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Moosa S. Madha and Azam S. Madha Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 72 of 1966
Judge
Reported in[1973]89ITR70(Cal)
ActsIncome Tax Act, 1922 - Sections 4(1), 4A, 34(1) and 66(1)
AppellantMoosa S. Madha and Azam S. Madha
RespondentCommissioner of Income-tax
Cases ReferredParimisetti Seetharamamma v. Commissioner of Income
Excerpt:
- .....were filed beyond the time the income-tax officer issued notices under section 34(1)(a) of the indian income-tax act, 1922, for the assessment years 1947-48 and 1948-49. the income-tax officer assessed the assessee in the status of a resident but not ordinarily resident on the total income of rs. 6,24,478 and rs. 3,55,214 for these two years respectively including therein remittances from burma at rs. 5 lakhs and at rs. 2 lakhs, respectively. in determining the assessee's residential status in these two assessments, the income-tax officer had relied on the fact that the assessee had not given him the information that was required for determining the assessee's residential status and also the fact that the assesses had property in calcuttaand bombay. the income-tax officer had.....
Judgment:

Sabyasachi Mukhakji, J.

1. The assessee, one S. C. Madha (since deceased), migrated with his father to Burma some time in the year 1901, from their native village at Variav in the erstwhile State, of Baroda. In Burma, the assessee started a business in partnership with his father in the name and style of E. C. Madha & Bros, and this firm became prosperous. The father of the assessee, Mr. E. C. Madha, died in 1946, and, thereafter, the firm had been carried on in partnership between the assessee and his sons. It appears that the assessee had an ancestral property in Calcutta being premises Nos. 68/1 and 68/2, Lower Chitpur Road, which had been let out to tenants. After the bombing of Rangoon and threat of invasion of Burma by the Japanese, the assessee evacuated to India, some time in January, 1942, and returned to Burma on or about the 10th of February, 1946. On instructions from M/s E. C Madha & Bros, of Rangoon, the National Bank of India Ltd., remitted a total amount of Rs. 5 lakhs between 5th April, 1946, and 10th April, 1946, to its branch in Calcutta where an account had been opened in the name of the firm. Again, on 26th October, 1947, a further sum of Rs. 2 lakhs was transferred from the firm's account with the National Bank of India Ltd., Rangoon, to its account in the National Bank of India Ltd., Calcutta. Out of this amount of Rs. 7 lakhs remitted from Rangoon to the firm's account in Calcutta, Rs. 5 lakh's was utilised for the purchase of two properties in Calcutta being premises No. 12, Ram Lochan Mullick Street, Calcutta, and 16, Zakeria Street, Calcutta, in the name of the assessee during the calendar years 1948 and 1949. On 8th April, 1953, the assessee filed a voluntary disclosure petition before the income-tax department, at Calcutta and also filed nine voluntary returns for the years 1944-45 to 1952-53, disclosing certain income from the properties in India and income from business in Burma for these years and also declaring the status to be non-resident. Inasmuch as returns were filed beyond the time the Income-tax Officer issued notices under Section 34(1)(a) of the Indian Income-tax Act, 1922, for the assessment years 1947-48 and 1948-49. The Income-tax Officer assessed the assessee in the status of a resident but not ordinarily resident on the total income of Rs. 6,24,478 and Rs. 3,55,214 for these two years respectively including therein remittances from Burma at Rs. 5 lakhs and at Rs. 2 lakhs, respectively. In determining the assessee's residential status in these two assessments, the Income-tax Officer had relied on the fact that the assessee had not given him the information that was required for determining the assessee's residential status and also the fact that the assesses had property in Calcuttaand Bombay. The Income-tax Officer had presumed that it would be reasonable in those circumstances to hold that the assessee had resided during his long stay in India and wherefrom the assessee attended to his multifarious business activities in Bombay and Calcutta. It is admitted that the assessee purchased a piece of land in Bombay some time in 1942, but no house had been constructed therein up to the end of the two accounting years.

2. The assessee preferred appeals before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that the Income-tax Officer had proceeded merely on the basis of surmise and he remanded the case back to the Income-tax Officer to make certain enquiries. The Income-tax Officer made certain enquiries and made a remand report which is at pages 20 to 22 of the paper-book. When the matter again came up before the Appellate Assistant Commissioner, he observed that again the Income-tax Officer had merely gone on presumption which was not enough, according to the Appellate Assistant Commissioner, to determine the residence of the assesses in the taxable territories. The Appellate Assistant Commissioner, therefore, decided the issue of residence on the basis of the materials before him. He took into consideration the disclosure petition filed by the assessee on the 8th April, 1953, and the assessee's affidavit affirmed on 1st July, 1953, and certain income-tax proceedings of the assessee before the State authorities of the then Indian State of Baroda within which the assessee's native village, Variav, was situated before its merger with the Union of India. In his disclosure petition the assessee had stated that the assessee was a resident in India upto the year 1945 and a semi-resident from 1945 to 1947 and since then, according to the assessee, he had been a non-resident in India. From this the Appellate Assistant Commissioner concluded that on his own admission the assessee was a resident in India fromt 1942 to 1949 and during the years 1945 to 1947 he was in India for a part of the period and for the remaining part he was outside India. The Appellate Assistant Commissioner also referred to the assessee's income-tax proceedings in the State of Baroda before its merger with the Union of India for the assessment year 1942-43. Certain statements of the assessee's son, Ahmad Suleman Madha, who represented the assessee in these proceedings were recorded, Ahmad Suleman Madha had stated that in 1942 as the war broke out they had come and settled in Variav with their families. They also maintained a house in Bombay and stayed there and also an office in Bombay. In 1943 a soap shop bad been started in Bombay and accounts of the same were maintained at Bombay, The office had been transferred from Rangoon to Bombay. There was also a report from Sar Suba Saheb, who seems to be an officer of the income-tax department of the Baroda State, wherein he had stated that the assessee stayed with his family in a building maintained at Bombay in all luxury. In these circumstances, the Appellate Assistant Commissioner held that on his own statement in the disclosure petition and from the records of the income-tax proceedings of the Baroda State, it was clear that during the four preceding years the assessee had been in the taxable territories for a period of 365 days and after coming to India he had all along stayed in Bombay and was engaged in soap business there. Therefore, according to the Appellate Assistant Commissioner, the first part of Section 4A(a)(iii) of the Indian Income-tax Act, 1922, was fulfilled. The Appellate Assistant Commissioner further held that so far as the second part of the said clause is concerned, the fact that the assessee was in the taxable territories during the previous year and his visit on that occasion was neither casual nor occasional would be established by the affidavit of the assessee filed on the 1st of July, 1953. The Appellate Assistant Commissioner in those circumstances held that for the assessment year 1947-48, the assessee was in the taxable territories during the year otherwise than on occasional or casual visit. The Appellate Assistant Commissioner further held that on the same basis the first part of Section 4A(a)(iii) of the Act was fulfilled also for the assessment year 1948-49 and for the second part the assessee's affidavit showed that he came to India after 9th of September, 1947, where he resided for two months and for the rest of the year he was at Variav. The Appellate Assistant Commissioner, therefore, was of the opinion that for the assessment year 1948-49 the second condition of Section 4A(a)(iii) was also fulfilled. The Appellate Assistant Commissioner, therefore, was of the opinion that the status of the assessee has been correctly determined by the Income-tax Officer. It was then contended before the Appellate Assistant Commissioner that the two amounts had been remitted by the firm of E. C. Madha Bros, of Rangoon from its account in the National Bank of India, Rangoon, to its account in the National Bank of India, Calcutta, Though ultimately the remittances were utilised by the assessee for investment in properties in subsequent years there was no evidence, according to the assessee, by which a finding in terms of Section 4(1)(b)(iii) of the Indian Income-tax Act, 1922, could be sustained. The Appellate Assistant Commissioner rejected the said contentions.

3. There was a further appeal before the Tribunal. The assessee died in the meantime and was represented by his legal representatives. Before the Tribunal it was contended on behalf of the assessee that even assuming that the assessee was in the taxable territories for a period of 365 days during the four years preceding the previous year and even assuming that the assessee was on a visit to India during the relevant previous year, there was no evidence upon which it could be held that such visit during the previous year was otherwise than of a casual or occasional nature. So far as the assessment for the year 1947-48 was concerned, the Tribunal was of the opinion that it has not been established that the visit of the assessee during the relevant previous year was not of a casual or occasional nature and, as such, the order of the income-tax authorities could not be sustained. The appeal for the said assessment year was, therefore, allowed. So far as the assessment for the assessment year 1948-49 was concerned the Tribunal agreed with the Appellate Assistant Commissioner that the assessee has stated in his affidavit that on 9th of September, 1947, he went to India and resided there for two months and at Variav for the rest of the year. The Tribunal was, therefore, of the opinion that the Appellate Assistant Commissioner was justified in holding that the assessee was in the taxable territories during the relevant previous year otherwise than on occasional or casual visit ascontemplated under Section 4A(a)(iii) of the Act. The Tribunal relied on the statement of the assessee in the disclosure petition as well as the statement made by the assessee in his affidavit. In those circumstances, the Tribunal was of the opinion that all the conditions necessary for the attraction of the provisions of Section 4A(a)(iii) of the Act were there, and, therefore, the assessee had been rightly assessed for the assessment year 1948-49 as a resident. It was then contended before the Tribunal that the remittances were by the firm to its own account in the National Hank and, as such, the same could not be held to be remittances by the assessee. It was next contended that inasmuch as the remittances were utilised for the purchase of the properties in the years 1948 and 1949, that is after the expiry of the relevant previous years the remittances could not be regarded as remittances made by the assessee during the two previous years. It was also contended that, assuming there were remittances by the assessee, there was no evidence that the remittances were out of past income and not out of capital. The Tribunal was unable to accept these contentions. The Tribunal, therefore, upheld the order of the Appellate Assistant Commissioner so far as the order for the assessment year 1948-49 was concerned.

4. Thereafter, on an application being made under Section 66(1) of the Indian Income-tax Act, 1922, the following questions have been referred to this court:

' (i) On the facts and in the circumstances of the case, was there any material or evidence for the Tribunal to hold that the assessee was a resident but not ordinarily resident in the taxable territories for the assessment year 1948-49 ?

(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of Rs. 2 lakhs had been remitted to the taxable territories by the assessee during the accounting year out of his accrued profits of earlier years '

5. The question No. 1 has to be determined with reference to the provisions of Section 4A(a)(iii) of the Indian Income-tax Act, 1922. In order that the assessee may be treated as a resident under that sub-dause it is necessary that the assessee should be in the taxable territories during the four years preceding the previous year for a period or for periods in the aggregate of not less than 365 days and in the relevant previous year at any time and then his visit in the relevant previous year was not casual or occasional. The assessment year with which we are concerned in this reference is assessment year 1948-49 for which the relevant previous year is the calendar year 1947. Therefore, in order to attract the provisions of Section 4A(a)(iii) of the Indian Income-tax Act, 1922, it would be necessary to establish: (J) that during 1st of January, 1943, to 31st December, 1946, the assessee was in India for a period of 365 days or more, (2) that the assessee was in India at any time between 1st of January, 1947, to 31st. December, 1947, and (3) that the presence of the assessee in 1947 in India was not due to any casual or occasional visit. So far as the first two conditions are concerned, it is an admitted position in this case that they are fulfilled. Indeed, Mr. S.R. Banerjee, learned counsel for the assessee, conceded that at the hearing before us. It also appears that the case proceeded on those assumptions before the income-tax authorities as well as the Tribunal. The documents inthis reference conclusively also establish the fact that the assessce was in India for 365 days or more during 1st of January, 1943, to 31st December, 1946, and that he was also in India during 1st of January, 1947, to 31st December, 1947. The only question that requires consideration in this case is whether the visits in India during 1947 were either casual or occasional. The requirements of the section were recently considered by the Supreme Court in the case of Commissioner of Income-tax v. B.K. Dhote, : [1967]66ITR457(SC) . The Supreme Court has held in that case that in order that the assessce may be treated as a resident in British India under Section 4A(a)(iii) of the Indian Income-tax Act, 1922, the onus of proving that the assesses was in British India during the lour years preceding the previous year for a period or periods in the aggregate of not less than 365 days, and in the relevant previous year at any time, lies upon the department. The Supreme Court has further held that if these two conditions are established or admitted, the onus then lies upon the assessee to prove that his visits in the previous year were casual or occasional. In the opinion of the Supreme Court in determining whether the visits are occasional or casual, the Tribunal has to consider the presence of the assessee in the taxable territories in relation to the object of his visit which must in each case be gathered from the circumstances in which the assessee paid the visit and his conduct. Accidental presence in or visit for a social purpose to the taxable territory may be regarded as occasional or casual, but a visit in connection with the business carried on by the assessee may not normally be regarded as occasional or casual. What is casual arid occasional in this context has also been considered in the case of A.M.M. Sayed Abdul Cadar v. Commissioner of Income-tax : [1950]18ITR310(Mad) . There what happened was, the assessee who was once a resident of British India, went to Ceylon several years ago and was carrying on a business there. In 1936 he came to British India and stayed for a period of 137 days. Then from October, 1937, to December, 1938, be stayed in British India for a period of 13 months. In the accounting year 1941-42 on account of the fear of invasion from Japan the assessee came to British India, lived in a rented house from 1st January, 1942, till 1st of July, 1942. During the accounting period remittances were received from Ceylon and they were sent to Ms father who was also residing in British India very near the assessee's place. The assessee returned to Ceylon after the fear of Japanese invasion was removed. The question was whether the assessee was a resident in British India under Section 4A(a)(iii) of the Indian Income-tax Act. It was held that the assessee was in British India for more than 365 days within the period of four years preceding the year of account and he was in British India in the year of account otherwise than on an occasional or casual visit. He was, therefore, a resident of British India. It was further observed that in order to determine whether his visit to British India was of a casual or occasional nature, the assessee's conduct prior to the period of charge could be taken into consideration. Satyanarayana Rao J. observed in his judgment at page 316 of the report as follows :

' There is no decision which has considered the expression ' occasional' or 'casual' visit; and though the expressions are capable of easy application to given set of facts, it is difficult to lay down in precise terms the meaning of those expressions. The word casual' according to Oxford Dictionary is capable of several meanings and it includes the idea of a thing being accidental or coming at uncertain times; not to be calculated upon; unsettled; occurring without design or liable to happen. The word ' visit' conveys also the meaning of short or temporary stay at a place. By occasional visit must be meant that a person visits a place on a particular occasion such as the marriage of a relation or a friend, or giving evidence in a suit and allied matters; while casual visit implies that the object or the intention of the person making the visit was to stay for a short period and return back to his residence; for example, a man may pay a visit to a friend or a relation or go to a place for sight-seeing.'

6. In the case of Shamnath Muskran v. Commissioner of Income-tax : [1950]18ITR840(All) the words ' occasional or casual visits ' in Section 4A(a)(iii.) of the Indian Income-tax Act, 1922, were also considered. It was held that the said words mean 'visits which are not regular which take place at uncertain intervals and not for a specific or certain object connected with the assessee's regular plan of life. ' The assessee, who was the Legal Remembrancer of the Bikaner Stale, came to Allahabad in the relevant year of account to meet his friends and relations, stayed there for three days and proceeded to Lucknow where also he stayed for three days. In the same year he again came to Lucknow for eye treatment and stayed there for four days. It was held that these visits were ' occasional or casual' visits within the meaning of Section 4A.(a)(iii) of the Indian income-tax Act, 1922. Malik C.J., delivering judgment at page 843 of the report, observed as follows :

' We do not think that a casual visit necessarily means an unintentional visit. In Murray's Oxford Dictionary, the word ' casual' when relating to persons or their actions is said to mean ' not depended on ; uncertain ; unmethodical; haphazard ; happy-go-lucky '. It would appear from this that a ' casual visit' means a visit which cannot be defined as a regular visit which occurs with any fixed regularity or at uncertain intervals. As regards the word ' occasional' it would ordinarily mean 'on an occasion', that is, ' on the happening of a certain event'.'

7. Bearing the above principles in mind and keeping in view the observations of the Supreme Court in the case of Commissioner of Income-tax v. B. K. Dhote, : [1967]66ITR457(SC) , we have to examine the facts of this case. Here the assessee in his voluntary disclosure which is at page 12 of the paper-book stated as follows:

' I was a resident in India up to the year 1945 and a semi resident from 1945-47 and since then I have been a non-resident in India. '

8. In his affidavit affirmed on the 1st July, 1953, which is at pages 27-28 of the paper-book the assesssee has stated in paragraph 7 as follows:

' That during the year from 1st April, 1947, to 31st March, 1948, I resided at Rangoon from the 1st April, 1947, to the 9th September, 1947. I then went to India where I resided in India for two months and at Variav for the rest of the year.'

9. It is clear, therefore, that after the 9th September, 1947, the assessee has stated clearly that he had resided in India for two months. The purpose of his residence in India has not been stated by the assessee. The onus was clearly upon the assessee to establish that the purpose of his visit to India in 1947 was either ' casual ' or ' occasional ', If this factor is taken into consideration in the background of the past conduct of the assessee and the fact of the ass^ssee having properties in Calcutta, it is impossible to say that the Tribunal acted without evidence in coming to the conclusion that in the relevant previous year the asst ssee was not able to establish that his visit was ' occasional' or 'casual'. In that view of the matter the question No. 1 has to be answered in the affirmative and in favour of the revenue.

10. The next question that arises for consideration is question No. 2 which must be determined with reference to Section 4(1)(b)(iii) of the Indian Income-tax Act, 1922. It appears that the remittances were made by the firm from its account in Rangoon to Calcutta. It is also in evidence, however, that the firm was not in need of the money. There is evidence that the money was ultimately utilised and used by the assessee. It was admitted that the firm had no business in India and there was no need for having any funds transmitted to India for the purpose of the firm. The partners of the firm were also the assessee and his sons, the assessee having dominant interest in the firm. It also appears that the assessee had accumulated profits of the past in Rangoon. The Tribunal was justified in those circumstances in holding that the remittances were by the assessee. It was, therefore, for the assessee to establish by evidence that the remittances were out of the capital of the assessee. The Tribunal has observed that the Income-tax Officer had given the assessee sufficient opportunity to produce copies of the accounts of the assessee in the books of the firm to satisfy the Income-tax Officer that the remittances were made out of the assessee's capital in the firm. The Tribunal has further observed that the assessee has failed to produce such accounts or in any other way to substantiate his claim that the remittances were out of capital, Reliar.ce may be made for this on the decision of the Supreme Court in the case of Bipin Lal Kuthiala v. Commissioner of Income-tax, : [1956]30ITR1(SC) .

11. Mr. Banerjee, the learned counsel for the assessee, made a point that certain account books were filed before the Tribunal and the Tribunal has not considered or taken note of them. It does not appear from the papers that the Tribunal granted leave to the assessee to adduce additional evidence or that these documents were admitted in evidence. In any case, this point has not been stated either in the statement of the case or in the appellate order. The Tribunal has also not included these papers alleged to have been filed before the Tribunal. The assessee has made no application for the inclusion of these papers. In those circumstances, we are unable to agree with Mr. Banerjee that the Tribunal should have considered these accounts. The onus being on the assessee to establish that the remittances were out of capital, and in view of the facts and circumstances of the case and the materials available, the Tribunal was justified in holding that the conditions of Section 4(1)(b)(iii) of the Income-tax Act have been complied. In the facts of this case we do not think that the decision of the Supreme Court in the case of Parimisetti Seetharamamma v. Commissioner of Income-tax, : [1965]57ITR532(SC) relied on by Mr. Banerji, is relevant or material. In that view of the matter the question No. 2 referred to this court must be answered in the affirmative and in favour of the revenue. The assessee will pay the costs of this reference.

Shankar Prasad Mitra, J.

12. I agree.


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