- (1.) This judgment would dispose of Civil No. 1133 and 11,34 of 1969 which have been filed by special leave by the Commissioner of Income Tax against the judgment of the Calcutta High court in two references under S. 66 of the Indian Income Tax Act, 1922 (hereiriafter referred to as the Act) and the question which arises for determination is whether there was relevant material before the Income Tax Appellae tribunal to hold that the sum of Rs. 5,00,000. 00 in fixed deposit in the name of Biswanath Gupta (Bhuwalka) was the concealed income of the respondent firm for the previous year corresponding to the assessment year 1046-47. Appeal No. 1133 relates to the sum of Rs. 4,50,000. 00 outofthe above sum of Rs. 5,00,000. 00, while appeal No. 1134 relates to the remaining sum of Rs. 50,000. 00 out of the sum of Rs. 5,00,000. 00.
(2.) The assessee firm, who is the respondent in these two appeals, is a registered firm consisting, of six partners. The names of the partners and their shares are given below:the respondent was carrying on business as dealers and commission agents in jute and other commodities. In addition to that it did speculative business. The respondent also acted as procuring agent for rice and paddy in certain areas for the government of Bengal and received commission on such procurements. The respondent was originally assessed on 30/03/1948, for the assessment year in question on the basis of an income of Rs. 4,71,752. 00. On appeal, the income assessed was reduced to Rs. 4,28,448. 00. On 19/02/1955, the Income Tax Officer issued notice under S. 34 of the Act stating that he had reason to believe that the respondent's income assessable to income tax had been under assessed. He accordingly called upon the respondent to file return of income for the assessment year in question. In response to that notice, the respondent filed a return showing income in accordance with the original assessment as reduced in appeal, namely, Rs. 4,28,448. 00. The Income Tax Officer thereafter examined the matter afresh and made reassessment. It was found by the Income Tax Officer that the respondent had obtained overdraft to the extent of Rs. 10,00,000. 00 from the central Bank of India Ltd. (hereinafter referred to as the central Bank) , Calcutta upon the security of two fixed deposit receipts of Rs. 5,00,000. 00 each in the central Bank, Jamnagar branch. One of those fixed deposit receipts was, dated 8/11/1944, in the name of Raghunath Prasad Agarwal, who is the same person as Raghunath Prasad Nopany and is son of Rawatmal Nopany, partner of the respondent firm. The other fixed deposit receipt was, dated 21/11/1944, in the name of Biswanath Gupta (B. N. Gupta) , who is the same person as Biswanath Bhuwalka and is son of Bajranglal, partner of the respondent firm. There was a third fixed deposit receipt of Rs. 5,00,000. 00 issued by central Bank, Jamnagar branch in the name of S. P. Agarwal, son of Rameshwarlal, partner of the respondent firm, but we are not much concerned with that receipt.
(3.) Although the present appeals relate to the fixed deposit of Rs. 5,00,000. 00 in the name of Biswanath,. we may also set out the facts concerning the fixed deposit receipt in the name of Raghunath Prasad in so far as they are essential for appreciating the point of controversy. On 2/11/1944, an amount of Rs. 5,00,000. 00 in cash was tendered to the Burrabazar, Calcutta branch of the central Bank for being transferred to Bombay head office of the Bank. The Bombay head office of the Bank issued thereafter demand draft No. 36 for the amount of Rs. 5,00,000. 00 on the Jamnagar branch of the Bank. On the basis of that demand draft, a fixed deposit receipt was issued by the Jamnagar branch of the central Bank on 8/11/1944, in the name of Raghunath Prasad. Jamnagar was at that time a part of the Indian princely State of Nawanagar. Anccher amount of Rs. 5,00,000. 00 was tendered to central Bank Burrabazar, Calcutta branch on 15/11/1944, for being transferred to Bombay head office. The head office of the Bank issued demand draft No. 41 in favour of Biswanath (B. N. Gupta) on its Jamnagar branch. On the basis of that demand draft, the Jamnagar branch of the Bank issued a fixed deposit receipt in favour of Biswanath for Rs. 5,00,000. 00 on 21/11/1944. On No 24/11/1944, the respondent firm opened an overdraft account with the central Bank, Calcutta for being operated up to a limit of Rs. 10,00,000. 00. Letter of guarantee and letter of continuity were signed in that connection by Raghunath Prasad and Biswanath on 2/12/1941, at the Calcutta branch of the central Bank along with a pronto signed by the respondent firm for keeping the two fixed deposit receipts under lein of the Bank against overdraft facilities granted to the respondent for an amount of Rs. 10,00,000. 00. At first it was taken to be a clean overdraft without any security, but on investigation the Income Tax authorities found that the overdraft facility had been granted to the respondent on the basis of the collateral security of the two fixed deposit receipts, dated 8/11/1944 and Nov 21/11/1944, issued by Jamnagar branch of the Bank in favour of Raghunath Prasad and Biswanath respectively. No consideration was received by Raghunath Prasad and Biswanath for the accommodation that they extended to the respondent for giving their fixed deposit receipts in security for the overdraft facility.;