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1946 (10) TMI 13

s is a reference under Section 66, clause (3), of the Indian Incometax Act (Act XI of 1922). The assessee in this case, namely Earn Datta Sita Earn of Basti, is a Hindu undivided family. It appears that in the year 1937-38 tax was assessed by the Income-tax Officer of Basti on a total income of ₹ 2,476. The assessee appealed to the Assistant Commissioner and was exempted from taxation, on a finding that his total income was ₹ 792 only, which was below the minimum assessable income. When the assessment for the following year, namely 1938-39, was being proceeded with, the Income-tax Officer discovered that there was an Amanat Khata in existence, showing large sums of cash receipts and withdrawals. The Income-tax Officer scrutinized the account books of the previous years, and discovered that there was an excess of deposits over withdrawals in the Amanat Khata relating to successive preceding five years. The assessee was then asked by the Income-tax Officer to explain the source from which all this surplus money came. His explanation was that it was brought from his private chest at home and from the wives of his brother and son. On being questionad further, the assessee, .....

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mentioned therein. It was in pursuance of this order, dated the 2nd of December, 1943, that the Commissioner of Incometax has made the present reference and the questions of law formulated by him for decision by this Court are as follows :― (1) Whether, in the circumstances of the case, the order of the Commissioner, dated the 29th March, 1940, rejecting the revision petitions of the assessee under Section 33 of the Act, is " otherwise prejudicial to him " (the assessee) within the meaning of sub-section (2) of Section 66 of the Act? (2) Whether the order passed by the Commissioner under Section 33, without notice to the assessee and without giving him an opportunity to be heard, is an order without jurisdiction; and whether the validity of the said order is a question of law arising out of tiiat order itself within the meaning of the first proviso to sub-section (2) of Section 66 of the Act ? (3) Whether there was evidence before the Income-tax Officer from which it was permissible to draw the inference that some income or accounts had been necessarily suppressed or concealed by the assessee and it was open to the Income-tax Officer to make a best judgment assessm .....

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nch case of Voora Sreeramulu Chetty v. Commissioner of Income-tan, Madras, reported in 7 I.T.B., page 263, with which a Division Bench of this Court consisting of Gollister and Bajpai, JJ., expressed their full agreement in the case of Income-tax Commissioner v. Sir Iqbal Ahmad reported in 42 A.L.J., page 454 ; 10 I.T.B., page 152. It has been argued that ordinarily it is always assumed that, unless there are some special reasons, a word used more than once in a statute is used in the same sense throughout. This view has been accepted by the referring Judge with the remarks :― "In the present case, it must be so, because of the express reference in Section 66 to an order passed under Section 33." We may however point out that the word " prejudicial " has to be interpreted in each section having regard to the context in which it is used. In Section 33 the words used are " prejudicial to an assessee " while the words in Section 66, clause (2), are "enhancing an assessment or otherwise prejudicial to him." If it were intended to convey identically the same meaning, it was absolutely unnecessary to superadd the words " enhancing an ass .....

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scussing all the authorities on the point, have come to the conclusion that the earlier Full Bench decision of Madras was overruled by a Full Bench of five Judges on good grounds. They have observed :― "It is impossible to argue that merely because the Commissioner confirms an order made by the subordinate authorities, his order of confirmation cannot be treated as an order prejudicial to the assessee, and the fallacy underlying this law has been fully exposed by the Full Bench of Madras." ......and also "We cannot lose sight of the word ' otherwise ' used by the Legislature to qualify the word * prejudicial.' An order enhancing an assessment is no doubt prejudicial to an assessee but if the order is prejudicial in any other way it is still covered by this sub-section." We may add that the powers given to an appellate Court are mentioned in Section 31, clauses (a) to (g), of the Act, and the same powers are, mutatis mutandis, to be exercised by the Commissioner under Section 33. When an order of assessment is involved the only orders that can be passed would be to confirm, reduce, enhance, or annul the assessment or to set aside the assessment .....

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In that case, if he thinks that it is not necessary to take any action, he drops the matter without proceeding further and no question of confirmation arisRs. But if he thinks it proper to reconsider the orders, he must give the assessee an opportunity of being heard, even when he ultimately confirms the order. As stated above, this provision is certainly not made for a case in which the aggrieved party himself petitions the Commissioner to revise or review the order of any authority subordinate to him. As such, it cannot be said that the Commissioner acted without jurisdiction in confirming the order without giving the applicant an opportunity to be heard. Even if the Commissioner proceeds to pass an order prejudicial to the assessee on calling for the record on his own motion without giving him an opportunity to be heard it would only amount to an irregularity in the procedure and would not make his order ultra vires or without jurisdiction. It may however be pointed out, that on the analogy of the Civil Procedure Code, if an application for revision is not summarily dismissed and the record is called for at the instance of a party, it is always advisable to hear him. In the pres .....

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ce is a question of fact, but the question whether there is evidence at all from which an inference can be drawn is a question of law. The learned counsel argues that if there is any evidence at all from which an inference can possibly be drawn this Court is not empowered to question the decision of the Income-tax Commissioner. We do not agree with this view of the matter. In every case the evidence apart from the sufficiency or otherwise, shall have to be examined in order to find out whether, in the circumstances of the case, a reasonable man would draw the inference from that evidence which has been drawn by the Income-tax Officer. In our judgment, there was no evidence worth the name from which an inference could be drawn that the assessee kept any account books for his private chest and which he refused to produce. We are of opinion that the existence of an Amanat Khata was not sufficient to excite any suspicion and it, as a matter of fact, did not excite any suspicion during the preceding five years. What is very significant in this case is, that in the year 1937-38 the Income-tax Officer made an assessment on a total income of ₹ 2,476 but on appeal, the Assistant Commi .....

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e entries under the heading Amanat Khata. Then the explanation given by the assessee in his application does not appear to be inherently open to any grave objection. The Appellate Assistant Commissioner has analysed this explanation. He had statements A and B prepared and on a comparison of those statements came to the conclusion:― "The deposits in assessee's Amanat Khata thus exceeded the deposits of outsiders by ₹ 27,536 and the withdrawals from the Amanat Khata came to only ₹ 7,915 whereas the money withdrawn by the depositors amounted to ₹ 16,608. If the increase or decrease in the Amanat Khata had depended on the deposits and withdrawals made by the depositors the figures quoted above by way of comparison would have differed within narrow limits and not by thousands." It seems to us that the Assistant Commissioner did not give any weight to the statement of the assessee, in his applications, that the excess of the withdrawals was due to two causes, namely that the business of the assessee was not in good condition and so he had to bring more capital, and also that the money was required to pay a number of persons who had deposits with the .....

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from the fact that an income-tax was assessed only on ₹ 4,227 in one year and on ₹ 19,134 in another year, whereas in the case of Kanhaiya Lal Umrao Singh v. Commissioner of Income-tax [1941] 9 I.T.R. 225, the business was carried on in several towns, namely Lucknow, Cawnpore and Rupadia, and the capital involved was many lacs of rupeRs. In the other case reported in 9 I.T.R., pages 286 (Chaturbhuj v. Commissioner of Income-tax, C.P. and U.P.), there was only an expression of opinion. When the case came up before a Bench of the Oudh Chief Court for an order under Section 66, clause (3), requiring the Commissioner to refer the case, the Bench, while refusing to entertain the application, remarked that no useful purpose would be served in directing the Commissioner to state the case and then proceeded to make certain observations. That case however is also distinguishable from the one before us because there were certain features in that case, such as advancing of money by the father of the assessee for which he kept no accounts, and it being admitted that he had no source of income except the joint family business and that he advanced money for the joint family business .....

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