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TMI Blog1946 (10) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, beyond making some other statements, presented applications in which he mentioned that he had to bring the money in excess of the withdrawals, both in the years 1937-38 and 1938-39, as the business was not in good condition, and also that money was required to make payments to a number of persons, who had their deposits with the assessee. The Income-tax Officer, not being satisfied, called upon the assessee, by means of notices under Section 22, clause (4), of the Indian Income-tax Act to produce the accounts which might show the source of the money deposited in the Amanat Khata. As no accounts were produced, on the ground that the assessee did not keep any such accounts, the Income-tax Officer proceeded to make an assessment under Section 23, clause (4), of the Indian Income-tax Act and added the surplus of deposits over withdrawals in both the relevant years to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessment? The reference came up for hearing before a Division Bench, which was of opinion that the first and second questions referred to this Court were of considerable importance and on its recommendation the case has been laid before this Full Bench. The first question of law referred to us turns on the interpretation of the words otherwise prejudicial to him occurring in Section 66, clause (2), of the Act. Section33 of the Indian Income-tax Act as it stood before its amendment by the Indian Income-tax (Amendment) Act, 1939, lays down :― (1) The Commissioner may of his own motion call for the record of any proceeding under this Act which has been taken by any authority subordinate to him or by himself when exercising the power of an Assistant Commissioner under sub-sectior (4) of Section 5. (2) On receipt of the record the Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessment or otherwise in Section 66 (2). To our mind this addition clearly indicates that it was intended to give a much wider sc6pe to the word prejudicial. The learned counsel for the Department has referred us to the two Nagpur rulings reported in 5 LT.R. 267 [Central India Spinning, Weaving and Manufacturing Co. Ltd., (Empress Mills) v. Commissioner of Incometax, C.P. and U.P.] and 596 (Trimbak Totaram v. Commissioner of Incometax, C.P. and U.P.) to support the proposition that the words otherwise prejudicial occurring in Section 66, clause (2), do not apply to an order under Section 33, which only confirms an order sought to be revised. In both these cases the three Judges Full Bench case of the Madras High Court reported in 3 LT.R,, page 55 (N. A. S. V. Venhatachalam Ghettiar v. Commissioner of Income-tax, Madras) was followed, but as that case has, on a fuller consideration, been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and direct the Income-tax Officer to make a fresh assessment. The order enhancing the assessment would certainly be prejudicial and there could be no other order that can be placed in that category except possibly an order confirming an order prejudicial to the assessee. Thus the words otherwise prejudicial would be more or less meaningless unless we accept the view that the order confirming a prejudicial order is also prejudicial. If we may say so with respect, there is great force in the reasoning of Leach, C. J., in the Full Bench Madras case, Voora Sreeramula Ghetty v. Commissioner of Income-tax, Madras [1939] 7 I.T.R. 263, that in order to come within the purview of Section 66, clause (2), the Commissioner's order need not be more prejudicial. It was also remarked in the same case by the learned Chief Justice that there is no difference in this respect between the dismissal of an appeal and the dismissal of a rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 present case, the learned Commissioner has written out a long order and has given detailed reasons for agreeing with the conclusions of the Assistant Commissioner. He would have certainly found it very helpful if he had heard the applicant with reference to his objections on which his petition was based. This is our answer to the first part of the question. As to the second part, we think that if the legality of an order is questioned, it is a question of law arising out of that order itself within the meaning of the first proviso to sub-section (2) of Section 66 of the Act. On the third question we have come to the conclusion that there was no 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 not open to the Income-tax Officer to make a best judgment assessment. It has been vigor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 Commissioner set this assessment aside, and came to the conclusion that the income of the assessee was only ₹ 792 which was below the assessable minimum. In the following year it suddenly dawned upon the Income-tax Officer that the assessee had an Amanat Khata which disclosed large sums of cash receipts and withdrawals and therefore he must have concealed some source of income; and he started proceedings under Section 34 of the Act and issued notices under Section 22, clause (4), and Section 23, clause (2). The Income-tax Officer did then put certain questions to the assessee to which he replied that the money came from his private chest and some of it belonged to the wives of his brother and son. He however gave a written explanation in the petitions which are printed at pages 21 and 23 of the statement of the case. They read as follows:- (3) That the Amanat Khata in the account book of the assessee is a Khat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations, 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 assessee. As such it was not possible for him to show that the entries in the Amanat Khata exactly tallied or even within a narrow limit with the deposits and withdrawals of the depositors. We are certainly of opinion that there was not sufficient material for drawing a definite inference, and suspicion was allowed to do duty for evidence. We are also influenced by the fact that the action of the Income-tax Officer appears to be vindictive, as, soon after the reversal of his decision about assessment of the year 1937-38 by the Appellate Assistant Income-tax Commissioner he brought this Amanat Khata into prominence and drew adverse inferences from it, although it was there at the time of the original assessment and many years before that. It also appears necessary to mention at this stage that by an order dated the 7th of July, 1933, it was clearly held by the Assistant Commissioner that the Khata was not open to any suspicion. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain 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. In the particular circumstances of that case, it was considered that there was sufficient evidence to hold that the accounts were withheld. Reference has also been made to a case of this Court reported in 10 I.T.R., page 386 (Rahomal Kannomal v. Commissioner of Income-tax, U.P.). In that case an application under Section 66, clause (3), was thrown out on the ground that it was a question of fact whether the assessee had another set of account books which he did not produce. It was not argued in this case that a wrong inference was drawn from a set of evidence. That case is not of any help to us in the present case. The last case that we would like to mention is the Privy Council case reported in 5 I.T.R., at page 170 (Commissioner of Incometax, C.P. and U.P. v. Lakshminarain Badridas), but that case is not very much to the point as it only indicates among other things, the manner in which best judgment assessment can be made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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