1. The case of the applicant before us was referred to the Income-tax Investigation Commission by the Central Government under Section 5 of the Taxation on Income (Investigation Commission) Act, 1947. The Commission submitted its report on the October 16, 1950, and after considering the report the Central Government directed under Section 8(2) of the Act that appropriate assessment proceedings under the Indian Income-tax Act and the Excess Profits Tax Act be taken against the assessee with a view to assess or re-assess the income which had escaped income-tax assessments for the years 1941-42, 1942-43, 1943-44, 1944-45, 1945-46, 1946-47 and 1947-48 and the excess profits tax assessments for the chargeable accounting periods ended March 31, 1941, March 31, 1942, March 31, 1943, March 31, 1944, March 31, 1945, and March 31, 1946. In pursuance of those directions the Income-tax Officer and the Excess Profits Tax Officer have made re-assessments for the relevant years.
2. Under Section 8(5) of the Act the assessee filed applications for a reference to the High Court on certain questions of law, and the Commissioner of Income-tax has referred to us one question. He has also set out in the statement of the case various questions which the assessee required him to refer to the High Court and the Commissioner has given reasons why he has not referred these questions. A notice of motion has been taken out by the applicant to compel the Income-tax Commissioner to refer these questions to us.
3. With regard to the question that arises on the reference itself, the question is : 'Whether the Commission which had power to investigate and report in a case referred to them by the Central Government had any jurisdiction to estimate the income of the assessee to ascertain the loss of revenue.' This question is covered by a decision of this Court in A. A. Ansari v. Commissioner of Income-tax, Bombay City, and Mr. Kolah has fairly conceded that the decision covers the question raised. In view of that decision the only answer we can give to the question raised is in the affirmative.
4. But what has been argued before us is really the notice of motion by which the assessee has sought to raise various questions. The number of questions sought to be raised are 26, but Mr. Kolah has confined his arguments to a certain set of questions, urging before us that questions of law clearly arise and we should raise those questions. The first set of questions are questions 1, 2, 3 and 22, and these questions raise the question of the constitution of the Commission. Briefly put, the submission of the applicant is that throughout the investigation of the applicant's case the Commission did not sit as a whole, but in various important matters one or two members of the Commission sat to carry on the investigation, and the contention is that the way the case was tried clearly resulted in a body which was not the properly constituted body hearing part of the applicant's case, and therefore the ultimate decision and report of the Commission was without jurisdiction. In order to understand this contention of the assessee it is necessary briefly to look at the scheme of the Taxation on Income (Investigation Commission) Act, XXX of 1947. It may be pointed out that this Commission was born of stress of circumstances. It was set up as an exceptional Commission to deal with exceptional cases and it would be wrong to judge this Commission by the ordinary standards, which one applies to ordinary judicial tribunals. Section 3 deals with the constitution and functions of the Commission, and the relevant function with which we are concerned is the one set out in clause (b), and that is 'to investigate in accordance with the provisions of this Act any case or points in a case referred to it under Section 5 and make a report thereon (including such interim reports as the Commission may think fit) to the Central Government in respect of all or any of the assessments made in relation to the case before the date of its report or interim report, as the case may be.' Then Section 4 deals with the composition of the Commission and it provides :
'The Commission shall consist of a chairman (being a person who is or has been a Judge of a High Court) and two other Commissioners, appointed by the Central Government.'
5. Section 6 deals with the powers of the Commission. Section 7 deals with the procedure, and sub-section (1) provides :
'The Commission shall, subject to the provisions of this Act, have power to regulate its own procedure... and may act notwithstanding a vacancy in the number of the Commissioners; and the powers of the Commission under sub-sections (1), (2), (3), (7) and (8) of Section 6 and sub-sections (2), (4) and (6) of this section may be exercised by any member thereof authorised by the Commission in this behalf.'
6. Therefore, under Section 7(1) it is competent to the Commission to delegate any of the powers mentioned in that sub-section to one or more members of the Commission. In other words, in respect of the matters referred to in Section 7(1) the Commission need not sit as a whole, but one member of the Commission, if he is so authorised by the Commission itself, may discharge the duties and functions of the Commission. Section 8(1) is important from this point of view. That sub-section provides :
'Save as otherwise provided in this Act, the materials brought on record shall be considered by all the three members of the Commission sitting together and the report of the Commission shall be in accordance with the opinion of the majority.'
7. Therefore the Legislature has emphasised that as far as considering the report is concerned and considering the materials on which the report is based are concerned, the Commission must act as a whole, must sit together, and the report must be the report of the Commission either unanimous or by a majority. The very fact that the Legislature has enacted Section 8(1) goes to show that the Legislature contemplated the Commission in other matters not sitting as a whole, and therefore it was necessary to emphasise that at least in certain matters the Commission must work as a whole.
8. Mr. Kolah has emphasised the well known principle of the joint responsibility of a judicial tribunal. The principle of law cannot be disputed that when a judicial tribunal is set up which consists of more than one members, there is a joint responsibility of all the members and the tribunal must function as a whole. But it is equally well established that the Legislature may provide exceptions to this joint responsibility, and in our opinion in the Act that we are considering the Legislature in terms has provided an exception to the principle of joint responsibility and the exception is to be found in Section 7(1) of the Act. To the extent that the matters dealt with are those specified in that sub-section, it is not necessary, as far as this particular Commission is concerned, to act together or to give effect to the principle of joint responsibility. In this connection it must be borne in mind that the functions of this Commission are very peculiar. It is not merely called upon to adjudicate upon certain matters; it is also called upon to investigate into the matters upon which ultimately it will have to adjudicate. Ordinarily a Judge does not investigate. Materials are placed before him by others who carry on the investigation and the judicial function merely consists in deciding upon such materials. But this tribunal, although a judicial tribunal, has been invested with powers and functions which are in a sense non-judicial or extra-judicial. It not only acts as a Judge, but it may be said that it acts as an investigator or a prosecutor as well and therefore the Legislature clearly realised that it would not be possible in a long inquiry and investigation to insist upon all the members of the tribunal sitting together at all times and therefore advisedly the Legislature provided an exception in Section 7(1) of the Act.
9. Mr. Kolah has relied on a decision of the Supreme Court in In re All-India Industrial Tribunal. In our opinion that decision, with respect, does not lay down any new principle. The principle it lays down is the principle which we have just enunciated. In that case the Supreme Court was considering the award made by the All-India Industrial Tribunal (Bank Disputes), and what was contended before the Supreme Court was that the award was bad inasmuch as the tribunal had not functioned as a whole throughout the various stages of the inquiry, and in the judgment it is pointed out that under the Industrial Disputes Act a board of conciliation, a court of inquiry and a tribunal are set up, and whereas in the case of a board of conciliation and the court of inquiry it is expressly provided that a board or the court of inquiry having the prescribed quorum may act notwithstanding the absence of the chairman or any of its members or any vacancy in its member, such a provision is absent when we turn to the constitution of the tribunal under Section 7, and it is also pointed out the the only exception that the statute provides with regard to the joint responsibility of the tribunal is the one contained in Section 8 and that exception comes into play only when the service of the chairman or other member ceases to be available at any time, in which case another person may be appointed and the proceedings shall be continued before the tribunal so reconstituted, and as in the opinion of the Supreme Court the case they were considering did not fall within this exception, the award was held to be void. As already pointed out, in this case also we agree that if the tribunal acted outside the exception provided by Section 7(1) and discharged any functions which the law did not permit it to delegate to one member, undoubtedly, the decision of the tribunal could be legitimately challenged; but as we will presently point out, it is not the case that the tribunal has acted outside the ambit of the exception provided by Section 7(1). Mr. Kolah is not in a position to say that the Commission has performed any functions which are not covered by sub-sections (1), (2), (3), (7) and (8) of Section 6 and sub-sections (2), (4) and (6) of Section 7. Therefore, whatever work the Commission has done sitting through one member has been done within the ambit of the powers which could be delegated under Section 7(1). But what is urged by Mr. Kolah is that there is no authorisation by the Commission as required by sub-section (1) of Section 7. Now, every judicial tribunal set up by a statute must be deemed to act properly and within the powers conferred upon it by the Legislature. If a member of the Commission discharges functions which may be delegated to him by the Commission, we must presume that there was a proper authorisation. It is significant to note that Section 7(1) does not require an authorisation in writing, and therefore it would be impossible to assume that a member of the Commission would discharge the important functions vested in it by the Act without a proper authority from his colleagues.
10. Mr. Kolah has drawn our attention to a written authorisation which has been referred to in one of the affidavits. That is an order passed by the Commission which is order No. 10 and which bears the date May 20, 1948, and that authorises the members of the Commission individually to exercise the powers conferred on the Commission by sub-sections (1), (2), (3) and (7) of Section 6 of the Taxation on Income (Investigation Commission) Act. It is pointed out by Mr. Kolah that when this order was issued Mr. Justice Rajadhyaksha was a member of the Commission. Mr. Justice Rajadhyaksha subsequently resigned and Mr. Justice Chatterjee, Chief Justice of Calcutta, was appointed in his place, and Mr. Kolah says that there is no subsequent authorisation when the Commission was newly constituted by the substitution of Mr. Justice Chatterjee for Mr. Justice Rajadhyaksha, and it is also pointed out that delegation under this order is in respect of only some of the powers referred to under Section 7(1) of the Act. Now, it is an error to look upon order No. 10 as conclusive of the matter. This order is set out in the affidavit as an illustration of how authorisations were made by the Commission. It does not follow that all authorisations were in writing or that the only authorisation which was effected by the Commission was the authorisation covered by order No. 10. Therefore, the presumption to which we have already made reference must have full sway and we must assume that whatever powers were exercised by members of the Commission individually were in the exercise of an authority duly given to them by the Commission as a whole. Nothing has been pointed out to us on these affidavits which would suggest that these powers were exercised without a proper authority.
11. Therefore, in our opinion, there is no substance in the point of law attempted to be raised by Mr. Kolah with regard to the constitution of the Commission.
12. It is then urged by Mr. Kolah that witnesses were examined and explanations were called for from the assessee while the witnesses were being examined and no note of the explanations given by the assessee was kept. With regard to the examination of witnesses, the power conferred upon the Commission is under Section 6(2) which gives to the Commission the power which a court has under the Civil Procedure Code of taking evidence on oath. But there is a wider power given under sub-section (3) and that power is that in the course of any investigation if it appears to the Commission to be necessary to examine any accounts or documents or to interrogate any person or obtain any statements from any person, the Commission may authorise any income-tax authority not below the rank of an Income-tax Officer in that behalf, subject to such directions as may be issued by the Commission from time to time, and the authorised official shall examine the accounts or documents, interrogate the person or obtain the statements from the person. Therefore, without calling a person as a witness a person can be interrogated by an authorised official under the directions of the Commission under this sub-section, and it is clear that if an authorised official as a delegate can interrogate a person, much more so can the Commission itself do so. If the Commission can interrogate any person or if an authorised person can interrogate any person, it could surely also interrogate the applicant himself. But apart from that there is also power given to the Commission under sub-section (2) of Section 7 which is to call upon and give the person whose case is being investigated a reasonable opportunity of rebutting any evidence adduced against him, and there is no reason to suppose that this right of the Commission-and indeed it is more the right of the assessee than of the Commission-to call upon the assessee to give an explanation with regard to the evidence adduced against him is to be exercised at any particular point of time. It will be open to the Commission at any stage to require the assessee to give an explanation with regard to the evidence adduced against him. A particular grievance is made with regard to a person by the name of Chimanlal Ramnarayan who was examined by the Commission, and it is pointed out that he was examined in the absence of the assessee. Now, although he was examined in the absence of the assessee, it is clear from the record that a copy of the statement of what this witness deposed to was furnished to the assessee and he was specially given an opportunity of cross-examining Chimanlal if he so desired. It was for the assessee to avail himself of that opportunity or not. But it could not be said that Chimanlal's evidence was made use of behind the back of the assessee; and it appears from the affidavits that the assessee actually cross-examined Chimanlal. Therefore, if Chimanlal was interrogated under the power given to the Commission under Section 6(3), the assessee can have no grievance so long as what was elicited in the course of the investigation was not made use of without an opportunity being given to the assessee of being heard with regard to that statement.
13. The next grounds which are urged are covered by questions 14 and 15 in the reference. Question 14 makes a complaint of the fact that the Commission did not take on record all relevant evidence desired to be adduced by the assessee and in not giving the assessee a reasonable opportunity of rebutting the evidence adduced against him; and question 15 is : 'Whether the Commission was justified in law in taking into consideration only the evidence against the assessee while disregarding and not at all adverting to the evidence in favour of the assessee.' Surely, it is for the Commission to decide what is and what is not relevant evidence. With regard to the grievance that certain evidence which the assessee desired was not taken into consideration by the Commission, this question is raised under a misapprehension of the scheme of the Act. It is only when materials gathered by the Commission or by an authorised official are brought on record that they become evidence in the case, and the rules of natural justice can only apply to those materials which the Commission have brought on record and which they consider for the purpose of the case. Many persons may be interrogated, many materials may be looked into or considered, much of it may be irrelevant, and the Commission ultimately decides what is relevant material which should be brought on the record. It is only at that stage that the materials become evidence and the assessee has a right to urge that with regard to those materials which have been brought on the record his explanation should be taken and those materials should be brought on the record in a manner consistent with the rules of natural justice. It is not suggested by Mr. Kolah that with regard to any materials brought on the record under Section 6(8) of the Act the rules of natural justice were violated. We do not understand the grievance that certain evidence or certain statements which were made by certain persons were not taken on record by the Commission. It is wholly for the Commission to decide what is relevant material and what material should be brought on record under Section 6(8).
14. What is next urged is covered by questions 24 and 25. Now, pursuant to the directions issued by the Government on the December 4, 1950, the Income-tax Officer issued a notice under Section 34. It is perfectly true that in this notice no reference is made to the directions of the Government of India of the December 4, 1950, but when we turn to the assessment order it is perfectly clear that the assessment was made not under the ordinary law under Section 34, but under the directions issued by the Government of India. Mr. Kolah says that when notice under Section 34 was issued he had a right to adduce evidence and there was an obligation upon the Income-tax Officer to assess only after taking into consideration the evidence adduced by the assessee. Again, this contention is put forward under a misapprehension of the scheme of the Act. Once the Commission has made its report and given its findings under Section 8(4), the findings recorded by the Commission subject to the provisions of sub-sections (5) and (6) become final; and sub-section (5) deals with a reference to the High Court, and sub-section (6) deals with the power of the Commission to correct clerical or arithmetical mistakes. Therefore, subject to those provisions it was not open to the Income-tax Officer or the Excess Profits Tax Officer to go behind the findings of the Commission. The assessment under Section 34 is made pursuant to the directions of the Government and for the purpose of that assessment the findings of the Commission must be taken as findings of fact which cannot be challenged or controverted. Therefore, in our opinion the Income-tax Officer and the Excess Profits Tax Officer were right when they refused to allow the assessee to lead fresh evidence or further evidence with regard to his assessment or re-assessment. The whole object of the investigation would be frustrated if the matters were to be reopened at the stage when the Income-tax Officer or the Excess Profits Tax Officer issues a notice under Section 34. The notice is merely formal. The assessment is to be made in accordance with the findings of the Commission, and the Income-tax Officer or the Excess Profits Tax Officer is as much bound by the findings of the Commission as any one else. It is then pointed out that under sub-section (7) of Section 8 any evidence in the case admitted before the Commission or an authorised official shall be admissible in evidence in any proceedings directed to be taken under sub-section (2), and Mr. Kolah says that at least he had the right to place before the taxing officers the evidence which was led before the Commission. Although sub-section (7) makes the evidence admissible, it does not say anything about the relevancy of the evidence. Therefore, although the evidence may be admissible, the question would still arise whether on a particular question the evidence is relevant. If the assessee wanted to rely on this evidence in order to go behind the findings of the Commission, the evidence would not be relevant at all, and we do not see what useful purpose would have been served by the assessee drawing the attention of the taxing officers to the evidence led before the Commission when these officers were bound by the findings given by the Commission. In the assessment order the officer has rightly stated that the Investigation Commission's report and the order of the Central Government which are final is the basic evidence to be taken into account in framing this assessment. The short answer to Section 8(7) is that that sub-section does not in any way affect the finality of the findings of the Commission, which finality has been given effect to by sub-section (4) of Section 8.
15. Mr. Kolah says that whatever our view may be on the questions of law, questions of law do arise and we should ask the Commissioner to refer these questions to us. Now, when Section 8 (5) refers to a question of law it does not mean that any question of law, however frivolous, however insupportable, however inarguable, must be referred by the Commission because the assessee suggests that such a question of law arises. If the Court finds that the question of law answers itself or that it is patently inarguable, there is no reason why the time of the Commissioner or of the Court should be wasted in asking the Commissioner to refer to us questions of law. Ingenuity of lawyers will always suggest questions of law arising out of the findings of the Commission. It is only when the Court is satisfied that a question of law arises and that it requires consideration by the Court that the Court would direct the Commissioner to raise a question of law. In that strictly technical sense Mr. Kolah may be right that the questions he has argued before us are questions of law. But on a careful consideration of the points Mr. Kolah has urged before us, we have come to the conclusion that there is no substance whatever in the questions of law and no useful purpose will be served by our asking the Commissioner to refer these questions to us.
16. The result is that the notice of motion fails and must be dismissed. We have already answered the question raised on the reference.
Assessee to pay the costs of the reference including the costs of the notice of motion.
17. Reference answered accordingly.