Criminal Appeal Nos 4  5 of 1979
From the Judgment and Order dated 2131978 of the Gujarat High Court in Criminal Revision Application Nos 98 and 97 of 1978
SK Kulkarani and PC Kapur NP for the Appellant
Arun Jetley Additional Solicitor General Ms Indu Malhotra MN Shroff P Parmeshwaran Ms A Subhashini Ms Ayesha Karim and PK Mullick for the Respondents
The Judgment of the Court was delivered by section RATNAVEL PANDIAN J
These criminal appeals by special leave granted under Article 136 of the Constitution of India are preferred by the appellant questioning the correctness of the judgment of the Gujarat High Court in Criminal Revision Application Nos 98 and 97 of 1978 whereby the High Court set aside the judgment and orders dated 211978 of the Sessions Judge Kutch at Bhuj made in Criminal Revision Application Nos 46 and 45 of 1976 confirming the orders dated 19676 passed by the Judicial Magistrate First Class Kutch in Application Exh
Nos 94 and 98 in Criminal Case Nos 929 and 930 of 1973 respectively
The factual matrix that have relevance to the questions raised and canvassed at the hearing may be briefly stated
A raid conducted by the officers of the Customs Department in the business cum residential premises of the appellant on 1791971 resulted in the seizure of some gold Lagadis bearing foreign marks primary gold gold ornaments and silver bricks coins etc
to the value of about Rs848422
During the said raid a sum of Rs79000 was also seized
In respect of this incident the Assistant Collector of Customs filed two separate complaints on 26111973 against the appellant in the court of the Judicial Magistrage First Class Anjar being criminal cases Nos 929 and 930 of 1973 for offences punishable 1 under the 715 provisions of the and 2 under the Gold Control Act 1968
After examination of the prosecution as well as the defence witnesses and recording of the statements of the appellants under Section 342 of the old Code of Criminal Procedure hereinafter referred to as the Code  arguments were advanced on behalf of the appellantaccused
The prosecution at this stage before commencing its arguments filed two applications both the cases under Section 540 of the old Code corresponding to Section 311 of the new Code requesting the Trial Court to recall Mr Mirchandani the Seizing Officer for further examination and to issue summons to two more witnesses namely Mr KK Das Assistant Collector of Customs and the Deputy Chief Officer Assayer of Mint Master Bombay for examination either as prosecution witnesses or as court witnesses as cotemplated under the said provision
The learned Judicial Magistrate passed two orders rejecting the applications which orders on revision by the respondents were confirmed by the session s Judge on being aggrieved by the said revisional orders the Union of India the first respondent herein preferred two Criminal Revision Applications Nos
97 and 98 of 1978
The second respondent namely the State of Gujarat also preferred two other Criminal Revision Application Nos 124 and 125 of 1978
The High Court by its Common Judgment though heavily criticised the conduct of the prosecution for its deplorable and lethargic attitude in not carefully and promptly conducting the proceedings allowed all the Criminal Revisions for the reasons assigned therein holding thus In view of what has been stated above I accept the four petitions filed in this court by the Union of India and the State of Gujarat and direct the Union of India to examine the aforesaid three witnesses within a period of fortnight after the receipt of the order of this court to the trial court
After the Union of India examines the aforesaid three witnesses as aforesaid it will be open to the accused to cross examine all the witnesses examined by the Union of India before the learned Magistrate
Feeling aggrieved by the judgment of the High Court these two appeals are preferred by the appellant
In this context it is pertinent to note that the appellant has not directed any appeal against the judgment of the High Court in allowing the two other Revision Application Nos 124 and 126 of 1978 filed by the Gujarat Government which were also allowed by the High Court
716 The learned counsel appearing on behalf of the appellant vigorously challenged the legality of the impugned judgment inter alia contending that the High Court has gravely erred in allowing the second revision petitions filed by the respondent by ignorning the weighty reasons given by the Trial Magistrate and the Section Judge before whom the first revision was filed and thereby in permitting the respondent the Union of India to examine the three witnesses as prayed by it notwithstanding that the case was pending before the Trial Court for considerable length of time and the defence argument was concluded and that the High Court by the impugned order has permitted the prosecution to bolster up its case by filling up the lacuna and plugging the loopholes which if carried out would be detrimental and prejudicial to the appellant
The next legal submission made on behalf of the appellant is that the entertainment of the second revision by the High Court is in violation of sub sections 2 and 3 of Section 397 of the new Code since the order passed by the Magistrate was an interlocutory order and that even assuming that it was not so the second revision by the same affected party is not entertainable
Before adverting to the arguments advanced on behalf of the appellant we would examine in general the scope and intent of Section 540 of the old Code corresponding to Section 311 of the new Code
Section 540 was found in Chapter XLVI of the old Code of 1898 under the heading Miscellaneous 
But the present corresponding Sections 311 of the new Code is found among other Sections in Chapter XXIV under the heading General Provisions as to Enquiries and Trials 
Section 311 is an almost verbatim reproduction of Section 540 of the old Code except for the insertion of the words to be  before the word essential  occurring in the old Section
This section is manifestly in two parts
Whereas the word used  in the first part is may  the word used in the second part is shall 
In consequence the first part which is permissive gives purely discretionary authority to the Criminal Code and enables it at any stage of enquiry  trial or other proceedings  under the Code to act in one of the three ways namely 1 to summon any person as a witness or 2 to examine any person in attendance though not summoned as a witness or 3 to recall and re examine any person already examined
717 The second part which is mandatory imposes an obligation on the Court 1 to summon and examine or 2 to recall and re examine any such person if his evidence appears to be essential to the just decision of the case
The very usage of the words such as any court  at any stage  or of any enquiry trial or other proceedings  any person  and any such person  clearly spells out that this section is expressed in the widest possible terms and do not limit the discretion of the Court in any way
However the very width requires a corresponding caution that the discretionary power should be invoked as the exigencies of justice require and exercised judically with circumpection and consistently with the provisions of the Code
The second part of the Section does not allow for any discretion but it binds and compels the Court to take any of the aforementioned two steps if the fresh evidence to be obtained is essential to the just decision of the case
It is a cardinal rule in the law of evidence that the best available evidence should be brought before the Court to prove a fact or the points in issue
But it is left either for the prosecution or for the defence to establish its respective case by adducing the best available evidence and the Court is not empowered under the provisions of the Code to compel either the prosecution or the defence to examine any particular witness or witnesses on their sides
Nonetheless if either of the parties with holds any evidence which could be produced and which if produced be unfavorable to the party withholding such evidence the court can draw a presumption under illustration g to Section 114 of the Evidence Act
In such a situation a question that arises for consideration is whether the presiding officer of a Court should simply sit as a mere umpire at a contest between two parties and declare at the end of combat who has won and who has lost or is there not any legal duty of his own independent of the parties to take an active role in the proceedings in finding the truth and administering justice It is a well accepted and settled principle that a Court must discharge its statutory functions whether discretionary or obligatory according to law in dispensing justice because it is the duty of a Court not only to do justice but also to ensure that justice is being done
In order to enable the Court to find out the truth and render a just decision the salutary provisions of Section 540 of the Code Section 311 of the New Code are enacted whereunder any 718 Court by exercising its discretionary authority at any stage of enquiry trial or other proceeding can summon any person as a witness or examine any person in attendance though not summoned as a witness or recall or re examine any person in attendance though not summoned as a witness or recall and re examine any person already examined who are expected to be able to throw light upon the matter in dispute because if judgments happen to be rendered on inchoate inconclusive and speculative presentation of facts the ends of justice would be defeated
There are various other provisions in the new Code corresponding to the provision of the old Code empowering the court specified therein to recall any witness or witnesses already examined or summon any witness if it is felt necessary in the interest of justice at various stages mentioned in the concerned specific provisions
A Judge under Section 236 Section 310 old Code or a Magistrate under Section 2483 Section 251 A13 and 255 A old Code is empowered to take evidence in respect of the previous convictions of the accused person concerned if he is charged with the previous conviction under sub section 7 of Section 211 and if he does not admit the previous conviction
Under Section 367 Section 375 old Code if when sentence of death passed by the Court of Sessions is submitted for confirmation to the High Court under Section 3661 Section 374 of the old Code the High Court thinks that a further enquiry should be made into or additional evidence taken upon any point bearing upon the guilt or innocence of the convicted person it may make such inquiry or take such evidence itself or direct it to be made or taken by the Court of Session
Under Section 391 Section 428 of old Code the Appellate Court while dealing with any appeal under Chapter XXIX if thinks additional evidence to be necessary may after recording its reasons either take such evidence itself or direct it to be taken by a subordinate Court as the case may be
Under Section 4632 Section 533 old Code if any Court of Appeal Reference and Revision before which confession or other statement of an accused recorded or purporting to be recorded under Section 164 or Section 281 Section 364 of the old Code is tendered or has been received in evidence finds that any of the provisions of either such sections have not been complied with by the Magistrate recording the statement the Court may notwithstanding anything contained in Section 91 of the Indian Evidence Act take evidence in regard to such non compliance and may if satisfied that 719 such non compliance has not injured the accused in his defence on the merits and that he duly made the statement recorded admit such evidence
Analogous to the above provisions of the Code of Criminal Procedure there are various provisions in the civil Procedure Code also enabling the civil Court to summon witnesses and examine them in the interest of justice
Under Order X Rule 2 of the Civil Procedure Code the Court at the first hearing of the suit or at any subsequent hearing may examine any party appearing in person or present in Court or any person able to answer any material questions relating to the suit by whom such party or his pleader is accompanied
Under Order X Rule 14 the Court may of its own motion summon as a witness any person including the party to the suit for examination and the said Rule is under the caption Court may of its own accord summon as witnesses strangers to suit and Order XVIII Rule 17 empowers the Court to recall any witness who has been examined and may subject to Law of Evidence for the time being in force put such questions to him as it thinks fit
The powers of the Court under this Rule 17 are discretionary and very wide
Besides the above specific provisions under the Cr
PC and CPC empowering the criminal and civil courts as the case may be to summon and examine witnesses a Judge in order to discover or to obtain proof of relevant facts is empowered under Section 165 of the Indian Evidence Act to exercise all the privileges and powers subject to the proviso to that section which power he has under the Evidence Act
Section 540 of the old Code Section 311 of the new Code and Section 165 of the Evidence Act may be said to be complementary to each other and as observed by this Court in Jamatraj Kewalji Govani vs State of Maharashtra  these two sections between them confer jurisdiction on the Judge to act in aid of justice
 The second part of Section 540 as pointed out albeit imposes upon the Court an obligation of summoning or recalling and re examining any witness and the only condition prescribed is that the evidence sought to be obtained must be essential to the just decision of the case
Though any party to the proceedings points out the desirability some evidence being taken then the Court has to exercise its power under this provision either discetionary or mandatory depending on the facts and circumstances of each case having in view that the most paramount principle underlying this provision is to discover or to obtain proper proof of relevant facts in order to meet the 720 requirements of justice
In this connection we would like to quote with approval the following views of Lumpkin J in Epps vs section  which reads thus   it is not only the right but the duty of the presiding judge to call the attention of the witness to it whether it makes for or against the prosecution his aim being neither to punish the innocent nor screen the guilty but to administer the law correctly              
Counsel seek only for their client s success but the judge must watch that justice triumphs
 The law is clearly expounded in the case of Jamatraj Kewalji Govani referred to above wherein Hidayatullah J as he then was while speaking for the Bench about the unfettered discretionary power of the court as envisaged under Section 540 of the Code has stated thus It is difficult to limit the power under our Code to cases which involve something arising ex improviso which no human ingenuity could foresee in the course of the defence
Our Code does not make this a condition of the exercise of the power and it is not right to embark on judicial legislation
Cases that go far are of course not quite right
Indeed they could be decided on fact because it can always be seen whether the new matter is strictly necessary for a just decision and not intended to give an unfair advantage to one of the rival sides                       
It would appear that in our criminal jurisdiction statutory law confers a power in absolute terms to be exercised at any stage of the trial to summon a witness or examine one present in court or to recall a witness already examined and makes this the duty and obligation of the Court provided the just decision of the case demands it
In other words where the court exercises the power under the second part the inquiry cannot be whether the accused has brought anything suddenly or unexpectedly but whether the court is right in thinking that the new evidence is needed by it for a just decision of the case
If the court has acted without the requirements of a just decision the 721 action is open to criticism but if the court s action is supportable as being in aid of a just decision the action cannot be regarded as exceeding the jurisdiction
 The next important question is whether Section 540 gives the court carte blanche drawing no underlying principle in the exercise of the extra ordinary power and whether the said Section is unguided uncontrolled and uncanalised
Though Section 540 Section 311 of the new Code is in the widest possible terms and calls for no limitation either with regard to the stage at which the powers of the court should be exercised or with regard to the manner in which they should be exercised that power is circumscribed by the principle that underlines Section 540 namely evidence to be obtained should appear to the court essential to a just decision of the case by getting at the truth by all lawful means
Therefore it should be borne in mind that the aid of the section should be invoked only with the object of discovering relevant facts or obtaining proper proof of such facts for a just decision of the case and it must be used judicially and not capriciously or arbitrarily because any improper or capricious exercise of the power may lead to undesirable results
Further it is incumbent that due care should be taken by the court while exercising the power under this section and it should not be used for filling up the lacuna left by the prosecution or by the defence or to the disadvantage of the accused or the cause serious prejudice to the defence of the accused or to give an unfair advantage to the rival side and further the additional evidence should not be received as a disguise for a retrial or to change the nature of the case against either of the parties
Fazal Ali J in Rameshwar Dayal vs State of UP  while expressing his views about the careful exercise of its power by the court has stated It is true that under Section 540 of the Criminal Procedure Code the High Court has got very wide powers to examine any witness it likes for the just decision of the case but this power has to be exercised sparingly and only when the ends of justice so demand
The higher the power the more careful should be its exercise    
The words Just decision of the case would become meaningless and without any significance if a decision is to be arrived at without a sense of justice and fair play
 In State of West Bengal vs Tulsidas Mundhra at 207 it has observed 722 It would be noticed that this section confers on criminal Courts very wide powers
It is no doubt for the Court to consider whether its power under this section should be exercised or not
But if it is satisfied that the evidence of any person not examined or further evidence of any person already examined is essential to the just decision of the case it is its duty to take such evidence
The exercise of the power conferred by section 540 is conditioned by the requirement that such exercise would be essential to the just decision of the case
 At the risk of repetition it may be said that Section 540 allows the court to invoke its inherent power at any stage as long as the court retains seisin of the criminal proceeding without qualifying any limitation or prohibition
Needless to say that an enquiry or trial in a criminal proceeding comes to an end or reaches its finality when the order or judgment is pronounced and until then the court has power to use this section
The answer to the question like the one that has arisen in the present case is whether the court would be justified in exercising its power under Section 540 is found in Kewalji s case albeit
In that case the appellant was prosecuted on two counts under Section 135a and b of the 
The appellant did not lead any evidence on his behalf but filed a written statement claiming inter alia that no offence had been disclosed against him since no witness had deposed that the contraband had been seized from him under the Act in the reasonable belief that they were smuggled goods
The day after the statement was filed the prosecution applied for examination of the customs officer who was incharge of the search as a court witness in the interest of justice
The Magistrate ordered the examination of the officer under Section 540 of the Code rejecting the objections raised by the appellant
Though an opportunity was given to the appellant to lead defence evidence the appellant stated that he had nothing further to add and no evidence to lead
The Trial Court convicted the appellant who being aggrieved by the judgment of the Trial Court preferred an appeal to the High Court which dismissed the appeal
Before this Court it was contended that the evidence of the officer was improperly received
That contention has been repelled by this court observing This power is exercisable at any time and the Code of Criminal Procedure clearly so states and thereafter concluded it cannot be said that the Court had exceeded its jurisdiction in acting the second part of Section 540 of the Code of Criminal Procedure
 Gajendragadkar J speaking for the Bench in Tulsidas Mundhra 723 cited supra has pointed out as follows Section 540 in terms applies at any stage of any enquiry trial or other proceeding under this Code
This section is wide enough to include a proceeding under section 207 A and so it would be unreasonable to contend that the scheme of section 207 A makes section 540 inapplicable to the proceeding governed by section 207 A
The power of the Court under section 540 can be exercised as much in regard to cases governed by section 207 A as in regard to other proceedings governed by the other relevant provisions of the Code It may be noted that section 207 A of the old Code in Chapter XVIII under the caption Enquiry into cases triable by the court of Session or the High Court dealt with the procedures to be adopted in proceedings instituted on police report and this provision is omitted in the new Code This Court in Kewalji s case albeit held that Chapter XXI of Cr
PC old under the heading Of the Trail of Warrant cases by Magistrates does not restrict the powers of criminal court under Section 540
In Masalti vs State of UP  wherein the defence did not opt to examine some witnesses who have been left out by the prosecution on the bona fide belief that those witnesses had been won over and the court also after due deliberation refused to exercise its power under Section 540 this Court while examining a submission that the Trial Court should have exercised its power under Section 540 and examined those witnesses expressed its opinion that that is one aspect of the matter which we have to take into account that is in considering whether the accused were prejudiced or not
It has been held by this Court in Rajeswar Prasad Mora vs State of West Bengal  Anr1966 1 SCR 178 while dealing with the ample power and jurisdiction of the court in taking additional evidence as follows Additional evidence may be necessary for a variety of reasons which it is hardly necessary even if it was possible to list here
We do not propose to do what the Legislature 724 has refrained from doing namely to control discretion of the appellate Court to certain stated circumstances
It may however be said that additional evidence must be necessary not because it would be impossible to pronounce judgment but because there would be failure of justice without it
The power must be exercised sparingly and only in suitable cases
Once such action is justified there is no restriction on the kind of evidence which may be received
It may be formal or substantial
 The above view has been reiterated in RB Mithani vs Maharashtra AIR 1971 SC 1630
The principle of law that emerges from the views expressed by this court in the above decisions is that the Criminal Court has ample power to summon any person as a witness or recall and re examine any such person even if the evidence on both sides is closed and the jurisdiction of the court must obviously be dictated by exigency of the situation and fair play and good sense appear to be the only safe guides and that only the requirements of justice command and examination of any person which would depend on the facts and circumstances of each case
What falls for determination now is whether the person indicated should be given an opportunity to rebut the evidence of the witness or witnesses summoned and examined under Section 540
This question came for determination in Rameshwar Dayal s case and this court answered that question thus It was argued by counsel for the State that there is no provision in the Criminal Procedure Code which requires the court to allow the appellant an opportunity to rebut the evidence of witnesses recommended under Section 540 Cr
This argument in our opinion is based on a serious misconception of the correct approach to the cardinal principles of criminal justice
Section 540 itself incorporates a rule of natural justice
The accused is presumed to be innocent until he is proved guilty
It is therefore manifest that where any fresh evidence is admitted against the accused the presumption of innocence is weakened and the accused in all fairness should be given an opportunity to rebut that evidence
The right to adduce evidence in rebuttal is one of the inevitable steps in the defence of a case by 725 the accused and a refusal of the same amounts not only to an infraction of the provisions of the Criminal Procedure Code but also of the principles of natural justice and offends the famous maxim audi alteram partem              
A careful perusal of this provision manifestly reveals that the statute has armed the Court with all the powers to do full justice between the parties as full justice cannot be done until both the parties are properly heard the condition of giving an opportunity to the accused to rebut any fresh evidence sought to be adduced against him either at the trial or the appellate stage appears to us to be implicit under Section 540 of the Cr
PC See also Kewalji s case cited above
This was the view taken by various High Court such as in Channu Lal vs R AIR 1949 All 692 Rengaswami Naicker vs Muruga Naicker AIR 1954 Mad 169 Shugan Chand vs Emperor AIR 1925 Lah 531 and The Queen vs Assanoolah 13 SWR Crl
The views expressed in the above judgments of the various High Courts have been approved by this Court in Rameshwar Dayal s case
We are in full agreement with the above view of Fazal Ali J and hold that whenever any additional evidence is examined or fresh evidence is admitted against the accused it is absolutely necessary in the interest of justice that the accused should be afforded a fair and reasonable opportunity to rebut that evidence brought on record against him
With this legal background let us now turn to the challenge posed by the appellant in these appeals
The Trial Court and the First Revision Court rejected the request of the prosecution on three grounds namely first that the prosecution has attempted to fabricate evidence at a belated stage to fill up the lacuna in the prosecution case and secondly that the request of the prosecution for taking additional evidence was after the closure of the defence and thirdly a substantial prejudice would be caused to the appellant if the prosecution is allowed to adduce fresh evidence
As pointed out by the High Court in its impugned order gold silver ornaments of the value of Rs848482 and currency notes of Rs79000 have been seized from the premises searched on the strength of the search warrant issued by Shri KK Das
What the appellant now contends is that the order of the High Court permitting the prosecution to recall one of the witnesses already examined and to summon two other new witnesses to prove 726 the foreign makings on the legadis is in violation of the principle underlying Section 540
We waded through the entire records inclusive of the copies of depositions search warrant and the application filed by the prosecution under Section 540 which are available in the file forwarded by the High Court though those documents are not annexed with the SLP
The prosecution filed the petition for examination of the three witnesses stating that foreign ingots lagadis have been sized from the possession of the appellant and that warrant for search of the premises of the appellantaccused was issued in this regard by the Assistant Collector of Customs namely Shri KK Das and hence fresh evidence is necessary for a just decision of the case
After perusing the depositions of the witnesses already examined that are found on the file we think that the appellantaccused cannot be said to be prejudiced in any way by examination of these three witnesses
PW 2 who was then working as Superintendent of Customs in the office of the Assistant Collector of Customs at Adipur during the relevant period has stated that Shri KK Das who was the then Assistant Collector of Customs issued the warrant dated 791971 authorising Shri Mirchandani Superintendent of Customs Adipur to search for the prohibited and dutiable goods and documents in the premises mentioned in the warrant
It is elicited from the same witness in the cross examination that the gold ornaments were seized since the sizing authority doubted that they are smuggled gold and procured by contriving the Gold Control Act
It is seen from the evidence of PW 3 that he and others inclusive of Superintendent Mirchandani went to the house of the appellant and they seized the gold ornaments Dhalia that is primary gold under Panchnama and search list Exts
24 and 25
Therefore the appellant s grievance that he has been taken by surprise on the request of the prosecution for taking fresh evidence that the evidence sought to be obtained is only for filling up the lacuna and the judgment impugned is prejudicial to him cannot be countenanced
Of the three witnesses permitted to be summoned and examined on the side of the Union of India the Mint Master is only an assayer
In our considered opinion the facts and circumstances of the case require the examination of these three witnesses for a just decision of the case as held by the High Court
In the light of the proposition of law which we have derived in the preceding portion of the judgment there is no illegality in summoning the witnesses after the closure of the defence arguments
It is seen from the order of the Trial Court that the argument of the prosecution has not yet begun
Since we feel that any further observation of ours in justification of this order may prejudice the defence of the appellant 727 before the Trial Court we are not inclined to discuss the evidence any further
A decision of this Court in Mir Mohd Omar and Other vs State of West Bengal was relied upon to show that after the examination of the accused under Section 313 of the new Code corresponding to Section 342 of the old Code the prosecution should not move the Trial Judge for recalling a witness already examined but the observation made in that decision has no application to the present case because in that case the said observation was made in a different context by this court while examining the plea of the prosecution in making corrections of the evidence already recorded under Section 272 of the Code and that decision does not deal with the ambit of Section 540 of the Code
The other contention raised on behalf of the appellant is that the order of the Magistrate rejecting the application of the prosecution under Section 540 is not a revisable order under Section 3971 as it being an interlocutory order and even if it is not so the second revision by the same party ie Union of India is not entertainable in view of the statutory bar under Section 3973 of the new Code as the Union of India has already availed the revision under Section 3972 before the Session Judge
We may straightaway reject this plea on the simple ground that the prosecution in the present case was launched under the old Code and as such the only provision of the old Code have to be applied as per Section 484 of the new Code
The fervent plea of the appellant is though the prosecution was instituted under the old Code he should not be denied the benefit and advantage of Section 3972 and 3 of the new Code
We are afraid that we could accede to this inexorable request of the appellant for two reasons namely that the appellant has not challenged the maintainability of the second revision filed and heard after the commencement of the new Code before the High Court claiming advantage of Section 3973 of the new Code and secondly he participated in the revision proceedings throughout under the old Code
Having failed in the revision he has no justification to raise this point before this Court especially when the proceedings under the old Code are saved by Section 484 of the new Code
As far as the question whether an order under Section 540 of the old Code is an inerlocutory order or a final order need not be gone into as that question does not arise in these proceedings
We would like to point out before parting with this judgment that though the High Court by its impugned judgment directed the Union of India to 728 examine the three witnesses in fact it has allowed all the four revision applications inclusive of the revision application Nos 124 and 125 of 1978 filed by the State of Gujarat seeking the same prayer as that of the Union of India
The appellant as we have pointed out in the prefatory portion of this judgment that that part of the judgment of the High Court allowing the two revisions filed by the State Government remains unchallenged
Further we would like to point out that the High Court in its concluding paragraph of its judgment instead of using the words I  direct ought to have used the word I   permit
For all the reasons stated above we hold that the judgment of the High Court does not suffer from any illegality or perversity calling for an interference at the hands of this Court and as such the appeals are liable to be dismissed as devoid of any merit
However we direct the Trial Court to afford a fair opportunity to the appellantaccused to cross examine the witnesses sought to be examined by the Union of India and also to lead rebuttal evidence if the appellant so desires
Accordingly these two appeals are dismissed
YL Appeals dismissed


Summary:
The Appellant Assessee a partnership firm was engaged mainly in Malaya in money lending business since 1949 and incidental to this business was also doing the business of sale and purchase of house properties gardens and estates
It was reconstituted under a deed dated 2631960
The firm was dissolved on 1331961 and closed its accounts with effect from that date
In its income tax return filed on 1041962 for the assessment year 1961 62 it had filed a profit and loss account wherein amount of 101248 equivalent of Rs158057 was shown as difference on revaluation of the estates gardens and house properties on the dissolution of the firm
In the memo of adjustment for income tax purposes this amount was deducted as being not assessable either as revenue or capital
The Income Tax Officer issued notice under section 232 of the Act on that very day and completed the assessment also on the same day after making a petty addition of Rs2088 paid as property tax in Malaya
When for the subsequent year 1962 63 the assessee filed its return showing nil income stating in the forwarding letter that the Firm had been dissolved on 1331961 the ITO wrote to the assessee that the revaluation difference of Rs158057 should have been brought to tax in the previous year
The assessee replied that no profit or loss could be assessed on a revaluation of assets that the assessee was gradually winding up its business in Malaya the surplus would be only capital 625 gains and that revalutation had been at the market price prevalent since 1954 and thus no capital gains were chargeable to tax
Not satisfied the ITO issued a notice under section 148 read with Section 147b of the Income Tax Act 1961
The assessee filed objections
Overruling all the objections the Income Tax Officer completed reassessment of the assessee Firm adding back the sum of Rs 158057 to the previously assessed income
Having failed right upto the High Court the assessee came in appeal before this Court
Dismissing the appeal affirming the decision of the High Court this Court
HELD 1 The proceedings us 147b were validly initiated
The facts of this case squarely fall within the scope of propositions 2 and 4 enunciated in Kalyanji Mavji s case
Proposition 2 may be briefly summarised as permitting action even on a mere change of opinion
This is what has been doubted in the IENS case
But even leaving this out of consideration there can be no doubt that the present case is squarely covered by proposition 4 set out in Kalyanji s case
This proposition clearly envisages a formation of opinion by the Income Tax Officer on the basis of material already on record provided the formation of such opinion is consequent on information in the shape of some light thrown on aspects of facts or law which the Income Tax Officer had not earlier been conscious of
636G 637B The difference between the situations envisaged in propositions 2 and 4 of Kalyanji Mavji is this that proposition 4 refers to a case where the Income Tax Officer initiates reassessment proceedings in the light of information obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier
Proposition 2 no doubt covers this situation also but it is so widely expressed as to include also cases in which the Income Tax Officer having considered all the facts and law arrives at a particular conclusion but reinitiates proceedings because on a reappraisal of the same material which had been considered earlier and in the light of the same legal aspects to which his attention had been drawn earlier he comes to a conclusion that an item of income which he had earlier consciously left out from the earlier assessment should have been brought to tax
637F H It is true that the return was filed and the assessment was completed on the same date
Nevertheless it is opposed to normal human 626 conduct than an officer would complete the assessment without looking at the material placed before him
It is not as if the assessment record contained a large number of documents or the case raised complicated issues rendering it probable that the Income Tax Officer had missed these facts
It is a case where there is only one contention raised before the Income Tax Officer and it is we think impossible to hold that the Income Tax Officer did not at all look at the return filed by the assessee or the statements accompanying it
The more reasonable view to take would in our opinion be that the Income Tax Officer looked at the facts and accepted the assessee s contention that the surplus was not taxable
But in doing so he obviously missed to take note of the law laid down in Ramachari which there is nothing to show had been brought to his notice
when he subsequently became aware of the decision he initiated proceedings under section 147b
The material which constituted information and on the basis of which the assessment was reopened was the decision in Ramachari
this material was not considered at the time of the original assessment
Though it was a decision of 1961 and the Income Tax Officer could have known of it had he been diligent the obvious fact is that he was not aware of the existence of that decision then and when he came to know about it he rightly initiated proceedings for reassessment
639E 640B The material on which the Income Tax Officer has taken action is a judicial decision
This had been pronounced just a few months earlier to the original assessment and it is not difficult see that the Income Tax Officer must have missed it or else he could not have completed the assessment as he did
Indeed it has not been suggested that he was aware of it and yet chose not to apply it
It is therefore much easier to see that the initiation of reassement proceedings here is based on definite material not considered at the time of the original assessment
640D E 2 The stock in trade of a firm at the time of its disolution has to be assessed at a fair value
there can be no manner of doubt that in taking accounts for purposes of dissolution the firm and the partners being commercial men would value the assets only on a real basis and not at cost or at their other value appearing in the books
The real rights of the partners cannot be mutually adjusted on any other basis
This is what happened in Ramachari
Indeed this is exactly what the partners in this case have done and having done so it is untenable for them to contend that the valuation should be on some other basis
Once this principle is applied and the stock in trade is valued at market price the surplus if any has to get reflected as the profits of the firm 627 and has to be charged to tax
The view taken by the High Court has held the field for about thirty years now and we see no reason to disagree even if a different view was possible
642B D 647E648A C Popular Automobiles vs Commissioner of Income Tax  Sunil Siddharthbhai vs Commissioner of Income Tax  Pupular Workshops vs Commissioner of Income Tax  Malabar Fisheries Co vs Commissioner of Income Tax  Indian  Eastern Newspaper Society vs Commissioner of Income Tax  Kalyanji Mavji  Co vs Commissioner of Income Tax 1976 102 ITR 287 Ms ALA Firm vs The Commissioner of Income Tax Madras  Commissioner of Income Tax vs Hind Construction Ltd  Commissioner of Income Tax vs Birla Gwalior P Ltd  Anandji Haridas  Co P Ltd vs SP Kushare Sales Tax Officer 1968 21 STC 326 Commissioner of Income Tax vs Dewas Cine Corporation  Ramachari  Co vs Commissioner of Income Tax  Maharaj Kumar Kamal Singh vs Income Tax Officer SC Commissioner of Income Tax vs A Raman  Co SC Salem Provident Fund Society Ltd vs Commissioner of Income Tax  Commissioner of Income Tax vs Rathinasabapathy Mudaliar  Addanki Narayanappa vs Bhaskara Krishnappa   Commissioner of Income Tax vs Bankey Lal Vaidya  Kikabhai Premchand vs Commissioner of Income Tax 1953 24 ITR 506 SC Commissioner of Income tax vs KARK Firm  Chainrup Sampathram vs Commissioner of Income Tax  Commissioner of Income Tax vs Ms Shoorji Vallabhadas  Co  Commissioner of Income Tax vs Krishnaswamy Muldaliar  Commissioner of Income Tax vs Ahmedabad New Cotton Mills Co Ltd 1930 LR 57 IA 21 Muhammad Hussain Sahib vs Abdul Gaffor Sahib reffered to