1. C. K. BANERR, J. -This reference under section 256(2)---of the 1. 7'. Act, 1961, arises out of the income-tax assessm ent of Sri Bhupesh Chandra Paul also known as Q. C. Paul, the assessee, for the assessm ent year, 1965-66.
2. The facts found and/or admitted in these proceeding, are shortly as follows: Pursuant to a summons issued under section 131 of the I. T. Act, 196f, K. N. Chakraborty appeared before the I. T. O. And deposed. He admitted the said transactions with the assesses but could not produce his books of account in support and stated that they had been lost by theft. He: also admitted that his licence as a book-maker had not been renewed by the Royal Calcutta Turf Club in March, 1969, as he was a tax defaulter. The I. T. O. Obtained further statements from the see to the effect that he had never bet on horses except, during the said period. The I. T. O also examined S. R.
3. Paul who stated that he had collected cheques from K. N. Chakraborty on occasions and .Had placed bets for the assesses with K. N. Chakraborty at the race course.
4. The I.T.O.-disbelieved the assessee's case that he had won the said amount on horse racing in view of the fact that the assessee had placed his bets only in five race meetings, in every one of which he won between Rs. 29,000 to Rs. 34,000. Ere also disbelieved that the books of K. N. Chakraborty had been lost. He found that at least three other persons had similar transactions with K. N.
5. Chakraborty and had won large amounts. The I. T.O. Came to the conclusion that the transactions of the assesses with K. N. Chakraborty were name-lending transactions, that the assessee had failed to discharge the, onus of proving the nature and source of the said receipts and held the same to be the income of the assesses from undisclosed sources.
6. The assessee appealed against the said assessment. It was contended before the A. A.. C. That the assesses had discharged his primary onus of pro--ving the source of the receipt. The account of K.
7. N. Chakraborty showed that the assesses had received the said amount. The fact that the relevant bettings could not be established with reference to the books of K. N. Chakraborty, it was contended, should not go against the assesses who had received the amount by account payee cheques and that the L T. O. In holding that the said amount had .Not been received by the assessee as gains from betting, proceeded on suspicion. With regard to the alleged collusive transactions of K. N: Chakraborty with other patios relied on by the I. T. O, it was stated that similar additions made by the 1: T. O., of other betting receipts from. K. N. Chakraborty by other ate, had been deleted on appeal. The A. A. C. Took the view that the collusion between the assesses and K.
8. N. Chakraborty suspected by the I. T. O. Bad not been proved. He held that the source of the amount in dispute had been shown by the assessee and the evidence thereof could not be rejected on suspicion. The absence of books of account and suspected transactions between the book-- maker and -his clients should be considered and investigated in the assessment of the book-maker and not of the assessee. He, therefore, held that the said sum was betting receipts and being casual income could not be added to the total income of the assesses and deleted the addition made by the I. T. O.
9. Being aggrieved by the order of the A. A. C., the revenue appealed t the Income-tax Appellate Tribunal.
10. It was contended on behalf of the revenue in the appeal that the A. A. C, lead failed to appreciate the evidence which did not prove the alleged winnings of the assessee. The assesses contended otherwise relying on the findings of the A. A.C. The assessee also referred to certain other orders of the where the transaction with K. N. Chakraborty had been accepted as genuine.
11. The Tribunal after considering the respective contentions of the parties set aside the order of the A.
12. A. C. And confirmed the assessm ent as made by the I. T. O. Mainly on the following grounds: (i)The assessee's story that be had won phenomenal amounts on the face course and then stopped attending the race meets altogether was unbelievable and particularly by reason of the discrepancies in the state--ments the assessee made at different times.
13. (ii)K.N. Chakraborty as found to be involved in other cases in similar circumstances rind his credentials bad not been accepted by the Tribunal in several orders.
(iii) The dealings of Chakraborty with the assesses and other parties in cheques contrary to the normal practice of book-makers who settled their transactions in cash indicated that the bank account of Chakra--borty was being utilised by the assesses.
(iv) It being admitted that Rs. 1,58,250 constituted the income of the assessee and the assessee having failed to establish that the said amount teas entitled to be exempted under section 10(3) of the I. T. Act, 1961 and it being found that the said amount did not represent the assessee's winning from bettings on horse racing must be assessed as taxable income.
14. On the application of the assessee under section 256 (2) of the I.T. Act, 1961, this Court directed the Tribunal to draw up a statement of the case, and to send up the following question of law for the opinion of this Court "Whether there was any legal finding and/or material before the Tribunal to hold that the sum of Rs.
15. 1,58,250 was not the income of the assesses from horse racing and whether such finding of t e Tribunal is unreason--able and perverse?--- Mr. Subrata Roy Chowdhury, learned counsel for the assessee, contended at the bearing that the Tribunal had based its decision on suspicion, conjecture arid surmise. There was in fact no discrepancy in the statements of the assessee as found by the Tribunal. The assessee initially stated that he used to instruct K. N. Chakraborty from his office to bet on specified horses. In his letter dated l8th September, 1970, be stated that this was done through his agent, S. R. Paul. The Tribunal relied on cases where transac--tions of K. N. Chakraborty with other persons had been disbelieved, but there were similar transactions of K. N. Chakraborty which were accepted and on the basis of transactions with other persons, it could not be inferred that his transactions with the assesses were bogus. The Members of the Tribunal had imported their personal knowledge .As to the manner of betting and settlement with bookies and conclusions reached thereby wholly irrelevant. If the Tribunal had relied on any irrelevant material its entire conclusion would be vitiated. Mr. Roy Chowdhury submitted that the assesses had discharged the onus of proving his claim for exemption by adducing the following evidence:
(1) Memo of beta in the letter-head of K. N. Chakraborty.
(2) The admissions of K. N. Chakraborty not challenged by cross-examination.
(3) The supporting evidence of S. R. Paul on which there was also no cross-examination by the revenue.
(4) That payments were received from K. N. Chakraborty by account Payee cheques.
16. The assessee having thus discharged the initial burden, the onus shifted on to the revenue. No evidence or materials were brought in by the revenue to prove that the appellant was not real.
17. The conclusion of the Tribunal that the assessee had won Rs. 1,58,250 on the race course was entirely unbelievable and false and was erroneous, Whether K. N. Chakraborty had lost his books of account or not or that some of the transactions of K. N. Chakraborty had been disbelieved or that the assessee having attained success in his betting had restrained himself from betting any further were irrelevant and the findings of the Tribunal based thereon were unreasonable and perverse.
18. Mr. Roy Chowdhury also contended that the questions raised by the assessee had been reframed by this Court and condensed into one question so as to bring out the real controversy between the parties and was not a new question.
19. Dhirajlal Girdharilal v. C. I. T. (1954) 26 I T R 736 (SC). This decision was cited for the following observations of the Supreme Court (pp. 739-740): ".. . . . . . .If the Court of fact, whose decision on a question of fact is final, arrives at its decision by considering material which is irrelevant to the enquiry, or by considering material which is partly relevant and partly irrelevant, or bases its decision partly on conjectures, surmises and suspicion, and partly on evidence, then in such a situation clearly an issue of law arises . . . . . . It is well established 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."
20. Omar Salay Mohamed Slut v. C. I. T. (1959) 37 I T R 151 (SC) was also cited for the following observations of the Supreme Court (p. 170) . . . . . . The Income-tax Appellate Tribunal is a fact-finding Tribunal and if it arrives at its own conclusions of fact after due consideration of the evidence before it, this Court will not interfere. It is necessary, however, that every fact for and against the assessee must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them and what were the findings reached on the evidence on record before it. The conclusions reached by the Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and 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 act on, no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, con--jectures or surmises and if it does anything of that sort, its findings, even though on questions of fact, will be liable to be set aside by this Court."
21. C. I. T. v. Daulat Ram Rawaimull (1973) 87 I T R 349 (SC). Here, the assessee, a firm, had obtained an overdraft upon security, inter alia, of a fixed deposit in the name of a son of one of its partners. The
1. T. O., on re-assessm ent, held that the said deposit represented the concealed income of the assessee. This was upheld by the Tribunal. On a reference, this Court held that there was no material before the Tribunal to hold that the said fixed deposit was he con--cealed income of the assessee. On a final appeal, the Supreme Court observed as follows (p. 360)
22. "The onus to prove that the apparent is not real is on the patty who claims is to be so. As it was the department which claimed that the amount of fixed deposit receipt belonged to the respondent- firm even though the receipt had been issued in the name of Biswanath, the burden lay on the department to prove that the respondent was the owner of the amount despite the fact that the receipt was in the name of Biswa nath."
23. C. I. T. v. Best & Co. (P.) Ltd. (1966) 60 I T R II (SC). This decision was cited for the following observations of the Supreme. Court (p. 18): "When sufficient evidence, either direct or circumstantial, in respect of its contention was disclosed by the revenue, an adverse inference could be drawn against the assesses: if he faced to put before the department material which was in his exclusive possession. This process is described in the law of evidence as shifting of the onus in the course of a proceeding, from one party to the other. There is no reason why the said doctrine is not applicable to income-tax proceedings. While the income-tax authorities have to gather relevant material to establish that the compensation given for the loss of agency was a taxable income, adverse inference could be drawn against the assessee if he had suppressed documents and evidence which were exclusively within his knowledge and keeping."
24. Mr. Roy Chowdhury also cited the following decisions: (a) Parry's Calcutta) Employees' Union v.
25. Parry & Co. Ltd. AIR 1966 Cal. 31, (b) Bal Velbai v. C.LT. (1963) 49 I T R SC 130 and (c) Malabar Co- operative Central Bank Ltd. v. C.I T. (1975) 101 I T R 87 to show how the Courts have dealt with and expounded the concept of perversity.
26. He submitted that the assessee had specifically raised the question of perversity and this Court reframed all the questions including that on perversity by a comprehensive question. In this connection, Mr. Roy Chowdhury cited the following decisions: C.I.T. v. Scindia Steam Navigation Co. Ltd. (1975) 101 I T R 87. The following observations of the Supreme Court in this case were relied on (pp. 609-612): "Section 66(2) confers on the Court a power to direct a reference only where the Tribunal was under a duty to refer under section 66(1), and it is, therefore, subject to the same limitations as section 66(1) ..... All that section 66(1) requires is that the question of law which is referred to the Court for decision on which the Court is to decide must be the question which was in issue before the Tribunal. Where the question itself was under issue, there is no further limitation imposed by the section that the reference should be limited to those aspects of the question which had been argued before the Tribunal. It will be as over-refinement of Abe position to hold that each aspect of a question is itself a distinct question for the purpose of section 66(1) of the Act."
27. Bhanji Bagawandas v. C. I. T. (1968) 67 I T R 18 (SC), Here the Supreme Court reiterated its observation in Scindia Steam Navigation Co. Ltd. (1961) 42 I T R 589 (SC). "
28. C. W. T. v. Mahadeo Jalan (1972) 86 I T R 621 (SC). Here, the Supreme Court observed that it had power to resettle or to reframe a question formulated by the Tribunal so long as a new and different question was not raised and the High Court also bad the power to reframe a question so as to bring out the real issues between the parties.
29. Central India Industries Ltd. v. C. I. T (1975) 99 I T R 211. Following the decision of the Supreme Court in C. I. T. v. Anusuya Devi (1968) 68 I T R 750. It was held by this Court that a question may be refrained to clarify or to pinpoint the real issues or for similar other reasons.
30. Mr. B. L P.I, learned counsel for the revenue, contended on the other hand that the conclusion of the Tribunal was the cumulative effect of the materials considered by it, and such materials should not be studied or examined in isolation but its total effect should be kept in view. If there was some evidence to support the findings of the Tribunal, this Court should not interfere with such findings in its advisory jurisdiction. Mr. P.I submitted that as the assessee was claiming an exemption in this case on the ground that the receipts in dispute were his race winning the onus necessarily lay an the assessee to prove the same. The question referred as reframed was a new question not asked for by the assessee and, therefore, this Court should decline to answer the same. The assessee, in any event, had failed to prove his case and the said amount, therefore, must tie held to be income liable to tax. None of the following basic findings of the Tribunal bad been challenged by the assessee:
(1) The story of the assessee's winning on race-course was entirely unbelievable and false.
(2) There were discrepancies in the statements made by the assessee.
(3) The bank account of Shri K. N. Chakraborty had been used by the assesses for his own advantage.
(4) The credentials of K. N. Chakraborty were not accepted in several orders of the Tribunal.
31. The following decisions were cited on behalf of the revenue 1, Sree Meenakshi Mills Ltd. v. C. I. T. (1957) 31 I T R 28, where the Supreme Court observed as follows (p. 37)
32. "When a conclusion has been reached on an appreciation of a number of facts established by the evidence, whether that is sound or not must be determined not by considering the weight to be attached to each single facts in isolation, but by assessing the cumulative effect of all the facts in their setting in the picture as a whole."
33. 2Homi Jehangir Gheesta v. C. I. T, (1961) 41 I.T.R 135 (SC).
34. This decision -was cited for the following observations of the Supreme court: ---We must read the order of the Tribunal as a whole to determine whether every material, fact, for and against the assessee, has been considered fairly and with due care; whether the evidence pro and con has been considered in reaching .The final conclusion; and whether the conclusion reached by the Tribunal bas been coloured by irrelevant considerations or matters of prejudice--- ---We must make it clear that we do not think that those decisions required that the order of the Tribunal must be examined sentence by sentence, through the microscope as it were, so as to discover the minor lapse here or any incautious opinion there to be used as a peg on which to hang an issueof law. In view of the arguments advanced before as it is perhaps necessary to add that in considering probabilities properly arising from the facts alleged or proved, the Tribunal does not indulge in conjectures, surmises or suspicions."
3. Bai Velbai v. C. 1, T. (1963) 49 I.T.R 130 (SC). In this case, the amount of high deno--mination notes encashed by the assessee in the relevant assessment year was treated as her income from undisclosed' source. On final appeal the Supreme Court observed as follows: - "As this Court observed in Sree Meenakshi Miss v. Commissioner of Income-tax, a finding of fact does not alter its character as one of fact merely because it is itself an inference from other basic facts; but .a finding on a question of fact is open to attack under section 66 as erroneous in law when there is no evidence to support it or if it is perverse or has been reached without due consideration of the several matters relevant for such a determination---..We have read the order of the Tribunal as a whole and we are not unmindful of the observation made in the case of Homi Jehangir Gheesta, that in considering probabilities properly arising from the facts alleged or proved, the Tribunal does not indulge in conjectures, surmises , or suspicions."
4. C. I. T. v. Ramakrishna Deo (51959) 35 I.T.R 312 (SC). Here the question was if the income derived by the assessee from forests by sale of timber was agricultural income and exempt from tax under the Indian I. T. Act, 1922. On a reference the Orissa High Court held that the onus was upon the revenue to prove that the income derived from the forest was chargeable to tax and it had failed to establish that -the income derived from sale of trees was not agricultural income. On appeal by 'the revenue the Supreme Court observed as fellows (p. 316): - "At the very outset, we should dissent from the view expressed by the learned fudges that the burden is on the department to prove that the income sought to be taxed is not agricultural income. The law is well settled that it is for a person who claims exemption to establish it, and there is no reason why it should be otherwise when the exemption is claimed is under the Income-tax Act."
5. R. B. Seth Champalal Rams warup v. C. I. T. (1966) 60 I.T.R 493 (SC).
6. Lakshmiratan Cotton Mills Co. Ltd. v. C. l. 7: (1969) 73 1 T R 634 (SC). These cases were also cited for similar observations by the Supreme Court.
7. Mahmudabad Properties (P.) Ltd. v. C. I. T. (1972) 85 1 T R 500 (Cal.). In this case the Tribunal took notice of the fact that there had been a steady increase in land value during the period from 1954 to 1961. The assessee contended that such importation of personal knowledge was not permissible in law. A Division Bench of this Court, following Forestside Properties (Chingford) Ltd. v. Pearce (3), held that matters of local knowledge could be relied on by the Tribunal, the members whereof belonged to the locality and having an intelligent concern with the local affairs.
8. In re: W. (.An Infant) (1971) 2 W L R 1011, 1021= (1971) 2 All E R 49 (H L). This was an adoption case and was cited for the following observations of the House of Lords: "And, be it observed, 'reasonableness' or `unreasonableness', where either word is employed in English law, is normally a question of fact and degree and not a question of law so long as there is evidence to support the finding of the Court Two reasonable parents can perfectly reasonably come to opposite conclusions on the same set of facts without forfeiting their title to be regarded as reasonable. The question in any given case is whether a parental veto comes within the band of possible reasonable decisions and not whether it is right or mistaken. Not every reasonable exercise of judgment is right, and not every mistaken exercise of judgment is unreasonable. There is a band of decisions within which no court should seek to replace the individual's judgment with his own."
9. Secretary of State for Education and Science v. Metropolitan Borough of Tameside(1976) 3 All E R
665. Here the House .Of Lords laid down the principles for reasonable exercise of power by an authority. Several unreported decisions of this Court, viz. Income-tax Reference Nos. 599 and 600 intituled M. M. Murarka & Co. v. C. I. T. Income Tax References Nos. 15 and 16 of 1971 intituled Worth Traaing Co. v. C. I. T. And P. C. Sharma & Sons v. C. I. T. Were also cited and relied on by the revenue.
35. On the question of perversity two decisions of the Supreme Court in G. Yenkataswami Naidu & Co. v. C. I. T. (6) and C. I. T. v. Rajasthan Mines Ltd. (1970) 78 I T R 45 (SC) were cited on behalf of the revenue.
36. The revenue also contended that a decision based on material partly irrelevant would be vitiated as a misdirection in law and would not be perverse and in this context cited two decisions of the Supreme Court in C. I. T. v. Indian Woollen Textile Mills (1964) 51 I T R 291 (SC) and C. I. T. v. Radha Kishan Nandlal (1975) 99 I T R 143 (SC).
37. It was next contended that a specified question had to be raised when the conclusion of the Tribunal was sought to be impugned as perverse. Such a question, it was contended, was not before the Court. In this connection a decision of the Supreme Court in C.I. T. v. Imperial Chemical Industries (India) (P.) Lad. (1969) 74 1 T R17 (SC) was cited.
38. It was next urged that even if the Tribunal had indulged in some peculation, if there were facts from which the conclusion could be drawn, the same should not be disturbed by the Court. For this proposition reliance was placed on the decision of the Supreme Court in Bhaichand Amoluk & CO.
39. C. I. T. (1962) 44 I T R 511, where the Supreme Court reiterated its observation in Homi Jehangir Gheesta.
40. It was also contended on behalf of the revenue that a question of fact arising from the non- acceptance by the income-tax authorities of the explanation of the assessee could not give rise to a question of law. In this connection decision of the Supreme Court in Newtan CHU Collieries Ltd. v.
41. C. I. T. (1962) 44 I T R 495 (SC) as cited for the following observations (p. 499): "If the income-tax authorities chose not to accept these explanations as correct, that does not mean that the finding as to inflation of wages at which they arrived was o finding based on no material. The materials were there; what happened was the income-tax authorities did not accept as correct the explanations offered by the assessee-Company. We do not think that the non- acceptance of the explanations given by the assessee-Company converts the question of the inflation of wages, which is essentially a question of fact, into a question of law."
42. It was also contended that in a reference the High Court exercising an advisory jurisdiction could not reappraise the facts and evidence as urged by the assessee. The following observations of the Supreme Court in Imperial Chemical Industries (India) P. Ltd. (1969) 74 I T R 17, in this connection were cited (p. 13): "It well established that the High Court is not a Court of appeal in a reference under section 66(1) of the Act, and it is not open to the High Court in such a reference to embark upon a reappraisal of the evidence and to arrive at findings of fact contrary to those of the Appellate Tribunal, It is the duty of the High Court while hearing the reference to a reference itself to the facts as found by the Appellate Tribunal and to answer the question of law in the context of those facts."
43. It was lastly contended on behalf of the revenue that this Court while refraining a question could not reopen an enquiry. The questions of fact or law were limited by the order of the Tribunal.
44. The revenue cited a decision of the Supreme Court in C. I. T. v. Smt. Anusuya Devi(1968) 68 I T R 750.
45. On behalf of the revenue the following decisions were also cited.
46. C.I.T. v. Turner Morrison & Co. Ltd. (1978) 114 I T R 505 (Cal.), Shankar Industries v. C L T. (1978) 114 I T R 689 (Cal.). Reform Flour Mills (Pvt.) Ltd. v. C. I. T. (1978) 1151 T R 598 (Cal.). It is not necessary to deal with the above decisions in detail.
47. The first part of the question referred is answered in the affirmative and the second part thereof is answered in the negative, both being in favour of the revenue. We make no order as to costs.
48. DLPAK KUMAR Sent, J.--I agree.