P.D. Desai, J.
1. The assessment year with which we are concerned in this reference is the assessment year 1970-71, the corresponding previous year being calendar year 1969. The assessee is a public limited company. It was originally running a textile mill. However, since 1971-72, the textile mill was closed down and thereafter the assessee derived income from property and by way of interest on certain advances and/or deposits made by it. Up to the assessment year previous to the assessment year under consideration, the income derived by way of interest was returned under the head 'Income from other sources'. In the assessment year in question, however, the assessee claimed that the interest income was business income and that it was liable to be taxed under the head 'Profits and gains of business'. The assessee also claimed deduction of expenses against the said income by treating it as business income. The Income-tax Officer and, on appeal, the Appellate Assistant Commissioner, negatived the claim of the assessee. On further appeal, the Income-tax Appellate Tribunal, however, upheld the claim of the assessee. At the instance of the revenue, the Tribunal referred the following question of law arising out of its order for the opinion of this court :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the income derived by the assessee-company from deposits and loans is 'income from business' and not 'income from other sources' ?'
2. In order to properly answer the question, it may be useful to summarise briefly the findings recorded by each of the authorities. The Income-tax Officer held that : (1) the assessee was running a textile mill as far back as assessment year 1941-42 and thereafter it discontinued as said business and derived income from property and interest on deposits; (2) the assessee always deposited the excess funds available with it with various parties and declared, up to assessment year 1969-70, interest income under the head 'Income from other sources'; (3) in the assessment year in question interest income was derived from loans advanced to five parties and scrutiny of the accounts of those parties revealed that there was no frequency of advances made to those parties and that the transactions were mainly in the nature of deposits; (4) no borrowal was effected by the assessee in the assessment year under consideration not in any of the earlier years to earn interest by lending money to the various parties and only surplus funds which were available with the company were advanced to earn interest; (5) the pattern of advances had also varied from year to year and in some years, monies were invested in banks while in others monies were placed either in fixed deposit or in sharafi account with certain companies; (6) frequency of advances was not of considerable magnitude and there was no element of risk involved in undertaking the advances; and (7) the conduct of the assessee did not show any organized lending activity and no money-lending licence was even obtained by the assessee. According to the Income-tax Officer, in the light of the aforesaid findings, the conclusion which could be justly reached was that the income was not business income but income from other sources within the meaning of the law.
3. The Appellate Assistant Commissioner, on appeal, held that, (1) the assessee, which was running a textile mill, closed down the mill and since about 25 years it derived income only from property and interest on deposits; (2) from assessment year 1945-46, the income from interest was being assessed as 'Income from other sources' and there was no substantial change in the nature of the transactions thereafter whereby interest derived could be styled as 'business income'; (3) scrutiny of the account of the assessee disclosed that many of the sums were advanced as deposits to firms or companies which were limited in number and the transactions to firms or companies which were limited in number and the transactions did not bear the impress of money-lending transactions; (4) interest income was returned as business income only with a view to claiming certain expenses which the assessee otherwise could not have claimed; and (5) it was not shown that the money-lending activity was a legitimate part of the company's business and it was permitted by the articles of association. In view of these findings, the Appellate Assistant Commissioner concurred in the view of the Income-tax Officer.
4. The Tribunal, on further appeal, referred to the various decisions cited before it and more particularly to the decision of the Supreme Court in Mazagaon Dock Ltd. v. Commissioner of Income-tax : [1958]34ITR368(SC) , and applying the well settled tests, it found that :
(1) the expression 'business', in the context of the income-tax law, was required to be construed in the board rather than restricted sense;
(2) it was not disputed that the assessee had stopped its textile manufacturing business long ago;
(3) the assessee had certain funds lying with it which were being advanced to various parties from time to time;
(4) though the assessee had returned the income from interest and it was assessed under the hear 'Other sources' in the previous assessments, it was well established that the principle of estoppel or res judicata was not applicable to income-tax proceedings;
(5) on the evidence produced it was clear that the board of directors of the assessee had held meetings from time to time with a view to regulate the advances to be made to various parties and it decided upon the amounts to be advanced as well as the rate of interest to be charged to various parties, depending on the exigencies of the situation;
(6) the objects clause of the company also authorised the assessee not only to invest and deal with the moneys of the company in such manner as may from time to time be thought necessary, but also to lend, deposit or advance monies, securities and property to such persons, firms or companies, limited or otherwise, and on such terms as may seem expedient and in particular, to customers and sellers and other having dealings with the company;
(7) the deposits were made to various parties with a view to achieving the said object and there was a systematic activity of advancing money to various parties from time to time; and
(8) the activity of advancing monies to various parties was a sort of organised activity undertaken by the assessee.
Having regard to these findings, the Tribunal decided that the income from interest was income taxable under the head 'Profits and gains of business' and not under the head 'Income from other sources'.
5. It was urged before us on behalf of the revenue that :
(1) at the hearing of the appeal before it the Tribunal allowed certain additional factual data to be brought on record which it was not competent to do;
(2) alternatively, even if such additional material was rightly allowed to be brought on record, the Tribunal ought to have remanded the case to the Income-tax Officer for further investigation since such material brought on record new facts which could not have seen accepted without inquiry;
(3) having regard to the conduct of the assessee in the past several years in treating the interest income as income from other sources and returning it as such for the purpose of levy of income-tax, there was no reason to treat such income as business income in the current assessment year;
(4) merely because the memorandum of association of the assessee-company authorised it not only to invest and deal with the monies of the company but also to lend, deposit or advance monies, no inference could have been necessarily drawn that the advances made by the assessee in the present case were in the regular course of business and that the income derived therefrom was business income; and
(5) the entire course of conduct of the assessee over the years showed that what was done was merely to invest surplus funds in deposits with a limited number of persons and firms and the activity of the assessee did not satisfy the tests laid down by the decided cases for treating such activity as business.
6. Now, we must start with the proposition, which is well established, that it is for the revenue to establish that the income earned by an assessee is within a particular taxing provision and that it is on that account liable to be taxed as such income. In the present case, therefore, it will be for the revenue to establish, having regard to all the materials on record, that the income derived by the assessee as and by way of interest was income from other sources and not business income as claimed by the assessee.
7. The word 'business postulates the existence of certain elements in the activity of an assessee which would invest it with the character of business. In each case the question whether or not the assessee carried on business must necessarily be approached in the light of the intention of the assessee, having regard to the legal requirement which are associated with the concept of business. As observed in State of Gujarat v. Raipur . : [1967]1SCR618 , in taxing status, the word 'business' is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business there must be course of dealings, either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure. Whether or not a person carries on business in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transaction must ordinarily be entered into with a profit motive. Such motive must pervade the whole series of transactions effected by the person in the course of his activity. To infer from a course of transactions that it is intended thereby to carry on business ordinarily the characteristics of volume, frequency, continuity and regularity indicating an intention to continue the activity of carrying on the transaction must exist. But no test is decisive of the intention to carry on the business. In the light of all the circumstances an inference which was rendered in the context of the sales tax law, was relied upon and referred to in the context of the income-tax law in a recent decision of the Supreme Court in Sole Trustee, Loka Shikshana Trust v. Commissioner of Income-tax : [1975]101ITR234(SC) .
8. The question which requires consideration is whether the finding of the Tribunal that the income realized by the assessee as and by way of interest in the instant case is business income was arrived at by it after taking into account all the relevant circumstances and upon a balanced consideration of the entire evidence on record and on application of the correct legal tests indicated as above.
9. We shall first dispose of the objection raised on behalf of the revenue with regard to the additional material which the Tribunal allowed to be brought on record at the hearing of the appeal. The additional material allegedly brought on record consists of three items, namely :
(1) an extract from the memorandum of association and articles of the company incorporating clauses 25 and 26;
(2) extracts from the minutes book of the meeting of the board of directors of the company from 1968 to 1970; and
(3) summary of loans and advances effected by the company from calendar years 1965 to 1972 along with full details of the copy of the relevant accounts.
10. While making these documents a part of the statement of the case, the Tribunal has referred only to the documents referred to in item No. 3 as having been submitted before it at the time of the hearing of the appeal. It is, therefore, difficult to predicate as to whether the documents referred to in the other two items were also submitted at the time of the hearing of the appeal before the Tribunal or whether they were produced before the lower authorities. So far as the documents referred to in item No. 3 are concerned, however, it would appear from the order of the Income-tax Officer that the relevant account books were produced before him. From the observations made by him in his order it is clear that the he scrutinized those accounts with a view to finding out as to how the assessee had dealt with its funds over a number of years. A legitimate inference could, therefore, be drawn that the original account books were produced before the lower authorities. The documents referred to in item No. 3 consisted of summary of loans and advances effected by the company from calendar years 1965 to 1972 along with full details as contained in the account books. Therefore, what the assessee appears to have done is that he had filed the relevant extracts for convenient reference at the hearing of the appeal. The said material, therefore, may not amount to additional evidence.
11. That apart, under rule 29 of the Income-tax Appellate Tribunal Rules, 1963, the Tribunal has power to permit production of additional evidence in three classes of cases :
(1) When the Tribunal requires any documents to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders;
(2) When the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed for any other substantial cause; and
(3) When the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them.
12. The said rule provided that in any of these three case, for reason to be recorded, the Tribunal may allow the production of additional evidence. We are not concerned in the present case with a case falling in the third category. The Tribunal has acted either in the circumstances mentioned in the first or in the second category.
13. Now, a perusal of the order of the Tribunal does not show that at any stage an objection was taken on behalf of the revenue against this additional material, if any, being brought on record. Not only that but in paragraph 8 of the statement of the case, the tribunal has also observed that the draft statement of the case was placed before the parties and that they had no comments to offer. It would thus appear that the additional material, if any, which the Tribunal took into account, which was made a part of the statement of the case, was not objected to even when it was sent up to this court as an integral part of the case. It is well settled that if evidence is allowed to be let in without any objection as to its admissibility at a subsequent stage. Not only that but once a document is properly admitted, the contents of those documents are also admitted in evidence, though those contents may not be treated as conclusive evidence. (See P.C. Purushothama Reddiar v. Perumal : [1972]2SCR646 ). It is settled law that the question of mode of proof is a question of procedure and is capable of being waived. This applies to proceedings of a civil nature. While what is not relevant under the Evidence Act, cannot in proceedings to which the Evidence Act applies, be made relevant by consent of parties, relevant evidence can be brought on the record for consideration of the court of the Tribunal without following the regular mode if parties agree. The reason behind this rule is that it would be unfair to ask any party to prove a particular fact when the other party has already admitted that the way it had been brought before the court has sufficiently proved it. Where, therefore, a party not only raised no objection to certain evidence being brought on record but indeed appeared to have invited the adjudicating authority to act on such evidence, it cannot be allowed later on to object to such evidence having been considered by such authority merely because the decision has gone against it (see Kalyan Peoples' Co-operative Bank Ltd. v. Dulhanbibi : [1963]2SCR348 ). When additional evidence is taken with the assent of both the sides or without objection at the time when it was taken, it is not open to a party to complain later on that it was in breach of the provision of law (see K. Venkataramiah v. A Seetharama Reddy : [1964]2SCR35 The first two contentions of the revenue must, therefore, be rejected in the circumstances of the case.
14. It was strenuously contended on behalf of the revenue, however, that in the instant case, the Tribunal having failed to record reasons before admitting additional evidence, as it was required to do under the provisions of rule 29, it must be taken to have committed a breach of a mandatory provisions of the said rule and, therefore, additional evidence must be treated as having been (sic) again has no substance. Provisions similar to rule 29 are to be found in Order 41, rule 27, Civil Procedure Code. Sub-rule (2) of the said rule in terms provides that wherever additional evidence is allowed to be produced by an appellate count, the court shall record the reason for its admission. In K. Venkataramiah's case. : [1964]2SCR35 , the Supreme Court had occasion to consider whether the provisions of Order 41, rule 27(2) were mandatory and as to what would be the effect of an appellate court omitting to record reasons for admission of additional evidence. The Supreme Court observed at page 1529 :
'It is very much to be desired that the courts of appeal should not overlook the provisions of clause (2) of the rule and should record their reasons for admitting additional evidence. We are not prepared, however to accept the contention of the appellant that the omission to record the reason vitiates the admission of the evidence. Clearly, the object of the provision is to keep a clear record of what weighed with the appellate court in allowing the additional evidence to be produced...... The omission to record the reason must, therefore, be treated as a serious defect. Even so, we are unable to persuade ourselves that this provision is mandatory. For, it does not seem reasonable to think that the legislature intended that even though in the circumstances of a particular case it could be definitely ascertained from the record why the appellate court allowed additional evidence and it is clear that the power was properly exercised within the limitation imposed by the first clause of the rule all that should be set at naught merely because the provision in the second clause was not complied with...... It is true that the word 'shall' is used in rule 27(2), but that by itself does not make it mandatory. We are, therefore, of opinion that the omission of the High Court to record reasons for allowing additional evidence does not vitiate such admission.'
15. In our opinion, this decision completely answers the objection raised on behalf of the revenue in the present case. Having regard to the circumstances under which additional material, if any, appears to have been taken on record in this case, the objection which is based on the ground of omission to record reasons loses its significance.
16. That takes us to the main question which has been raised in this reference. The findings of the Tribunal which motivated it to reach the decision which it arrived at have already been summarized. The Tribunal had before it a clear concept of what 'business' means is a taxing statute and having regard to the principles laid down in the decided cases to which it has referred, it proceeded to apply the relevant tests.
17. The Tribunal noted that for a number of years the assessee had returned the income derived by it as an and by way of interest under the head 'other sources' and that it was assessee accordingly. It, however, proceeded to observe that the principles of estoppel and res judicata were not applicable to income-tax proceedings and that, therefore, the matter had to be viewed in the light of the facts and circumstances brought on record, so far as the assessment year in question was concerned. We do not think any objection could be taken to the approach of the Tribunal, so far as this particular aspect is concerned.
18. In Commissioner of Income-tax v. V. MR. P. Firm, Muar : [1965]56ITR67(SC) , the Supreme Court pointed out that the doctrine of 'approbate and reprobate' is only a species of estoppel; it applies only to the conduct of parties. As in the case of estoppel, it cannot operate against the provisions of a statute. If a particular income is not taxable under the Income-tax Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Equity is out of place in tad law; a particular income is either exigible to tax under the taxing statute or it is not. If it is not, the Income-tax Officer has no power to impose tax on the said income.
19. Similarly, in Commissioner of Income-tax v. Durga Prasad More : [1971]82ITR540(SC) , the Supreme Court observed that neither the principle of res judicata not the rule of estoppel was applicable to assessment proceedings.
20. As regards the applicability of the principle of res judicata, there are elaborate observations in Raja Bahadur Visheshwara Singh v. Commissioner of Income-tax : [1961]41ITR685(SC) , wherein it was held that there was no such thing as res judicata in income-tax matters and that it was open to the Appellate Tribunal on the material before it to arrive at a finding which was not consistent with the decision arrived at by the taxing authorities in the earlier proceedings for assessment to income-tax.
21. In Dalhousie Investment Trust Co. Ltd. v. Commissioner of Income-tax : [1968]68ITR486(SC) , the Supreme Court observed that a decision given in the earlier years was not binding in the proceedings for assessment during subsequent years.
22. No exception could possibly be taken, therefore, to the approach adopted by the Tribunal, so far as this particular aspect is concerned.
23. The fact that the assessee had treated the income from this source as income taxable under the head 'Income from other sources' can again be not allowed to overplay its effect.
24. In Ramnarain Sons (P.) Ltd. v. Commissioner of Income-tax : [1961]41ITR534(SC) , the Supreme Court observed that merely because the assessee in that case had entered the shares of a particular mill in its statement of shares in which trading transactions were carried on could not alter the real character of the acquisition. In Raja Bahadur Kamakhya Narain Singh v. Commissioner of Income-tax : [1970]77ITR253(SC) , the Supreme Court observed that the name the assessee gave to his account, namely, 'account of Rs. 48 lakhs floating in the share market', could not render the dealings in that account into trading transactions, if otherwise they were not. In Investment LTD. v. Commissioner of Income-tax : [1970]77ITR533(SC) , the Supreme Court held that the description of stock in the balance-sheet as 'investment' was not decisive.
25. The fact, therefore, that the assessee returned interest income as income taxable under the head 'income from other sources' could not be held to be decisive. It was, as observed in Karam Chand Thapar & Bros. P. Ltd. v. Commissioner of Income-tax : [1971]82ITR899(SC) , only a relevant circumstance which could have been relied on. If the Tribunal, therefore, having regard to the entire activity of the assessee in the light of other facts and circumstances on record did not treat this particular circumstance as having much bearing in the facts and circumstances of the present case, it could not have been said to have misdirected itself in law.
26. The Tribunal next considered the extract from the minutes of the meetings of the board of directors which had met from time to time and it held that the proceedings of the meetings showed that the directors were regulating the advances to be made to various parties and that they decided not only upon the amounts to be advanced but also the rate of interest to be charged depending upon the exigencies of the situation. Some of the minutes of the proceedings of the board of directors of the assessee-company form part of the statement of the case and we find that the inference which the Tribunal has drawn is borne out by the contents of those documents. The very first resolution passed by the board of directors on October 30, 1968, shows that an mount of Rs. 4 lakhs out of the surplus funds of the company was directed to be invested with reputed and solvent firms in sharafi interest and in terms containing such additional conditions which may be in the interest of the assessee-company. The managing director of the any single firm an amount exceeding Rs. 2,00,000. The next resolution which is dated January 31, 1969, speaks of 'advance' of a sum of Rs. 1,50,000 to Vikram Mills which had expired on December 21, 1968, and it directs that of the amount realized on maturity of the advance; an amount of Rs. 1,00,000 be advanced an loan for 12 months to the same company. The said resolution then made reference to the earlier resolution dated October 30, 1968, and proceeded to record that the assessee-company had advanced a sum or Rs. 1,30,000 at sharafi rate of interest to a firm of Ahmedabad. These are the two illustrative resolutions to which we have made reference. The proceedings of the board of directors not only reveal that the directors were regulating the advances which the assessee-company used to make but also that they treated it as a part of the activity which the company had to undertake. Significant use of the expressions 'advance' and 'sharafi interest' also gives its own colour to the transactions.
27. The Tribunal then relied upon clauses 25 and 26 of the articles of association of the assessee-company. Those two clauses, inter alia, authorised the assessee-company 'to invest and deal with the moneys of the company in such manner as may from time to time be thought necessary' and 'to lend, deposit or advance money, securities and property to such persons, firms or companies, limited or otherwise, and on such terms as may seem expedient and in particular to customers and seller and others having dealings with the company.......' The Tribunal had legitimately drawn an inference from the aforesaid two clauses that they authorised the assessee-company not only to invest and deal with the monies of the company in such manner as it may from time to time think necessary but also to lend, deposit, or advance moneys to such persons, firms or companies and on such terms as may seem expedient to the assessee-company. It is true, as contended on behalf of the revenue, that the last part of the objects clause 26 refers to advances being made in particular to customers and sellers and others having dealings with the company. We do not think, however, that the last part can be read as controlling the first part. The objects of the company, having regard to the language in which they are couched, authorised the company to make advances not only to customers and sellers but also to any 'persons, firms or companies as the assessee-company thought proper. In Oriental Investment Co. Ltd. v. Commissioner of Income-tax : [1957]32ITR664(SC) it was observed that merely because the company had within its objects the dealing in investment in shares does not give to it the characteristics of a dealer in shares. But if other circumstances are proved, it may be a relevant circumstance for the purpose of determining the nature of activities of an assessee. It would thus appear that for the purpose of judging whether the transactions in advances of monies were in the nature of business or investment, the Tribunal was entitled to rely upon the objects clauses along with other circumstances and to arrive at the conclusion that it did.
28. The Tribunal then considered the activity of the assessee and it found that it advanced monies to various parties with a view to achieving the objects with which it was formed and that there was a systematic activity of advancing monies to various parties from time to time. The Tribunal was obviously referring to the material produced before it by the assessee which shows not only how the board of directors dealt with the question of advances but also that from calendar year 1965 till calendar year 1972, the assessee was advancing monies to various parties on different terms both as to duration of the advances as also interest. The Tribunal held that the activity of advancing monies to various parties was a sort of an organized activity undertaken by the assessee-company and that, therefore, its income from other sources. The Tribunal rightly applied the relevant tests, namely, volume, frequency, continuity and regularity of transactions in reaching the conclusion that it arrived at.
29. The foregoing discussion would show that the tribunal reached its ultimate decision after taking into account all the relevant circumstances and upon a balanced consideration of the entire evidence on record and on application of the correct legal tests.
30. We are, therefore, of the opinion that the question referred to us in the present reference must be answered in the affirmative, that is to say, in favour of the assessee and against the revenue. The Commissioner will pay the costs of the reference to the assessee.