NARASIMHAM, C.J. - This statement of the case under section 66(2) of the Indian Income-tax Act was made by the Income-tax Appellate Tribunal in consequence of a direction issued by a Bench of this court on the 2nd February, 1956, calling upon the Tribunal to refer the following question for the decision of this court :
'Whether the order of the Tribunal is illegal on account of the Tribunal having committed an error of record and the Tribunal in not having discussed the important materials in the case.'
The relevant facts are as follows. The petitioner and his two sons were members of a Hindu undivided family of which he was the karta. The family separated on the 12th March, 1945. At the time of partition a sum of Rs. 10,500 alone was kept in charge of the petitioner though it was not clearly stated for what purpose it was earmarked. On the 21st January, 1946, the petitioners son Narayan Prasad Misra encashed high denomination notes of the value of Rs. 85,000 at Sambalpur treasury after making a declaration to the effect that that sum represented the sale proceeds, including profits, of Bidi leaf business carried on by the joint family consisting of himself, his father and his brother. The Income-tax authorities suspected that this sum of Rs. 85,000 was the concealed income of the petitioner and hence in the assessment year 1946-47 they increased the total assessable income by that sum. The petitioners case before them was that the sum which originally belonged to the joint family was specially set apart and kept with him at the time of partition for the purpose of (1) paying the total income-tax that may be payable by the Hindu undivided family for the years 1944-45 and 1945-46 (which had not been finally determined then) and (2) the marriage expenses of the petitioners daughter. He, therefore, contended that the sum was not concealed income at all and that it was spent for the purposes for which it was meant. This explanation was not accepted either by the Income-tax Officer or by the Income-tax Appellate Assistant Commissioner, mainly because it was at variance with the statement made by the petitioners son while encashing the high denomination notes at Sambalpur treasury and also because in the deed of partition this sum was not at all mentioned. But when the matter was taken up before the Income-tax Appellate Tribunal, that authority was willing to accept a portion of the petitioners case. The Tribunal thought that the income-tax liability for the years 1944-45 and 1945-46 of the joint family may be roughly estimated at Rs. 20,000, at Rs. 10,000 a year, as that was the tax liability of the joint family during the previous years, and to that they added another sum of Rs. 10,000 presumably for the marriage expenses of the petitioners daughter. They accordingly exempted a total sum of Rs. 30,000 from the sum of Rs. 85,000 and directed that a sum of Rs. 55,000 alone should be held to be unaccounted income for the year in question and as such liable to assessment. They refused to state a case and when the dispute was taken up before a Division Bench of this court, that Bench thought that the Tribunal committed a serious error of record by omitting to take note of the fact that for the assessment years 1944-45 and 1945-46 of the Hindu undivided family an assessment of Rs. 78,000 had actually been made by the Income-tax Officer prior to the date of the Tribunals order, and that the Tribunal ought to have taken this figure also into account. The court further observed that the Tribunal should have discussed the evidence relating to the actual payment of income-tax by the Hindu undivided family for the years in question.
I have no doubt that the Tribunal has committed a serious error of record which has vitiated its findings. It is true that as the final court of fact, it is exclusively within the jurisdiction of the Tribunal to accept or reject the petitioners explanation to account for the sum of Rs. 85,000 encashed at Sambalpur treasury. The lower income-tax authorities consistently rejected the petitioners explanation in toto mainly because of the contradiction between that explanation and that given by the petitioners son in his statement made at the time of encashing the high denomination notes. But the Income-tax Tribunal was prepared to believe the petitioners explanation to some extent, though while estimating the actual amount that was set apart for payment of income-tax due by the Hindu undivided family for the years 1944-45 and 1945-46 it arbitrarily fixed the amount at Rs. 10,000 per year, because, according to that authority, the tax liability for the previous years was Rs. 10,000. It is now admitted that for the years 1944-45 and 1945-46 the Hindu undivided family had been assessed to a total income-tax of about Rs. 78,000. This fact was known to the Tribunal on the 6th September, 1953. It also appears that a substantial portion of this tax had been actually paid by the assessee. The Tribunal should, therefore, have considered these two important pieces of evidence, before finally deciding to deduct a substantial sum from Rs. 85,000 as having been set apart for payment of income-tax by the undivided family, at the time of partition. By their omission to do so the Tribunal has committed an error of law.
We now understand that the assessments of the Hindu undivided family for the relevant periods were taken up before the Tribunal and ultimately, on the 13th December, 1955, the total income-tax payable by the family for the years 1944-45 and 1945-46 was fixed at about Rs. 70,000 only. The Tribunal may take into consideration this final figure of assessment and also the actual amount of income-tax paid by the petitioner as the karta of the family for the years in question, before giving full effect to our order.
For the aforesaid reasons we would answer the question in the affirmative. The petition is allowed with costs. Hearing fee Rs. 100 (Rupees one hundred only).
BARMAN, J. - I agree.
Question answered in the affirmative.