Gouri Prasad Bagaria And Ors. vs Commissioner Of Income-Tax, West...

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 10 January, 1961

Coram: J.C. Shah, J.L. Kapur, M. Hidayatullah

In this proceeding, the petitioners Gouri Prasad Bagaria and several others sought review of the income‑tax assessment that had been made against their father, Hanuman Prasad Bagaria, who had passed away after the Supreme Court had granted him special leave. For convenience, the Court referred to Hanuman Prasad Bagaria as the “assessee” and to his heirs and legal representatives as the “appellants.” The petition challenged the judgment and order issued by the High Court of Calcutta on 14 December 1955, which arose from an income‑tax reference made under section 66(1) of the Indian Income‑Tax Act. The High Court was asked to consider whether, based on the material before the Tribunal, it could be established that the assessee had bought gold in the year 1918, that he had sold that gold in the year under consideration, and that the sum of Rs 72,523 represented the proceeds of such sale. The High Court answered this question in the negative, holding that no such material existed.

The factual backdrop was relatively straightforward. During the assessment year 1945‑46, which corresponded to the financial year 1944‑45, the Income‑Tax Officer discovered a credit of Rs 72,523 in the name of Ganesh Das Hanuman Prasad, who was the father of the assessee. The assessee was required to explain the nature and source of this amount. He testified that the sum derived from the sale of gold that he had purchased in Bombay in the year 1918, that the gold had been stored in the family chest, and that it was sold in the year of assessment. The entry in the account books naming the assessee’s father was said to have been made in accordance with Marwari custom. Additionally, the assessee’s pass book showed a withdrawal of Rs 1,00,000 a few days later, which the assessee explained was a payment to Messrs Birla Brothers for the purchase of a colliery. The Income‑Tax Officer rejected this explanation, treating the Rs 72,523 as undisclosed income of the assessee. This assessment was affirmed by the Appellate Assistant Commissioner. Upon further appeal, the Tribunal accepted the assessee’s explanation and ordered the sum to be excluded from the assessment. The Tribunal’s order was very brief, and it read in full: “The only point pressed in this appeal is about the addition of a sum of Rs 72,523 as the assessee’s got this money by sale of gold but what is not admitted is that the assessee got this money by sale of gold but what is not admitted is that the assessee had gold with him since 1918 when, as the assessee says, he purchased it in Bombay when the metal was cheap. We have heard the parties at some length the examined the personal history of the …”

In this case the Court observed that the appellant’s explanation possessed the appearance of truth. Consequently the Court accepted the explanation and ordered that the amount of Rs 72,523 be excluded from the assessment. Following this, the Commissioner of Income‑Tax made an application for a reference. The Income‑Tax Appellate Tribunal, Calcutta Bench, by that time reconstituted, referred the matter to the Court on the question that had been raised. The High Court of Calcutta then invoked section 66(4) and required the Tribunal to prepare a supplementary statement of the case. The High Court directed the Tribunal to forward to the Court a statement describing the manner in which the Appellate Bench of the Tribunal had examined the personal history of the appellant. The Court further instructed the Bench that had heard and disposed of the appeal to answer a series of specific queries: (a) whether the assessee was examined at all by the Appellate Bench; (b) if so, whether any record of that examination existed in the files; (c) if a record existed, what its contents were; (d) even if no record existed, whether the assessee was examined in fact; and (e) if the assessee was examined but no record was made, whether the members who heard the appeal could recall what the assessee had said.

The supplementary statement of the case was submitted by the original Judicial Member and an Accountant Member, both of whom had not been present at the hearing of the appeal. They consulted the former Accountant Member, who affirmed agreement with the contents of the supplementary statement. The Tribunal’s responses to the Court’s questions were admittedly vague, yet the Tribunal proceeded to re‑examine the assessee about a year and a half after the original hearing and transmitted a copy of that statement to the Court. After reviewing the matter from several perspectives and expressing dissatisfaction with the manner in which the supplementary statement had been prepared, the High Court concluded that the Tribunal possessed no material to support a finding that the assessee had purchased gold in 1918 and subsequently sold it in the relevant year of account. In the opinion of this Court the case was straightforward and did not raise any substantial question of law. The Tribunal had relied on the appellant’s own statement, considering his conduct and past history that were observable to the Tribunal. When an assessee’s statement is accepted, it constitutes material upon which a finding may be based; to demand additional material would amount to asserting that the accepted statement is not material for a finding. Accordingly, the Tribunal’s belief in the appellant’s statement concluded the factual enquiry, and a finding based on that statement was proper and sufficient.

The Court noted that once it was established that the finding of the Tribunal could rest upon the statement made by the assessee, which the Tribunal had accepted as true, there was no genuine question of law to be decided. Nevertheless, even if the matter were treated as involving a legal question, the Court found the answer to be unavoidable. The material on which the Tribunal based its finding was the statement of the assessee, which the Tribunal had believed; this statement alone was sufficient to support the finding. Consequently, the Court concluded that the view expressed by the High Court should be overturned and that the issue should be answered affirmatively. In the final analysis, the Court ordered that the appeal be allowed and that costs be awarded both in this proceeding and in the proceedings before the High Court. The appeal was thus allowed, and the costs were granted in the manner specified.