TaxTMI 
TaxTMI 
1966 (10) TMI 24
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....essee is Nandlal Kasera of 243, Chittaranjan Avenue, and an individual, owning some properties and having a share in the firm of Messrs. Bengal Kopack Ginning. The assessment year is 1948-49. The accounting year is 2003/4 Diwali ending on the 11th November, 1947. The original assessment for the year 1948-49 was completed on the 11th December, 1933, on a total income of Rs. 2,985 only. It was then subsequently discovered and the income-tax Officer came to know that the assessee had done extensive speculative business in jute and hessian, in his own name and also in the name of Messrs. Hanuman & Co and had acquired considerable property from such business, which he had concealed. Notice was therefore issued under section 34(1)(a) by the Income-tax Officer for the reassessment of the total income of the assessee. The assessee in reply filed a return of income showing a loss of Rs. 181 only. The assessee admitted before the Income-tax Officer that he had done some speculative business with one Madanlal Saraf which was supposed to result in a huge loss but the assessee had not shown that loss in the return filed on the flimsy grounds that he had no details relating to the transsaction. ....
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.... extraordinary and is in the following terms : " As the matter was fairly old and your petitioner had become an old man his memory had failed recording the actual position of Messrs. Hanuman & Co. " The whole attempt from now onwards was to explain these two irreconcilable statements only on the ground of lapse of memory on medical certificate. The Income-tax Officer rejected he plea of lapse of memory and dismissed the assessee's application under section 27 of the Act. The facts on record show from the statement of case that the Income-tax Officer found that the assessee had speculative dealings through one Madanlal Saraf, Stock & Share Broker, of No. 7, Lyons Range, Calcutta. This Madanlal Saraf paid Rs. 6,979 to Messrs. Hanuman & Co. by cheque on the 24th February, 1957, on the Comilla Union Bank. That cheque was collected by Hindustan Mercantile Bank Ltd. on the account of payee Hanuman & Co. On examination of the proposal form for opening the bach account, it was found that the assessee, Nandlal Kasera, was mentioned there as the proprietor of Hanuman & Co. The Income-tax Officer also found that Messrs. Sagarmal Dhanra of 1, Roopchand Roy Street, Calcutta, had specul....
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....f the Income-tax Officer in my view are well-founded." He also came to the finding and conclusion that : " It is quite evident after going through the above facts that the assessee has in a well-calculated way falsely disowned his proprietorship of Messrs. Hanuman & Co. and that in pursuance of this false declaration, with the said purpose of preventing a proper assessment of his profits on the above concern, he did not make available his books of account in spite of the ample opportunities given to him under section 22(4)." The Appellate Assistant Commissioner also found as a fact that the whole case of the assessee about his medical certificate and lapse of memory was unacceptable. He records the fact that the assessee was attending before the Appellate Assistant Commissioner, had been talking and arguing his own case and he found : " My impression is that at any rate now he fully recapitulates the material facts of his case and even minor details as well." He therefore, accepted the Income-tax Officer's finding on this point and rejeted the assessee's story of memory. The Appellate Assistant Commissioner therafter, proceeds to discuss the merits of the case and....
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.... case the estimate as made by the Income-tax Officer would not be excessive." He, therefore, confirmed the Income-tax Officer's order under section 23(4) and dismissed the assessee's application under section 27 of the Income-tax Act. The assessee, thereafter, appealed to the Tribunal both for relief against the best judgment assessment under section 23(4) as well as the order made under section 27 of the Act. What the Tribunal did was this : The Tribunal,dismissed the assessee's application under section 27 of the Income-tax Act. The relevant finding on the point of the Tribunal is : " His (assessee's) failure to produce the books of accounts of the business in response to notice under section 22(4), was, therefore, clearly a default which invited assessment under section 23(4). We are not impressed by his plea of lapse of memory to explain away his categorical disclaimer about his having any connection with Hanuman and Co. nor are we satisfied that he had sufficient reasons not to produce the books before the assessment was made when he could so conveniently produce them after the assessment was made. We, therefore, hold that the income-tax authorities were justified in ....
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....eived from it. The Income-tax Officer could not know this fact in view of the non-cooperation of the appellant ...... In view, however, of the fact that ignoring all this important aspect introduces an element of arbitrariness in the assessment, we will take that into account and reduce the addition to Rs. 1,00,000 as estimated income from the business in the name of Hanuman and Co. " This is an extraordinary decision and conclusion by the Tribunal. It is open to serious criticism and cannot be sustained. We shall briefly state the reasons. In the first place, the Tribunal, having rightly rejected the assessee's application under section 27 of the Act, should never have considered statements or facts produced with that application under section 27. The reason is simple. The rejection of the application under section 27 of the Act is rejection also of the supposed statements and facts that were intended to be introduced by that application under section 27. Having rejected that application, it was improper and illegal on the part of the Tribunal to refer again to such documents or statements which were part of the application under section 27 of the Act. This whole story of the a....
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....n is based on the hypothesis and assumption contained in the expression, forming part of the question, namely, " having held that the Income-tax Officer has made an addition of Rs. 4,60,000 to the income of the appellant without basis and arbitrarily. " This hypothesis or assumption is wrong and we are of the opinion that the addition by the Income-tax Officer of the sum of Rs. 4,60,000 to the income of the appellant was not arbitrary nor without any basis, but was fully supported by facts and figures and was a correct and appropriate sum. On the second part of the first question raising the point, " was it (Tribunal) justified in adding the sum of Rs. 1 lakh to the income of the appellant as estimated income and is such addition arbitrary and fanciful and based on no materials, " we hold and answer this part of the question by saying that the addition of the said sum of Rs. 1 lakh as aforesaid by the Tribunal was arbitrary and fanciful and was not supported by any material whatsoever. The answer to the second question asked on this reference follows from the above answer to the first question. We hold and answer that the Appellate Tribunal was certainly justified in coming to t....
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....ounded." Therefore, the reference is disposed of by this High Court by judgment containing the grounds of the decision, deciding the question of law raise on the reference. In so far as it is a judgment and decision containing the grounds, such a judgment of the High Court on an income-tax reference has all the attributes of a judgment of a trial court or an appellate court. What does not happen, however, is that this judgment is not in the technical sense followed by a decree of the High Court, so that there could be an execution of such a decree. But although there is no decree unclear section 66(5) of the Income-tax Act, yet there is a very significant provision therein which is its fourth special feature. When the High Court has decided the question of law raised in the reference by a judgment containing the grounds on which the decision is founded, the matter apparently goes back to the Tribunal and the provision of section 66(5) of the Act is--" and shall send a copy of such judgment under the seal of the court and the signature of the Registrar to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to such judgment. " Th....
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....cal questions of law that the High Court has to decide under this jurisdiction under section 66 of the Income-tax Act. To say, therefore, that the High Court has to answer the question of law but not look at facts is first to make the High Court blind and then to call for vision from the High Court on the point of law. No point of law can be answered except though a set of facts in a court of law and especially in a matter so prosaic about facts as income-tax. But this capacity of the High Court to look into facts arises from the very nature of the duty cast upon the High Court. It has to look into the facts on which the question of law arises. The question of law is not like an orchid growing in the high air but it grows on the soil of hard facts and more than usual hard facts of income-tax in this jurisdiction. The High Court's approach has been cautious and rightly so in this respect. The courts, therefore, have evolved certain principles. These principles illustrate the function of the court and demonstrate that what this court does in such a case is, not act as a court of facts in the sense that it does not find new facts or take notice of new facts not already on the recor....
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....id by the Supreme Court in Commissioner of Income-tax v. Daulatram Rawatmull that even though the finding of the Tribunal on the fact is final, its decision as to the legal effect of those findings is a question of law which can be reviewed by the High Court and that a finding on a question of fact even though reached by a Tribunal, is open to attack under section 66(1) of the Act as erroneous in law when there is no evidence to support it or if it is perverse. See the observations of Shah J. in that case at pages 579-80. In this case and in the present reference before us, it is clear and plain beyond doubt that the sum of rupees one lakh as found by the Tribunal was not based on any material or fact or circumstance but was a pure guess-work or fancy of the Tribunal. Therefore, that finding of fact about the figure of rupees one lakh must be set aside on the principle just enunciated. Equally on the principle that where there is some fact to support the finding then this court should accept such finding of fact and, therefore, on the same principle, the sum of Rs. 4,60,000 as found by the Income-tax Officer and confirmed by the Appellate Assistant Commissioner and proved almost....
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....rmutations and combinations affecting the potency of such mixture of fact or law to turn the question either to a question of fact only or of law only. Here, we hold, there was no evidence before the Tribunal to arrive at the figure of rupees one lakh and we also hold that there was ample evidence, if not conclusive evidence, to prove that the actual figure of concealed income was Rs. 4,60,000 and that fact is on the record. Therefore, it is not even a case where there could be a possible or impossible plea for remand for a finding of fact on this point. Lest it be forgotten, it has got to be emphasised that this was a best judgment assessment where the attempt to reopen it under section 27 had failed. The tests for such a judgment are now well-settled ever since Commissioner of Income-tax v. Laxminarain Badridas. No doubt, such an assessment has to be according to the best of the Income-tax Officer's judgment. The Privy Council laid down the test that the Income-tax Officer in coming to such judgment must not act vindictively or capriciously in the matter, but must make what he honestly believes to be a fair estimate of the proper figure of assessment. For that purpose, he is e....
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.... or qualified by saying that the decision must be so given as not to enhance the assessment made by the Tribunal. That will be laying a limitation on the powers and jurisdiction of this High Court, which is not there under section 66(5) of the Act. Supposing by answering a question of law it follows that the assessment must be enhanced as a matter of course, then is it going to be said that because it leads to enhancement, therefore, the High Court's answer either should not be given or must be modified ? We have no hesitation in holding that such a view is entirely wrong and against the statute. Some reference to some of the relevant sections of the Income-tax Act on this point may not be without in interest on this subject. Apart from the express and unqualified language of section 66(5) of the Act giving the power, the duty and the jurisdiction to this High Court to decide the questions of law on the reference, section 33 which is section to deal with appeals against orders of the Appellate Assistant Commissioner, specially by its sub-section (6) provides--" save as provided in section 66 orders passed by the Appellate Tribunal on appeal shall be final. " Therefore, the final....
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....ed or reduced, that will be the effect that must follow. We read nothing in section 66(5) of the Act to find any limitation that the High Court in dealing with a reference under section 66(5) of the Act is limited only to conformation of the Tribunal's assessment or its reduction and is not competent to enhance it if the answers to the questions of law decided by the High Court demand it. Finally, on this branch of the argument, Mr. Ghose, for the assessee, contends that because this is a reference at the instance of the assessee, therefore, the assessment made by the Tribunal cannot be enhanced to his detriment. In support of this branch of his argument, he says that if that was that was sought for by the income-tax authorities, then they should have brought a reference at their instance. We do not think that this High Court can be held at ransom and its jurisdiction determined by the person at whose instance the reference is made under section 66 of the Act. No matter at whose instance the reference is made under section 66 of the Act, be it of the assessee or of the taxing authorities or be it under direction of court, once the reference is before the court, the court has unqual....