Case Note & Summary
The dispute arose from the income tax assessment of an assessee for the assessment year 1948-49, relevant accounting year being calendar year 1947. The assessee, originally from Baroda, had migrated to Burma and carried on business in soap and umbrella. After the bombing of Burma in 1942, he came to India and stayed till 1946, then returned to Burma. In 1946 and 1947, the partnership firm's bankers remitted Rs. 5 lakhs and Rs. 2 lakhs respectively from Rangoon to Calcutta, credited to the assessee's account. The assessee used part of these remittances to purchase two properties in Calcutta in 1948 and 1949. In 1953, he filed a voluntary disclosure petition and nine voluntary returns for assessment years 1944-45 to 1952-53, disclosing incomes from Indian properties and Burma business. The Income Tax Officer initiated proceedings under Section 34(i)(a) and assessed the assessee as resident but not ordinarily resident for 1948-49 on a total income of Rs. 3,55,214, relying on his voluntary disclosure statements, affidavit, and property purchases. The Appellate Assistant Commissioner initially remanded the case, but after further enquiry, confirmed the assessment. The Tribunal set aside the assessment for 1947-48 but upheld it for 1948-49, holding that the assessee was resident but not ordinarily resident and that the remittances were from accrued profits. The Tribunal referred two questions to the High Court under Section 66(1): whether there was any material to hold the assessee a resident but not ordinarily resident, and whether the Rs. 2 lakh remittance was from accrued profits. The High Court answered both in favour of the Revenue. The assessee appealed to the Supreme Court. The Supreme Court examined Section 4A(a)(iii) of the Income-tax Act, 1922, which deems an individual resident if, having been in taxable territories for 365 days or more in the preceding four years, he is in India in the relevant year otherwise than on an occasional or casual visit. The Court found that the assessee had not stated the reason for his two-month visit to India in 1947 in his affidavit, nor claimed it was occasional or casual. The burden was on the assessee to prove the casual nature, and mere absence of business in India did not discharge this burden. The finding was essentially factual. On the remittance issue, the assessee failed to prove that the Rs. 2 lakhs did not represent business income; he did not produce account books despite opportunities. The complaint about the Tribunal ignoring photostat copies of account books was not raised in the Section 66(1) application, and the High Court rightly did not consider them. The Supreme Court dismissed the appeal, affirming the High Court's decision in favour of the Revenue.
Headnote
A) Income Tax - Residential Status - Section 4A(a)(iii) of Income-tax Act, 1922 - Assessee held resident but not ordinarily resident - Assessee must prove his visit to India in 1947 was occasional or casual; mere assertion of having no business in India during two months' stay did not discharge burden - The finding was essentially factual, based on assessee's failure to prove casual nature of visit, and was upheld by the Supreme Court. (Paras 1-3) B) Income Tax - Accrued Profits - Remittance of Rs. 2 lakhs from Burma - Assessee failed to prove remittance did not represent business income; burden of proof that remittance was not from accrued profits lay on assessee - Failure to produce account books despite opportunities allowed Revenue's inference of accrued profits; High Court rightly confirmed the Tribunal's finding. (Paras 4-5) C) Income Tax - Reference under Section 66(1) of Income-tax Act, 1922 - Photostat copies of account books not considered by High Court - New documents not raised in application under Section 66(1) could not be entertained; assessee did not take up any question regarding these documents; High Court justified in not considering them. (Paras 6-7)
Issue of Consideration
Whether the Tribunal had material to hold that the assessee was a resident but not ordinarily resident in the taxable territories for assessment year 1948-49 under Section 4A(a)(iii) of Income-tax Act, 1922; whether the Tribunal was justified in holding that the remittance of Rs. 2 lakhs from Burma to India was from accrued profits of earlier years.
Final Decision
The Supreme Court dismissed the appeal, affirming the High Court's decision in favour of the Revenue. The Court held that the assessee failed to prove his visit to India in 1947 was occasional or casual, and that the finding of residential status was essentially factual. The assessee also failed to prove that the remitted Rs. 2 lakhs did not represent business income, and the photostat copies of account books could not be considered because the issue was not raised under Section 66(1).
Law Points
- Burden of proving occasional or casual visit under Section 4A(a)(iii) of Income-tax Act
- 1922 lies on assessee
- mere assertion of no business in India does not discharge burden
- finding of residential status is essentially factual
- burden to prove remittance not from accrued profits lies on assessee
- failure to produce account books supports inference of accrued profits
- photostat copies of account books not considered when not raised in application under Section 66(1)
- High Court cannot entertain new factual grounds not raised before Tribunal.
