JUDGMENT
Chagla, C.J.
1. Although a rather long and elaborate statement of the case has been submitted to us, the
facts which we have to consider in order to decide this question which we asked the Tribunal to raise are few and simple. The assessee is a registered firm and it had two partners. There was another firm in which Vasantsen, the son of Dwarkadas, one of the partners of the assessee firm, was a partner with outsiders and that firm commenced doing business on 28-1-1941.
For the assessment year 1944-45 the Income-Tax Department, took the view that the firm of Vasantsen Dwarkadas was a branch firm of the assessee firm and therefore whatever profit Vasant-sen Dwarkadas made should be included in the assessment of the assessee firm. The Income-Tax Department also took the view that a profit of Rs. 16,429 was made by Vasantsen Dwarkadas in doing business with N. Parekh & Co., that N. Parekh & Co. was not a genuine party, and that they were entitled to include the sum of Rs. 16,429/- in the profits of Vasantsen Dwarkadas, the profits being arrived at on the basis that N. Parekh & Co. was either a benamidar or not a genuine party.
From this decision of the Income-Tax Officer and the Appellate Assistant Commissioner, Vasantsen Dwarkadas appealed to the Tribunal and the appeal was on two grounds. One was that the Income-Tax Officer and the Appellate Assistant Commissioner were in error when they held that Vasantsen Dwarkadas was not a separate entity entitled to be assessed separately from the assessee firm, and the other was with regard to the sum of Rs. 16,429/-.
The Tribunal confirmed the decision of the Income-Tax Officer and the Appellate Assistant Commissioner and held that Vasantsen Dwarkadas was a branch of the assessee firm and not a separate assessable entity. One should have thought that having come to that conclusion the Tribunal would not have gone into the question whether the sum of Rs. 16,429/- was properly included in the assessment of Vasantsen Dwarkadas because this question would directly arise in the assessment of the assessee firm, and if Vasantsen Dwarkadas was not an independent assessable entity it could not maintain any appeal as to the merits of its assessment and quite clearly the Tribunal should not have gone into the question of Rs. 16,429/- and should have reserved its decision till the appeal was preferred by the assessee firm in respect of this sum of Rs. 16,429/-.
Unfortunately, and that is the cause of the whole trouble, the Tribunal expressed its opinion with regard to the sum of Rs. 16,429/- and held that the addition of this amount in the assessment of Vasantsen Dwarkadas was not justified. It pointed out that the Income-Tax Officer called upon the assesses to produce before him the proprietors of N. Parekh & Co. with their books of account, the assessee could not comply with that requisition, and the Tribunal seemed to have excused the conduct of the assessee on the ground that it was difficult for the assessee to comply with this requisition after so many years.
It also pointed out that N. Parekh & Co. was paid by cheques and also moneys were received from N. Parekh & Co. by cheques and it therefore came to the conclusion that there was nothing improbable if the assessee was not able to trace N. Parekh & Co. On this line of reasoning it directed that Rs. 16,429/- should be deleted from the assessment of Vasantsen Dwarkadas.
Having come to this conclusion the Tribunal itself realised that what it had done was really not quite proper and went on to observe:
“We would however point out that this question should normally arise when the firm Purshottam Laxmidas appeals. We understand that the
firm Purshottam Laxmidas has appealed but on account of some unavoidable circumstances the appeals of Furshottam Laxmidas could not be heard along with the present appeals. For the purpose of statistics, we allow appeal No. 7388 in part.” (This was the appeal which dealt with Rs. 16,429/-).
With respect to the Tribunal, it is difficult to understand, if the Tribunal had no jurisdiction to entertain the appeal of vasantsen Dwarkadas on the question of inclusion of Rs. 16,429/- in its assessment, Vasantsen Dwarkadas on its own finding not being an assessable entity, how for the purpose of statistics an appeal which is not maintainable could be maintained and a decision given on merits.
It is unfortunate that the Tribunal did not realise that difficulties might arise when it considered the appeal of Purshottam Laxmidas, the assessee, that more materials might be placed be-Sore it, and that it may be compelled to come to a contrary conclusion when it considered the case of the assessee. This is precisely what happened when the appeal of Purshottam Laxmidas, the as-sessee. went before the Tribunal.
In its order in the appeal of the assessee for the assessment year 1944-45 the Tribunal was impressed by the fact that N. Parekh & Co. was a very important constituent of the assessee company and the figures which it had not considered in the appeal of Vasantsen pwarkarias were strikingly brought before the Tribunal.
The Tribunal points out in its order that the total sales of Purshottam Laxmidas was Rs. 23,92,567/- and out of this goods worth Rs. 8,04,363/-were sold to N. Parekh & Co., and therefore it really became clear that if N. Parekh & Co. was an important constituent it coulci not understand why the assessee could not help the Income-Tax Department in tracing N. Parekh & Co. It also referred to the fact that N. Parekh & Co. had sold the same goods purchased from the assessee to Va-santsen Dwarkadas & also that the Income-Tax Officer had referred to the evidence relating to the godown books containing certain erasures.
2. Then the Tribunal launched upon an Inquiry of its own and it made inquiries from Dev-kran Nanjee Banking Co. Ltd. with regard to N. Parekh & Co. and it found that N. Parekh & Co. had an account with the Bank which had become dormant in 1947, and we agree with Mr. Kolah–and there is a great deal of justification in his grievance–that if they did inquire about the account of N. Parekh & Co. with the Devakaran Nan-jee Banking Co. the Tribunal might have gone a step further and found out what was the position with regard to the banking account of N. Parekh & Co. during the relevant years with which it was concerned in assessing the assessee.
The assessee also produced a letter from Chi-kal Market Co. Ltd. which went to show that there was a party by the name of N. Parekh & Co trading in piece goods in the name and style of N. Parekh & Co. in Sanivat Year 1999 and 2000, which are the relevant years with which we are concerned. Then rather pathetically the Tribunal points out in its order that when they considered the appeal of Vasantsen Dwarkadas they were not sure that the question whether N. Parekh & Co. was a genuine party or not would again have to be considered. They also said that they thought that the addition of Rs. 16,429/- was the only amount they were concerned with and therefore the matter was at an end.
But when the assessment of Purshottam Laxmidas came before them they found that large amounts were Involved in which Purshottam Lax-
midas was alleged to have done business with N. Parekh & Co., and in the assessment year 1844-45 two additions have been made in the assessment of N. Parekh & Co. which the Tribunal had to consider, one was the addition of Rs. 16,429/- which was in respect of the transaction of Vasantsen Dwarkadas with N. Parekh & Co. and the other was the addition with regard to the transactions of Purshottam Laxmidas with N. Parekh & Co. which had not been considered by the Tribunal at all.
Quite frankly and honestly the Tribunal confessed that they were in error and the Tribunal has shown the courage of stating that they would rather be inconsistent and give a correct judgment rather than be consistent and give an erroneous decision. It is on this order that the assessee’ contends that there was no evidence to justify the finding given by the Tribunal in this order that N. Parekh & Co. was not a genuine party, and in effect reversing its decision given earlier in the assessment of Vasantsen Dwarkadas.
3. As we have often pointed out, when a re-j ference is made with regard to a question of fact, the reference must not be looked upon as an appeal against the decision of the Tribunal. The temptation on the part of the assessee is almost irresistible to point out to us how the Tribunal has gone in coming to a particular decision. But we are not concerned in the slightest degree with the merits of the decision arrived at by the Tribunal.
All that we are concerned with is whether the finding of fact is justified by any relevant or ma-terial evidence. If there is no evidence at all, then undoubtedly the finding of fact is not a finding at all and it would be open to us to set aside that finding. But if the Tribunal can draw our attention to any relevant evidence on which the finding is based, we must accept that finding as binding upon us and not go further and inquire whether there is a larger volume of evidence on the other side or that another Tribunal of fact might have come to a different conclusion.
4. There is one fact on which reliance has been placed by the Tribunal as set out in the statement of the case which strikes us as sufficient in itself to justify the decision given by the Tribunal and the finding is that in the sales made by the assesses to N. Parekh & Co. the sales were made at a lesser price than the market price and that in many cases the assessee company having sold goods to N. Parekh & Co. at a lesser price than the market price, N. Parekh & Co. in its turn sold these very goods to Vasantsen Dwarkadas.
The importance and significance of this transaction will be realised. If Vasantsen Dwarkadas is no other than the assessee himself, the assessee by putting up a dummy like N. Parekh & Co. passed on the profits to N. Parekh & Co. and bought the goods himself at a higher rate, thus depriving the Income-Tax Department of the right to levy a tax on profits which had really been earned by the assessee.
Mr. Kolah says that this fact is based on surmise, speculation and guesses and there is no basis for this finding. That is not correct. The Tribunal has accepted this fact to which reference has Just been made from the assessment order of the Income-Tax Officer and the Income-Tax Officer who looked at the books of account of the assessee and who considered the various materials points out–and this is in the assessment order of 1944-45–that it has been noticed that particularly in the sales effected to Messrs. N. Farekh & Co., loss is shown in various transactions, the sale price being less than the market rates prevailing on the selling dates as seen from the sales effected to other merchants.
The Income-Tax Officer also noticed that the major portion of the goods sold by Puvshottam Lawnidas to N. Parekh & Co. was in turn purchased from N. Parekh & Co. by Vasantsen Dwarkadas. The same is the view of the Income-Tax Officer with regard to the assessment of 1945-46.
5. The Tribunal has also attached importance to the observation of the Income-Tax Officer which is again based on fact that there are some tell-tale erasures in the godown books of Vasantsen Dwar-kadas. What Mr. Kolah quarrels with ig the inference drawn by the Income-Tax Officer, which inference is accepted by the Tribunal from the fact that these goods were sold by the assessee company to N. Parekh & Co. at a price lower than the market price, and the inference drawn by the Income-Tax Officer is this:
“Messrs. N. Parekh & Co. must have in their turn sold these very goods presumably to the customers of the assessee at a considerable profit and in these circumstances, the loss of Rs. 2,3297-shown on the sales effected to Messrs. N. Parekh & Co. is disallowed and in addition an estimates margin of gross profit at 10 per cent on the purchases of Rs. 1,41,003/- passed over to Messrs N, Parekh & Co. for Rs. 1,38,674/- is added to the income determined above.”
Therefore, what the Income-Tax Officer had before him was a continuous and consistent course of underselling by the assessee to N. Parekh & Co. This underselling shows that a loss has been caused to the assesses and the Income-Tax Officer draws the inference that N. Parekh & Co. is not a genuine party, that the profit was really made by N. Parekh & Co. which was not disclosed by the assessee, and therefore he transfers the profits made by N. Parekh & Co. to the assessee company again on the basis that N. Parekh & Co. was not a genuine party.
We do not. see any reason why either the Income-Tax Officer or the Tribunal is not entitled to draw inferences from proved facts. The work of a fact finding Court or Tribunal would be im-ipossible if it was suggested that it was not open jto such a Court or Tritavmal to draw any inferences from proved facts. Every day Courts all over the country which are deciding cases are drawing inferences in order to come to a particular conclusion in favour of one party or the other.
The facts actually proved may be few, but from those facts certain necessary irresistible conclusions would follow. The only grievance that an assessee can have is if an inference is drawn which ia Incapable of being drawn from a particular proved fact, but it cannot be said that the Income-Tax Officer was drawing upon his imagination in drawing this inference.
6. Mr. Kolah has very strongly relied on a judgment of the Supreme Court in Dhirajlal Gir-dharlal v. Commr. of Income-tax, . As this judgment has often been referred to when applications are made to us for compelling the Income-Tax Tribunal to make a reference perhaps it would just be as well if we were make a few observations about this judgment.
What is seriously suggested by Mr. Kolah is that if the Tribunal considers evidence in order to come to a particular conclusion and even if a. part of that evidence is irrelevant, the decision arrived at is bad even though there may be sufficient evidence left on the record which would justify that finding.’ With respect to the Supreme Court, we have no doubt that the Supreme Court never came to that, conclusion, nor did it lay down any such law,
In order to understand the observations of any Court, and even the highest Court in the land, one must look at the facts which led the Court to make that particular obseivation, and in this particular case what had happened was that an application was made to us by the assessee to compel the Tribunal to make a reference and we took the view that as the finding of the Tribunal was a finding of fact, no question of law arose. The Supreme Court, with respect, differed from the view that we took and held that a question of law did arise and the Tribunal should have been asked to refer a question of law. It is in that connection that the Supreme Court observed that
“when a Court of fact acts on material, partly relevant and partly irrelevant, 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 finding. Such a finding is vitiated because of the use of inadmissible material and thereby an issue of law arises.” Therefore, now the law as laid down by the Supreme Court is that if we are satisfied by the assessee that in coming to any particular conclusion the Tribunal has not merely considered relevant evidence but also irrelevant evidence, we must hold that a question of law arises and we must direct the Tribunal to refer a question of law. But, with respect, the Supreme Court has not decided that because a question of law arises and because the Tribunal has considered irrelevant evidence, therefore necessarily the question of law must be decided in favour of the assessee.
The question will still remain and will have to be decided by the High Court, when the reference comes before it, whether there was sufficient relevant evidence to justify the decision arrived at by the Tribunal.
Mr. Kolah in referring to the passage of the learned Chief Justice at page 273 that the finding is vitiated because of the use of inadmissible material, overlooks the important qualification made by the learned Chief Justice and that is “and thereby an issue of law arises.” So the fact that a finding is vitiated by inadmissible evidence is only considered by the learned Chief Justice for the purpose of deciding that an issue of law arises whenever the assessee satisfies the High Court that there is inadmissible evidence which has been considered in order to arrive at the finding of fact.
7. In Our opinion, in this case there is no Inadmissible evidence which the Tribunal has taken into consideration. If the Tribunal has considered probabilities and if it has drawn inferences from proved facts, the Tribunal was perfectly Justified in doing so.
But even assuming Mr. Kolah is right and there are factors which the Tribunal might not have taken into consideration, even so ultimately on this reference it is for us to consider whether there was evidence on which the Tribunal could have held that N. Parekh & Co. was not a genuine party. In our opinion, there was sufficient evidence before the Tribunal to justify this finding of fact, and therefore we answer the question submitted to us in the affirmative. The assessee to pay the costs.
8. There is one point of procedure to which we must refer. As we have pointed out earlier, the Tribunal ascertained from the Devkaran Nan-jec Banking Co. whether there was a customer oC the Bank by the name of N. Parekh & Co. and it received letters from the Bank with regard to this query. It also received a letter from the Chikal Market Co., Ltd. to which reference has been made.
The assessee quite legitimately asked the Tribunal to include these letters in the statement of
the case. For some reason which we find it difficult to understand the Tribunal having referred to these facts in the statement of the case, refused to annex these documents. The proper procedure for the assessee to have followed, if it attached importance to these documents, was, as we nave already pointed out on several occasions before, to have taken out a notice of motion for a supplemental statement of the case, and as a matter of fact such a notice of motion has been taken out by the assessee.
But in anticipation of an order on that notice of motion as it were, what the assessee has done is that it has incorporated these two documents in the paper book printed by the assessee for this Court. It is hardly necessary to say that this is entirely a wrong practice- The paper book can only consist of the statement of the case and the documents which the Tribunal considers should be incorporated in the paper book. An assessee has no right to incorporate in the paper book a document with regard to which the Tribunal refuses to give its permission for being included in the paper book.
Any grievance that the assesses had could have been ventilated here by a different procedure and not by the procedure of anticipating a decision on the notice of motion and incorporating those documents in the paper book. Mr. Kolah says that the solicitors instructing him did not intend to do anything which was improper. We certainly accept that explanation, but as it is a matter of procedure we thought it our duty to point out that the procedure followed was not proper.
9. The notice of motion taken out by the assessee, to which reference has been made, contains a rather unusual prayer that the statement of the case, which according to the assessee is irrelevant and wrong, should be omitted and another statement of the cases which for our edification is included in the paper book, should be substituted in its place.
We know of motions which suggest to us or which require of us that additional materials should be submitted to us by the Tribunal, but it is rather unusual for a notice of motion to ask us to ask the Tribunal to substitute an entirely new statement of the case as suggested by the assessee, and again it is unfortunate that the statement of the case should have been incorporated in the paper book.
10. Notice of motion dismissed with costs.
11. Order accordingly.