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Judgment
Rajagopalan, J.—The question referred to this court was :
Whether on the facts and circumstances of this case, there is any material to support the estimate of the excess receipt of Rs. 42,000, by the
assessee on the sale of onions.
The assessee had his headquarters at Tuticorin. He had a branch at Colombo in Ceylon. The assessee used to export onions of his own to his
branch at Colombo for sale there. The assessee also used to export onions belonging to others for sale at his Colombo branch on a commission
basis. One of those for whom he exported onions in the year of account was his son-in-law, Sethuramalingam Pillai, who had his shop in Tinnevelly
and who traded under the vilasam of V. A. S. Arumugham Chettiar and Sons.
During the year of account, the assessee sold to the Ceylon Government through his branch at Colombo 4,699 cwts. of onion. That these were
sold at the controlled rates was not in dispute. During the year of account the assessee also sold in the open market 3,746 cwts. He claimed to
have sold the goods in the open market also at the controlled rates and showed the total receipts on that basis.
The Income Tax Officer was of the view that the assessee must have sold his goods in the open market at rates higher than the controlled rates,
and he added a sum of Rs. 42,000 to the gross receipt disclosed by the assessee in his books. That was confirmed on appeal by the Assistant
Commissioner and on further appeal, by the Tribunal.
The initial difficulty we experienced was to find out what exactly the finding of the departmental authorities and the Tribunal was. The Income
Tax Officer recorded :
I have, therefore, no hesitation in rejecting the assessees explanation and holding that the assessee too must have sold onions at the prevailing
market rates but has not accounted for the prices realised in excess of the controlled rate.
That would imply that the assessee, like other dealers similarly situate, had an opportunity of selling his goods at black market rates, but that
does not necessarily imply that he availed himself of that opportunity and did sell at prices in excess of the controlled rates. The Assistant
Commissioner recorded :
I am, therefore, satisfied that the appellant did realise extra amounts over and above the controlled rates on the sale of 3,287 cwts.
That, at any rate, was clear. But when the matter went up on appeal to the Tribunal, the Tribunal recorded, adopting the formula used by the
Income Tax Officer :
The assessee must have collected substantial extra prices over and above the controlled prices in Colombo, the whole of which he has suppressed.
In the statement of the case what the Tribunal recorded in paragraph 11 was :
The assessee must have collected substantial extra prices over and above the controlled prices in Colombo, the whole of which he has suppressed.
But this statement in paragraph 11 does not truly represented what the Tribunal recorded in paragraph 2 of its order on appeal. As we pointed
out, the Assistant Commissioner left one in no doubt as to what his finding was. He recorded that sales had taken place in excess of the controlled
price and that the assessee was in receipt of the excess sums. But that was certainly not the form in which either the Income Tax Officer or the
Tribunal recorded its views.
Apart from the difficulty of discovering what precisely the finding of the Tribunal was - and any express finding of fact of the Tribunal is certainly
binding on us - there is the further difficulty of discovering what exactly was the evidence on which an implied finding could be inferred that the
Tribunal took the view that the excess price of Rs. 42,000 had, in fact, been collected at Colombo. The statement recorded the details of some
transactions entered into by the Dharmaperumal Pillai, another assessee, who had also dealing in exporting onions for sale at Colombo. That
Dharmaperumal Pillai was able to sell at prices in excess of the controlled rates did not necessarily imply that the assessee also did break the law
by selling his goods at prices in excess of the rates fixed by the Government. There is no presumption in favour of any illegality of a transaction. In
fact, the presumption is the other way about. There must be evidence to show that the assessee did sell goods in excess of the controlled prices,
but such direct evidence there was none.
The other piece of evidence on which the Department and the Tribunal relied was that afforded by the transaction carried out at the Colombo
branch on behalf of the son-in-law of the assessee, Sethuramalingam Pillai, whose consignments of onions were eventually sold at Colombo. It was
also in evidence that one Lakshmana Pillai represented Sethuramalingam Pillai at Ceylon. It was admitted by the assessee that Sethuramalingam
Pillai consigned all his goods for sale only at the assessees shops at Colombo and that there were no sales of Sethuramanlingam Pillai outside the
assessees shop. It was further in evidence that the assessee sold those goods on commission and that the pattials that the assessees sent disclosed
sales only at the controlled rates, on which basis alone commission was paid to the assessee. But there was evidence which has been sent as
annexure A-2 which provide that Lakshmana Pillai sent an account of his principal Sethuramanlingam Pillai, which showed, among other things,
that on January 31, 1947, an excess price had been collected on sale of 407 bags of onions and on March 31, 1947, an excess price had been
collected on sale of 327 bags of onions. With reference to the sale of 407 bags the average worked out to Rs. 2-2-6 per cwt. and the excess price
on 327 bats of onions averaged Rs. 5-13-3 per cwt. In paragraph 6 of the statement of the case, details were given of certain sales of
Sethuramanlingam Pillais goods effected at Colombo partly by sales to Government and partly by sales in the open market through the branch
shop of the assessee. They do not tally with the sales recorded in annexure A-2. What however is more significant is that there was nothing in the
evidence to indicate that either on January 31, 1947, or on March 31, 1947, there were any sales of the assessees goods themselves at the shop in
Colombo. It may be permissible to argue that, if on January 31, 1947, 407, there were any sales of the assessees goods themselves at the shop in
Colombo. It may be permissible to argue that, if on January 31, 1947, 407 bags of Sethuramlingam Pillai had been sold at price in excess of the
controlled prices, it was very unlikely that sales of the assessees goods effected on the same day were at lower prices, the controlled prices. But,
as we pointed out, there was no evidence at all to show that the assessee had any transactions of his own either on January 31, 1947, or on March
31, 1947.
Thus, analysing the evidence in relation to the sales of Sethuramalingam Pillais goods, the position comes to this. Some of his goods were sold
to the Government and there was no difficulty about the prices realised. Some of the goods were sold in the open market and with reference to a
part of those sales Lakshmana Pillai certainly admitted realisation of excess prices. Whether those realisations were made through the assessees
branch shop at Colombo there was no evidence to show. The assessee himself accounted only for sales at controlled prices. Lakshmana Pillai
accounted to his principal Sethuramalingam Pillai for the excess amounts collected. Whether the excess amounts were by Lakshmana Pillai or
whether they were collected by the branch shop of the assessee at Colombo there was no evidence to show. In this state of the evidence it is
rather difficult to evidence to show. In this state of the evidence it is rather difficult to base any conclusion on the sales of some of Lakshmana
Pillais goods, that the assessees goods almost must have been sold in the shop at prices in excess of the controlled rates.
As we said, the finding of the Tribunal itself is not clear. Evidence to sustain any possibly finding by actual realisations it is difficult to discover
on the evidence on record. Sethuramalingam Pillais transactions have to stand by the themselves, and, in the absence of any connecting link they
may not serve any basis for finding out whether there were any actual realisations of excess prices on all the goods of the assessee sold in the open
market in the year of account. No doubt, if there had been any evidence what was the rate at which the excess price should be estimated would
arise for consideration. The average rate adopted by the Department, which was confirmed by the Tribunal, was Rs. 13 per cwt. We have already
pointed out that the transactions referred to in Lakshmana Pillais account in annexure A-2 disclosed Rs. 2-2-6 per cwt. on one transaction and Rs.
5-13-0 per cwt. on another transaction. Certain transactions of Dharmaperumal Pillai were shown in annexure C. The range was from Rs. 8-13-6
to Rs. 19-2-7 per cwt. and the average worked out of Rs. 12-6-0 per cwt. Here again we have to point out that even if every one of the dealers in
the onion market had an opportunity to sell onions above the controlled rate, what precisely was the excess amount realised with reference of the
same dealer on another occasion or on even the average of the transactions of any one given dealer. But this question on what basis the estimate
should be made does not arise for consideration; and estimating profits is certainly not within the jurisdiction of this court.
We have to answer the question referred to us in the negative and in favour of the assessee. The assessee will be entitled to the costs of this
reference. Counsels fee Rs. 250. Question answered in the negative.