MEREDITH, J. -
(1.) THESE are two references to this Court under Section 66(2) of the Income Tax Act by the Income-tax Tribunal, this Court having required the Tribunal to state a case. A joint statement has been made, and only a single question has been referred, as both references relate to the same matter, one being with regard to the assessment of income-tax and the other the assessment of excess profits tax.
(2.) THE assessee is an undivided Hindu family, and the question which has been referred is whether there is any legal evidence to support the finding of the Tribunal that Rs. 49,300 was part of the assessees income during the accounting year. THE accounting period in question is from the 11th of November, 1939, to the 30th October, 1940. THE assessee has business and property, the business including two rice mills and a grain gola, trading in clarified butter and timber, and there is also a pawn brooking business.
The Income-tax Officer held that a sum of Rs. 84,000 shown as cash credits in the personal ledger account of the business in the name of the family, actually represented, not, as it purported to do, capital sums brought from the home chest of the family, but secreted profits of the business. The Income-tax Officer, in rejecting the contention that the sums in question were brought from the family chest, went into the accounts for four years past. No accounts had been kept of the family income and expenditure, but he tried on the materials available, to reconstruct a family chest account for past years, and he came to the conclusion that there could not have been these surpluses in the family chest, taking into account the fact that the family had only 600 bighas of land and there were 50 members to maintain. He also notice that there was room in the accounts for suppression of profits, and that the total net profits shown amounted to only Rs. 9,402 on a sales turnover of fifteen lakhs. He added the sum of Rs. 84,000 to these profits.
On appeal the Assistant Commissioner went elaborately into the accounts himself, examining those accounts for seven years back and some accounts older still, and as a result of his examination, he reduced the sum added to profits from Rs. 84,000 to Rs. 49,300 the subject-matter of the reference. Against this order an appeal was taken to the Tribunal to make a reference to this Court under Section 66(1). This application was dismissed. The petitioner then came to this Court under Section 66(2) with the result, as already stated, that the Tribunal was asked to make the reference which is now before us.
What we have to decide is merely whether there is any legal evidence to support the conclusion arrived at by the Income-tax authorities. Much of the argument before us has, perhaps inevitably, partaken largely of the nature of a challenge to the finding upon the merits. With the merits we are not, however, at all concerned. The question before us, if one may so put it, is was there a case to go to the jury ? - not whether the evidence was such as to justify the conclusion.
No doubt the materials upon which the Income-tax authorities acted constituted only circumstantial evidence. Nevertheless, that there was evidence cannot, I think, be doubted. I have referred to the fact that on a sales turnover of fifteen lakhs the net income shown was Rs. 9,402, which amounts only to three quarters of 1 per cent. The Appellate Assistant Commissioner and the Tribunal further noticed that, though the period was one of prosperity for traders, and other mills had shown gross profits on the turnover amounting to 10 per cent the assessee had shown only 5 per cent. Mr. Pathak for the assessee contends that this at least was not evidence which could legally be taken into consideration because the names of those other mills were not supplied to the assessee. The names were in my opinion, irrelevant and the Income-tax Commissioner could not have supplied them. What was done was to draw the attention of the assessee to the fact that it was proposed to use this material and to give him a full opportunity to say what he had to say regarding it. The Assistant Commissioner states in his order that in regard to this matter he gave the assessee full hearing. He then states what the assessee had to say, and it appears from that that the assessee did not attempt to challenge the statement that other firms had shown 10 per cent. What he did do was to suggest that that figure of 10 per cent. might have been arrived at upon a system of accounting different from his own. There is no reason to suppose that the Assistant Commissioner would not have gone into this point fully, had the assessee pressed it, and would not have revealed the system of accounting upon which the estimate of 10 per cent. had been made. In short, there is no reason to suppose that anything was done behind the back of the assessee and the actual fact relied on was not really challenged by the assessee. The objection substantially was that owing to other possible circumstances the inference sought to be made from that fact was not justified. That fact, it was suggested, carried little weight with regard to the matter under consideration. In short, the objection made was not with regard to the correctness of that statement, but upon the weight which should be attached to it - a mere question of fact.
(3.) COUPLED with the extraordinarily low profits shown were the facts that no accounts at all had been conveniently kept regarding this home chest, and no explanation was furnished of the real source of these sums drawn from the home chest, and indeed, this home chest seems to have partaken of the nature of the widows miraculous cruse of oil which was never exhausted, or the purse of Fortunates which was always full. The Income-tax authorities were surely entitled to use this as material in connection with the other materials before them from which to draw a conclusion. As I have already stated, it is not for us to express any opinion whether the conclusion they did draw was upon these materials, in fact justified.
My answer to the question put to us would be that there was legal evidence to support the finding of the Tribunal, and I would answer the reference accordingly. The Income-tax Commissioner is entitled to his costs which we assess in the sum of Rs. 250.
Agarwala C.J. - I agree.