COMMISSIO~ER OF INCOME-TAX, CALCUTI'A WEST BENGAL, v. SMT. ANUSUY A DEVI Nol'ember 28. 1967 [J. C. SHAH Al'[) V. RAMASWAMI, JJ.] illco111e-1ax Act (II of 1922), s. 66(1), (2) and (4)–Question nor 1aiscd before 1'rihuntJl either in appeal or applicalion to state a case-If Jligh Court can direct reference on such question-If High Court must r.nsk'('f quc~tion referred-Power to rejran1c question and call for addi- tional state1nen1 fro1n Tribunal when to be exercised.
The hu,band of Ihe respondent died in October 1944. For the assess- nlcnt year 1945-46, his cstat·~ v.·as assessed to income-tax on a tot.al income of Rs. 22, I 60. In January I 946, the respondent
encashed 584 high denomination notes of the value of Rs. 5,84,000. There were proceed- ings for rc-as~sment of the total income of the asses.see, wherein it wa" stated before the Income-lax Officer, on behalf of the respondent, thal
during the previous 30 years, her husband was giving gifts to the respon- dent and was also setting apan money exclusively for her and their children aod, that the fund so accumulated amounting to Rs. 5,84,000 remained in a cupboard and was found after bis death, and therefore, the amount wao; not liable to tax as the income of her husband in the previous year. The I ncomc-tax Officer disbelieved her explanation and brought the amount of Rs. 5.84,000 to tax as Ire income of the respondents' husband from an 11ndiscloscd source in the year of account 1944-45.
The order wac; con- firmed hy the Appellate Assi..;tant Commissioner ~·ho also referred to the rcspon<lent's declaration under the High Denomination Bank Notes CDcmonctisa1ion) Ordinance that the amount v,,ras made over by the de. ceasc<l. some time before his death, to her for her benefit and that of her 8 minor "on…. The Appellate Tribunal also
uph~ld the order of the JnconH~-ta:'I: ()fficcr. The respondent then filed an application under s. 66 ( 1 l to … ralc :1 c:P\C to 1he High Court. In 1hat appJication she asserted
that ..,i94 out of the 584 notes were received from a Bank in Calcutta in rc<lli1,ation of a cheque drav.n for R'\. 4,94.000 in Septcmhcr 1945 hy her cJJe1,t '\On. The Tribunal rejected the applic;.itior. The High Courl undi;r …… 66(2) directed the Trihunal to state a case on 1hc que1,tion:-Whcther the ·rribunal crrc<l in law hy basing its deci'\ion on a part of the evidence i)-.'TlOring 1hc … tatement made a~ regards the withdraw:il or Re;. 4.94.000 hv 494 pi·:..·cc-; of Rs. 1,000 note'\ from the
h:ink. The ·rribunal, while …. uhmittin~ the statement of case. pointed out that the statement in the petition under s. 66( 1) \Vas m::iterially different from that made hefore the Income-tax Officer and that the Tribunal v.·as not invited to consider. at the hearin~ of the appeal, the truth of that statement. The Hii:h Court. thcrcafl·~r. heard the reference and decided in favour of the a~sessec. ho1d- in~ that:
(!) the Tribunal ignored a part of the declaration made by the re~pondent that 494 high denomination notes were received from the hank in Calcutta in September 1945; (2) no opportunity was given by the Tribu- nal to the r~pondent to clear up the discrepancies in her statements made :1r the time of the disclosure of the high denomination note, :ind before the Tncon1c-tax Officer: and (3) it was not open to the Court hearing a refe· rence under s. 66(2) to hold, contrary to the decision recorded at the time \\.'hC'n the TribunaJ \\·:1-. direct·~d 10 stare the case on a question. th;:it the qucc.tion Jid nol arise out of the order of the Tribunal.
c g II c C.L T. V. ANUSUYA DEVI ln appeal to this Court, HELD : ( 1) In the question which was directed to be referred it was assumed that the Tribunal had before it the statement about the receipt of 494 currency notes from the bank at Calcutta. But that evidence was not before the Tribunal. No such statement was made either before the ln· come.tax Officer, or before the Appellate Assistant Commissioner or in the appeal before the Tribunal. The statement was made for the first time in the petition under s. 66(1). Even in the application it was not suggested that the finding of the Tribunal was vitiated because some relevant evi- dence was ignored. The order of the Tribunal was not therefore open to the objection that the appeal before it was decided on a partial review of the evidence. [471 B, D-Fl
( 2) The plea of want of opportunity was not raised before the Tribu- nal, a~ci therefore, the validity of the conclusion of the Tribunal on the evidence could not be assailed before the High Court on the ground that the depanmental authorities had violated the basic rules of natural justice, without raising that question be!ore the Tribunal. [472 HJ (3) The High Coun was· in error in holcling that at the hearing of a reference pursuant to an order calling upon the Tribunal to state a case, the High Coun must proceed to answer the question without considering whether it arises out of the order of the Tribunal or whether it is a ques- tion of law, or whether it is academic, unnecessary or irrelevant especially when by an erroneous order the High Coun dir~ted the Tribunal IQ state a case on a question which did not arise out of the order of the TribUQ.al. [472 ~El
Observations contra in Chainrup Sampatram v. Commissioner of In- come-tax, West Bengal, 20 I.T.R. 484. overruled. ( 4) When too Tribunal was not invited to state a case on a question of law alleged to arise out of its order, the High Court could not direct the Tribunal to state it on that question. [471 G~HJ
Con1n1issioner of Income-tax v. Scindia Steam Navigation Co. Ltd., 24 l.T.R. 589 followed. (5) The irregularities in the judgment of tho High Coun could not be cured by reframing the question referred to the High Court and calling for a supplemrotary statement from the Tribunal The power to refranie a qltestion may be exercised only to clarify some obscurity in the question referred or to pinpoint the real issue between the tax payer and tlie depart- ment 'Jr for similar other reawns.
It cannot be exercised for reopening an enquiry on questions of fact, which Was closed by the order of the Tribu- nal. Similarly, a supplementary statement could be ordered only on a ques- tion arising out of the order of the Tribunal if the court is satisfied that the ori,ginal statement is not sufficient to enable it to determine the question raised thereby, and, when directed the supplementary statement mav be onlv on such material and eviden~ as mav already be on record. but not included in the statement initially made .. [473 B-D] Keshav Mills Ltd. v. Commissioner of Income-tax, Bombay North, Ahmedahad, 56 I.T.R. 365 and Narain Swttdeshi Weaving Mills v. Com- missioner of Exce,. Profit• Tax, 26 I.T.R. 765, referred 10. ( 6) The Tribunal was not in error in failing to raise and state a case on the question whether the amount of Rs. 5,84,000 was taxable in the accounting year 1944-45.
That question Wa'l. considered by the Income- tax Officer and by the Appellate Assistant Coinmissioner and the explana- fl9Gd) 2 S.C.R. tioo of the respondent was rejected by them, and no argument was raised befDre the tribunal that the amount. though taxable, was not tbe, income of the year of account 1944-45. Further, when· tbc High Court did not direct the Tnbunal to state a case on the question, it must be deemed to have rejected the application to refer that question, and the order of rejec- tion having become final, this Court cannot set it aside without an appeal by the rcspoodcnt. (474 B, E, H; 475 A)
CIVIL APPELLATE JURISDICTION : Civil Appeal _No. 2457 of 1966. Appeal from the judgment and order dated September 13, 1963 of the Calcutta High Coun in Income-tax Reference No. 29 of 1959.
S. T. Desai, B. R. L. Iyengar and R. N. Sachthey, for the appellant. A. K. S<'n, R. M. Ha:arnavis, and K. L. Ha1/1i, for the respon- dent. The Judgment of the Coun was delivered by
Shah, J. One Amritlal qied on October 18, 1944. For the assessment year 1945-46 his estate was a~sessed to tax on a total income of Rs. 22, I 60/- from salary and other sources. In
January 1946, Anusuya Devi widow of Amritlal encashed high denomination notes of the value of Rs. 5,84,000/-, and made a declaration as required by the High Denomination Bank Notes (Demonetisation) Ordinance, 1946 that :
"A sum of Rs. 5,84,000/- in notes were made over and/ or directed to be made over by the declarant's .deceased husband Amritlal Ojha at Rajkor in April, 1944; sometime before his death for the benefit of decla-
rant and her 8 minor sons." In a proceeding for reassessment of the income of Amritlal for the a~sessment year 1945-46 the attorney who appeared on behalf of Anusuya Devi stated that "Amritlal was from time to time, during the last 30 years of his life, giving gifts to his wife and also setting apart money exclusively for his wife and children imd that the fund so accumulated which remained in a cupboard" was found after his death.
The Income-tax Officer disbelieved the explanation furnished and brought the amount ol Rs. 5,84,000/- to tax as income of Amritlal in the year of account 1944-45 from an undisclosed source, and with his decision the Appellate Assistant Commissioner agreed.
At the hearing of the appeal before the Income-tax Appellate Tribunal, Anusuya Devi-widow of Amritlal-filed an affidavit in which it was stated, i11ter alia : c c It C.I.T. v. ANUSUYA DEVI (Shah, J. \
5. "From time to time during our married life, late Sri Amritlal Ojha used to make presents of cash moneys to me on occasion of birthday of myself and of my sobs and daughter by him and also on
the occasion of his own birthday. and. on the anni- versary of our marriage." 6. "My husband late Sri Amritlal Ojha used to tell me that these presents of cash money that he made was to make provisions for me and my minor sons
and daughter and also to meet the expenses of their education and marriage in the event of his death.'' · 8. "The total amount of the money so paid by late Sri Amritlal Ojha was Rs. 5,84,000/-.
This amount was my stridhan property and was all along in my posssession." This affidavit was admitted in evidence by the Tribunal, but the Tribunal declined to admit an affidavit of Gunvantray one of the sons of Amritlal, because in their view an attempt was made· to bring on record a large number of new facts which were not dis- closed before the departmental authorities.
The Tribunal de- clined to accept the case set up by Anusuya Devi. Beside point- ing out the discrepancies in the statements made from time to time. which rendered her case unreliable, the Tribunal expressed the view that gifts made during a long period of "20 to 30 years" could not all have been made only in thousand rupee notes. The Tribunal accordingly upheld that order bringing to tax Rs. 5,84,000/- as income from an undisclosed source in the account year 1944-45.
In her application for stating a case to the High Court on eleven questions set out therein Anusuya Devi asserted that in her declaration under s. 6 of the High Denomination Bank Notes (Demonetisation) Ordinance, 1946, she had given information pursuant to the queries as follows :
"Reasons for keeping above in high denominaticn notes rather than in current account, fixed deposit or securities, When and fro'm \vhat source did 'dcclarant come into p:Jsscssion
of bank notes nciw tendered. No bank account. The amount is held in trust for minors and as prices of securities very so for greater safety the amount is held in cash for· the benifit of the dcfandent and
in trust for the minors. A sum of Rs. 5,84,000 in notes were made over and or directed to be made over by the decb.rant's deceas- ed husband Amritlal Ojha at Rajkot in April 1944 sometime before his
death for the benefit of the declarant and her eight minor sons. In the latter part of August and beginning (1968] 2 sc.n. of September 1945, Rs. 4,94,000/- was deposited With the Bank of
Jndia Ltd. at its Bombay Braach and transferred by T.T. to their Calcutta Branch in the «.ccount of the dcclarant's major son Bhupatray Ojba who drew a self cheque for Rs. 4,94,UOO; .. rc<:eivcd payment by
494 pieces of I ,000/- notes (inclu- ded 10 the list) and made them over to the declarant. The Tribunal rejected the application. The High Court of Judi- cature at Calcutta however directed the Income-tax Appellate Tribunal to state a case on the following question :
"Whether the Tribunal erred in law· by basing their decision on part of the evidet•ce ignoring the statement made as regards the withdrawal of Rs. 4,94,000/- by 494 pieces of Rs. 1,000/- notes from the bank?"
In compliance with the order, the Tribunal observed that the extract from the statement.incorporated in the petition under s. 66 (I) was materially different from the statement reproduced in the order of the focome-taic Officer and that the Tribunal was not invited to consider at the hearing of the appeal the truth or otherwise of the alleged copy of the declaration incorporated in the petition under s. 66( 1) and that at the hearing of the appeal the original declaration had not been produced.
The learned Judges of the High Court who heard the reference were apparently of the view. that the question referred did not arise out of the order of the Tribunal, but they felt bound by the view expressed in Chainrup Sampatram v. Commissionu of In- come-tax, West Bengal(') that it is not open to the Court hearing a reference under s. 66 ( 2) to hold, contrary to the decision re- corded at the time when the Tribunal was directed to state the case on a question, that the question did not arise out of the order of the Tribunal.
Bijayesh Mukherji, J., who delivered the prin- cipal judgment of the Court observed that the Tribunal had apparently ignored a part of the declaration made by Anusuya Devi that 494 high denomination notes out of those enca•hcd in January 1946 were received from a Bank in Calcutta in realiza- tion of a cheque for Rs. 4,94,000/- drawn in September 1945 by Bhupatray her eldest son; that there was reason to doubt that statements referred to in his order by the Appellate· Assistant Com- missioner were made by Anusuya Devi or her attorney; and that in any event opportunity to "clear up the discrepancies" between the statement made at the time of the disclosure of the high de- nomination notes and the statements said to have been made before the Income-tax Officer or before the Appellate Assistant Commi;sioner ought to have been given to her. Holding that the -··- ·— ——
(1)201.fR 4~4 c s c C.I.T. V. ANUSUYA DEVI (Shah, J.) 47 \ order of the Tribunal suffered from those infirmities the learned Judges of the High Court answered the question in the affirmative. In our judgment (he order of the High Court cannot be sus- tained.
The statement that out of 584 high denomination note' disclosed by Anusuya Devi 494 notes were received in realization of a cheque drawn by Bhupatray at Rajkot was made for the first time in a petition under s. 66 ( l ) : it did not find place in the statement before the Income-tax Officer. nor in the grounds of objection raised before the Appellate Assistant Commissioner. and ·not even in the affidavit filed before the Tribunal.
The Tri- bunal was never apprised of that part of the case, and had no opportunity to test the correctness of that statement. On the state- ments made before the Income-tax Officer and in the affidavit there can be no doubt that it was the case of Anusuya Devi that she had encashed high denomination notes which she had receiv- ed from her husband.
No fault can therefore be found with the observations of the Tribunal that it was "a peculiar fact that al I the money stated to have been received and found in the cupboard was all in hjgh denomination notes and the entire amount had to be exchanged under the High Denomination Bank Notes (Demo- netisation) Ordinance".
In the question which was referred under the direction of the High Court, it was assumed that the Tribunal had before it the statement about the receipt of 494 currency notes of Rs. 1,000 /- each from a Bank at Calcutta in realization of a chequc. But that evidence was not before the Tribunal, and the order of the Tribu- nal was not open to the objection that it had decided the appeal before it on a partial review of the evidence.
Even in the appli~ cation tnade to the Tribunal under s. 66(1) in the large number of questions which it was claimed arose out of the order of the Tribunal, it was not suggested that the finding of the Tribunal was vitiated because some relevant evidence was ignored.
If the Tribunal refuses to state a case under sub-s. ( 1) of s. 66 on the ground that no question of law arises, and the High Court is not satisfied with the correctness of that decision, the High Court may in exercise of the power under s. 66(2) require the Tribunal G' to state a case, and refer it.
When the Tribunal is not invited to state a case on a question of law alleged to arise ou,t of its order, the High Court cannot direct the Tribunal to state it on that ques- tion: see Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd.('). The reason of the rule is clear : the High Cowt cannot hold that the decision of the Tribunal refusing to state a case on a particular question is incorrect if the Tribunal was not asked to consider whether the question arose out of its order, and· whether it w11s a question of law.
(I) 42 T.T.R. 589. We find it difficult to uphold the view of the· Calcutta High Court .that if an order is passed by the High Court calling upon the Tnbunal to state a case on a question which docs !lot arise out of the order of the Tribunal, the High Court is bound to advise the Tribunal on that question even if the question docs not arise out of the order of the Tribunal.
The High Court may only answer a question referred to it by the Tribunal : the High Court 1s however not bound to answer a question merely because it is raised and referred. It is well-settled that the High Court may
decline to answer a question of fact or a question of law which is purely academic, or has no bearing on the dispute between the parties or though referred by the Tribunal does not arise out of its order.
The High Court may also decline to answer a question arising out of the order of the Tribunal, if it is unnecessary or irrelevant or is not calculated to dispose of the real issue between the tax-payer and the department. If the power of the High Court to refuse to answer questions other than those which are questions of law directly related to the dispute between the tax-payer and the department, and which when answered would determir ~ qua that question the dispute, oc granted, we fail to see any g~ound for restricting that power when by, an erroneous order the High Court has directed the Tribunal to state a case on a question which did not arise out of the order of the Tribunal. We are unable therefore to hold that at the hearing of a reference pursuant to an order calling upon the Tribunal to state a case. the High Court must pro- ceed to answer the question without considering whether it arises out of the order of the Tribunal, whether it is a question of law, or whether it is academic, unnecessary or irrelevant.
We are of the opinion that the very basis of the question on which the Tribunal was called upon to submit a statement of the case did not exist. The Tribunal cannot in this case be charged
with recording its decision without considering all the evidence on the record : the decision of thi; Tribunal was clearly based on appreciation of evidence on the record before it, and the High Court was, in our view, incompetent to direct the Tribunal to state the case on the question which was directed to be referred and dealt with by the High Court.
We are also unable to agree with the .observation of the High Court that the explanation which the Assistant Commissioner says was made by Anusuya Devi was not made by her or by her attorney.
No such plea was appa- rently raised before the Tribunal. There is also no ground for .believing that Anusuya Devi was not given an opportunity to "clear up the discrepancies" between tl1c statements made by her or on her behalf from time to time in connection with the encash- ment of the high denomination notes.
That pica was not raised before the Tribunal, and the validity of the conclusion of the Tribunal on .appreciation of evidence cannot be assailed before c C.!.T. v. ANUSUYA DEVI (Shah, /,)
the High Cou'1: on the ground that departmental authorities had violated the basic rules of natural iustice without raising that ques- tion before the Tribunal. Counsel for Anusuya Devi requested that in any event the
question which has been referred by the Tribunal in pursuance of the order of the High Court may be reframed and a supplemen- tary statement may be ordered to be submitted by the Tribunal. But power to reframe a question may be exercised to clarify some obscurity in the question referred, or to. pinpoint the real issue between the tax-payer and the department or for similar other reasons : it cannot be exercised for reopening an enquiry · on questions of fact which is closed by. the order of the Tribunal. Again, a supplementary statement may be ordered only on the question arising out of the order of the Tribunal, and if the Court is satisfied that the statements are not sufficient to enable the Court to determine the question raised thereby, and when directed may be only on ·such material and evidence as may al- ready be on the record but which has not been included in the statement initially made : Keshav Mills Ltd. v. Commissioner of Income-tax, Bombay North, Ahmedabad('). We do not think
that the judgment of this Court in Narain Swedeshi Weaving Mills v. Commissioner of Excess Profits Tax(') lays down any general proposition that the High Court hearing a reference is entitled to amend or reframe a question and call for a supple- mentary statement so as to enable a party to lead evidence which has not been led before the Tribunal or the departmental autho- rities.
In Narain Swadeshi Weaving Mills' case( 2 ) this Court merely reframed the question so as to bring out the real issue between the parties. Finally counsel for Anusuya Devi submitted that the Tribunal was bound to state a case on the following question which was set out in the application under s. 66 ( 1) :
6. "Whether there is any material before the Tri- bunal to hold that the said sum of Rs. 5,84,000/- representing the value of the encashed high denomina- tion notes was the income of the deceased Amritlal
Ojha of the period of the year 1944-45 prior to his death?" Counsel submitted that since the Tribunal had failed to raise and· state a case on that question, and the High Court had also in directing that a statement of case be submitted, ignored that ques- tion, in the interest of justice and for a final and satisfactory dis- posal of the case this Court may order a statement on that question.
Counsel said that merely because on the findings of (I) 56 I.T.R. 365. (2) 26 I.T.R 765. [1968) 2 S.C.R. the Tribunal Amritlal was on April 30, 1944, possessed of a large sum of money JI could not be assumed that the whole amount wao; earned after April I, 1944, and was on that account taitable in its entirely in the year of assessment 1945-46.
The question whether the amount of-Rs. 5,84,000/- was taxable in the proceeding for assessment for the year 1945-46 was considered by the Income-tax Officer and by the Appellate Assistant Conunissioner.
The ·Income-tax Officer observed that by the explanation submitted on behalf of Anusuya Devi beforc him, contrary to what was stated at the time of encashment of the high denomination notes, it was attempted "as an afterthought, to spread over the amount over a number of years".
The con- tention that the amount of Rs. 5,84,000/- was not taxable in the year of assessment 1945-46 was rejected. The Appellate Assis- tant Commissioner observed that on the statement made by
Anusuya Devi that she had received the amount from her husband in the year of account 1944-45 and that it was unfortunate that there was no complete record of the "earnings and· withdrawals" of Amritlal from the various businesses in which he was interested, and that in the absence of such a record all that was to be done was to examine whether the explanation was credible.
He ob- served that "the accounting year wao; very favourable for all types of business, and in all probability the sum represented some income earned by the deceased in some ventures which were not known to the Department and therefore the sum could be treated as income of Amritlal from undisclosed sources".
The Tribunal observed that they were unable to believe the version of Anusuya Devi that the amount was accumulated by her husband during a long period, and since the assessee and his legal representatives had failed to prove the source of the fund, it "must be considered as of income character".
Apparently, no argument was raised before the Tribunal that the amount though taxable was not income of the year of account 1944-45 and could obviously not be referred. The High Court may answer only those que~tions which arc
actually referred to it. New questions which ha~e not been referred cannot be raised and answered by the High Court. If the Tribunal refuses to refer a case under s. 66( I) which arise' out of its order, the proper course. is for the aggrieved party to move the High Court to require the Tribunal under s. 66(2) to refer the same.
The question whether Rs. 5,84,000/- repre- sented income of the year of account 1944-45 was not submitted hy the Tribunal to the High Court. Even if it be assumed that the High Court was moved to direct the Tribunal to state a ease on the sixth question which was set out in the application filed hefore the Tribunal under s. 66 (I), the application must be c
c C.I.T. v. ANUSUYA DEVI (Shah, J.) deemed to have been rejected, and the order of rejection has become final. We have no power, without an appeal by the assessee, to set aside that order of the High Court and to direct the Tribunal to state a case on that question.
The appeal must therefore be allowed, and the order passed hy the High Court set aside.· The answer to the question will be in the negative. This case discloses a very disturbing state of affairs prevailing in the Income-tax Department.
It is a startling revelation that the entire record of an assessee's case both before the Income-tax Officer and the Appellate Assistant Commissioner was founcj missing, and has not been traced th,ereafter.
Even if collusion be ruled out, the persons concerned in looking after the safety of the important record of proceedings of assessment cannot escape a charge of gross negligence. In the circumstances of the case.
we think there shall be no order as to costs in the High Court and in this Court. V.P.S. Appeal allowed.