P.N. Shinghal, C.J.
1. This application under Section 256(2) of Income tax Act, 1961, hereinafter referred to as the Act. was filed by Smt. Prem Bai Parakh who is not dead and is represented by her legal representatives Peerdan Parakh and others. I has been stated in the application that Smt. Prem Bai Parakh commenced her business under the name and style of M/s Prakash Textile Agency at Calcutta in 1956 with Bhanwarlal Banthia and Moolchand Surana as partners. Those two partners retired, and the firm was reconstituted by taking Smt. Kamla Devi Parakh, Smt. Vimla Devi Parakh, Smt. Inchra Bai Maloo, Shri Kirpa Chand Surana and Shri Shantilal Banthia as new partners. The reconstituted firm obtained registration in Calcutta and its assessment was competed upto assessment year 1966-67. Smt. Prem Bai Parakh, hereinafter referred to as the assessee, was a regular income-tax payer since 1956 when the partnership business of M/s Prakash Textile Agency was commenced. Her share income vas taken to be 'earned income' upto assessment year 1965-66 It has been stated that for assessment year 1966-67, Income tax Officer, A Ward, Bikaner, treated her share income from the aforesaid firm as 'un earned income' on the ground that the assessee was in Bikaner throughout that year and at no time made any personal contribution to the running of the business of the firm It has been alleged that the Income-tax Officer did not look into the 'past history' of the case and did not give an opportunity to the assessee to show cause before taking that view in his assessment order Annexure 1. The assessee preferred en appeal, and the Appellate Assistant Commissioner accepted her contention and held that the share of her income from the aforesaid firm was 'earned income' in her hands and was not liable to special surcharge. The appellate order is on record as Annexure 2.
2. The department field an appeal before the Income-tax Appellate Tribunal, Jaipur. The assesses claimed that she filed affidavit Annexure 3 of Kirpa Chand Surana stating that she supervised the affairs of the firm by letters, telegrams and telephones and that the partner of the firm also visited Bikaner to consult her in regard to the conduct of the business of the firm. The assessee claimed that she produced one letter written by her to the firm and a letter written by the Ahmedabad branch of the firm to her The Tribunal held however that 'from the two letters alone' it was difficult for it to come to the finding that the assessee was actively engaged in the conduct of the business of the firm so as to treat her share income as 'earned income' and that at best the correspondence would go to show that she had taken some 'casual interest' in the conduct of the business of firm, but there was no material to show that she had taken any a time part in the conduct of the business. The grievance of the assessee is that the Tribunal reversed the finding of the Appellate Assistant Commissioner 'merely on the assumption' that the two letters were not sufficient in law to show that she was actively engaged in the business of the firm 'despite the peculiar predicament in which the applicant was placed on account of the sudden and sad demise of her husband during the relevant accounting period i.e. 1965- 66'. The Tribunal's order is on the record as Annexure 4.
3. The assessee then made an application under Section 256(1) of the Act for referring the following 'questions of law'' to this Court.
Question No. 1.
Whether on the facts and the circumstances of the case, the finding of the Appellate Tribunal that the assessee did not actively engage in the conduct of the business of the firm Messrs Prakash Textile Agency, stands vitiated because the Appellate Tribunal has failed (sic) consider the important material showing her active participation in the business?
Question No. 2.
Whether on the facts and circumstances of the case the Appellate Tribunal was justified in holding that from the two letters alone it was not possible for it to hold that she was actively engaged in the conduct of the business of said firm?Question No. 3.
Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in holding that the assesses was not actively engaged in the conduct of the business of Messers Prakash Textile Agency?Question No. 4.Whether on the facts and circumstances of the case, the Appellate Tribunal was right in treating the share of profit income from M/s Prakash Textile Agency in the assessee as 'unearned income'?
The application was however rejected by the Tribunal's order Annexure 7 dated April 28, 1972 on the ground that the finding of the Tribunal that the asseesee was not actively engaged in the conduct of the business of the firm during the relevant accounting year was a pure finding of fact That is why the present application has been made under Sub-section (2) of Section 256 on the basis of the considerations' mentioned in the application. We shall have occasion to refer to them in a while.
4. It has been argued by Mr. L.R Mehta, learned Counsel for the applicant, that the Tribunal committed an error of law in not taking in to consideration the affidavit Annexure 3 of Kirpa Chand even though it had a bearing on the question whether the assessee was a partner who was actively engaged in the conduct of the business of the film. We were inclined to examine argument of the learned Counsel, but he was unable to state the date on which the affidavit was said to have been filed before the Appellate Tribunal, or even to satisfy us that the Appellate Tribunal allowed it to be filed for purposes of deciding the appeal before him. On the other hand, we find that Tribunal has categorically stated in its appellate order Annexure 4 dated November 8, 1971 that 'no material has been placed before us other than the above two letters' to show that the assessee had taken any active part in the conduct of the business of the firm either at Calcutta or at its branch at Ahamedabad. There is therefore no justification for the argument of the learned Counsel for the applicant that the four questions are questions of law for the reason that an illegality was committed by the Tribunal in deciding the appeal without taking the affidavit into consideration even though it was a relevant piece of evidence on the controversy. It may also be mentioned that the affidavit is really of no consequence because it has not been stated in it that any instructions were at all given by the assessee to Kirpa Chand and, if so, in regard to which matters of the firm.
5. It would thus appear that there is no force in the applicant's communion in regard to question No. 1 that it is a question of law because the Tribunal gave its finding without considering the aforesaid affidavit of Kirpa Chand Surana.
6. An argument has also been advanced to the effect that it is permissible for a partner to actively participate in the business of the firm without his physical presence at the places of its business all the time. argument has been supported by a reference to Commissioner of Income-tax, Gujarat II v. Natwarlal Tribhovandas : 87ITR703(Guj) . It is true that in a given case a partner may be said to be actively engaged in the conduct of the business of the firm without being physically present at the place of the business, but such active participation his to be proved all the same. As it happens, the Tribunal has held that there was so such proof in the present case. Even in Natwarlal Tribhovandas's case 1973 (83) ITR 703 it has been held that even though active engagment does not necessarily signify active and continues participation in the actual transaction of the day to day business of the firm, it is flexible enough to take in the case of a partner who devotes true, attention and labour to some activity or alignment calculated or designed to lead to the preservation, growth or advancement of the business of the firm. The Tribunal has however held that the assessee has not proved any such activity on her part, and the finding has not been shown to have been vitiated by any such error as has been stated in Commissioner of Income-tax, Bihar and Orrissa v. S.P. Jain : 87ITR370(SC) so as to raise a question of law for reference to this Court.
7. As regards question No. 2, Mr. Mehta has argued that it is a question of law because the Tribunal has made a 'numerical approach' in evaluating the evidentiary value of the two letters produced by the assessee and in holding that she was not entitled to relief on account of pained income, We have gone through the finding of the Tribunal and we fine that what it has held is that 'from the two letters alone it is difficult for us to come to the finding that the assesee was actively engaged in the conduct of the business of the firm so as to treat her share income as 'earned Income' So what the Tribunal has done is to examine and evaluate the evidentiary value of the two letters, and to reject it as insufficient for proving that the assessee was actively engaged in the business of the firm, in the absence of any other 'material' It cannot therefore be said that the evidentiary value of the letters was evaluated on a 'numerical' basis so as to give (sic) to a question of law.
8. It has also been argued that as the assessee had been given the benefit of earned income in the earlier years on the ground that she was actively engaged in the conduct of the business of the firm, that was good and cogent evidence for a decision of the controversy during the assessment year 1966-67, but was left out of consideration. Reference in this connection has been made to V.M. Ipoh and Ors. v. Commissioner of Income-tax Madras : 67ITR106(SC) . It will be sufficient for us to say in this connection that the argument can be of no avail to the assessee as she has admitted that there was a change in the circumstances to which the was allowed the benefit of earned income in the preceding yeas inasmuch as she was admitted in mourning during the assessment year 1966-67 and did not at all visit Calcutta or Ahmedabad where the business of the firm was being carried on Question No. 2 cannot also be said to raise a question of law.
9. Then comes question No. 3. It raises the general question whether on the facts and circumstances of the case, the Tribunal was justified in holding that the assessee was not actively engaged in the conduct of the business of the firm. We invited Mr. Mehta to refer us to the ground or basis for the contention that it was question of law, and he frankly conceded that it was based on questions Nos. 1 and 2 and did not require separate consideration.
10. That leaves question No. 4 for consideration as to whether on the facts and circumstance of the case, the Tribunal was right in treating the share of the profit from the firm as unearned income in the hands of the assessee. In regard to his question also, Mr. Mehta has admitted that it is a general and a compendious question of the type usually framed in applications under Section 258(2) and that we need not examine it apart from the argument advanced by him in regard to the first two questions.
11. It would thus appear that the Tribunal has rightly taken the view that its finding that the assessee was not actively engaged in the conduct of the business of the firm during the relevant accounting year, is a pure finding of facts, so that there is no merit in this application and we have no hesitation in dismissing it with costs.