Appeals Nos
347 to 350 of 1960
Appeals by special leave from the judgment and order dated January 18 1953 of the Incometax Appellate Tribunal Calcutta Bench in Incometax  Appeals Nos 7062 7064 and CPTA No 548 of 1951 52
NC Chatterjee A V Viswanatha Sastri and DN Mukherjee for the appellants
KN Rajagopal Sastri and D Gupta for respondent
July 17
The Judgment of the Court
was delivered by HIDAYATULLAH J These appeals with special leave were filed by one Kanhaiyalal Lohia who died during the pendency of the appeals and who 841 is now represented by the executors appointed under his will
By these appeals which are consolidated the appellants question an order dated January 8 1953 of the Income tax Appellate Tribunal Calcutta Bench in appeals filed by the Department against the order of the Appellate Assistant Commissioner
The Tribunal reversed the order of the Appellate Assistant Commissioner and restored that of the Income tax Officer
Kanbaiyalal Lohia made petitions under section 66 1 to the Tribunal setting out a number of questions of which the following was I referred to the High Court  Whether in the cirumstances of this case where the Income tax Officer District III 2 separately assessed the business run in the name of Brijlal Nandkishore as belonging to a partnership firm consisting of Brijlal and Nandkishore the Income tax Officer Non Companies E P T District can assess the income from the same business in the hands of the assessee  This question was answered against him
Kanhaiyalal Lohia also applied under section 66 2 to the High Court of Calcutta for reference of the other questions but failed
No appeal has been filed by him against the order of the High Court refusing to direct the tribunal to state a case or against the decision on the question referred and the present appeals have been filed against the decision of the Tribunal
At the hearing of these appeals we asked counsel for the appellants how in view of the recent decisions of this Court in Chandi Prasad Chokhani vs State of Bihar 1 and Indian Aluminium Co Ltd vs Commissioner of Income tax 2 these appeals were maintainable if the two decisions of the High Court had become final
Mr A V Viswanatha Sastri relied upon the decisions in 1  2 Civil Appeal No 176 of 1959 decided on April 24 1961
842 Dhakeswari Cotton Mills Ltd vs Commissioner of Income tax West Bengal 1 and Sardar Baldev Singh vs Commissioner of Income tax Delhi and Ajmer 2 and pointed out that in those cases appeals were entertained from the Tribunal s order though he conceded with his usual frankness that special circumstances must exist
He contended that this was a case in which such circumstances existed
We shall deal with the appeals from that point of view because unless special circumstances exist the appeals must be regarded as not competent in view of our recent rulings above mentioned
Kanhaiyalal Lohia who was a prosperous dealer in jute had his head office in Calcutta
He had no issue and his family consisted of his wife his brother Brijlal Lohia and Brijlal s son Nandkishore Lohia
The properties of Kanhaiyalal Lohia were self acquired and he was always assessed as an individual
He maintained accounts according to the Ramaswami year
In his return for the account year April 14 1943 to April 1 1944 corresponding to the assessment year 1944 45 he indicated that he had closed down in the middle of 1943 his purchasing centres in East Bengal which stood in the name of Nandkishore and that he had gifted to his brother Rs 51 1 1 01 on July
12 1943 and to his nephew Rs 250000 on September 30 1943
He showed income of his East Bengal business only up to the closure of that business
Brijlal and Nandkishore entered into partnership between themselves and started a business under the name and style of Brijlal Nandkishore
 They took over the purchasing centres in East Bengal
They opened accounts in banks in the name of Brijlal Nandkishore and became members of the Baled Jute Association and the Jute BalersAssociation and traded in their own names
A deed of partnership between them was also executed on August 5 1953
The business of Kanhaiyalal Lohia and of Brijlal Nandkishore 1  2  843 was within the jurisdiction of the same Incometax Officer
In the assessment of the partnership firm notices were issued to the partnership both under section 222 and section 34 and the partner ship also applied for registration under section 26A of the Income tax Actwhich was granted
The partnership was also assessed for the years 1945 46 and 1946 47
The assessment of Kanhaiyalal Lohia was completed by the Income tax Officer Non Companies Income Tax cum Excess Profits Tax District and during the assessment for the year 1945 46 a notice was issued under section 224 of the Income Tax Act on August 24 1949 calling for accounts of the head office at Calcutta and also the branches including the business being carried on as Brijlal Nandkishore Kanhaiylal Lohia proved the above facts producing the books of account bank statements registration certificate of Brijlal Nandkhore and evidence showing the membership of Brijlal Nandkishore of the two Associations
He also produced letters from four persons including one Sri AL Mazumdar who was questioned by the Income tax Officer without notice to  Kanhaiyalal Lohia and whose statement was also recorded
Kanhaiyalal Lohia objected to this procedure but the Income tax Officer it is alleged paid no heed to his protests and on
March 31 1950 the assessment was completed and the income of the branches under the direct control of Brijlal Nandkishore was pooled with the income of Kanhaiyalal Lohia
The Income tax Officer held that the gifts were not bonafide and were colourable transactions
He relied upon the statement of Sri A L Mazumdar which was recorded when Kanhaiyalal Lohia was not present
Against the assessment Kanhaiyalal Lohia appealed to the Appellate Assistant Commissioner before whom two more letters from leading businessmen were filed
The Appellate Assistant Commissioner accepted the letters which were filed and held that the gifts were proved and were bona fide and directed the exclusion 844 of the income of Brijlal Nand kishore from the assessment of Kanhaiyalal Lohia
The order of the Appellate Assistant Commissioner was pronounced on December 27 1951
The Department appealed to the Appellate Income tax Tribunal Calcutta Bench
The Tribunal disagreed with the Appellate Assistant Commissioner all held on January 8 1953 that the gifts were not proved by the assessee by unimpeachable evidence and that the income of Brijilal Nandkishore was rightly included in the assessment
As stated already
applications under section 66 1 and section 66 2 were made to the Tribunal and the High Court respectively
The Tribunal referred one question but declinedto refer the
other quest ions
The High Court then moved under section 66 2 but without success
The High Court agreed with the Tribunal and answered the question which was referred against Kanhaiyalal Lohia
Before the High Court Kanhaiyalal s counsel Dr Pal admitted that he
could not persuade the Court to answer the referred question against the Department and it appears that it was conceded by the Department before the High Court that the assessment of Brijlal Nandkishore would be cancelled
Kanhaiyalal Lohia then filed the present appeals against the order of the Tribunal dated January 8 1953
This Court has pointed out in Chandi Prasad Chokhani vs State of Bihar1 and Indian Aluminium Co Ltd vs Commissioner of Income tax 2 that the two cases in which this Court interfered with appellate orders of a Tribunal and relied upon before us were of a special kind
In Dhakheshwari Cotton Mills case3 there was a breach of the principle of natural justice and that was held sufficient to entitle an aggrieved party to come to this Court against the appellate order of the Tribunal under article 136
In 1  2Civil Appeal No 176 of 1959 decided on April 24 1961
3  845 Baldev Singh s case 1 this Court entertained an appeal against the appellate order of the Tribunal because limitation to take other remedies was IS barred without an fault of the assessee concerned
The ratio in each of these cases is that a circumstance which cannot be corrected by the procedure of a stated question of law on a statement of the case may afford a ground for invoking the jurisdiction of Court under article 136
That ratio does not apply where a question of law can be raised and is capable of being answered by the High Court or on appeal by this Court
An appeal against an order of the High Court deciding a question referred or against a refusal to call for a statement can be brought before this Court under section 66A if the High Court decides the question referred and under article 136 if the High Court refuses to call for a statement
In the present case the order of the High Court on the question referred was not brought before this Court by the ordinary mode indicated in the Indian Income tax Act presumably because of the concession of counsel that he could not claim that the question be answered in favour of the assessee and the attitude of the Department that the assessment of Brijlal Nandkishore would be cancelled
The order refusing to call for a statement on questions other than the one referred is also not questioned before us
The attempt is to bring this case within the ratio of Dhakeshwari Cotton Mills  case2and in support it has been pointed out mainly that the examination of Sri A L Mazumdar in the absence of Kanhaiyalal Lohia was against the principles of natural justice
The statement of Sri A L Mazumdar was taken on March 28 1950 and it is recorded as follows  Mr Mazumdar is questioned by me as to what be knows regarding the alleged gift as recorded in the books of Kanhaiyalal Lohia in favour of Brijlal and Nand Kishore
He says 1  2  846 that I don t remember things very distinctly but 1 can say that the gifts to Brij Lal or Nand
Kishore were not made in my presence as alleged
Mr Kanhaiyalal Lohia used to tell me that his brother and nephew are idling away their time hence I shall give them a gift and make them work by that money
The partnership deed was most probably drawn up by me
The gift was reported to have been made to Brij Lal and Nand Kishore before I should have taken up the drafting of the deed
Kanhaiyalal told me several times that he wanted to separate his brother and nephew
When the firm was started then Brijlal came to me and asked me if father and son s partnership deed could be drawn up
I don t know anything else than this in the matter
 The lie given by Sri Mazumdar to the statement of Kanhaiyalal Lohia has affect his credibility
The order sheet shows that Mr B Sen Gupta took a copy of Sri Mazumdar s statement and expressed a desire to cross examine him but when the opportunity was given he failed to appear
It is impossible to think in these circumstances that there has been any breach of the principles of natural justice
The order sheets of March 29 and 30 1950 clearly record the absence of Mr B Sen Gupta
In our opinion there is no breach of the principles of natural justice in this case to entitle the appellants to invoke the ruling in Dhakeshwari Cotton Mills case It was contended before us that the finding of the Tribunal was perverse and that on an examination of the total circumstances it is quite clear that the gifts were not only real but were acted upon
This was a matter within the jurisdiction of 1  847 the Appellate Tribunal as the final fact finding authority
The Tribunal acted within its powers in refusing to accept the evidence tendered and looking at the circumstances of the case we cannot say that the finding has been perversely reached
For a number of years the brother and the nephew were supported by Kanhaiyalal Lohia and it does not appear that a gift of even a small sum was made to them to put them on their legs
Suddenly in the year 1943 Kanhaiyalal Lohia made up  his mind to put them in business with a gift of the order of Rs 760000 odd
For this purpose he had to overdraw his accounts with the Bank and to pay interest to the Bank
It does not appear why he felt that the establishment of his brother and nephew in business should be made on such a grand scale which involved him in debt
This circumstance taken with the fact that Mr Mazumdar stated that he had always complained that they were good for nothing and were idlers makes the transactions auspicious
It was presumably done with a view to reduce the assessable profits in the hands of Kanhaiyalal Lohia and on the evidence the Tribunal was entitled to hold as it did that this was a sham transaction
In our opinion no special circumstances exist on which the appellants can claim to come to this Court against the decision of the Tribunal by passing the decision of the of High Court on the question referred and there fusal the High Court to call for a statement of the case from the Tribunal on questions which the Tribunal refused to refer to the High Court
The appeals are therefore within the rulings of this Court in Chandi Prasad Chokhani vs State of Bihar 1 and Indian Aluminium Co Ltd vs Commissioner of Income tax2 and must be regarded as incompetent
The appeals are dismissed with costs one set
Appeal dismissed


Summary:
The appellant supported his brother and his nephew for a number of years as they were doing no work
In the year 1943 he made a gift of Rs 760000 odd to them though he had to overdraw his account with the Bank and to pay interest or the amount borrowed to raise the money
He also made a transfer of some of his businesses to them
His explanation was that these gifts were made to set these two persons up in business
The Income tax Officer held that the gifts were riot bonafide and he assessed the income of all the businesses in the hands of the appellant
The appellant had produced letters from some businessmen in support of his case
One such person was one M who was examined by the Income tax Officer without notice to the appellant
Later however a copy of the statement of M was taken by the appellant s counsel and at his request M was summoned for cross examination but on the date fixed none appeared for the appellant who was also absent
The appellant made a petition under section 661 of the Income tax Act to the Tribunal asking that a number of questions of law be referred to the High Court
Only one question was referred by the Tribunal which declined to refer the other questions
In the High Court the question referred by the Tribunal was answered against the appellant on the admission of his counsel
The High Court was moved also under section 662 to order a reference of the remaining questions but the High Court rejected the application
The appellant did not appeal against these two orders of the High Court and instead filed appeals against the orders of the Tribunal
The appellant relied upon two cases of this Court viz Dhakeshwari Colton Hills  Case and Baldev Singh s case and contended that tile appeal to this court was competent
Held that the appeals were incompetent in view of the decisions of this Court in Chandi Prasad Chokhani vs State of Bihar and The Indian Aluminium Co Ltd 840 Held
further that an appeal against an order of the High Court deciding a question referred or against a refusal to call for a statement can only be brought before the Supreme Court under section 66A of the Income tax Act if the High Court decides the question referred and under article 136 of the Constitution if the High Court refuses to call for a statement
There can be no direct appeal to the Supreme Court by passing the decisions of the High Court
Held
also that there was neither any breach of the principles of natural justice in this case nor the existence of circumstances as existed in Baldev Singh s case to justify the appeal
Held that where a witness has been examined by the Income tax Officer behind the back of the assessee but a copy of the statement of the witness is made available to the assessee and an opportunity is given to him to cross examine the witness thereis no breach of the principle of natural justice
ChandiPrasad Chokhani vs State of Bihar
1962 2 SCR 276and Indian Aluminium Co Ltd vs Commissioner of Income tax
Civil Appeal No 176 of 1959 decided on April 24 1961 followed
Dhakeshwari Cotton Mills Ltd vs Commissioner of Income
tax  and Sardar Baldev Singh vs Commissioner of Income tax Delhi and Ajmer
  explained