# MESSRS MEHTA PARIKH & CO v. THE COMMISSIONER OF INCOME-TAX, BOMBAY

- **Citation:** [1956] 1 S.C.R. 626
- **Court:** Supreme Court of India
- **Decided:** 1956
- **Case number:** Civil Appeal No. 81 of 1954
- **Bench:** S. R. Das C.J, BHAGWATI a.nd VENKATARAMA AYYAR
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/messrs-mehta-parikh-co-v-the-commissioner-of-income-tax-bombay-1250
- **Pages:** 13

## Headnote

Income-tax-I nconie jroni undisclosed so11,rces-AssessmentAssessee' s explanation based on accounts supported by offidavitsAccounts accepted as genuine and statements in affidavits not controverted-Finding based on no evidence-Inference front. proved or
iidmitted facts-If questions of law-Principle of interferenccIndian Income-tax Act (XI of 1922), ss. 62(2), 23(3), 26·A.
The appellants, a partnership firm assessed under ss. 23(3) and
26· A of the Income·tax Act, were called upon by the Income·tax
Officer during the assessment year 1947-48 to explain how and when
they came to possess 61 thousand·rupee currency notes which they
had encashed on the 18th January, 1946, after the promulgation of
the High Denomination Bank Notes (Demonetisation) Ordinance
of 1946, under which such notes ceased to be legal tender on the
expiry of the 12th of January, 1946. The assessees produced their
cash-book entries from the 20th December, 1945, to the 18th January, 1946, which were accepted as correct by the Income-tax Officer,
who, however, made no further scrutiny of the accounts, and the
entries showed that on the 12th of January, 1946, the cash balance
in hand was Rs. 69,891·2-6. The case of the appellants was that
the said notes were a part of the cash balance and in further support of their case they filed before the Appellate Assistant Commissioner three a1,Edavits by persons actually making the payments,
..._
in respect of certain entries in the cash-book to prove that Rs. 20,000
on the 28th December, 1945, Rs. 15,000 on the 6th of January,
1946, and Rs. 8,000,, out of a sum of Rs. 8,500, on the 8th of January, 1946, were paid in thousand-rupee notes.
The Income-tax
Officer and the Appellate Assistant Commissioner in appeal, on a.
ca.!culation of their own, held that the possession by the appellants
of so many thousand-rupee notes was an impossibility and that
these notes must represent income from undisclosed sources and as
such be added to the assessable income of the appellants. Neither
the Appellate Assistant Commissioner nor the Income-tax Officer,
who was present at the hearing of the appeal, called for the deponents in order to cross-examine them with reference to their
statement in the affidavits. The Appellate Tribunal Ql1 appeal
accepted the explanation of the assessees in respect of 31 of the
notes but not with regard to the rest and rejected their application
for a reference of the matter to the High Court. The assessees moved
the High Court and the Tribunal was directed under s. 66(2) to state
S.C.R.
SUPREME COURT REPORTS
627
a case for its decision. In answering the main question, the High
7956
Court was of the opinion that the finding of the Tribunal was a finding of fact or an inferencB based on such finding and it was not
Messrs M, hta
possible to say that such finding or inference was unreasonable or
Parikh and Co.
arbitrary.
v.
The Commissioner
Held (per curiam), that the High Court was in error in refusing
of Income.tax
to interfere with the finding of the Tribunal which was based on no
Bombay '
evidence and the appeal must succeed.
Per C.J. and BHAGWATI J.-Conclusions based on facts proved
or admitted may be conclusions of fact but whether a particular inference can legitimately be drawn from such conclusions may be a
question of law.
Where, however, the fact finding authority has
acted without any evidence or upon a view of the facts which could
not reasonably be entertained or the facts found were such that no
person acting judicially and propel'!y instructed as to the relevant
law could have found, the court is entitled to interfere.
Chitnilal Ticamchancl Coal Co. Ltd. v. Commissioner of Incometax, Bihar and Orissa, ([1955]) 27 I.T.R. 602), applied.
Cameron v. Prendergast (Inspector of Taxes), ([1940] 8 I.T.R.
(Suppl.) 75), Bamford v. Osborne (H. M. Inspector of Taxes), ([1942]
10 I.T.R. (Suppl.) 27) and Edwards (Inspector of Taxes) v. Bairstow
and Another, ([1955] 28 I.T.R. 579), referred to.
The High Court was

## Text

1956
May 10
626
SUPREME COURT REPORTS
(1956]
MESSRS MEHTA PARIKH & CO.
v.
THE COMMISSIONER OF INCOME-TAX,
BOMBAY.
(S. R. DAS C.J., BHAGWATI a.nd VENKATARAMA
AYYAR JJ.]
Income-tax-I nconie jroni undisclosed so11,rces-AssessmentAssessee' s explanation based on accounts supported by offidavitsAccounts accepted as genuine and statements in affidavits not controverted-Finding based on no evidence-Inference front. proved or
iidmitted facts-If questions of law-Principle of interferenccIndian Income-tax Act (XI of 1922), ss. 62(2), 23(3), 26·A.
The appellants, a partnership firm assessed under ss. 23(3) and
26· A of the Income·tax Act, were called upon by the Income·tax
Officer during the assessment year 1947-48 to explain how and when
they came to possess 61 thousand·rupee currency notes which they
had encashed on the 18th January, 1946, after the promulgation of
the High Denomination Bank Notes (Demonetisation) Ordinance
of 1946, under which such notes ceased to be legal tender on the
expiry of the 12th of January, 1946. The assessees produced their
cash-book entries from the 20th December, 1945, to the 18th January, 1946, which were accepted as correct by the Income-tax Officer,
who, however, made no further scrutiny of the accounts, and the
entries showed that on the 12th of January, 1946, the cash balance
in hand was Rs. 69,891·2-6. The case of the appellants was that
the said notes were a part of the cash balance and in further support of their case they filed before the Appellate Assistant Commissioner three a1,Edavits by persons actually making the payments,
..._
in respect of certain entries in the cash-book to prove that Rs. 20,000
on the 28th December, 1945, Rs. 15,000 on the 6th of January,
1946, and Rs. 8,000,, out of a sum of Rs. 8,500, on the 8th of January, 1946, were paid in thousand-rupee notes.
The Income-tax
Officer and the Appellate Assistant Commissioner in appeal, on a.
ca.!culation of their own, held that the possession by the appellants
of so many thousand-rupee notes was an impossibility and that
these notes must represent income from undisclosed sources and as
such be added to the assessable income of the appellants. Neither
the Appellate Assistant Commissioner nor the Income-tax Officer,
who was present at the hearing of the appeal, called for the deponents in order to cross-examine them with reference to their
statement in the affidavits. The Appellate Tribunal Ql1 appeal
accepted the explanation of the assessees in respect of 31 of the
notes but not with regard to the rest and rejected their application
for a reference of the matter to the High Court. The assessees moved
the High Court and the Tribunal was directed under s. 66(2) to state
S.C.R.
SUPREME COURT REPORTS
627
a case for its decision. In answering the main question, the High
7956
Court was of the opinion that the finding of the Tribunal was a finding of fact or an inferencB based on such finding and it was not
Messrs M, hta
possible to say that such finding or inference was unreasonable or
Parikh and Co.
arbitrary.
v.
The Commissioner
Held (per curiam), that the High Court was in error in refusing
of Income.tax
to interfere with the finding of the Tribunal which was based on no
Bombay '
evidence and the appeal must succeed.
Per C.J. and BHAGWATI J.-Conclusions based on facts proved
or admitted may be conclusions of fact but whether a particular inference can legitimately be drawn from such conclusions may be a
question of law.
Where, however, the fact finding authority has
acted without any evidence or upon a view of the facts which could
not reasonably be entertained or the facts found were such that no
person acting judicially and propel'!y instructed as to the relevant
law could have found, the court is entitled to interfere.
Chitnilal Ticamchancl Coal Co. Ltd. v. Commissioner of Incometax, Bihar and Orissa, ([1955]) 27 I.T.R. 602), applied.
Cameron v. Prendergast (Inspector of Taxes), ([1940] 8 I.T.R.
(Suppl.) 75), Bamford v. Osborne (H. M. Inspector of Taxes), ([1942]
10 I.T.R. (Suppl.) 27) and Edwards (Inspector of Taxes) v. Bairstow
and Another, ([1955] 28 I.T.R. 579), referred to.
The High Court was in error in treating the finding of the Tribunal as a finding of fact and failed to apply the true principles of
interference applicable to such cases.
The entries in cash-book and the statements made in the affi·
davits in support of the explanation, which were binding on the
Revenue and could not be questioned, clearly showed that it was
quite within the range of possibility that the appellants had in their
possession the 61 high denomination notes on the relevant date and
their explanation could not be assailed by a purely imaginary calculation of the nature made by the Income-tax Officer or the Appellate
Assistant Commissioner.
The Tribunal made a wrong approach and while accepting the
appellants' explanation with regard to 31 of the notes, it had
absolutely no reason to exclude the rest as not covered by it in
absence of any evidence to show that the excluded notes were profits earned by the appellants from undisclosed sources. The appellants having given a reasonable explanation the Tribunal could not,
by applying a rule of thumb, discard it so far as the rest were concerned and act on mere surmise.
Per VENKATARAMA AYYAR J.-The finding of the Tribunal that
high denomination notes of the value Rs. 30,000 represented concealed profits of the appellants being unsupported by any evidence
amounted to an error of law and was liable to be set aside.
That so
many notes of high denomination should have been held as part of
628
SUPREME COURT REPORTS
[1956]
1956
the cash for so long a time, might be highly suspicious but decisions
must be founded on legal testimony and not on suspicion.
Messrs Mehta
Parikh and Co.
v.
The Comtnissioner
of lnco,ne~tax,
Botnbay
The question whether the accounts were genuine or not was a
pure question of fact a·na a finding that they were genuine was bind·
ing both on the Revenue and the subject.
CIVIL APPELLATE JURISDICTION:
Civil Appeal
No. 81 of 1954.
Appeal from the judgment and order dated the
10th March 1953 of the Bombay High Court in Income-tax Reference No. 35 of 1952.
R.J. Kolah and/. N. Shroff for the appellant.
G. N.Joshi, Porus A. Mehta and R.H. Dhebar for
the respondent.
1956: May 10. The following Judgments were
delivered.
BHAGWATI J.-Two questions were referred by the
Income-tax Appellate Tribunal to the High Court of
Bombay under section 66(1) of the Indian Incometax Act.
(1) Whether there is any material to justify the
assessment of Rs. 30,000 (Rupees thirty thousand)
from out of the sum of Rs. 61,000 (Rupees sixtyone
thousand) (for Income-tax and Excess Profits Tax
and Business Profits Tax purposes) representing the
value of high denomination notes which were en cashed
on the eighteenth day of January one thousand nine
hundred and forty six, and
(2) Whether in any event by reason of the orders
of the Revenue Authorities not having found that
the alleged item was from alleged undisclosed business profits the assessment of Rs. 30,000 (Rupees
thirty thousand) is in law justified for Excess Profits
Tax and Business Profits Tax purposes?
The High Court answered the first question in the
affirmative but refused to answer the second question,
being of the opinion that even though it had asked
the Tribunal to refer that question under section 66
(2) of the. Act, it had no jurisdiction to do so inasmuch
as the appellants had not asked the Tribunal to refer
S.C.R.
SUPREME COURT REPORTS
629
the second question and, therefore, no question arose
of the Tribunal refusing to raise that question or to
submit it for the decision of the High Court.
The appellants are a partnership firm doing business
in Mill Stores at Ahmedabad. Their head office is in
Ahmedabad and their branch office is in Bombay.
The Governor-General on 12th January 1946 promulgated the High Denomination Bank Notes (Demonetisation) Ordinance, 1946 and High Denomination
Bank Notes ceased to be legal tender on the expiry
of 12th day of January 1946. Pursuant to clause 6
of the Ordinance the appellants on 18th January 1946
encashed high denomination notes of Rs. 1,000 each
of the face value of Rs. 61,000.
This was done in
the calendar year 1946 being the account year corresponding with assessment year 1947-48.
During the assessment proceedings for the year
1947-48 the Income-tax Officer called upon the appellant to prove from whom and when the said high
denomination notes of Rs. 61,000 were received by
the appellants and also the bona fides of the previous
owners thereof. After examining the entries in the
books of account of the appellants and the ,position
of the Cash Balances on various dates from 20th
December 1945 to 18th January 1946 and the nature
and extent of the receipts and payments during the
relevant period, the Income-tax Officer came to the
conclusion that in order to imstain the contention of
the appellants he would have to presume that there
were 18 high denomination notes of Rs. 1,000 each in
the Cash B11.lance on 1st January 1946 and that all
cash receipts after l'st January 1946 and before 13th
January 1946 were received in currency notes of
Rs. l,000 each, a presumption which he found impossible to make in the absence of any evidence. He,
therefore, added the sum of Rs. 61,000 to the assessable income of the appellants from undisclosed
sources.
On appeal to the Appellate Assistant Commissioner
the appellants produced before him affidavits of three
persons to show that the appellants had received
Rs. 20,000, in 1,000 rupees currency notes on 28th
1956
Messrs Mehta
Parikh and Co.
v.
The Commissioner
of /11come-ta;r,
Bombay
Bhagu:ati J,
1956
Messis Mehta
Parikh and Co.
v.
The Co1ntn£sst'oncr
of lnconie-tax,
Bo1nbay
Bhagu.>ati J,
630
SUPREME COURT REPORTS
[1956)
December 1945, Rs. 15,000 in 1,000 rupees currency
notes on 6th January 1946 and Rs. 8,500 in 1,000
rupees currency notes (making Rs. 8,000) on 8th
January 1946, thus aggregating to Rs. 43,500 during
the relevant period. The Appellate Assistant Commissioner did not accept the statements contained in
the said affidavits and dismissed the appeal and confirmed the order of the Income-tax Officer.
An appeal was taken by the appellants before the
Income-tax Appellate Tribunal. The Tribunal after
taking into consideration all the materials which bad
been placed before the Appellate Assistant Commissioner, including the said affidavits, was of the opinion
that if it was to accept the appellants' contention, it
would mean that practically every payment above
Rs. 1,000 was received by the appellants in high denomination notes, which was almost impossible. The
Tribunal could not say that the appellants had no
high denomination notes with them. It accepted the
books of account of the appellants but thought that
the cash balance on 18th January 1946 could not have
sixtyone high denomination notes. It came to the
conclusion that the appellants appeared to have put
in high denomination notes in the cash balance and
taken the other notes away. It accepted the appellants' explanation only in regard to 31 notes and
directed that the appellants' assessment for the year
under reference be reduced by that amount and dismissed the rest of the appeal.
The appellants applied to the Tribunal for stating
a case and referring the first question of law to the
High Court for its opinion under section 66(1) of the
Act.
The Tribunal rejected the said application
holding that no question of law arose from its order.
The appellants thereupon applied to the High Court
under section 66(2) of the Act for an order directing
the Tribunal to state a case and refer the questions
set out in the application. The High Court directed
the Tribunal to state a case and refer the two questions of law set out hereinabove to it for its decision
under section 66(2) of the Act. In stating the case
and referring the said questions of law to the High
-
8.C.R.
SUPREME COURT REPORTS
l:i31
Court, the Tribunal pointed out that the second quest9s6
tion was not urged' before the Tribunal at any stage
Messrs Mehta
and hence it was not dealt with by it in its original
Parikh and co.
m~.
~
The reference was heard by the High Court and the The Commissioner
High Court answered the first referred question in the
of Income-tax,
affirmative, but did not answer the second referred
Bombay
question, The High Court held that there were
BhagwatiJ.
materials before the Tribunal to hold that the sum
of Rs. 30,000 represented the income of the appellants from undisclosed sources and that the finding
of the Tribunal was a finding of fact based on
materials before it and even if it was an inference
drawn by the Tribunal, the inference was based on
the facts and materials before the Tribunal. The Higl:i
Court observed that it was impossible to say that the
inference drawn by the Tribunal from the circumstances was an unreasonable inference or an arbitrary
and capricious inference or an inference, which no
judicial tribunal could ever draw. It, therefore,
answered the first referred question in the affirmative.
As regards the second referred question, the High
Court held that that question was not raised by the
appellants in their application for reference under
section 66(1) of the Act and, therefore, it had no
jurisdiction to ask the Tribunal to state a case on a
particular question of law; where the appellants themselves had never asked the Tribunal to refer such a
question to the High Court and that even though it
had directed the Tribunal under section 66(2) to refer
the said question, as it had no jurisdiction to ask the
Tribunal to refer the said question, it was not open
to it to answer the second question which had been
raised by the Tribunal at its instance and refused to
answer it.
On a petition made by the appellants for leave to
appeal to this court, the High Court granted a certificate that this was a fit case for appeal to this court
and hence this appeal.
It may be mentioned at the outset that the assessment of the appellants by the Income-tax Officer was
under section 23(3) and section 26-A of the Act. The
1956
Messrs Mehta
Parikh and Co,
v.
The Commissioner
o/ Inconie·tax,
Bonibay
Bhagwati J.
632
SUPREME COURT REPORTS
[1956]
books of account of the appellants were accepted by
the Income-tax Officer and the only scrutiny made
by the Income-tax Officer was whether at the relevant
date, i.e. on 12th January 1946, the appellants had in
their cash 61 notes of high denomination of Rs. 1,000
each.
The cash book entries from 20th December
1945 up to 18th January 1946 were put in before the
Income-tax Officer and they showed that on 28th
December 1945 Rs. 20,000 were received from the
Anand Textiles, and there was an opening balance of
Rs. 18,395 on 2nd January 1946. Rs. 15,000 were received by the appellants on 7th January 1946 from
the Sushico Textiles and Rs. 8,500 were received by
them on 8th January 1946 from Maniben, widow of
Shah Maneklal Nihalchand. Various other sums were
also received by the appellants from 2nd January
1946 up to and inclusive of 11th January 1946, which
were either multiples of Rs. 1,000 or were over
Rs. 1,000 and were thus capable of having been paid
to the appellants in high denomination notes of
Rs. 1,000. There was a cash balance of Rs. 69,891-2-6
with the appellants on 12th January 1946, when the
High Denomination Bank Notes (Demonetisa tiou)
Ordinance 1946 was promulgated and it was the case
of the appellants that they had then in their custody
and possession 61 high denomination notes of
Rs. 1,000, which they encashed through the Eastern
Bank on 18th January 1946.
The appellants further
sought to support their contention by procuring before the Appellate Assistant Commissioner the affidavits of Kuthpady Shyama Shetty, Geqeral Manager
of Messrs Shree Anand Textiles, in regard to payment
to the appellants of a sum of Rs. 20,000 in Rs. 1,000
currency notes on 28th December 1945, Govindprasad
Ramjivan Nivetia, proprietor of Messrs Shusiko Textiles, in regard to payment to the appellants of a
sum of Rs. 15,000 in Rs. 1,000 currency notes on 6th
January 1946 and Bai Maniben, widow of Shah
Maneklal Nihalchand, in r,;gard to payment to the appellants of a sum of Rs. 8,500 (Rs. 8,000 thereout being in Rs. 1,000 currency notes) on 8th January 1946.
The appellants were not in a position to give further
S.C.R.
SUPREME COURT REPORTS
633
particulars of Rs. 1,000 currency notes received by
them during the relevant period, as they were not in
the habit of noting these particulars in their cash
book and therefore relied upon the position as it
could be spelt out of the entries in their cash book
coupled with these affidavits in order to show that
on 12th January 1946 they had in their cash balance
of Rs. 69,891-2-6, the 61 high denomination currency
notes of Rs. 1,000 each, which they en cashed on 18th
January 1946 through the Eastern Bank.
Both the Inrome-tax Officer and the Appellate
Assistant Commissioner discounted this suggestion of
the appellants by holding that it was impossible that
the appellants had on hand on 12th January 1946,
the 61 high denomination currency notes of Rs. I ,000
each, included in their cash balance of Rs. 69,891-2-6.
The calculations, which they made involved taking
into account all payments received by the appellants
from and after 2nd January 1946, which were either
multiples of Rs. 1,000 or were over Rs.1,000. There
was a cash balance of Rs. 18,395-6-6 on hand on 2nd
January 1946, which could have accounted for 18 such
notes.
The appellants received thereafter as shown
in their cash book several sums of monies aggregating
to over Rs. 45,000 in multiples of Rs. 1,000 or sums
over Rs. 1,000, which could account for 45 other notes
of that high denomination, thus making up 63 currency notes of the high denomination of Rs. 1,000
and these 61 currency notes of Rs. 1,000 each, which
the appellants encashed on 18th January 1946 could
as well have been in their custody on 12th January
1946. This was, however, considered impossible by
both the Income-tax Officer and the Appellate Assistant Commissioner as they could not consider it
within the bounds of possibility that each and every
payment received by the appellants after 2nd January 1946 in multiples of Rs. 1,000 or over Rs. 1,000
was received by the appellants in high denomination
notes of Rs. 1,000 each. It was by reason of their
visualisation of such .an impossibility that they negatived the appellants' contention.
'
It has to be noted, however, that beyond these
82
1956
Messrs Mehla
Parikh and Co.
v.
Tho Commissioner
of Income.ta~-.
Bombay
Bhagu•atl J,
634
SUPREME COURT REPORTS
[1956]
1956
calculations of figures, no further scrutiny was made
Messrs Mehta
by the Income-tax Officer or the Appellate Assistant
Parikh and co. Commissioner of the entries in the cash book of the
v.
appellants. The cash book of the appellants was
The Commissioner accepted and the entries therein were not challenged.
of Income.tax,
No further documents or vouchers in relation to those
Bombay
entries were called for, nor was the presence of the
BhagwatiJ.
deponents of the three affidavits considered necessary by either party. The appellants took it that the
affidavits of these parties were enough and neither
the Appellate Assistant Commissioner, nor the Incometax Officer, who was present at the hearing of the
appeal before the Appellate Assistant Commissioner,
considered it necessary to call for them in order to
cross-examine them with reference to the statements
made by them in their affidavits. Under these circumstances it was not open to the Revenue to
challenge the correctness of the cash book entries or
the statements made by those deponents in their
affidavits.
This being the position, the state of affairs, as it obtained on 12th January 1946, had got to be appreciated, having regard to those entries in the cash
books and the affidavits filed before the Appellate
Assistant Commissioner, taking them at their face
value. The entries in the cash books disclosed that,
taking the number of high denomination notes at 18
on 2nd January 1946, there came in the custody or
possession of the appellants after 2nd January 1946
and up to 12th January 1946, 49 further notes of
that high denomination, making 67 such notes in the
aggregate, out of which 61 such notes could be encashed by the appellants on 18th January 1946
through the Eastern Bank. A mere calculation of the
nature indulged in by the Income tax Officer or the
Appellate Assistant Commissioner was not enough,
without any further scrutiny, to dislodge the position
taken up by the appellants, supported as it was, by
the entries in the cash book and the affidavits put ii1
by the appellants before the Appellate Assistant
Commissioner.'
The Tribunal also fell into the same error. It could
S.C.R.
SUPREME COURT REPORTS
635
not negative the possibility of the appellant being in
possession of a substantial number of these high denomination currency notes. It, however, considered
that it was impossible for the appellants to have bad
61 such notes in the cash balance in their bands on
12th January 1946 and then it applied a rule of the
thumb treating 31 out of such 61 notes as within the
bounds of possibility, excluding 30 such notes as not
covered by the explanation of the appellants. This
was pure surmise and had no basis in the evidence,
which was on the record of the proceedings.
The High Court treated this finding of the Tribunal as a mere finding of fact.
The position in regard
to all such findings of fact, as to whether they can be
questioned in appeal, is thus laid down by the House
of Lords in Cameron v. Prendergast (Inspector of
Taxes)(1):
"Inferences from facts stated by the Commissioners are matters of law and can be questioned on
appeal. The same remark is true as to the construction of documents. If the Commissioners state the
evidence and hold upon that evidence that certain
results follow, it is open to the Court to differ from
such a. holding".
To the same effect are the observations of the House
of Lords in Bamford v. Osborne (H. M. Inspector of
Taxes)(~):
"No doubt there are many cases in which Commissioners, having had proved or admitted before
them a series of facts, may deduce therefrom further
conclusions which are themselves conclusions of pure
fact. But in such cases the determination in point
of law is that the facts proved or admitted provide
evidence to support the Commissioners' conclusions".
The latest pronouncement of the House of Lords on
this question is to be found in Edwards (Inspector of
Taxes) v. Bairstow and Another(8). Viscount Simonds
observed at page 586:-
"For it is universally conceded that, though it is
(1) [1940) 8 I.T.R. (Suppl.) 75, 81.
(2) (1942110 I.T.R. (Suppl.) 27, 84.
(3) [1955] 28 I.T.R. 579.
1956
Me•srs Mehta
Parikh and Co.
v.
The Commissioner
of Income-tax,
Bombay
Bhagwati J.
19J6
Messrs Mehta
Par;kh and Co.
v.
The Com1nissioner
"\
o/ lnco111e .. tax,
Bomba1
BhagwatiJ.
636
SUPREME COURT REPORTS
[1956]
a pure finding of fact, it may be set aside on grounds
which have been stated in various ways but are, I
think, fairly summarised by saying that the court
should take that course if it appears that the Commissioners have acted without any evidence or upon
a view of the facts which could not reasonably be
entertained".
and Lord Radcliffe expressed himself as under at
page592:-
"If the case contains anything ex facie which is
bad law and which bears upon the determination, it
is, obviously erroneous in point of law. But, without
any such misconception appearing ex facie, it may be
that the facts found are such that no person acting
judicially and properly instructed as to the relevant
law could have come to the determination under appeal. In those circumstances, too, the court must
intervene".
It follows, therefore, that facts proved or admitted
may provide evidence to support further conclusions
to be deduced from them, which conclusions may
themselves be conclusions of fact and such inferences
from facts proved or admitted could be matters of
law. The court would be entitled to intervene if it
appears that the fact finding authority has acted without any evidence or upon a view of the facts, which
could not reasonably be entertained or the facts found
are such that no person acting judicially and properly
instructed as to the relevant law would have come to
the determination in question.
The High Court recognised this position in effect
but went wrong in applying the true principles of
interference with such findings of fact to the present
case.
The attempt which was made by the High
Court to probe into the mind of the Tribunal hy trying to discard the affidavitofGovindprasad Ramjivan
Nivetia in regard to the payment of Rs. 15,000 to
the appellants in 15 currency notes of Rs. 1,000 each
on 6th January 1946 and thus reducing the aggregate sum of Rs. 43,500 to Rs. 28,500 and justifying
the figure of Rs. 31,000 arrived at by the Tribunal
was really far-fetched and contrary to the terms of
SJ'1.R..
SUPR.EME COUR.'f REPOR.TS
637
the Tribunal's order itself, the Tribunal not having
7956
given any inkling, whatever, of what was at the back
Messrs Mehta
of its mind when it fixed upon the figure R.s. 31,000.
Parikh and co.
Really speaking the Tribunal had not indicated upon
v.
what material it held that R.s. 30,000 should be Tiie Commissioner
treated as secret profit or profits from undisclosed
of Income-tax,
sources and the order passed by it was bad.
The
Bombay
appellants had furnished a reasonable explanation
BhagwatiJ.
for the possession of the high denomination notes of
the face value of Rs. 61,000 and there was no justification for having accepted it in part and discarded
it in relation to a sum of Rs. 30,000.
The case was
analogous to the one before the Patna High Court in
Chunilal Ticamchand Coal Co. Ltd. v. Commissioner of
Income-tax, Bihar and Orissa(1) and should have been
similarly decided in favour of the appellants.
For the reasons indicated above, we are o·f the opinion that the High Court was in error in answering
the first referred question in the affirmative. It
ought to have answered it in the negative and held
that there were no materials to justify the assessment
of Rs. 30,000 from out of the sum of Rs. 61,000, for
Income-tax and Excess Profits Tax and Business Profit Tax purposes representing the value of the high
denomination notes which were encashed on 18th
,January 1946.
In view of the above it is not necessary for us to go
into the question whether the High Court ought to
have answered the second referred question also. The
answer to the first referred question being in the
negative, the very basis for Excess Profits Tax and
Business Profits Tax disappears and the second
referred question becomes purely academical.
The result, therefore, is that the appeal is allowed
and the first referred question is answered in the
negative. The appellants will have their costs here
as well as in the High Court.
VENKATARAMA AYYAR J.-I agree to the order just
proposed; but I prefer to rest my decision on the
(1) [1966] 27 I.T.R. 602,
638
SUPREME COURT REPORTS
[1956]
7956
ground that the finding of the Tribunal that high
Messrs Mehta
denomination notes of the value of Rs. 30,000 repreParikh and co. sented the concealed profits of the appellant is not
v.
supported by any evidence, and is, in consequence,
The commissioner erroneous in point of law and liable to be set aside.
of Income-tax.
The evidence on record has been exhaustively reBombay
viewed in the judgment just delivered, and there is no
BhagwatiJ.
need to traverse the same ground again. To put the
matter in a nut-shell, the accounts of the appellant
have been accepted by the Tribunal as genuine, and
it is impossible to say, having regard to the cash
balance as shown therein, that the notes in question
could not have been included therein. The Tribunal observes that it is unlikely that so many high
denomination notes would have been held as part
of the cash on hand for such a large number of days.
That, no doubt, is highly suspicious; but the decision
of the Tribunal must rest not on suspicion but on
legal testimony. For the respondent, Mr. Joshi contended that the cash balance shown in the books
could not be accepted as true, because the appellant
had ample time to rewrite the accounts, as the Ordinance was issued on 12th January 1946 and the year
of account of the assessee was the Calendar year.
Whether the accounts are genuine or not is a pure
question of fact, and a finding on a question of fact
is as much binding on the Revenue as on the subject.