Bankim J. Shah v. Commissioner of Income-Tax — 1991 DIGILAW 234 (GUJ)

JUDGMENT : R.C. Mankad, J. The assessee is an individual and, in this reference, we are concerned with his income-tax assessment for the assessment year 1970-71. The assessee derives income from dividend, interest and share of profit from Superior Engineering and Moulding Works. In his return of income for the assessment year 1970-71, the assessee disclosed a total income of Rs. 8,822. In Part IV of the return of income, the assessee claimed exemption in respect of a sum of Rs. 70,000 on the ground that it represented income of casual nature. According to the assessee, the said sum of Rs. 70,000 represented prize money received by him in a cross-word puzzle competition conducted by one "Kundan Sabda Sparda" ("Sparda" for short) and, as such, the said sum was not taxable. The Income-tax Officer called upon the assessee to produce before him the proprietor of Sparda along with his books of account in order to verify the claim made by the assessee. The Income-tax Officer addressed several letters to the assessee to which the assessee's representative replied by saying that all the documentary evidence was lying in the possession of the Income-tax Department. The Income-tax Officer recorded statements of the assessee as well as his father, J. M. Shah. The Income-tax Officer pointed out to the assessee that, since he was claiming exemption in respect of the aforesaid sum of Rs. 70,000, the burden was on him to prove that he was entitled to such exemption and he called upon the assessee to produce such evidence as he might consider necessary in support of his claim for exemption. The assessee was also given an opportunity to make inspection of the documents and evidence which the Income-tax Officer had collected in the course of his inquiry. The Income-tax Officer examined the witnesses and the assessee was given an opportunity to cross- examine them. In his assessment order, the Income-tax Officer, on appreciation of the evidence on record, held that the sum of Rs. 70,000 in respect of which the assessee had claimed exemption did not represent genuine prize money as claimed by the assessee. He held that the said sum of Rs. 70,000 represented the assessee's income from undisclosed sources. The Income-tax Officer further held that the assessee had paid commission of Rs. 2,100 to one N. S. Patel for the bogus prize which was alleged to have been received. He held that the said sum of Rs. 70,000 represented the assessee's income from undisclosed sources. The Income-tax Officer further held that the assessee had paid commission of Rs. 2,100 to one N. S. Patel for the bogus prize which was alleged to have been received. In the view which he took, the Income-tax Officer added Rs. 70,000 and Rs. 2,100 to the income disclosed by the assessee in his return and framed the assessment accordingly. 2. Being aggrieved by the inclusion of the sums of Rs. 70,000 and Rs. 2,100 in his total income, the assessee carried the matter in appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, confirming the view of the Income-tax Officer, held that there was enough material on record to hold that sum of Rs. 70,000 received by the assessee was not genuine prize money, as claimed by him, but was unaccounted money which was shown as prize money. He also upheld the addition of Rs. 2,100 added for the commission paid to N. S. Patel. 3. Being aggrieved by the order of the Appellate Assistant Commissioner, the assessee preferred an appeal before the Income-tax Appellate Tribunal ("the Tribunal" for short). The Tribunal examined the evidence on record in detail and found that the persons who wanted to bring out their unaccounted money contacted the proprietor of Sparda through their agents and filled in forms with the correct solutions of the cross-word puzzles. Prizes were declared in favour of such parties and cheques were issued in their favour for the prize money which were cleared from the moneys deposited by them. The Tribunal found that Sparda did not have enough funds of its own to distribute prizes. On appreciation of the evidence and material on record, the Tribunal came to the conclusion that the alleged prize declared in favour of the assessee did not represent a genuine prize. The Tribunal also pointed out other material circumstances which strengthened the conclusion reached by it. The Tribunal, therefore, held that the assessee had failed to satisfactorily explain the source of Rs. 70,000 credited by him in his books. It, therefore, upheld the decision of the Appellate Assistant Commissioner and the Income-tax Officer that the sum of Rs. 70,000 was liable to be taxed in the hands of the assessee as income from undisclosed sources. For the same reasons, it also upheld the addition of Rs. 70,000 credited by him in his books. It, therefore, upheld the decision of the Appellate Assistant Commissioner and the Income-tax Officer that the sum of Rs. 70,000 was liable to be taxed in the hands of the assessee as income from undisclosed sources. For the same reasons, it also upheld the addition of Rs. 2,100 paid byway of commission to N. S. Patel. In the result, the Tribunal dismissed the assessee's appeal. 4. It is in the background of the above facts that the Tribunal has referred to us, for our opinion, the following questions under section 256(2) of the Income-tax Act, 1961 : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal misdirected itself in law in basing its conclusions on evidence which was not brought to the notice of the assessee and the veracity of which was not offered for being tested at the hands of the assessee by cross-examination ? (2) Whether, on the facts and circumstances of the case, the order of the Tribunal is invalid in law because it is based on certain information which was never put to the assessee on certain depositions of witnesses who were never offered for cross-examination to the assessee ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the prize of Rs. 70,000 paid by Kundan Sabda Sparda Harifai to the assessee was taxable income of the assessee ? (4) Whether, on the facts and circumstances of the case, the Tribunal was right in law in adding Rs. 2,100 to the income of the assessee as alleged commission paid to Harifai ?" 5. The finding recorded by the Tribunal that the sum of Rs. 70,000 included by the assessee in Part IV of his return of income did not represent genuine prize money received by him for the correct solution of the cross- word puzzle and that it represented the assessee's income from undisclosed source is a finding of fact. It was, however, urged that, in recording the above finding, the Tribunal had relied on evidence of witnesses who were not examined in the presence of the assessee and who were not offered for cross-examination by the assessee. It was urged that the Income-tax Officer had not examined (1) C. N. Shah who was alleged to have deposited Rs. It was, however, urged that, in recording the above finding, the Tribunal had relied on evidence of witnesses who were not examined in the presence of the assessee and who were not offered for cross-examination by the assessee. It was urged that the Income-tax Officer had not examined (1) C. N. Shah who was alleged to have deposited Rs. 70,000 in the bank account of Sparda ; (2) V. C. Vyas, employee of N. S. Patel, proprietor of Sparda; (3) H. C. Trivedi, proprietor of Janta Stall ; (4) Shantilal Shah ; and (5) M. T. Patni, nor had he offered them for the assessee's cross-examination. He, however, relied on their evidence in disbelieving the claim made by the assessee. It is not disputed that N. S. Patel, proprietor of Sparda, was examined by the Income-tax Officer in the presence of the assessee and the assessee had cross-examined him at length. It was urged that the finding recorded by the Tribunal is vitiated because it is based on relevant and irrelevant evidence. 6. We do not find any substance in the contention of the assessee. It is not correct to say that the Tribunal had relied on the evidence of the aforesaid witnesses and the evidence of other witnesses in reaching the conclusion which it did. The conclusion of the Tribunal is based on the testimony of N. S. Patel, proprietor of Sparda. N. S. Patel has deposed that parties who submitted entries with the correct solution of the cross-word puzzle were given prizes by cheques which were cleared with their own money. Parties who wanted to bring out their unaccounted money, approached through their agents and such parties gave money for the payment of the prizes declared in their favour. It also appears from his evidence that he did not have money of his own from which he could have given the prizes to the persons who had given correct solution to the cross-word puzzle. N. S. Patel stated that the prize given to the assessee was arranged through his agent. It is on this evidence that the Tribunal came to the conclusion that the prize, alleged to have been declared in favour of the assessee, was not a genuine prize. It is true that, after reaching this conclusion, the Tribunal has referred to the circumstances which strengthened its conclusion. It is on this evidence that the Tribunal came to the conclusion that the prize, alleged to have been declared in favour of the assessee, was not a genuine prize. It is true that, after reaching this conclusion, the Tribunal has referred to the circumstances which strengthened its conclusion. While referring to these circumstances, the Tribunal appears to have taken into consideration statements made by witnesses who were not examined. However, in our opinion, merely because the Tribunal has referred to certain circumstances which strengthened its conclusion, it would not vitiate its finding which is based on the evidence of N. S. Patel. The Tribunal thought it fit to rely on the testimony of N. S. Patel and, in this reference, we would not be justified in holding that the Tribunal ought not to have relied on his evidence. As the final fact-finding authority, it was open to the Tribunal to decide whether or not to place reliance on the testimony of a witness and, if, in its wisdom, it thought it fit to rely on the evidence of a witness, it is hardly a matter for this court to interfere in the reference. The finding recorded by the Tribunal is not unreasonable or perverse. We, therefore, do not see any reason to disagree with the conclusion reached by the Tribunal that the sum of Rs. 70,000 disclosed in Part IV of the return of income of the assessee and the sum of Rs. 2,100 paid by way of commission to N. S. Patel were liable to be added to the income of the assessee for the assessment year under reference. 7. So far as questions Nos. 1 and 2 are concerned, as already observed above, the Tribunal has not reached this conclusion on the evidence which was not brought to the notice of the assessee or the evidence of witnesses who were not examined in the presence of the assessee and who were not offered for his cross-examination. For the reasons stated above, we are not inclined to hold that the Tribunal had misdirected itself or that its order is invalid on the grounds mentioned in questions Nos. 1 and 2. We, therefore, answer questions Nos. 1 and 2 in the negative and against the assessee. In the view which we are taking, we answer questions Nos. 3 and 4 in the affirmative and against the assessee. 8. 1 and 2. We, therefore, answer questions Nos. 1 and 2 in the negative and against the assessee. In the view which we are taking, we answer questions Nos. 3 and 4 in the affirmative and against the assessee. 8. Reference answered accordingly With no order as to costs.