Case: Newton Chikli Collieries Limited Vs. Commissioner of Income Tax, M. P. and Bhopal

arise out of acquittance rolls. His argument is that in the absence of such an opportunity the adding back of Rs. 50, 000 was really based on no material and was, furthermore, in violation of section 23(3) of the Income-tax ActBefore we proceed to consider the aforesaid two points urged on behalf of the appellant, it is necessary to state what the precise scope of the appeal before us is. Neither the High Court nor this court sits in appeal over the assessments in question. As in the High Court so also before us, the short question is whether there was any material before the Tribunal for the finding that the wages had been inflated. If there was such material from which a reasonable inference as to inflation of wages could be drawn, the matter is at an end. Having heard learned counsel for the appellant, we agree with the view expressed by the High Court that there was such material. Learned counsel for the appellant has taken us very carefully through the explanations which the assessee-company gave for the increase in the wages. He referred to the increase in the expenses by reason of the Government resolution dated October 10, 1947, the increased cost of cutting coal and the increase in the number of workmen, and also the cost of explosives, kerosene oil etc., which was previously borne by the workers but was to be borne by the assessee-company in the relevant year. He has further drawn our attention to the circumstance that the Income-tax Officer proceeded on the basis of coal despatched and not on coal raised during the six years for which the Income-tax Officer prepared a comparative statement. It has been pointed out to us that on a correct computation based on the tons of coal raised the increase came to Rs. 715 per 100 tons of coal raised for the year 1948 as against Rs. 526 for the year 1947. It is argued that the increase is less than what the Government itself allowed for the price increase. All these points have been fully considered by the High Court ; yet the High Court has pointed out that there were materials from which the income-tax authorities could come to the conclusion that there was inflation in the expenses under the head " wages and salaries ". Before the Income-tax Officer the only reason which the assessee-company gave for the increase was the effect of the Government resolution dated October 10, 1947. When the assessee-company was asked to file a comparative statement showing salaries paid each year departmentwise from 1939, it failed to do so. It filed a statement showing the increased rates. No evidence was given as to the increases made between 1939 and 1948.4. The monthly acquittance rolls showed a somewhat unusual state of affairs. First, many payments were acknowledged by persons other than the payees ; secondly, even in the case of literate persons, payments were acknowledged by persons affixing their thumb impressions. It has been contended before us that the colliery worked in shifts, and it sometimes so happened that a workman was working in the colliery at the time of payment of wages and, therefore, his wages were taken by some other workman. Then, there were cases of no acknowledgmentss at all. With regard to these, the explanation was that one person was dead and as it was a case of unpaid wages no acknowledgment was taken ; and with regard to others, the explanation was that acknowledgments were not taken by inadvertence. Whether these explanations are correct or not do not fall for decision at this stage. It was for the income-tax authorities to consider the correctness or otherwise of these explanations. If the income-tax authorities chose not to accept these explanations as correct, that does not mean that the finding as to inflation of wages at which they arrived was a finding based on no material. The materials were there ; what happened was that the income-tax authorities did not accept as correct the explanations offered by the assessee-company. We do not think that the non-acceptance of the explanations given by the assessee-company converts the question of the inflation of wages, which is essentially a question of fact, into a question of law. The High Court was, therefore, right in its answer to the first questionAs to the second argument we do not think that the assessee-company can make any grievance on the score that no opportunity was given to it as contemplated by section 23(3) of the Act. The assessee-company did not produce the comparative statement asked for by the Income-tax Officer. It filed a statement showing increased rates of salary which was of no help. It then produced the acquittance rolls of workmen on monthly wages. No acquittance rolls were produced in respect of workmen on weekly wages on the ground that such rolls did not exist. Section 23(3) does not contemplate that with regard to every reason which the Income-tax Officer formulates for his order, the assessee must be given an opportunity to produce fresh evidence or fresh explanation. The Income-tax Officer fully considered whatever materials the assessee-company produced in reply to the notices issued to it or even independently of that notice. The Appellate Assistant Commissioner also considered the explanations which the assessee-company gave with regard to the defects noticed by the Income-tax Officer. Indeed, the Tribunal accepted some of the explanations as good explanations ; yet the Tribunal found that the defects in the keeping of acquittance rolls or the wages record indicated an inflation of wages and held that the Income-tax Officer was right in adding back Rs. 50, 000 in respect thereof. This finding of the Tribunal can have only one meaning, namely, that there was an inflation of wages. Therefore, we are of opinion that it is idle on the part of the assessee-company to contend that no opportunity was given to it to explain the defects in the acquittance rolls.5.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]We do not think that theof the explanations given by theconverts the question of the inflation of wages, which is essentially a question of fact, into a question of law. The High Court was, therefore, right in its answer to the first questionAs to the second argument we do not think that thecan make any grievance on the score that no opportunity was given to it as contemplated by section 23(3) of the Act. Thedid not produce the comparative statement asked for by theOfficer. It filed a statement showing increased rates of salary which was of no help. It then produced the acquittance rolls of workmen on monthly wages. No acquittance rolls were produced in respect of workmen on weekly wages on the ground that such rolls did not exist. Section 23(3) does not contemplate that with regard to every reason which theOfficer formulates for his order, the assessee must be given an opportunity to produce fresh evidence or fresh explanation. TheOfficer fully considered whatever materials theproduced in reply to the notices issued to it or even independently of that notice. The Appellate Assistant Commissioner also considered the explanations which thegave with regard to the defects noticed by theOfficer. Indeed, the Tribunal accepted some of the explanations as good explanations ; yet the Tribunal found that the defects in the keeping of acquittance rolls or the wages record indicated an inflation of wages and held that theOfficer was right in adding back Rs. 50, 000 in respect thereof. This finding of the Tribunal can have only one meaning, namely, that there was an inflation of wages. Therefore, we are of opinion that it is idle on the part of theto contend that no opportunity was given to it to explain the defects in the acquittance rolls