Patna High Court
Maharani Kanak Kumari Sahiba vs Commissioner Of Income-Tax, Bihar And ... on 20 August, 1954
Equivalent citations: [1955]28ITR462(PATNA)
JUDGMENT
RAMASWAMI and AHMAD, JJ. - In this case the assessee is the Maharani of Dumraon and the assessment relates to the year 1947-48. The accounting year is the period from 1st of November 1945, to 31st of October, 1946. The assessee is the owner of house properties and she also carries on the business of manufacture of lanterns and mosquito nets in her factory known as Bihar Lantern Factory. For the assessment year 1947-1948 the assessee returned a total income of Rs. 54,726. After the promulgation of the High Denomination Bank Notes (Demonetization) Ordinance, the assessee exchanged high denomination notes to the value of Rs. 3,97,000 on 22nd January, 1946. In her declaration made before the Imperial Bank the assessee stated that the reason for keeping high denomination notes was that "she had always kept large sums with her personally as was the custom with the ladies of her status and position". In column 16 of the declaration the assessee made the further statement that she had received the money from her father and mother and other relations. The Income-tax Officer called upon the assessee to explain the source of the money. The assessees agent appeared before the Income-tax Officer and explained that the high denomination notes really belonged to the husband of the assessee, namely, the Maharaja of Dumraon. The Income-tax Officer thereafter required the assessee to give proof of this statement. But the assessee did not give any further evidence. The Income-tax Officer then completed the assessment including the whole amount of Rs. 3,97,000 as the secreted profits of the assessee. The assessee took the matter to the Appellant Assistant Commissioner and it was contended on her behalf that the high denomination notes to the extent of Rs. 3,97,000 should be excluded from the assessment. In proof of her statement the assessee produced before the Appellate Assistant Commissioner a certificate from the Imperial Bank showing that on the 11th of November, 1942, the Maharaja of Dumraon had withdrawn from the Imperial Bank a sum of Rs. 8,00,000 and on the 20th of November, 1944, he had withdrawn a sum of Rs. 3,00,000. The assessee also offered evidence to show that on the 18th of January, 1946, the Maharaja had exchanged from the Imperial Bank high denomination notes to the value of Rs. 10,00,000. On the 19th of January, 1946, the Maharajas son Kumar Kamal Singh had exchanges high denomination notes to the extent of Rs. 1,15,000. The case of the assessee was that the amount of Rs. 1,15,000 exchanged by Kumar Kamal Singh and the amount of Rs. 3,97,000 exchanged by the assessee herself after the passing of High Denomination Bank Notes (Denometization) Ordinance really belonged to the Maharaja of Dumraon. In proof of this statement the agent of the assessee pointed out that on a comparison of the high denomination notes withdrawn by the Maharaja in 1942 and 1944 it was clear that notes to the extent of Rs. 8,50,000 tallied with the notes exchanges by the Maharaja of Dumraon on the 18th January, 1946, and that notes to the extent of Rs. 2,00,000 tallied with the notes exchanges by the Maharani on the 22nd of January, 1946, and that notes to the extent of Rs. 50,000 tallied with the notes exchanged by the Maharaj Kumar Kamal Singh on the 19th of January, 1946. It was also pointed out on behalf of the assessee that after the high denomination notes were exchanges by the assessee, the amount of Rs. 3,97,000 was credited to the Imperial Bank on the same date in the name of the Maharaja of Dumraon and not in the name of the assessee. The amount of Rs. 1,15,000 exchanged by the Maharaj Kumar Kamal Singh was also credited in the account of the Maharaja of Dumraon on the 19th of January, 1946. The Appellate Assistant Commissioner examined the estate account books of the Maharaja for over twenty-five years and ascertained from those books that the Maharaja had withdrawn sums of money to the extent of Rs. 53,00,000 from time to time. The Appellate Assistant Commissioner also took note of the fact that the annual income of the estate was about Rs. 30,00,000 and the Maharaja had occasion to handle large surplus amount from the income of the estate. Considering all these circumstances the Appellate Assistant Commissioner reached the finding that the entire amount of Rs. 3,97,000, which is the amount of high denomination notes encashed by the assessee, represented the surplus collections of the Dumraon Raj Estate, which were withdrawn by the Maharaja from time to time and later on encashed through the assessee. The Income-tax Department preferred an appeal to the Income-tax Appellate Tribunal against the order of the Appellate Assistant Commissioner. It was contended on behalf of the Department that there was no evidence before the Appellate Assistant Commissioner to show that Rs. 1,97,000 out of the total amount of Rs. 3,97,000 really belonged to the Maharaja of Dumraon and not the assessee. The Appellate Tribunal accepted this argument and remanded the case back to the Income-tax Officer "to bring on record further evidence after proper investigation on the following lines : (1) To examine the lady on oath and to record her deposition; and (2) to investigate the claim of the lady that the sum of Rs. 3,97,000 could have come out of her husbands cash balance in the way that she alleges it to be". The Appellate Tribunal also stated : "In this connection, the books of account of the husband, if produced by the lady in support of her case, should be examined with regard to the likelihood of the husband having been in possession of the entire sum of Rs. 15,12,000 that should have been encashed by him of which this sum of Rs. 3,97,000 is alleged to form a part. The nature of the entries that have been made in the Roker in the neighbourhood of the date of demonetisation and the date of banking these high denomination notes in the husbands Imperial Bank account should throw further light on this aspect of the matter. The Income-tax Officer is given full discretion as to the nature of the enquiry that he feels called upon to make into the books of the husband or otherwise, in order that he may be able to support the assessment."
At the instance of the High Court, the Income-tax Appellate Tribunal has submitted the following questions of law : "(1) Whether in the circumstances of this case the order of remand by the Tribunal is legal and valid ? (2) Whether the Tribunal was entitled in law to order for further investigation regarding the sum of Rs. 3,97,000 ? (3) Whether the Tribunal was entitled in law to permit the Income-tax Officer to make further enquiry to support the assessment ?"
On behalf of the assessee Mr. Dutt put forward the argument that in the circumstances of the case the Appellate Tribunal had no legal justification for remanding the case to the Income-tax Officer for the purpose of taking additional evidence. The argument of the learned counsel was that out of that total amount of Rs. 3,97,000 there was definite proof that the amount of Rs. 2,00,000 of high denomination notes was identical with the amount withdrawn by the Maharaja of Dumraon from the Imperial Bank on the 11th of November, 1942, and the 20th of November, 1944. It was contended that as regards the amount of Rs. 2,00,000 the identity of high denomination notes has been established and there was definite proof that this amount of Rs. 2,00,000 belonged to the Maharaja and not to the assessee. With regard to the balance of Rs. 1,97,000 the assessee could not show that there was identity of the high denomination notes but it was shown on behalf of the assessee before the Appellate Assistant Commissioner that after the high denomination notes were exchanges, the entire amount of Rs. 3,97,000 was deposited in the current account of the Maharaja of Dumraon in the Imperial Bank on the same date. It was further shown on behalf of the assessee from the production of the account books of the Dumraon estate for the last twenty-five years that the Maharaja had withdrawn from time to time a total sum of Rs. 53,00,000 in high denomination notes. There was also an affidavit filed by the agent of the Maharani before the Appellate Assistant Commissioner that the Maharani had not other business except the Bihar Lantern Factory and the Hosiery Mill. It was argued by Mr. Dutt, therefore, that the assessee had produced all the relevant evidence before the Income-tax authorities and there was no legal justification for the Income-tax Appellate Tribunal to make an order of remand. On behalf of the Income-tax Department Mr. R. J. Bahadur, however, pointed out that the Income-tax Appellate Tribunal has been vested with an unqualified discretion under section 33 not merely to dismiss or allow and appeal but also to make an order of remand either to the Appellate Assistant Commissioner or to the Income-tax Officer for the purpose of further investigation of facts. Counsel based his argument under section 33(4) of the Indian Income-tax Act which reads :-"The Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate any such orders to the assessee and to the Commissioner." It is true that in a proper case the Income-tax Appellate may remand an appeal for further investigation to the Income-tax Officer under the provisions of section 33(4). It cannot be doubted that the Appellate Tribunal has a great measure of discretion granted to it under section 33(4) but the real question is whether the Income-tax Appellate Tribunal has legally exercised the discretion in this case in making the order of remand. The main point upon which the Appellate Tribunal made the order remand was whether there was likelihood that the husband of the assessee was in possession of the sum of Rs. 15,12,000 which was the value of the high denomination notes encashed after the passing of the Demonetization Ordinance. But this matter had been investigated already by the Appellate Assistant Commissioner who found after examination of the estate account books produced by the Maharaja that for the last twenty-five years the Maharaja had withdrawn a total sum of Rs. 53,00,000, mostly in one thousand rupee notes or in ten thousand rupee notes. Mr. Dutt made the submission that the material on the pointed was already before the Appellate Tribunal and there was no warrant on the Tribunals part for remanding the case to the Income-tax Officer to make a further investigation on the same point. In our opinion, the argument of Mr. Dutt is correct and the Appellate Tribunal had not justification for making the order of remand to the Income-tax Officer to bring on record further evidence on the same point. It is true that section 33(4) has granted a very wide statutory discretion to the Income-tax Appellate Tribunal in disposing of an appeal but the discretion given under this section to the Income-tax appellate Tribunal is judicial discretion which must be exercised in accordance with legal principles, and not in an arbitrary or capricious manner. The principle to be applied in such a case is pointed out by Lord Halsbury in Susannah Sharp v. Wakefield : "An extensive power is confided to the justices in their capacity as justices to be exercised judicially; and discretion means when it is said that something is to be done within the discretion of the authorities that that something is to be done according to the rules of reason and justice, not according to private opinion : Rookes case; according to law and not humour. It is to be, not arbitrary, vague, and fanciful, but legal and regular. And it must be exercised within the limit, to which an honest man competent to the discharge of his office ought to confine himself : Wilson v. Rastall." Applying this principle to this case it is manifest that the order of remand made by the Appellate Tribunal is not a legally valid order, and the first question referred to the High Court should be answered in favour of the assessee and again the Income-tax Department.
In view of the first question, we do not consider it necessary to furnish any answer to the other two questions referred by the Income-tax Appellate Tribunal.
We should make it clear that in view of our answer to the first question the appeal preferred by the Income-tax Department, namely I.T.A. 1637 of 1949-50, should be treated as still pending in the file of the Income-tax Appellate Tribunal and should disposed of in accordance with law.
The Income-tax Department should pay costs of this reference to the assessee. Hearing fee Rs. 250.
Reference answered in favour of the assessee.