Appeals Nos 271 272 of 1955
Appeal by special leave from the judgment and order dated June 19 1953 of the Calcutta High Court in Income tax Reference Nos 6  7 of 1950
AV Viswanatha Sastri A K Dutt section K Kapur and Sukumar Ghose for the appellant
CK Daphtary Solicitor General of India R Ganapathy Iyer R H Dhebar and D Gupta for the respondent
November 13
The Judgment of the Court was delivered by VENKATARAMA AIYAR J
The appellant was a Hindu undivided family carrying on business as piecegoods merchants in the city of Calcutta
The present proceedings relate to the assessment of its income for the year 1946 47 the previous year thereto being June 12 1944 to April 24 1945
In the course of the assessment the appellant filed a petition under section 25 A of the Incometax Act 1922 claiming that there had been a partition in the family on April 241945
On May 271945 the In
come tax Officer enquired into both these matters the factum of partition and the quantum of income charge
able to tax and pronounced orders thereon on June 30 1945
On the petition under section 25 A he held that the partition was true and that the family had become divided into five groups
As regards the income assessable under section 23 the dispute related to six sums aggregating to Rs 230346 shown in the accounts as the sale proceeds of ornaments
The case of the appellant with reference to these sums was that at the partition the jewels of the family were sold in six lots that the price realised therefrom was invested in the business and that the credits in question related thereto
The Income tax Officer declined to accept this explanation
He observed that while the books of the appellant 417 showed that what was sold was ornaments the accounts of Chunilal Damani to whom they were stated to have been sold showed sale of gold
He also pointed out that while the weight of the ornaments according to the partition agreement exhibit A was 3422 tolas the weight of gold which was actually sold to the purchaser was 3133 tolas
The explanation given by the appellant for this discrepancy was that the jewels in question had come down to the family through several generations and were not pure
The Income tax Officer rejected this explanation because he held that the weight which was actually deducted for impurities in the accounts of the purchaser was almost negligible and that what was sold was thus pure gold and not gold in old family jewels
He also remarked that the sales were in round figures of 500 tolas and that if the assessee had been taking old ornaments broken or unbroken for sale it is inconceivable that on three occasions out of six he took gold weighing 500 tolas in round figure He also referred to the fact that there was no list of the family jewels and that there was nothing in the family accounts to show what jewels were held by the family
He accordingly held that the story of sale of family jewels was not true and that the sum of Rs 230346 represented concealed profits of the business and he included the said amount in the taxable income
He also followed it up by an order imposing tax on the appellant under the Excess Profits Tax Act
The appellant took both these orders in appeal to the Appellate Assistant Commissioner who again went into the matter fully and observed that the appellant had been changing his version as to the true character of the sales from time to time
Dealing with the discrepancy of 289 tolas between the weight shown in the partition agreement exhibit A and that appearing in the accounts books of Chunilal Damani he remarked that while the explanation of the appellant before the Income tax Officer was that it was due to alloy and brass in the jewels before him the position taken up was that it was due to pearls and stones which 53 418 had been removed from the jewels and that the gold contained in the jewels was pure gold
He did not accept this explanation as in his opinion the jewels which were stated to have been in existence for three or four generations should have contained much more of alloy than was shown in the accounts of the purchaser
He also considered that the sale of gold in round figures of 250 or 500 tolas was a circumstance which threw considerable doubt as to the truth of the appellant s version
In the result he confirmed the findings of the Income tax Officer and dismissed the appeals
Against these orders the appellant appealed to the Appellate Tribunal
There he sought to rely on a certain proceedings book as showing that the family jewels were really broken up and that what was sold to Chunilal Damani was the gold thus separated
As this proceedings book forms the real sheet anchor of the appellant s contention before us it is necessary to refer to the facts relating thereto in some detail
On February 20 1945 the members of the family entered into an agreement exhibit A to divide their joint proper
ties among the five branches of which it was constituted
In sch
B to this document are set out the jewels to be divided and their total weight is in round figure 3422 tolas
Then we have the proceedings book and that purports to be a record of the decisions taken by the members of the family from time to time for implementing exhibit A
The minutes of the meeting held on February 23 1945 show that the pearls and stones imbedded in the jewels were to be removed and divided among the members and that a goldsmith called Inderban was engaged for the purpose of breaking up the jewels
Then we have the minutes of a meeting held on February 28 1945 and therein it is recited that the weight of the pearls stones and copper removed was again in round figure 289 tolas and deducting this out of 3422 tolas being the weight of the jewels set out in exhibit A the gold which was available for partition was 3133 tolas
It is recorded that this quantity should be sold in the market and the sale proceeds credited in the capital accounts of the business
And then we have the last of the proceedings dated April 21 419 1945 which record that gold weighing 3133 tolas was sold and the price credited in the accounts
Now if these minutes are genuine and give a correct picture as to what really took place they would go a long way to support the version given by the appellant as to how he came by the sums making up a total Rs 230346
Quite naturally therefore the appellant applied to the Tribunal to receive the proceedings book in evidence and the ground given in support of the application was that it had been filed before the Income tax Officer but had not been considered by him
Then the question was raised as to whether the proceedings book was in fact produced before the Incometax Officer
The argument of the appellant was that the decision taken at the meeting dated April 21 1945 which forms the concluding portion of the book had been translated into English at the instance of the Income tax Officer the original being in Hindi that the said translation was marked exhibit B and contained the endorsement of the Officer  Original produced  and that accordingly the book must have been produced before the Officer
But the Tribunal was not impressed by this argument
It observed that the book iselft had not been initialled by the Officer and that though the minutes of the meeting dated April 21 1945 were genuine there was no certainty that when it was shown to the Income tax Officer it was contained in the book now produced that such minutes could have found a place in another book as well and that therefore the book which was sought to be admitted before it in evidence was not proved to be the book which was produced before the Officer
It was also of the opinion that the minutes of the previous meetings could not have been shown to the Officer
It accordingly refused to receive the book in evidence and relying on the other circumstances mentioned in the order of the Income tax Officer and the Appellate Assistant Commissioner it held that the sum of Rs 230346 was not the proceeds of the family jewels sold but secret profits made by the appellant in business
Another contention raised by the appellant before 420 the Tribunal was that in the proceedings under section 25A the Income tax Officer had held after making enquiry that the partition set up by it was true and that as according to the appellant the partition consisted in the division inter alia of family jewels weighing 3422 tolas the Income tax Officer must be held to have decided that the family was in possession of the jewels mentioned in exhibit A and had divided them in the manner set out in exhibit B and that as that order had become final it must conclude the present question in favour of the appellant
The Tribunal repelled this contention on the ground that the order under section 25A only decided that there was partition in the family and that it had no bearing on the issues which arose for decision in the assessment proceedings
In the result both the appeals were dismissed
Pursuant to an order of the High Court of Calcutta dated December 7 1950 passed under section 662 of the Act the Tribunal referred the following questions for its Opinion 1 Whether the Income tax Appellate Tribunal was bound by the findings of fact of the Income tax Officer relating to the nature and division of the assets of the joint family in question which he arrived at in his enquiry under Section 25Al of the Indian Income tax Act  2Whether there was any material or evidence upon which the taxing authorities could legally hold that the amount of Rs 230346 Rupees two lakhs thirty thousand three hundred and forty six represented undisclosed profits of the accounting year in question   The reference was heard by Chakravarti C J and Lahiri J who by their judgment dated June 19 1953 answered the first question in the negative and the second in the affirmative
The appellant then filed an application under section 66A2 for leave to appeal to this Court and that having been dismissed has preferred the present appeals on leave granted by this Court under article 136
Mr Viswanatha Sastri learned counsel for the appellant raised the following contentions 421 1 In view of the order of the Income tax Officer under section 25A it was not open to the Department to contend that the sum of Rs 230346 does not represent the value of family jewels
2The finding of the Income tax authorities that the said amount represents concealed profits of business is not supported by legal evidence and is in any event perverse
3There is no evidence that the amount in question represents profits of business and it was therefore not chargeable to tax under the provisions of the Excess Profits Tax Act
1On the first question the appellant relied on certain observations in the order of the Income tax Officer passed under section 25A as amounting to a decision that the family had the jewels mentioned in exhibit A and that what was actually divided was only the price received therefor
Now when a claim is made under section 25A the points to be decided by the Income tax Officer are whether there has been a partition in the family and if so what the definite portions are in which the division had been made among the members or groups of members
The question as to what the income of the family assessable to tax under section 233 was would be foreign to the scope of an enquiry under section 25A
That section was it should be noted introduced by the Indian Income tax Amendment Act 1928 3 of 1928 for removing a defect which the working of the Act as enacted in 1922 had disclosed
Under the provisions of the Act as they stood prior to the amendment when the assessee was an undivided family no assessment could be made thereon if at the time of the assessment it had become divided because at that point of time there was no undivided family in existence which could be taxed though when the income was received in the year of account the family was joint
Nor could the individual members of the family be taxed in respect of such income as the same is exempt from tax under section 141 of the Act
The result of these provisions was that a joint family which had become divided at the time of the assessment escaped tax altogether
To 422 remove this defect section 25A enacted that until an order is made under that section the family should be deemed to continue as an undivided family
When an order is made under that section its effect is that while the tax payable on the total income is apportioned among the divided members or groups all of them are liable for the tax payable on the total income of the family
What that tax is would depend on the assessment of income in proceedings taken under section 23 and an order under section 25A would have no effect on that assessment
It is in this context that we must read the observations in the order under section 25A relied on for the appellant
In fact that order does not expressly decide that the family had the jewels mentioned in exhibit A and that they were converted into cash as claimed by the appellant
Nor could such a finding be implied therein when regard is had to the scope of the proceedings under section 25A and to the fact that the order under section 233 holding that the sum of Rs 230346 did not represent the value of the family jewels sold was passed on the same date as the order under section 25A and by the very same officer
2The next question is and that is what was really pressed before us whether the sum of Rs 230346 represents the price of family jewels sold or whether it is concealed business profits
That clearly is a question of fact the finding on which is open to attack in a reference under section 66 only if it could be shown that there is no evidence to support it or that it is perverse
Now the contention of Mr Viswanatha Sastri for the appellant is that the finding that it is concealed profits was reached by the Income tax Officer and by the Appellate Assistant Commissioner by ignoring the very material evidence furnished by the proceedings book and that the Appellate Tribunal had erroneously refused to receive the book in evidence
This contention raises two controversies i Was the proceedings book which was produced before the Tribunal the book which was produced before the Income tax Officer  ii If it was were the minutes of the meeting prior to April 21 1945 relied on by the appellant before the Income tax Officer  Whatever 423 view one might be inclined to take on the former question so far as the latter is concerned it is perfectly plain that they were not
On May 27 1947 the enquiry was held on both the petitions under s 25A and on the quantum of income assessable to tax under section 233
Exhibit D is an extract from the order sheet of the Income tax Officer and it runs as follows Regarding credits amounting to Rs 230346 6 3 in the ac
Udoyaram Bhaniram the representatives state that besides the evidence produced which are noted below they are not in a position to produce any further evidence i Account books of the assessee containing the details of the amounts aggregating the aforesaid sum
ii Sale statements rendered by Chunilal Damanicopies of which have been filed
iiiRoker of Chunilal Damani containing entries for purchase of gold sold by the assessee family along with Surajrattan Bagri the accountant of Chunilal Damani
iv Statement of Lakhmichand Bhiwaniwalla and Pannalal Bhiwaniwalla member of the assessee family
 This statement is signed by the counsel for the appellant
It is clear from the above that the proceedings book was not relied on as evidence on the character of the receipts making up the sum of Rs 230346
The fact appears to be that the appellant produced the proceedings book in support of his petition under section 25A for the purpose of establishing that there was a completed partition and relied only on the minutes of the meeting held on April 21 1945 in proof thereof and that is why that alone was translated in English and marked as exhibit B It is also to be noted that there is no reference in the order of assessment by the Income tax Officer under section 233 to the minutes of the meetings prior to April 21 1945 and that they were not even translated as was the record of the meeting dated April 21 1945
The obvious inference is that they were not relied on by the appellant and were therefore not considered by the Officer
It is also 424 significant that the order of the Income tax Officer refers to sale of ornaments broken or unbroken
The story that the gold which was separated from the jewels after removing the pearls and stones was melted and sold in quantities of 250 or 500 tolas which was the argument pressed before us was not put forward before him
It is argued that in the appeal against the order of the Income tax Officer the ground was definitely taken that the proceedings book had been produced before him and that it was also prominently mentioned in a petition supported by affidavit filed by the appellant
But the order of the Appellate Assistant Commissioner does not deal with this matter either and it is inconceivable that he would have failed to consider it if it had been pressed before him
It is also to be noted that the appellant who had obtained a return of the proceedings book from the Income tax Officer did not file it before the Appellate Assistant Commissioner nor did he move for its admission in evidence
Apart from taking the grounds to which we were referred the appellant appears to have presented his case before the Appellate Assistant Commissioner precisely on the same lines on which lie pressed it before the Income tax Officer
In view of these facts we are unable to hold that in refusing to admit the proceedings book as evidence in the appeal the Appellate Tribunal acted perversely or unreasonably
Indeed counsel for the appellant did not contend in the High Court that the Tribunal had acted illegally or unreasonably in refusing to admit the proceedings book in evidence
That being so it cannot be said that the finding given by the Tribunal on an appreciation of the facts and circumstances already set out is unsupported by evidence or is perverse
The position may thus be summed up In the business accounts of the appellant we find certain sums credited
The explanation given by the appellant as to how the amounts came to be received is rejected by all the Income tax authorities as untenable
The credits are accordingly treated as business receipts which are chargeable to tax
In V Govindarajulu 425 Mudaliar vs The Commissioner of Income tax Hyderabad 1 this Court observed  There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amounts of cash received during the accounting year the Income tax Officer is entitled to draw the inference that the receipts are of an assessable nature
 That is precisely what the Income tax authorities have done in the present case and we do not find any grounds for holding that their finding is open to attack as erroneous in law
3Lastly the question was sought to be raised that even if the credits aggregating to Rs 230346 are held to be concealed income no levy of excess profits tax can be made on them without a further finding that they represented business income and that there is no such finding
When an amount is credited in business books it is not an unreasonable inference to draw that it is a receipt from business
It is unnecessary to pursue this matter further as this is not one of the questions referred under section 662
In the result the appeals fail and are dismissed with costs
Appeals dismissed
1  810


Summary:
The appellant was awarded a contract for constructing approaches to certain Bridge structure
As per the agree ment he was required to do hard rock cutting to the extent of 754530 cft
and the rate fixed was Rs129 per thousand cft
plus 2
Actually the appellant was required to perform hard rock cutting to the extent of 1818704 cft
For the additional work the appellant claimed payment at the rate of Rs200 per thousand cft
He also claimed certain other sums under other heads
Dispute in respect of 4 heads was referred to arbitration
The arbitrator in his award disal lowed two claims and allowed the other two claims one of which was in respect of the additional work of hard rock cutting and awarded a sum of Rs52800 under this head
The arbitrator filed the award in the High Court
After consid ering the objections filed by the respondent a Single Judge of the High Court ordered that the award be made a rule of the Court
The respondent filed an appeal against the said order and the Division Bench set aside ex parte the claim for higher remuneration at the rate of Rs200 per thousand cft
Aggrieved the appellant has preferred an appeal by  special leave
The other appeal also by special leave is against the High Court s rejection of the prayer for setting aside the ex parte judgment
Allowing the former appeal and disposing of the latter one HELD 1
As regards the award of an arbitrator under the Act the law is well settled that the arbitrator s adjudica tion is generally considered binding between the parties for he is a tribunal selected by the parties and the power of the court to set aside the award is restricted to cases set out In section 30 of the Act
It is however not open to the 77 Court to speculate where no reasons are given by the arbi trator as to what impelled the arbitrator to arrive at his conclusion
But the jurisdiction of the arbitrator is limit ed by the reference and if the arbitrator has assumed juris diction not possessed by him the award to the extent to which it is beyond the arbitrator s jurisdiction would be invalid and liable to be set aside
An arbitrator or umpire is under no obligation to give reasons in support of the decision reached by him unless under the arbitration agree ment or the deed of submission he is required to give such reasons
If the arbitrator or umpire chooses to give reasons in support of his decision it is open to the Court to set aside the award if it finds that an error of law has been committed by him on the face of the record
An award can neither be permitted nor set aside merely on the ground that it does not contain reasons in support of the conclusion or decisions reached in it except where the arbitration agree ment or the deed of submission requires him to give reasons
82H 83A E Jivarajbhai Ujamshi Sheth and Others vs Chintamanrao Balaji and Others   Raipur Development Authority and Others vs Ms Chokhamal Contractor and Others 1989 2 SCC 721 relied on
21 In the instant case the arbitration agreement or the deed of submission did not require the arbitrator to give reasons and therefore the award cannot be questioned on the ground of an error on the face of the award
The Divi sion Bench of the High Court set aside the award in respect of the claim relating to payment for additional work of hard rock cutting on the ground that in making the award the arbitrator exceeded his jurisdiction by allowing a rate to the contractor in excess of the agreed rate for the job of hard rock cutting against the terms and conditions in clause 12 of the agreement
83F G 22 Under clause 12 of the agreement the Engineer in charge was empowered to make any additions to the original specifications that may appear to him to be necessary or advisable during the progress of the work and the contractor was bound to carry out the work in accordance with any instructions given to him in writing signed by the Engineer in charge
85B C 23 It has to be inferred from the terms of the contract whether this power to order extras although apparently unlimited is in fact limited to ordering extras upto a certain value and in such a case extras ordered in excess of that amount may be outside the terms of the contract
78 Parkinson Sir Lindsay  Co Ltd vs Commissioners of His Majesty s Works and Public Buildings  referred to
Hudson s Building and Engineering Contracts 8th Edn
294 296 referred to
In some awards given by the arbitrators in the Cen tral Public Works Department of the Government of India the variation of the tendered quantities under the variation clause in the contract has been restricted to 10 beyond which the contractor was entitled to claim as extras and awards have been accepted and implemented by the Government
It appears that the standard form of contract of the Central Public Works Department has been amended and now it specifi cally permits for a limit of variation called deviation limit upto a maximum of 20 and upto such limit the con tractor has to carry out the work stipulated in the contract and for the work in excess of that limit at the rates to be determined in accordance with clause 12 A under which the Engineer in Charge can revise the rates having regard to the prevailing market rates
88D F Gajaria s Law relating to Building and Engineering Contracts in India 3rd Edn pages 410 412 referred to
In the instant case the Executive Engineer the Superintending Engineer and the Additional Chief Engineer have expressed the view that the additional work under the terms of the contract may be confined to 20 and the appel lant may be paid at the rates prescribed in the contract for 20 of the additional work and for the extra quantity of additional work he may be paid remuneration at the increased rate taking into account the increased costs in execution of the said work on account of the peculiar nature of the work while considering the claim of the appellant the arbitrator was required to consider the terms of the contract and to construe the same
It was therefore permissible for the arbitrator to consider whether clause 12 of the contract enables the Engineer in charge to require the appellant to execute additional work without any limit or a reasonable limit should be placed on the quantity of the additional work which the appellant may be required to execute at the rate stipulated for the main work under the contract
For that purpose the arbitrator could take into consideration the practice prevalent in the Central Public Works Depart ment in this regard as well as the correspondence between the appellant and the authorities recommending payment of remuneration at the increased rate for the additional work in excess of 20 of the quantity stipulated in the contract
79 The appellant was claiming increased rate of Rs200 per 1000 cft
for the entire quantity of additional work
The arbi trator did not accept the said claim of the appellant in full and has partly allowed the said claim by awarding Rs52800 which means that the arbitrator has awarded the increased rate only for a part of the additional work of hard rock cutting which the appellant was required to exe cute
The arbitrator was entitled to do so on the construc tion placed by him on clause 12 of the contract and there fore it cannot be said that in awarding the sum of Rs52800 for the additional work the arbitrator has exceed ed his jurisdiction and the award is vitiated by an error of jurisdiction
88G H 89A E 5
The judgment of the Division Bench of the High Court setting aside the award of the arbitrator with regard to the claim relating to payment for additional work of hard rock cutting is set aside and the order passed by the Single Judge upholding the award of the arbitrator in this regard is restored
89F 6
Since the judgment of the Division Bench of the High Court is set aside the appeal against the order rejecting the prayer for setting aside the ex parte judgment does not survive