<CITATION> .

1. <ORG> has filed this writ petition under Article 226 of the Constitution praying that <ORG> may be restrained by issuing a writ of prohibition from levying and collecting excise duty on their product, namely, woollen industrial felt under the Central Excises and Salt Act , 1944 (hereinafter referred to as 'the Act'). It was further prayed that the amount of Rs. 7,52,320.55 paise collected by the respondent as excise duty from the petitioner company be ordered to be refunded to the petitioner.

2. The petitioner-company manufactures woollen felts at Jaipur. The woollen felts and allied product manufactured by the company, according to the petitioner, are used for industrial purposes, and not for wearing apparels and therefore it does not fall within the expression 'woollen fabrics' as used in Item No. 21 of Schedule I annexed to the Act under which the excise duty is charged.

3. According to the averments made by the petitioner-company there is similar factory known as <ORG>, Baroda producing exactly the similar material. That Mill challenged in <ORG> the levy and collection of excise duty on their produce and <ORG> by their judgment in Special Civil Appln. No. 442 of 1967 under Article 226 of the Constitution in the matter of <ORG> v. <ORG> held that the woollen felt manufactured by that firm could not be taxed under Item No. 21 of Schedule I to the Act. On the basis of this judgment of <ORG> the petitioner-company wrote to the excise authorities not to levy and collect the excise duty on the woollen felt produced by it but in spite of its repeated requests made by the petitioner the excise authorities did not agree and continued to levy and collect the excise duty on the product of the petitioner-company. It is under these circumstances that the petitioner has filed this writ petition with the prayer as aforementioned.

4. <ORG> joined issues with the petitioner-company and urged that Item No. 21 of Schedule I to the Act only speaks of the 'woollen fabrics' which, according to the replying respondent, covers the woollen felt. It was also averred that the purpose or use of the woollen felt has no bearing on the levy and collection of the excise duty under the said provision of law. It was denied that the product of the petitioner-company is used for ammunition industry, aviation industry, telephone industry, agriculture industry and for oil filters used in automobile industry, etc. According to <ORG> the purpose for which the petitioner company is alleged to be manufacturing felt has no bearing whatsoever on their liability for payment of excise duty under Item No. 21 of Schedule I of the Act.

5. Mr. <NAME> argued that 'fabric' is a term which covers all textiles, no matter how manufactured and the nature of the material from which it is made. Felts, according to him, can never fall within the ambit of textiles as the process used by the petitioner-company for manufacturing the woollen felts is different from the process employed for manufacturing the fabrics. The compressed felt sheets manufactured by the petitioner-company, according to Mr. <NAME>, are quite different from the apparel cloth as it does not stand the course of washing. According to the petitioner, the finished product of the company is obtained by the process of making the compressed woollen felts both with manual labour as well as with the help of two or three imported and also indigenously fabricated machines, and the process of making the compressed woollen felts is just to put the fabrics of the wool symetrically and press it with the help of multi roller using chemicals as well. The felts are manufactured in sheets of various thickness in length and width and are used for industrial purposes. Therefore, in his opinion felt industry cannot be linked with the process of manufacturing woollen fabrics.

6. On the other hand, Mr. <NAME>, appearing on behalf of <ORG>, relied on the dictionary meaning of the word 'felt' and urged that the word 'fabric' according to the Oxford Dictionary, or Encyclopaedia Britannica, 9th Volume (1969 Edition) and <ORG>'s Dictionary of Textile Terms, covers felt also, and therefore while interpreting the expression "woollen fabric" as used in Item No. 21 of Schedule I of the Act it would not be possible to take the 'Felt' out of the said expression.

7. To resolve the controversy whether 'felt' is covered by the word 'fabric', let us first look to the dictionary meaning of these expressions.

8. <ORG> has issued a Glossary of Textile Terms and that Glossary has defined 'felt' as under,--

"Felt--A textile material characterised by the densely matted condition of most of all the fibres of which it is composed.

Note.--Two broad classes of felt can be distinguished (a) materials having a woven fabric structure, and (b) non-woven materials consisting principally of animal fibres, relying for their construction upon the ability of the constituent fibres to meet together to form a composite body with neither wrap or weft".

9. <ORG> at page 149 has given the meaning of 'felt' as a kind of cloth made by rolling and pressing wool, 'Fibre' has been defined as a substance capable of being spun, woven or felted. The meaning of the word 'fabric' as given in this dictionary is, "thing put together, woven material, construction and texture tissues."

10. Encyclopaedia Britannica, 1969 Edition, at page 161 has given the meaning of 'felt' as follows,--

"Felt, a class of fabrics or fibrous structures obtained through the interlocking of wool, fur or some hair fibres under conditions of heat, moisture and friction. ....."

"Wool Felt" has also been described in this very volume at page 228 as "The wool fibre is covered with a sheath of over-lapping scales arranged like the shingles on a roof.... .... The combination of moisture, heat and mechanical agitation causes the wool fibres to extend and retract. The scales permit the fibres to slide past each other more easily in one direction than in the other. Thus the fibres become progressively entangled to the point where a compact felt, or fulled, fabric results. Felts can be prepared by the direct entanglement of fibres or by first spinning yarns, weaving cloth and then fulling the cloth with hot, soapy water and agitation."

11. Webster's Third New International Dictionary, Volume I (1966 Edition) at page 836, has defined 'felt' as follows,--

"a cloth constructed usually of wool and fur fibres often mixed with natural or synthetic fibres by the interlocking of the loose fibres through the action of heat, moisture, chemicals, and pressure without spinning, weaving or knitting."

The dictionary meaning of the word felt' as given above hardly leaves any room for doubt that the felt is manufactured by the interlocking of the loose fibres by adopting a process as employed by the petitioner-company for manufacturing its product. <ORG> has described "felt" as a class of fabrics or fibrous structure. 'Fabric' has been defined as a cloth of a particular kind. In view of the dictionary meaning of the words 'felt' and 'fibre', there is hardly any room for doubt that the expression 'felt' which is manufactured by fibres is covered by the expression "woollen fabric". In this view of the matter, it is difficult for us to accept the contention of Mr. <NAME> that felt as produced by the petitioner-company will not, in its generic sense, come within the ambit of the expression 'woollen fabric'.

12. It was, however, contended by Mr. <NAME> that 'fabric' is a genus of 'felt', which is only a specie and therefore it cannot be taken out of the application of the term "woollen fabric". The demand of the petitioner that its product should be exempt from the levy of the excise duty, therefore according to Mr. <NAME> cannot be entertained by <ORG> in the exercise of its jurisdiction under Article 226 of the Constitution. In support of this contention, reliance has been placed by Mr. <NAME> on authorities in <CITATION> AIR 1964 SC 1519 and <CITATION> 1973 SC 194.

13. In <NAME>'s case AIR 1964 SC 1519, the interpretation of Entry 22 of Part I of the Import Trade Control Hand-book was challenged and it was urged that <ORG> while exercising its jurisdiction under Article 226 of the Constitution should not interfere with the conclusion reached by the authority under the Act, which on the very face of it appears to be quite reasonable. While dealing with this point learned Judges held that "a court dealing with a petition under Article 226 is not sitting in appeal over the decision of <ORG> and therefore the correctness of the conclusion reached by those authorities on the appreciation of the several items in the Hand-book or the Indian Tariff Act which is referred to in these items, is not a matter which falls within the writ jurisdiction of <ORG>." The learned Judges further observed that "there is, here no complaint of any procedural irregularity of the kind which would invalidate the order, for the order of the Collector shows by its contents that there has been an elaborate investigation and personal hearing accorded before the order now impugned was passed."

14. In <NAME>'s case AIR 1973 SC 194, the question that was raised before the <ORG> was whether the High <ORG> in the exercise of its extraordinary jurisdiction under Article 226 of the Constitution could interpret the expression used in the Act so as to judge the proper scope of Item No. 74 (vi) of Part V of the I. T. C. Schedule when they have been given proper hearing by the <ORG> authorities. Their Lordships of the Supreme <ORG> after reviewing their previous judgments in <NAME> v. <NAME> (AIR 1961 SC 1506) and <ORG> (AIR 1964 SC 1519) observed as follows:--

"In view of these two decisions of this Court which are binding on us, we have no manner of doubt that <ORG> was quite right in accepting the conclusions and findings of the <ORG> authorities about the proper scope of Item 74 (vi) of the I. T. C. Schedule. In our opinion, there is nothing in the decision of the Collector which can warrant its condemnation as perverse or unreasonable. Even if it be assumed that because of the language used in the two items viz. Item 74 (vi) and 74 (x) of the I. T. C. Schedule, there is some room for confusion, it would not be competent for <ORG> to interfere in a writ petition with the conclusion or findings of the Collector of <ORG> regarding the scope and ambit of those items."

15. Relying on the observations of this Court in <CITATION> for Rajasthan 1972 WLN 850 = (AIR 1973 Raj 171) Mr. <NAME> urged that even if there is possibility of giving a different meaning to a particular item in the Schedule from the one as given by the authorities created under the Act, this Court should adhere to the meaning given by such authorities and should be slow to interfere while exercising its jurisdiction under Article 226 of the Constitution with the verdict given by the authorities.

16. While meeting this argument of Mr. <NAME>, Mr. <NAME> vehemently urged that in a taxing statute, like the one under consideration, the court should not, as far as possible, enlarge the scope of the Item mentioned in the Schedule by adhering to the dictionary meaning of the expressions or words used by the legislature. According to him, the expression used by the legislature should be given a meaning as it is commonly understood in commercial world. According to Mr. <NAME> the expression 'woollen fabric' as used in Item No. 21 in Schedule I is understood in common parlance as meaning woollen cloth and woollen textiles; 'felt'. which is never used as textiles, cannot be covered by the words "woollen fabric". In support of this argument, reliance has been placed by the learned counsel on the <ORG> judgment and certain other judgments of <ORG> and other <ORG>; including the decision of the <ORG> in the case of Gujarat Woollen Mills SCA No. 442 of 1967 (Guj) (supra).

17. In the Gujarat case the petitioner used to manufacture felt of the same type which the petitioner-company produces. The judgment of that case resolves the controversy raised in the instant case and it applies to it on all fours. The learned Judges of <ORG> after considering various decisions of <ORG> under the provisions of the Sales Tax Act , held that in the light of the practical common sense and in applying the tests laid down by the decided cases referred therein, it is clear that the product manufactured by the petitioner firm for industrial use, though a felt as understood from the technical point of view, is not a woollen fabric as is generally understood in common parlance by persons dealing with this commodity and are well conversant with woollen fabrics in their dealing with this commodity in the course of their trade and business.

18. In another Gujarat case: <CITATION> (1965) 16 STG 1059 (Guj), a question arose whether borders woven on handloom out of pure silk, art silk and jari threads are handloom cloth within the moaning of entry 29 in Schedule A of the Bombay Sales-tax Act, 1959. In order to interpret this entry 29 the learned Judges were asked to interpret the word 'cloth' used therein. The argument advanced before the Court was that even a carpet would be covered under the expression 'handloom cloth' but in the technical or technological sense meaning given by a dictionary, a carpet may be a woven fabric but it could never be given a meaning which would bring it within the ambit of the word 'cloth' after consulting various dictionaries. The learned Judges quoted with approval the following para,--

"The expression 'cloth' has acquired a secondary meaning, that is to say, a meaning attached to that expression in common par-lance by those dealing in and conversant with handloom cloth, and the carpet of the type we have before us would not, in our view, be included in the expression 'handloom cloth of all varieties'."

After taking into consideration various authorities cited before the <ORG>, the learned Judges finally held that the word "cloth" in entry 29 of Schedule A must be interpreted according to its secondary or popular sense, and not in its primary or technical sense, in which it is commonly understood in ordinary parlance. In ordinary parlance border cannot be regarded as cloth.

19. <ORG> in <CITATION>  = (AIR 1974 SC 1362) laid down a principle to interpret the taxing statute and observed while deciding a question whether paddy and rice are identical goods for imposition of Sales Tax under the Punjab General Sales-tax Act, 1948, as follows,--

"In order to find out the true meaning of the entries mentioned in the <ORG> Act , what is relevant is not the dictionary meaning but how those entries are understood in common parlance, specially in commercial circles. <ORG> primarily deals with dealers who are engaged in commercial activity and, therefore, what is of the essence is to find out whether in commercial circles, paddy is considered as identical with rice."

20. <CITATION> (1968) 21 STC 227 (Mad) entry 47 Schedule I of the Madras General Sales-tax Act, 1959, came up for interpretation before <ORG>. The said entry contained "lubricating oils, all kinds of mineral oils, quenching oils and greases". A question arose whether furnace oil, a non-lubricant, would fall within the ambit of lubricant. Their Lordships observed that the words "all kinds of mineral oils" in the ordinary sense had only a limited meaning, namely, mineral oils which were lubricants, and therefore mineral oils could not be covered by entry 47.

21. In another case: <NAME> v. Assistant Sales Tax Officer <NAME>, AIR 1961 SC 1325 a question arose before <ORG> while interpreting item 6 of Schedule II of the C. P. and Berar Sales Tax Act, 1947, whether "betel leaves' are included in the vegetables as mentioned in the said entry. While rejecting the case of the assessee that betel leaves were covered by the expression "vegetables" as used in item 6, their Lordships observed that the expression "vegetables" must be interpreted not only on the dictionary meaning or in its technical sense or from the botanical point of view but it should be given a meaning as understood in common parlance. Their Lordships in this connection observed as follows,--

"It, (vegetable) has not been defined in the Act and being a word of every day use it must be construed in its popular sense meaning 'that sense which people conversant with the subject matter with which the statute is dealing would attribute to it'. It is to be construed as understood in common language."

While arriving at this conclusion their Lord-ships referred with approval the following observations of <ORG> in AIR 1956 Nag 54:--

"In our opinion, the word Vegetables' cannot be given the comprehensive meaning the term bears in natural history and has not been given that meaning in taxing statutes before. The term Vegetables' is to be understood as commonly understood denoting those classes of vegetable matter which are grown in kitchen gardens and are used for the table."

22. Mr. <NAME> placing reliance on a <ORG> authority in the <CITATION> (1967) 19 STC 24 (SC) urged that in that case the expression "sugar" in entry 47 of Schedule A to the Bambay Sales Tax Act, 1959, was given a wider meaning. It covered all types of product of sugar like patasa, harda and alchidana, and similarly any product made from the woollen fabric will be covered by the expression "woollen fabric". This decision, in our opinion, does not affect the principles laid down by the <ORG> to interpret the taxing statute in a manner in which the term used therein is generally understood in common parlance by those who deal with such commodities.

23. The law laid down by <ORG> in the Gujarat Woollen Felt Mills' case clearly covers the controversy raised in the case before us. We are in respectful agreement with the law laid down by the learned Judges of <ORG> and we feel that the expression "woollen fabric" as used in Item 21 of Schedule I of the Act shall not cover the product of the petitioner-company "woollen felt".

24. As regards the prayer for the refund of the duty realised by <ORG> from the petitioner-company we can say that this Court cannot pass a decree in favour of the petitioner for the refund of the said amount while exercising its extraordinary jurisdiction under Article 226 of the Constitution. The petitioner's learned counsel also did not press this claim with that vehemence with which he had argued the case of other points. We, therefore, reject the prayer of the petitioner for the refund of the amount realised as duty on the products of the petitioner-company.

25. For the reasons mentioned, the writ petition is partly allowed and it is declared that felt produced by the petitioner-company would not be covered by the expression "woollen fabric" as contained in Item No. 21 of Schedule I of the Act and as such <ORG> shall not realise the excise duty from the petitioner-company.

26. Looking to the circumstances of the case we make the costs easy.


JUDGMENT <NAME>, J.

1. This is a defendant's appeal arising out of a suit for declaring an order for the removal of the plaintiff-respondent from service as null and void on account of the contravention of the principles of natural justice in the holding of the departmental inquiry culminating in the order of removal.

2. The plaintiff-respondent was a member of <ORG> and was under the control of the Security Officer, <ORG>. At the relevant time he was pasted at Abu Road Ha was seen carrying two kilograms of coal which was the property of the Railway. He was served with a charge sheet, departmental proceedings were initiated against him and finally he was visited with the penalty of removal from service by the Security Officer He went up in appeal, but without any success. He then served a notice under Section 80 Civil Procedure Code on <ORG> and on 2.3.67 instituted the suit in the court of Munsif, Ajmer City (East). The plaint was later on amended with the pel mission of the court and an amended plaint was filed on 16 10.69. The order of removal was challenged on a number of grounds, but it is not relevant to make any reference to all of them except the one ground that the Inquiry Officer did not afford an opportunity to the plaintiff Government servant to adduce oral evidence to rebut the departmental evidence. The suit was contested by <ORG>.

3. The ground on which the two courts below found the order of plaintiff's removal from service to be illegal was that the plaintiff had not been afforded an opportunity to adduce his oral evidence, This was covered by issue No. 1 which ran as follows:

Whether Notice No. 30/AS/40/3/1-WR/ 17/65 dated 28.4.66 is void, illegal and inoperative for the reasons mentioned in para 3(a) to 3(j) of the plaint and Para 3(k) to 3(o) of the amended plaint?

4. The, aforesaid ground was comprised in Para-3(1) of the plaint. The Union tried to justify the order. It was pleaded that in the circumstances it could not be urged with justification by the plaintiff chat no opportunity to adduce oral evidence had been afforded to him or that consequently there had been violation of the principles of natural justice rendering the order of removal of the plaintiff from service null and void It was argued that, in the first instance, by the order dated 7.8.65 (Ex. A/35) the plaintiff was called upon to furnish the list of his defence witnesses, but the plaintiff had failed to avail of this opportunity and he did not furnish any such list. The reliance was placed on the proceedings sheet dated 25.11.65 which went to show that after the conclusion of the departmental evidence the plaintiff was asked to state what defence he had to furnish and hers also the plaintiff did not choose to avail of the opportunity of expressing his desire to lead any defence evidence Certain cases were cited by both the sides before the learned Civil Judge. The learned Civil Judge considered them and held that the mere fact that the plaintiff had not furnished the list of his witnesses at the initial stage did not disentitle him from leading defence evidence after the closure of the departmental case. The learned Judge pointed out that it was the duty of the departmental officer to have afforded the plaintiff ah opportunity to lead his oral evidence after the closure of the prosecution evidence. According to the, learned Civil Judge, the order sheets dated 25.11.65 and 1.12.65 did not show that such an opportunity was ever afforded to the plaintiff. Consequently, according to the learned Civil Judge, there was violation of the principles of natural justice with the mult that the order of removal from service passed against the plaintiff on the basis of this inquiry was null and void. I may put the conclusion leached by the learned Civil Judge in his own words:

From the decisions of their Lordships of <ORG> cited by me above and of the other <ORG> also, the preponderance of the judicial decision is that the delinquent should be afforded an opportunity to lead oral evidence in rebuttal of the evidence produced by the department. It is true that the plaintiff was asked to furnish his list in a Memo accompanying the charge-sheet which has been marked Ex. A/35, but his failure to submit the list at the initial stage, does not deprive him of the opportunity to lead oral evidence in his defence after the closure of the departmental case. The Enquiry Officer should have afforded the plaintiff with an opportunity to lead oral or documentary evidence in his defence after the closure of the evidence of the department. The order sheets dated 25.11.65 and 1,12. 65 do not show that such an opportunity was ever afforded to the plaintiff and hence the non affording of this opportunity fully violates the principles of natural justice and vitiates the enquiry conducted against the delinquent plaintiff, and any findings of punishment based on that enquiry, are further vitiated. I therefore, hold that the learned lower court was right in holding that the proof of the allegations contained in Para 3(1) of the amended plaint, violates the principles of natural justice.

5. In the result, the learned Civil Judge affirmed the decree of the first court holding that the order of removal of the plaintiff from service was null and void.

6. It is in these circumstances that the <ORG> has come in further appeal to this Court.

7. Learned Counsel for the Union has contended that the courts below were in error in decreeing the plaintiff's suit He reiterated that the opportunity to lead evidence had, in fact, been given to the plaintiff. Attention was invited to the documents Ex. A/5, Ex A/16 and Ex A/35. Learned Counsel maintained that in the circumstances it was for the plaintiff himself to have expressed his wish to examine his oral evidence. Then it was argued that there has been full compliance of the statutory rules governing this inquiry and further stressed that the plaintiff himself had not taken this as a ground firstly, in his reply to the show cause notice against the penalty of removal proposed by the appointing authority or subsequently at any stage, such as, as in the departmental appeal or in the notice of suit under Section 80 Civil Procedure Code. According to learned Counsel, it was only in the amended plaint that this ground was raised for the first time; no such ground having been taken even in the plaint that was filed in 1967. Thus according to learned Counsel, there was no merit in this ground; more so when there was no statutory rule for the affording of such an opportunity to 'he plaintiff and when no prejudice is shown to have resulted. Learned Counsel placed reliance on a number of decisions, such as, <CITATION> , <CITATION> , <CITATION> 1966 (2) LLJ 729 and <CITATION> Court 1967 (2) LLJ 375.

8. On the other hand, learned Counsel for the respondent tried to support the decree of the court below. He took the stand that it was the duty of the Inquiry Officer to have afforded the opportunity to lead the defence evidence to the plaintiff even if the plaintiff had not specifically asked for it. The plaintiff Government servant had the right to have an opportunity to adduce his defence evidence and the same was required to be made available to him by the Inquiry Officer. Since this was not granted there has been violation of the principles of natural justice according to learned Counsel. He relied on <CITATION> . System 1966 (30) FIR 130, P.Orr & Sons (Privrte), Ltd. and Their Workmen 1958 (2) LLJ 152, <CITATION> which had been reaffirmed in subsequent cases, such as, <CITATION> and <CITATION> read from the "Law and Procedure of Departmental Enquiries" by <NAME> from page 663.

9. It is by now firmly established that an Inquiry Officer conducting departmental inquiries against a Government Servant which may entail the punishment of dismissal or removal from service has to act quasi-judicially. He has to follow the rules of procedure governing the inquiry. By and large, such rules embody the principles of natural justice as well, but broadly speaking whenever such rules are silent the principles of natural justice which are not bing but formulation of principles for display of fair play have to be followed. Such principles have been stated in <NAME> v. <ORG> Their Lordships had to consider the scope of the words- "reasonable oportunity" occurring in Article 311(2) of the Constitution. Their Lordships observed:

The reasonable opportunity envisaged to the <ORG> servant by the provision contained in Article 311(2) includes (a) an opportunity to deny his guilt and establish his innocence, which he can only do if he is told what the charges levelled against him are and the allegations on which such charges are based; (b) an opportunity to defend himself by cross-examining the witnesses produced against him and by examining himself or any other witneses in support of his defence; and finally (c) an opportunity to make his representation, as to why the proposed punishment should not be inflicted on, him, which he can only do if the competent authority, after the enquiry is over and after applying his mind to the gravity or otherwise of the charges proved against the <ORG>. servant tentatively proposes to inflict one of the three punishment and communicates the same to the government servant. Thus, the protection provided by rules, like Rule 55 of the Civil Services (Classification, Control and Appeal) Rules, is bodily lifted out of the rules and together with an additional opportunity embodied in Section 240(3) of the <ORG> of India Act, 1935, so as to give a statutory protection to the <ORG> servants and is now incorporated in Article 311(2) so as to convert the protection into a constitutional safeguard.

Here we are concerned with the principle (b) as mentioned in passage and have to see whether the <ORG> servant in the present case had an opportunity to defend himself by examining himself or any other witness in support of his defence. In the present case the parties are on common ground that the plaintiff was served with a charge sheet accompanted with the statement of allegations. He had submitted his reply thereto, the departmental witnesses were examined in the presence of the plaintiff and he had been afforded the opportunity of cross-examining the departmental witness and he did cross-examine them and further the statement of the plaintiff was recorded after the closure of the departmental evidence. It is also not denied by the defendant appellant that the plaintiff did not examine any defence witness. The point of controversy is whether it was for the Inquiry Officer to have expressly asked the plaintiff to produce his witnesses or it was for the plaintiff to ask the Inquiry Officer to take his evidence. We have to consider here whether the rules of natural justice make it incumbent on the Inquiry Officer to definitely call upon the delinquent servant to produce his defence witnesses, if any, or the <ORG> servant should himself express this and wish and produce the witnesses. <CITATION> the learned Judges observed:

The question of reasonable opportunity to show cause is dependent on the peculiar facts of each case. What is reasonable is, not necessarily what is the best but, what is fairly appropriate under all the circumstances of the case. Reasonable opportunity to show cause does not necessarily include a right to be specifically & expressly granted time to produce evidence in defence even when a public servant does not choose to ask for it and does not express any desire to produce such evidence. The enquiry cannot be considered to be open to challenge on the ground that the procedure laid down in the Evidence Act for recording evidence or in the Code of Criminal Procedure for trial of offences has not been strictly followed.

10. <CITATION> 1966 (2) LLJ 729 it was observed by the learned Judge that:

As no prayer was made by the petition for adducing defence evidence it cannot be said that as the enquiry officer did not voluntarily give him an opportunity to produce his witnesses in defence, it would amount to a violation of the principles of natural justice.

11. <CITATION> Court 1967 (2) LLJ 375 the learned Judges observed that:

Stating it broadly, and without intending it to be exhaustive, rules of natural justice require that a party should have opportunity of adducing all relevant evidence on which he relies. The evidence of the opponent should be taken in his presence and that he should be given the opportunity to cross-examine and no materials to be relied on against him without his being given an opportunity of explaining them. It does not appear that there is any further obligation cast on the enquiry officer to ask the chargesheeted person whether he wants to lead any evidence and ascertain the names of witnesses, and cause steps to be taken for their production.

12. <CITATION> the learned Judges observed:

An opportunity to cross-examine or to adduce evidence is not something that the inquiring authority can tie around the neck of the officer proceeded against; but it is an occasion that arises, and is to be availed of. The usual procedure is that the chargesheet is served and the cause, if any is taken. The evidence if documentary is communicated to the person proceeded against, and if oral, the witnesses cf the department are examined before him. If he is not present, he is asked if he would like to be heard in person. He is then invited to cross-examine, and after it is over, to file his own documentary evidence and call his witnesses, if any, give his argument.

13. On the other hand, in <ORG> v. Vellore Elec System 1966 (30) FIR 130 it was observed that:

In a domestic enquiry held into misconduct by an employee, after the examination of the witnesses for the employer and their cross-examination, the accused is entitled to give evidence in person and to have defence witnesses called This right cannot be denied simply because the accused did not give the list of witnesses whom he proposed to call in a proforma which was sent to him for completion along with the charge-sheet. Where the employee asked for an adjournment complaining that he was not being permitted to examine defence witnesses on his behalf, the enquiry officer should give the employee an opportunity to give a list of witnesses after the conclusion of the examination of the prosecution witnesses and to have them examined. Where the services of an employee are terminated without such an opportunity being given to him, the termination will not be valid.

14. <CITATION> Court, M.P. Indore 1972 L&IC 511, the learned Judges observed:

So far as the first point is concerned, the fact is that on the date of the enquiry the respondent No. 3 was asked the question as to whether he wanted to produce defence witnesses. He stated that the enquiry should be conducted at the site where the occurrence took place. This was taken by the Enquiry Officer as meaning that he did not want to give any evidence. <ORG> has not read this answer in that sense. <ORG> is of opinion that by this answer the respondent No. 3 wanted to say that he might be able to produce evidence if the enquiry was conducted at the site and that, therefore, the possibility of his, producing evidence cannot be ruled out. We are unable to say that this interpretation of <ORG>, is necessarily wrong. It should have been made clear to him that he should produce evidence there if he so liked. On the second point also we have seen order of the officer conducting the domestic enquiry. The order is very short and dots not give any reason for holding that the charges had been proved The Enquiry Officer has not even mentioned the name of witnesses or the nature of evidence that was procuded before him on the basis of which he found the charges proved. We are, therefore, unable to hold that this part of the decision of <ORG> was without jurisdiction or patently wrong in law.

15. Having considered the various cases, I find my self in agreement with the statement that the question of there being reasonable opportunity to show cause is dependent on the peculiar facts of each case. What may not be a reasonable course to adopt in one case may not be considered so in another set of facts. The proceedings must disclose: (1) that by statutory rules, if any, governing the inquiry were in essence complted with, and (2) that the Government servant has bad an adequate opportunity to meet the charges with which he was faced. All the material on which the department seeks to reply should be placed before the Inquiry Officer and the delinquent Government servant should have an opportunity of explaining such material. The evidence should be recorded in his presence and he should have the opportunity to cross-examine the witnesses Further where there are previously recorded statements, he should be furnished with copies thereof if he wants to cross-examine the witnesses on their basis After the closure of the departmental evidence the Government servant should be afforded the opportunity of producing any defence evidence as the Government servant may like to do. Whether the Inquiry Officer should, in so many words, call upon the Government servant to produce his defence evidence or it will be for the Government servant himself to ask for an opportunity to produce his witnesses is a matter which cannot be put down with any rigidity. Here one will have to keep in view the surrounding circumstances of each case. What is reasonable in one case may not necessarily be reasonable in another case. For example, if a Government servant comes from a category who cannot be expected to be fully aware of the valuable right of the Government servant in this regard then it will be expected of the Inquiry Officer to specifically ask the Government servant to produce his defence, if he so wants to do. In another situation, if a Government servant comes from a higher catagory and on account of his education and experience cannot be said to be unaware of his right in this behalf, then the mere fact that the Inquiry Officer had not specifically asked the Government servant to produce his defence evidence may not be of much importance. The essence, of the matter in every case will be whether the Government servant had or had no opportunity to produce his defence. For seeing whether the Government servant had or had no adequate opportunity of meeting the charges against him by having the opportunity of producing the defence one will have necessarily to examine the proceedings taken by the Inquiry Officer.

16. In the present case, let us therefore, examine as to what had happened in the case. Ex. A 6 is the charge sheet that he was served on the plaintiff It is a printed form which had been filled in. It is for <ORG>. After the usual charge in para-2(b) the plaintiff <NAME> has been called upon to furnish the names and addresses of the witnesses, if any, whom he wished to call in support of his defence The same thing has been said in the covering letter which is again on printed form and it is Ex. A35 Ex. A-17 is the acknowledgement by the plaintiff of his having received the charge sheet with the statement of allegations. Ex. A-7 is his reply to the charge sheet wherein he had written to say that the allegations levelled against him were denied, but the justification for denial could not be laid down in the absense of the relevant records which were refused to him by the disciplinary authority. Further, according to him, the copies of the documents supplied to him were not attested by any officer Then he had given the names of the persons whom he desired to be his defence counsel Then he had given the names of the persons whom he desired to be his defence counsel. Order sheets have been placed on record as Ex A-49. They show that on 13-10-65 the documents were received from <ORG>'s Office on 27-10-65. the witnesses for the department were present, but the representative of the plaintiff had not come and, therefore, the inquiry could not commence. Same thing happened on subsequsnt dates. On 25-11-65 this is what was recorded:

<NAME> The defaulter and his representative and IPF Jajndany were present. Also <NAME> who was called for re-examination was present. Their statements were recorded and the D, E. completed. The defaulter <ORG> has promised to give his final defence statement in writing by 2.12.65 at <ORG>, as his representative is not free. For final written defence statement next date is therefore fixed at <ORG> on 2.12.65.

Then on 2.12.65 and 5.12.65 the following orders were recorded:

<NAME> The defaulter and his representative were present and they wrote down the defence statement and handed over at 15/- hrs. D E. completed in all respects <ORG> written and submitted.

17. The above proceedings disclose that the entire departmental evidence was recorded on 25.11.65 The plaintiff was asked to give his defence statement in writing by 2.12.65. This was so or desired because the person defending him was not free. Then 2.12.65 was fixed for the final written defence statement, On 2.12.65 the defaulter and his representative wrote down the defence statement and handed it over. Then it is noted that the departmental inquiry was completed in all respects.

18. Now, I may turn to Ex. A/16 which contains the further statement of the plaintiff which was recorded on 25.11.65 i.e. the day the departmental evidence was closed.

Q You have heard the evidence given by the various witnesses in your presence during this inquiry including their cross-examination. Have you got to say anything in your defence and if so do you want to give it orally or in writing?

Ans. I will give my defence statement in writing and that too at Jaipur on 2 12.65 as my representative <NAME> who is headquartered at <ORG> is not free to move out of Head qr.

This is read over and explained to all concerned in the language familiar to them and is correct.

Reading Ex. A/16 and the order sheet of 25 11.65 I have no doubt in my mind whatsoever that what the officer was then contemplating was the taking of the final statement of the delinquent servant and it was far from his mind whether any defence evidence should be recorded or not. The order sheet dated 2.12.65 shows that with the submission of the defence statement which mean the statement of the delinquent Government servant the departmental inquire was considered to be completed in all respects. It was expected of the Inquiry Officer before closing the inquiry, in the circumstances, to have asked thy deliquent servant if he would like to produce any defence evidence An impre ession is created on my mind that with the taking of the statement in writing-of the plaintiff Government servant by the Inquiry Officer thought that he had done his job and the departmental inquiry was complete in all respects. It is true, the Government servant had not furnished the list of witnesses though be was called upon to do so vide the charge sheet Ex. A/5 and the covering letter thereof Ex. A/35, but here I cannot lose sight of what the Government servant had stated in Ex. A/7 dated 24-8-65 wherein he had stated that though he was denying the charge sheet, but he was unable to afford justification for denial in the absence of relevant records which had been refused to him by the disciplinary authority Further he made grievance of the fact that the copies of the documents supplied to him were not duly attested by any officer. It was, therefore, too much of him to be expected that he would be in a position to furnish the list of his defence witnesses when be had not been made aware of the material against him by permitting him to have inspection of the relevant records. This is not to say that at any subsequent stage no inspection was allowed to him or the copies of the documents were not furnished to him. That might have been done. Also I am not saying that what the Government servant had stated in Ex. A/7 was necessarily true, but while considering the question of non-submission of list of witnesses at the initial stage one cannot over-look as to what had happened at that time and and for that Ex. A/7 produced by none other than <ORG> itself cannot be ignored. It was for them to say that what had been written by the Government servant in Ex. A/7 was contrary to facts. Therefore, non-submission of the list of defence witnesses at the initial stage is of no consequence. Of course, if one were not to find any justification for non-submission of the list of witnesses then it would be for the Government servant to express the desire that he would like to produce the defence evidence at the stage his statement would be recorded or soon thereafter, Even if no list of defence witnesses is produced at the initial stage, but the Government servant wants to examine defence evidence at a later stage that opportunity cannot be denied to him. It may very well happen that the mind is made up about the kind of defence witnesses, one would like to produce only after the entire departmental evidence is recorded. I should, however, add that it is always desirable to furnish a list of defence witnesses where it is possible to do so, but the mere fact that list of witnesses had not been furnished at the initial stages would not disentitle the Government servant to examine his defence evidence at the appropriate stage. Therefore, in the facts and circumstances of the present case I am satisfied that it was for the Inquiry Officer to have asked the Government servant to examine his defence witnesses, if he wanted to do so. It cannot be forgotten that the Government servant came from the ranks in <ORG> and did not belong to the officer cadre. He may not have, therefore, fully appreciated that it was for him to produce the defence witnesses Then again the charge levelled against the Government servant was quite serious. It is common knowledge that at stations or on the line many of the petty <ORG> officials do make use of the <ORG> coal, but that cannot be tolerated in the case of a member of <ORG>, who is expected to protect the <ORG> Property whether its value is much or not. In his case undoubtedly the offence would be a serious one and, therefore, full opportunity should be afforded to the servant in such a situation to defend himself. The order of plaintiff's removal from service passed by the appointing authority has rightly been held to be illegal, by the courts below but they have committed one error and it is that the proceedings being not in conformity with the principles of natural justice only from the stage of taking of defence evidence the order cannot preclude the competent authority from re-commencing the procedings from the stage of the recording of defence evidence and the decree of the court below, therefore, requires this modification.

19. Accordingly, I hereby allow the appeal in part. Though I uphold the decree of the court below to the extent that the order of removal of the plaintiff from service is illegal, the competent authority shall be at liberty to re-commence the proceedings, if it so desires, from the stage of the recording of the defence evidence and then to pass a proper order according to law. The parties are left to bear their own costs.

20. Learned Counsel for the <ORG> orally prayed for leave to appeal under Section 18 of the Rajasthan High Court Ordinance 1949, but as the <ORG> has been left free to re-commence the proceedings, if they so want to do, from the stage of the recording of the defence evidence, I am not inclined to grant leave which is accordingly hereby refused.


JUDGMENT <NAME>, J.

1. This second appeal is at the instance of defendant-2nd party against the judgment of affirmance, the trial <ORG> having decreed the plaintiffs' suit and the lower appellate <ORG> having dismissed the appeal.

2. Since I propose to remand this case to the lower appellate Court, the facts need not be stated in detail. It would suffice to say that the plaintiffs-respondents instituted the instant suit for declaration of title and recovery of possession as also for mesne profits with respect to certain lands described in the Schedule to the plaint. According to the plaintiffs, the suit property was sold at auction in execution of rent decree and purchased by the decree-holder ex-intermediary, who obtained delivery of possession thereon on 20-3-1943. The ex-intermediary, namely, defendant 5th party, is said to have sold the suit land to the plaintiffs under a registered sale deed dated 11-8-1959 and the plaintiffs claimed title and possession by virtue of that sale deed. There was a proceeding under Section 144 Cr. P. C., in respect of the suit land, which was converfed into one under Section 145 Cr. P. C., and which was decided against the plaintiffs; and the defendants 1st and 2nd party are said to have dispossessed the plaintiffs from the suit land on 19-7-1963 leading the plaintiffs to file the suit.

3. The defendant 1st party and the plaintiffs compromised the matter admitting the claim of the plaintiffs. The suit was contested by the defendant 2nd party, who claimed to be purchaser of six dhoors of land, out of the suit property by virtue of sale. The auction sale, the sale certificate and delivery of possession in consequence thereof, were all described as paper transaction and it was asserted that neither the ex-intermediary, defendant 5th party, nor the plaintiffs came in possession of the suit land.

4. Amongst the issues framed in the trial Court, some of them arc as follows: -

(1) Whether the suit was barred by limitation?

(2) Whether the sale deed alleged to have been executed in favour of the plaintiffs as also defendant 2nd party was genuine?

(3) Whether the story of possession and dispossession set up by the plaintiffs was correct?

The suit was a hotly contested one. The parties filed a good number of documents. In addition to these, as many as 15 witnesses were examined on behalf of the plaintiffs and 14 on behalf of the defendant 2nd party. <ORG> held that the story of possession and dispossession, as set up by the plaintiffs, was correct and that the defendant 2nd party had not acquired title to the suit land by adverse possession. On these and other findings, the plaintiff's suit was decreed including their claim for mesne profits. Defendant 2nd party carried the matter in appeal before the first appellate Court. The lower appellate Court dismissed the appeal confirming the judgment and decree of the trial Court. Although <ORG> discussed the documentary evidence adduced by the parties, it is undisputed that it did not at all discuss the oral testimony of any of the witnesses either for the plaintiffs or the defendant.

5. The sole substantial question of law that was framed for decision in this appeal at the time of its admission may be found in Order No. 12 dated 14-5-1979 which runs as follows:--

"Whether the decision of the lower appellate Court given without considering the oral evidence led by the appellant is in accordance with law?"

6. <NAME>, learned counsel for the appellant, vehemently submitted that the judgment of the lower appellate Court stood vitiated for non-consideration of the oral evidence adduced by the parties and as such the judgment and decree of the lower appellate Court was liable to be set aside and justice necessitated a remand of the case. <NAME>, learned counsel for the respondents, relying on a decision of this Court reported in AIR 1973 Pat 386 ( <CITATION> ) faintly argued that as the lower appellate Court merely affirmed the findings of <ORG> and as there was discussion of the oral evidence in the judgment of <ORG>, the judgment of the lower appellate Court need not be interfered with. On the admitted position that the lower appellate Court, surprisingly enough, did not at all discuss the oral evidence of any of the witnesses for the plaintiffs or the defendant, I find myself unable to accept the argument of Sri <NAME>.

7. Order 41, Rule 31 of the Civil P. C. lays down as follows:-- "Contents, date and signature of judgment:-- The judgment of <ORG> shall be in writing and shall state-- (a) the points for determination; (b) the decision thereon; (c) the reasons for the decision; and (d) where the decree appealed from is reversed or varied, the relief to which the appellant is entitled; and shall..........."

The object of this rule in making it incumbent upon the appellate <ORG> to raise points for determination and to state reasons for the decision is to clear up the pleadings and focus the attention of the <ORG> and of the parties on the specific and rival contentions which arise for determination as also to offer the litigant parties an opportunity of knowing and understanding the grounds upon which the decision proceeds with a view to enable them to exercise, if they see fit, and are so advised, the right of second appeal conferred by Section 100 Civil P. C.

The matter involved determination of important questions of fact raised in the pleadings which necessitated a careful consideration of the oral evidence adduced. What to speak of careful consideration, there is no whisper at all about the oral evidence in the judgment of the lower appellate Court.

8. Section 100 C. P. C. provides for second appeal, which is to be entertained if <ORG> is satisfied that the case involves a substantial question of law. A finding of fact arrived at by the lower appellate <ORG> on due consideration of the evidence becomes final and is binding on this <ORG>. This necessitates due consideration of the evidence, both oral and documentary, by the lower appellate <ORG> before recording a finding of fact.

9. It is the finding of fact duly recorded by the lower appellate <ORG>, be it a judgment of either affirmance or reversal, which is binding on this <ORG>. This necessitates observance by the lower appellate <ORG> of the mandatory provisions of Order 41 Rule 31, C. P. C., even in cases where the lower appellate <ORG> affirms the finding of the trial <ORG>. While it may not be necessary that the judgment should record all the facts in great detail and it should deal mechanically with all the points, it must show that the <ORG> has brought its independent judgment on a consideration of the relevant evidence, both oral and documentary, to bear on the decision. This being not the position in the instant case, serious infirmity has crept in the judgment of the lower appellate <ORG> and it must stand vitiated. The decision of this <ORG> in <CITATION> (AIR 1973 Pat 386) (supra) cannot come to the rescue of the respondents. Paragraph 10 of that judgment would show that in that case the evidence of the witnesses had not been discussed (in detail) which implied that there was some discussion of the oral evidence. The facts too are also distinguishable.

10. On the facts and in the circumstances of this case, the submission of Sri. <NAME> that Non-consideration of the oral evidence by the lower appellate Court would have the effect of vitiating the whole judgment of the lower appellate Court appears to be sound and must prevail.

11. The result is that the appeal succeeds and is allowed. The judgment and decree of the lower appellate Court are set aside and the matter is remanded to the lower appellate Court for fresh decision on consideration of the, evidence, both oral and documentary in accordance with law. The cost of this appeal shall abide the decision to be arrived at by the lower appellate Court on remand.

12. An application under Order 1, Rule 10 and Order 22 Rule 10 C.P. C. has been filed before this Court by one <NAME> praying therein for substitution or addition in place of respondent <NAME>. After keeping a copy of the petition on the record of the second appeal, the original petition should be sent back to the lower appellate Court and the lower appellate Court shall, after hearing the parties, consider this petition and pass orders in accordance with law.


PETITIONER: COMMISSIONER OF INCOME-TAX, GUJARAT Vs. RESPONDENT: A. RAMAN & COMPANY DATE OF JUDGMENT: 18/07/1967 BENCH: <NAME>, <NAME>: <NAME>, J.C. SIKRI, S.M. RAMASWAMI, V. CITATION: 1968 AIR 49 1969 SCR (1) 10 CITATOR INFO : RF 1972 SC 29 (4) E 1973 SC2330 (13) F 1974 SC1358 (10) RF 1975 SC 703 (11) AFR 1976 SC 203 (1,4,12,15,16) F 1977 SC 757 (31) RF 1977 SC2129 (12) R 1979 SC1960 (6,14) RF 1986 SC 649 (16,47) RF 1986 SC1853 (19,21) ACT: Indian Income-tax Act , 1961, s. 147-Conditions for the exercise of power to re-open assessment. Constitution of India, 1950, Art. 226- Powers of <ORG> to issue writ when Income-tax Officer's jurisdiction to issue notice under S. 147 of the Indian Income-tax Act, 1961 is questioned-<ORG> must not re-appraise evidence. HEADNOTE: The assessee firm consisted of two partners who were managers of their respective <ORG>. The firm sold its goods to the aforesaid families and the families again sold the goods on their own account. In income-tax proceedings for the years 1959-60, 1960-61 and 1961-62 the firm and the <ORG> were separately assessed in respect of their incomes. Subsequently <ORG> took view that the sale of goods by the firm to the families was only a device to divert the profits of the firm and on this view issued notices under s. 147 of the Incometax Act, 1961 requiring the assessee to show cause why the assessments for the years 1959-60, 1960-61 and 1961-62 should not be reopened. The <ORG> of Gujarat in a petition for a writ under Art. 226 of the Constitution quashed those notices and restrained the Income-tax Officer from taking proceedings in pursuance thereof. With special leave granted by this Court, the Revenue appealed. Held:(i) The <ORG> may issue a high prerogative writ prohibiting the Income-tax Officer from proceeding with reassessment when it appears that the Income-tax Officer had no jurisdiction to commence proceedings because the conditions precedent do not exist. [12G-H; 13B- <CITATION> 1, Calcutta, & Anr. 41 I.T.R. 191, followed. It is however not open to the <ORG> exercising powers under Art. 226 to set aside or vacate the notice for reassessment by itself re-appraising the evidence. [15B] (ii)The condition which invests the Income-tax Officer with jurisdiction has two branches: (i) that the Income-tax Officer has reason to believe that income chargeable to tax has escaped assessment; and (ii) that it is in consequence of information which he has in his possession and that he has reason so to believe. The expression 'information' in the context of which it occurs must mean instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment. If he has such information the Income-tax Officer may commence proceedings under s. 147(1)(b) . But to commence such a proceeding it is not necessary that on the materials which came to the notice of the Income-tax Officer, the previous order of assessment was vitiated by some error of fact or law. [13C-G] (iii)In the present case however the pre-conditions for the issue of a notice of re-assessment did not exist. The law does not oblige a trader to make the maximum profit that he can out of his 11 trading transactions. Income which accrues to a trader is taxable in his hands: income which he could have, but has not earned is not made taxable as income accrued to him. Avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibited. [15D-G] JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 768 of 1966. Appeal by special leave from the judgment and order dated December 18, 1964 of <ORG> in Special Civil Application No. 332 of 1964.

<NAME>, <NAME>, <NAME> and <NAME>, for the appellant.

<NAME> and <NAME>, for the respondent. The Judgment of the Court was delivered by <NAME>, J.-The assessees--<ORG>-are dealers in "mill stores" in the course of their business they sell " mill stores" to other dealers including two concerns trading in the names of M/s A. M. <NAME> & Co. and <ORG>, which are owned by the Hindu undivided families, managers of which are the only partners of the assessees. For the assessment years 1959-60, 1960-61 and 1961-62 the assessees were originally assessed by the Income-tax Officer, Circle-1, Ward-A, Ahmedabad, while the partners of the assessees and the Hindu undivided families which traded in the names of M / s A. M. <NAME> & Co. and <ORG> were assessed by Income-tax Officers in other Circles. The cases of assessees, of the partners of the assessees and of the two Hindu undivided families trading in the names of A. M. <NAME> & Co. and <ORG> were later transferred to the Income-tax Officer, Group Circle-J, Ahmedabad. That Officer by letter dated March 20, 1964 informed the assessees that he was convinced from a perusal of the assessment records of the assessees, their partners and their individual Hindu undivided families, that the partners of the assessees had contrived to divert profits of the assessees to their respective Hindu undivided families and had tried to "evade proper taxation", and on that ground he called upon the assessees to submit their objections, if any, to the reopening of the assessments for the years 1959- 60, 1960-61 and 1961-62. The assessees in reply contended that the Income-tax Officer had no jurisdiction to reopen the assessments since the Hindu undivided families of the two partners and the assessees had submitted "effect and complete returns of income" supported by their books of account, "quantity details" of purchases, sales and expenses, and had given all material facts and relevant information necessary for assessment at the time of each assessment.

The Income-tax Officer issued three separate notices under s. 147 of the Income-tax Act , 1961, requiring the assessees to show cause why the assessments for the years 1959-60, 1960-61 and 1961-62 should not be reopened. <ORG> in a petition for a, writ under Art. 226 of the Constitution quashed those notices and restrained the Income-tax Officer from taking proceedings in pursuance thereof. With special leave granted by this Court, the Commissioner of Income-tax has appealed to this Court. In support of the claim of the Income-tax Officer, to reopen the assessments, reliance was placed in <ORG> on cl. (b) of s. 147 (1), of the Income-tax Act , 1961. The material part of s. 147(1)(b) may be read:

"If-

(a)

(b)notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153 , assess or reassess such income or recompute the loss or the depreciation allowance as the case may be, for the assessment year concerned.

Explanation 1-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:-

(a) where income chargeable to tax has been underassessed; or * * * * *"

Under s. 147(1)(b) reason to believe that income chargeable to tax has escaped assessment in consequence of information in the possession of the Income-tax Officer is a condition precedent to the exercise of his jurisdiction to assess or reassess the income of the assessee. If that condition does not exist, steps taken by the Income-tax Officer to assess or reassess the income will be without jurisdiction. It was held by this <ORG> in <CITATION> (1) that <ORG> in appropriate cases has power to issue an order prohibiting the Income-tax Officer from proceeding to reassess the income when the conditions precedent do not exist. At p. 207, <NAME>, J., delivering the majority judgment of the <ORG> observed:

"It is well-settled however that though the writ of prohibition or certiorari will not issue against an executive authority, <ORG> have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an exe- cutive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, <ORG>, it is well settl- ed, will issue appropriate orders or directions to prevent such consequences".

<ORG> may, therefore, issue a high prerogative writ prohibiting the Income-tax Officer from proceeding with re- assessment when it appears that the Income-tax Officer had no jurisdiction to commence proceeding.

The condition which invests the Income-tax Officer with jurisdiction has two branches: (i) that the Income-tax Officer has reason to believe that income chargeable to tax has escaped assessment; and (ii) that it is in consequence of information which he has in his possession and that he has reason so to believe. Since the learned Judges of <ORG> have concentrated their attention upon the second branch of the condition and have reached their conclusion in favour of the assessees on that branch, it would be appropriate to deal with the correctness of that approach. The expression "information" in the context in which it occurs must, in our judgment, mean instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment. If as a result of information in his possession, the Income-tax Officer has reason to believe that income chargeable to tax had escaped assessment, the Income-tax Officer has jurisdiction to assess or reassess income under s. 147(1)(b) of the Income-tax Act, 1961. Information in his possession that income chargeable to tax has escaped assessment furnishes a starting point for assessing or reassessing income. If he has that information, the Income-tax Officer may commence proceedings for assessment or reassessment. To commence the proceeding for reassessment it is not necessary that on the materials which came to the notice of the Income-tax Officer, the pre- vious order of assessment was vitiated by some error of fact or law.

<ORG> exercising jurisdiction under Art. 226 of the Constitution has power to set aside a, notice issued under s. 147 of the Income-tax Act , 1961, if the condition precedent to the exercise of the jurisdiction does not exist. The <ORG> may, in exercise of its powers, ascertain whether the Income-tax Officer had in his possession any information: the <ORG> may also determine whether from that information the Income-tax Officer may have reason to believe that income chargeable to tax had escaped assessment. But the jurisdiction of the <ORG> extends no further. Whether on the information in his possession he should commence a proceeding, for assessment or reassessment, must be decided by the Income-tax Officer and not by the High <ORG>. The Incometax Officer alone is entrusted with the power to administer the Act: if he has information from which it may be said, prima facie, that lie had reason to believe that income chargeable to tax had escaped assessment, it is not open to the High <ORG>, exercising powers under Art. 226 of the Constitution, to set aside or vacate the notice for reassessment on a re-appraisal of the evidence. <ORG> in this case was apparently of the view that the information in consequence of which proceedings for reassessment were intended to be started, could have been gathered by the Income-tax Officer in charge of the assessment in the previous years from the disclosures made by the two Hindu undivided families. But that, in our judgment, is wholly irrelevant. Justification of the Income-tax Officer to reassess income arises if he has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment. That information, must, it is true, have come into the possession of the Income-tax Officer after the previous assessment, but even if the information be such that it could have been obtained during the previous assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law, but was not in fact obtained, the jurisdiction of the Income-tax Officer is not affected. <ORG> was also of the view that the inference raised by the Income-tax Officer that the Hindu undivided families of the assessees had made profit by sale of articles purchased from the assessees larger than the profit which the assessees had made, was not justified, since there was no evidence on the record about the price at which similar goods were sold by the assessees to other merchants and about the profit which those other merchants made by sale of those goods. But in a petition under Art. 226 of the Constitution the taxpayer may challenge the validity of a notice under s. 147 of the Income-tax Act, 1961, on the ground that either branch of the condition precedent does not exist, but an investigation whether the inferences raised by the Income-tax Officer from the information are "correct or proper" cannot be made. Counsel for the Commissioner is, therefore, right in contending that the High <ORG> entered upon an investigation of matters which were not within their competence.

But the appeal of the Commissioner must still fail. The case of the Commissioner on the materials placed before <ORG>, suffers from a serious infirmity on the first branch of the jurisdictional condition. The averments made in the affidavit filed by the Income-tax Officer in that behalf do not establish the existence of that branch of the condition. In reply to the averment by the assessees that the Income-tax Officer had no reason to believe that income had escaped assessment, the Income-tax Officer stated:

"In the course of the discussions I had at the several meetings hereinabove referred, I also learnt that in the earlier years also the petitioners (the assessees) had effected such sales to the said Hindu undivided families, and that over and above the margin of profits earned by the petitioners (the assessees) from the Hindu undivided families, the Hindu undivided families had earned substantial profits on the resale of such goods. 1, therefore, came to the conclusion that the creation of the Hindu undivided family business was merely a subterfuge or a contrivance by the partners of the petitioner firm (the assessees) to divert the huge profits made by the petitioners (the asses- sees) on imported articles".

The plea raised by the Income-tax Officer is that income which could have been earned by the assessees was not earned, and a part of that income was earned by the Hindu undivided families. That according to the Income-tax Officer was brought about by "a subterfuge or contrivance". Counsel for the Commissioner contended that if by resorting to a "device or contrivance", income which would normally have been earned by the assessee is divided between the assessee and another person, the Incometax Officer would be entitled to bring the entire income to tax as if it had been earned by him. But the law does not oblige a trader to make the maximum profit that he can out of his trading transactions. Income which accrues to a trader is taxable in his hands: income which he could have, but has not earned, is not made taxable as income accrued to him. By adopting a device, if it is made to appear that income which belonged to the assessee had been earned by some other person, that income may be brought to tax in the hands of the assessee, and if the income has escaped tax in a previous assessment a case for commencing a proceeding for reassessment under s. 147(1)(b) may be made out. Avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality, but on the operation of the Income-tax Act . Legislative injunction in taxing statutes may not. except on peril of penalty, be violated, but it may lawfully be circumvented. If the goods were nominally transferred to the Hindu undivided families the latter acting merely as benamdars for the assessees, and the profits were earning in truth by the assessees, income earned by sale of the goods by the Hindu undivided families may be held chargeable to tax as income which has escaped assessment to tax in the hands of the assessees. In the present case,, no such case was attempted to be made out in the affidavit filed by the Income-tax Officer. We hold, therefore, that on the materials on the record, the Income-tax Officer. had no reason to believe that income chargeable to tax had escaped assessment for the three years in question. The order passed by <ORG> is therefore confirmed. There will, however, be no order as to costs in this <ORG> and <ORG>.

<NAME>

Appeal dismissed.