Messrs. Lalchand Bhagat Ambical Ram v. the Commissioner of Income-tax, Bihar & Orissa
on January 5, 1955,
whereby the High Court answered the referred
question in the affirmative. The High Court was of
the opinion that the onus of proving the source of the
said amount was on the appellant which the appel
lant did not discharge and that there was evidence
before the Tribunal to come to the conclusion it did.
The finding arrived at by the Tribunal WIJ1! therefore
a pure finding of fact and it could not be urged that
it was based on no evidence. The High Court further
held that as the appellant itself claimed that the said
amount of Rs. 2,91,000 formed part of the cash
balance of its business, the said profits were profits of
the business and as such liable to excess profits tax.
The appellant then applied to the High Court for a
certificate under s. 66A (2) of the Income-tax Act for
leave to appeal to this Court. These applications
were rejected by the High Court on August 25, 1955,
observing that it had answered the question of law
not on the academic principles of onus but on the
material from which it was open to the Income-tax
authorities to arrive at the conclusion at which they
arrived.
308 SUPREME COURT REPORTS [1960Cl))
z959 The appellant thereupon on October 22, 1955,
applied to this Court for special leave to appeal which
La~!~~!,.a;':!"' was gr.anted by this Court on November 28, 1955, in
v. both the appeals arising out of the assessment for
TAe Commissioner Income-tax as well as the excess profits tax. Both
of Income-tax the appeals arising out of these orders being Civil
Appeals Nos. 679 and 680 of 1957 are now before us.
Bha:wa/; J. The main question to determine in these two appeals
is whether there was any material to support the
finding of the Tribunal that the sum of Rs. 1,41,000
represented the secreted profits of the appellant's
business and as such liable to be taxed in the hands
of the appellant under the Indian Income-tax Act and
the Excess Profits Tax Act ? Tl).e contention of the
Revenue all throughout has been that it is a finding of
fact reached by the authorities competent in that
behalf and this Court should not interfere with such
findings of fact. The contention of the appellant on
the other hand, has been that even though it may be
a finding of fact to be reached by the authorities
concerned on the materials on the record before them,
such finding is vitiated by reason of the authorities
indulging in conjectures, suspicions and surmises and
basing the same on no material whatever which goes
to support the same. It is also contended that the find
ing reached by them is a perverse one which a reason
able body of men could not have arrived at on the
material on the record.
The limits of our jurisdiction to interfere with find
ing of fact reached by the courts or tribunals of facts
have been laid down by us in various decisions of this
Court. In Dhirajlnl Girdharilnl v. Commissioner of
Income-tax, Bombay (1) we observed that when a Court
of fact arrives at its decision by considering material
which is irrelevant to the enquiry, or acts on material,
partly relevant and partly irrelevant, where it is
impossible to say to what extent the mind of the
Court was affected by the irrelevant material
used by it in arriving at its decision, a ques
tion of law arises: Whether the finding of the
Court of fact is not vitiated by reason of its having
(I) [1954] 26 l.T.R. 736.
S.C.R. SUPREME COURT REPORTS 309
relied upon conjectures, surmises and suspicions not z959
supported by any evidence on record or partly upon L 1 ,. "" Bh "'
evidence and partly upon inadmissible material. We
11
;,,.~ical R:~
also observed in Dhakeswari Cotton .llfills Ltd. v. v.
Commissioner of Income-tax, West Benyal (1) that an The Commissi01Ur
assessment so made without disclosing to the assessee 0! Income-tu
the information supplied by the departmental rep- Bnagwati ].
resentative and without giving any opportunity to
the assessee to rebut the information so supplied and
declining to take into consideration all materials
which the assessee wanted to produce in support of
the case constituted a violation of the fundamental
rules of justice and called for interference on our part.
In Messrs. Metha Parikh and Co. v. The Commissioner
of Income-tax, Bombay(~) this Court observed that the
conclusions based on facts proved or admitted may
be conclusions of fact but whether a particular in-
ference 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 properly instructed as to
the relevant law could have found, the Court is en-
titled to interfere. In our decision in M eenakshi Mills,
Madurai v. Commissioner of Income-f,ax, Madras (3)
after discussing the various authorities on the subject
we laid down that :-
"
(3) A finding on a question of fact is open to
attack under S. 66(1) as erroneous in law when
there is no evidence to support it or if it is
perverse."
'l'he latest pronouncement of this Court in Omar Salay
.Mohamed Bait v. The Commissioner of Income-tax,
Madras(') summarises the position thus:-
"We are aware that the Income-tax Appellate
Tribunal is a fact finding Tribunal and if it arrives
at its own conclusions of fact after due conside
ration of the evidence before it this Court will not
(r) (1955] 1 S.C.R. 941.
(2) [1956] S.C.R. 6i6.
(3) (1956] S.C.R. 691.
(4) C.A. No. I.5 of 1958 decided OD
March .5• 1959.
z959
Lalchand Bhagat
.A.mbical Ram
v.
T,,e Commissioner
of Ineom~-ta~
Bugwali J.
310 SUPREME COURT REPORTS [1960(1}]
interfere. It is necessary, however, that every fact
for and against the assessee must have been con
sidered with due care and the Tribunal must have
given its finding in a manner which would clearly
indicate what were the questions which a.rose for
determination, what was the evidence pro a.nd
contra in regard to each one of them and what were
the findings reached on the evidence before it. The
conclusions reached by the Tribunal should not be
coloured by any irrelevant considerations or matters
of prejudice a.nd if there are any circumstances
which required to be explained by the assessee, the
assessee should be given an opportunity of doing so.
On no account whatever should the Tribunal base
its findings on suspicions, conjectures or surmises
nor should it a.ct on no evidence a.t all or on impro
per rejection of material and relevant evidence or
partly on evidence and partly on suspicions, conjec
tures and surmises a.nd if it does anything of the
sort, its findings even though on questions of fa.ct
will be liable to be set aside by this Court."
It is in the light of these observations that we have
to <let.ermine the question a.rising before us in the
present appeals. It is clear on the record that the
appellant maintained its books of account according to
the mercantile system and there were maintained in
its cash books two accounts : one showing the cash
balances from day to day and other known as
" Almirah account " wherein were kept large balances
which were not required for the day-to-day working
of the business. Even though the appellant kept large
a.mounts in bank deposits and securities monies were
required at short notice at different branches of the
appellant. There were also collections made from
various Beoparies or merchants and monies were also
required for doing the grain purchase work on behalf
of the- Government. These monies were credited in
the Almirah account which showed heavy cash balan
ces from time to time. In the books of account for
previous years it was the practice of the appellant to
give details of the notes of high denominations giving
the distinctive numbers of these notes received or paid
S.C.R. SUPREME COURT REPORTS 311
or at least other description e.g., " So many notes " of z959
Rs. 1,000 each. In the assessment year, however, Lalchand Bhagat
this practice does not appear to have been followed Ambical Ram
but entries continued to be made of monies thus v.
received_ from the banks, different branches, Beoparees The Commissioner
etc., without any such details being filled therein. A of lncome·lair
statment of these cash balances viz., the balance in the Bhagwatif.
Rokar and the balance in the Almirah from Septem-
ber l, 1945, to January 31, 1946, was filed before the
Income-tax authorities and this statement showed that
apart from the balance in the Rokar the balance in
the Almirah rose from Rs. 1,36,397-10-0 on Septem-
ber l, 1945, to Rs. 1,97,397-10-0 on September 30, 1945,
to Rs. 2,23,397-10-0 on October 13, 1945, to
Rs. 2,65,397-10-0 on November 27, 1945, to
Rs. 2,91,397-10-0 on December 29, 1945, and remained
at Rs. 2,81,397-10-0 on January 10, 1946. The balance
in the Rokar :fluctuated considerably but on the
relevant date January 10, 1946, it stood at
Rs. 26,092-10-9. It was Rs. 24,976-13-3 on January 11,
1946, and Rs. 29,284-3-9 on January 12, 1946,
when the High Denomination Bank Notes (Demoneti-
zation) Ordinance, 1946, was promulgated. These
entries showed that there was with the appellant on
on January 12, 1946, an aggregate sum of
Rs. 3,10,681-13-9 and it~ was highly probable that the
High Denomination notes of Rs. 2,91,000 were includ-
ed in this sum of Rs. 3,10,681-13-9. The books of
account of the appellant were not challenged in any
other manner except in regard to the interpolations
relating to the number of high denomination notes of
Rs. 1,000 each obviously made by the appe,llant ip. the
accounts for the assessment year in question in the
manner aforesaid and even in regard to these interpo-
lations the explanation given by the appellant in
regard to the same was accepted by the Tribunal.
Even though the Income-tax Officer made capital out
of the interpolations and subsequent insertions in the
books of account and styled the evidence furnished by
them as created or manipulated evidence thus. dis-
coi.mting the story of the appellant in regard to the
source of these high denomination notes, the Tribunal
312 SUPREME COURT REPORTS [1960(1))
z959 was definitely of opinion that there was no other
L l ha d Bh , reason to suspect the genuineness of the account
a c n aga. b k · h" h h · t 1 t• " Ambical Ram oo s m w IC t ese m erpo a ions were iound. As a
v. matter of fact the Tribunal accepted these books of
The Commissioner account as genuine and worked up its theory on the
of Income-la• basis of the entries which obtained in these books of
account. The Tribunal had before it the statement
Bhagwati]. of large amounts received by the appellant from the
banks, different branches of the appellant and its
Beoparees or merchants which showed that between
February 6, 1945, and January 11, 1946, amounts
exceeding Rs. 1,000 aggegrating to Rs. 5,04,713 had
been received by the appellant. Even though large
amounts may have been paid out by the appellant in
this manner between the said dates, the entries of the
balance in Rokar and the balance in Almirah showed
that on January 12, 1946, the balance in Rokar was
Rs. 29,234-3-9 and the balance in Almirah was
Rs. 2,81,397-10.0 the total cash balance thus aggre
gating to Rs. 3,10,681-13-9. Nobody had any inkling
of the promulgation of the High Denomination Bank
Notes (Demonetization) Ordinance, 1946, on January
12, 1946, and if in the normal course of affairs and
situated as the appellant was, the appellant kept these
large cash balances in High Denomination Notes of
Rs. 1,000 each, there was nothing surprising or impro
bable in it. If the appellant had to disburse such large
sums of monies at short notices at the different branches
of the appellant and also to its Beoparees apart from
financing the Government for grain purchase work
which it used to carry on, it would be convenient for
it to handle these large sums of monies in high deno
mination notes of Rs. 1,000 each and the most natural
thing for it to do was to keep these cash balances in
as many high denomination notes as possible. The
Tribunal in fact took count of this position and after
giving due weight to all the circumstances arrived at
the conclusion that the appellant might be expected
to have possessed as part of its business cash balance
at least Rs. 1,50,000 in the shape of high denomin
ation notes on January 12, 1946, when the Ordinance
above mentioned was promulgated. This conclusion
S.C.R. SUPREME COURT REPORTS 313
,
of the Tribunal could only be arrived at on the basis I959
that the entries in the books of account in regard to Lalchand Bhagat
the balance in Rokar and the balance in Almirah were Ambical Ram
correct and represented the true state of affairs, in v.
spite of the interpolations and subsequent insertions The Commissioner·
which had been made to bolster up the true case. 0! Income-ta:r
If these were the materials on record which would Bhagwati J.
lead to the inference that the appellant might be
expected to have possessed as part of its cash balance
at least Rs. 1,50,000 in the shape of high denomin-
ation notes on January 12, 1946, when the Ordinance
was promulgated, was there any material on record
which would legitimately lead the Tribunal to come
to the conclusion that the nature of the source from
which the appellant derived the remaining 141 high
denomination notes of Rs. 1,000 each remained unex-
plained to its satisfaction. If the entries in the books
of account in regard to the balance in Rokar and the
balance in Almirah were held to be genuine, logically
enough there was no escape. from the conclusion that
the appellant had offered reasonable explanation as to
the source of the 291 high denomination notes of
Rs. 1,000 each which it encashed on January 19, 1946.
It was not open to the Tribunal to accept the genuine-
ness of these books of account and accept the ex-
planation of the appellant in part as to Rs. 1,50,000
and reject the same in regard to the sum of
Rs. 1,41,000-0-0. Consistently enough, the Tribunal
ought to have accepted the explanation of the appel-
lant in regard to the whole of the sum of Rs. 2,91,000
and held that the appellant had satisfactorily explain-
ed the encashment of the 291 high denomination
notes of Rs. 1,000 each on January 19, 1946.
The Tribunal, however, appears to have been influ
enced by the suspicions, conjectures and surmises
which were freely indulged in by the ·Income-tax
Officer and the Appellate Assistant Commissioner and
arrived at its own conclusion, as it were, by a rule of
thumb holding without anY, proper materials before it
that the appellant .might be expected to have possessed
as part of its business, cash balance at least Rs. 1,50,000
in the shape of high denomination notes on January
40
314 SUPREME COURT REPORTS [1960(1)]
r959 12, 1946,- a mere conjecture or surmise for which
there was no basis in the materials on record before it.
Lalchand Bhagat Th I Offi h d · f Ambi,al Ram e ncome-tax cer a indented m support o
v. his conclusion the surrounding circumstances, viz., that
The Commissioner the appellant was one of the premier Arhatdars and
of Jn,om•·lax grain merchants of Sahibganj with branches, doin~
similar business, at Nawgachia and Dhullian and all
Bhagwati f. these places were very important business centres and
Sahibganj, the principal place of business, had gained
sufficient notoriety for smuggling foodgrains and other
commodities to Bengal by country boats, and Dhulian
which was just on the Bihar-Bengal border was
reported to be a great receiving centre for such com
modities, that the foodgrains licence of the appellant
at Nawgachia was also cancelled during the account
ing year for not keeping proper stock accounts and
the appellant was prosecuted under the Defence of .
India Rules but was given the benefit of doubt and
was acquitted, that the accounting year and the
year preceding it as also the year succeeding it
were very favourable for the foodgraindealers but the
appellant though he had large capital in hand declared
losses all through from 1944-45 assessment year up to
1946-47 assessment year, the loss according to its books
in the year under consideration being to the tune of
about Rs. 46,000, that t.he appellant was in very
favourable circumstances in which there was a pos
sibility of its earning a considerable amount in the year
under consideration, that it also indulged in specula
tion (a loss of about Rs. 40,000 shown in Nawgachia
branch (in Kalai account)), in which profit in a single
transaction or in a chain of transactions could exceed
the amounts involved in the high denomination notes,
that even in the disclosed volume of business in the
year under consideration in the Head Office and in
branches there was possibility of its earning a con
siderable sum as against which showed a net loss of
about Rs. 45,000 and.that the appellant had all these
probable source or sources from which the appellant
could have earned the sum of Rs. 2,91,000 which was
represented by the high denomination notes of Rs. 1,000
each.
S.C.R. SUPR€ME COURT R~PORTS 315
The Appellate Assistant Commissioner also empha- 1 959
sized the said aspect but based his conclusion mainly Lalchand Bhaglll
.on the ground that the appellant had failed to prove Ambical Ram
that the high denomination notes had their origin in v.
capital and not in profit and held that the Income-tax The Commissioner
Officer was justified in treating the sum of Rs 2,91,000 of Income-tax
as secreted profits.
h b h h b
Bhafwati ].
This was t e ackground against whic t e Tri unal
came to its own conclusion. Even though it recog
nised that it was not improbable that when very large
sums, say in excess of Rs. 10,000 . at a time were
received, a fairly good portion thereof consisted o'fhigh
denomination notes and as high denomination notes
were valid tender and nobody could have foreseen that
they would be demonetised suddenly in January 1946,
there was nothing out of the way in persons dealing
with tens of thousands of rupees and whose balances
ran to lakhs, being in possession of a fair proportion
of their balances in the shape of high denomination
notes. While recognising this probability of the
appellant having been in possession of a fair propor
tion of its balances in the shape of high denomination
notes, the Tribunal unconsciously though it was, fell
into an error when it held that the appellant might
be expected to have possessed at least Rs. 1,50,000 in
the shape of high denomination notes as part of its
cash balance, thus treating the remaining Rs. 1,41,000
in the high denomination notes of Rs. 1,000 each as
outside the purview of these cash balances.
Unless the Tribunal had at the back its mind the
various probabilities which had been referred to by
the Income-tax Officer as above it could not have come
to the conclusion it did that the balance of Rs 1,41,000
comprising of the remaining 141 high denomination
notes of Rs. 1,000 each was not satisfactorily explained
by the appellant.
If the entries in the books of account were genuine
and the balance in Rokar and the balance in Almirah
on January 12, 1946, aggregated to Rs. 3,10,681-13-9
and if it was not improbable that a fairly good portion
of the very large sums received by the appellant
from time to time, say in excess of Rs. 10,000 at a time
316 SUPREME COURT REPORTS [1960(1)]
I959 consisted of high denomination notes, there was no
Lalchcmd Bhagat basis for the conclusion that the appellant had satis
Ambical Ram factorily explained the possession of Rs. 1,50,000 in,
v. the high denomination notes of Rs. 1,000 each leaving
The Commissioner the possession of the balance of 141 high denomina
o/ Income-ta• tion notes of Its. 1,000 each unexplained. Either the
Bhagwati J. Tribunal did not apply it§ mind to the situation or it
arrived at the conclusion it did merely by applying the
rule of thumb in which event the finding of fact reach
ed by it was such as could not reasonably be enter
tained or the fact found. were such as no person acting
judicially and properly instructed as to the relevant
law could have found, or the Tribunal in arriving at
its findings was influenced by irrelevant considerations
or indulged in conjectures, surmises or suspicions in
which event also its finding could not be sustained.
Adverting to the various probabilities which weigh
ed with the Income-tax Officer we may observe that
the notoriety for smuggling foodgrains and other
commodities to Bengal by country boats acquired by
Sahibgunj and the notoriety achieved by Dhulian as a
great receiving centre for such commodities were
merely a background of suspicion and the appellant
could not be tarred with the same brush as every
Arhatdar and grain merchant who might have been
indulging in smuggling operations, without an iota
of evidenec in that behalf. The cancellation of the
foodgrain licence at Nawgachia and the prosecution of
the appellant under the Defence of India Rules was
also of no consequence inasmuch as the appellant1 was
acquitted of the offence with which it had been charged
and its licence also was restored. The mere possibility
of the appellant earning considerable amounts in the
year under consideration was a pure conjecture on the
part of the Income-tax Officer and the fact that the
appellant indulged in speculation (in Kalai account)
could not legitimately lead to the inference that the
profit in a single transaction or in a chain of transac
tions could exceed the amounts, involved in the high
denomination notes,-this also was a pure conjecture
or surmise on the part of the Income-tax Officer. As
regards the disclosed volume of business in the year
S.C.R. SUPREME COURT REPORTS 317
under consideration in the Head Office and in branches I959
the Income-tax Officer indulged in speculation when
he talked of the possibility oft.he appellant earning a Lalchand Bhagat Ambical Ram
considerable sum as against which it showed a net loss v.
of about Rs. 45,000. The Income-tax Officer indicated The Commissioner
the probable source or sources from which the appel- of Income-tax
lant could have earned a large amount in the sum of
Rs. 2,91,000 but the conclusion which he arrived at in Bhagwati J.
regard to the appellant having earned this large
amount during the year and which according to him
represented the secreted profits of the appellant in its
business was the result of pure conjectures and
surmises on his part and had no foundation in fact
and was not proved against the appellant on the record
of the proceedings. If the conclusion of the Income-tax
Officer was thus either perverse or vitiated by suspi-
cions, conjectures or surmises the finding of the Tribunal
was equally perverse or vitiated if the Tribunal took
count of aH these probabilities and without any rhyme
or reason and merely by a rule of thumb, as it were,
came to the conclusion that the possession of 150 high
denomination notes of Rs. 1,000 each was satisfactorily
explained by the appellant but not that of the balance
of 141 high denomination notes of Rs. 1,000 each.
The position as it obtained in this case was closely
analogous to that which obtained in Messrs. J.V!ehta
Parikh & Go. v. The Commissioner of Income-tax,
Bombay (1). In that case the assessee had to satis
factorily explain the possession of 61 High Denomi
nation Notes of Rs. 1,000 each and the Tribunal
came to the conclusion that the assessee had satisfac
torily explained the possession of 31 of these notes and
not of the remaining 30. The High Court had treated
the finding of the Tribunal as a finding of fact. It was
held by this Cpurt that the entries in cash-book and
the statements made in the affidavit 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 assessee
had in their possession the 61 High denomination notes
o'n the relevant date and their explanation in that
(1) [1956) S.C.R. 626.
'
318 SUPREME COURT REPORTS [1960(1)]
r959 behalf could not be assailed by a purely imaginary
calculation of the nature made by the income-tax Lalchand Bhagat
Ambical Ram Officer or the Appellate Assistant Commissioner. It
v. further held that the Tribunal made a wrong approach
The Commissioner and while accepting the assessee's explanation with
of lne'"!'•-••~ regard to 31 of the notes, it had absolutely no reason
to exclude the ;est as not covered by it in the absence
Bhagwati J. h d of any evidence to show t at the exclu ed notes were
profits earned by the assessee from undisclosed sources.
The assessee having given a reasonable explanation
the TTibunal could not, by applying a rule of thumb
discard it so fa.r as the rest were concerned and act on
mere surmise. In arriving at its decision this Court
referred to the case of Ghunilal Ticamchand Goal Go.
Ltd. v. Commissioner of Income-tax, Bihar and Orissa (')
and stated that the case before it should also have been
similarly decided by the High Court in favour of the
assessee.
A decision of the Allahabad High Court reported in
in Kanpur Steel Go. Ltd. v. Commissioner of Income"
tax, U ttar Pradesh(') may also be noted in this context.
The assessec there encashed 32 currency notes of
Rs. 1,000 each on January 12, 1946, when the High
Denomination Bank Notes (Demonetisation) Ordinance,
1946, came into force, and when the Income-tax Officer
called upon it to explain how these currency notes
came into its possession, the assessee claimed that the
notes represented part of its cash balance which, on
that date, stood at Hs. 34,313. The Income-tax Officer
rejected the explanation and assessed the. amount of
Rs. 32,000 represented by these currency notes as
suppressed income of the assessee from some undisclos
ed source. The Tribunal took into account the state
ment of sales relating to a few days preceding the date
of encashment and found that the highest amount of
any one ~ngle transaction was only Hs. 399. The
Tribunal also referred to another statement of the
daily cash balances of the assessee from December 20,.
1945, to January 12, 1946, and noted that the cash
balance of the assessee was steadily increasing. The
Tribunal, however, estimated that high denomination
{I) [1955] '7 I.T.R. 602. (2) [1957] 32 I.T.R. 56.
S.C.R. SUPREME COURT REPORTS 319
currency notes to t.he value of Rs. 7,000 only could x959
form part of the cash balance of the assessee. It Lalchand Bhagat
therefore upheld the assessment to the extent of Ambical Ram
Rs. 25,000. On a reference to the High Court it was v.
held (i) that the burden of proof lay upon the Depart- The Commissiomr
ment to prove that the sum of Rs. 32,000 represented 0! Income-ta"
suppressed income of the assessee from undisclosed Bhagwati ].
sources, and the burden was not on the assessee to
prove how it had received these high denomination
currency notes; for, until the Demonetisation Ordinance
came into force high denomination currency notes could
be used as freely as notes of any lower denomination
and no one had any idea that it should be necessary
for him to explain the possession of high denomination
currency notes, the assessee had naturally not kept any
statement regarding the receipt of these currency notes,
and it was for the first time on January 12, 1946, when
the Ordinance came into force, that it became necessary
for the assessee to explain its possession of these
currency notes and (ii) that the explanation given by
the assessee that the notes formed part of the cash
balance of Rs. 34,000 and odd was fairly satisfactory
and was not found by the Tribunal to be false ; the
statement of sales was hardly relevant to the question;
the Department, in relying on the entries relating to
the bills of each day committed an error and no in-
ference should have been drawn from them; that any
one single transaction did not exceed Rs. 399 did not
preclude the possibility of payment in high denomina-
tion notes for such transaction ; therefore, the Tribunal
rejected the explanation of the assessee on surmises,
and there was no material for the Tribunal to hold
that the sum of Rs. 25,000 represented suppressed
income of the assessee from undisclosed sources .
• In arriving at the above decision the High Court
referred to the cases of Mehta Parikh & Co. v. Com
missioner of f71iCome-tax, Bombay (1) and Ohunilal
Tic.amchand Coal Co., Ltd. v. Commissioner of Income-
tax, Bihar and Orissa (2). •
It is, therefore, clear that the Tribunal in arriving
at the conclusion it did in the present case indulged in
(r) [1956) S.C.R. 626. (2) [195~] 27 I.T.R, 602,
320 SUPREME COURT REPORTS [1960(1))
'959 suspicions, conjectures and surmises and acted without
Lalchand Bhagat any evidence or upon a view of the facts which could
Ambicat Ram not reasonably be entertained or the facts found were
v. such that no person acting judicially and properly
The Commissioner instructed as to the relevant law could have found, or
of Income-ta• the finding was, in other words, perverse and this Court
is entitled to interfere. :.
Bhagwali f. We are therefore of opinion that the High Court was
z959
May r5.
clearly in error in answering the referred question in
the affirmative. The proper answer should have been
in the negative having regard to all the circumstances
of the case which we have adverted to above.
· The appeals will accordingly be allowed, the judg
ment and order passed by the High Court will be set
aside and the referred question will be answered in the
negative. The appellant will be entitled to its costs of
the reference in the High Court and of these appeals in
this Court as against the respondent.
Appeals allowed.
THE COMMISSIONER OF INCOME-TAX,
WEST BENGAL
v.
KALU BABU LAL CHAND
(S. R. DAS, C. J., N. H. BHAGWATT, and
M. HIDAYATULLAH, JJ.)
Income-tax-Income of the Hindu undivided fam'ily-Manager
of the joint family using family funds for promoting company and
subsequently becoming managing director-Remuneration of the
managing director-Whether taxable as income of the undivided
family.
R was the karta of the Hindu undivided family which
became interested in a business concern which ~'as then being
carried on by others. With a view to taking over the said
business as a going concern, a company was floated \vith R as one
of the promoters. Pursuant to an agreement with the vendors
of the business and in anticipation of the incorporation of the
company, Ron behalf of the company, took over the concern,
carried it on and supplied the finance at all stages out of the
joint family funds. On December rg, 1930, the contemplated
company was incorporated under the Indian Companies Act as