Case: Commissioner of Income Tax, Bombay North Vs. Lakhiram Ramdas

1. These are two appeals by special leave of this Court. One appeal is from the judgment and order of theAppellate Tribunal, Bombay Bench C (hereinafter referred to as the Tribunal), dated November 7, 1955, by which the Tribunal held that S. 34 (1) (a) of the IndianAct. 1922 was not applicable in the case, as there was no omission or failure on the part of the assessee to make a return of his income under S. 22 for the assessment yearor to disclose fully and truly all the material facts necessary for his assessment for that year. The second appeal is from the order of the High Court of Bombay, dated December 14, l956 by which the said High Court rejected an application made by the present appellant under S. 66 (2) of theAct. By that order the High Court refused to ask the Tribunal to state a case for its consideration of a question of law which the appellant said arose from the order of the Tribunal, dated November 7, 1955.

Court's reasoning:
It is not necessary to deal with that preliminary objection, because learned Advocate for the appellant has conceded that the appeal direct from the order of the Tribunal must be dismissed in view of the decision of this Court in Chandi Prasad Chokhani v. State of Bihar,ITR 498: (AIR 1961 SC 1708 ),which laid down that save in exceptional and special circumstances, this Court would not exercise its power under Art. 136 of the Constitution in such a way as to bypass the High Court by entertaining an appeal direct from the order of the Tribunal and thereby ignore the decision given by the High Court. Therefore, the appeal from the order of the Tribunal, dated November 7, 1955 must bepresent respondent, who was the assessee in the case, carried on a cloth business at Ahmedabad. Later he opened branches at Karachi and Bombay. He was assessed toin the status of a Hindu undivided family. In the account period relevant to the assessment yearthe assessee opened a branch at Karachi. The total income for that assessment year was determined at Rs. 38,400. For the assessment years46 the assessee maintained joint accounts for the whole period of two years. In the assessment yearhe opened a branch office at Bombay. The original assessment for the aforesaid two years was completed under the provisions of S. 23 (3) of theAct on September 13, 1946. In the assessment for the year(Samvat year 2000) the assessees income was derived from his cloth business carried on at Ahmedabad, Karachi and Bombay and certain other properties. Separate sets of accounts were maintained for the head office as well as for the two branches. The books of accounts were produced and were examined by the Examiner of Accounts who submitted a report to theOfficer concerned. The total income for the assessment yearwas determined to be Rs. 15,294. Sometime after the completion of the said assessment, theOfficer concerned received information that the assessee had purchased a draft of Rs. 1,10,000 from the Exchange Bank of India and Africa Ltd. at Bombay and the draft was deposited on July 17, 1944 in a branch of the said Bank at Ahmedabad for realisation. In consequence and on the basis of this information, theOfficer initiated a proceeding under S. 34 (1) (a) of theAct against the assessee by issuing a notice to the latter on March 24, 1954. It may be here stated that the exact date on which theOfficer came to know of the purchase of the draft for Rs. 1,10,000 is not known. TheOfficer also issued a notice to the assessee under S. 22 (4) to produce his account books for the Samvat year 2000 and his passbooks of the Exchange Bank of India and Africa Ltd. The assessee gave a certain explanation for not being able to produce either his account books or the pass books of the said Bank. TheOfficer disbelieved the explanation and by a revised assessment order made on October 15, 1954, added a sum of Rs. 1,10,000 as income from an undisclosed source, which had escaped assessment in the original assessment. There was an appeal to the Appellate Assistant Commissioner who confirmed the order of theOfficer. Then, there was an appeal to the Tribunal. The Tribunal allowed the appeal on the ground that S. 34 (1(a) was not applicable inasmuch as there was no omission or failure on the part of the assessee to make a return of his income under S. 22 for the yearor to disclose fully and truly all material facts necessary for his assessment for that year. The Tribunal pointed out that at the time of the Original assessment the assessee had produced his books of account with regard to all the three offices at Ahmedabad, Bombay and Karachi. The assessee also filed therelating to his business at the aforesaid three places. The Tribunal further pointed out that before completing the assessment for the years6, theOfficer had called for all the relevant account books which had been examined by an Examiner of Accounts, an officer subordinate to theOfficer. This officer submitted a report relating to the account books of the Ahmedabad business and he mentioned therein that the assessee had accounts with the Exchange Bank of India and Africa Ltd. and certain other banks. The Tribunal held that in these circumstances it could not be said that there was any omission or failure on the part of the assessee to make a return of his income under S. 22 or to disclose fully and truly all material facts necessary for his assessment for the yearThe present appellant then moved the Tribunal under S. 66 (1) of theAct and asked the Tribunal to state a case to the High Court of Bombay on the following question of law, which, according to the appellant, arose out of the Tribunals orderThe Tribunal rejected the application under S. 66 (1) on two grounds: firstly, that the question which the appellant said arose out of the Tribunals order was a question of fact and not a question of law and secondly, that the question suggested by the appellant was misconceived, because the question before the Tribunal at the time of the hearing of the appeal was not whether the assessee had failed to disclose the transaction of Rs. 1,10,000 in his return and the statements accompanying it, but whether there was any omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the year in question. The appellant then moved the High Court of Bombay under S. 66 (2) of toAct. That application, as we have stated already, was summarily dismissed by the High Court by its order, dated December 14,are unable to accept this argument as correct. First of all, it must be pointed out that the question which the appellant suggested should be referred to the High Court in his petitions under S. 66 (1) and S. 66 (2) of theAct is different from the question which is now raised by the learned Advocate for theagree with the view expressed by the Tribunal that the question suggested was misconceived, because what the Tribunal had to consider was whether the proceeding under S. 34 (1) (a) was properly initiated by theOfficer in the yearwhat the Tribunal had to consider was whether the assessee had fully and truly disclosed all material facts necessary for the assessment. The Tribunal examined all the relevant materials produced by the assessee at the time of the original assessment and came to the conclusion that there was no omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. The Tribunal referred to the account books produced by the assessee and particularly to the report of the Examiner of Accounts who submitted a report to theOfficer with regard to the bank account of the assessee in the Exchange Bank of India and Africa Ltd. In our opinion, in the circumstances of this case the question whether the assessee had or had not failed to disclose fully and truly all material facts necessary for his assessment was a question of fact and we are unable to accept the argument of the learned Advocate for the appellant to the contrary.