JUDGMENT
K.T. Desai, C.J.
1. The assessee, Messrs. Dalichand Motichand, is an unregistered firm. The assessment year with which we are concerned is the year 1947-48, the accounting year being the year 1946-47. At the relevant time, the assessee carried on business as merchants and commission agents at Dhoraji in the former Native State of Gondal in Kathiawar. The assessee entered into a contract for the supply of certain quantity of hemp nets lying at Bhavnagar to Messrs. Chimanlal Sarabhai & Co. The contract provided for the sale of the entire quantity of hemp nets weighing 558 tons and 10 cwt. at the rate of Rs. 320 per ton. The goods were then lying at various presses of Bhavnagar and were to be delivered to the purchaser after they were pressed in bales. A term of the contract provided that the payment in respect of the goods should be made by the purchaser to the assessee in Kathiawar within one month of the taking of delivery of the goods. The goods were delivered to the purchaser, Messrs. Chimanlal Sarabhai & Co. at Bhavnagar, and a sum of Rs. 1,78,720, being the purchase price of the goods, was paid to the assessee. This sum of Rs. 1,78,720 was paid in the manner following. A bank draft for Rs. 70,000 was delivered to Nanchand Motichand, a partner in the firm of the assessee, at Dhoraji by Sarabhai Sakalchand, a partner in the firm of Messrs. Chimanlal Sarabhai & Co. on 16th December, 1946. There is no dispute in connection with this amount and this amount has been considered to have been paid at Dhoraji. A sum of Rs. 30,000 was paid in cash by Sarabhai Sakalchand to Nanchand Motichand, on behalf of the assessee firm, on 16th December, 1946, along with the delivery of the bank draft for Rs. 70,000. In regard to this sum of Rs. 30,000 also there is now no dispute that it was paid at Dhoraji and no question arises in connection with this payment. A further sum of Rs. 40,000 was paid on 22nd January, 1947, and the balance of Rs. 38,720 was paid on 25th February, 1947. The question that arose for consideration was whether these two sums of Rs. 40,000 and Rs. 38,720 were paid at Ahmedabad, the place where the purchaser was carrying on business, or were paid at Dhoraji. The Income-tax officer took the view that payments were made at Ahmedabad and held that the profits attributable to them were assessable to tax. The matter was carried further before the Appellate Assistant Commissioner who took the same view as the Income-tax Officer and held that the sums of Rs. 40,000 and Rs. 38,720 were paid at Ahmedabad and that the profits attributable to these sums were, therefore, assessable to tax. An appeal was preferred before the Income-tax Appellate Tribunal but the same proved unsuccessful in so far as the sum of Rs. 40,000 and Rs. 38,720 were concerned, for the Tribunal also held these sums to have been received at Ahmedabad and the profits attributable to them to be assessable to tax. These proceedings, it may be mentioned, arose as a result of a notice issued against the assessee under section 34(1)(a) of the Income-tax Act, 1922. Apart from the contentions on the merits relating to the sums of Rs. 40,000 and Rs. 38,720 the assessee contended that the Income-tax Officer, Ward D, Rajkot, who issued the notice under section 34(1)(a) of the Income-tax Act, 1922, had no jurisdiction to make the assessment. The assessee also contended that the assessment was not property made under section 34(1)(a) of the Income-tax Act, 1922. These two contentions were also negatived by the Tribunal. The assessee therefore required the Tribunal to refer three questions of law arising out of its decision for determination by the court under section 66(1) of the Income-tax Act, 1922, but the Tribunal raised only two questions of law which, in its opinion, arose from the order and referred the same for the decision of the court, the two questions being :
“1. Whether the Income-tax Officer, Ward D, Rajkot, had proper jurisdiction under notification No. 9 of February 13, 1956, to make the assessment ?
2. Whether on the facts and in the circumstances of the case the assessment was properly made under section 34(1)(a) of the Income-tax Act ?”
2. The assessee being aggrieved by the decision of the Tribunal not to refer to the court the question relating to the aforesaid payments of Rs. 40,000 and Rs. 38,720 aggregating to Rs. 78,720 took out a notice of motion for a direction that the question whether there was any evidence to support the Tribunal’s finding that the sum of Rs. 78,720 was actually received in British India be referred to the court. An order was made on the notice of motion that the reference be referred back to the Tribunal with a direction to draw up the necessary statement of case referring to the court the following question of law :
“Whether there was any evidence to support the Tribunal’s finding that the sum of Rs, 78,720 was actually received in British India ?”
3. It was further ordered that the costs of the notice of motion and of the order be costs in the reference. Reference No. 3 of 1960 is the original reference in connection with the two questions referred to by us above. Reference No. 8 of 1961 is the reference relating to the question which the Tribunal was required to refer to the court for its decision.
4. It may be mentioned at the outset that at the hearing of the reference Mr. D.D. Shah, the learned advocate for the assessee, did not press the two questions which were referred in Reference No. 3 of 1960 and it is therefore not necessary to determine the same. The only question pressed by Mr. D.D. Shah on behalf of the assessee was the question that has been referred to us in Reference No. 8 of 1961. It will be necessary for us in considering this question to examine the material that was before the Tribunal in connection with these two payments of Rs. 40,000 and Rs. 38,720 and incidentally, it will also be necessary to consider the material relating to the payments of the earlier sums of Rs. 70,000 and Rs. 30,000 in respect whereof the Tribunal came to the conclusion that the payments had been made at Dhoraji.
5. The first piece of evidence that we must consider is the contract between the assessee and the purchaser, Messrs. Chimanlal Sarabhai & Co. Under the terms of the contract, it is clear that payment in respect of the goods had to be made in Kathiawar within one month of the taking of delivery of the goods. Payment must therefore be presumed to have been made in Kathiawar in accordance with the terms of the contract unless the contrary is shown by the department.
6. Turning next to the payment of the sums of Rs. 70,000 and Rs. 30,000 we find a receipt produced by Messrs. Chimanlal Sarabhai & Co. It is a receipt passed by the assessee acknowledging payment of the draft for Rs. 70,000 and a cash sum of Rs. 30,000. It is made out at Dhoraji and is dated December 16, 1946, and it has been signed on behalf of the assessee by Nanchand, a partner of the assessee. It is in the form of a letter addressed by the assessee to Messrs. Chimanlal Sarabhai & Co. A translation of the receipt, which is annexed as annexure to the further statement of the case, runs as under :
“Shri Sarabhai on your behalf has given to us to-day the following amounts. So be it noted that the said amount has been credited to your account.
Rs. 70,000 A draft No. 25,240 dated 12-12-46 on Bank of
India, Rajkot.
Rs. 30,000 Cash.
The total amount of Rs. 1,00,000 has been credited to your account which may be noted by you".
In connection with these two sums of Rs. 70,000 and Rs. 30,000 there, are entries in the books of Messrs. Chimanlal Sarabhai & Co. A translation of the account of the assessee in the books of Messrs. Chimanlal Sarabhai & Co. appears as annexure G to the further statement of the case. The entries run as under :
Cr. Dr.
70,000-00 To Magsar Vad. 4. (Thursday dated 12-12-46) 70,000
being cash paid in the local station road branch of
Bank of India for purchase of draft in your name on
Bank of India. Rajkot, No. 25/240 dated 12-12-46
brought and sent.
30,000-00 Magsar Vad. 6 (Saturday dated 14-12-46, 30,000
cash : Haste Sha Nanchand Motichand.
7. Sarabhai Sakalchand was examined under section 37 of the Income-tax Act. He deposed that the sum of Rs. 70,000 was paid by draft and the sum of Rs. 30,000 by cash, and that these payments were made by him to the assessee at Dhoraji and that a sum of Rs. 50-8-0, being travel expenses incurred by him for going to Dhoraji, had been debited in his books of account. On this evidence, the Tribunal came to the conclusion that the aforesaid two sums had been paid at Dhoraji.
8. We shall now examine the evidence in connection with the subsequent payments of Rs. 40,000 and Rs. 38,720. As regards the sum of Rs. 40,000 there is a receipt passed by Nanchand for the assessee. It is dated 22nd January, 1947, at Dhoraji. A translation of the receipt appears as part of annexure “E” and is in the terms following :
“Dhoraji dated 22-1-47.
M/s. Chimanlal Sarabhai & Co., Ahmedabad.
We have received in cash Rs. 40,000 (in words rupees forty thousand) sent by you. Be it noted that the same has been credited to your account.
We have also been given the original receipt in Gujarati and the Gujarati words are as follows :
* * *
8. It is clear from this receipt that Rs. 40,000 had been sent by Messrs. Chimanlal Sarabhai & Co. to the assessee at Dhoraji. There is an entry in connection with this payment appearing in the account of the assessee in the books of Messrs. Chimanlal Sarabhai & Co. A translation of that entry as appearing in annexure “G” is as under :
"Cr. Dr.
40,000-0-0
Posh Ved. 30 (Wednesday dated 22-1-47)
40,000 cash. Haste Sha Nanchand
Motichand."
Sarabhai Sakalchand, who was examined on 12th February, 1957, stated in connection with this payment of Rs. 40,000 as follows :
"40,000 by cash sent to Dhoraji through somebody. I don't remember who."
9. He was asked whether it was not natural that whenever any person was sent for making payments the name of such person would appear in the narration in the cash book, to which he replied that there was no such custom. He was further asked whether he was in the habit of sending cash to other places through his representative and he replied that there were no other cases of sending cash outside. There were no entries in the books of account of Chimanlal Sarabhai & Co., in connection with any travelling expenses paid to any person for taking this sum of money from Ahmedabad to Dhoraji, and in the course of his evidence, he stated that the amount was sent through a person known to the firm as reliable, that person was not sent specifically for making the payment and that he was going for his own business and the firm entrusted its work of paying this sum to such person and so the question of payment of travelling expenses did not arise. When we was asked the reason why he could not remember the name of the person with whom the money was sent, he replied that the incident had happened ten years back.
As regards the sum of Rs. 38,720 there is a receipt which has been produced passed by Nanchand on behalf of the assessee. A translation of the receipt forms part of annexure “E”. The receipt as translated runs as under :
“Dhoraji dated 25-2-47.
M/s. Chimanlal Sarabhai & Co.,
Ahmedabad.
We have received Rs. 38,720 (in words rupees thirty-eight thousand seven hundred and twenty) sent by you in full settlement of your account.
The same has been credited to your account.
You will kindly inform of the work if any.”
Here also, the important words are ‘sent by you’, the Gujarati words in the original being :
The translation of the entry in the account of the assessee in the books of Messrs. Chimanlal Sarabhai & Co., in connection with this payment appears as part of annexure “G” and runs as under :
"Cr. Dr.
38,720-0-0
Fagan Sud. 3 (Tuesday, 25-2-47) 38,720-0-0
cash sent to you yesterday. Paid Hate
Nanchand Motichand."
10. In connection with this payment also, Sarabhai Sakalchand was examined and his answers in connection with this payment are similar to those given by him in connection with the payment of the sum of Rs. 40,000. Nanchand was not examined before the income-tax authorities.
11. On this material, we have to consider whether there was any evidence on which a Tribunal could have arrived at the finding which this particular Tribunal has done. The law on the subject is well settled. It has been laid down by the Supreme Court in the case of Sree Meenakshi Mills Ltd. v. Commissioner of Income-tax [[1957] 31 I.T.R. 28; [1956] S.C.R. 691.] that even a finding on a question of fact can be attacked under section 66(1) as erroneous in law if there is no evidence to support it or if it is perverse. The question whether the two sums of Rs. 40,000 and Rs. 38,720 were received by the assessee at Dhoraji, as contended by the assessee, or at Ahmedabad, as contended on behalf of the revenue, is a question of fact. That question of fact has no doubt to be determined by drawing inferences from other basic facts established in the case but none the less it remains a question of fact. The finding in connection with such a question can, therefore, be brought before us and attacked as being erroneous in law only if we find that there is no evidence to support it or if we find that it is perverse. The contract in this case provides for payments being made in Kathiawar and the presumption must therefore be, unless rebutted by the department, that the payments under the contract must have been made rather in Dhoraji in Kathiawar than a Ahmedabad. The receipts in connection with the payment of the two sums of Rs. 40,000 and Rs. 38,720 also in terms refer to these two amounts as being moneys sent by Messrs. Chimanlal Sarabhai & Co. to the assessee. These receipts clearly show that the amounts could not have been paid by Messrs. Chimanlal Sarabhai & Co. to Nanchand, a partner of the assessee, at Ahmedabad. If the amounts had been paid to Nanchand, a partner of the assessee, at Ahmedabad, then Nanchand would not be the agent of Messrs. Chimanlal Sarabhai & Co. for bringing the amounts from Ahmedabad to Dhoraji. He would in that event receive the amounts as a partner of the assessee and there would be no question of his being the carrier of the amounts on behalf of Messrs. Chimanlal Sarabhai & Co., and if that be so, it is difficult to understand why the receipts should describe the amounts as having been sent by Messrs. Chimanlal Sarabhai & Co., to the assessee. This phraseology is consistent only with the amounts having been sent by Messrs. Chimanlal Sarabhai & Co., and paid to the assessee at Dhoraji. The entry in the books of account of Chimanlal Sarabhai & Co., in connection with the sum of Rs. 38,720, also clearly supports the case of the assessee. It states in terms that Rs. 38,720 have been sent by Messrs. Chimanlal Sarabhai & Co., “yesterday”. It is clear from this entry that the amounts had been sent, not on the day when the entry was made, namely, 25th February, 1946, but a day earlier. The words “sent to you yesterday” could never have found a place in the entry if the amount had been paid to Nanchand, a partner of the assessee, at Ahmedabad, being the place where the entry was made in the books of account of Messrs. Chimanlal Sarabhai & Co. As regards the sum of Rs. 40,000 the words “Haste Sha Nanchand Motichand” no doubt appear. But these words also appear in connection with the earlier payment of Rs. 30,000 and it has now been accepted by the Tribunal itself that so far as the payment of Rs. 30,000 was concerned, that was a payment made to Nanchand, a partner of the assessee, at Dhoraji by Sarabhai, a partner of Messrs. Chimanlal Sarabhai & Co. There is nothing in the words “Haste Sha Nanchand Motichand” which would lead to the conclusion that the payment was made to Nanchand at Ahmedabad and not at Dhoraji. From the mere fact that after the expiry of nearly ten years Sarabhai Sakalchand is unable to name the persons who carried the aforesaid amount of Rs. 40,000 and Rs. 38,720 it is not possible to infer that these amounts were not sent by Messrs. Chimanlal Sarabhai & Co., but were paid to Nanchand at Ahmedabad where Messrs. Chimanlal Sarabhai & Co. carried on business. The fact that Sarabhai is unable to name those persons after this lapse of time cannot displace the inference which must necessarily be drawn from the two receipts which in terms state that the moneys had been sent by Messrs. Chimanlal Sarabhai & Co., and the inference which must necessarily follow from the fact that the entry in the books of Messrs. Chimanlal Sarabhai & Co., in regard to the sum of Rs. 38,720, in terms states that the money had been sent a day before the making of the entry. The Tribunal’s finding appears solely to have been based on one solitary circumstance. The Tribunal has stated, in the course of its order, dated 24th October, 1958, as follows :
“Dhoraji, it is stated, is at a distance of seven to eight hours by train journey from Ahmedabad. Therefore, if the amounts could be debited in the accounts on 22nd January, 1947, and 25th February, 1947, at Ahmedabad, the amounts could not have been received by the assessee at Dhoraji on the same day so as to enable him to pass a receipt on that very day.”
Later on, it is further observed as follows :
“We have already shown that if the amounts were actually sent to the assessee through such alleged intermediaries on 22nd January, 1947, and 25th February, 1947, it was impossible that the buyer firm should obtain a receipt from the assessee on the very day on which the amounts are alleged to have been sent to the assessee.”
12. With respect we find it extremely difficult, if not impossible, to follow the reasoning of the Tribunal. The fact that it takes about seven to eight hours by train to reach Dhoraji from Ahmedabad cannot make it physically impossible for a person to send moneys from Ahmedabad to Dhoraji so that the moneys may be received on the same day on which they are sent. Apart from any other consideration, the Tribunal seems to have overlooked the fact that the entry, at least so far as the amount of Rs. 38,720 is concerned, in clear terms says that the moneys had been sent the day before the making of the entry. In our view, on the evidence on the record, no reasonable person could come to the conclusion that he payments of Rs. 40,000 and Rs. 38,720 were made to the assessee at Ahmedabad, and we must, therefore, hold that the finding of the Tribunal in this connection is perverse.
In order to bring out the true nature of the controversy between the parties, we would reframe the question in the terms following :
“Whether there was any evidence to support the Tribunal’s finding that the sum of Rs. 78,870 was actually received in British India or that the aforesaid finding of the Tribunal was perverse ?”
13. Our answer to the question is that the finding of the Tribunal in this connection is perverse. The assessee has lost in Reference No. 3 of 1960 and has succeeded in Reference No. 8 of 1961. The assessee had taken out a notice of motion dated 1st December, 1959, and the costs of that notice of motion and the order made thereon were made costs in the reference. Taking all the circumstances into account, we consider that the fair order to make as regards costs would be that the Commissioner should pay to the assessee a sum of rupees one hundred and fifty by way of costs and we order accordingly.
