JUDGMENT
DIXIT C.J. – This reference by the Income-tax Appellate Tribunal has been made consequent to a direction made by this court on an application under section 66(2) of the Indian Income-tax Act, 1922, of the Commissioner of Income-tax Madhya Pradesh, Nagpur and Bhandara. The question propounded are :
“(1) Whether there is any evidence to support the finding of the Tribunal that the sum of Rs. 50,000 was not credited in cash by the assessee on 24th March, 1954, with Ramchandra & Sons, the bankers and that the relevant entry in the pass book was merely a transfer entry ?
(2) Whether the material, if any, on the basis of which the Tribunal came to this conclusion could be legally taken into consideration ?”
The assessee is a Hindus undivided family carrying on business as military contractors in show. In the income-tax return for the assessment year 1554-55, a total income of Rs. 3,537-12-0 for the previous year ending on 31st March, 1954, was shown by the assessee, which did not maintain any accounts. When a notice under section 23(2) of the Act was issued to Babulal Nim, the karta of the Hindu undivided family, he produced the pass book of the account of the family with Ramchandra & Sons, show, a local banker. On a scrutiny of the pass book, it was revealed that on 24th March, 1954, a cash deposits of Rs. 50,000 was made in the accounts of the family and on 3rd April, 1954, there was a withdrawal of Rs. 50,000. The Income-tax Officer, therefore, called upon the assessee to explain the source of this deposit. In reply, the assessee field a statement saying that the amount of Rs. 50,000 consisted partly of past saving and partly of a legacy left by Puranlal, an ancestor of the family, and that the deposit was made in the bank for the purpose of obtaining a solvency certificate which was needed for the purpose of his registration as a contractor with the Western Railway and the Madhya Bharat Public Works Department. The statement was repeated in the examination of Babulal Aim by the Income-tax Officer. Babulal added that he and other members of the joint family did not believe in keeping large amounts in any bank. It was admitted that an amount of Rs. 50,000 was withdrawn on 3rd April, 1954. The Income-tax Officer was not satisfied with this explanation. On the material before him, he came to the conclusion that the assessee had not been able to rove that Puranlal left any legacy or that the assessees savings in the previous years were large enough for the accumulation of a substantial amount of Rs. 50,000. Accordingly, the Income-tax Officer included in the assessees profits the amount of Rs. 50,000 income from “undisclosed sources”. The assessee then preferred an appeal before the Appellate Assistant Commissioner, who agreeing with the reasoning and conclusion of the Income-tax Office, dismissed the appeal.
In second appeal before the Tribunal, the assessee contended for the first time that he did not deposit on 24th March, 1954, or at any time thereabout Rs. 50,000 with the banker, Ramchandra & Sons, nor did he receive any payment of Rs. 50,000 on 3rd April, 1954; and that the banker made the credit and debit entries in the pass book just to enable him to furnish a solvency certificate that was required by the M. E. S. authorities for his recognition as a contractor. It appears from the order dated the 1st April, 1959, passed by the Tribunal on the assessees appeal that when this contention was raised the Tribunal put some questions to the assessee and called upon the assessee to file an affidavit which he did. In the affidavit (page 24 of paper-book). Which was filed by the assessee before the Tribunal, it was, inter alia, stated :
“In March 1954, the M. E. S. authorities required me to produce a solvency certificate recognising me as a contract. I requested my banker, the said Rai Sahib Ramchandra & Son, to issue a certificate of solvency. For showing solvency the said banker credited on March 24, 1954, Rs. 50,000. I did not deposit on that date or at any time thereabout Rs. 50,000 with the said banker. The said banker debited on April 3, 1954, Rs. 50,000 to my account without making any repayment to me.
I did not deposit with the banker Rs. 50,000 on March 24, 1954 or withdraw or receive Rs. 50,000 from the said banker, Rai Sahib Ramchandra & Son.”
No record of the questions put by the Tribunal to the assessee, Babulal Nim, and the answers given by him was kept. It appears that before the Tribunal the assessee produced for the first time a copy of an entry in the bankers ledger-book indicating that Rs. 50,000 had been advanced by Ramchandra & Sons, bankers, to the assessee on 24th March, 1954 as a loan carrying interest at the rate of one per cent. Per month on the basis of a promissory note, and that the said amount was repaid by a cash deposit of Rs. 50,000 on 3rd April, 1954. This entry did not give any indication as to whether the interest charged on Rs. 50,000 was ever paid by the assessee and if so, when. The Tribunal found the assessees explanation satisfactory and accordingly selected the amount of Rs. 50,000 from the profits of the assessee. Thereafter, the Commissioner of Income-tax moved the Tribunal to state the case to this court and refer the following question :
“Whether the Tribunal was justified in relying on the affidavit of the assessee without giving the Income-tax Officer an opportunity to rebut the evidence ?”
While rejecting this application, the Tribunal said that the Commissioner had raised a “peculiar question” and observed :
“The decision of the Tribunal has been given on the basis of the bank account. There was no question of giving the department a chance to rebut the affidavit. The assessee was called upon to file an affidavit with at view to show his bona files. There appears to be some fallacy in the mind of the department as to the decision of the Tribunal. It is after examining the books of the private bankers that the Tribunal came to the conclusion that the entry in question was only a transfer entry. A sum of Rs. 50,000 would not disappear into the air in the hands of a person like that of the assessee. Whether the assessee has explained a certain in his bank account or not is, in our opinion, a pure finding of fact.”
The department them presented an application in this court under section 66(2) and the Tribunal was asked by this court to state the case of the assessee and refer the two questions reproduced earlier.
The short an simple point raised by this reference for decision is really whether the new statement explaining the credit entry of Rs. 50,000 on the pass book which the assessee gave for the first time before the tribunal could legally be taken into consideration. If the Tribunal was within its power in admitting that statement, then the finding of the Tribunal on the acceptance of that settlement that the assessee did not deposit Rs. 50,000 in the bank on 24th March, 1954, and that the bank made the credit and debit entire on 24th March, 1954, and 3rd April, 1954, us to enable the assessee to obtain a solvency certificate would no doubt be based on some material. The case would then be governed by the decision of the Supreme Court in Gouri Prasad Bagaria V. Commissioner of Income-tax, where it has been said :
“Where the assessees statement is believed, there is obviously material on which the finding can be given…. if the finding was based upon a statement which was good material on which it could be based, no question of law really arose.”
The present case, however, differs from the case of Gouri Prasad. The distinction is that in Gouri Prasads case the assessees statement explaining a credit entry was throughout the proceedings before the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal one and the same. It was rejected by the Income-tax Officer and the Appellate Assistant Commissioner but accepted by the Tribunal. But here there was a voice face on the part of the assessee when the matter came up before the Tribunal and he offered an explanation which had not been even remotely suggested before the Income-tax officer or the Appellate Assistant Commissioner the assessee, while admitting that an amount of Rs. 50,000 was deposited on 24th March, 1954, and withdrawn on 3rd April, 1954, gave the explanation that the amount formed past savings. It was in the course of the argument before the Tribunal that the assessee for the first time came out with the statement that there was no deposit or withdrawal of Rs. 50,000 on the above dates and the entries made by the bank in the pass book were mere paper entries just to enable him to obtain a solvency certificate. In the first paragraph of the order passed by the Tribunal on 1st April, 1959, disposing of the assessees second appeal, it has been observed :
“The M. E. S. required the assessee arranged with his bankers (R. S. Ramchandra and Sons) to show a substantial credit in his account. A deposit of Rs, 50,000 was, therefore, shown to have been made on 24-3-1954 and withdrawn on 3-4-1954. All other entire in this account are very small. This explanation of the assessee was rejected by the Income-tax Officer.”
These observations give the impression that the explanation which the assessee gave before the Tribunal was also tendered before the Income-tax Officer and the Appellate Assistant Commission do not at all deal with any such explanation of the assessee that in fact there was no deposit or withdrawal of Rs. 50,000 on the aforesaid two dates. It is inconceivable that the Income-tax Officer and the Appellate Assistant Commissioner would have failed to consider this explanation if it had been given before them. It is noteworthy that the objection which the assessee raised in the memorandum of appeal filed before the Appellate Assistant Commissioner was that the Income-tax Officer had not appreciated the fact that the amount of Rs. 50,000 represented a part of the capital of the assessee. The ground ran thus :
“That the inclusion of Rs. 50,000 in the total income from contracts is illegal, arbitrary and bad in law an therefore may be excluded. The learned income-tax Officer have in fact not appreciated the fact that the said amount represented a part of the capital of the petitioners.”
So also the grounds of appeal before the Tribunal contained a reaffirmation of the stand that Rs. 50,000 were deposited in the bank and that the explanation offered by the assessee before the Income-tax Officer was reasonable and should have been accepted. The grounds of appeal presented before the Tribunal were :
“1. Was there any material on record to find that the cash credit of Rs. 50,000 was the assessees income from other sources ?
2. Whether, in absence of any material on record indicating that the assessee had some other source of income than that disclosed by it, the Income-tax Officer was legally justified in holding that the money in question was income from some undisclosed sources ?
3. Whether the explanation regarding the source of money furnished by the assessee could reasonably be accepted ?”
It is thus abundantly plain that the explanation which the assessee gave before the Tribunal during the course of the hearing of the appeal was altogether a new one and was sought to be supported on material which had not been produced before the income-tax officer or the Appellate Assistant Commissioner.
It is no doubt in the discretion of the Appellate Tribunal to receive and admit additional evidence in an appeal before it. But the power strictly limited by rule 29 of the Appellate Tribunal Rules, 1946. That rule provides that :
“The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass order or for any other substantial cause, or if the Income-tax Office has decided the case without giving a sufficient opportunity the assessee to add evidence either on points specified by his or not specified by him the Tribunal may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced.”
It is clear from this rule that the admissibility of additional evidence under this rule depends upon whether or not the Tribunal requires the evidence to enable it to pass orders or for any other substantial cause, or if the Income-tax Officer has decided the case without giving a sufficient opportunity to the assessee to adduce evidence on points specified by him or not specified by him. The rule does not enable the assessee or the department to tender fresh evidence to support a new point or make out a new case. It will be noticed that the rule is somewhat analogous to Order XLI, rule 27, Civil Procedure Code, under which an appellate Civil concerned admit additional evidence. Now, there is no doubt as to the scope of Order XLI, rule 27, Civil Procedure Code, and it is well settled by Arjan Singh v. Kartar Singh and other decisions of the Supreme Court and the privy Council that the legitimate occasion for the application of rule 27 is when on examining the evidence as it stands some inherent lacuna or defect becomes apparent, not where a discovery is made outside the court, of fresh evidence and an application made to import it, that the trustee is whether the appellate court is able to pronounce decision on the material before it without taking into consideration the additional evidence sought to be adduced and that the requirement must be the requirement must be the requirement of the court. In Arjan Singh v. Kartar Singh it was pointed out that the discretion given by Order XLI, rule 27, Civil Procedure Code, to the appellate court to receive additional evidence is not an arbitrary one, but is a judicial one circumscribed by the limitations given in that rule, and that if additional evidence is allowed to be adduced contrary to the principles governing the reception of such evidence, it would be a case of improper exercise of discretion and the additional evidence so brought on record must be ignored and the case decided as if it is non-existent. Here the statement which the assessee gave before the Tribunal and the affidavit which he filed were no for the reason that the Tribunal found itself unable to decide the appeal on the material before it. The assessee did not even pray for being allowed to file a fresh statement and to produce evidence to establish it on the ground that the Income-tax Officer had decide the case without giving him sufficient opportunity to adduce evidence. What happened was that the assessee urged before the Tribunal for the first time that in fact no deposit of Rs. 50,000 was made on 24th March, 1954, and there was no withdrawal of that amount on 3rd April, 1954 and the credit and debit entries in the pass book were made by the bankers just to oblige him to obtain a solvency certificate. The Tribunal then questioned the assessee and directed him to file an affidavit. It is interesting to note that in the reply which the assessee filed opposing the departments application under section 66(1) (page 27 of the paper-book), the assessee has said that when during the hearing of the appeal the Tribunal questioned him about the statement given by him before the Income-tax Officer, he replied that that it had been obtained under duress and threat and influence and was not voluntary and, therefore, the Tribunal examined him at length and asked him to file an affidavit which he did. It is thus clear that the Tribunal allowed the assessee to raise a new point and make out an altogether new case and directed him to file an affidavit to support it. It was within the assessees knowledge whether or not a deposit of Rs. 50,000 was in fact made in the bank on 24th March, 1954, and his failure to state before the Income-tax Officer the no such deposit was ever made in the bank and that the bank made fictitious and debit entries just to help him to get the solvency certificate and to produce evidence it establish it was to get the entirely due to this own fault or negligence. Even if the assessee forget this very material fact before the Income-tax officer, he could have raised it at least before the Appellate Commissioner. But that was not done. On the other hand, the assessee adhered to his statement that Rs. 50,000 represented a part of his capital. No suggestion was made by the assessee before the Appellate Assistant Commissioner that the statement which he gave before the Income-tax officer was under duress or threat or influence. Even in the grounds of appeal before the Tribunal there was no mention whatsoever of the version later put forward at the time of the hearing of the appeal before the Tribunal or any suggestion that his statement before the Income-tax officer was extracted from him under duress or threat. In such a situation there was no justification for the Tribunal for entertaining the new case which was put forward by the assessee for the first time before it and for directing him to file an affidavit to support it. The affidavit which the assessee field and the material which he produced before the Tribunal constituted additional evidence which the Tribunal admitted contrary to rule 29 of the Appellate Tribunal Rules, 1946. The evidence must be excluded from consideration on the authority of the decision of the Supreme Court in Arjan Singh v. Kartar Singh. On that exclusion there remains no material to support the finding of the Tribunal that a sum of Rs. 50,000 was not credited in cash by the assessee on 24th March, 1954, with Ramchandra and sons, the bankers. It must be added that the ledger entry at page 16 of the paper-book shoeing an advance of Rs. 50,000 by Ramchandra and sons, bankers to the assessee, on the basis of a promissory note does not seem to have been relied upon by the Tribunal. There is no reference to it in any order of the Tribunal and the assessee himself did not refer to it in the affidavit which he field before the Tribunal and say that the deposited of Rs. 50,000 on 24th March, 1954, was out of this money advanced by the bankers.
6. In its order dated the 1st April, 1959, the Tribunal has observed :
“We agree with the departmental representative that the whole mischief has been caused by the assessee not coming forward with the correct explanation at the original stage.”
It is not known what the departmental representative actually said. But we are unable to regard the above statement in the Tribunals order as incorporating am admission on behalf of the department that the assessee had a right to make out a new case before the Tribunal or that the new explanation given by him about the credit entry was satisfactory and should be accepted. If any such admission had been made the department would not have moved the tribunal under section 66 (I) and the Tribunal should have made some reference to this admission while rejecting the application under section 66(I).
For all these reasons, our answers to the questions referred are that there is no evidence to support the finding of the Tribunal that the sum of Rs. 50,000 was not credited in cash by the assessee on 24th March, 1954, with Ramchandra and Sons, the bankers, and that the affidavit which the assessee filed before the Tribunal could not legally be taken into consideration. The department shall have the costs of this reference. Counsels fee is fixed at Rs. 200.
Order accordingly.
