P. B. MUKHARJI J. - The question for determination on this income-tax reference is :
'1. The Income-tax Appellate Tribunal in its order dated 27th March, 1961, having held that the Income-tax Officer has made addition of Rs. 4,60,000 to the income of the appellant without any basis and arbitrarily, was it justified in adding the sum of Rs. 1,00,000 to the income of the appellant as estimated income and is such addition arbitrary and fanciful and based on no materials ?
2. In the facts and circumstances of the case, was the Appellate Tribunal justified in coming to the conclusion that any part of the income of Hanuman & Co. should be added to the income of the appellant or was the same done arbitrarily and without any materials ?'
The statement of case in this reference makes the following facts relevant for the purpose of determining or deciding the question.
The assessee is Nandlal Kasera of 243, Chittaranjan Avenue, and an individual, owing some properties and having a share in the firm of Messers. Bengal Kopak Ginning. The assessment year is 1948-49. The accounting year is 2003/4 Diwali ending on the 11th November, 1947. The original assessment for the year 1948-49 was completed on the 11th December, 1953, on a total income of Rs. 2,985 only. It was then subsequently discovered and the Income-tax Officer came to know that the assessee had done extensive speculative business in jute kind hessian, in his own name and also in the name of Messrs. Hanuman & Co. and had acquired considerable property from such business, which he had concealed. Notice was therefore issued under section 34(1) (a) by the Income-tax Officer for the reassessment of the total income of the assessee. The assessee in reply filed a return of income showing a loss of Rs. 181 only. The assessee admitted before the Income-tax Officer that he had done some speculative business with one Madanlal Saraf which was supposed to result in a huge loss but the assessee had not shown that los in the return filed on the filmsy grounds that he had no details relating to the transaction. Thereupon, the Income-tax Officer issued notice under section 22(4) of the Act calling upon the assessee to produce all the books of account and vouchers. On the date of hearing, the assessee appeared with his authorised representative and stated that he had not maintained any books of account whatever. Indeed, the assessee denied any connection with Hanuman & Co. and, in his deposition recorded by the Income-tax Officer under section 37 on the 8th January, 1958, the assessee made the following statement :
'I hereby declare that I have not done any business in the name of Messrs. Hanuman & Co. I have not entered into any business transaction with the said Hanuman & Co.'
This has now been proved to be wholly an outrageous falsehood. The Income-tax Officer did not accept the plea that was made. The investigations made by him from the banks revealed that the assessee was himself the proprietor of Hunuman & Co.
The assessee did not produce any books of account in compliance with the statutory notices. In the circumstances, the Income-tax Officer made a reassessment to the best of his judgment under section 23(4) of the Income-tax Act, 1922, read with section 34, estimating the income of the assessee from the undisclosed business at Rs. 4,60,000. The total income assessed by the Income-tax Officer by his order dated 31st January, 1958, was Rs. 4,62,652. The assessee thereafter, on the 1st April, 1958, filed a petition under section 27 of the Act for cancelling the assessment made under section 23(4) of the Act. There the assessee came forward with the story for the first time that he had only half share as a partner in Hunuman & Co. and that the books of account of Hanuman & Co were not with him when the requisition was made by the Income-tax Officer under section 22(4) of the Act and that was the reason why he was not in a position to produce those books of account before the Income-tax Officer. He, however, admitted even in the petition under section 27 of the Act that those books were then available and he was ready to produce the same.
As the case made in the application under section 27 of the Act was wholly inconsistent with the declaration that the assessee had made to the effect that he had no business transaction with Hunuman & Co. he was asked to explain this outright discrepancy. The assessees explanation, which is recorded, is extraordinary and is in the following terms.
'As the matter was fairly old and your petitioner had become an old man his memory had failed regarding the actual position of Messrs. Hanuman & Co.'
The whole attempt from now onwards was to explain these two irreconcilable statements only on the ground of lapse of memory on medical certificate. The Income-tax Officer rejected the plea of lapse of memory and dismissed the assessees application under section 27 of the Act.
The fact on record show from the statement of case that the Income-tax Officer found that the assessee had speculative dealings through one Madanlal Saraf, Stock & Share Broker, of No. 7, Lyons Range, Calcutta This Madanlal Saraf paid Rs. 6,979 to Messrs. Hanuman & Co. by cheque on the 24th February, 1957, on the Comilla Union Bank. That cheque was collected by Hindustan Mercantile Bank Ltd. on the account of payee Hanuman & Co. On examination of the proposal form for opening the bank account, it was found that the assessee, Nandlal Kasera, was mentioned there as the proprietor of Hanuman & Co. The Income-tax Officer also found that Messrs. Sagarmal Dhanraj of, Roopchand Roy Street, Calcutta, had speculative dealings with the assessee. In fact, the Karta of Sagarmal Dhanraj produced hundis paid to Hanuman & Co. to settle the differences. These very hundis had been endorsed by the assessee, Nandlal Kasera himself, on behalf of Hanuman & Co. to other persons and Sagarmal Dhanraj had made the final payment to the holder in due course
The Income-tax Officer therefore rightly held that the assessee was the sole proprietor of Hanuman & Co. and he rightly disbelieved the plea of the assessee that the account books of Hanuman & Co. were not in his custody when he had made the requisition under section 22 (4) of the Act.
At this point it is necessary to make a reference to some other fact on the basis of which certain arguments were made on behalf of the assessee before us on this reference. In the statement of case it had been said that the assessee produced the statement before the Income-tax Officer purported to have been granted on behalf of Messrs. East India Jute & Hessian Exchange Ltd. showing that a sum of Rs. 21,28,875 had been deposited by Messrs. Hanuman & Co. with the Clearing House Bank as against Rs. 12,33,839-1-0 received by Messrs. Hanuman & Co. was closed on the 17th November, 1947. Now the point to be remembered about this fact is that this was not disclosed at the time of the best judgment assessment under section 23 (4) of the Act. This was a smoke-screen put up at the time of the application under section 27 of the Act, when the assessee thought that his game of concealment was up. This fact will be important when we come to consider the order of the Tribunal which reduce the assessment to Rs. 1,00,000 from Rs. 4,60,000 on this fact alone.
To proceed with the account of relevant facts, it is necessary to state that the Income-tax Officer dismissed the assessees application under section 27 of the Act by his order 18th February (sic), 1958. The assessee thereafter appealed to the Appellate Assistant Commissioner both against the best judgment assessment as well as against the order dismissing his application under section 27 of the Act. The Appellate Assistant Commissioner dismissed both the appeals by his consolidated order dated 4th February, 1959. The Appellate Assistant Commissioner came to the conclusion that :
'The observation and finding of the Income-tax Officer in my view are well-founded.'
He also came to the finding and conclusion that :
'It is quite evident after going through the above facts that the assessee has in a well-calculated way falsely disowned his proprietorship of Messrs. Hanuman & Co. and that in pursuance of this false declaration, with the said purpose of preventing a proper assessment of his profits on the above concern, he did not make available his books of account in spite of the ample opportunities given to him under section 22(4).'
The Appellate Assistant Commissioner also found as a fact that the whole case of the assessee about his medical certificate and lapse of memory was unacceptable. He records the fact that the assessee was attending before the Appellate Assistant Commissioner, had been talking and arguing his own case and be found :
'My impression is that at any rate now he fully recapitulates the material facts of his case and even minor details as well.'
He, therefore, accepted the Income-tax Officers finding on this point and rejected the assessees story of loss memory.
The Appellate Assistant Commissioner, thereafter, proceeds to discuss the merits of the case and records his findings of fact. He finds that it is clear that Messrs Sagarmal Dhanraj made a total sum of Rs. 5,22,626 by way of difference in jute and he assigned them to Hanuman and Co. Copies of accounts of Hanuman and Co. from Messrs. Sagarmal Dhanraj and Madanlal Saraf were cited by the Appellate Assistant Commissioner in support of his finding. It is also found as a fact that the account with Sagarmal Dhanraji as noted above showed payment of Rs. 5,22,626 as speculative profit to Hanuman and Co. and Rs. 71,706 as speculative profit realised from Hanuman and Co. during the financial year 1947-48. Thirdly, the Appellate Assistant Commissioner confirms the Income-tax Officers finding on the record that the account with Madanlal Saraf showed a total debit of Rs. 12,052 and total credit of Rs. 20,418 resulting in a profit of Rs. 8,366 to the appellant during the financial year 1947-48. Fourthly, the Appellate Assistant Commissioner also confirmed the Income-tax Officers finding that Madanlal Saraf had paid Rs. 6,979-11-0 to Messrs. Hanuman and Co. by cheque dated August 24, 1957, which cheque was collected by Hindustan Mercantile Bank on account of the payee Hanuman and Co. Fifthly, the copies of accounts and proposal forms showed that Kasera, the assessee, was the sole proprietor of Hanuman and Co.
Sixthly, the Income-tax Officer had examined the karta of Messrs. Sagarmal and Co. and also the karta of Messrs. Sagarmal Dhanraj who testified that the hundis which were paid to Hanuman and Co. were to settle differences in speculative profits. The statement on behalf of Sagarmal Dhanraji showed that the payments made by them to the assessee were speculative profit. The Appellate Assistant Commissioner noticed that in the account of the Income-tax Officer, one single entry only was there in respect of a cheque return for Rs. 11,350. The total receipts were Rs. 5,22,525. The debits were Rs. 71,706. This gave a net profit of Rs. 4,50,819 in the dealings with Messrs. Sagarmal Dhanraj. The profit from Madanlal Saraf during the financial year 1947-48 came to Rs. 8,366. The total of these amounts came to Rs. 4,59,185. The Income-tax Officer estimated the appellant income at Rs. 4,60,000. On those facts the Appellate Assistant Commissioner, on the calculation and figure set out above, came to the following conclusion :
'In these facts and circumstances of the case the estimate as made by the Income-tax Officer would not be excessive'.
He, therefore, confirmed the Income-tax Officers order under section 23(4) and dismissed the assessees application under section 27 of the Income-tax Act.
The assessee, thereafter, appealed to the Tribunal both for relief against the best judgment assessment under section 23(4) as well as the order made under section 27 of the Act. What the Tribunal did was this : The Tribunal dismissed the assessees application under section 27 of the Income-tax Act. The relevant finding on the point of the Tribunal is :
'His (assessees) failure to produce the books of accounts of the business, in response to notice under section 22(4), was, therefore, clearly a default which invited assessment under section 23(4). We are not impressed by his plea of lapse of memory to explain away his categorical disclaimer about his having any connection with Hanuman and Co. nor are we satisfied that he had sufficient reasons not to produce the books before the assessment was made when he could so conveniently produce them after the assessment was made. We, therefore, hold that the income-tax authorities were justified in refusing to reopen the assessment under section 27.'
Pausing here for a moment on the above decision and on the point under section 27 of the Act, it is quite clear that the Tribunal was coming to a finding that the attempt to produce documents and specifically the hint of the fact in the statement purporting to have been granted by the East India Jute and Hessian Exchange Ltd. showing the deposit of the sum of Rs. 21,28,875 by Hanuman and Co. with the Clearing House Bank as against Rs. 12,33,839-1-0 received by Hanuman and Co. was not found to be dependable fact. These are the books or statement of account which the Tribunal says were 'conveniently' produced after the assessment was made.
But curiously enough the Tribunal on the merits came to a very range conclusion. The Tribunal records that the Income-tax Officer did not give any basis for making the addition of Rs. 4,60,000 in the order itself but the Appellate Assistant Commissioner had tried to give the basis from certain particulars contained in the foot-note to the assessment order. The Tribunal forgot that the Income-tax Officer and the Appellate Assistant Commissioner were both authorities to find facts. The Tribunal was entirely wrong in mentioning a 'foot-note to the assessment order. There was no foot-note in fact, in theory or in imagination. What the Tribunal thought was in the foot-note were the facts on record, namely, the evidence from Sagarmal Dhanraj the bank, Madanlal Saraf and other evidence which we have just mentioned above. The Appellate Assistant Commissioner summarised serially almost all the relevant facts and reasons showing to the hilt even by calculation that the Income-tax Officers estimated income of the assessee at Rs. 4,60,000 under the best assessment judgment was supported by all material facts relevant for the purpose. Therefore, this conclusion of the Tribunal is not supported by any fact or evidence.
But the Tribunal does not stop there.
The Tribunal proceeds to say :
'That the appellant received considerable amount from Messrs. Sagarmal Dhanraj but his contention is that he received them not his own but on account of some other clients and that his only income was brokerage income from theses transactions..... Reliance is also placed on the fact that on the balance the appellant had paid Rs. 9 lakhs more to the Clearing House than he had received from it. The Income-tax Officer could not know this fact in view of the non-cooperation of the appellant..... In view, however, of the fact that ignoring all this important aspect introduces an element of arbitrariness in the assessment, we will take that into account and reduce the addition to Rs. 1,00,000 as estimated income from the business in the name of Hanuman and Co.'
This is an extraordinary decision and conclusion by the Tribunal. It is open to serious criticism and cannot be sustained. We shall briefly state the reasons.
In the first place, the Tribunal having rightly rejected the assessees application under section 27 of the Act, should never have considered statements or facts produced with that application under section 27. The reason is simple. The rejection of the application under section 27 of the Act is rejection also of the supposed statements and facts that were intended to be introduced by that application under section 27. Having rejected that application, it was improper and illegal on the part of the Tribunal to refer again to such documents or statements which were part of the application under section 27 of the Act. This whole story of the assessee about Rs. 21,28,875 and Rs. 12,33,839-1-0 set out above was for the first time smuggled by the assessee through and the Tribunal should never have relied on that statement.
Secondly, the Tribunal was wrong in holding that disregard of this fact introduced any element of arbitrariness in the orders of the Income-tax Officer and the Appellate Assistant Commissioner. On the contrary, consideration by the Tribunal of matters not on record or in evidence or properly brought within the procedure of the Income-tax Act vitiated the Tribunal decision on this point.
Thirdly, the Tribunal decision to add Rs. 1 lakh as the estimated income was wholly unwarranted by the facts. There is not an iota of evidence in support of such a figure as Rs. 1 lakh which the Tribunal estimated. It is an absoluted and utter fancy, a mere caprice and whimsical figure. As against that arbitrary decision of the Tribunal, the figure of Rs. 4,60,000 arrived at by the Income-tax Officer and carefully analysed by the Appellate Assistant Commissioner is clearly accounted. We are of opinion that the amount of Rs. 4,60,000 was based on incontestable fact and evidence on record. There was no evidence, legal or otherwise, to show that the assessee paid nine lakhs of rupees more. Even then there was no evidence that by any process of calculation or payment or by any method or reason it is possible to arrive at the figure of Rs. 1,00,000 which the Tribunal did. We, therefore, hold that the Tribunal had no basis to add the sum of Rs. 1,00,000 or to come to that figure as an estimate and that this sum of Rs. 1,00,000 was arbitrary and based on no material. At the same time we come to the finding that the figure of Rs. 4,60,000 was not arbitrary but supported by reason, facts, figures and evidence.
It will be the appropriate stage here to refer to some of the decisions cited at the Bar and in particular to the arguments about the nature of jurisdiction under section 66 of the Income-tax Act. Before discussing the decisions and the arguments on the scope and ambit of the jurisdiction under section 66 of the Income-tax Act, it will be convenient to give the answer to the questions. For the reasons and the facts stated above we proceed to answer the question in the following manner :
In the first question the interrogation is based on the hypothesis and assumption contained in the expression, forming part of the question, namely, 'having held that the Income-tax Officer has made an addition to Rs. 4,60,000 to the income of the appellant without basis and arbitrarily.' This hypothesis or assumption is wrong and we are of the opinion that the addition by the Income-tax Officer of the sum of Rs. 4,60,000 to the income of the appellant was not arbitrary nor without any basis, but was fully supported by facts and figures and was a correct and appropriate sum. On the second part of the first question raising the point, 'was it (Tribunal) justified in adding the sum of Rs. 1 lakh to the income of the appellant as estimated income and is such addition arbitrary bad fanciful and based on no materials,' we hold and answer this part of the question by saving that the addition of the said sum of Rs. 1 lakh as aforesaid by the Tribunal was arbitrary and fanciful and was not supported by any material whatsoever.
The answer to the second question asked on this reference follows from the above answer to the first question. We hold and answer that the Appellate Tribunal was certainly justified in coming to the conclusion that a part of the income of Hanuman and Co. should be added to the income of the appellant to that part of the question the answer must be in the affirmative. The second part of the second question raising the point - 'or was the same done arbitrarily and without any materials' - the answer is in the affirmative so far as the sum of Rs. 1 lakh was concerned, and we hold that the proper addition should have been Rs. 4,60,000, as done by the Income-tax Officer and confirmed by the Appellant Assistant Commissioner.
The question, therefore, are answered in the manner aforesaid.
What is now said is that the jurisdiction of this court under section 66 of the Income-tax Act is limited to the finding of the fact by the Tribunal that only a sum of Rs. 1 lakh should be added and no more, and that this reference being at the instance of the assessee and not the Commissioner of Income-tax, this High Court cannot in effect by answering the question enhance the assessment fixed or held by the Tribunal. This raising an interesting legal point.
A look at section 66 of the Indian Income-tax Act, 1922, reveals the nature and character of the statement of case by the Tribunal to the High Court and the High Courts jurisdiction to dispose such reference. The basic feature of this reference under this section is that it deals only with a 'question of law.' It does not, therefore, deal with a question of fact. The high Court, acting as a court of reference under this section, therefore is not a court of facts like an ordinary trial court or a court of appeal. The second basic feature of this jurisdiction is that the reference has to be disposed of by deciding the question asked on the reference. In other words, the jurisdiction of the High Court under section 66 of the Income-tax Act is the jurisdiction to decide and answer the question raised in the statement of case referred to the High Court. From that point of view the jurisdiction of this High Court as a court of reference under section 66 of the Income-tax Act is a jurisdiction limit to the question asked and that question is necessarily a question of law. The third basic feature of this jurisdiction is that when the High Court disposes of an income-tax reference under section 66 of the Income-tax Act, it has to 'deliver its judgment thereon containing the grounds on which such decision is founded.' Therefore, the reference is disposed of by this High Court by judgment containing the grounds of the decision, deciding the question of law raised on the reference. In so far as it is a judgment and decision containing the grounds, such a judgment of the High Court on an income-tax reference has all the attributes of a judgment of a trial court, or an appellant court What does not happen, however, is that this judgment is not in the technical sense followed by a decree of the High Court, so that there could be an execution of such a decree. But although there is no decree under section 66(5) of the Income-tax Act, yet there is very significant provision therein which is its fourth special feature.
When the High Court has decided the question of law raised in the reference by a judgment containing the grounds which the decision is founded, the matter apparently goes back to the Tribunal and the provision of section 66(5) of the Act is - 'and shall send a copy of such judgment under the seal of the Court and the signature of the Registrar to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably of such judgment.' Therefore, there is that residue of judicial work left for the Tribunal to do. That reside is to pass such orders as are no essay to dispose of the case conformable to the judgment given by the High Court. It means that the final order is that of the Tribunal and the Tribunal must of course act in conformity with the judgment given by the high Court on the reference.
This, in brief, is the main substance and content of the jurisdiction of the High Court under section 66 of the Income-tax Act in disposing of a reference. It has been variously described. It has been said in some cases that it is an advisory jurisdiction. Its advisory character follows from the feature that the High Court answer only the question raised and that it does not deal with question of fact but deals with question of law. But this jurisdiction, even though it might be called advisory in that sense, yet is not merely precatory or persuasive or voluntary requests which could be either accepted or rejected. In that sense it is compulsory and is binding not only on the parties before the reference in the High Court but upon the Tribunal which is directed by the statute to act conformably to the judgment of the High Court on the reference.
Analysing the language of section 66(5) of the Income-tax Act, 1922, the jurisdiction is obligatory upon the High Court to decide the question of law because the words are 'shall decide the question of law.' In deciding such question of law and in the process of coming to that decision, no impeditment or obstruction in our view should be placed before the High Court, because the statute does not qualify in any manner the high court jurisdiction in this respect to decide the question of law. The questions of the law are not academic questions which the high court is required to answer under this jurisdiction. The high court is not like an examine sitting with a law paper set to test his ability and knowledge in answering questions of law, nor does the High Court right a thesis or discourse on questions of law under this jurisdiction. Theses questions of law are questions of law arising on the facts of particular controversy which is the subject-matter of the reference. Therefore, they are not academic questions of law but practical questions of law that the High Court has to decide under this jurisdiction under section 66 of the Income-tax Act. To say, therefore, that the High Court has to answer the question of law but not look at facts is first to make the High Court blind and then to call for vision from the High Court on the point of law. No point of law can be answered except through a set of facts in a court of law and especially in a matter so prosaic about facts as income-tax. But this capacity of the High Court to look into facts arises from the very nature of the duty cast upon the High Court. It has to look into the facts on which the questions of law arises. The questions of law is not like an arched growing in the high air but is grows on the soil of hard facts and more than usual hard facts of income-tax in this jurisdiction. The High Courts approach has been cautious and rightly so in this respects.
The courts, therefore, have evolved certain principles. These principles illustrate the function of the court and demonstrate that what this court does in such a cases is, not act as a court of a facts in the sense that it does not find new facts or take notice of new facts not already on the record. The fact-finding authorities in these proceeding are, in the first place, the Income-tax Officer, in the second place, the appellant Assistant Commissioner, and lastly, in the third place, the Tribunal. These are the fact-finding authorities. Therefore, the provision is made that before exercising jurisdiction under section 66 of the Income-tax Act 'a statement of the case' has to be drawn up by the Tribunal either on its own motion or upon direction by his court. This statement of the case is the soil of facts and the question of law has to arise on this soil facts. Normally the statement of case deal with the facts at different stages, before the Income-tax officer, the Appellant Assistant Commissioner and the Tribunal. It is not said by the statute or any of the sub-section under section 66 of the income-tax Act that the High Court in deciding the reference is bound by any finding of facts reached by the Tribunal, but what the High Court has to do is to decide a question of law arising out of the order of the Tribunal and not the order of the Income-tax Officer or the Appellate Assistant Commissioner.
The next principle is that this basic duty of the High courts to decide the question of law must have to be discharged and in so discharging it, if there by any question of facts which has to be interpreted, then that power must be held to be implicit in this High Courts jurisdiction under section 66 of the Income-tax Act. If that implicit power is denied, then the High Courts jurisdiction to decide the question of law raised on this reference would be seriously crippled and jeopardized. No doubt, this interpretation of fact must be a fact which is essential to the interpretation to determine the question of law and no doubt it must be such interpretation of a fact without which it is not possible to decide that question of law. Within those limit this High Court must be implied to have this essential ancillary power to interpret the fact which give rise to the question of low it is required to answer.
Necessarily, certain corollaries have flowed out from this doctrine. A fact found which is not supported by any material on record has been held to the such a fact which this High Court has jurisdiction under section 66 of the Income-tax Act to set aside even though it might be a finding of fact reached by the Tribunal. That is why it was said by the Supreme Court in Commissioner of Income-tax v. Daulatram Rawatmull, that even though the finding of the Tribunal on the fact is final, its decision as to the legal effect of those finding is a question of law be reviewed by the High Court and that a finding on a question of fact even though reached by a Tribunal, open to attack under section 66(1) of the Act as erroneous in law when there is no evidence to support it or if it is perverse. See the observation of shah J. in that case at pages 579-80.
In this case and in the present reference before us, it is clear and plain beyond doubt that the sum of rupees one lakhs as found by the Tribunal was not based on any material of fact or circumstance but was a pure guess-work or fancy of the Tribunal. Therefore, that finding of fact about the figure of rupees one lakhs must be set aside on the principle just enunciated. Equally on the principle that where there is some fact to support the finding then this court should accept such finding of fact and, therefore, on the same principle, the sum of Rs. 4,60,000 as found by the Income-tax Officer and confirmed by the Appellant Assistant commissioner and proved almost to the hilt by evidence on record, must be accepted by this court as an unalterable fact.
This result also follows from the application of the above principles in another way. The Supreme Court in Daulatram Rawatmulls case, just mentioned, says that the legal effect of a finding of fact is a question of law which can be reviewed by the High Court within its jurisdiction. What is the apparent fact on which the Tribunal came to the figure of rupees one lakhs in this case The apparent fact is an unproved assertion illegally received and more illegally considered by the Tribunal regarding the receipt and payment of Rs. 21,00,000 and Rs. 12,00,000 and odd which was have discussed above. This material was not in the assessment proceedings; this material did not become part of the record at any stage of the assessment proceedings and especially in view of the fact that the assessees application under section 27 of the Act had been dismissed all through by the Income-tax Officer, by the Appellate Assistant Commissioner and what is more, by the Tribunal itself. The Tribunal, therefore, acted illegally in noticing facts, which is had no jurisdiction to notice, after having dismissed the assessees application under section 27 of the Act. What is more and what is worse is, even on the basis of that material, the sum of rupees one lakhs which the Tribunal hit upon cannot be worked out by any process either by material or by logic or by mathematics.
The final role to be played by the Tribunal under section 66(5) of the Act, which we have just discussed, was noticed by the Bombay High Court in Rajkumar Mills Ltd. v. Income-tax Appellate Tribunal.
We should have thought that the point was concluded by the decision of the Supreme Court in Sree Meenakshi Mills Ltd. v. Commissioner of Income-tax, where the principle was clearly established that findings on question of pure fact arrived at by the Tribunal are not to be disturbed by the High Court on reference even though the High Court would on the evidence come to a different conclusion, unless it appears that there is no evidence before the Tribunal upon which they had come. In this reference, we are not troubled by the doctrine of fine distinctions between pure facts and pure law, between mixture of facts and law, the degree of their mixture and their permutations and combinations affecting the potency such mixture of fact or law to turn the question either to a question of fact only or of law only. Here, we hold, there was no evidence before the Tribunal to arrive at the figure of rupees one lakhs and we also hold that there was ample evidence, if not conclusive evidence, to prove that the actual figure of concealed income Rs. 4,60,000 and that fact is on the record. Therefore, it is not even a case where there could be a possible or impossible plea for remand for a finding of fact on this point.
Lest it be forgotten, it has got to be emphasised that this was a best judgment assessment where the attempt to reopen it under section 27 had failed. The tests for such a judgment are now well-settled ever since Commissioner of Income-tax v. Laxminarain Badridas. No doubt, such an assessment has to be according to the best of the Income-tax Officers judgment. The Privy council laid down the test that the Income-tax Officer in coming to such judgment must not act vindictively or capriciously in the matter, but must make what he honestly believes to be a fair estimate of the proper figure of assessment. For that purpose, he is entitled to consider local knowledge, assessees circumstances, his own knowledge of previous returns of the assessee and all other matters which he thinks would assist in arriving at a fair and proper estimate. The Privy Council pointed out that though there must necessarily be guess-work in the matter, it must be honest guess-work. We have no hesitation in holding in the facts of this case that the Income-tax Officer and the Appellate Assistant Commissioner exercised their best judgment in accord with the tests laid down by the Privy Council. The best judgment assessment in this case was neither vindictive nor capricious nor penal. Indeed, it was fully supported by undeniable facts, some of which were admitted by the assessee himself, which he tried to deny at the beginning but which ultimately he unsuccessfully tried to explain away. This court, therefore, is satisfied that the best judgment assessment in this case was a reasonable assessment based on facts.
Had there been an iota of evidence to support the Tribunals decision about the figure of rupees one lakh, we would not have interfere with its decision on the principle laid down by the Supreme Court in Bank of Bihar Ltd. v. Commissioner of Income-tax emphasing the principle that, where there is some evidence to justify the conclusion of the Tribunal, it is not open to the High Court in a reference under section 66 of the Income-tax Act to make a reappreciation of that conclusion.
In that view of the matter, the interesting argument for the assessee that, in this reference, the High Court cannot enhance the assessment from rupees one lakh to Rs. 4,60,000 loses much of its force. This court is really not enhancing the assessment to any new figure or amount, or making an assessment of its own, but restoring the assessment of the Income-tax Officer and confirmed by the Appellate Assistant Commissioner, wrongly and illegally set aside by the Tribunal. The High Court certainly has jurisdiction to answer the questions asked. The actual questions asked in this case leave us free to enhance the assessment. We have only answered the questions as they have been framed and done mo more. If the jurisdiction is to be understood in terms of questions and answers as it must under section 66(5) of the Act which places a mandate upon this court to decide such questions, then that jurisdiction is not limited or qualified by saying that the decision must be so given as not to enhance the assessment made by the Tribunal. That will be laying a limitation on the powers and jurisdiction of this High Court, which is not there under section 66(5) of the Act. Supposing by answering a question of law it follows that the assessment must be enhanced as a matter of course, then is it going to be said that because it leads to enhancement, therefore, the High courts answer either should not be given or must be modified We have no hesitation in holding that such a view is entirely wrong and against the statute.
Some reference to some of the relevant sections of the Income-tax Act on this point may not be without an interest on this subject. Apart from the express and unqualified language of section 66(5) of the Act giving the power, the duty and the jurisdiction to this High Court to decide the questions of law on the reference, section 33 which is the section to deal with appeals against orders of the Appellate Assistant Commissioner, specially by its sub-section (6) provides - 'save as provided in section 66 orders passed by the Appellate Tribunal on appeal shall be final.' Therefore, the finality attaching to the Tribunals order is only 'save as provided in section 66'. That is section 66 which gives this High Court jurisdiction. Section 35(5) of the Income-tax Act, 1922, mentioning about assessment of a partner in a firm or of the firm uses the words 'enhancement made in the income under section 66' and necessarily implies that enhancement of the assessment is not beyond the purview of section 66(5) of the Income-tax Act provided of course that follows from the decision on the question of law asked on the reference. It is argued by Mr. Ghose for the assessee that, because the proviso to section 66(7) mentions reduction in the amount of assessment, therefore it was reduction and not enhancement which would come under this jurisdiction. This argument is unsound. This reduction in the assessment is mentioned there, only in connection with refund under section 66(7). and that cannot limit the jurisdiction of the High Court under section 66(5) of the Act only to reduction and prevent enhancement, if that follows from the decision on the question of law asked on the reference. Such cases of refund of excess after reduction in the assessment are also mentioned in such other clauses as the third proviso to section 18A(6) of the Act, but they cannot control the unqualified jurisdiction of this High Court under section 66(5) to decide a question of law arising on the reference. It was also argued that section 31(3)(a) expressly gives to the Appellate Assistant Commissioner, in disposing of an appeal before him, the power not only to reduce but also to enhance the assessment, and, therefore, unless the power to enhance the assessment is expressly given, it cannot be assumed. That argument does not impress us. If that were so, then such express power, either of reduction or enhancement, is not given to the Tribunal, either, because all that section 33(4) says is this that the Appellate Tribunal may pass such orders as it thinks fit. Therefore, it must be implied that the Tribunal has the jurisdiction to pass an order either enhancing or reducing the assessment made by the Appellate Assistant Commissioner, by virtue of the Tribunals statutory powers to 'pass such orders as it thinks fit'. On a parity of reasoning, section 66(5) says that the High Court shall decide the question of law and if in deciding the question of law, the assessment is enhanced or reduced, that will be the effect that must follow. We read nothing in section 66(5) of the Act to find any limitation that the High Court in dealing with a reference under section 66(5) of the Act is limited only to confirmation of the Tribunals assessment or its reduction and is not competent to enchance it if the answers to the question of law decided by the High Court demand it. Finally, on this branch of the argument, Mr. Ghose, for the assessee, contends the because this is a reference at the instance of the assessee, therefore, the assessment made by the Tribunal cannot be enhanced to this detriment. In support of this branch of his argument, be says that if that was what was sought for by the income-tax authorities, then they should have brought a reference at their instance. We do not think that this High Court can be held at ransom and its jurisdiction determined by the person at whose instance the reference is made under section 66 of the Act. No, matter at whose distance the reference is made under section 66 of the Act, be it of the assessee or of the taxing authorities or be it under direction of Court, once the reference is before the Court, the Court has unqualified jurisdiction to decide the question of law raised on that reference irrespective of the fact at whose instance the reference is made. It is in that sense an advisory or opinion jurisdiction on the points of law asked on the reference, and unlike an ordinary litigation or suit art the instance of a plaintiff.
In this view of the matter, it is not necessary for us to discuss at any more length the observations in the decision of a Division Bench of this Court in Chainrup Sampatram v. Commissioner of Income-tax, on the nature and character of the jurisdiction under section 66 of the Income-tax Act.
Before concluding, we have only to record the significant fact that the questions in this case were framed by the Bench that made the rule absolute and the questions that the Bench framed were larger than the questions which the assessee had suggested presumably because the Bench making the rule absolute was not sure that the hypothesis or the assumption in question No. (1) as notice above was right or wrong.
Therefore, this court answers the questions in the manner already set out above. The assessee will pay the costs of this reference. This reference is not certified for two counsel.
LAIK J. - I agree.