Holding

The burden of proof lies on the Revenue, and in the absence of material evidence that the amount was remitted by the assessee, the Tribunal’s finding was unreasonable and the reassessment was set aside.

Summary

The firm M/s Kishinchand Chellaram was reassessed for the year 1947-48 after the Income Tax Officer received information that Rs 1,07,350 had been telegraphed from its Madras office to Bombay in favour of a person named Nathirmal. The Officer repeatedly asked the assessee to explain the transaction but failed to disclose to it the bank manager’s letters on which the assessment was based. The assessee denied any such remittance; the bank’s application was later found to be signed by an employee, Tilok Chand, not by the firm. The Tribunal and the High Court held the amount to be concealed income of the assessee, but the Supreme Court held that the Revenue bore the burden of proving the remittance was made by the assessee and that no material evidence existed to support that finding. Consequently, the Court set aside the reassessment and allowed the appeal.

Issues considered

Whether there was material evidence to justify the finding that the amount of Rs 1,07,350 was remitted by the assessee and represented undisclosed income.
Who bears the burden of proof in a re‑opening of assessment under Section 34 of the Income‑Tax Act, 1922.
Whether the bank manager’s letters, not disclosed to the assessee, constitute admissible evidence under the Evidence Act.

Legislation cited

Income Tax Act, 1922s. 34

Subjects

re‑opening of assessmentburden of proofIncome Tax ActSection 34telegraphic transferemployee remittanceconcealed incomeEvidence ActhearsaySupreme Court

Judgment

720 .'
/

A

KISHINCHAND CHELLARAM
.A
v.
B
THE COMMR. OF INCOME-TAX BOMBAY CITY II, BOMBAY

September 16, 1980

[P. N. BHAGWATI AND E. S. VENKATARAMIAH, JJ.]
Re-opening of assessment-Re-opening made on a letter of the Bank Mana-
c ger addressed to the Income Tax Officer-Income-tax Act, 1922, section 34-
Evidence Act applicability of tax cases-Burden of proof on whom lies in cases
of re-opening of assessment.
The appellant firm M / s. Kishinchand Chellaram was assessed to tax for
the assessment year 1947-48, the relevant accounting year being .the year ending
6th April, 1947. The concerned Income Tax Officer on an information that
D a sum. of Rs. 1,07,350 purported to have been sent by the assessee by a
telegraphic transfer through the Punjab National Bank Ltd., Madras, to its
Bombay .Branch favouring one Nathirmal on 16-10-1946, has escaped assess-
ment, called upon the assessee, through his letters dated 24th February, 1955
and 4th March, 1955 to explain the same. The Income Tax Officer did not
refer to the letters dated 14th January, 1955 and 10th February, 1955 addressed
by him to the Bank Manager nor the reply of the Manager dated 18th February,
1955 in the said .two letters addressed to the assessee. Nor were the copies
E supplied to the assessee nor even madf~ available on record before all authorities
including the Supreme Court. The assessee through its letter dated 24th March,
1955 replied that as per its records no such remittance was ever sent by it
from Madras to Nathirmal in Bombay. On 2nd February, 1956, the Income
Tax Officer for the second time called the very same particulars to which the
assessee by its letter dated 9th February, 1956 once again denied the remittance
by it. Despite this, by his letter dated 4th March, 1957 addressed to the
F assessee, the Income Tax Officer repeated his earlier request to it to explain
about the remittance, complaining at the same time of silence by the assessee
to his letter dated 2nd February, 1956. The assessee in its reply dated 13th
March, 1957 while inviting attention to its earlier replies dated 24th March,
1955 & 9th February, 1956 reiterated that no amount of Rs. 1,07,350 was
remitted by it from Madras to Nathirmal. Disbelieving it, the Income Tax
Officer, by his order brought to tax the amount of Rs. 1,07 ,350 on the ground
that it represented the concealed income of the assessee and observed that
G "there was no reason to doubt the banker's st;itement that the amount was
remitted by M / s. Kishinchand Chellaram from Madras".
The assessee preferred an appeal to the Assistant Appellate Commissioner.
At this stage, it· came to light that the purported telegraphic transfer was applied
for by one "Tilok Chand C/o M/s. K. Chellaram, 181, Mount Road, Madras"
and it was received at Bombay by one ·"N.B. Bani". In spite of the plea of
H the asse5see that the transaction did not relate to its firm, the Assistant Appellate
KISHINCHAND. CHELLARAM ·v.:C.I.T•. (Bhagwati, J.) 7,21

'"-· -Commissioner holding that the assessee has not discharged the burden of proof
,lying on it to explain the amount, rejected the appeal. Further :ippeal to the
Tribunal and. a reference called for by the 'High Court at the instance of the
assessee was also answered against it. Hence the appeal after obtaining special
foave of the Court.
Allowing the appeal, the Court,
HELD : (I) There was no material evidence at ail on the basis of which B
the Tribunal could come to the finding that the amount of Rs. 1,07,350 was
·remitted by the assessee from Madras and that it represented the concealed
income of the assessee. [73 lE].
In the faee of the application for remittance signed in the name of Tilok
·Chand, that this amount was sent by the assessee and the finding to that effect
reached by the Tribunal is unreasonable and perverse. What at the .highest
·could be said to be established by the. material evidence on record is that c
'Tilok Chand remitted the amount ~f Rs. 1,07,350 from Madras and this amount
was received· by Nathirmal in Bombay. Even if it is accepted that Tilok
•Chand and Nathirmal were employees of the assessee as held by the Tribunal,
the ·utmost that could be said is that an employee of the assessee in Madras
remitted the amount of Rs. 1,07,350 to another employee in Bombay. But,
from. this premise it does not at all follow that the remittance was made by
·the employee in Madras on behalf of. the assessee or that it was received by D
the employee in Bombay on behalf of the assessee. The burden was on the
Revenue to show that the amount of Rs. 1,07,3:50 said to have been remitted
from Madras to Bombay belonged to the assessee and it was not enough for
·the Revenue to show that the amount was remitted by Tilok Chand, an em-
·ployee of the assessee, to Nathirmal, another employee of the assessee. It is
·quite possible that Tilok Chand had resources of his own from which he
·could remit the 'amount of Rs. 1,07,350 to Nathirmal. It was for the Revenue E
to rule out this possibility by bringing proper evidence on record, for the burden
of showing that the amount was remitted by the assessee was on the Revenue. '
'[730H-731DJ ,
The two- documents viz. the letters dated 18th February, 1955 and 9th
March, 1957 did not constitute any material evidence which the Tribunal could
'legitimately have taken into account for the purpose of arriving at the finding
·that the amount of Rs. 1,07,350 was remitted by the assessee from Madras to
F.
Bombay because while the former was not disclosed to the assessee by the
Revenue Authorities till the hearing before the Tribunal in regard to the
preparation of the supplemental statement of the case, giving the assessee an
opportunity to cross-examine the Manager of the Bank, the latter was not dis-
·closed to the assessee at any stage. Further, there is no explanation given by
:the ReYenue as to how these two important documents were not traceable earlier.
G
'E'ren if these two letters were to be taken into account, they did not supply
·any reasonable basis for reaching the findfog that it' was the assessee which sent
the remittance of Rs. 1,07,350. There can be no doubt that if the amount had
'been remitted by Tilok Chand on behalf of the assessee he would have signed
the application for telegraphic transfer on behalf of the assessee and not in
'his own name. This apart it is impossible to believe that the Manager of the
·Bank could have ·failed to appear before the Income Tax Officer in answer
·to the summons dated 5th March, 1957 and there is no doubt that this state-
n:
·ment must have. been recorded and the said. statement also withheld. [729 H:-
·730A; 729B, C; 730B, E; 729F-G]

.,
722 SUPREME COURT REPORTS [1981] 1 S.C.R.

A (2) It is true that the proceedings under the Income Tax law are not governed
by the strict mies of evidence and therefore it might be said that even without
calling the Manager of the Bank in evidence to prove this letter, it could be·
taken into account as evidence; 1 But before the Income Tax Authorities could
rely upon it, they were bound to produce it before the assessee so that the
assessee could controvert the statements contained in it by asking for an op-
portunity to cross-examine the Manager of the Bank with reference to the
B statements made by him. Moreover, this letter was said to have been addressed·
by the Manager of the Bank to the Income Tax Officer on 18th Febmary,.
1955 in relation to a remittance alleged to have b~n sent on 16th October,.
·1946 and it is impossible to balieve in the absence of any_ evidence to that
effect, that the Manager who wrote this letter on 18th Febmary, 1955 must
have been incharge of the Madras Office on 16th October, 1946 so as to·
have personal knowledge as to who remitted the amount of Rs. 1,07,350. The·
c Revenue authorities ought to have .called upon the Manager of the Bank to

-
produce .the documents and papers on the basis of which he made the state-
ments contained in his letter an~ confronted the assessee with those documents
and papers but instead of doing so, the Revenue authorities chose to rely·
merely on the statements contained in the letter and that too, without showing
the letter to the ~ssessee. [728A-FJ

D
CIVIL APPELLATE JuRJsmcnoN: Civil Appeal No. 2728 of 1972'.
Appeal by Special Leave from the Judgment and Order dated'
22-2-1971 of the Bombay High Court in I.T.R. No. 76/63.
H. G. Advani, Ashok Advani Bar-at-Law, Hiranandan, Mrs.
E Sheila Sethi and K. Balasubramaniani for the Appellant. •
P. J. Francis and Miss A. Subhashini for the Respondent.
.The Judgment o;f the Court was delivered by

BHAGWATI J.-The shor~ question which arises for determination
F in this appeal by special leave is whether there was any material
evidence to justify the finding tlrnt a sum of Rs. 1,07,350 ' was
remitted by the assessee from Madras -to Bombay and that it
represented tihe undisclosed income of ,the assessee. The assessee·
before us is the firm of M/s. Kishinchand Chellaram and the
assessment year with which we are concerned is 1947-48, the relevant
G accounting year being the year ending 6th April 1947. 'The original'
assessment of the assessee for .fr1is. assessment year was completed·
long back, but it seems that some information was received by the
Income Tax Officer that a sum of Rs. 1,07,350 was. remvtted by the·
assessee from Madras by rtwo , telegraphic transfers through the-
Punjab National Bank Limited and the Income Tax Officer ·therefore-
H addressed two letters dated 14th January 1955 and 10th February
1955 -to the Manager of the Punjab National Bank Limited making
inquiries about this remittance. Neither 1these two le~ters nor tlleir copies:
KISHINCHAND CHELLARAM V. C.I.T. (Bhagwati, J.) 7.23

appear to have been brought on record and it was common ground A
between the parties that they were at no - time .disclosed to the
assessee and even now the copies of these tiwo letters which ought to
ibe in the record of the Income Tax Departments have not been
produced before. us. The Manager of the Punjab National Bank
A' - Limited replied to the inquiries made by the Income Tax Officer
by his, letter dated 18'th Feb'ruary 1955 in which he stated : "one B
telegraphic ,f.ransfer of Rs. 1,07,350 sen;t by M/s. Kishinchand
Chellaram from Madras was received by us on 16-10"46. T.T.
receipt was issued by us on 1the same day in favour of one
Mr. Nathfrmal and paid in cash on the same day." Though this
letter of the Manager of the Punjab National Bank. Limited was on c
·the record of the Income Tax Officer, he did not disclose it to the
assessee nor did he make any reference to it in the letters dated
24th February 1955 and 4th March 1955 which he addressed to the
assessee making inquiries about .the remittance of Rs. 1,07,350
said to have been made by the assessee from Madras to Nathirmal
in Bombay. These two letters addressed, by the Income Tax Officer D
also make inquiries in regard to various other matters besides the
remittance of Rs. 1,07,350 and the assessee replied to these inquiries
by its levter dated 24th March 1955 in. which' amongst other things
it pointed out ·that it was not able to trnce any entry in its Madras
books in regard to this remittance of Rs. 1,07,350 indicating clearly
0

1that no such remittance was sent by it from Madras ito Nathirmal E.
in Bombay. There was no further communication from the Income
Tax 'Officer to the assessee until 2nd February 1955 when the Income
Tax Officer once again addressed a letter to the assessee reiterating
that, one telegraphic transfer of Rs. 1,07,350 was sent by the assessee
from Madras on 16th Ootober, 1946 in flavour of Punjab National
Bank Limited, Kalba Devi Road, Bombay and this amount was paid F
•to one Nathirmal in cash ·on the same day and requesting .the
assessee to explain the nature of this .tiransaction and to produce the
relevant proofs of having accounted for this amount in its b6oks of
account. The assessee reiterated by its reply dated 9th February
1956 that it had once again looked into its books of account but G
did not find any entry in regard to 1he remittance of Rs. 1,07,350
and . in .the absence of such entry, it was not in a positi<.12 to say
anything further in the matter. Then again there was a Iliil in the
correspondence for a period of about one yea!" and on 4th March
1957, the Income Tax Officer once again addressed. a letter to the
as·sessee repeating its request to explain the nature of the remittance R
of Rs. 1,07,350 and .to produce relevant books of account and
complaining that the assessee did not seem to have given any reply
'
SUPREME COURT REPORTS [19&1] 1 S.C.R.

A to his earlier letter dated 2nd February 1956. This complaint was,
of course, unjustified because the assessee had replied to the earlier
letter of the Income Tax Officer by its letter dated 9th February
1956. But even so the assessee once agMn reiterated in its reply
dated 13th March 1957 ,that no amount of Rs. 1,07,350 was remitted
by the assessee from Madras and pointed out that N athirmal was
B a common name in the Sindhi community and requested the Income·
Tax Officer to kindly give his father's name to enable the assessee
to look into the matter further and also to inform the assessee as
to who on behalf of the assessee purported to have sent the telegraphic
transfer from Madras. The Income Tax Officer did not give any
c further information to the assessee and proceeded to make an order
of reassessment under section 34 of the Indian Income Tax Act,
1922 bringing to tax ,the amount of Rs. 1,07,350 on the ground
that it represented the concealed income of the assessee. The Income
Tax Officer observed in the order that the Punjab National Bank
Limited had stated that one telegraphic transfer of Rs. 1,07,350
D was sent by M/s. Kishinchand Chellaram from Madras and received
by ,them on 16-10-1946, and "there was no reason to doubt the
banker's statement that the amount was remitted by M/s. Kishinchand
Chellaram from Madras." It was also statied in ,the order that the
telegraphic transfer was encashed by one· Nathirmal who was
identified by an officer of the bank and whose address was the same
E as that of the Bombay office .of the assessee, and it was found from
the assessee's records that this Nathirmal was an employee of the
assessee in the relevant accounting year and, therefore, the conclusion
was irresistible that the telegraphic ti:ansfer was sent by the assessee
from its Madras officei and encashed by the assessee's employee on
its behalf in Bombay and since it was not accounlted for in the books
F of account it must be held to be the undisclosed income ot the
assessee.
The assessee being aggrieved by the order of the Income Tax
Officer preferred an appeal to· the Assistant Appellate Commissioner.
It was pointed out on behalf of the assessee at the hearing of the
G appeal that Nathirmal who was supposed to have received the amount
of Rs. 1,07,350 sent by telegraphic transfer from Madras and to
have sign¢ the voucher in regard to the receipt of this amount as
'N.B. Bani' had left the service of the assessee long back and a
grievance was made that it was not known as to who was the person
who was supposed to have made the remittance on behalf of the
H assessee, because ·in the absence of this information, it was not
possible for the assessee to meet the case of the Revenue. The
Appellate Assistant Commissioner thereupon obtained from the
KISH!NCHAND CHELLARAM v. C.I.T •. (Bhagwati, J.) '7.25

Madras office of the Punjab National Bank Limited a copy of the A
telegraphic transfer application by which the amount of Rs. 1,07,350
was remitted and this copy which , was disclosed to tihe assessee
showed that the application was signed by one Tilok Chand as
follows: "Tilok Chand, C/o M/s. K. Chellaram, 181, .Mount Road,
Madras". The assessee pointed out to the Appellate Assistant
Commissioner that ·there were two Tilok Chand's working in the B
assessee's office at Madras at the material time, one was Tilok Chand
Thadani and the other was. Tilok Chand Chellarnm and both these
Tilok Chahds had left the sel"Vice of the assess.ee .Jong back. The
assessee informed the Appellate Assistant Commissioner that the
whereabouts of Tilok Chand Thadani were not known and so far
as Tilok Chand Chellaram was concerned, he was then at Hong
c
·. ·~· Kong. It was also pointed out to the Appellate Assistant Com-
missioner tilat · the business in Madras was carried on by the
assessee in .tile name or M/s. Kishinchand Chellaram and not
M/s. K. Chellaram and that the remittance of Rs. 1,07,350 said
to have been made by Tilok Chand was not on behalf of the assessee D
nor was it sent to 1the assessee and that its ip.clusion as undisclosed
income o~ the assessee was not at all. j_ustified. The Appellate
Assistant Commissioner however negatived these contentions of the ·
· assessee and held that the remittance of tile amount of Rs. 1,07,350
was by an· employee of the assessee from Madras to another employee
in Bombay and the Bank had also repo1ited that the remittance related E
~ to the assessee and hence the burden was on tile assessee to explain
and prove the nature and source of rthe remittance and since this
burden was not discharged, the inclusion of <the amount in the
assessment of .the assessee was liable to be sustained. The Appellate
Assistant Commissioner accordingly rejected the appeal and confirmed
the assessment of J!ihe assessee. F
The assessee thereupon preferred a further appeal to the
Tribunal but this appeal was also unsuccessful. The Tribunal relied
on the letter of the Bank dated 18th February 1955 to which we
.have already referred earlier, and surprisingly enough, though this
letter was strongly relied upon both by the Appellate Assistant
Commissioner and the Tribunal, arid an extract of ii was
'given in
the order of the Appellate Assi&tant Commissioner, it was riot
produced before &e assessee nor was a copy of it given to the
assessee. The Tribunal also placed reliance on another letter dated
9th March 1957 addressed by ·the Bank to ·the assessee where it
was stated by the manager of the Bank that they had received one
, telegraphic transfer from Madras office on 16th October 1946
favouring N athirmal and this amount was remitted by the assessee
726 SUPREME C()URT REPORTS [1981] 1 S.C.R.

A through their Madras office. This letter was admittedly written by
lfhe manager of tihe Bank 1to the assessee in reply to the assessee's
letter dated 7th March 1957 but obviously it did not carry the
matjter any further since it was in the same terms as the letter dated
18th Februaw 1955 addres&ed by the manager of the Bank to the
Income Tax Officer. The Tribunal 1then proceeded to observe that:-
B
"J1he assessee was not in a position to show rthat the
respective employees in Madras and Bombay .were carrying on
any business and were in a position to send from one place
to another such a large sum of Rs. 1,07,350. The assessee
merely informed the Income Tax Officer that it had nothing to
c do with this amount. It would have been easy for the assessee
to have the said persons ellamined so as 1to show that the i;um
of Rs. 1,07,350 cannot represent any amount belonging to the
assessee. But for the reasons best known to itself it did not
choose ,to do so. By remitting the amount as cash and by
not bringing it into its books -the assessee cannot escape the
D consequences of having to explain the source for this and
especially when the bank through which the amount was
remiitted has in categorical !terms stated that the remitter from
Madras was the assessee. It would have been open to the
assessee to establish the .contrary by showing that ·the bank's
statement that the asses-see did remit -the amount is not correct
E
and thus &splace the evidence on record, but it did not choose
to examine the bank officers witih reference 1to this aspect either.
Therefore, this is a case where a sum of Rs. 1,07,350 has been
remitted by 1Ji_e assessee as shown by the bank's letter from
Madras to its employee in Bombay which has not been brought
F to books. In the said circumstances, it is for the assessee to
explain the source for the fund and it cannot escape the
consequence by merely adopting an attitude of non-co-
operati on."
The Tribunal accordingly held that the assessee had not satisfactorily
explained the source of the amount of Rs. 1,07,350 and the Income
G Tax Officer was therefore justified in adding this amount as the
undisclosed income of the assessee.
This order of the Tribunal led to the filing of an application
for a reference by the assessee and on the application b..!ing rejected
by the Tribunal, the. assessee preferred an application 10 the High.
H Court fur directing the Tribunal to make a referenc{. and on this
application, the High Court directed the Tribunal to r0fer the following
question for the opinion of tihe High Courit :
KISHINCHAND CHELLARA¥ v. C;I.T. '(Bhagwati, J.) 727

"Whether there was any material evidence to justify the A
findings of the Tribunal that-the amount remitted by an employee
of the Madras Branch to an -employee of the Bombay Branch
was the income of the firm of M/s Kishinchand Chellaram from
undisclosed source?"

The Tribunal thereupon drew up a statement of the case and B
referred the above-question to the High Court. The entire evidence
in the case was considered by the High Court and ~aking the view
that there was material evidence to justify the finding that the amount
of Rs. 1,07,350 remitted by Tilokchand to Natihirmal was the
undisclosed income of the assessee, the High Court answered the
question in favour of the Revenue and against the assessee. The c
assessee thereupon preferred the present appeal with special leave
~I obtained :6rom this Court.

The sole question- which arises for determination in the appeal
is whether there was any material evidence to justify the findiµgs of
the Tribunal that the amount of Rs. 1,0?,350 said to have been D
remitted by Tilokchand from Madras represented the undisclosed
income of the assessee. The only evidence on which ·the Tribunal
could rely for the purpose of arriving at this finding .was the letter
dated 18th February 1955 said to have been addressed by the
Manager of the Punjab National Bank Limited to the Income Tax
E
Officer. Now It is difficult to see how this Jetter could at all be
relied upon by the Tribunal as a material piece of evidence supportive
qf its finding. In the first place, this letter was not disclosed 'to
assessee by the Income Tax Officer and even though the Appellate
Assistant Commissioner reproduced an extract from it in his order,
he did not care to produce it before the assessee or give a copy of F
it to tihe assessee. The same position also obtained before the
Tribunal and the High Court and it was, only when a supplemental
statement of -the case was called for by 1Ji_is Courit by its order
dated 16th August, 1979 that, according to the Income Tax Officer,.
this letter was traced by him and even then it was not shown by
him to the assessee but it was forwarded to the Tribunal and it was G
for the first time at tihe hearing before ,the Tribunal in regard to the
preparation of the supplemental statement of the case that this 1·

letter was shown to the assessee. It will therefore be seen that, even
if we assume that this letter was in fact addressed by the manager
of the Punjab National Bank Limited to the Income Tax Officer,
no reliance could be placed upon it, since it was not shown to the H
assessee until at the stage of preparation of the rnp_plemental
statep1ent of the case and 'no opportunity to cross-exrn1in~ the

Ir"'
SUPREME COURT 'REPORTS [1981] 1 S.C.R.

A manager 'of the Barik could in the circurnsfances be 'sought or
availed of by the assessee.. It is true that the proceedings under
tihe Income Tax Jaw are not governed by the strict rules of evidence
and therefore jt might be said that even without calling the Manager
of the Bank in evidence to prove this letter, it could be taken into
account as evidence. But before the Income Tax Authorities could
B rely upon it, they were bound to produce it before the assessee so
that the assessee could controvert the statements contained in it by
asking for an opportunity to cross examine the Manager of the
Bank with reference to the statements made by him. Moreover,
this letter was said to have been addressed by the Manager of the
c Bank to the Income Tax Officer on 18th February 1955 in relation
to a remittance alleged to have been sent on 16th October, 1946 and
it is impossible to believe in the absence of any evidence to that
effect, that manager who wrote this letter on 18th February 1955 must
have been in-charge of the Madras Office on 16th October 1946 so as
to have personal knowledge as to who remitted the amount of
D Rs. 1,07,350. What the Manager of the Bank wrote in this letter could
not possibly be based on his personal knowledge and it does not
appear from the letter as to what were the original documents and
papers from which he gathered the information conveyed by him
to the Income Tax Officer. The. statements corifained in this letter
addressed by the Manager of the Bank to ,the Income Tax Officer
E were in tihe nature of hearsay evidence and could not be relied upon
, by the Revenue authorities. The Revenue authorities could have
very well called upon the manager of the Bank to produce the
documents and papers on the basis of which he made the statements
contained in his letter and confronted the assessee with those
do.cuments and papers but instead of doing so, the Revenue authorities
F chose to rely merely on the st!ltements contained in the letter and
that too, without showing the letter to the assessee. There is also one
other i.lnportant circumstance which deserves to be noted. It appears
. that when the letter dated 9th March 1957 was addressed by the
manager of the Bank to .the assessee, a copy of it was forwarded by
the manager to the Income Tax. Officer and this copy contained the
G
following endorsement:-
"Copy to Mr. T. K. Surendran, 2nd Income-tax Officer,
Income-Tax Office, C-IV Ward, Bombay for information with
reference to his summons dated 5-3-1957. One orily T. T. for
H Rs. 1,07,350 was received with particulars as above.
Mr. Nathirmal was idenmfi.ed by Mr. B. N. Mallaya, the then
Officer in our offi.ce."
KISHANCHAND CHELLARAM v. c.1.t (Bhagwati, /.) 729

This copy of the letter dated 9tih March 1957 was obviously in the A
record of the Income Tax Officer but it was not disclosed to the
assessee at any stage and according to the Income Tax Officer, it
was not traceable until the case came back to him for evidence in
connection with the preparation of the supplemental statement of the
case. He then seemed to trm;e it and forwarded it alongwith his
report to the Tribunal and it was at the hearing before the Tribunal B
in connection with supplemental statement of the case that it was
shown to the assessee for the first time. It is difficult to understand
how this copy of the letter dated 9th March 1957 as also the letter
da,ted 18th February 1955 said to have been addressed by the
Manager of the Bank to the Income Tax Officer were not traceable c
in the records of the Income Tax Officer alt this time and they came to
be traced only when the supplemental statement of the case was
called for by this Court. There is no explanation given by the
Revenue as to why ·these two important documents were not traceable
and they were. not disclosed to the assessee. The reason perhaps
was, and this was the suggestion made by the learned counsel D
appearing on behalf of the assessee, that the Revenue authorities did
not wish to give an opportunity to the assessee to call the manager
of the Bank for cross-examination, lest the edifice .which they wanted
to construct for taxing the assessee on the amount of Rs. 1,07,350
might be jeopardised. It is interesting to note that the endorsement
made at the foot of the copy of the letter dated 9th March 1957 E
sent to the Income Tax Officer clearly shows that the Manager of
the Bank was served by the Income Tax Officer with a summons
dated 5th March 1957 and one can reasonably presume that the
Manager of the Bank must have appeared in answer to the summons
,,...l before the Income Tax Officer and given his statement. But no such
, \
statement has been produced by the Revenue authorities nor are we F
told as to what happened when the Manager of the Bank appeared
in obedience to the summons. It is impossible to believe that· the
Manager of the Bank should have failed to appear before the Income
Tax Officer in answer to the summons and there is no doubt that
his statement must have been recorded. The question then is, why
0
G
has this staternent been kept back by the Revenue authorities? Even
if we assume that the Income Tax Officer did not record the
statement of the Manager of the Bank, it is difficult to appreciate
why he should not. have done so and probed into the matter further
with a view to finding out what was the basis on which the manager
had made the statement that the remittance was sent by the assessee.
We are clearly of the view that the letters dated 18th February 1955
an~ 9th March 1957 did not constitute any material evidence which

5--645 S. C. India/80
no SUPREME COURT REPORTS [1981] l• S.C.R.

A the Tribunal could legitimately take into account for the purpose of
arriving at the finding that the amount of Rs. 1,07,350 was remitted
by the assessee from Madras. and if these two letters are eliminated
from consideration, it is obvious that there was no material evidence
at all before the Tribunal which could support this finding.
But even if these .two letters dated 18th February 1955 and
B
9th March 1957 were to be taken into account, we do not think
they supply any reasonable basis for reaching the finding that it was ,
tlle assessee which sent the remittance of Rs. 1,07,350. It-is
undoubtedly true that the Manager of the Bank stated in these two
letters that the amount of Rs. 1,07,350 was remitted by the assessee
c through the Madras office of the Bank, but this statement which was
obviously not based on the personal knowledge of the manager, which
was not supported by any documents or papers produced by the
manager and in regard to which it was not known as to wha.t was
the materi¥ on which it was based, was clearly belied by the original
application for remittance which was signed by Tilokchand in his
D own name and not on behalf of the assessee. The primary evidence
before the Tribunal in regard to the remittance of the amount of
Rs. 1,07,350 was the application signed by Tilokchand and this
application cl~arly showed that it was Tilokchand and not the assessee
which remltted the amount of Rs. 1,07,350 from Madras. There
can be no doubt that if the amount had been remitted by Tilokchand
E on behalf of the assessee, be would have sign.ed the application on
behalf of the assessee and not in his own name. We fail to appreciate
how, in the face of this primary evidence showing Tilokchand a; the
person who remitted the amount of Rs. 1,07,350 the Tribunal could
possibly accept the unsupported statement of the Manager of the
Bank, based on hearsay, that the amount was remitted by the ·~
)
F assessee. Unfortunately, the Revenue authorities did not produce
copies of the letters dated 14th January 1955 and 10th February
1955 addressed by the Income Tax Officer to the Manager of ttte
~ank. Copies of these letters, it produced, would perhaps have
shown that the suggestion that the amount of Rs. 1,07,350 was
G remitted by the assessee was made by the Income Tax Officer and
taking the cue from this suggestion, the Manager of the Bank might
have stated 'that the telegraphic transfer of Rs. 1,07,350 was sent
by the assessee. It is to our mind impossible to hold, in the face
of the application for remittance signed in the name of Tilokchand,
. thait rthis amount was sent by the assessee and the finding to that
H effect reached by the Tribunal must be held to be unreasonable and
perverse. What at the highest could be said to be established by
the material evidence on recotd is that Tilokchand remitted the

•
KISHANCHAND CHELLARAM v. C.J.T. (Bhagwati, J.) 731

amount of Rs. 1,07,350 from Madras and this amount was received A
by Nath"tnnai in Bombay. Even if we accept that Tilokchand and
· Nathirmal were employees of the assessee as held by the Tribunal,
.~. the utm0st that could be said is that an employee of the assessee in
Madras remitted the amount of Rs. 1,07,350 to another employee
iin Bombay. But. from this premise it does not at all follow that
the remittance was made by the employee in Madras on behalf of B
the assessee or that it was received by :the employee in Bomb~y on
·beb,al.£ of the assessee. The burden was on the . Revenue to show
that the amount of Rs. 1,07,350 .said to have been remitted from
Madras to Bombay belonged .to the assessee and it was not enough
~or the Revenue to show that the amount was remitted by Tilokchand,
\n employee of the assessee, to Nathirmal, another employee of the ·
c
assessee. It is quite possible that Tilokchand had resources of his
own from which he could remit the amount of Rs. 1,07,350 to
Nathirmal. It was for the Revenue to rule out this possibility by
·bringing proper evidence on record, for the burden of showing that
the amount was remitted by the assessee was on !he Revenue. D
Unfortunately, for the Revenue, neither Tilokchand nor Nathirmal
was in the service of the assessee at the time when the assessment
was reopeued and the assess.ee could not therefore be expected to
·call them in evidence for the purpose of helping the Revenue l£l
·discharge the burden which lay upon it. We must therefore hold that
there was no material evidence at all before the Tribunal on the basis E
-of which the Tribunal could come to the finding that the amount of
Rs. 1,07,350 was remitted by the assessee from Madras and that it
:represented the. concealed income of the assessee.
We according1y allow the appeal, set aside the judgment of the '
High Court and answer the question referred by the Tribunal in
F
favour of the assessee and against the Revenue; The Revenue will
pay the costs of the assessee throughout.

:S.R. Appeal allowed.