SHAIK MOHAMMAD BROTHERS L K Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following two questions, one at the instance of the assessee and the other at the instance of the income-tax department, were referred by the Income-tax Appellate Tribunal, Madras, as arising out of its order dated 30th May, 1969, in I.T.A. No. 966 of 1967-681.

(2.) DURING the assessment year 1961-62, the assessee was carrying on the business of manufacture and purchase and sale of jewellery and precious stones. DURING the course of the examination of the books of the assessee, the Income-tax Officer came across certain loans alleged to have been taken on hundis by the assessee and was of the view that those, loans are not real and had not been taken for business purposes. After examining the partners as also a broker through whom some of the loans under the bundles had been taken, the Income-tax Officer held the view that the assessee did not get actually cash as loans through the broker, but really brought in his own unaccounted monies in a circuitous way. The Income-tax Officer, therefore, took the peak credit of Rs. 1,25,000 which was the largest amount of such camouflaged loans as disclosed in the books and treated it as the income of the assessee from undisclosed sources. He added on this sum to the income of the assessee and made certain other additions and passed the final order of assessment dated March 29, 1966. The assessee took up the matter in appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner agreed with the assessing officer and also took the view that the sum of Rs. 1,25,000 represented the assessee's own money ; but the appellate authority, on an overall analysis of the accounts of the assessee, found that a sum of Rs. 68,742 was acceptable for purpose of deduction and so deducted the sum from the peak credit of Rs. 1,25,000 and retained an addition of Rs. 56,258 and modified the order of the Income-tax Officer. The assessee went up further and questioned the addition of the sum of Rs. 56,258 before the Tribunal. The Tribunal called for several documents and examined the statements made by the assessee as well as the brokers and the bankers whose names are disclosed in the hundies and came to the conclusion that the bankers and the brokers did not support the so-called lending as genuine. It would say that whatever may be the general conduct of the bankers and brokers which was far from satisfactory, the assessee had not been able to shake their evidence. It rejected the department's contention that the entire peak credit of Rs. 1,25,000 has to be added on as income of the assessee. It would also observe that the department having failed to file an appeal or a memorandum of cross-objections in the appeal filed by the assessee and not having questioned otherwise the order of the Appellate Assistant Commissioner, it could not probe into the request of the department that the addition should not be only in the sum of Rs. 56,258, but it ought to be the entire sum of Rs. 1,25,000. In this view, the Tribunal, while agreeing with the Appellate Assistant Commissioner that a sum of Rs. 56,258 only was to be added on, disposed of the appeal of the assessee in that way and would not grant any relief to the department. It was in those circumstances that the above questions have been referred to us for our answer.

(3.) ON the whole we find that there has not been a legal approach to the totality of the available material for purposes of arriving at a conclusion. The broker was prevaricating. There is no explanation given by the bankers as to how they could discount the so-called non-genuine hundi. The evidence of the broker was not considered in juxtaposition to the statements given by the bankers which the Tribunal themselves characterises as self-serving and given to save their skins. The avoidance to consider the important material which has an impact on the questions arising for consideration before the Tribunal, are all matters which have a definite bearing upon the question in issue. We have already referred to the legal aspect that if the Tribunal fail to give due consideration and care to all the materials before them and if important evidence is ignored and if no acceptable reason is given as to the truncated fashion in which the appreciation of evidence has been done, then such an order cannot be accepted and a well instructed parson would require much more deeper examination of all the relevant facts to conclude one way or the other. It is also by now clear that it is necessary for the revenue to go deep into the subterranean region of facts and discover if possible veins therein of wanton attitude of evasion and thereafter explore the reasonable possibility of finding against the assessees and speaking for the revenue. Such an attempt, in our view, has not been done. We are, therefore, not in a position to afford an answer to the question referred to us by the Tribunal as arising out of their order.