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TMI Blog1953 (2) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... ecided to be made and the Income-tax Officer is bound to issue a fresh notice in that respect and to call for a fresh explanation from the assesse. (3) Whether there was any legal material before the Tribunal to justify the finding that the cash credits in question were represented the assessee's income liable to assessment. The first two questions are not very happily worded As a matter of fact, the questions suggested by the assessee were clearer. The assessee is a Hindu undivided family carrying on the business of the manufacture and sale of iron bars, strips etc, in Kanpur The assessee has income from house property as also from business carried on in the name of Sing Engineering Works and Sing Plate Mills etc Usual notices u/s 22 of the Indian Income-tax Act were issued, requiring the assessee to produce its account books for the relevant account period i e 1st April, 1941 to 31st March 1942 The assessee however, produced account books only from 12th Sept 1941, that is the accounts from 1st April, 1941, to 11th Sept, 1941, were not produced The assessee gave some explanation that the account books had been taken away by one Amar Sigh, an employee, but that explanation was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and the Income-tax Officer shall thereupon proceed to make such fresh assessment and determine where necessary the amount of tax payable on the basis of such fresh assessment. In the case before us, the only direction given by the AAC was that Income-tax Officer shall make a fresh assessment after proper enquiries As we have already said, it is not suggested that proper enquiries were not made and the learned counsel has not been able to explain on what basis he urges that the material which was on the record at the time when the assessment, which had not been set aside, was made must be treated as non-existent and must not be taken into consideration The AAC had pointed out that certain photographic impressions, on which the Income-tax Officer had relied, were not admissible in evidence for want of proof The Income-tax Officer was, no doubt not entitled to utilize that material without further proof and it is not suggested that he did There is no reason why the other evidence which was properly admitted and places on the record and to which no exception had been taken should be deemed to be non-existent Therefore, our answer to the first question is that the Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Income-tax Officer or by the AAC When the case came up before the Income-tax Appellate Tribunal the line taken by the learned counsel for the assessee was that he admitted and did not challenge the other items of income and thus conceded that the Income-tax Officer was right in his estimate that profits to the extent of ₹ 2,83,981 out of ₹ 3,33,981 had been made but, as regards the sum of ₹ 40000 he challenged the findings of the Income-tax Officer and AAC urged that the explanation given by the assessee should have been accepted The Tribunal rejected this contention for practically the same reasons for which the AAC had rejected it Those reasons, if we might say, were very count The assessee had pointed out that, in the previous account year, a sum of ₹ 1,13,746 had been withdrawn in the course of that year against deposits amounting to ₹ 6,093 The balance, according to the assessee, was left in its hands and, out of that balance, it had transmitted from Amritsar to Kanpur the sum of ₹ 50,000 on 14th Feb, 1942 It, however, appears that out of ₹ 1,13,746 withdrawn in the previous year, the sum of ₹ 81,875 had been withdrawn on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Mr Lee, and we consider the appellant company had not discharged the onus that lay upon it of displacing the assessment I am bound to take the view-I cannot escape from it-that they must have directed their attention to the two issues which had been raised by the appellant company They must have considered whether these sums were lent to the company, or whether they were not, and I am quite satisfied that they came to the conclusion that the alleged loans were wholly fictitious They considered the whole story was untrue and that the 1,300 pounds was really part of the taxable profits of the company. The learned Judge held that there was no basis for disagreeing with the conclusion arrived at by the Commissioners When the matter went up before the Court of Appeal, the Court of Appeal treated it as a pure question of fact and held that, on the evidence of Alfred Lee having been rejected, it having been believed that Mr Lee was not in a position to advance the money no conclusion other than that arrived at by the Commissioners was possible. We may note here that, in the statement of the case, it was overlooked that this was a decision by the Income-tax Officer u/s 23 (4) of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he best of his judgment' (which only means as best he can in the circumstances) the assessee who has 'not chosen to state an account so that the amount of profits may be strictly determined, cannot complain if a random assessment is made' upon him by the Crown. The learned Chief Justice relied on the judgment of the Lord President in Macpherson and Company Vs Moore (surveyor of Taxes) 2 and held as follows :- when it is said that a tribunal is invested with a 'judicial direction' what is meant is that in certain proved or admitted circumstances it has been given the poser to act or not to act in a particular way Such a discretion, no doubt, must be exercised within the limit to which an honest man competent to the discharge of his office ought to confine himself. In case if Commissioner of Income-tax, Central and United Provinces Vs Laxminarayan Badridas ([1937] 5 ITR 170) their Lordships of the Judicial Committee approved of the above decision Dealing with the matter of assessment u/s 23 (4) of the Act, their Lordships pointed out that, in the case before them, as the assessee did not produce his account books, the Income-tax Officer had found that the assessee had fluid resour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t must be the consideration of facts relating to the income of the assessee. The learned Chief Justice held that even in a best judgment assessment u/s 23 (4) there must be some material for the conclusion arrived at by the Income-tax Officer and the only difference according to him, between an assessment under sub-section (3) and an assessment under sub-section (4) of Section 23 was that u/s 23 (4) a more summary method was contemplated by the Act as the assessee had been guilty of deliberate default We do not think there is any real difference between the decision of their Lordships of the Judicial Committee and the observations made by the learned Chief Justice of Madras As a mater of fact, the observations of their Lordships of the judicial committee were binding on the Madras Court and the Madras Court could not have gone against the decision of the Judicial Committee The judicial Committee did not lay down that there need be no material They pointed out that the Income-tax Officer has to come to an honest conclusion and the honest conclusion must be on some some basis There is a difference between the recording of a finding on a point on the evidence produced by the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er unless it is shown to the satisfaction to the appellate court that the discretion has been exercised mala fide or arbitrarily or capriciously The burden of satisfying the appellate court in this respect must rest on the party challenging the exercise of the nest judgment by the Income-tax Officer There was no suggestion in the case before us that the order of the Income-tax Officer was either mala fide, capricious, arbitrary or unreasonable If the question referred to us had been whether the Income-tax Officer could have reasonably come to the conclusion in a best judgment assessment u/s 23 (4) that the income of the assessee was as computed by him, we would have had no hesitation in answering the question in the affirmative. Shri Jagdish Swarup, learned counsel for the Department, at one time processed that we should ask for a fresh statement of the case u/s 66 (4) of the Indian Income-tax Act so that we may have before us facts or circumstances which the Income-tax Officer and the AAC had acted but, in that case, we would have to ask for a reference on a question not raised by the assessee before the Appellate Tribunal Having read the order of the Income-tax Officer and the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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