B.K. Mehta, J.
1. Shortly stated, the facts leading to these two references are as under :
The relevant assessment years are 1957-58 and 1958-59. The assessee of Income-tax Reference No. 208 of 1974 is a building contractor and he undertakes construction works of the Government and semi-Government bodies. For the assessment year 1957-58, he had undertaken the construction works which are broadly known as 'N' group and 'B' group works. He also entered into a sub-contract with M/s. Allied Construction Co., for the construction work known as 'O' group work. Assessee, Thobhandas J. Gajjar, of Income-tax Reference No. 45 of 1974 was also carrying on the business of construction works in partnership under the name and style of M/s. Gajjar & Company, and he entered into a contract with the erstwhile Bombay Housing Board for purposes of constructing 2,136 tenements at Bapunagar, Ahmedabad, in February, 1955. The contract was entered into with the Housing Board in the name of Pravin Construction Company. This contract is knows as 'P' group contract.
2. Before the Income-tax Officer, it was contended on behalf of Shri Thobhandas J. Gajjar that he had assigned the said contract to one Shri Vasantlal who was the proprietor of M/s. Vasant & Company for a consideration of payment of commission of 2 1/2% to the said Shri Gajjar. This Vasantlal happened to be the brother-in-law of the assessee, Popatlal Panachand Shah of Income-tax Reference No. 208 of 1974.
3. The controversy with which we are concerned in these two references is pertaining to the income arising from the works of 'P' group contract entered into with the Bombay Housing Board by the said Shri Gajjar. In the course of the assessment of both the assessees, viz., Popatlal Panachand Shah of Income-tax Reference No. 208 of 1974 and Thobhandas J.Gajjar of Income-tax Reference No. 45 of 1974, for assessment years 1957-58 and 1958-59, it was contended by Shri Gajjar that he had not executed the contract since it was assigned to the aforesaid Vasantlal, who was a benamidar for the aforesaid assessee, Popatlal Panachand Shah. Voluminous evidence was led before the Income-tax Officer by both the aforesaid assessees, namely, Popatlal Panachand Shah and Thobhandas J. Gajjar. According to Thobhandas, he was entitled so far as 'P' group construction works were concerned to charge 2 1/2% commission and the entire contract was carried out virtually by the aforesaid assessee, Popatlal Panachand and the income under the said contract had really gone to Popatlal through benamidar, Vasantlal, of M/s. Vasant & Company and for all intents and purposes that income was income of the assessee, Popatlal. In the course of the assessments for the assessment year 1957-58, it was, inter alia, urged on behalf of the assessee, Popatlal, that the Income-tax Officer had no jurisdiction to investigate about the real ownership of the income under 'F' group contract since in Civil Suits Nos. 1766 of 1957 and 18 of 1958 in the Court of Joint Civil Judge (J.D.), Ahmedabad, between the labour contractors for carpenting work on the one hand and the assessee, Thobhandas J. Gajjar on the other and in Civil Suit No. 1873 of 1957 in the Court of Joint Civil Judge (J.D.), Ahmedabad, between the labour contractors and both the assessees, where, inter alia, questions arose as to whether Shri Gajjar had in fact and law entered into the contract for execution of 'P' group contract works and was, therefore, responsible for the debts of the labour contractors employed for purposes of execution of the said contract works, or that the contract was assigned to Vasant & Company and, therefore, the assessee, Popatlal was responsible for the said liability, the learned civil judge by his common judgment and order dated 28th February, 1960, found on the evidence that the aforesaid Thobhandas J. Gajjar had not assigned the contract to Vasant & Company and it was he who in fact carried out the contract and, therefore, he was liable for the dues of the plaintiff and, in that view of the matter, the learned civil judge passed decrees in all the three suits against Thobhandas J. Gajjar and exonerated Popatlal Panachand Shah from the liability of the said suit debts. Thobhandas J. Gajjar, therefore, carried the matters in appeal before the Court of Extra Assistant Judge of Ahmedabad, from the aforesaid judgment and decrees, who, by his common judgment and decree of 30th June, 1961, on re-appreciation of the entire evidence upheld the findings of the civil judge and dismissed the appeals. It was, therefore, urged on behalf of the assessee, Popatlal Panachand Shah, that in view of these questions being concluded in civil courts, the Income-tax Officer should not go behind the judgment and decree of the civil courts and must hold that it was Thobhandas who was, for all intents and purposes, the owner of the income earned under 'P' group contract works. This contention did not impress the Income-tax Officer as in his view there were certain additional facts which were brought on record before him in the course of the inquiry in assessments of the said two assessees, which established that all the income in respect of 'P' group contract works were firstly received by Shri Gajjar, who credited to his bank account in the name of Pravin Construction Company, and he on his part transferred identical amounts to the bank account of Vasant & Company out of which substantial amounts were transferred from M/s. Vasant & Company to the said assessee, Popatlal Panachand Shah. In other words, it was found by the Income-tax Officer on this additional evidence that the income earned under the said 'P' group contract works ultimately reached the hands of the assessee, Popatlal Panachand Shah, and he must, therefore, be assessed on that income. The Income-tax Officer, however, for protection of the revenue, assessed Shri Gajjar also for the said income as in the opinion of the Income-tax Officer, the question was not free from doubt as to who was the real owner of that income, since the civil courts have held that Gajjar was responsible for the execution of the said contract, and, therefore, included the income from this contract in the total income of Shri Gajjar also. The Appellate Assistant Commissioner, however, in appeal preferred by the assessee, Popatlal, confirmed the order of the Income-tax Officer as in his opinion since the assessee, Popatlal, had not gone in appeal before the Tribunal from his orders confirming the assessments in respect of the income from the 'P' group contract works in his hands in earlier years, and, therefore, accepted the assessments of such income in his hands. He accordingly allowed the appeal of the assessee, Thobhandas, against the protective assessment and deleted the said income from his assessments. The assessee, Popatlal, went in appeal before the Tribunal from this order of the Appellate Assistant Commissioner while the Income-tax Officer preferred an appeal from the order of the Appellate Assistant Commissioner in the matter of assessments of Thobhandas.
4. Before the Tribunal, on behalf of the assessee, Popatlal, it was, inter alia, contended that in case of disputed title to income the orders of civil courts should be held binding and the Income-tax Officer was not entitled to go behind these decisions where the civil courts have found that it was Thobhandas who had undertaken and executed the 'P' group contract works and all his pleas about the assignment of the contract work in consideration of commission of 2 1/2% through Vasantlal of Vasant & Company were with an ulterior purpose of evading income-tax and, therefore, it was Thobhandas who was liable for the debts of the sub-contractors employed by him and the assessee, Popatlal Panachand, was merely a manager of M/s. Pravin Construction Company under whose name and style Thobhandas had undertaken the 'P' group contract works from the Bombay Housing Board. This contention did not impress the Tribunal which held that the Income-tax Officer was entitled to go behind the civil court's decision in view of the additional evidence which had been brought on record before him and in view of the significant fact that ultimately the income earned under the said contract reached the assessee, Popatlal, he should be held to be the owner of the said income and liable to be assessed on it. The Tribunal, therefore, dismissed the appeal of the assessee, Popatlal. The Tribunal accordingly upheld the order of the Appellate Assistant Commissioner in the appeal of Thobhandas against the protective assessment and dismissed the appeal of the Income-tax Officer from the said order of the Appellate Assistant Commissioner. At the instance of the assessee, Popatlal Panachand Shah, the following question has been referred to us in Income-tax Reference No. 208 of 1974 :
'Whether, on the facts and in the circumstances of the case, and also keeping in view the judgments of the joint civil judge and extra assistant judge referred to in the statement, the Tribunal was right in law in holding that it was Shri Popatlal P. Shah and not Thobhandas J. Gajjar, who was taxable in respect of the income from the execution of 'P' group contract for the assessment years 1957-58 and 1958-59 ?' Similarly, at the instance of the revenue, the following question has been referred to us in Income-tax Reference No. 45 of 1974 :
At the time of hearing of these references, which we have heard together, on behalf of the assessee, Popatlal Panachand Shah, the following contentions were raised :
(1) The Income-tax Officer has no jurisdiction to go behind the judgment and decree of the learned civil judge, as confirmed by the extra assistant judge in the three civil suits filed by the sub-contractors against both the assessees, holding that Popatlal Panachand was merely a manager and it was for all intents and purposes Thobhandas J. Gajjar who had entered into the contract with the Bombay Housing Board in the matter of 'P' group contract works and executed the same and, therefore, it was Thobhandas and not Popatlal who was responsible for the dues of the sub-contractors.
(2) In any case there was no scope and question to investigate and ascertain whether Vasantlal of M/s. Vasant & Company was benamidar of Popatlal Shah for the income of the business of 'P' group contract works since Thobhandas could not have, in law, assigned and transferred the contract in question with the Bombay Housing Board in respect of the 'P' group contract works nor in fact he had assigned or transferred and in absence of legal and valid transfer of the contract to Popatlal Panachand Shah, or for that matter to Vasantlal as his benamidar, the income earned from that contract must be treated as income of Thobhandas.
5. The contentions were sought to be repelled on behalf of the assessee, Thobhandas, as well as on behalf of the revenue by urging that the civil court's judgment can be binding either as precedent or on principle of res judicata and there cannot be any bar of res judicata to a statutory authority whose duty and right it is to investigate and determine to whom really the income belongs. The Income-tax Officer is a Tribunal of exclusive jurisdiction for purposes of assessment and under the Income-tax Act, he has to decide, whether a particular receipt is 'income' or not and who is the real owner of that income. The decision of the Income-tax Officer may be challenged in proceedings before the superior Tribunal established under the Income-tax Act. But the statutory authority, namely, the Income-tax Officer, cannot be prevented from determining a question which is purely within his jurisdiction for purposes of assessment on the principle of res judicata for the obvious reason that the statutory authority, viz., the Income-tax Officer, was not a party to the proceedings or the suits between two private persons. What the Income-tax Officer has done in the present case is to determine, whether the income belonged to the assessee, Thobhandas, or to Vasantlal of M/s. Vasant & Company, who was the benamidar, for the assessee, Popatlal, and the finding that Vasantlal was the benamidar of the assessee, Popatlal, is a pure question of fact, which cannot be gone into by this court in a reference made under the Income-tax-Act.
6. Before we deal with the respective contentions of the parties, it would be profitable to refer to what the Tribunal has found as a matter of fact in these cases. The material part of the findings of the Tribunal are recorded in the following terms :
'Some important points which have come out may be recapitulated. The contract was taken by Shri Gajjar in his name. Before the tender was passed Shri Gajjar got a document signed by Shri P. P. Shah assigning sub-contract to Shri P. P. Shah but Shri Gajjar had not signed the document. After the contract was taken, another agreement was executed assigning the contract to Shri Vasantlal under the name of Vasant & Co. This too was not signed by Shri Gajjar. Shri P. P. Shah stood as surety for his brother-in-law, Shri Vasantlal, executing the contract. It appears that the actual execution of the work was done in the initial stages by Shri P.P. Shah. He claims to have done this as were however done by Shri Gajjar. It is explained that being the person legally liable for the contract he could not escape this position.
19. The civil courts had definitely come to the conclusion that Shri P. P. Shah was working as a manager of Shri Gajjar and the liability to pay for the work done by petty labour contractor was that of Shri Gajjar even when the work was assigned by Shri P. P. Shah. The courts have held that the documents assigning the sub-contract to Shri P. P. Shah and the later document assigning the contract to Shri Vasantlal are not enforceable documents as Shri Gajjar had not signed the same .....
20. Another important aspect is that substantial funds received for this contract by Shri Gajjar were passed on to the bank account of Vasan & Company. On the one hand on behalf of Shri Gajjar it is explained that Shri Gajjar lost control over the money and also significantly the address of the bank account of M/s. Vasant & Co. was given as that of Shri P. P. Shah; no funds have come back to Shri Gajjar. On behalf of Shri P. P. Shah it is urged that Shri Gajjar had obtained signatures of Shri Vasantlal on blank cheques and did whatever he liked with the funds and the bank account. On behalf of Shri Gajjar it is explained that the moneys in fact went to Shri P. P. Shah most of these were collected through Shri P. P. Shah's employees and they had stated in their examination that the moneys were given to Shri Shah and some admittedly found place in the bank account of Shri Shah. On behalf of Shri Shah it is explained that as he had to incur expenses and even to provide loans to Shri Gajjar, some funds which came to him were utilised for these purposes'.
7. It would also be profitable at this stage to advert shortly to the facts and circumstances which led to the litigations between the labour contractors and both the assessees and what the civil courts have decided in these litigations. Three suits were filed in the Court of Joint Civil Judge (J.D.) at Ahmedabad, being Civil Suits Nos. 1766 of 1957, 1873 of 1957 and 18 of 1958 by the labour contractors for recovery of their dues. Civil Suit No. 1766 of 1957 was filed by labour contractor, Mistry Ramjibhai Bhimjibhai, for recovery of Rs. 3,085 being the amount of carpenting work in the execution of 'P' group contract works against the assessee, Thobhandas Gajjar. The Second Suit No. 1873 of 1957 was filed by Lallubhai Kunverji for recovery of Rs. 2,075 being the amount due for his work of supplying hardware and entering materials against Pravin Construction Company and both the assessees, Thobhandas J. Gajjar and Popatlal Shah. The third Suit No. 18 of 1958 was filed by Karsandas Hamirbhai for recovery of Rs. 2,560 being the amount due for his masonry work against the assessee, Thobhandas, as the other (sic) of Pravin Construction Company.
8. In Civil Suits Nos. 1766 of 1957 and 18 of 1958 the defence of the assessee, Thobhandas, was inter alia, that there was no privity of contract between the parties since the contract was not entered into with the respective plaintiffs by the assessee. Thobhandas, and in fact, the assessee, Thobhandas, had assigned the contract entered into with the Bombay Housing Board to Shri Vasantlal Mohanlal who happened to be the proprietor of M/s. Vasant & Company, and it was Vasantlal who had given the sub-contract to the respective plaintiffs. It was further contended by the assessee, Thobhandas, in those suits that Vasantlal and the assessee, Popatlal Panachand Shah, were relatives and they had conspired to involve the assessee, Thobhandas, by creating false documents. In fact, it was further contended by the assessee, Thobhandas, that he had paid all the bills of 'P' group contract works to Vasantlal and he was, therefore, not liable for the suit dues.
9. In Civil Suit No. 1873 of 1957 where the assessee, Popatlal Panachand Shah, was a party, the assessee, Thobhandas, contended in the written statement that the assessee, Popatlal, who was defendant No. 3 in the suit, had no concern with the contract relating to construction of 2,136 tenements of 'P' group contract with the Bombay Housing Board and that the assessee, Popatlal, was never authorised or advised by the assessee, Thobhandas, to give sub-contract of the work to the plaintiff, nor had he given any authority to purchase and sign the bills. Assessee, Thobhandas, further contended that he had assigned the contract in question to Vasantlal Mohanlal who was the owner of M/s. Vasant & Company and it was Vasantlal who had given the work to the plaintiff and Vasantlal and Popatlal who were relatives had conspired to involve the assessee, Thobhandas, falsely in the suit. He had in fact paid all the bills to Vasantlal and, therefore, he was not liable for the suit dues. Assessee, Popatlal, contended in his written statement that he was working as an agent of Pravin Construction Company and, therefore, the plaintiff of that suit had no right to recover the money from him.
10. On the above pleadings, the trial court raised necessary issues and recorded the evidence of the respective plaintiffs as well as of both the assessees, namely, Thobhandas and Popatlal. At the hearing the three suits were consolidated and the learned civil judge by his common judgment and order held in effect that the assessee, Popatlal, was merely a manager of Pravin Construction Company in whose name the assessee, Thobhandas, had taken the contract for execution of 2,136 tenements at Bapunagar in Ahmedabad from the Bombay Housing Board, which was known as 'P' group contract; and that the assessee, Thobhandas, had not assigned the contract to Vasant & Company. In Civil Suit No. 1873 of 1957 where the assessee, Popatlal, was a party numbered as defendant No. 3 and Pravin Construction Company and the assessee, Thobhandas, were numbered as defendants Nos. 1 and 2, the learned civil judge raised the following pertinent issues Nos. 3 and 4 :
'3. Whether the plaintiff proves the suit claim against all or any of the defendants
4. If so, from whom
11. While dealing with these issues, the learned civil judge has observed as under :
'It is a fact that the defendant, Thobhandas, had kept the contract of 'P' group tenements in the name of his company, Pravin Construction Company, and for this there is no dispute, that the evidence of defendant, Thobhandas, is that he had given the sub-contract to Vasant & Company whose owner is Vasantlal. For this the defendant wants to rely on the writing of contract, exhibit 92. According to him, first, he had given contract to Popatlal as per writing, exhibit 82, but as Popatlal told that the sub-contract should be given to Vasantlal & Company as Vasantlal was his, i.e., Popatlal's relative. While Vasantlal's evidence is that he had not kept any contract from the defendant, Thobhandas, but he was his servant on monthly pay of Rs. 150 and he had to sign as per direction of Thobhandas and so he had signed exhibit 92 and the cheques. He also states that the defendant had opened khata in his name in Punjab National Bank and the defendant, Thobhandas, had told him to sign as per his directions in order that the defendant, Thobhandas, may not have any trouble in income-tax. He also says on oath that this fact he had stated before the income-tax department also. Now, it is a fact that this Vasantlal had never done contract work before this alleged sub-contract and so it is not possible that the defendant, Thobhandas, would give contract of huge amount of lakhs of rupees to him. Similarly, Vasantlal also says on oath that he had signed letters, exhibits 117, 118, 119, to Gajjar and Shah and the writing in it is not his and that he signed them only at the instance of the defendant, Thobhandas. These letters, exhibits 117-118, are dated February 15, 1955, and February 11, 1955 i.e., prior to tender of the defendant to the Housing Board will also show that the letters do not make the defendant in proving sub-contract to Vasant & Company. He also admits that cheques, exhibits 115, 1 to 4, bear his signatures but he had signed bearer cheques at the instance of the defendant. From those cheques the defendant, Thobhandas, wants to show that cheques were given by Vasant & Company to the plaintiff, Lallubhai Ramji of C.S. No. 1873/57. These cheques are exhibits 120 to 123. Now, a perusal of these cheques shows that they are bearer cheques and are cashed not by plaintiff, Lallubhai Ramji, but three of them are cashed by one Ratila M. Patel and one by Jayantilal R. Patel. Lallubhai, the plaintiff, also says on oath that no cheques were given to him by Vasantlal & Company. This fact supports the evidence of Vasantlal who says that defendant, Thobhandas, had opened Khata in his name in Punjab National Bank and that he used to sign blank cheque, of the clear work which were remaining with the defendant, Thobhandas, ..... It Vasantlal had really given these cheques, exhibits 120 to 123, he would have drawn them as cross cheques in order to prove that he had made payments to Lallubhai Ramji. It is also argued that Popatlal has passed surety bond for Vasantlal, exhibit 83, and that shows that the sub-contract was given to Vasant & Company but, we have to note that defendant has to make a show of real contract and so he has made Popatlal to sign it as Popatlal was his servant, i.e., manager. It is also argued by the defendant's learned advocate that Vasantlal had never given orders for timbers and the order shows that it was for 'P' group work. These orders are exhibits 117 and 119. These orders are to one Gajjar and Shah and we have to note that defendant is a partner of Gajjar and Shah. As I stated before, the defendant has to make a show that the sub-contract was given to Vasant & Company and so he has made Vasantlal while these orders (sic) as Vasantlal was serving under him ...... Moreover, we have to note that Thobhandas has even given a certificate to the Housing Board that Vasantlal was his servant for 12 months. If Vasantlal was really his sub-contractor he would not give such certificate. Moreover, the defendant admits that he has never informed the Housing Board that he had given sub-contract to Vasant & Company. Moreover, the defendant, Thobhandas, is not even able to produce a single bill given to him by Vasant & Company, for the work done by him as per sub-contract. No doubt he wants to rely on his books of accounts of Samvat years 2011, 2012 and 2013, where there are entries in khata of Vasant & Company but as I remarked before in order to save him from paying the excessive income-tax and in order to show to the income-tax authorities he has to maintain such khatas. Therefore, all these facts clearly show that in fact no sub-contract was given to Vasant & Company, and even according to the terms of the Housing Board tender no sub-contract could be given.
(14) It will be seen from the agreement and final bill, etc., that Popatlal singed as the manager of the defendant, Thobhandas's Co., i.e., Pravin Construction Co. Exhibit 99, the letter written by defendant Thobhandas, to executive engineer, housing division, also shows that he had authorised Popatlal to receive materials and to sign all general correspondence and it is also admitted by him that his previous signatures on behalf of his company, i.e., defendant's Thobhandas Company, are admitted by him. This letter clearly shows that Popatlal was working as manager of the defendant'.
12. In that view of the matter, the learned civil judge held that Pravin Construction Company and the assessee, Thobhandas, liable for the dues of sub-contractors and exonerated Popatlal, because he was held to be merely the manager of Pravin Construction Company in whose name 'P' group contract was taken from the Bombay Housing Board. Assessee, Thobhandas, being aggrieved by this judgment and order carried the matter in appeal before the District Court, Ahmedabad. The learned extra assistant judge who heard the appeals raised the point for his consideration as to whether the plaintiff in each suit proves the suit contract. In paragraph 9 of his judgment, the material portion relevant for purposes of these references, reads as under :
'The plaintiff in each suit relies on a written contract. These contracts are at exhibits 73, 127 and 80. Now, all these three contracts are signed by Popatlal Panachand Shah as the manager of the appellant and for and on behalf of Pravin Construction Company, as the manager thereof. Mr. Sheth urged that Popatlal was not the manager either of the appellant or of Pravin Construction Company. It was also urged that even if Popatlal is proved to be the manager of the appellant or Pravin Construction Company he had no authority to bind his principal, viz., the appellant, by entering into the contract with the plaintiffs. It is an admitted position that the appellant himself has not entered into contract with any of the plaintiffs. All the contracts are entered into by the plaintiffs with Popatlal as the manager of the appellant now. Before I consider this position further I would like to see as to who has actually carried out the contract given by the Bombay Housing Board. It is beyond dispute that the contract was given to the appellant. The whole of the contract work was carried out and it is admitted at the hearing of the appeals that the payment has been made to the appellant by the Bombay Housing Board. But, according to the appellant, after the tender was accepted and he was given the contract somewhere in February, 1955, he himself entered into a contract with Vasant & Company and by this contract Vasant & Company was assigned the benefit of the entire contract with the Bombay Housing Board; exhibit 92 is the contract which according to the appellant he entered into with Vasant & Company. Vasant & Company is the trade under which one Vasantlal Mohanlal is supposed to be carrying on business. Vasantlal Mohanlal himself has been examined at exhibit 116 and in his evidence he has denied that he has either entered into contract with the appellant or that he had done any work towards the contract .... Exhibit 92, the contract relied upon by the appellant with Vasantlal M. Shah, will have to be looked at in the light of this evidence of Vasantlal. It may also be noted that exhibit 92 is the document by which Thobhandas gave as sub-contract for carrying out the entire contract of the appellant with the Bombay Housing Board. It is in fact an assignment of the whole of the contract by the appellant to Vasantlal Mohanlal Shah yet it is not signed by the appellant at all. Though it is a bilateral contract, it is executed by Vasantlal Shah alone. Under the terms of exhibit 92, it was Vasantlal who had to carry out the contract with the Bombay Housing Board and to pay to the appellant 2 1/2 per cent. over the contract amount. It is the appellant's suggestion that he had assigned the entire contract in favour of Vasantlal after taking overriding commission of 2 1/2 per cent. over the contract amount. If the assignment was in favour of Vasantlal as alleged, why the appellant did not sign exhibit 92. If Vasantlal ever wanted to enforce the contract against the appellant there is nothing to show on the face of the contract that the appellant was even bound by it. No doubt, in the body of the contract, the name of the appellant is shown but he has not executed the same and is not binding on him at all. To me it appears that this contract with Vasantlal M. Shah is merely a nominal one to defeat either the income-tax or some other claim of the Government by showing that the appellant got only 2 1/2 per cent. towards the entire contract price and that he was not liable to account for the profits accruing from the contract work. There is not doubt in my mind that exhibit 92 is merely a paper contract. This becomes also evident from another document, exhibit 82. It is dated November 9, 1954. It is clearly established in evidence that the tender form was filed somewhere in December, 1955. Yet by exhibit 82 the appellant purported to assign the entire contract between him and the Bombay Housing Board to Popatlal Panachand Shah. This Popatlal Panachand Shah is the same person whom the plaintiff suggests as the manager of the appellant. Exhibit 82 would show that at one or the other stage the appellant tried to bring into existence some document to show that after he was given contract by the Bombay Housing Board he had assigned the same to some other person after taking an overriding commission of 2 1/2 per cent. and that he is not liable to account for the profits arising out of the performance of the contract. Therefore, I am not prepared to believe that the appellant had given the sub-contract to Vasant & Company, and it was Vasant & Company who had performed the entire contract. It is an undisputed fact that the contract is performed. The only question is that who performed the contract and the only irresistible inference would be that it must be the appellant who must have performed the contract. Of course, this is not sufficient to show that the appellant has entered into the contract with each of the plaintiffs.
14. Now, it was not disputed before me that each of the plaintiffs did the work claimed by him to have been done. All the plaintiffs at the hearing of the appeals stated that if the appellant can show that the appellant has paid Vasant & Company for the work done by them even from the books of the appellant himself they are prepared to withdraw the suit. Mr. Sheth could not show that Vasant & Company was ever paid for the work done by the plaintiffs. It is true that a khata was opened in the name of Vasant & Company in the Punjab National Bank. But if the contract with Vasant & Company was merely a device for certain purposes it is not difficult to imagine that to give a colour to the device a khata must have been opened in the Punjab National Bank in the name of Vasant & Company. But the question is who opened the khata and the evidence of Vasantlal shows that the defendant opened the khata.
13. ..... Now I would like to examine whether Popatlal was the manager of the appellant and whether he had the requisite authority to enter into a contract with the plaintiffs. In this connection, I would like to refer to exhibit 99, letter of authority on stamp paper sent by the appellant to the executive engineer, housing division, at Ahmedabad. It is the power of attorney given by the appellant to Popatlal Panachand Shah. By this letter of authority the appellant authorised Popatlal Panachand Shah to receive materials to be given by the housing board for the purpose of carrying out the contract by the appellant with the Bombay Housing Board and he further authorised Popatlal to sign general correspondence on behalf of the appellant. This authority was sent on 17th May, 1955, but by this the work previously done by Popatlal Panachand was ratified by the appellant. This exhibit 99 shows definitely that Popatlal was working as the agent of the appellant who is the principal'.
13. The learned extra assistant judge thereafter addressed himself to the question of the scope of authority of the manager, Popatlal, and its binding effect on the appellant, Thobhandas. The learned extra assistant judge found that the manager, Popatlal, had authority and the contracts entered into by him were binding on the appellant, Thobhandas. In that view of the matter he dismissed all the three appeals. The extracts set out above from judgments of the trial courts as well as the appellate court establish the following points :
1. The contract for execution of 'P' group tenements was entered into with the Bombay Housing Board by the assessee, Thobhandas, in the name of Pravin Construction Co.
2. No assignment of the contract was made in favour of Vasant & Company.
3. No such assignment could have been made in law under the said contract.
4. The contract was wholly performed by the assessee, Thobhandas.
5. Vasantlal, the proprietor of Vasant & Company, was admittedly an employee of the assessee, Thobhandas.
6. Assessee, Popatlal Panachand Shah, was admittedly a manager of Pravin Construction Company in whose name the assessee, Thobhandas, had taken the contract.
7. Assessee, Thobhandas, had purported to assign the work of 'P' group tenements to the assessee, Popatlal Panachand Shah, even before his tender was accepted by the Housing Board.
8. Both the alleged contracts of assignment were not signed by the assessee, Thobhandas.
9. No entries from the books of accounts of the assessee, Thobhandas, were produced or pointed out to show that he had made payments in respect of 'F' group contract to Vasant & Company.
10. The alleged assignment deeds were for ulterior purposes of evading income-tax.
14. Neither the Income-tax Officer nor the Appellate Assistant Commissioner could persuade themselves to accept these findings of the civil courts as conclusive on the question which arose before them as to who was the real owner of the income earned under the 'P' group contract, because the income-tax department was not a party to the civil proceedings, and that it could certainly collect some further materials which might not have been considered by the civil courts. The Tribunal also concurred with this view of the lower authorities. The material evidence, which weighed with the lower income-tax authorities and also with the Tribunal for coming to the conclusion that it was Popatlal who was the real owner of the income earned from the contract in question is as under :
1. No explanation of the assessee, Popatlal, as to why he should sign the agreement to take sub-contract even before he become the manager of the assessee, Thobhandas.
2. No explanation why he agreed to be surety for Vasant & Company, if he was only a manager of the assessee, Thobhandas.
3. No explanation why he undertook the responsibility of financing business as well as of making payments in respect of this contract.
4. Assessee, Popatlal, was the only experienced person in the contract work amongst the three, namely, Thobhandas, Vasantlal and Popatlal.
5. Evidence of the two clerks of Popatlal that they withdrew the amount from the bank account of Vasant & Company and paid the amount to the assessee, Popatlal Shah.
15. The Tribunal from these additional facts held that some profits should be assessed in the hands of a person who has earned the same and not in the hands of the person who has been held legally liable under such contracts for payments to the sub-contractors or who is liable under the same for proper execution thereof. In the opinion of the Tribunal, the courts were concerned with the legal liability attached to the contract and the question of actual earning of income was not before them for their consideration. For determining the question as to who in fact earned the income, the Tribunal held that it must be the person who actually carried out the work and the person who actually got the money. The Tribunal also noted that it was not shown that after the assessee, Thobhandas, transferred the money from the account of Pravin Construction Company to Vasant & Company, it was returned to him. The Tribunal, therefore, held that the assessee, Thobhandas Gajjar, actually got 2 1/2 per cent. of commission and actual execution and profits of the contract remained with the assessee, Popatlal Shah.
16. In the above context, we have to deal with the contentions which have been urged. It cannot be disputed that the judgments of civil courts are always binding inter partes unless they are judgments in rem. The judgments inter partes would be final and binding in subsequent proceedings on the principles of res judicata. They may be binding as precedent as well. It is an established position of law, as stated by the Supreme Court in Chhatrasinhji Kesarisinhji Thakore v. Commissioner of Income-tax : 59ITR562(SC) , that the Income-tax Officer is, within the limits assigned to him under the Act, a Tribunal of exclusive jurisdiction for purposes of assessment and he has, under the Act, to decide whether a particular receipt is 'income' and it is not necessary that he must make some person or body other than the assessee a party to the proceedings before he decides the question; and as between the State and the assessee it is his function alone to determine whether the receipt is income and is taxable. It is equally settled that the bar of res judicata dehors section 11 of the Civil Procedure Code as a matter of general principle would apply when a matter or issue arises between the same parties in the subsequent proceedings, is finally determined by a competent court between the same parties. The decision of a civil court inter partes cannot, therefore, operate as res judicata in the proceedings where the parties are not the same, though some of them may be common. It is equally beyond doubt that a statutory authority is bound to hold statutory inquiry and perform statutory duties and such authorities could never be precluded from discharging statutory functions by invoking a rule of estoppel or a bar of res judicata for that matter (vide Sayed Mohamed Bacuir-el-Edroos Vaide Sayed Jaffer-el-Edroos Saijadnashinh of Edroos Gadi v. Alimiya Mamadmiya  13 GLR 285 ]. So far as the first contention is concerned, we must agree with the learned advocate for the revenue that these judgments of the civil courts cannot operate as res judicata or as estoppel forbearing the Income-tax Officer from inquiring into as to who is the real owner of the income in the facts and circumstances of the case. It cannot be said as a broad proposition of law that the decisions of civil courts in these references would operate as res judicata so as to bind the Government, which was admittedly not a party to the proceedings before the civil courts, or would preclude the Income-tax Officer in the course of assessments to investigate in whose hands a particular income should be assessed. It is his jurisdiction and, admittedly, the question of ownership of the income was not before the civil courts nor the civil courts had jurisdiction to determine that question. Even if the civil courts assumed this jurisdiction on wrong interpretation of a statute or under its general jurisdiction of section 9 the decision was arrived, cannot operate as res judicate (vide Mathura Prasad Sarjoo Jaiswal v. Dossibai N. B. Jeejeebhoy : 3SCR830 ).
17. However, the question does stare us in the face, whether the Tribunal was right in holding that it was the assessee, Popatlal, and not the assessee, Thobhandas, who was taxable in respect of the income earned from the execution of 'P' group contract works for the relevant assessment years. We have set out the findings made by the civil courts and in spite of these findings what additional evidence weighed with the Tribunal in reaching the conclusion that it was the assessee, Popatlal, who was taxable in respect of such income We have not been able to appreciate how the Tribunal could have reached the conclusion when it has not been found as a matter of fact by the fact-finding authorities in the course of the assessments out of which these references arise, that the contract in question was in fact assigned to Vasant & Company, which was claimed by the assessee, Thobhandas, to be benamidar of the assessee, Popatlal. Assuming that the finding that Vasant & Co. was benamidar for Popatlal is a question of fact, which could not be disturbed in the facts and circumstances of this case in these references, even then the three broad facts which have been lost sight of by the Tribunal are :
(1) that the 'P' group contract was not in fact assigned to Vasant & Company since the relevant deed was not signed at all by the executant, namely, the assessee, Thobhandas;
(2) that in law it could not have been assigned because the contract with the Housing Board prohibited it; and
(3) that since all the moneys under the contract were in fact received by the assessee, Thobhandas, it is really surprising how the Tribunal reached the conclusion that the income earned from such contract was the income of the assessee, Popatlal, and not of the assessee, Thobhandas.
18. In our view, even assuming that the assessee, Thobhandas, had transferred the moneys so received from the Housing Board to Vasant & Company, which can safely be assumed to be benamidar of the assessee, Popatlal, it would amount to application of the income by the assessee, Thobhandas, who should be really held liable for tax for the said receipt. In K. A. Ramachar v. Commissioner of Income-tax : 42ITR25(SC) , where the assessee who was a partner in a firm, executed three irrevocable deeds of settlement in favour of his wife, a married daughter and a minor daughter, assigning to each of them one-fourth of his share of the profits in the firm (but no losses) payable to him during a period of 8 years from the date of the settlement to be enjoyed by them absolutely and exclusively. They were also entitled directly to receive and collect from the firm their share under the settlements. In the account books of the firm the profits due to the assessee were credited to the assessee's account and one-fourth thereof was transferred to the accounts of each of the three beneficiaries. The assessee claimed that those amounts could not be included in his total income for purposes of assessment to income-tax. This contention was not accepted right up to the stage of the High Court, which answered the question referred to it that the amounts payable to the wife and daughters were liable to be included in the total income of the assessee, who carried the matter in appeal to the Supreme Court. In the above context of the admitted deed of assignment and the books of accounts of the firm of which the assessee was a partner, the Supreme Court observed as under (page 28) :
'An examination of the deeds of settlement shows that the disponer had stated that from the profits 'payable to him' certain amounts in specified shares were to be paid to his wife and two daughters. No doubt, the assessee in those deeds created a right in favour of the disponees to get the amounts direct from the firm, of which he was a partner. The tenor of the documents shows that the profits were first to accrue to him and were then applied for payments to the disponees. Learned counsel for the appellants contended that what had been assigned was an actionable claim, to wit, the right to profits, and, therefore, the profits were diverted, before they accrued to the disponer. This, in our opinion, is neither in accordance with the law of partnership nor with the facts as we have found on the record. Under the law of partnership, it is the partner and the partner along who is entitled to the profits. A stranger, even if he were an assignee, has and can have no direct claim to the profits. By the deeds in question, the assessee merely allowed a payment to his wife and daughters to constitute a valid discharge in favour of the firm; but what was paid was, in law, a portion of his profits, or, in other words, his income. A glance at the account books of the firm, Messrs. Chari and Ram, clearly shows that the amounts were first credited in the khata of Rangachari and then under his directions were transferred from his khata to those of his wife and daughters. The dispositions, therefore, were, in law and in fact, portions of the income of Rangachari, after the income had accrued to him and tax was payable by him at the point of accrual'.
19. In the present case before us, there is no assignment to Vasant & Co. in fact or in law as held not only by the civil courts but also concurred in by the income-tax authorities. In view of the provisions contained in section 60 of the Income-tax Act, 1961, all income arising to any person by virtue of a transfer, whether revocable or not and whether effected before or after the commencement of the said Act, would, where there is no transfer of the assets from which the income arises, be chargeable to income-tax as the income of the transferor and would be included in his total income. We have not been, therefore, able to appreciate, how the Tribunal reached the conclusion that though the source from which this income was earned was not transferred in fact, nor could have been transferred in law, the income arising from the source could be held to be the income of the alleged transferee. The contention of the revenue that this court cannot enter into the examination of the question as to the propriety of the finding of the Tribunal that Vasantlal was virtually a benamidar of Popatlal as alleged by the assessee, Thobhandas, is totally misconceived, because we are not examining that finding, because the dispute in this assessment is not between Vasantlal, the benamidar, and Popatlal, the real owner. The moot question which has arisen in these references is : who is the real owner of the income earned from 'P' group contract, whether the assessee, Thobhandas, who has entered into and executed the contract and who has received in fact the income accrued under the said contract, or the assessee, Popatlal, who, it is alleged and found by the income-tax authorities, has virtually and substantially received the amount ultimately. In our view, unless we can spell out an overriding title or charge in favour of the assessee, Popatlal, all the payments made by the assessee, Thobhandas, as found by the income-tax authorities to Vasantlal of Vasant & Company, who was held to be benamidar of Popatlal, would amount to application of the income of Thobhandas who should be really held liable to pay tax since no legally enforceable obligation was ever created by the assessee, Thobhandas, in favour of the assessee, Popatlal, or his benamidar, Vasantlal. In that view of the matter, therefore, the Tribunal was clearly in error and not justified in the facts and circumstances of the case in holding that it was Popatlal who was liable to be assessed for the income accrued and earned under the 'P' group contract.
20. The result is that we answer the question referred to us in these references in the negative and in favour of the assessee, Popatlal, and against the assessee, Thobhandas. The Commissioner of Income-tax shall pay costs of Popatlal in Income-tax Reference No. 208 of 1974. There should be no order as to costs in Income-tax Reference No. 45 of 1974.