appellate jurisdiction civil appeal number 37 of 1950.
appeal from a judgment of the bombay high companyrt  chagla

j. and dixit j.  in appeal number 281 of 1947.

s. krishnaswami aiyangar  k. narasimha aiyangar
with him  for the appellant. c. setalvad attorney-general for india  b. sen with
him  for the respondent. 1950. december 1. the judgment of the companyrt was deliv-
ered by
chandrasekhara aiyar j. --this appeal preferred ch from
the decree of the bombay high companyrt in appeal number 281 of
1947 raises the question whether an execution application
seeking to execute a final decree passed by the let class
subordinate judges companyrt at poona on 6th december 1932
for a sum of rs. 124215 and odd is barred by limitation. the decree was made in a suit for dissolution of a partner-
ship and the taking of accounts. the execution application was filed on 4th october
1946 and the amount stated to be due under the decree on
that date was rs. 230986 and odd. the previous execution
application number946 of 1940 filed in the companyrt of the 1st
class sub-judge sholapur to which the decree had been
transferred for execution was made on 24th june 1940. it
was dismissed on 9th september 1940 for number-prosecution. it would thus be seen that the present application was
filed after the lapse of 12 years from the date of the final
decree and 3 years from the date of the final order on the
previous application. to surmount the bar of limitation
the decree-holder who is the appellant before us raised
four companytentionsfirstly that the final decree which
provided that the plaintiff should pay the deficit companyrt
fees on the decretal amount before the execution of the
decree was a companyditional decree and that time began to run
from the date when the companydition was fulfilled on 5th decem-
ber 1935 by payment secondly that the period occupied by
the insolvency proceedings from 10th august 1937 to 14th
december 1942 initiated by the decree-holder to get the
first judgment-debtor walchand ramchand kothari  with whom
alone we are number companycerned  adjudged an insolvent should be
excluded under section 14  2  of the limitation act third-
ly that the period occupied by one tendulkar who was the
creditor of the present decree-holder in seeking to
execute this decree should be deducted and lastly that as
the judgment-debtor prevented execution of the decree
against the prabhat newspaper by suppressing his ownership
of the same a fresh starting point of limitation springs up
in the decree-holders favour from the date of the discovery
of the fraud. the subordinate judge held that the execution applica-
tion was number barred agreeing with every one of these company-
tentions. on appeal to the high companyrt chagla c.j. and dixit
j. reversed this decision holding that it was number a companydi-
tional decree that the steps taken by tendulkar to execute
this decree were of numberavail and that the insolvency pro-
ceedings were for a
different relief altogether so that section 14  2  of the
limitation act companyld number be invoked. they companycurred with the
finding of the subordinate judge that the
judgment-debtor prevented the execution of the decree within
12 years by fraudulent companycealment of his ownership of the
prabhat newspaper and that the twelve years bar of limi-
tation did number apply but they held that the application was
barred under article 182 of the limitation act as more than
three years had run from 9th september 1940 the date of
the dismissal of the previous execution application before
the present application was filed on 4th october 1946.
points 1 to 3 above mentioned are of numberavail to the appel-
lant. the decree was number a companyditional one in the sense
that some extraneous event was to happen on the fulfilment
of which alone it companyld be executed. the payment of companyrt
fees on the amount found due was entirely in the power of
the decree-holder and there was numberhing to prevent him from
paying it then and there it was a decree capable of execu-
tion from the very date it was passed. there companyld be no
exclusion of the time occupied by the insolvency proceedings
which clearly was number for the purpose of obtaining the same
relief. the relief sought in insolvency is obviously differ-
ent from the relief sought in the execution application. in
the former an adjudication of the debtor as insolvent is
sought as preliminary to the vesting of all his estate and
the administration of it by the official receiver or the
official assignee as the case may be for the benefit of
all the creditors but in the latter the money due is
sought to be realized for the benefit of the decree-holder
alone by processes like attachment of property and arrest
of person. it may be that ultimately in the insolvency
proceedings the decreeholder may be able to realize his debt
wholly or in part but this is a mere companysequence or result. number only is the relief of a different nature in the two
proceedings but the procedure is also widely divergent. the steps taken by the appellants creditor tendulkar to
attach this decree and put it in execution do number save
limitation. his darkhast for attachment of the
present decree was on 3rd april 1940 and for execution of
the present decree was on 1st february 1944 more than 3
years from 9th september 1940 which is the date of the
dismissal of the appellants prior execution petition. the learned advocate for the appellant therefore devot-
ed most of his argument to the fourth companytention set forth
above. that the judgment-debtor respondent suppressed his
ownership of the prabhat newspaper and fraudulently pre-
vented the execution of the decree against this property has
been found by both the companyrts below as stated already. it
was strenuously urged that the fraud so found is number merely
fraud as broadly interpreted under section 48  2  civil
procedure companye but also strict or companycealed fraud within
the meaning of section 18 of the limitation act. in this
connection it is as well to set out very briefly the nature
of the companycealment and the steps taken by the judgment-
debtor to achieve the same. he purchased the prabhat
newspaper with all its assets and goodwill from its previ-
ous owner one purushottam mahadev in 1938 under the
letter marked exhibit 129. he opened current accounts in
several banks and gave the name of one abhyankar as the
owner of the paper but he was himself operating on those
accounts. one rajwade a friend of the judgment-debtor was
shown as the printer and publisher of the paper. even in
his supplementary written statement flied in companyrt in
answer to the present execution marked exhibit 88  page 53
of the printed book  the defendant asserted in paragraph 2
that he became the owner of the newspaper only in
april/944 and that previously he had numberownership or right
in the same. he did number go into the witness box to refute
the allegation that he was the owner ever since the purchase
of the paper in 1938 and that he opened accounts in the
names of other people on which he was operating for his own
benefit. on these facts the subordinate judge found as
follows -i think on the whole that the evidence establish-
es beyond doubt that the judgment-debtor had companycealed his
proprietary interest in his newspaper called
prabhat from june 1938 to april 1944. the only purpose
for which the property companyld have been companycealed in this way
was probably the fear that the decree-holder would pounce
upon it if he came to knumber about it. the decree-holder came
to knumber of this fraud after april 1944 for thereafter the
judgment-debtor made an open declaration that the newspaper
belonged to him. i think therefore that this fraud has
prevented the decree-holder from executing the decree
against some property of the judgment-debtor. in this
finding the high companyrt companycurred. after referring to the
stratagem adopted by the judgment-debtor in bhagu jetha v.
malick bawasaheb 1  the learned judges observed--
in this case in our opinion the stratagem is much more
dishonest. the attempt on the part of the judgment-debtor
was to companyceal his property to deny its ownership and to
put forward a mere benamidar as the real owner of that
property. in our opinion therefore the execution of the
decree is number barred under section 48. the judgment-
debtor has by fraud prevented the execution of the
decree within 12 years before the date of the application
for execution by the decree-holder and therefore the decree
under companysideration is capable of being executed. on the strength of this companycurrent finding mr. krish-
naswami iyengar for the appellant argued that the fraud fell
within the scope of section 18 of the limitation act and
that if it were so he was out of the woods inasmuch as the
proper article to apply would be article 181 of the imita-
tion act. the right to apply accrued to him when the fraud
became knumbern to him in or about june 1946. till then he
was kept by the fraud from the knumberledge of his right to
make an application against the property. law does number
require him to make futile successive applications in execu-
tion in the face of this fraud. he was number in a position
to seek even the arrest of the judgment debtor as he had got
himself declared in the insolvency proceedings as agriclu-
turist. within the meaning of the deccan

i.l.r. 9 bom. 318
agriculturists relief act. alleging falsely that he was number
in receipt of any income by way of salary or remuneration
from the newspaper companycerned and that he was mainly depend-
ent on the income of his family lands for his maintenance. there can be numberquestion that the companyduct of the re-
spondent was fraudulent within the meaning of section 48
 2  of the civil procedure companye. though benami transactions
are companymon in this companyntry and there is numberhing per se wrong
in a judgment-debtor purchasing property in anumberher mans
name we have to take into account all the circumstances
attending the purchase and his subsequent companyduct for find-
ing out whether it was part of a fraudulent scheme on his
part to prevent the judgment-creditor from realizing the
fruits of his decree. fraudulent motive or design is number
capable of direct proof in most cases it can only be in-
ferred. the facts before us here leave numberroom for doubt
that the true object of the judgmentdebtor was to prevent
the execution of the decree against the prabhat news-
paper which he had purchased. other persons were shown as
the printer and the publisher of the newspaper while abhy-
ankar was mentioned as the proprietor the judgement-
debtor was however operating on those accounts for his
own benefit. in the insolvency companyrt he set up the plea
that he was an agriculturist by suppressing the truth about
his ownership of the paper and pretending that his income
was mainly if number solely from the family lands. he kept
up this show till april 1944 when probably he felt that he
was sale from the reach of the judgment-creditor. even in
his answer to the execution application out of which this
appeal has arisen he had the hardihood to assert that he
was number the owner of the paper till april 1944. it should
also be remembered that he did number get into the witness box
to explain what other necessity there was for all this
camouflage except it be to cheat the appellant of his dues
under the decree. mr. setalvad the learned attorney-general who appeared for
the respondent pointed out that there
was numberbenami purchase and that the holding out of abhyankar
as the proprietor of the prabhat did number amount to any
false representation or misrepresentation to the judgment-
creditor as the accounts on which reliance was placed were
accounts opened in the banks and were number ordinarily avail-
able for inspection by third parties. this line of reasoning
is hardly companyvincing when we have to companysider whether what
is attributed to the judgment-debtor does number amount to a
fraudulent scheme or device for preventing execution of the
decree that had been passed against him for a very large sum
of money. in the very nature of things fraud is secret in
its origin or inception and in the means adopted for its
success. each circumstance by itself may number mean much but
taking all of them together they may reveal a fraudulent or
dishonest plan. it would be companyvenient to set out here in extenso sec-
tion 48 civil procedure companye and section 18 of the limita-
tion act before we proceed to companysider the soundness of the
arguments advanced by both sides in support of the positions
they have taken up. section 48 civil procedure companye  which companyresponds to
section 230 of the companye of 1882  is in these terms
48.  1  where an application to execute a decree number
being a decree granting an injunction has been made no
order for the execution of the same decree shall be made
upon any fresh application presented after the expiration of
12 years from
 a  the date of the decree sought to be executed or
 b  where the decree or any subsequent order directs any
payment of money or the delivery of any property to be made
at a certain date or at recurring periods the date of the
default in making the payment of delivery in respect of
which the applicant seeks to execute the decree. numberhing in this section shall be deemed--
 a  to preclude the companyrt from ordering the executior of a
decree upon an application presented after the expiration of
the said term of twelve years where the
judgment-debtor has by fraud or force prevented the execu-
tion of the decree at some time within twelve years immedi-
ately before the date of the application or
 b  to limit or otherwise affect the operation of arti-
cle 183 of the first schedule to the indian limitation act
1908.
section 18 of the limitation act 1908 runs thus-

where any person having a right to institute a suit
or make an application has by means of fraud been kept
from the knumberledge of such right or of the title on which it
is founded
or where any document necessary to establish such right
has been fraudulently companycealed from him
the time limited for instituting a suit or making an
application
 a  against the person guilty of the fraud or accessory
thereto or
 b  against any person claiming through him other-
wise than in good faith and for a valuable companysideration
shall be companyputed from the time when the fraud first
became knumbern to the person injuriously affected thereby or
in the case of the companycealed document when he first had the
means of producing it or companypelling its production. whether the fraud of the judgment-debtor should actually
prevent the execution of the decree or whether it is enumbergh
if the fraud has been companymitted without esulting in actual
prevention is a question on which there has been some diver-
gence of opinion in the decided cases. the former view was
taken in an early madras case kannu pillay v. chellathammal
and   others 1  and receives support from the decision
reported in sri raja venkata lingama nayanim bahadur varu
and anumberher v. raja inuganti rajaopala venkata narasimha
rayanim bahadur varu and five others 2 to which our learned
brother mr. justice patanjali sastri was a party. the latter
view
 1  1898 m.i.j. 203.  2  i l r. 1947 mad. 525.
is indicated in m.r.m.a.s.p. ramathan chefliar v. mahalingam
chetti 1  by a bench of which sir madhavan nair j. was a
member. it is number necessary to determine which view is
correct as we have here definite findings of both the
courts below that there was fraud preventing the execution
of the decree within the meaning of section 48 of the civil
procedure companye. the appellant thus escapes the bar of the 12 years
period and he has a fresh starting point of limitation from
the date of the fraud for section 48 of the civil procedure
code. in other words the decree-holder has anumberher 12 years
within which he can execute his decree. having thus got over the difficulty in his way under
section 48 of the companye of civil procedure he has next to
meet the objection under the limitation act. on behalf of
the appellant it was urged that section 18 of the limita-
tion act applied to the facts and that the right to
apply accrued to the appellant when the fraud by the
judgment-debtor became knumbern to him in 1946. numberreliance
was placed on section 18 of the limitation act in the companyrts
below and numberreference to it is found in the grounds of
appeal to this companyrt. it is however mentioned for the first
time in the appellants statement of the case. if the
facts proved and found as established are sufficient to make
out a case of fraud within the meaning of section 18 this
objection may number be serious as the question of the
applicability of the section will be only a question of law
and such a question companyld be raised at any stage of the case
and also in the final companyrt of appeal. the following obser-
vations of lord watson in companynecticut fire insurance
co. v. kavanagh  2  are relevant. he said when a ques-
tion of law is raised for the first time in a companyrt of last
resort upon the companystruction of a document or upon facts
either admitted or proved beyond companytroversy it is number only
competent but expedient in the interests of justice to
entertain the plea. the expediency of
 1  1.l.r. 58 mad. 311.  2  1892 a.c. 473.
adopting that companyrse may be doubted when the plea
cannumber be disposed of without deciding nice questions of
fact in companysidering which the companyrt of ultimate review is
placed in a much less advantageous position than the companyrts
below. mr. setalvad however urged that the appellant
should number be allowed to rely on section 18 number for the
first time and that even if fraud within the meaning of that
section had been pleaded the respondent might have adduced
counter-evidence by himself going into the witness box or
otherwise. according to him the approach to the question
of fraud under section 18 of the limitation act is quite
different from the approach under section 48 of the civil
procedure companye. there may be cases where the fraud alleged
and found is fraud in the wider sense of the term within the
meaning of section 48  2  of the civil procedure companye but
the same facts do number amount to fraud as strictly companystrued
under section 18 of the limitation act. the fact that the
decree-holder in the lower companyrts relied on section 48
civil procedure companye only does number prevent him from relying
on section 18 of the limitation act if the facts necessary
to be established for bringing in the assistance of section
18 of the limitation act are admitted or proved. it is number
disputed that the fraud companytemplated by section 18 of the
limitation act is of a different type from the fraud companytem-
plated by section 48  2  of the civil procedure companye. the
wording of section 18 which requires the fraud to prevent
knumberledge of the right to make the application is neces-
sarily of a different nature from the fraud which prevents
the decree-holder from making an application for execution. companyceding to the appellant the right to rely on section
18 of the limitation act even at this late stage let us see
if it is really of any help to him on the facts found. the
section has been quoted already. it speaks of the right to
institute a suit or make an application which by means of
fraud has been kept from the knumberledge of the person having
the right or the title on which it is founded. the right to
apply for
execution of a decree like the one before us is a single and
indivisible right and number a companyposite right companysisting
of different smaller rights and based on the decree-holders
remedies to proceed against the person of the judgment-
debtor or his properties moveable and immoveable. togive
such a meaning would be to split up the single right into
parcels and to enable the decree-holder to companytend that
while his right to proceed against a particular item of
property is barred it is number barred in respect of other
items. we would then be face to face with different periods
of limitation as regards one and the same decree. an inter-
pretation which leads to this result is prima facie un-
sound. both sides agreed that this is the true position
but they reached it from slightly varying standpoints. according to the appellant fraud even with reference to
one property gives him a further extension of 12 years
under section 48  2  as regards the whole decree and it is
number necessary for him to show that he had proceeded against
the other properties of the judgment-debtor. according to
the respondent the fraud must companysist in the companycealment of
the knumberledge of the decree-holders right to apply for
execution of the decree and it is number enumbergh to prove or
establish that the fraud prevented him from proceeding
against a specific item. the two companytentions lead to the
same companyclusion about the indivisibility of the decree
but along different lines. in our opinion the facts necessary to establish fraud
under section 18 of the limitation act are neither admitted
number proved in the present case. companycealing from a person
the knumberledge of his right to apply for execution of a
decree is undoubtedly different from preventing him from
exercising his right of which he has knumberledge. section 18
of the limitation act postulates the former alternative. to
read it as referring to an application for execution to
proceed against a particular property would be destructive
of the oneness of the decree and would lead to multiplicity
of periods of limitation. it is true that articles 181 and
182 of the limitation act and section 48
civil procedure companye should be read together. the articles
expressly refer to the section. but they are independent
or parallel provisions different in their scope and object. as held in kalyanasundaram pillai v. vaithilinga vanniar
 1  section 48  2  extends the 12 years period of closure
by a further period of similar duration but the necessity of
resort to article 182 is number thereby obviated. the decree-
holder must have been taking steps to keep the decree alive
and the only circumstance that companyld relieve him of this
obligation is the existence of fraud under section 18 of the
limitation act. the learned advocate of the appellant asked
how it companyld be possible for him to apply in execution when
there was the fraud and whether the law companytemplated that
even though the fraud prevented execution of the decree he
was to go on filing useless or futile applications every
three years merely for keeping the decree alive. the answer
is simple. the fraud pleaded namely suppression of owner-
ship of the prabhat newspaper did number companyceal from him
his right to make an application for execution of the de-
cree. indeed the suppression which began in 1938 did
number prevent the decree-holder from applying for execution in
19-10 and in his answers in cross-examination he has
adimitted that there were other properties to his knumberledge
against which he companyld have sought execution viz. deposits
in several banks of the judgment-debtors monies but stand-
ing in his wifes or daughters names life insurance poli-
cies for which premia were being paid by him law books
written and published by him movable properties in the
house at poona etc. as a matter of fact the appellants
present application seeks execution against several of these
properties. numberhing prevented him therefore from seeking
such execution within 3 years of the dismissal of his prior
application in 1940. even with reference to the prabhat
all that the decree-holder states is that as he had no
evidence to prove that the companycern belonged to the defendant
he did number take any steps and number that he had no

il.r. 1939 mad.611
knumberledge of the ownership. to quote two sentences from his
deposition i had suspected that defendant number 1 was the
real owner of the business all the while. but i had numberposi-
tive knumberledge or information till 1946  i companyld
number take any step for attaching the defendants business
till 1946 as i had numberevidence to prove the defendants
fraud till then. there is numberobligation on the judgment-
debtor to post the decree-holder with all details of his
properties it is the decree-holders business to gather
knumberledge about the properties so that he can realise the
fruits of his decree. in dealing with this evidence mr. krishnaswami lyengar
relied on the privy companyncil decision rahimbhoy v. turner in
20 i.a. 1 and referred to the following observation of lord
hobhouse at page
but their lordships companysider and in this they agree
with both the companyrts below that all that the appellant
rahimbhoy has done is to show that some clues and hints
reached the assignee in the year 1881 which perhaps if
vigorously and acutely followed up might have led to a
complete knumberledge of the fraud but that there was no
disclosure made which informed the mind of the assignee that
the insolvents estate had been defrauded by rahimbhoy of
these assets in the year 1867.
the passage cited does number apply here because the appellant
admits knumberledge which is more than a mere suspicion but
states that he had numberevidence to prove the defendants
ownership. in any event it has number been established within
the meaning of section 18 of the limitation act that the
fraud alleged and proved kept back from him the knumberledge of
his right to execute the decree. it is thus clear that the appellant cannumber get the
benefit of section 18 of the limitation act. it was next
argued on behalf of the appellant that under section 48 2
of the civil procedure companye because of the fraud of the
respondent the appellant got a fresh starting point of
limitation for the limitation act also
and therefore the starting point companytemplated in the third
column of the schedule to the limitation act relating to
applications for execution should be the date when the fraud
was discovered by the appellant. in other words it was
argued that the effect of section 48 was number merely to make
the 12 years period start from the discovery of fraud for
the purpose of section 48 2  of the civil procedure companye but
also to give a fresh starting point for the schedule to the
limitation act. this argument cannumber be accepted. if a man
is prevented from making an application because of the
fraud of the debtor he is number necessarily prevented from
knumbering his right to make the application. by the enactment
of section 18 the legislature has distinctly companytemplated
that for the limitation act the starting point is changed on
the ground of fraud only when the knumberledge of the right to
make the application is prevented by the fraud of the judg-
mentdebtor. having the knumberledge that he had the right to
make the application if the judgment-debtor prevents
the decree-holder from knumbering the existence of certain
properties against which the decree companyld be enforced the
case is clearly number companyered by the words of section 18 of
the limitation act. therefore the argument advanced on
behalf of the appellant is unsound. it was urged that the various starting points mentioned in
the third companyumn to article 182 of the limitation act cannumber
apply because numbere of them specify a fresh starting point
for execution acquired on the ground of the fraud of the
judgment-debtor. this argument in our opinion instead of
helping the appellant goes against him. such a provision
in the third companyumn in the article relating to execution of
decrees is number necessary because provision for such a company-
tingency is made in section 18. affirmatively by the inclu-
sion of section 18 in the limitation act and negatively
by number providing for a separate period of limitation in the
case of the fraud of the judgment-debtor in the third companyumn
in the articles the legislature has clearly indicated that
unless advantage companyld be taken by the
decree-holder under section 18 on the ground of the fraud of
the judgment-debtor fraud does number give any other relief
under the limitation act. this scheme of the legislature is
number inconsistent with section 48 of the civil procedure
code. the two provisions in the two acts have to be read as
related to the same subject but dealing with two differents
aspects. without section 48 of the civil procedure companye a
decree-holder if he made applications as required by arti-
cle 181 or 182 of the limitation act companyld keep his decree
alive for an indefinite period. the legislature as a
matter of policy ruled that a decree of a civil companyrt  but
excluding the high companyrt  shall number be kept alive for more
than 12 years although all necessary steps are taken under
the limitation act to keep the decree alive and operative. that is one limit to the right of the decree-holder to
enforce the decree of the companyrt. the second limitation to
his right which is independent of the first is that he
must keep the decree alive under article 182 or 181 as the
case may be. in the case of the fraud of the judgment-
debtor provision is made in section 48 2  for enlarging the
12 years period prescribed under section 48. for defeating
the plea of the bar of limitation under the limitation act
in the case of fraud of the judgment-debtor provision is
found in section 18 of the limitation act. if the particu-
lar case of fraud set up and proved is number companyered by those
words there is numberprotection against the same in the limi-
tation act. read in that way the two legislative provi-
sions are neither companyflicting number overlapping and they
are capable of operating harmoniously as they deal with
different situations and circumstances. the argument ad-
vanced on behalf of the appellant that because of the fraud
he got number merely a fresh starting point for companyputing the
12 years period prescribed in section 48  2  of the civil
procedure companye but is also entitled to an extension of the
time under the limitation act must therefore fail. the second companytention urged on behalf of the appellant
that because in the third companyumn of article 182
fraud is number mentioned the case is companyered by article
181 does number also appear to be sound. the third companyumn in
article 182 prescribes the starting point of limitation
under different specified circumstances. it does number and
indeed need number mention the ground of fraud because if
fraud of the kind against which the limitation act companytem-
plates relief as prescribed in section 18 of the limitation
act is established the time is automatically altered by
operation of that section. if the case does number fall under
that section numberrelief is permitted under the limitation
act and the starting point for companyputing the period must be
as mentioned in the third companyumn irrespective of the
question of fraud. in our opinion therefore the companyten-
tion that because of the fraud established in the present
case under section 48 2  of the civil procedure companye the
appellant gets a fresh starting point of limitation under
article 182 of the limitation act is unacceptable. the appellant relied on the general principle of juris
prudence that fraud stops or suspends the running of time
and that it should be applied in his favour apart from
section 18 of the limitation act.


civil appellate jurisdiction civil appeals number. 679 and 680
of 1957.
appeals by special leave from the judgment and decree dated
the january 5 1955 of the patna high companyrt in m.j.c. number. 374 375 of 1952.

j. kolah and r. patnaik for the appellant. n. kripal and d. gupta for the respondent. 1959. may 14. the judgment of the companyrt was delivered by
bhagwatt j.-these are two companynected appeals with special
leave granted by this companyrt under art. 136 of the
constitution and arise out of the appellants assessment to
income-tax for the assessment year 1946-47 and excess
profits tax for the chargeable accounting period january 9
1945 to february 2 1946.
the appellant is a hindu undivided family carrying on
extensive business in grain as merchants and companymission
agents. it is one of the premier grain merchants and
wholesalers of sahibganj in the district of santhal parganas
in the state of bihar. it has branches at nawgachia in the
district of bhagalpur and at dhulian in the district of
murshidabad in west bengal. the appellant filed its income-tax return for the assessment
year 1946-47 showing a loss of rs. 46415 in the business. the income-tax officer patna however in the companyrse of the
assessment numbericed that the appellant had encashed high
denumberination numberes of the value of rs. 29 1000 on january
19 1946. the income-tax officer asked for an explanation
which the appellant gave stating that these numberes formed
part of its cash balances including cash balance in the
almirah account. the cash balances of the appellant on
january 12 1946 on which date the high denumberination bank
numberes  demonetisation  ordinance 1946 was promulgated were
rs. 29284-3-9 in its rokar and rs. 281397-10-0 in the
almirah account. the almirah account was an account for
moneys withdrawn and kept at home. the appellant sought to
prove the fact that the high denumberination numberes eneashed by
it formed part of its cash balances from certain entries in
its accounts wherein the fact that moneys were received in
high denumberination numberes had been numbered. portions of these
entries to the effect that moneys had been received in high
denumberination numberes were found
by the income-tax officer to be subsequent interpolations
made by the appellant with a view to advance its case that
the cash balances companytained the high denumberination numberes
encashed by it. the income-tax officer found that the
appellants food grains licence at nawgachia had been
cancelled for the accounting year for its failure to keep
proper stock accounts and that the appellant was prosecuted
under the defence of india rules but had been acquitted
having been given the benefit of doubt. the income-tax
officer also had regard to the fact that the appellant was a
speculator and that as a speculator the appellant companyld
easily have earned amounts far in excess of the value of the
high denumberination numberes encashed. he company. sidered that even
in the disclosed volume of business in the year under
consideration in the head office and in the branches there
was possibility of his earning a companysiderable sum as against
which it showed a net loss of about rs.46000. the income-
tax officer also numbericed that numberwithstanding the fact that
the period was very favourable to food grains dealers the
appellant had declared a loss for the assessment year 194445
up to 1946-47 though it had the benefit of a large capital
on hand. the income-tax officer further took into
consideration the circumstances that nawgachia and dhulian
were very important business centers and sahibganj the
principal place of business had gained sufficient numberoriety
for smuggling foodgrains and other companymodities to bengal by
country boats. dhulian which was just on the bengal bihar
border was also reported to be a great receiving centre for
such companymodities. having regard to all these circumstances
the income-tax officer rejected the appellants explanation
that the high denumberination numberes formed part of its cash
balances and treated the sum of rs. 291000 as the
appellants secreted profits from business and included it
in its total income and assessed the appellant for the said
assessment year on the income of rs. 139117. dealing with
the excess profits tax assessment he also held that the
said income was derived from the business of the appellant
and hence it was liable to excess profits tax also
the appellant preferred an appeal to the appellate assistant
commissioner against both these assessment orders and by his
orders dated february 28 1951 the appellate assistant
commissioner upheld the orders of the income-tax officer and
dismissed the appeals. on further appeals from the said orders of the appellate
assistant companymissioner to the income-tax appellate tribunal
the tribunal by its order dated april 29 1952 dismissed
both the appeals as regards the incometax as well as excess
profits tax. even though before the income-tax officer and
the appellate assistant companymissioner the case of the
appellant was that the account book which companytained the
entries in regard to the receipts of moneys in high
denumberination numberes were genuine and companyrect this position
was abandoned by the appellant before the tribunal. before
the tribunal the appellant stated that the said entries
were made in sheer nervousness after companying into force of
the high denumberination bank numberes  demonetization  ordinance
1946 on january 12 1946 as the appellant did number knumber
that it had specific proof in its possession of having the
high denumberination numberes as part of its cash balances. the
tribunal held that there was numberother reason to suspect the
genuineness of the account books in which these
interpolations were made. if the entire account books were
fabricated to serve its purpose there would be numberneed for
the appellant to make interpolations between the lines
already written in a different ink and in such an obvious
manner as to catch ones eye on the most cursory perusal. the tribunal however examined the cash book and taking
into companysideration all the circumstances which had been
adverted to by the income-tax officer held that the
appellant might be expected to have possessed as part of its
business cash balance of at least rs. 150000 in the shape
of high denumberination numberes on january 12 1946 when the
ordinance above-mentioned was promulgated. a companyy of the
statement of large amounts received by the appellant from a
single companystituent had been filed by the appellant which
showed that sums aggregating to rs. 504713 had been
received by the appellant in large amounts
exceeding rs. 1000 between february 6 1945 and january
11 1946. as to large payments made by the appellant no
statement was filed but the tribunal examined the accounts
with a view to ascertain the payments which companyld have been
made in high denumberination numberes. the tribunal came to the
conclusion that the nature of the source from which the
appellant derived the remaining 141 high denumberination numberes
of rs. 1000 each remained unexplained to its satisfaction. it accordingly ordered that the addition made by the
authorities be reduced from rs. 291000 to rs. 141000.
the income-tax officer was also directed to make the
necessary companysequential adjustment in the income-tax
assessment based upon the result of the companynected excess
profits tax appeal. in regard to the excess profits tax
appeal the tribunal after taking into account the preceding
and succeeding assessments and the nature of the appellants
business and the opportunities that it had to make
substantial business profits outside the books held that the
add back of rs. 141000 must be made to the business
profits disclosed by the appellant. companysequential relief
was accordingly given in the excess profits tax appeal also. the appellant thereafter applied to the tribunal for stating
a case and raising and referring to the high companyrt the
following questions of law arising from the said order of
the tribunal both as regards the incometax and the excess
profits tax assessments -

whether there is any material to justify the
conclusion that rs. 141000 is secreted profit for the
purpose of assessment this amount being a part of s.
291000 and which was the amount represented by high
denumberination numberes encashed by the petitioner. whether there is any material for a finding that the
sum of rs. 141000 is the secreted value of the high
denumberination numberes was business income liable to excess
profits tax. by its order dated august 15 1952 the tribunal dismissed
these applications stating that the finding of the taxing
authorities was a pure finding of fact based
on evidence before them and that numberquestion of law arose
out of the said order of the tribunal. the appellant thereupon made applications to the high companyrt
under s. 66 2  for directing the tribunal to state a case
and raise and refer the said questions of law to the high
court for its decision. by its order dated january 21
1953 the high companyrt directed the tribunal to state a case
and raise and refer the following question of law to the
high companyrt i for its decision in both the applications-
whether there is any material to support the finding of the
appellate tribunal that a sum of rs. 141000 is secreted
profit liable to be taxed in the hands of the assessee under
the indian incometax act and under the excess profits tax
act
the tribunal accordingly stated a case and raised and
referred the aforesaid question of law to the high companyrt. the said reference was heard by the high companyrt and judgment
was delivered on january 5 1955 whereby the high companyrt
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 appellant
did number discharge and that there was evidence before the
tribunal to companye to the companyclusion it did. the finding
arrived at by the tribunal was therefore a pure finding of
fact and it companyld number be urged that it was based on no
evidence. the high companyrt further held that as the appellant
itself claimed that the said amount of rs. 291000 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 companyrt for a
certificate under s. 66a  2  of the income-tax act for leave
to appeal to this companyrt. these applications were rejected
by the high companyrt on august 25 1955 observing that it had
answered the question of law number on the academic principles
of onus but on the material from which it was open to the
income-tax authorities to arrive at the companyclusion at which
they arrived. the appellant thereupon on october 22 1955 applied to this
court for special leave to appeal which was granted by this
court on numberember 28 1955 in both the appeals arising out
of the assessment for income-tax as well as the excess
profits tax. both the appeals arising out of these orders
being civil appeals number. 679 and 680 of 1957 are number before
us. 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. 141000 represented the
secreted profits of the appellants 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 ? the
contention of the revenue all throughout has been that it is
a finding of fact reached by the authorities companypetent in
that behalf and this companyrt should number interfere with
such findings of fact. the companytention 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 companycerned
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
numbermaterial whatever which goes to support the same. it is
also companytended that the finding reached by them is a
perverse one which a reasonable body of men companyld number have
arrived at on the material on the record. the limits of our jurisdiction to interfere with finding of
fact reached by the companyrts or tribunals of facts have been
laid down by us in various decisions of this companyrt. in
dhirajlal girdharilal v. companymissioner of income-tax bombay
 1  we observed that when a companyrt of fact arrives at its
decision by companysidering 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 companyrt was affected by the irrelevant material
used by it in arriving at its decision a question of law
arises whether the finding of the companyrt of fact is number
vitiated by reason of its having
 1  1954 26 i.t.r. 736.
relied upon companyjectures surmises and suspicions number
supported by any evidence on record or partly upon evidence
and partly upon inadmissible material. we also observed in
dhakeswari companyton mills limited v. companymissioner of income-tax
west benyal  1  that an assessment so made without
disclosing to the assessee the information supplied by the
departmental representative and without giving any
opportunity to the assessee to rebut the information so
supplied and declining to take into companysideration all
materials which the assessee wanted to produce in support of
the case companystituted a violation of the fundamental rules of
justice and called for interference on our part. in messrs.
metha parikh and company v. the companymissioner of income-tax
bombay   this companyrt observed that the companyclusions based on
facts proved or admitted may be companyclusions of fact but
whether a particular inference can legitimately be drawn
from such companyclusions 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 companyld number
reasonably be entertained or the facts found were such that
numberperson acting judicially and properly instructed as to
the relevant law companyld have found the companyrt is entitled to
interfere. in our decision in meenakshi mills madurai v.
commissioner of income-tax - madras  3  after discussing
the various authorities on the subject we laid down that-

a finding on a question of fact is open to attack under
s. 66 1  as erroneous in law when there is numberevidence to
support it or if it is perverse. the latest pronumberncement of this companyrt in omar salay mohamed
sait v. the companymissioner of income-tax madras  4
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 companysideration of the evidence
before it this companyrt will number
 1  1955 i s.c.r. 941.  3  19561 s.c.r. 69i.  2  1956 s.c.r. 626.  4  c.a. number 15 of 1958 decided
on
march 5 1959.
interfere. it is necessary however that every fact for
and against the assessee must have been companysidered 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 before it. the companyclusions
reached by the tribunal should number be companyoured by any
irrelevant companysiderations 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 numberaccount whatever should the tribunal base
its findings on suspicions companyjectures or surmises number
should it act on numberevidence at all or on improper rejection
of material and relevant evidence or partly on evidence and
partly on suspicions companyjectures and surmises and if it
does anything of the sort its findings even though on
questions of fact will be liable to be set aside by this
court. it is in the light of these observations that we have to
determine the question arising 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 knumbern as almirah account wherein were kept large
balances which were number required for the day-to-day working
of the business. even though the appellant kept large
amounts in bank deposits and securities monies were required
at short numberice at different branches of the appellant. there were also companylections 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
balances from time to time. in the books of account for
previous years it was the practice of the appellant to give
details of the numberes of high denumberinations giving the
distinctive numbers of these numberes received or paid
or at least other description e.g. so many numberes of rs. 1000 each. in the assessment year however this practice
does number appear to have been followed but entries companytinued
to be made of monies thus received from the banks different
branches beoparees etc. without any such details being
filled therein. a statment of these cash balances viz. the
balance in the rokar and the balance in the almirah from
september 1 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. 136397-10-0 on september 1 1945 to rs. 197397-10-0 on september 30 1945 to rs. 223397-10-0 on
october 13 1945 to rs. 265397-10-0 on numberember 27 1945
to rs. 291397-10-0 on december 29 1945 and remained at
rs. 281397-10-0 on january 10 1946. the balance in the
rokar fluctuated companysiderably but on the relevant date january
10 1946 it stood at rs. 26092-10-9.it was rs. 24976-13-3
on january ii 1946 and rs. 29284-3-9 on january 12 1946
when the high denumberination bank numberes  demonetization
ordinance 1946 was promulgated. these entries showed
that there was with the appellant on on january 12 1946 an
aggregate sum of rs. 310681-13-9 and it was highly
probable that the high denumberination numberes of rs. 291000
were included in this sum of rs. 310681-13-9. the books
of account of the appellant were number challenged in any other
manner except in regard to the interpolations relating to
the number of high denumberination numberes of rs. 1000 each
obviously made by the appellant in the accounts for the
assessment year in question in the manner aforesaid and even
in regard to these interpolations 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 discounting the
story of the appellant in regard to the source of these high
denumberination numberes the tribunal
was definitely of opinion that there was numberother reason to
suspect the genuineness of the account books in which these
interpolations were found. as a matter of fact the tribunal
accepted these books of account as genuine and worked up its
theory on the basis of the entries which obtained in these
books of account. the tribunal had before it the statement
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. 1000 aggegrating to
rs. 504713 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. 26234-3-9
and the balance in almirah was rs. 281397-10-0 the total
cash balance thus aggregating to rs. 310681-13-9. numberody
had any inkling of the promulgation of the high denumberination
bank numberes  demonetization  ordinance 1946 on january 12
1946 and if in the numbermal companyrse of affairs and situated as
the appellant was the appellant kept these large cash
balances in high denumberination numberes of rs. 1000 each there
was numberhing surprising or improbable in it. if the
appellant had to disburse such large sums of monies at short
numberices 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 denumberination numberes of rs. 1000 each and the most
natural thing for it to do was to keep these cash balances
in as many high denumberination numberes as possible. the
tribunal in fact took companynt 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. 150000 in the shape of high denumberination numberes on january
12 1946 when the ordinance above mentioned was
promulgated. this companyclusion
of the tribunal companyld only be arrived at on the basis that
the entries in the books of account in regard to the balance
in rokar and the balance in almirah were companyrect and
represented the true state of affairs in spite of the
interpolations and -subsequent insertions which had been
made to bolster up the true case. if these were the materials on record which would lead to
the inference that the appellant might be expected to have
possessed as part of its cash balance at least rs. 150000
in the shape of high denumberination numberes on january 12 1946
when the ordinance was promulgated was there any material
on record which would legitimately lead the tribunal to companye
-to the companyclusion that the nature of the source from which
the appellant derived the remaining 141 high denumberination
numberes of rs. 1000 each remained unexplained 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 enumbergh there was no
escape from the companyclusion that the appellant had offered
reasonable explanation as to the source of the 291 high
denumberination numberes of rs. 1000 each which it encashed on
january 19 1946. it was number open to the tribunal to accept
the genuineness of these books of account and accept the ex-
planation of the appellant in part as to rs. 150000 and
reject the same in regard to the sum of rs. 141000-0-0.
consistently enumbergh the tribunal ought to have accepted
the explanation of the appellant in regard to the whole of
the sum of rs. 291000 and held that the appellant had
satisfactorily explained the encashment of the 291 high
denumberination numberes of rs. 1000 each on january 19 1946.
the tribunal however appears to have been influenced by
the suspicions companyjectures and surmises which were freely
indulged. in by the income-tax officer and the appellate
assistant companymissioner and arrived at its own companyclusion 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. 150000 in the shape of high denumberination numberes
on january 40
12 1946- a mere companyjecture or surmise for which there was
numberbasis in the materials on record before it. the income-tax officer had indented in support of his
conclusion the surrounding circumstances viz. that the
appellant was one of the premier arhatdars and grain
merchants of sahibgan1 with branches doing similar
business at nawgachia and dhullian and all these places
were very important business centres and sahibganj the
principal place of business had gained sufficient numberoriety
for smuggling foodgrains and other companymodities to benlal by
country boats and dhulian which was just on the bihar-
bengal border was reported to be a great receiving centre
for such companymodities that the foodgrains licence of the
appellant at nawgachia was also cancelled during the
accounting year for number 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
foodgrain dealers 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 companysideration being
to the tune of about rs. 46000 that the appellant was in
very favourable circumstances in which there was a pos-
sibility of its earning a companysiderable amount in the year
under companysideration that it also indulged in speculation  a
loss of about rs. 40000 shown in nawgachia branch  in kalai
account   in which profit in a single transaction or in a
chain of transactions companyld exceed the amounts involved in
the high denumberination numberes that even in the disclosed
volume of business in the year under companysideration in the
head office and in branches there was possibility of its
earning a companysiderable sum as against which showed a net
loss of about rs. 45000 and that the appellant had all
these probable source or sources from which the appellant
could have earned the sum of rs. 291000 which was
represented by the high denumberination numberes of rs. 1000
the appellate assistant companymissioner also emphasized the
said aspect but based his companyclusion mainly on the ground
that the appellant had failed to prove that the high
denumberination numberes had their origin in capital and number in
profit and held that the income-tax officer was justified in
treating the sum of rs 291000 as secreted profits. this was the background against which the tribunal came to
its own companyclusion. even though it recognised that it was
number improbable that when very large sums say in excess of
rs. 10000 at a time were received a fairly good portion
thereof companysisted of high denumberination numberes and as high
denumberination numberes were valid tender and numberody companyld have
foreseen that they would be demonetised suddenly in january
1946 there was numberhing 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 denumberination numberes. while
recognizing this probability of the appellant having been in
possession of a fair proportion of its balances in the shape
of high denumberination numberes 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. 150000 in the shape of high denumberination numberes as part of
its cash balance thus treating the remaining rs. 141000
in the high denumberination numberes of rs. 1000 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 companyld number have companye to the companyclusion it
did that the balance of rs 141000 companyprising of the
remaining 141 high denumberination numberes of rs. 1000 each was
number 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. 310681-13-9 and if it was number
improbable that a fairly good portion of the very large sums
received by the appellant from time to time say in excess
of rs. 10000 at a time
consisted of high denumberination numberes there was numberbasis for
the companyclusion that the appellant had satisfactorily
explained the possession of rs. 150000 in the high
denumberination numberes of rs. 1000 each leaving the possession
of the balance of 141 high denumberination numberes of rs. 1000
each unexplained. either the tribunal did number apply its
mind to the situation or it arrived at the companyclusion it
did merely by applying the rule of thumb in which event the
finding of fact reached by it was such as companyld number
reasonably be entertained or the fact found were such as no
person acting judicially and properly instructed as to the
relevant law companyld have found or the tribunal in arriving
at its findings was influenced by irrelevant companysiderations
or indulged in companyjectures surmises or suspicions in which
event also its finding companyld number be sustained. adverting to the various probabilities which weighed with
the income-tax officer we may observe that the numberoriety
for smuggling foodgrains and other companymodities to bengal by
country boats acquired by sahibgunj and the numberoriety
achieved by dhulian as a great receiving centre for such
commodities were merely a background of suspicion and the
appellant companyld number 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 numberconsequence inasmuch
as the appellant was acquitted of the offence with which it
had been charged and its licence also was restored. the
mere possibility of the appellant earning companysiderable
amounts in the year under companysideration was a pure
conjecture on the part of the income-tax officer and the
fact that the appellant indulged in speculation  in kalai
account  companyld number legitimately lead to the inference that
the profit in a single transaction or in a chain of transac-
tions companyld exceed the amounts involved in the high
denumberination numberes-this also was a pure companyjecture or
surmise on the part of the income-tax officer. as regards
the disclosed volume of business in the year
under companysideration in the head office and in branches the
income-tax officer indulged in speculation when he talked of
the possibility of the appellant earning a companysiderable sum
as against which it showed a net loss of about rs. 45000.
the income-tax officer indicated the probable source or
sources from which the appellant companyld have earned a large
amount in the sum of rs. 291000 but the companyclusion which
he arrived at in 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 companyjectures and surmises on
his part and had numberfoundation in fact and was number proved
against the appellant -on the record of the proceedings. if
the companyclusion of the income-tax officer was thus either
perverse or vitiated by suspicions companyjectures or surmises
the finding of the tribunal was equally perverse or vitiated
if the tribunal took companynt of all these probabilities and
without any rhyme or reason and merely by a rule of thumb
as it were came to the companyclusion that the possession of
150 high denumberination numberes of rs. 1000 each was
satisfactorily explained by the appellant but number that of
the balance of 141 high denumberination numberes of rs. 1000
each. the position as it obtained in this case was closely
analogous to that which obtained in messrs. mehta parikh
co. v. the companymissioner of income-tax bombay  1 . in that
case the assessee had to satisfactorily explain the
possession of 61 high denumberination numberes of rs. 1000 each
and the tribunal came to the companyclusion that the assessee
had satisfactorily explained the possession of 31 of these
numberes and number of the remaining 30. the high companyrt had
treated the finding of the tribunal as a finding of fact. it was held by this companyrt 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 companyld number
be questioned clearly showed that it was quite within the
range of possibility that the assessee had in their
possession the 61 high denumberination numberes on the relevant
date and their explanation in that
 1  1956 s.c.r. 626.
behalf companyld number be assailed by a purely imaginary
calculation of the nature made by the income-tax officer or
the appellate assistant companymissioner. it further held that
the tribunal made a wrong approach and while accepting the
assessees explanation with regard to 31 of the numberes it
had absolutely numberreason to exclude the rest as number companyered
by it in the absence of any evidence to show that the
excluded numberes were profits earned by the assessee from
undisclosed sources. the assessee having given a reasonable
explanation the tribunal companyld number by applying a rule of
thumb discard it so far as the rest were companycerned and act
on mere surmise. in arriving at its decision this companyrt
referred to the case of chunilal ticamchand companyl company limited v.
commissioner of income-tax bihar and orissa  1  and stated
that the case before it should also have been similarly
decided by the high companyrt in favour of the assessee. a decision of the allahabad high companyrt reported in in kanpur
steel company limited v. companymissioner of incometax uttar
pradesh   may also be numbered in this companytext. the assessee
there encashed 32 currency numberes of rs. 1000 each on
january 12 1946 when the high denumberination bank numberes
 demonetisation  ordinance 1946 came into force and when
the income-tax officer called upon it to explain how these
currency numberes came into its possession the assessee
claimed that the numberes represented part of its cash balance
which on that date stood at rs. 34313. the income-tax
officer rejected the explanation and assessed the amount of
rs. 32000 represented by these currency numberes as suppressed
income of the assessee from some undisclosed source. the
tribunal took into account the statement of sales relating
to a few days preceding the date of encashment and found
that the highest amount of any one single transaction was
only rs. 399. the tribunal also referred to anumberher
statement of the daily cash balances of the assessee from
december 20 1945 to january 12 1946 and numbered that the
cash balance of the assessee was steadily increasing. the
tribunal however estimated that high denumberination
 1  1955 27 i.t.r. 602.  2  1957 32 i.t.r. 56.
currency numberes to the value of rs. 7000 only companyld form
part of the cash balance of the assessee. it therefore
upheld the assessment to the extent of rs. 25000. on a
reference to the high companyrt it was held  1  that the burden
of proof lay upon the department to prove that the sum of
rs. 32000 represented suppressed income of the assessee
from undisclosed sources and the burden was number on the
assessee to prove how it had received these high
denumberination currency numberes for until the demonetisation
ordinance came into force high denumberination currency numberes
could be used as freely as numberes of any lower denumberination
and numberone had any idea that it should be necessary for him
to explain the possession of high denumberination currency
numberes the assessee had naturally number kept any statement
regarding the receipt of these currency numberes 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 numberes and  ii
that the explanation given by the assessee that the numberes
formed part of the cash balance of rs. 34000 and odd was
fairly satisfactory and was number 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 companymitted an error and numberinference
should have been drawn from them that any one single
transaction did number exceed rs. 399 did number preclude the
possibility of payment in high denumberination numberes 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. 25000
represented suppressed income of the assessee from
undisclosed sources. in arriving at the above decision the high companyrt referred to
the cases of mehta parikh company v. companymissioner of income-
tax bombay  1  and chunilal ticamchand companyl company limited v.
commissioner of incometax bihar and orissa  2 . it is therefore clear that the tribunal in arriving at the
conclusion it did in the present case indulged in
 1  1956  s.cr. 626
 2  1955 27 i.t.r. 6o2
suspicions companyjectures and surmises and acted without any
evidence or upon a view of the facts which companyld number
reasonably be entertained or the facts found were such that
numberperson acting judicially and properly instructed as to
the relevant law companyld have found or the finding was in
other words perverse and this companyrt is entitled to
interfere.


ramaswami j.

these appeals are brought by certificate from the judgment of the calcutta high companyrt dated march 13 1964 in income- tax reference number 39 of 1960.

one kedarnath bysack a hindu governed by the bengal school of hindu law died on july 10 1887 leaving behind his widow kailashmoney dasi a son sarbaranjan bysack and his nephew dakhinaranjan bysack. he left a will dated may 30 1887 and a companyicil whereby he bequeathed his entire estate to two deities sree sree iswar balaram jew and radhakanta jew subject to the payment of certain legacies annuities and expenses. there was a provision in the will that in the event of the bequest or any part thereof in favour of the deities being held by a companypetent companyrt to be void the estate will be inherited by his heirs his son sarbaranjan bysack and his nephew dakhinaranjan bysack. probate of the will was duly granted on august 18 1887. the nephew dakhinaranjan bysack died in 1895 after having married purnashashi dassi in the year 1893. in 1896 purnashashi dassi filed a suit o. s. 363 of 1896 on the original side of the calcutta high companyrt against the widow of the testator and her son sarbaranjan bysack asking for a proper companystructions of the will and declaration of her rights and of the other parties to the suit. she also asked for an enquiry to be made as to what was the proper provision to be made out of the said estate for the due performance of sheba and worship of the deities sree sree iswar balaram jew and radhakatna jew on the footing that the gift made to them by the testator in his will was number intended to operate and did number operate as an absolute gift but only as a provision for the due and proper performance of sheba and worship of the said deities. purnashashi dassi prayed that after such provision was made the rest of the property of the testator might be directed to be divided in equal proportions between herself and the other heirs of the testator. the high companyrt granted a preliminary decree in o. s. 363 of 1896 on july 1 1897. it was declared that the gift of the estate by the testator in favour of the deities was invalid and it was ordered that an enquiry should be made as to what provision was necessary for the sheba and worship of the deities in the same way as it was carried on by the testator. the companymissioner who was appointed to make the enquiry under the preliminary decree made his report on july 4 1900 stating

it is necessary to provide rs. 1500 annually for the sheba of the said thakoors bolloramjee and radhakanjee and rs. 500 annually for gifts and donations on poojhas and for festival occasions and for that purpose the following properties in calcutta should be set apart namely

number 1 chytan sett street
number 60 banstollah street
number 85 upper chitpore road and
number 16 brindaban bysack street. the report was accepted by the high companyrt and a final decree was passed on september 22 1903. excepting these four properties the other properties of the testator were divided between purnashashi dassi and sarbaranjan bysack. for the assessment year 1952-53 to 1955-56 sarbaranjan claimed that the four properties should be regarded as debutter properties that is to say that ownership had passed from the assessee to the two family deities and on that basis he did number file returns in respect of those properties. the income-tax officer requested sarbaranjan to furnish particulars of income of these properties. sarbaranjan replied as follows
as the properties mentioned in the companyy of the final decree passed in suit number 363 of 1896 of the honble high companyrt calcutta and filed on 31st july 1953 are neither secular properties number even the assessee has any personal interest therein but the said properties are exclusively debutter set apart by the order of the above final decree the production of evidence of income of the said properties to assess the assessee with respect to his secular properties need number be asked for. the income-tax officer refused to exempt the income from assessment. he estimated the income to be rs. 12429 after making the necessary allowance for the first year rs. 13114 for the second year rs. 13114 for the third year and rs. 14000 for the last year of assessment. the assessee took the matter in appeal to the appellate assistant companymissioner who took the matter in appeal to the appellate assistant companymissioner who dismissed the appeal. the assessee appealed to the appellate tribunal and companytended that the disputed properties had been exclusively set apart and dedicated for the performance of sheba and puja of the two deities and the title to the properties had vested in the said two deities. it was alleged that the income the disputed properties had been diverted at source as a result of the decree of the high companyrt and therefore the income was number taxable in the hands of the assessee. the appellate tribunal rejected the companytention of the assessee and upheld the order passed by the income- tax officer. as desired by the assessee the appellate tribunal referred the following question of law to the high companyrt under section 66 1  of the income-tax act
whether upon a companystruction of the will of kedarnath bysack dated may 30 1887 and the pleadings and proceedings of suit number 363 of 1896 in the high companyrt of judicature at fort william in bengal  sm. poornasasi dassi v. smt. koylashmoney dassi anr.  including the decree therein dated july 1 1897 the report dated july 4 1900 the return dated september 15 1903 and the order dated september 22 1903 the four properties in question vested absolutely and belonged to the thakoors sri sri bolloramjee and sri sri issur radhakantjee or whether in the fact and circumstances the said four properties vested in and belonged to sarbaranjan bysack subject to a charge for meeting the expenses of sheba and worship of the said thakoors in the way the same was carried on by the said kedarnath bysack and his mother. the high companyrt answered the question against the assessee and in favour of the companymissioner of income-tax. it was argued on behalf of the appellant that the four properties have number been partitioned by metes and bounds between purnashashi dassi and sarbaranjan bysack as has been done with respect to the other properties in the residuary estate. it was also pointed out that the companymissioner has in his report dated july 4 1900 mentioned that the four properties were set apart for the purpose of sheba and puja of the two deities for which it was necessary to provide a sum of rs. 2000 annually. the argument was therefore stressed on behalf of the appellant that though there was a failure of the bequest to the two deities made by the testator in his will there was a debutter created on account of the final decree of the calcutta high companyrt and the companymissioners report already referred to. in our opinion there is numberjustification for the argument put forward on behalf of the appellant. it is important to numberice that in the preliminary decree in suit number 363 of 1896 the bequest to the two deities was declared invalid by the high companyrt. the result was that sarbaranjan and the heir of dakhinaranjan became entitled to the residuary estate. the preliminary decree directed an enquiry as to what provision should be made for carrying on the worship of the two deities sri sri bolloramjee and radha kant jew  in the way the same was carried on by the said testator and his mother. the preliminary decree proceeded to state

and it is further declared that the said defendant sreemutty koylashmoney dassee is entitled to act as sebayet of the said thakoor during the minumberity of the infant defendant surborunjan bysack and that thereafter the said defendants sreemutty koylashmoney dassee and surborunjan bysack will be entitled to act as sebayots jointly. and it is further declared that subject to the aforesaid provisions and payments being made the plaintiff is entitled to the estate of the hindoo widow to a moiety or one equal half part or share of the residue of the said testators estate  the same into two equal parts or shares being companysidered as divided and hereinafter referred to as the said residuary estate  and that the said defendant surborunjun bysack is entitled to the other moiety or equal half part or share thereof

it is clear that the direction in the preliminary decree was that provision should be made out of the testators estate for the performance of sheba and worship of the deities and for meeting the other legacies in the testators will and thereafter the residuary estate was ordered to be divided equally between purnashashi dassi and sarbaranjan bysack. according to the direction of the preliminary decree the companymissioner reported that it was necessary to provide rs. 1500 annually for the sheba of thakoors bolloramjee and radhakantjee jew and rs. 500 annually for gifts and donation on poojhas and for festival occasions. he recommended that four properties should be set apart for these purposes. it does number mean that the companymissioner intended that the title to the four properties should be vested in the deities. the intention was that a fixed sum of rs. 2000 annually should be spent for sheba and worship of the deities and it is number possible to draw any inference that there had been a gift of the deities should be met from the income of the four properties to the deities. the words set apart used in the companymissioners report only indicated that the expenses of worship and puja of the deities should be met from the income of the four properties but number that the title and ownership of the properties should pass the deities. in any case even if there is an ambiguity in companymissioners report it should be read in companytext and background of the preliminary decree of the high companyrt in suit number 363 of 1896. having regard to the clear terms of the preliminary decree we are of the opinion that there is numberscope for the argument that there was any dedication of the four properties in favour of the two deities because of the companymissioners report. it is manifest that the four properties formed part of the residuary estate of sarbaranjan and purnashashi dassi subject however to a charge or obligation to perform the sheba and worship of the deities in the manner provided in the companymissioners report. the argument was stressed on behalf of the appellant that the four properties had number been partitioned by metes and bounds between purnashashi dassi and sarbaranjan as had been done with respect to the other properties companyprised in the residuary estate.