Iqbal Husain, J.
(1) This is an application filed by the Assessees Messrs. Gudathur Thimmappa and Son, Raichur to direct the Appellate Tribunal to refer the question of law arising in the case for the decision of this Court under S. 82 (2) of the Hyderabad Income-tax Act. The facts of the case are briefly as follows :
(2) A notice under S. 30(2) of the Hyderabad Income-tax Act was given to the assessees for the return of their income. The return of income was due on 25-6-1949 and a 'NIL' income return was filed by the assessees. The assessees were asked to appear with the account books and other evidence in support of their return of income. The last notice under S. 30(4) of the Hyderabad Income-tax Act was served on the assessees on 19-9-1951 to produce their books on 22-9-1951. The petitioners-assessees prayed for an adjournment but the Income-tax officer, Raichur Circle as per his order dated 30-9-1951 refused the adjournment prayed for. Thereupon the assessees applied for cancellation of the assessment under S. 39 of the Hyderabad Income-tax Act, and redo the same. They filed certain papers and submitted before the officers that they were prevented by sufficient cause from non-complying with the notice served on them. The Income-tax Officer passed an order to the effect that the reasons given by the assessees have failed to convince him and therefore, dismissed the petition.
(3) The assessees filed an appeal before the appellate assistant Commissioner of Income-tax, Hyderabad, against the order of the Income-tax Officer, Raichur Circle refusing to reopen the assessment under S. 39 of the Hyderabad Income-tax Act for the year 1357 F made under S. 31(4) of the Act. The Appellate Assistant Commissioner dismissed their appeal and confirmed the order of the Income-tax officer. Two separate appeals were filed before the Income-tax Appellate Tribunal by the Assessees. One against the order of the Appellate Assistant Commissioner made under S. 39 of the Hyderabad Income-tax Act in respect of the assessment made by him for the assessment year 1357 F and another appeal was filed against the quantum of assessment which was made under S. 31(4) of the same Act.
With the latter appeal we are not concerned just at present. With regard to the former, the Appellate Tribunal held that no question of law arises out of the aforesaid order and therefore, they refused to draw up a statement of the case and refer it to the High Court of Judicature at Hyderabad under S. 82(1) of the Hyderabad Income-tax Act 1357 F. Against the order, the petitioners-assessees have filed this application praying this Court to direct the Appellate Tribunal to refer the question of law arising in the case for the decision of this Court.
(4) The assessees are a firm run in the name and style of Gudathur Thimmappa and Son carrying on business with their headquarters at Bellary. The Karta of the said firm viz. Gudathur Thimmappa urged before the Hyderabad High Court in his petition which has been subsequently transferred to this Court on integration, that there has been a failure of justice by the non-compliance of the provisions of the Act by the Income-tax Officers. They erred in construing the sufficiency of cause shown by the petitioners for non-production of the books of accounts on the due date. The grounds urged by them are as follows :
1. That he, Gudathur Thimmappa, viz. the karta was ill during the period from 10-9-1951 to 30-9-1951;
2. The headquarters of his business being at Bellary the account books were under examination of the I. T. O concerned since 7-9-1951 for the relevant assessment year;
3. That the I. T. O. Raichur Circle had given him to understand that the assessment for 1357 F will be taken up by him only after the assessment at Bellary was completed.
(5) The point to be considered is whether the Income-tax Appellate Tribunal has erred in its order that no question of law arises out of the order complained against and therefore, in refusing to draw up a statement of the case and refer Income-tax to the High Court under S. 82(1) of the Hyderabad Income-tax Act. For a proper consideration of this matter one has to consider the orders that have culminated in the order of the Appellate Tribunal. The first order is that of the Income-tax Officer, Raichur Circle who dismissed the petition of the Assessees under S. 39 of the Hyderabad Income-tax Act.
The order refers to the notice issued under S. 30(4) of the Act calling upon the assessees to produce or cause to be produced their accounts or documents and the failure of the assessees to do so, The reasons for the failure to produce the accounts are neither stated in the said order nor is there anything to show that they have been taken into consideration in a judicial way as is required under the law by the said Officer. His decision is couched is as laconic terms as possible and that is to this effect. 'The reasons given by him (the assessee) fail to convince me'.
No doubt it is true that he is an Income-tax Officer and not a Judge trying a civil or criminal case, but still appears to me that is incumbent on the Income-tax Officer when the rights of the assessees are at stake to give as judicial a decision as possible and for that purpose set out the grounds urged by the assessee and give sufficient reasons for either accepting or rejecting them. This has not been done. It looks as though the order of the Income-tax Officer is like that of a general who reported to his Headquarters and to his Government after succeeding in his campaign as follows :
'I went, I saw and I conquered.'
This laconic reasoning given by the Income-tax Officer to my mind, has greatly prejudiced the case of the assessee.
(6) For the moment I will not refer to the order of the Income-tax Appellate Assistant Commissioner, but straightway refer to the order of the Income-tax Appellant Tribunal regarding the application filed by the assessee to exercise its discretion under S. 82(1) of the Income-tax Act. That order again is also brief. It runs as follows :
'By these applications the assessees require the Appellate tribunal to refer to the High Court certain questions of law which are said to arise out of the Tribunal's consolidated order in I. T. 7422 and 7423 of 1951-52 inasmuch as in our opinion no question of law arises out of the aforesaid order of the Tribunal, we refuse to draw up a statement of the case and refer It to the High Court of Judicature at Hyderabad under S. 82(1) of the Hyderabad Income-tax Act of 1357 F.'
Later there is one further paragraph viz. Paragraph 3 referring to this matter and that is to the following effect:
The question whether the assessee was prevented by sufficient cause from producing the evidence in support of the return filed is a question of fact. The finding of the Tribunal on this question being a finding of fact, no question of law can be said to arise out of that finding. We, therefore, dismiss R. A. 403.'
Even this order dated 18-5-1954 does not give the reasons for refusing to countenance the pleas and not only the pleas but also the documentary evidence produced by the petitioners in support of their contention that they were prevented from sufficient cause from tendering the books of account before the Income-tax Officer for scrutiny on the appointed day.
(7) From a perusal of these orders one is at a loss to find out what exactly were the reasons that justified the refusal of these assessees' request. There is one considered order passed in this case which I have to refer to in this connection and that is the order passed by the Appellate Assistant Commissioner of Income-tax, Hyderabad, dated 3-3-1952, passed in appeal against the order of the Income-tax Officer, Raichur refusing to reopen the assessment under S. 39 of the Act for the year 1357 F. The learned Officer states the grounds urged by the petitioner-assessees justifying their failure to produce their accounts on the due date. I will now consider the grounds one by one.
(8) That Shri Kadathur Thimmappa, the karta of the assessee-firm was ill is borne out by the medical certificate counter-signed by the District Medical Officer, Bellary produced by the assessee. The learned Appellate Assistant Commissioner does not disbelieve this part of the evidence. But he states that the sickness of the petitioner could not constitute a sufficient case for non-compliance since he was represented by an experienced income-tax consultant who could see to the assessment proceedings in his absence and the appearance of the petitioner in person was not found to be necessary. No doubt the Income-tax Officer does give a certain reason for considering whether the sickness of the petitioner constituted sufficient cause or not.
Shri Chandrasekhar the learned Government Pleader also emphasises this fact and states that what the S. 30(4) of the Hyderabad Income-tax Act requires is for the assessee to produce or cause the account books to be produced. The learned Government Pleader emphasises the latter part 'cause them to be produced'. His argument is that the personal attendance of the assessee is not absolutely necessary. But this circumstance alone is not to be considered in isolation but should be considered with the other reasons given by the assesses for the non-production of their accounts.
(9) The other reason that is given by the assessees is that during the relevant period as their business headquarters was at Bellary, their accounts were being examined by the I. T. O. concerned since 7-9-1951 for the relevant assessment year. It is impossible for an assessee to produce his account books simultaneously at both places. The assessees, in support of their contention, have produced extracts of diaries of the Income-tax Practitioners who were representing him viz. Mr. K. R. Acharya and also the Chartered Accountant D. V. Sarovar to show that these two practitioners were busy with the assessees' books before the Income-tax Officer, Bellary and hence they also could not go up to Raichur and satisfy the Income-tax Officer with regard to the assessment pending before him.
The assessees have also produced an extract of cash book showing the expenses incurred by their staff in attending to the Income-tax Officer at Bellary, and the further document that has been filed by them is a communication received from the Income-tax Officer, Bellary dated 27-12-1951 to evidence the fact that during the relevant period when the books were called for by the Income-tax Officer, Raichur the assessees' books were being examined by the Income-tax Officer, Bellary. The learned Appellate Assistant Commissioner holds that it was possible for the petitioner or his representative to take an adjournment at Bellary and produce the books before the Income-tax Officer, Raichur.
He does not, however, negative the contention of the assessees that their books were being scrutinised by the Income-tax Officer at Bellary. There is another important reason given by the Assessees for the non-production of their accounts and that is the third ground that he has urged before the Income-tax Appellate Assistant commissioner to the following effect : That the I. T. O. Raichur Circle had given him, viz. the karta to understand that the assessment for the year 1357 F will be taken up by him only after the assessment at Bellary was completed. The learned Appellate Assistant Commissioner states that the ground that was urged before him in this regard in a little more detail is as follows:
'The point mainly pressed on his (assessee's) behalf by his authorised representative is that on 25-1-1951 the I. T. O gave a personal interview to the assessee and his representative Mr. Acharya and informed him that the assessment for the year 1357F will be finalised only after the assessment by the I. T. O. Bellary is completed.'
The learned Officer does not say that this contention is a false one. The point to be considered is taking all the three pleas put forward by the assessee, has he or has he not placed before the court grounds which, taking a judicial view of the matter, entitle the officer to come to the conclusion that there were sufficient grounds for their non-attendance on the day in question.
(10) Whether there is any material to support a finding regarding the sufficiency of the cause is a question of law. There are materials placed by the assessee which are not found to be false. But I am afraid the Income-tax Officer has not taken these materials into consideration to judge the sufficiency of cause. Even the order of the Appellate Assistant Commissioner does not go to show that the grounds urged by the assessees are baseless. He tries to explain away those grounds. When these facts are uncontroverted and are not found to be wrong what is the result? The question whether a finding of fact is inconsistent with the evidence or is contradictory thereto is a question of law.
Whether the cause shown is or is not sufficient should be decided by the Income-tax Officer judicially and not capriciously or arbitrarily or in a manner which is unsound. To my mind, in spite of the several uncontroverted facts stated above, the decision of the Income-tax Officer appears to be unreasonable. The facts establish a sufficiency of cause. Determination of sufficiency of case involves the question whether the judicial discretion of the Income-tax Officer has been exercised in a sound and reasonable manner so as to involve a question of law.
If there was no evidence at all to support the contentions of the assessee or if the evidence was unbelievable. I would straightway have agree I with the view of the Tribunal that the matter concerns only findings of fact. But in spite of them an unjudicial order is passed to the effect that no sufficiency of cause is shown. Hence a point of law arises regarding the exercise of the discretion of the Income-tax Officers. These are some of the considered which bring this case within the purview of S. 82(2) of the Hyderabad Income-tax Act.
(11) In the case reported in : 30ITR181b(SC) , Mehta Parikh and Co.v. Commr. of Income-tax, Bombay, their Lordships of the Supreme Court have held as follows:
'The facts proved or admitted may provide evidence to support further conclusions to be deduced from them, which conclusions may themselves be conclusions of fact and such inferences from facts proved or admitted could be matters of law. The court would be entitled to intervene if it appears that the fact finding authority has acted without any evidence or upon a view of facts which could not reasonably be entertained or facts found are such that no person acting judicially and properly instructed as to the relevant law would have come to the determination in question.'
(12) The decision reported in AIR 1941 Oudh 279, in the matter of Kanhaiya Lal Umrao Singh, where it is held by the Oudh High Court that the sufficiency of evidence is no doubt is a question of fact. but the question whether there is any evidence at all from which an inference could be drawn is a question of law. There is a further decision of the very same Judges in a later case reported in AIR 1941 Oudh 445, Chaturbhuj v. Commr. of Income-tax, wherein the learned Judges stated as follows :
'The question whether there were any materials upon which it could be found that there was no sufficient cause within Section 27 for not complying with the requirements of the law is one of law.'
Section 27 corresponds to Section 39 of the Hyderabad Income-tax Act.
(13) The learned Government Advocate contends that there is no question of law arises in this case and he relies on a decision reported in : AIR1940All530 Sheoduttrai Pannalal v. Commr. Of Income-tax, U. P. wherein it is held as follows :
'The question whether an assessee had or had not sufficient cause within the meaning of Section 27 of the Act is ordinarily a question of fact and no reference with regard to it is competent under S. 66(2) or (3) of the Income-tax Act.'
Section 66(2) corresponds to Section 81(2) of the Hyderabad Income-tax Act. I would like to emphasise the word 'Ordinarily' that is used in this decision. Very advisedly, if I should say so with respect, the learned Judges have used the word 'Ordinarily' and they have not made it as a sort of a general rule applicable in all cases. This case can easily be distinguished because there had been a finding by the Assistant Commissioner that the 'assessee had only produced partial accounts and there must exist supplementary set of accounts which had not been produced,' and it was stated that upon these findings it was impossible to say that the issue whether the assessee had sufficient cause within the meaning of S. 27 involved any question of law. The learned Government Pleader relies upon a decision reported in AIR 1937 PC 133, Commissioner of Income-tax, U. P. and C. P., v. Badridas Ramraj Shop Akola. In the very words of Lord Justice Lord Russel, the facts of the case are as follows :
'On 19-10-1931 the respondent applied in writing for a further adjournment alleging that he had been ill for the last month and could do no work and that his agent who had been away had returned. With this application he seems to have sent a medical certificate which, however. Merely stated that the respondent was suffering from influenza some 15 days ago and that he had gone very weak since that time and that he was still weak and suffering from a cough. Their Lordships are not surprised that the officer was unable to accept such a certificate and refused to grant any further adjournment. There would appear to be ample ground for his view that the application backed by such a certificate was merely a devise to obtain postponement.' Fortunately for the assessees in the present case there is no such adverse comment on the certificate produced by them. Neither is it the view of any of the Income-tax officers that the assessee was neither ill nor that they produced a certificate as a mere devise for obtaining postponement. As I have stated not only the certificate but the other grounds urged by the assessees have been accepted as correct by the officers concerned. But still they have come to the conclusion that the matter raised only a question of fact and not a point of law.
The Privy Council case cited by the learned Government Pleader is completely distinguishable from the facts of the present case. In this case not only was there a medical certificate produced but there was a further fact which, to my mind, titled the issue, viz. that there was an undertaking given by the Income-tax Officer, Raichur Circle that the accounts of the assessee will be scrutinised only after he had done with the assessment work before the Income-tax Officer, Bellary.
(14) Sri Krishna Murthy the learned Advocate for the assessee-petitioners has two strings to his bow. One is, as I have stated above, his argument to the effect that whether there is any evidence from which an inference regarding sufficiency of cause could be drawn is a question of law. The second string to his bow is that if it raises a question which is partly relevant and partly irrelevant or partly a question of law and partly a question of fact if according to him, it is in the domain--perhaps not an unknown domain but a known domain where both these boundaries meet, still he has cause of action. In support of his contention he has cited the decision reported in : 26ITR736(SC) . Dhirajlal Girdharilal v. Commr. of Income-tax, Bombay, His Lordship Justice Mahajan has stated as follows :
'The question whether or not the Hindu undivided family was doing business in shares transferred to it by the firm is undoubtedly a question of fact; but if the Court of fact, whose decision on a question of fact is final, arrives at this decision by considering material which is irrelevant to the enquiry, or by considering material which is partly relevant and partly irrelevant, or bases its decision partly on conjectures, surmises and suspicions, and partly on evidence then in such a situation clearly an issue of law arises.'
Further in the decision reported in Meenakshi Mills, Madurai v. Commr, of Income-tax, madras, : 1SCR691 certain principles are laid down by His Lordship Venkatarama Iyer J. as follows:
(1) when the point for determination is a pure question of law such as construction of statute or a document of title, the decision of the Tribunal is open to the reference to the Court under S. 66(1).
(2) When the point for determination is a mixed question of law and fact while the finding of the Tribunal on the facts found is final, its decision as to the legal effect of those findings is a question of law which can be reviewed by the Court.
(3) The finding on a question of fact is open to attack under S. 66(1) as erroneous in law when there is no evidence to support it or if it is perverse:
(4) When the finding is one of fact, the fact that it is itself an inference from other basic will not alter its character as one of fact.'
Mr. Krishna Murthy relies upon the principles nos. (2) and (3) as applicable to the facts of this case and I agree with his contention.
(15) In a further decision of the Supreme Court reported in : 32ITR664(SC) Oriental Investment Co., Ltd. v. Commissioner of Income-tax. Bombay, it is laid down as follows :
'The Court has no jurisdiction over conclusions of fact except to see whether there is evidence to justify them and that proper principles have been applied. The inference from facts will be a question of fact or of law according as the point for determination is one of pure fact or a mixed question of law and fact. The primary requirement of Sub-section 1 and 2 of Section 66 is that there must be a question of law arising out of the order. To draw a line between what is a question of law and what is a question of fact is not always easy. It is difficult to define this distinction.'
His Lordship Justice Kapur has, with approval quoted the guiding principle laid down in the judgment reported in : 1SCR691 .
(16) Taking into consideration the several cases cited at the Bar, the facts and circumstances of this case, I come to the conclusion that a question of law arises in this petition and I further find that the decision of the Appellate Tribunal is incorrect when it states that no question of law arises. We direct that the Appellate Tribunal do refer the following case to the High Court :
'Whether in the circumstances of the case as alleged and on the findings of the Income-tax Officers the assessee were not prevented by sufficient cause from complying with the notice issued under Section 30(4) of the Hyderabad Income-tax Act.'
Ahmed Ali Khan, J.
(17) In the circumstances of the case I agree with the conclusion arrived at by my learned Brother. The question of sufficiency of cause involves the question whether judicial discretion has been exercised in a sound and reasonable manner or in a judicially unsound manner so as to involve a question of law. The Income-tax Officer undoubtedly had such a discretion under Section 39 of the Hyderabad Income-tax Act and the Assistant Commissioner or Income-tax Act and the Assistant Commissioner of Income-tax had also a similar discretion in an appeal under that section. I would hold therefore, that a question of law, viz. whether or not the discretion given by S. 39 of the Hyderabad Income-tax Act was properly exercised, arises out of the order of the Income-tax Officer and thus, we require the Tribunal to state the case to refer to this Court.
(18) Costs in respect of this application will abide by the final order for costs which will be made on the reference. The fee of the advocate is fixed Rs. 100/-.
(19) Petition allowed.