of the Income-tax Act, 1961 '

The Income-tax Officer found that the assessee was liable to be assessed to tax in respect of the income in question and that penalty proceedings for not paying the advance tax voluntarily were to be dealt with separately. On appeal, the Appellate Assistant Commissioner found that the receipts in question from abroad were not chargeable to tax as they cannot be considered as income arising from the vocation of the appellant but depended entirely on the whims of the donor. They were purely voluntary payments without any legal or contractual basis, and by sending these amounts the donors were merely supporting the movements is which they believed. On further appeal to the Income-tax Appellate Tribunal, Cochin Bench, that Tribunal found that the test followed by the Tribunal on the earlier occasion had to be followed for the assessment year in question also. It was of the view that so long as the receipt of the amount depended on the good wishes of the donors in America it was receipt of a non-recurring nature even though the assessee might have received the amounts on various occasion. Therefore, following the order of the Tribunal for two prior assessment years it found that the remittances so received were not proved to be the income of the assessee; and that even if they were 'other income', it was only of a casual and non-recurring nature, not arising from business or exercise of a profession or occupation (vide paragraph 4 of annexure 'C' of the statement of the case). The statement of the case was sent up by the Tribunal formulating the two questions of law for decision of this court.

In respect of the prior order of the Appellate Tribunal which was referred to and followed, as noted in the Tribunals order and statement of facts, the matter came up to this court in Commissioner of Income-tax v. Dr. K. George Thomas : [1974]97ITR111(Ker) . This court on that occasion disagreed with the view taken by the Appellate Tribunal and had answered two question of law formulated for its decision, practically in the same terms as in the present case, in favour of the department and against the assessee.

The decision of the Division Bench referred to above should directly govern this case. But, counsel for the assessee raised a point that there is a fundamental distinction between this case and the case reported in Commissioner of Income-tax v. Dr. K. George Thomas : [1974]97ITR111(Ker) . He relied particularly on the statement in paragraph 5 of the statement of the case which we have set out earlier. The contention raise on the basis of the said paragraph is that in the case before us it cannot be said that the assessee had received the income in question, and that the income was received by, or on behalf of, the India Gospel Mission. An argument to that effect was advanced on the earlier occasion before the Division Bench in Commissioner of Income-tax v. Dr. K. George Thomas : [1974]97ITR111(Ker) . This court rejected the argument as follows (page 115, 116) :

'We are also of the view that the argument of behalf of the assessee before the Tribunal that the payments were to the India Gospel Mission or to any movement should not have been entertained, because it was against the specific case of the assessee. There was no material whatever to indicate the existence of any such outside agency to which the payments were made, the assessee merely receiving the payments on behalf of that agency as if he was a trustee or one standing in a fiduciary capacity to that agency.'

Except for paragraph 5 of the statement of the case, the position is the same here also. We do not think that in the instant case paragraph 5 of the statement of the case would make any difference to the question. We are unable to regard that as really as statement of fact sent up by the Tribunal. On the other hand, as a reading of the paragraph itself shows, it was a comment made by the Tribunal in sending up the statement of facts, on the decision in Commissioner of Income-tax v. Dr. K. George Thomas : [1974]97ITR111(Ker) rendered subsequent to the Tribunals order. Our jurisdiction in these matters is governed and regulated by section 256 of the Income-tax Act, 1961. The relevant portion of it is as follows :

'256. (1) The assessee or the Commissioner may, within sixty days of the date upon which he is served with notice of an order under section 254, by application in the prescribed from, accompanied where the application is made by the assessee by a fee of one hundred and twenty-five rupees require the Appellate Tribunal to refer to the High Court any question of law arising out of such order and, subject to the other provisions contained in this section. The Appellate Tribunal shall, within one hundred and twenty-days of the receipt of such application, draw up a statement of the case and refer it to the High Court :

Provided that the Appellate Tribunal may, if it is satisfied that the applicant was prevented by sufficient cause from presenting the application within the period hereinafter specified, allow it to be presented within a further period not exceeding thirty days......'

The answer to the reference is provided for in section 260, which it is unnecessary to extract. Section 260 makes it plain that the High Court is to answer the question referred, which, as seen from section 256, can only be one 'arising out of the order' of the Tribunal. We are unable to find that the question of law as to whether the assessee was in receipt of income for the relevant years in question, or whether the same was by the India Gospel Mission, is one that arises out of the order of the Tribunal. It does not appear to have been raised before the Tribunal, and was not dealt with by it. It is inconceivable that such a fundamental objection that the assessee had not received the relevant income would not have been raised by way of direct onslaught on the assessment proceedings at the threshold itself.

Counsel for the department has drawn our attention to Amarendra Lal Khan v. Commissioner of Agricultural Income-tax : [1959]36ITR288(Cal) as authority for the proposition that the findings of fact properly made by the appellate authority are final, and that these ought to the made in the appellate authoritys order; and only the facts so found are to be set out in the statement of the case sent up to the High Court. The ruling also states that the findings made at the appellate stage cannot be added to or varied, at the stage of making the reference, except that clerical errors could be corrected or necessary clarification made.

We find no scope to entertain or to accept the contention urged on behalf of the assessee. In the circumstances, we answer both the questions referred to us in the negative, that is, in favour of the department and against the assessee.

I.T.R. Case No. 23 of 1975 :

For the assessment year 1962-63, the assessees return had to be filed on or before February 29, 1963, but was filed only on February 22, 1966, showing only 'loss'. The officer assessed to tax, mainly because he held that the income that we noticed in I.T.R. No. 22 of 1975 was taxable. The defence to the penalty proceedings was that there was no failure to file the return, because the assessee had not taxable income, if the disputed income were to be excluded. This was accepted by the Tribunal, which has formulated the following question for our decisions :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the penalty levied on the assessee under section 271(1)(a) of the Income-tax Act, 1961, was rightly cancelled by the Appellate Assistant Commissioner ?'

In the light of our decision in I.T.R. Case No. 22 of 1975, we answer the question referred to in I.T.R. No. 23 of 1975 in the negative, that is, in favour of the department and against the assessee.

I.T.R. Case No. 24 of 1975 :

The questions referred are :

'(1) Whether, on the facts and circumstances of the case, the Tribunal was right in finding that the amounts of Rs. 4,32,956 was not assessable as the income of the assessee for assessment year 1963-64 ?

(2) Whether, on the facts and circumstances of the case, the Tribunal was right in finding that the amount of Rs. 4,32,956 are receipts of a casual and non-recurring nature not arising from business of the exercise of profession or occupation within the meaning of section 10(3) of the Income-tax Act, 1961 ?'

In view of our decision in I.T.R. No. 22 of 1975, the two questions referred are answered in the negative, that is, in favour of the department and against the assessee.

I.T.R. Case No. 25 of 1975 :

Three questions have been referred. These questions are :

'(1) Whether, on the facts and circumstances of the case, the Tribunal was right in finding that the amount of Rs. 3,32,000 (Rs. 3,40,000) was not assessable as the income of the assessee for assessment year 1969-70 ?

(2) Whether, on the facts and circumstances of the case, the Tribunal was right in finding that the amount of Rs. 3,32,000 (Rs. 3,40,000) are receipts of a casual and non-recurring nature not arising from business or the exercise of a profession of occupation within the meaning of section 10(3) of the Income-tax Act, 1961 ?

(3) Whether, on the fact and in circumstances of the case, the Tribunal was justified in finding that the explanation of the assessee about the nature and source of the receipt of Rs. 3,32,000 from America and credited in the account of the India Gospel Mission is satisfactory and, therefore, the addition of Rs. 3,40,000 as income from other sources is not justified ?'

In the light of our judgment in I.T.R. No. 22 of 1975, we answer the three questions in the negative, that is, in favour of the department and against the assessee. There will be no order as to costs in any of these cases.

A copy of the judgment in all these cases, under the signature of the Registrar and the seal of this court, will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.


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