P L D 1979 Supreme Court 949 (PLP)

MUHAMMAD AKRAM, J.‑This judgment will dispose of the above two civil petitions for special leave from a consolidated order dated 1st of February, 1978 passed by a Division Bench of the Lahore High Court at Lahore, whereby the two respective applications, made by the present petitioner under section 66(2) of the Income‑tax Act, 1922, arising out of the assessments made against her for the assessment years 1973‑74 and 1974‑75, were dismissed and the Court refused to refer the so‑called questions of law raised by the assessees for their answers. Briefly, the relevant facts are that the petitioner‑assessee is a film artist by profession and has appeared in a number of Punjabi and Urdu films released by their producers. In connection with the two assessment years 1973‑74 and 1974‑75 she filed her separate returns and relied on the certificates of payment allegedly received by her from the producers of those films during the respective financial years for the computation of her total income. But the Income‑tax Officer by his two separate orders rejected these certificates and refused to rely on them and instead proceeded to base his assessment on his own estimates. These orders were upheld in the two separate appeals of the assessee rejected by the Appellate Assistant Commissioner of Income -tax (B‑Range), Lahore. She then filed two further appeals (I. T. A. No. 204 of 1976‑77 and

1. T. A. No. 205 of 1976‑77) before the Income‑tax Appellate Tribunal (Pakistan). Lahore. On the 23rd of December 1976, the Tribunal agreed in principle with the rejection of the producers' certificates in computing her total receipts, at the same time allowed some relief to her in estimating her income for the assessment year 1973‑74 but confirmed the assessment framed against her for the assessment year 1974‑

75. In these circumstances, on the 18th of July 1977, the petitioner‑assessee then filed two separate petitions under section 66(1) of the Act before the Tribunal with the prayer that the following questions of law said to arise out of its appellate order may be referred to the High Court for its opinion;

(i) Whether, on the facts and circumstances of the case, the Income- tax Appellate Tribunal was justified in upholding the order of the I. T. O. rejecting the certificates of payments produced in support of the income version by the petitioner without proper verification. (ii) Whether, on the facts and circumstances of the case, the Income- tax Appellate Tribunal was justified in fixing the rate of remuneration of per film without proper verification of the certificates of payments produced in support of the income version by the petitioner. (iii) Whether, on the facts and circumstances of the case, the Income. tax Appellate Tribunal was justified in relying on the evidence from the newspapers and film magazine produced by the I. T. O. in his orders in rejecting the certificates of payments. But the Tribunal rejected both the petitions on the 12th of December 1977 on the ground that no question of law arose out of its appellate order for reference to the High Court. The petitioner then moved the High Court under section 66(2) of the Act with the prayer to frame the aforementioned three questions of law arising out of the Tribunal's order for its opinion in the two respective cases. But the two applications were likewise dismissed by a Division Bench of the Lahore High Court by a consolidated order passed on the 1st of February 1978. Hence these two separate petitions for special leave to appeal from the judgment and order passed by the High Court. We have heard the learned counsel for the petitioner in these two cases before us. Before dealing with the contentions advanced before us it shall be helpful to give a resume of the orders passed by the three Income‑tax Authorities against the petitioner. In respect of the assessment year 1973‑74, the petitioner‑assessee at first filed her return declaring an income of Rs. 14,090 with her total receipts at Rs. 44,

000. But later on it. was revised showing her total receipts at Rs. 54,

000. She again filed a further revised return showing her total receipts as Rs. 1,60,000 and declaring her net income at Rs. 30,090 only. In response to the notices served on her under sections 22(4) and 23(2) of the Act, the assessee appeared before the Income‑tax Officer through her authorised repres entative and furnished wealth statement, personal expenses statement and also produced certificates for the alleged payments received by her from the producers of 10 out of the 14 films in which she had played the role as a film star during the relevant account year in question. The Income‑tax Officer observed that none of these certificates were supported by any of the agreements in writing entered by her with the respective producers of those films. In his opinion the assessee is one of the most renowned film artist of Pakistan Film Industry and normally performs the roles of an heroine in Punjabi as well as Urdu films. During the year under consideration she was the main attraction in the films in which she gave her performance and that most of her films were box hits attracting tremendous crowds and had done wonderful business. He further observed that it was a well‑known fact that in the Film Industry of Pakistan artists enter into verbal agreements for handsome amounts actually received by them against such like certificates issued by the producers for party amounts only. In the opinion of the Income‑tax Officer this fact was fully established from a parallel case of another assessee who was proved to have received a sum of Rs. 45,000 outside the books against a similar certificate issued by the producer. In the face of these facts the Income‑tax Officer concluded that the assessee had definitely understated her receipts. In this conclusion he was further fortified on examining her wealth statement and personal expenses statement. According to these she had incurred Rs. 10,000 at her personal expenses during the year in question. She was maintaining a car which was purchased by her during this year and was paying Rs. 300 per mensem as the house rent. According to the Income‑tax Officer, she was also maintaining social status and was enjoying a glamorous life led by her. In these circumstances in the opinion of the Income‑tax Officer the personal expenses disclosed by her were ridiculously low. Moreover, the reconciliation of the wealth statement of the assessee for the year under consideration with that of the year 1972‑73 showed that net assets of the assessee were Rs. 10,000 in respect of jewellery as compared to her next assessment for the year 1973‑74 at Rs. 83,000 on income of the assessee during this year was Rs. 30,090 out of which she had incurred personal expenses of Rs. 6,000 thereby leaving a margin of Rs. 24,

090. Furthermore in this connection according to the learned Income‑tax Officer, as already discussed above, the assessee had shown her personal expenses at Rs. 6,000 against an amount of Rs. 10,000 claimed in her wealth statement filed earlier. In the result the Income‑tax Officer refused to accept the declared receipts and estimated them at Rs. 2,00,000 for the year in question. The assessee did not furnish any details for the professional expenses claimed by her at Rs. 29,910 and they were not supported by any vouchers whatever. In this state of affairs the Income‑tax Officer did not allow the professional expenses in full and estimated them at Rs. 15,000, yielding a not income of Rs. 1,85,000 at which she was assessed for the year. In respect of the assessment year 1974‑75, the assessee filed her return declaring an income of Rs. 27,

350. She was served with the statutory notices under section 22(4), 22(4‑A) and 23(2) of the Act. In compliance with the notices, the assessee appeared before the Income‑tax Officer through her authorised representative. She filed her wealth statement and certificates of payments received by her from the producers in respect of 16 films out of the 17 films in which she had appeared as a film star. She however, did not produce any agreements in writing entered by her with the producers in support of these certificates. For somewhat similar reasons as in the preceding year, the Income‑tax Offcer arrived at the conclusion that the assessee had definitely understated her receipts and the personal expenses of Rs. 8,000 incurred by her during the whole of the year were ridiculously low. He therefore, estimated her receipts at Rs. 2,50,000 for the whole of the year but allowed the professional expenses in full at Rs. 53,650, yielding the net income of Rs. 1,96,350 for the year. In dismissing her two appeals the appellate Assistant Commissioner of Income‑tax observed that the producers' certificates in support of her receipts were rightly rejected by the Income‑tax Officer on the ground that there were no written agreements with the producers, the rate of remuneration per film was low and in view of parallel case in which payments of higher amounts were proved to have been made. In the opinion of the learned Appellate Assistant Commissioner it could not be believed that a producer who has lacs of rupees at stake and chain of commitments with distributors and exhibitors, etc. could start a film without making any agreement with his artists, especially the main ones. The assessee being a busy artist the producer could not afford to assign her without any express agreement in writing. He, therefore, concluded that these agreements were withheld and not produced deliberately. In the circumstances, the learned Appellate Assistant Commissioner further observed that the I. T. O. could not rely solely on the evidence produced by the assessee as the Income‑tax Act enables and empowers him to obtain outside evidence while making the assessment and utilize it in his judgment. He is further empowered to obtain the wealth statement of the assessee, ascertain the value of the wealth declared, Judge living standard, mode of expenditure and then draw his own conclusion therefrom. He is entitled to rely on parallel cases and make his own assessment of the expected total income. The Income‑tax Officer, in the circumstances was not obliged to base his assessment on the producers' certificates alone. In the instant case he observed that the income of the assessee came to Rs. 5,000 per film for the year 1973‑74 and less than Rs. 5,000 for the year 1974‑75 which was hardly believable. None of the payments to her were made by cheques and all the payments were received in cash. There were no books of accounts kept by the assessee in the normal course of the business, no agreements executed by her with the producers, none of the payment made through books or the Bank. The Income‑tax Officer also took into consideration low personal expenses declared by the assessee which were not in keeping with her social status and the style of her living. In the circumstances, the Appellate Assistant Commissioner deemed it necessary to refer to the parallel cases of some of the other leading artists in the Tribunal. Before the Appellate Tribunal the learned counsel for the petitioner insisted that the Assessing Officer did not marshal any evidence to falsify the certificates filed by the assessee and it was argued that the cases of the producers who had issued the certificates in question were assessed by the same Assessing Officer and he could have easily verified their truth with reference to those records. But no such effort as to verification of the certificates was made and the Assessing Officer had discarded the declared version of the assessee in rejecting these certificates on mere surmises and conjectures. In this connection reliance was also placed on the reported decision by a learned Single Judge of the Lahore High Court at Lahore in the case of Shahid Hussain ((1976) 34 Taxation 38) wherein it was held that such like certificates produced by the assessee could not be discarded unless they were proved to be wrong. Before the 'tribunal the Departmental representative however, tried to justify the action of the Assessing Officer and the order passed be the Appellate Assistant Commissioner in confirming these assessments against the assessee. He pointed out that in the assessment year 1973‑74, the petitioner had appeared in 14 films but had produced the certificates only for 10 films. Even otherwise the certificates were not signed by the producer himself and could not be treated as a valid piece of evidence. Moreover, no other proof was filed in support of these receipts and the expenses were all unvouched. In these circumstances, according to the learned Departmental Representative, the Assessing Officer was right in estimating the receipts particularly when in an earlier year also her declared version was rejected and the assessment was made on the basis of estimates. The learned Tribunal after careful consideration of these arguments was of the opinion that in Shahid Hussain's case the principle laid down was that the evidence consisting of certificates produced by the assessee could not be ignored or rejected without proper enquiry and verification. The Tribunal had no quarrel with this proposition of law. However, on the facts of this case, the Tribunal was inclined to agree with the Authorised Representative of the assessee that these certificates in question constituted a piece of evidence but that these did not constitute conclusive evidence of the income of the assessee. In its opinion, every piece of evidence had to be examined on its merits and in relation to the peculiar circumstances of each case. In this behalf, however, according to the Tribunal, the certificates in question were not in the nature of direct piece of evidence and such indirect and secondary evidence, although having a probative value was not free from doubt both when the assessee had failed to produce the best evidence nor the person who had issued these certificates was not produced in corroboration. In the reported case of (1944) 12 ITR 393 the contention was repelled that if an assessee offers any evidence under subsection (3) of section 23 of the Act (whether reliable or unreliable) by producing some documents, the Assessing Officer must base his decision on it. In the opinion of the Tribunal, it would be wrong on the part of the Assessing Officer to rely on any document of indirect and secondary nature without further corroboration. In the ultimate analysis the Tribunal found that the Assessing Officer had confirmed the past history in determining the income by estimates which were held by the learned Appellate Assistant Commissioner to be rather lenient towards the assessee. In conclusion the Tribunal confirmed the assessment as framed for the assessment year 1974‑75 at the total income of Rs. 1,96,350 and the relief allowed to the petitioner in the assessment year 1973‑74 whereby her estimated income was reduced from the assessed Rs. 1,85,000 to Rs. 1,73,

000. The petitioner has failed to produce a copy of the order passed by the Appellate Tribunal on her application made under section 66(1) of the Act refusing to refer questions of law allegedly arising out of its order. She has however, produced a copy of the order dated 1st of February 1978, passed in two consolidated cases by a Division Bench of the Lahore High Court at Lahore, whereby her two applications made under section 66(2) of the Act were dismissed. Before the High Court it was contended on behalf of the petitioner that the certificates filed by her before the Assessing Officer should not have been summarily rejected and the income worked out on the basis of extraneous considerations. But this contention was repelled by the High Court with the observations that :‑ "The certificates were not in respect of all the films in which the petitioner had worked. These were not obtained or given in the ordinary course of business. The only purpose of their existence was to serve the requirements of the assessee concerning the Income‑tax assessment. The absence of contemporaneous agreements, the prevailing practice in the profession from which the petitioner derived income are all matters relevant for arriving at a conclusion where the authenticity of accounts is not fully established." On these findings therefore, the High Court was of the opinion that there was no merit in the reference which was consequently refused. Hence these petitions for special leave before us from the judgment of the High Court. We have carefully considered the contentions raised before us. The petitioner‑assessee had filed certain certificates allegedly issued by the producer showing the receipts for her performances as an artist in some of the films. Admittedly, she did not produce the certificates in respect of all the films in which she bad appeared as an artist nor were they backed by contemporaneous agreements binding on the parties in the matter of by performance of these contracts In the absence of any independent corrobora tive evidence produced by the assessee the Assessing Officer in his own judgment was not fully satisfied with their authenticity. Going by the prevailing practice in the film industry, he observed that a few suppressions had been made in respect of similar other assessees in the comparable income of other equally successful artists. After a scrutiny of her wealth statements and account of expenses the Assessing Officer exercised his best judgment and enhanced the receipts for the two assessment years as stated above. On appeal the Appellate Assistant Commissioner and likewise the Appellate Tribunal had examined at great length each and every submission advanced before them by the assessee and had based their own conclusion on the material brought on the record. In these circumstances the Appellate Tribunal was justified in holding that their appellate order did not give rise to any question of law worth reference under section 66(1) of the Act and the order was upheld by the High Court in rejecting the application of the petitioner moved before it under section 66(2) of the Act. The Assessing Officer was not bound to rely on all the evidence produced by the assessee in case he was not satisfied about it. He was entitled to reject the account believed by him to be a false and unreliable, although there maybe no direct and definite evidence with him to prove the incorrectness. There is no rule of law compelling a Judge to accept evidence, even though it is un-contradicted, which he believes to be a pack of lies (In re : Bagbat Halwai) (3 I T C 48). In this connection in Ganga Ram Balmokand v. Commissioner of Income‑tax Punjab (1937 I T R 464) it was held that the law " 'does not impose any burden on the income tax authority to prove by positive evidence that the accounts are unreliable or that the figure at which they assess is the correct figure. On the other hand, the question of the unreliability of accounts is a question of fact and primarily falls for the determination of the Income‑tax authorities alone. If, therefore, it is once decided by them that the accounts are fictitious or unreliable, their finding cannot be disturbed unless it is altogether capricious and injudicial. In matters like these a very wide discretion vests in the Income‑tax authorities in view of the exigencies of the case, and the control exercisable on them C is very meagre. What alone has to be seen in such cases is whether the discretion has been judicially exercised and if it is once found to be so exercised, no Court can interfere with the order. In this connection their Lordships of the Privy Council in Commissioner of Income‑tax, United and Central Provinces v. Badridas Ramrai Shop, Akola (AIR1937PC133) has held that the Assessing Officer must make what he honestly believes to be a honest estimate of the proper figure of assessment, and for this purpose he must be able to take into consideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate ; and though there must necessarily be guesswork it the matter, in must be honest guesswork. In that sense too the assessment must necessarily be arbitrary. From the above discussion we are convinced that the Income‑tax Authorities in exercise of their judicious discretion have concurred in finding for very valid reasons assigned by them that the certificates in dispute produced by the assessee did not inspire confidence and could not be relied upon in determining the receipts of the assessee made during the two assessment years in question, the Assessing Officer had made the assessment to the best of his judgment in the light of the material before him. The appellate order passed by the Appellate Tribunal is concluded by the finding of facts and did not give rise to any question of law worth reference to the High Court. We therefore, find no force in these two petitions which are hereby dismissed. S. A. H. Petitions dismissed.