Income-tax assessment inquiry can probe real cash credits, disregard civil decrees, use commissions, and examine witnesses without counsel.

Income-tax assessment authorities may investigate the real nature and source of cash credits notwithstanding civil decrees between the assessee and third parties, because the civil recovery record does not conclude the statutory question of who truly owns the money. The authority may also use commissions and other officers to record evidence where required for effective assessment, and that procedure is not without jurisdiction merely because the assessment is pending before the territorial officer. Witnesses summoned for examination have no inherent right to insist on counsel being present during recording of statements, though ordinary legal protections remain available.

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Issues: (i) Whether the Income-tax Officer could continue to enquire into the nature and source of the amounts notwithstanding civil decrees obtained by the petitioners against the assessee-federation; (ii) whether enquiry by officers acting under commission was without jurisdiction when the assessment was pending before the Income-tax Officer having territorial jurisdiction; and (iii) whether deponents or witnesses summoned for examination in the assessment proceedings were entitled to be represented by counsel.

Issue (i): Whether the Income-tax Officer could continue to enquire into the nature and source of the amounts notwithstanding civil decrees obtained by the petitioners against the assessee-federation.

Analysis: The scope of a civil court's adjudication on promissory notes and decrees for recovery of money was held to be different from the scope of an assessment inquiry under the Income-tax Act. The assessment authority was concerned with determining whether the credits represented income of the federation and to whom the money really belonged. The existence of decrees between the federation and the decree-holders did not conclude that question for income-tax purposes. The officer was entitled to examine the real nature of the receipts and to disregard the decrees for purposes of his statutory inquiry, subject to the ordinary appellate process under the Act.

Conclusion: The Income-tax Officer was competent to proceed with the enquiry, and the decrees did not bar the assessment investigation.

Issue (ii): Whether enquiry by officers acting under commission was without jurisdiction when the assessment was pending before the Income-tax Officer having territorial jurisdiction.

Analysis: The record showed that the officer having jurisdiction over the assessee had issued commissions to other officers for recording statements because a very large number of persons had to be examined and the assessment was subject to time limits. The power to issue commissions and summon witnesses was treated as part of the statutory powers available for effective assessment. No illegality or want of authority was found in the use of other officers for recording evidence in aid of the assessment.

Conclusion: The enquiry by officers acting under commission was valid and within jurisdiction.

Issue (iii): Whether deponents or witnesses summoned for examination in the assessment proceedings were entitled to be represented by counsel.

Analysis: The Court held that no provision in the income-tax law or general procedure conferred a right on a witness to insist on the presence of counsel while statement was recorded. The power to summon and examine witnesses was compared to the court's power to require attendance and cross-examine deponents on affidavits. A witness could claim the protection available in law, including the protection against compelled self-incrimination in appropriate proceedings, but that did not create a right to legal representation during examination. The apprehension of prejudice was treated as unfounded in law.

Conclusion: Witnesses had no right to be accompanied by counsel during recording of their statements.

Final Conclusion: The challenge to the assessment-related inquiry failed on all material grounds, and the statutory power of the revenue authorities to investigate the true nature of the credits was upheld.

Ratio Decidendi: In income-tax assessment, the assessing authority has exclusive statutory power to investigate the real character of cash credits and is not bound by civil decrees between the assessee and third parties; that power includes issuance of commissions for recording evidence, and witnesses summoned for such inquiry have no inherent right to legal representation.

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