DEKA, J. - This is a reference invited under section 66 (2) of the Indian Income-tax Act, and a statement of the case has been made in accordance with the order of this court. The points under reference are as follows :
"1. Whether the statements of the two depositors, Suraj Mian and Mohomad Talim, which were not recorded on oath in clear violation of section 37 of the Indian Income-tax Act, would be admissible in evidence and could be acted upon in holding the sum of Rs. 85,050 kept as deposits to be the income of the assessee ?
2. Whether the affidavits filed by the depositors before the learned Appellate Assistant Commissioner, admitting the said deposits to be their own moneys, could not be relied on and acted upon in law, in the absence of any rebutting evidence, without an examination of the persons filing the affidavits ?
3. Whether the entries in the books of account of the assessee kept in regular course of business showing the deposits in the names of remaining depositors, whose statements were not recorded under section 37 of the Income-tax Act, but who filed affidavits admitting the amounts deposited to be their own money, could be held in law to be not genuine in the absence of any rebutting evidence whatsoever in record and simply on the basis of the alleged statements made by the two depositors only ?
4. Whether, in the facts, circumstances and evidence adduced in the case, the addition to the total income, as income from undisclosed source of a sum of Rs. 85,050 being aggregate of the credits in the names of 9 (nine) different third parties, was legally justified ?"
The facts shortly put are that the assessee was a Hindu undivided family and Sri Balabux More was the karta at the material period. The family carried on business in jute, mustard goods, grocery, cloth etc., at Kaibargaon in the district of Nowgong, with branches at 0several places, including Juria and Calcutta. In course of examination of account books of the Juria branch, the Income-tax Officer, Nowgong, discovered cash deposits in the names of several persons totalling a sum or Rs. 85,050 as detailed below :
Abdul Mia ..
Bahadur Mia ..
Abdul Subhan ..
Sk. Mahabattulla ..
Suraj Mia ..
Mohd. Talim ..
The assessee explained that he had taken temporary loans from the above-named persons with a view to meet his liabilities to certain Calcutta parties. The alleged depositors were found to be all cultivators by profession, and the Income-tax Officer issued summonses under section 37 of the Indian Income-tax Act to the first eight persons for examination, but only one of them, namely, Suraj Mia, appeared before him, and the last depositor, Md. Talim, was also produced before him, and they were examined by the Income-tax Officer in the presence of the assessee or rather his representative. They did not support the entries as such or the deposits shown to their credit. Their statements were recorded by the Income-tax Officer, but they were administered no oath prior to the recording of their statements. On an examination of the accounts submitted by the assessee and on a scrutiny of the statements made by these two persons, the Income-tax Officer refused to hold that the transactions as shown in the books of account of the assessee were genuine. He accordingly treated the sum of Rs. 85,050 as hidden profit of the assessees firm and accordingly added it to the income of the assessee for the accounting year 2006 S. Y., the relevant assessment year being 1950-51.
An appeal was preferred against this assessment by the assessee before the Appellate Assistant Commissioner of Income-tax. During the tendency of this appeal, the two persons - Suraj Mia and Mohd. Talim -filed two affidavits retracting their statements already made before the Income-tax Officer, and asserting that it was due to some sort of threat held out by the Income-tax Officer that they had made incorrect statements before him. On the other hand, in the affidavits filed before the Appellate Assistant Commissioner, they stated that the monies shown against their names as deposits in the books of account were correct. The other persons whose names appeared as depositors in the books of the assessee in regard to the other amounts, as mentioned above, also filed affidavits stating that they had deposited the amounts with the assessee as shown in their books. The learned Appellate Assistant Commissioner took into consideration these affidavits filed as well as the books of account of the assessee. In his opinion, these affidavits did not show the real state of things - the alleged depositors having had at no time any sizable amount to their credit. He finds categorically that some of the alleged depositors had financial transactions with the assessee during the accounting year concerned other than the cash deposits in question, and it is seen from those transactions that petty amounts were being deposited by them from time to time followed by withdrawals at short intervals, leaving practically no balance to be carried forward for the next year. In consideration of the circumstances, he held that the entities in the assessees books were not correct and the affidavits filed could not be believed. He accordingly affirmed the finding of the Income-tax Officer with regard to this Rs. 85,050 as undisclosed income of the assessee and upheld the assessment. An appeal being taken against this assessment by the assessee to the Appellate Tribunal, this point was discussed and the relevant finding is in these words :
"4. The addition of Rs. 85,050 being the aggregate credits in 9 names must remain added. We agree with the Department for the reasons given by the Income-tax Officer and Appellate Assistant Commissioner, that the assessee has failed to prove the source of these credits."
Mr. P. Chaudhuri appearing on behalf of the Department has contended that the point under reference do not strictly arise from the order of the Appellate Tribunal, that being a condition precedent under section 66 (1) of the Income-tax Act. For our purpose, we need not answer that point categorically, the reference being already made under the directions of this court. I, therefore, propose to go straight into the points as raised and answer them.
Much stress has been laid on the first point as formulated, namely, as to whether it was obligatory on the Income-tax Officer to administer oath to the two persons appearing before him, namely, Suraj Mia and Mohd. Talim, when they were examined in pursuance of the provisions of section 37 of the Income-tax Act. The question is : Whether the statements of these two persons which were not recorded on oath, were admissible in evidence and could be acted upon in holding the sum of Rs. 85,050 to be the income of the assessee. On a reference to section 37 of the Act, it would appear that it gives the Income-tax Officer, Appellate Assistant Commissioner, Commissioner and Appellate Tribunal the powers as vested in a court under the Code of Civil Procedure, 1908, when trying a suit in respect of the following matters, namely :
(a) discovery and inspection;
(b) enforcing the attendance of any person, including any officer of a banking company, and examining him on oath;
(c) compelling the production of books of account and other documents; and
(d) issuing commissions.
Section 37 (1) (b) provides that the officers named in the section have the power of "enforcing the attendance of any person, including any officer of a banking company, and examining him on oath." Here, though eight persons were summoned to appear before the Income-tax Officer for the purpose of examination, as provided under this section, two of them appeared and their statements were recorded, but not on oath. The first part of the question is : whether the Income-tax Officer concerned could examine the two persons in question at all without administering oath or affirmation; and the second branch is : if those two persons were so examined, whether their statements would be admissible for the purpose of the case. The relevant part of the section, as I have already quoted, does not lay down any obligation to administer oath, but it empowers the officer so to do. Therefore, he could examine the persons even without administering oaths. The second branch of the question is answered by section 13 of the Indian Oaths Act (X of 1873) itself, which runs as follows :
"No omission to take any oath or make any affirmation, no substitution of any one for any other of them, and no irregularity whatever, in the form in which any one of them is administered, shall invalidate any proceeding or render inadmissible any evidence whatever, in or in respect of which such omission, substitution or irregularity took place, or shall affect the obligation of a witness to state the truth."
In this case, therefore, the statements of the persons were admissible, and we must accordingly answer the first point raised under reference in favour of the Department.
The second point which I have already quoted raises the question as to whether the affidavits filed at the appellate stage before the Appellate Assistant Commissioner were conclusive on the point under investigation, and whether the Appellate Assistant Commissioner was obliged to act upon the same in the absence of any rebutting evidence. The portion of the judgment of the Assistant Commissioner on this particular point has been placed before us, and we find that he has given his own reasons as to why he preferred to reject the affidavits filed by the alleged depositors. His finding is purely a question of fact and we find no illegality in arriving at the same, nor do we consider it to be perverse. It is not necessary in all cases that the Department should come with some rebutting evidence of its own, but the parties concerned are entitled to make out a case on the materials as they are before the officer concerned. Therefore, it would depend always on the circumstances of each case as to whether an affidavit commands credit, irrespective of the fact as to whether the deponent turns up for examination or not.
The third point under the reference is inter-connected with the first two points already answered. The finding is quite clear that the assessees accounts were not trustworthy in the estimation of the taxing officer-nor did the Appellate Assistant Commissioner believe that they were made in the usual course of business. The relevant extract runs as follows :
"On a scrutiny of the books, it is evident that the entries in respect of the alleged cash deposits were not made in usual course of entering other business transactions. Also at no time in the past or future any of the alleged depositors have been shown to have made such large deposits with the assessee for safe custody or any other purpose. In fact, these petty cultivators could hardly have had so much surplus money with them. On these facts and circumstances, I am of the view that the Income-tax Officers action in treating the alleged deposits as the assessees income from some undisclosed source is quite justified."
No limit can be put to the discretion of the officer concerned as to whom or what document he will believe or what he will reject. He can take into consideration all relevant and admissible evidence rather in a wider sense than strictly legal and, therefore, there was nothing wrong in rejecting the statements contained in the affidavits of persons who did not offer themselves for interrogation before the Income-tax Officer concerned.
The fourth point really summarises the earlier contentions raised in the above three points. Those points being decided against the assessee, this point also must be answered in favour of the Department.
In our opinion, therefore, the reference is disposed of as indicated above, and all the points are answered in favour of the Income-tax Department. The assessee is to pay the costs of this reference, which we assess at Rs. 100.
SINHA, C. J. - I agree. In my opinion, the provisions of section 37 of the Indian Income-tax Act are enabling inasmuch as they vest the Income-tax Officer and the other authorities of the Income-tax Department mentioned therein with powers to enforce the attendance of any person and examine him on oath or affirmation, as also to exercise the other powers mentioned in the section. Under section 37 if the Act, therefore, the Income-tax Officer or the other officers of the Department mentioned therein have the power to enforce the attendance of any person who may be able to give information to the officer concerned in regard to the assessment. It is now firmly established that the materials on which the assessment is based may be such materials as may not be such materials as may not be admissible under the rules of the Evidence Act. The Income-tax Officer must available to the assessee, so that he may have a chance of satisfying the officer by giving any rebutting evidence to those materials. See Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax. In that view of the matter, the material furnished by the statement of a person whose attendance is enforced by the Income-tax Officer or any other officer of the Department, is good material, although that statement is not made by the person on any oath or affirmation. The provisions of this section do not compel the authorities mentioned therein to take statements of persons only upon oath.
Reference answered accordingly.