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Issues Involved:
1. Interpretation of "otherwise prejudicial to him" in Section 66(2) of the Indian Income-tax Act. 2. Validity of the Commissioner's order under Section 33 without notice to the assessee. 3. Permissibility of the inference by the Income-tax Officer regarding suppressed or concealed income/accounts and the validity of a best judgment assessment. Detailed Analysis: Issue 1: Interpretation of "otherwise prejudicial to him" in Section 66(2) of the Indian Income-tax Act The first question of law revolves around the interpretation of the phrase "otherwise prejudicial to him" in Section 66(2) of the Indian Income-tax Act. The court noted that the interpretation of this phrase has led to considerable divergence of opinion in Indian courts. The court agreed with the view expressed in the Full Bench case of Voora Sreeramulu Chetty v. Commissioner of Income-tax, Madras, and the Division Bench of this Court in Income-tax Commissioner v. Sir Iqbal Ahmad. The court emphasized that the word "prejudicial" must be interpreted in context. The addition of "enhancing an assessment or otherwise" in Section 66(2) indicates a broader scope for the term "prejudicial." The court rejected the narrower interpretation that an order confirming a prejudicial order is not itself prejudicial. The court concluded that the Commissioner's order confirming a prejudicial order is also prejudicial, answering the first question in the affirmative. Issue 2: Validity of the Commissioner's order under Section 33 without notice to the assessee The second question concerns whether the Commissioner's order under Section 33, without notice to the assessee, is without jurisdiction. The court clarified that the Act does not confer a right upon the assessee to move the Commissioner under Section 33. The proviso requiring a hearing applies only when the Commissioner acts on his own motion. If the Commissioner confirms an order without giving the assessee an opportunity to be heard, it constitutes an irregularity in procedure but does not render the order ultra vires or without jurisdiction. The court suggested that it is advisable to hear the assessee if the record is called for at the instance of a party. The court also affirmed that questioning the legality of an order is a question of law arising out of that order within the meaning of Section 66(2). Thus, the court answered the second question by stating that the Commissioner did not act without jurisdiction, but the legality of the order is a question of law. Issue 3: Permissibility of the inference by the Income-tax Officer regarding suppressed or concealed income/accounts and the validity of a best judgment assessment The third question addressed whether there was evidence before the Income-tax Officer to infer that the assessee suppressed or concealed income/accounts, justifying a best judgment assessment. The court concluded that there was no evidence to support such an inference. The court emphasized that the sufficiency of evidence is a question of fact, but whether there is any evidence at all is a question of law. The court found that the explanation provided by the assessee regarding the Amanat Khata was reasonable and that the Income-tax Officer's rejection of this explanation was not justified. The court noted that the Income-tax Officer's actions appeared vindictive, especially given the reversal of his decision in the previous year. The court concluded that the Income-tax Officer's inference was based on suspicion rather than evidence, and thus, it was not permissible to make a best judgment assessment. Therefore, the court answered the third question by stating that there was no evidence to justify the inference of suppressed or concealed income/accounts. Conclusion The court answered the reference accordingly, with the assessee entitled to costs from the Income-tax Department. The court certified a fee of Rs. 500 for Mr. Brij Lal Gupta, Counsel for the Department, and directed that a copy of the judgment be sent to the Commissioner of Income-tax.
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