Civil Appeal Nos 681 and 682 of 1957
Appeals by special leave from the order dated August 2 1954 of the Income tax Appellate Tribunal of India Bombay Bench A  in Income tax Appeals Nos
3756 of 1948 49 and 2161 of 1950 51
R J Kolah and I N Shroff for the appellants
H N Sanyal Additional Solicitor General of India KN Rajagopal Sastri and D Gupta for the respondent
238 1959
May 12
The Judgment of the Court was delivered by BHAGWATI J
These two appeals with special leave under article 136 of the Constitution are directed against the order of the Income tax Appellate Tribunal of India Bombay Bench  A  hereinafter referred to as  the Tribunal  dated August 3 1954 in Income tax Appeals Nos
3756 of 1948 49 and 2161 of 1950 51 whereby the Tribunal held that the amounts of cheques of Rs198643 and Rs 496365 for the assessment years 1943 44 and 1944 45 were received by the appellant from the Government in the taxable territories and were as such liable to tax under section 41a of the Indian Income Tax Act XI of 1922 hereinafter referred to as the Act
At all material times the appellant was a public joint stock company incorporated under the then Baroda State Companies Act and having its registered office at Baroda
The appellant was the owner of a textile mill and carried on business in manufacturing and selling textiles at Baroda
In the accounting years 1942 and 1943 tenders were invited by the Government of India for some of the articles manufactured by the appellant and the appellant submitted its tenders to the Government of India which accepted the tenders and placed orders for supply of goods manufactured by the appellant
These orders were accepted by the appellant at Baroda and the deliveries of the goods manufactured by the appellant and sold by it to the Government of India were pursuant to the said orders to be and were in fact effected F 0
B Baroda
In fact so far as the manufacture and sale of the goods supplied to the Government of India were concerned as also the deliveries thereof everything took place at Baroda outside the then British India
According to the conditions of the contracts governing the supplies made by the appellant to the Government the system of payment was that unless otherwise agreed upon between the parties payment for delivery of the goods would be made on submission of the bills in the prescribed form in accordance with 239 the instructions given in the acceptance of the tender by a cheque on a Government Treasury or a Branch of the Reserve Bank of India or the Imperial Bank of  India transacting Government business
The appellant after effecting deliveries of the goods submitted bills in the prescribed printed form which contained the sentence that  Government should pay the amount due to the appellant by cheque  but the appellant did not request or write to the Government in what way the payment by cheque was to be made by Government to the appellant
After submission of the bills the appellant received at Baroda in payment of its bills cheques through post from the Government drawn on a Government Treasury or on a branch of the Reserve Bank of India or the Imperial Bank of India transacting Government business
The said cheques were received at Baroda by the appellant from the Government along with a memo stating  The undersigned has the honour to forward herewith cheque No dated in payment of the bills noted below then followed a tabular statement setting out the number amount and date of the bills
On the top of the memo there was a direction that  it be immediately returned to the Controller of Supplies Accounts with the acknowledgment form on the reverse duly signed and stamped
 The acknowledgment form was expressed as follows  The undersigned has the honour to acknowledge cheque No dated for Rs in payment of the bills noted in the first column on the reverse
 The payments made by cheques were accepted by the appellant unconditionally and in full satisfaction of its claim for goods supplied to the Government
On receipt _of such cheques the appellant endorsed the same and sent them either to Bombay or Ahmedabad in the Banking account of the appellant at such places
By his orders dated September 20 1945 and March 16 1943 for the assessment years 1942 43 account year being calendar year 1941 and 1943 44 account year being calendar year 1942 the Income tax Officer 240 held that the sums of Rs 198643 and Rs 496365 being the amounts of the cheques received by the appellant for the goods supplied to the Government of India amounted to receipt of income profits and gains in British India during the said accounting years inasmuch as the said cheques were drawn on banks in British India and were liable to tax
On appeal to the Appellate Assistant Commissioner from the said orders of the Income tax Officer the Appellate Assistant Commissioner confirmed the orders of the Income tax Officer and dismissed the appeals
From the said decision of the Appellate Assistant Commissioner the Appellant appealed to the Income tax Appellate Tribunal who after two remand orders on various points in the case which have no relevance to the question involved in these appeals finally by its order dated August 3 1954 held that even though the appellant did not write to the Government saying that the cheques be sent by post there was an implied request to the Government to send the cheques by post observing that where a person in Baroda writes to another in Delhi to send the money due to him by a cheque there is an implied request to send the cheque by post
The appellant could not have intended that the cheques would be sent otherwise than by post and it was not the case of the appellant that the cheques received from the Government were delivered by hand on behalf of the Government to the Appellant at Baroda and following the decision of this Court in Commissioner of Income tax Bombay South vs Messrs Ogale Glass Works Ltd  the Tribunal held that the amounts of the cheques referred to above were received by the appellant in the taxable territories and as such the appellant was liable to tax under section 41a of the Act
On December 20 1954 the appellant applied for special leave to appeal against the said order of the Tribunal under article 136 of the Constitution which leave was granted by this Court by its order dated April 15 1955
By a further order dated September 19 1955 both the appeals were consolidated for the purposes of printing of the record and for filing of the 11955 1 SCR 185
241 petitions of appeal and the statements of case therein
These appeals have now come up for hearing and final disposal before us
On the facts narrated above it is clear that the mode of payment agreed upon between the appellant and the Government of India as specified in Cl
21 in the printed form of tender was that the payments for the delivery of the goods were to be by cheques drawn on a Government Treasury or on a branch of the Reserve Bank of India or the Imperial Bank of India transacting Government business
The appellant used to submit the bills in the prescribed printed form which mentioned that the Government should pay the amounts due to the appellant by cheque
In payment of these bills the appellant used to receive at Baroda cheques  drawn by the Government as aforesaid along with a memo of acknowledgment which stated that the cheques mentioned therein were forwarded in payment of the bills noted in the tabular statement setting out the amount number and date of the bills
The acknowledgmet it form on the reverse was thereafter duly signed and stamped by the appellant acknowledging the receipt of the cheques in payment of the said bills and was despatched by the appellant to the Government
These payments by cheques were accepted by the appellant unconditionally and in full satisfaction of its claims for the goods supplied to the Government
The case of the Revenue in the first instance was that even though these cheques were received by the appellant in Baroda they were sent by the appellant after duly endorsing the same either to Bombay or Ahmedabad in the banking accounts of the appellant at such places and these cheques were cashed and the proceeds thereof were received by the appellant in either Bombay or Ahmedabad and accordingly the income profits and gains were received by the appellant within the taxable territories
This contention was really of no avail to the Revenue because on the particular facts of the present case it was common ground that the payments made by cheques were accepted by the appellant unconditionally and in full satisfaction of its claims for goods supplied to the 31 242 Government and therefore if the cheques be held to have been received by the appellant in Baroda the income profits and gains were also received in Baroda which was outside the taxable territories
Even if the receipts of the cheques at Baroda be treated as a conditional payment of the appellant s claims for the goods supplied to the Government the position was no better for the simple reason that the cheques not having been dishonoured but having been duly cashed the payments related back to the dates of the receipts of the cheques and in law the dates of payments were the dates of the delivery of the cheques which was certainly in Baroda out side the taxable territories
In either event it could not be urged by the Revenue that the income profits and gains were received by the appellant at any place other than Baroda Vide the Commissioner of Income tax Bombay South vs Messrs Ogale Glass Works Ltd 1 ibid at 196
The position which was however taken up by the Revenue subsequently was that the cheques were posted by the Government in Delhi at the implied request of the appellant and therefore the payments must be held to have been received by the appellant at Delhi the Post Office being thus constituted the agent of the appellant for the purposes of receiving the same
Learned Counsel for the appellant contested this position by urging that the only thing mentioned by the appellant was that the payment for the goods supplied by the appellant to the Government was to be by cheques and there was no request either express or implied emanating from the appellant for the despatch of these cheques by post with the result that if the Government chose to send these cheques by post from Delhi it was not in pursuance of any request express or implied made by the appellant in that behalf but it was so done by the Cxovernment on its own initiative thus constituting the Post Office the agent of the Government and there was no receipt of the monies by the appellant until the cheques reached their destination at Baroda
The case of the Commissioner of Income tax Bombay South vs Messrs Ogale Glass Works Ltd 1 which was relied upon by Revenue was sought 11955 1 SCR 18_ 243 to be distinguished on the ground that in that case the assessee had written on the bill form the words  Kindly
remit the amount by a cheque in our favour on any bank in Bombay  which was an express request conveyed to the Government by the assessee to send the cheque by post thus constituting the Post Office the agent of the assessee
No such words having been used by the appellant in this case the only consequence of the provision contained in the bill form that the payment be made by cheque was that the Government was authorised or entitled to make the payment by cheque but how to reach those cheques to the appellant was left to the sweet will and discretion of the Government and if the Government chose to send those cheques by post there was no request express or implied emanating from the appellant to send the cheques by post so as to constitute the Post Office the agent of the appellant for the purposes of receiving the same
It is true that in the Commissioner of Income tax Bombay South vs Messrs Ogale Glass Works Ltd 1 the words  kindly remit the amount by a cheque in our favour on any bank in Bombay  were specifically used by the assessee and these words were construed to be an express request by the assessee to the Government to send the cheques by post
The various authorities which were discussed viz Thairlwall vs The Great Northern Railway Co  Badische Anilin Und Soda Fabrik vs The Basle Chemical Works Bind Schedler 3  Comber vs Layland  and MitchellHenry vs Norwich Union Life Insurance Society 5 were also cases where the expressions used were construed as words of express request constituting the Post Office the agent of the party receiving the money or the goods and went to support the case made by the Revenue that the post office was constituted the agent of the assessee for the purposes of receiving the cheques when they were posted by the Government in Delhi
Where however no such express words were used and the matter rested merely in the stipulation that the payment would be made by cheques would the mere 1 1955 1 S CR 185
3 2 4 519I8 2 KB 67
244 posting of the cheques in Delhi be enough to constitute the Post Office the agent of the appellant so that the income profits and gains may be said to have been received by the appellant within the taxable territories  If there was nothing more the position in law is that the Post Office would not become the agent of the addressee and the mere posting of the cheque would not operate as delivery of the cheque to the addressee so as to pass the title in the cheque to the addressee
Vide Thorappa vs Umedmalji 1 and the case of Exparte Cote In re Daveza 2
Where however on the facts and circumstances of the case an implied request by the creditor to send the cheque by post can be spelt out the Post Office would be constituted the agent of the addressee for the purposes of receiving such payment
The authority in support of this proposition is to be found in Norman vs Ricketts3
In that case Madame Phillippe one of the plaintiffs carried on business as a milliner in Bondstreet and one of her customers was the defendant Mrs Ricketts
Between March 1884 and March 1885 goods were supplied by Madame Phillippe to Mrs Ricketts to the amount of pound 142
Mrs Ricketts lived in Suffolk and at the end of March 1885 Madame Phillippe wrote to her in Suffolk saying  the favour of a cheque within a week will oblige 
Mrs Ricketts accordingly on April 6 sent Madame Phillippe a cheque for the amount by post
The cheque was an open cheque payable to the order of Madame Phillippe
The cheque was stolen in the transit and Madame Phillippe never received it but it was paid by Mrs Ricketts  bankers to the thief
Madame Phillippe then commenced this action to recover the amount and Mr Baron Huddleston who tried the case without a jury held 1885 2 TLR 607 that the sending of the cheque was payment and gave judgment for the defendant
The plaintiffs appealed and the appeal was dismissed by the Court of Appeal consisting of Lord Esher M R Lindley and Lopes L JJ
The Master of the Rolls said that if a debtor had to pay his creditor 1 2 3 245 money as a general rule the debtor must come and pay his creditor
But if the creditor asked him to pay in a particular way the debtor might do so
If asked to pay through the post the putting the letter in the post with the money was a sufficient
The only question here was whether the plaintiffs asked the defendant in effect to send the money through the post
An express request to send through the post was not necessary
If what the plaintiffs said amounted to a request to send the cheque by the post then there was payment
To answer that question the existing circumstances must be looked at
A milliner in London wrote to a lady in Suffolk asking for a cheque bid that letter reasonably lead the lady to suppose and did she suppose that she might send the cheque by post  She could not suppose that she was to send a messenger with it or come up to London herself
The only reasonable and proper meaning to be attached to it whatever Madame Phillippe might have intended was that she was to send the cheque by post
She therefore reasonably believed that she was invited to send her cheque by post and she did what she was asked to do
Consequently what she did amounted to payment to the appellant
The Lords Justices concurred with this judgment
Resting itself upon the observations in this case this Court observed in Commissioner of Income tax Bombay South vs Messrs Ogale Glass Works Ltd 1 at p 295  According to the course of business usage in general to which as part of the surrounding circumstances attention has to be paid under the authorities cited above the parties must have intended that the cheques should be sent by post which is the usual and normal agency for transmission of such articles and according to the Tribunal s findings they were in fact received by the assessee by post
 Learned Counsel for the appellant particularly drew our attention to the case of Pennington vs Crossley and sons Limited  a decision of the Court of Appeal consisting of Lord Esher MR AL Smith and Rigby L JJ where Norman vs Ricketts 3 was distinguished
In that case the plaintiff sold on December 10 1 2 189713TLR 5i3
31886 246 1896 the goods in question to the defendants and on the same date an invoice was sent to the defendants under which the defendants were entitled to discount if the payment was made within 14 days
Upon December 24 the defendants posted a cross cheque made payable to the plaintiff or his order and with the cheque was sent a form of receipt for signature by the plaintiff
The envelope containing the cheque was properly addressed to the plaintiff but was not registered
There was no express request to send the cheque by post
The cheque was never received by the plaintiff but was cashed by a stranger on the strength of a forged endorsement of the plaintiff s name thereupon
On an action to recover the price of the goods sold and delivered the defendants contended that the posting of the cheque amounting in law to payment and gave evidence that for about 20 years before this transaction payments for goods in question as between the plaintiff and the defendants were always made by cheque sent by post in the form of receipt given above
The learned Judge held that the course of business showed that the parties had agreed that the payment should be made by cheque and that the posting of the cheque amounted to payment and accordingly gave judgment for the defendants
The Court of Appeal reversed this decision
The Master of the Rolls in his judgment distinguished the case of Norman vs Ricketts 1 stating that in that case there was what amounted to a request to send a cheque by post and the Court held that the posting of the cheque was payment
There was no such request here
The course of business between the plaintiff and the defendants was not taken to mean that there was a request to the defendants to send the cheque by post and that the plaintiffs would run the risk of the cheques miscarrying in the transit
The defendants sent to the plaintiff cheques by post on the various sales together with a form of receipt to be signed by him independently of any arrangement
There was nothing in the circumstances to warrant the conclusion that putting the cheque in the post was to  be taken as the delivery of the cheque to the plaintiff the only facts 1 247 being that the defendants always sent cheques by post and that when the plaintiff received them he sent back the receipt duly signed
This case does not militate against the ratio of the decision in Norman vs
Ricketts 1 but really confirms the same
If on the facts and circumstances of that case the Court of Appeal had been able to find any request express or implied to send the cheques by post the decision would certainly have been confirmed but in so far as there was nothing in the circumstances of the case from which such an inference could be raised the Court of Appeal observed It would be most monstrous to infer from those circumstances a request to send a cheque by post and that the plaintiff would consider that he had received it as soon as it was posted
 The other Lord Justices delivered judgment to the same effect and the appeal was allowed
The above ratio is really determinative of the question before us
The stipulation in the contract between the appellant and the Government was that the payment would be made by cheques
The Government of India was located in Delhi and the cheques would be necessarily drawn by it from Delhi
Could it be imagined that in the normal course of affairs the cheques thus drawn in Delhi would be sent by a messenger to Baroda so that they may be delivered to the appellant in Baroda Or that the officer concerned would come to Baroda himself and hand the same over to the appellant in Baroda  The only reasonable and proper way of dealing with the situation was that the payment would be made by cheques which the Government would send to the appellant at Baroda by post
According to the course of business usage in general which appears to have been followed in this case the parties must have intended that the cheques should be sent by post which is the usual and normal agency for transmission of such articles
If that were so there was imported by necessary implication an implied request by the appellant to send the cheques by post from Delhi thus constituting the Post Office its agent for the purposes of receiving those payments
1 248 Learned Counsel for the appellant further drew our attention to certain provisions of the Post Office Act 1898 and the postal regulations framed thereunder and tried to argue that the Post Office was really the agent of the Government and the Government could recall the cheques at any time before they actually reached the appellant at Baroda
All these provisions were discussed by this Court in the Commissioner of Income tax Bombay South vs Messrs Ogale Glass Works Ltd 1 and it was held that these provisions did not help the assessee
The position as it obtains was thus summarised at p 204  there can be no doubt that as between the sender and the addressee it is the request of the addressee that the cheque be sent by post that makes the post office the agent of the addressee
After such request the addressee cannot be heard to to say that the post office was not his agent and therefore the loss of the cheque in transit must fall on the sender on the specious plea that the sender having the very limited right to reclaim the cheque under the Post Office Act 1898 the post office was his agent when in fact there was no such reclamation
Of course if there be no such request express or implied then the delivery of the letter or the cheque to the post office is delivery to the agent of the sender himself
 In our opinion the principle which has been enunciated by us in the Commissioner of Income tax Bombay South vs Messrs Ogale Glass Works Ltd 1 is applicable to the facts of the present case even though the words  to remit the amount by cheque  have not been specifically used herein
Non user of those words does not make any difference to the position and it is not possible to distinguish the present case from that case merely on this ground
We are therefore of opinion that the Income tax Appellate Tribunal was right in the conclusion to which it came and these appeals must accordingly be dismissed with costs one set between the two appeals
Appeals dismissed
11955 11 SCR 185


Summary:
On September 7 1952 the appellant went to Dum Dum Aerodrome to board a plane for Hong Kong
On his search by the customs authorities a sum of RS
25000 was recovered from him which he had not declared in his declaration form and for which he had no permit from the Reserve Bank of India for taking out of India
On September II 1952 the Reserve Bank authorised Inspector Mitra to move the Additional District Magistrate 24 Parganas under section 193 Of the Foreign Exchange Regulation Act for permission to proceed against the appellant
On September 16 1952 Mitra applied to the Magistrate for a search warrant and for a warrant of arrest and both warrants were issued
The appellant was arrested and released on bail with a direction to appear before the Magistrate on September 19 On September 19 the Magistrate granted bail to the appellant but refused him exemption from personal attendance before the Court and granted time till November 19 1952 for completing the investigation
This time was extended upto January 2 1953 and then upto February 2 1953
In the meantime on January 27 1953 Mitra was authorised under section 233b Of the Act to file a complaint against the appellant
The complaint was filed on February 2 1953 before the Additional District Magistrate who transferred the case to a Magistrate I Class for trial
On the same day the Magistrate I Class recorded the presence of the appellant allowed his application for reduction of security and fixed March 26 and 27 1953 for evidence
Upon conclusion of the trial the Magistrate acquitted the appellant but on appeal the Calcutta High Court convicted him
The appellant contended that the entire trial was without jurisdiction as the Magistrate had taken cognizance of the offence on September 16 1952 without there being a complaint in writing by a person authorised as required by section 233 of the Act
Held that cognizance of the offence was taken by the Additional District Magistrate on February 2 1953 after the complaint had been filed and the trial was valid
As to when cognizance is taken of an offence will depend upon the facts and circumstances of each case
Mere issuing of a search warrant or warrant of arrest for the purposes of investigation did not by 94 themselves amount to taking of cognizance
Cognizance was taken when a Magistrate applied his mind for the purpose of proceeding under section 200 and subsequent sections of Ch
XVI of the Code of Criminal Procedure or under section 204 Of Ch
XVII of the Code
In the present case cognizance was taken when on February 2 1053 the Additional District Magistrate applied his mind to the case with a view to issuing a process and sent the case for trial to another magistrate
Superintendent and Remembrancer of Legal Affairs West Bengal vs Abani Kumar Banerji and R R Chari vs The State of Uttar Pradesh   applied
The facts found clearly established that the appellant attempted to take out of India the currency notes in question and such attempt was also an offence
The High Court had rightly rejected his explanation that he had applied to the Reserve Bank for a permit to take the currency notes out of India and that as the permit had not been received he had handed over the notes to the customs authorities for safe custody