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Shakuntala Devi Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 131 of 1967
Judge
Reported in[1971]82ITR416(Cal)
ActsIncome Tax Act, 1922 - Section 33B
AppellantShakuntala Devi
RespondentCommissioner of Income-tax
Appellant AdvocateDebi Pal and ;Pronob Kumar Pal, Advs.
Respondent AdvocateB.L. Pal and ;A. Sen Gupta, Advs.
Cases ReferredSmt. Bagsu Devi Bafna v. Commissioner of Income
Excerpt:
- t.k. basu, j.1. in this reference under section 66(1) of the indian income-tax act, 1922, the income-tax appellate tribunal has referred the following question of law to this court :'whether, on the facts and in the circumstances of the case, the tribunal was justified in maintaining the order of the commissioner of income-tax under section 33b of the indian income-tax act, 1922, setting aside the assessments and directing the income-tax officer to make fresh assessments in accordance with law?'2. the facts relating to this reference may be briefly noted. the relevant assessment years are 1956-57 to 1961-62. the assessee is an individual and the relevant previous years are the financial years 1955-56 to 1960-61.3. the assessee was a new assessee who had not hitherto been assessed to.....
Judgment:

T.K. Basu, J.

1. In this reference under Section 66(1) of the Indian Income-tax Act, 1922, the Income-tax Appellate Tribunal has referred the following question of law to this court :

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in maintaining the order of the Commissioner of Income-tax under Section 33B of the Indian Income-tax Act, 1922, setting aside the assessments and directing the Income-tax Officer to make fresh assessments in accordance with law?'

2. The facts relating to this reference may be briefly noted. The relevant assessment years are 1956-57 to 1961-62. The assessee is an individual and the relevant previous years are the financial years 1955-56 to 1960-61.

3. The assessee was a new assessee who had not hitherto been assessed to income-tax and suo motu filed returns for the assessment years 1955-56 to 1961-62 before the Income-tax Officer, 'B' Ward, 24-Parganas. All the returns were filed on the same date, i.e., the 18th September, 1961. The address of the assessee was given as 15, Basantalal Shah Road, Tollygunge. On the same day, i.e., the 18th September, 1961, the Income-tax Officer, 'B' Ward, 24-Parganas, directed the issue of notices under Section 23(2) of the Income-tax Act, 1922, fixing the hearing on the 21st September, 1961 According to the notings in the record the notices were served on Shri P. C. Pande, income-tax practitioner, but no office copies thereof were in the records. The Income-tax Appellate Tribunal in hearing the appeal out of which the reference arises had recorded the fact that the originals of these notices were not produced before the Income-tax Appellate Tribunal at the time of the hearing of the appeals.

4. To continue the narrative, on the 21st September, 1961, Mr. P. C. Pande attended at the Income-tax Officer completed the assessments on the same date for the seven years from 1955-56 to 1961-62. The demand notices, challans and the assessments orders were served on the assessee's representative on the very next date, i.e., 22nd September, 1961.

5. The income returned by the assessee was 4,200 for the assessment year 1955-56. Rs. 4,500 for each of the assessment years 1956-57 to 1960-61 and Rs. 4,403 for the assessment year 1961-62. According to the assessment orders the assessee's business was in pawn-broking and money-lending. The Income-tax Officer completed the assessment after making a uniform addition of Rs. 1,200 in each of the assessment.

6. On the 18th July, 1963, the Commissioner of Income-tax issued a notice to the assessee proposing to take action under Section 33B of the Indian Income-tax Act, 1922, for all the aforesaid assessment years from 1955-56 to 1961-62. The notice issued by the Commissioner of Income-tax has not been included in the paper-book but it is to be found as part of the order of the Income-tax Appellate Tribunal in paragraph 4 thereof. The relevant portion may be set out hereunder :

'On calling for and examining the records of your case for the assessment years 1955-56, 1956-57, 1957-58, 1958-59, 1959-60, 1960-61 and, 1961-62 and other connected records, I consider that the orders of assessment passed by the Income-tax Officer, 'B' Ward, Dt. 24-Parganas on 21st September, 1961, are erroneous in so far as they are prejudicial to the interests of the revenue for the following reasons amongst others.

2. Enquiries made have revealed that you neither resided nor carried on any business at the Tollygunge address shown in the returns. Also the Income-tax Officer was not justified in accepting the initial capital, the acquisition and sale of gold ornaments, the income from business, etc., without any enquiry or evidence whatsoever.

3. I, therefore, propose to pass such orders thereon as the circumstances of the case justify after giving you an opportunity of being heard under the powers vested in me under Section 33B of the Indian Income-tax Act, 1922. The cases will be heard at 11 a.m. on 26th August, 1963, at my above office when you are requested to produce the necessary evidence in support of your contentions. Objections in writing accompanied by the necessary evidence, if any, received on or before the appointment for personal hearing will also be duly considered.'

7. In answer to this notice the assessee sent a lengthy reply running into several pages and containing as many as eighteen legal grounds including the question of the vires of some of the provisions of the Income-tax Act. It is significant, however, that no documentary evidence of any description whatsoever was annexed to or referred to in the reply to the notice to show cause issued by the Commissioner of Income-tax under Section 33B of the Indian Income-tax Act, 1922. It is to be remembered that in the notice to show cause the Commissioner of Income-tax had specifically invited the assessee to produce such evidence, oral and documentary, which she desired to produce in support of her case.

8. It would be appropriate to notice at this stage that the assessee at the time of the original assessments by the Income-tax Officer, 'B' Ward, 24-Parganas, had filed a declaration. The declaration has been reproduced in the order of the Commissioner of Income-tax under Section 33B of the Act and may be reproduced here in extenso :

'I, Shakuntala Devi, wife of Sardar Bahadur Singh, proprietor, Wedgwood Hotel, respectfully showeth as follows :

(1) That I was married in 1948 and at the time of marriage, my fatherRam Saran Das, who was a wealthy man of West Punjab (now Pakistan),gave me valuable golden ornaments which I sold as follows with a view todoing business in money-lending, speculation, pawning on interest, etc. :

YearTolasRateAmount Rs.

12-2-49413.2100-8-041,519-1-024-3-49614.995-4-058,537-1-320-5-50388.11102-0-039,646-2-027-3-51308.1

98-0-830,193-2-0

1,724.7

1,69,895-7-3

I hold pucca receipts in respect of the above sales.

(2) That my income became taxable since assessment year 1955-56 ; hence I am filing voluntary returns from 1955-56 to 1961-62.

(3) That my initial capital of Rs. 1,69,895-7-3 as reflected in the statement of account for 1955-56 is comprised of gold sales made in 1949, 1950 and 1951 as stated in para. (1).

(4) That my year-to-year financial position is reflected in the statement of account from 1955-56 to 1961-62 attached herewith.

(5) That I have not maintained any books of accounts, because I do not know the system of book-keeping. Nor have I maintained any bank account. Hence my returns are on estimate basis.

(6) That I have run my business in my individual capacity, my husband having no connection in it.

(7) That, as reflected in my statement of account relevant for 1961-62, 1 had, as cash on hand, an amount of Rs. 2,00,000 as on 31st March, 1961, which I intend to invest now.

(8) That so far I have no other investment anywhere.

(9) That what I have stated above is true to my knowledge and beliefand my returns may be accepted as such.'

9. The Income-tax Officer, B-Ward, 24-Parganas, passed stereo-typed assessment orders for all the assessment years mentioned above. TheCommissioner of Income-tax in the order under Section 33B of the Indian Income-tax Act, 1922, had set out in paragraph 9 thereof the assessment order for 1955-56 which is reproduced hereinbelow :

'A voluntary return has been filed showing income of Rs. 4,300. This, is taken to be a return under Section 22(1).

In response to notice under Section 23(2), Shri P.G. Pandey, authorised representative, appears. The case is discussed with him and the assessment is made as under :

Assessee's business was that of pawn-broking and money-lending ; no proper accounts were ever maintained. In the absence of proper accounts, the income shown cannot be taken as exhaustive and correct and I thus accordingly enhance the income returned by Rs. 1,200 on estimate. Total thus comes to Rs. 5,500.'

10. As already observed and as has been noticed by the Commissioner of Income-tax, a short stereo-typed assessment order had been passed for each of the succeeding assessment years from 1956-57 to 1961-62, the income assessed in these years being Rs. 5,500 Rs. 5,500, Rs. 5,500, Rs. 5,500, Rs. 5,500 and Rs. 5,603 for the assessment years 1956-57, 1957-58, 1958-59, 1959-60, 1960-61, and 1961-62, respectively.

11. The Commissioner of Income-tax, West Bengal, Calcutta, Mr. F. H. Vallibhoy, passed the order under Section 33B of the Indian Income-tax Act, 1922, on August 27, 1963. By his order, the Commissioner of Income-tax found that having regard to all the facts and circumstances of the case, the assessments made by the Income-tax Officer, B-Ward, 24-Parganas, Shri A. K. Banerjee, by his orders dated 21st September, 1961, for the assessment years 1955-56 to 1961-62 were erroneous in so far as they were prejudicial to the interests of the revenue. The Commissioner of Income-tax cancelled the said assessments and directed the Income-tax Officer to do fresh assessments according to law after making proper enquiries and investigation with regard to the jurisdiction, possession of initial capital by sale of ornaments, carrying on of the business and the sources of the amount of Rs. 2 lakhs said to be possessed by her as on 31st March, 1961.

12. The Commissioner of Income-tax recorded in his order that a written reply to the notice of 'show cause' was received from the assessee on August 24, 1963. The assessee was given an opportunity of being heard on August 26, 1963, which was postponed to August 27, 1963, at the request of the assessee's authorised representative. On August 27, 1963, Sarvashri N. C. Roy and Satin Sen, advocates, attended on behalf of the assessee and were heard.

13. With regard to the contention advanced before the Commissioner onbehalf of the assessee that notice to 'show cause' dated 18th July, 1963,was vague and did not contain all the particulars with regard to the matters having regard to which the assessment orders were considered erroneous and prejudicial to the interests of the revenue, the Commissioner observed as follows :

'...This is clearly not so and sufficient reasons and indications have been given in the 'show cause' notice for the initiation of action under Section 33B of the Act. It has been contended that the assessee was not furnished with reports of enquiries on the basis of which action under Section 33B of the Act was considered applicable. As stated above, the 'show cause' notice gives sufficient reasons and indications as to why I considered that the assessments in question were erroneous in so far as they were prejudicial to the interests of the revenue. The assessee is in the best know of her own state of affairs and it was her duty to have led the necessary evidence or caused to be led the same in response to the 'show cause' notice.... What was required by the 'show cause' notice was for the assessee to prove that the jurisdiction was correct, that the stories of initial capital, possession and sale of ornaments and of her having carried on money-lending, speculation and pawn-broking businesses were true and genuine. Besides merely denying the statements made in the 'show cause' notice that the Income-tax Officer was not justified in accepting the initial capital, acquisition and sale of jewellery and the income from business and the same were accepted by him without any enquiry or investigation, no evidence or cogent proofs have been noted or furnished to substantiate the assessee's case.'

14. After setting out the declaration filed by the assessee before the original assessing authority and a specimen of the stereo-typed order of assessment, the Commissioner of Income-tax proceeds to observe as follows :

'It is seen from the assessment records and from what is stated above that all the assessments were made by the Income-tax Officer in post-haste without making any enquiry or investigation into the antecedents of the assessee, whether the jurisdiction was correct, whether the story of possession and sale of ornaments was genuine, whether the assessee was actually carrying on money-lending, speculation and pawn-broking businesses as alleged and all other factors relevant for making correct and proper assessments. On enquiry, it has been ascertained that the Income-tax: Officer, B-ward, 24-parganas, had no jurisdiction over the assessee and hence all the assessments made by him are ab initio null and void. It has been learnt from spot enquiries made by the ward inspector of the department that the assessee never resided at nor carried on any business from the address given in the returns of income as 15, Basantalal Shah Rd., Tollygunge. The premises at 15, Basantalal Shah Rd., Tollygunge, are owned and occupied by one Shri Baijnath Prasad and he has declared inhis written statement that he had never let out any portion of his house property to the assessee at any time. Local enquiries reveal that the assessee is the wife of Shri Bahadur Singh of 5 and 5A, Sudder Street, Calcutta, and the assessee has been residing with him at that place for the last seven years or so.'

15. Dealing with the question of maintenance of accounts by the assessee, the Commissioner of Income-tax makes the following observations :

'With the returns of income, the assessee's authorised representative has filed statement of accounts. As noted in her statement referred to above, the assessee did not maintain any books of accounts nor did she have a bank account. In view of this clear statement of the assessee, it is not understood as to how, the Income-tax Officer had stated in his assessment orders that 'no proper accounts were ever maintained'. It is clear that no books of accounts were produced before the Income-tax Officer and hence it is not known as to how the assessee was able to prepare statement of accounts and file them with the returns of income.'

16. The observations of the Commissioner of Income-tax with regard to thequestion of proof of initial capital are even more significant and may be noted hereunder as follows :

'The assessee has shown an initial capital of Rs. 1,69,895 as on 1st April, 1955. As per her statement referred to above, this sum is said to have emanated from sale proceeds of gold ornaments which she had received in 1948 at the time of her marriage from her father, Sri Ram Saran Das. In support of the alleged sale of ornaments, copies of cash memos have been filed on the records, the sales being alleged to have been made through M/s. Naba Kishore Dey & Bros, of 8, Nalini Sett Road, Calcutta. On the present Income-tax Officer issuing summons on the said alleged bullion merchant for verification of the sale of ornaments made by the assessee, there has been no response. The assessee has not produced the original vouchers pertaining to the sales nor has the said bullion merchant brought with him the books of accounts for verifications in this matter. It is difficult to believe that the assessee could have inherited ornaments of such large value and as to why the sale proceeds were kept unutilised for a span of eight years. Though the total value of the ornaments amounts to Rs. 1,69,895, the sales are stated to have been made by cash and not by cheques. There is no evidence made available as to who were the parties who really bought these ornaments through the jewellers, M/s. Naba Kishore Dey & Bros., who seems to be a got-up party for providing bogus sale vouchers so that they could be produced by unscrupulous assessees to falsely show that their concealed income had emanated from sale of old ornaments. Hence the Income-tax Officer erred in believing the assessee's story about possession and sale of ornaments without getting any evidence about the assessee having received the said ornaments at the time of her marriage in 1948, and without summoning the said jewellers to verify whether the sale was genuine and who were the parties who had in turn bought these ornaments through that bullion merchant.'

17. With regard to the assessee's statement that she carries on business in money-lending, speculation and pawn-broking, the Commissioner of Income-tax observes that the statements of accounts filed with returns of income contain only estimated receipts of profit without giving any details as to how much of the profits were derived from speculation business and how much was the interest income earned in money-lending and pawn-broking; business. No details were made available by the assessee as to in which' commodity and with which brokers the speculation business was carried on and what were the profits earned or losses incurred in the respective accounting years. The concluding portion of the Commissioner's observation on this aspect of the matter is as follows :

'It is difficult to believe that a married lady could carry on speculation business which requires special skill and personal attention. With regard to the alleged money-lending and pawn-broking businesses, also, no evidence or details have been made available. It has not been brought on record as to which parties the assessee gave loans, at what rate of interest, when was the capital returned and interest received. The assessee had no trading licence and hence it is not possible to believe that any money-lending or pawn-broking business was carried on by her.'

18. In the concluding portion of the order, the Commissioner records the fact that the assessee's husband, Sri Bahadur Singh, has for a number of years been carrying on the following businesses having a half share therein :

(1) Wedgwood Hotel of 5A, Sudder Street, Calcutta

(2) Gaylord Bar & Restaurant of Dhanbad

(3) Asha Wine Stores Katrasgarh

(4) Taxi No. WBT 165, and

(5) House property at Dhanbad.

19. In paragraph 15 of the order, the Commissioner of Income-tax has expressed the following view :

'Apart from this, as stated above, the moneys disclosed in the name of the assessee really belong to her husband and if the same were related and brought to tax in his hands, the revenue effect would be much more than that on the basis of the assessment to be made in the hands of the assessee on the basis of accumulation of capital as referred to above.'

20. Having regard to all the facts and circumstances of the case, the Commissioner of Income-tax set aside the orders of assessment and directed fresh assessments for the respective assessment years on the lines which have already been indicated above.

21. The assessee appealed to the Income-tax Appellate Tribunal against the consolidated order of the Commissioner of Income-tax, West Bengal, under Section 33B of the Indian Income-tax Act, 1922. Although the cases with regard to the reopening of assessment under Section 33B of the Indian Income-tax Act, 1922, were heard and disposed of by the Commissioner of Income-tax by a single order, different and altogether new contentions were advanced on behalf of the assessee before the Income-tax Appellate Tribunal with regard to the assessment year 1955-56. With regard to that assessment year 1955-56 it was contended that voluntary returns having been filed beyond the expiry of four years from the relevant year of assessment, it was non est in the eye of law and hence no order of assessment could be passed on the basis thereof. Consequently, it was argued that the Commissioner of Income-tax had no jurisdiction to set aside an assessment which was null and void ab initio. The Tribunal allowed the assessee to raise this contention and disposed of the appeal with regard to the assessment year 1955-56 by a separate order. It was stated before us by learned counsel for both the parties that a separate reference has been directed from the order of the Income-tax Appellate Tribunal with regard to the assessment year 1955-56. This is, however, a contention with which we are not concerned in the present reference.

22. With regard to the assessment years 1956-57 to 1961-62 the Income-tax Appellate Tribunal did not consider it necessary to deal with the appeals separately. It passed a consolidated order for all the assessment years 1956-57 to 1961-62. Having recorded the contentions advanced on behalf of the assessee on various questions of fact and law, the Income-tax Appellate Tribunal observed as follows in paragraph 9 of the order :

'It is not necessary of us to deal with the various contentions by the learned counsel. We are satisfied that this is a case of a new assessee where the assessments have been made hurriedly without making properenquiry as to the truth or otherwise of the facts alleged in the returns. As held by the Division Bench of the Calcutta High Court in the case of Smt. Bagsu Devi Bafna v. Commissioner of Income-tax, [1966] 62 I.T.R. 506 (Cal.) we must hold that the Commissioner was justified in initiating action under Section 33B. Also having regard to the recent decision of the appellate court in the case of Commissioner of Income-tax v. Rampyari Khemka, [1967] 63 I.T.R. 367 (Cal.) we are of opinion that the Commissioner's order under Section 33B is not vitiated by the reference to any extraneous or irrelevant matters. The fact that the assessments have been made hurriedly in the case of a new assessee without accounts and without corroborative evidence was enough to justify 'the Commissioner's order directing the Income-tax Officer to make assessmentsafresh after making proper enquiries.'

23. With regard to the maintenance of the accounts by the assessee the Income-tax Appellate Tribunal went on to observe as follows :

'When the assessee has stated that she had not kept any accounts, the Income-tax Officer's observation that no proper accounts were maintained is an improvement on the assessee's version. Further some accounts would have been necessary in regard to the type of activities claimed to have been carried on by the assessee. Practically the identical incomes returned and the identical additions made by the Income-tax Officer to the returned incomes show that the assessments were made on the basis of off-hand estimate's and without proper evidence.'

24. In the result, the Tribunal dismissed all the appeals for the assessment years 1956-57 to 1961-62.

25. It is in this state of facts that the question which has been set out hereinabove comes before this court for its opinion.

26. Mr. Pronob Pal, appearing on behalf of the assessee, contended in the first place that the Commissioner of Income-tax in passing the order under Section 33B of the Indian Income-tax Act, 1922, had considered the results of certain enquiries behind the back of the assessee. Consequently, the order of the Commissioner is in contravention of the principles of natural justice and should be held to be bad in law on that ground.

27. There are several answers to this submission of Mr. Pal for the assessee. In the first place, it is to be remembered that the notice to show cause had been issued by the Commissioner of Income-tax under Section 33B of the Indian Income-tax Act, 1922, containing certain specific allegations. We shall come to the question of what the allegations were and how they were made in some detail. But before we do that it is to be observed that it is now well settled that any action may be taken by a departmental authority or a Tribunal on the basis of certain preliminary enquiries and investigations. The assessee or the party aggrieved by the notice is not entitled to demand the details or the results of those enquiries. What is, however, definitely enjoined by the rules of natural justice is that the party concerned should be specifically informed of what the charges or the allegations are and that at the stage of the enquiry no material should be considered behind the back of the delinquent or the aggrieved party.

28. In the present case, the first allegation in the notice to show cause was that the assessee neither resided nor carried on any business at the Tollygunge address which was shown in the returns, It is curious that except for a bald denial in her reply to the notice to show cause, no evidence of any kind whatsoever was produced by the assessee before the Commissioner of Income-tax to substantiate her case that she was a resident of 15, Basantalal Shah Road, Tollygunge, at the relevant time. If she was residing there she must have been either the owner of a house or a tenant in someone else's house. If she was living in her own house she could have produced the documents relating to her ownership of the land on which the house was built. She could have produced the relevant municipal rate bills or the electric bills or the telephone bills to show that she was in fact residing there. If she was residing as a tenant she could have produced the evidence of the rent receipts from her landlord to substantiate her case. She could have also produced the various other bills which we have mentioned above. Strangely enough, not one scrap of paper was produced by the assessee on this aspect of the matter.

29. That being the position, we are of the view that, quite apart from any other question, the Commissioner of Income-tax was entitled to come to the conclusion that the allegation that the assessee never resided nor carried on any business at the address which is shown in her return not having been met by the assessee with proper evidence, that question went to the root of the jurisdiction of the Income-tax Officer who purported to assess the assessee in that jurisdiction. This is clearly a matter which repaired further investigation and the Commissioner of Income-tax was entitled to come to that conclusion.

30. All that the Commissioner has done by the impugned order under Section 33B of the Indian Income-tax Act, 1922, is to set aside the orders of assessment and direct a fresh and full enquiry on all questions including the question of jurisdiction.

31. The second allegation, and a very specific one, was that the Income-tax Officer was not justified in accepting the initial capital without any enquiry or evidence whatsoever. As will be seen from the declaration filed by the assessee at the time of the original assessment, as also from her written reply to the notice to 'show cause', there are certain vital links in the chain of the assessee's story with regard to the initial capital. The first link in the chain is that she got married in 1948, and received large quantities of ornaments from her wealthy father at the time of her marriage. The second important link in the chain is that between theyears 1949 and 1951 she sold some of these ornaments at different times and received a sum of Rs. 1,69,895-7-3 as the sale proceeds of these ornaments. The third link in the chain is that this amount, which represented the sale proceeds of her ornaments, was invested by her in the business of speculation, money-lending and pawn-broking. These respective items of business of the assessee yielded certain returns which was the subject-matter of the assessment in the years 1956-57 to 1961-62.

32. Needless to say, the crucial link in this chain of the assessee's story is the sale of ornaments by her which produced the money which was subsequently invested by her in business. It has to be remembered that the Income-tax Officer making the original assessment records in the order of assessment that the original cash memos evidencing the sale of gold ornaments were produced before him. It is further recorded in the order of assessment for 1955-56 that the Income-tax Officer examined the original cash memos and copies were placed on record.

33. This statement of the Income-tax Officer in the order of assessment is to be read in the context of the declaration made by the assessee before him. In the declaration, the details of the various sales of ornaments made by her were noted (which has been quoted above) and at the end of that statement the following solemn declaration is made: 'I hold pucca receipts in respect of the above sales.'

34. It will be observed however from the order of the Commissioner of Income-tax that in the course of the hearing of the proceedings under Section 33B of the Indian Income-tax Act, 1922, the original vouchers representing the sale of ornaments were not produced before the Commissioner of Income-tax. Having regard to the fact that only copies of cash memos were to be found in the records of the original assessment, the Commissioner directed the Income-tax Officer to issue a summons to the bullion merchant, Messrs. Naba Kishore Dey & Bros., who according to the assessee had effected the sales of these gold ornaments. No one appeared before the Commissioner of Income-tax in response to this summons. The inevitable result of this was that there was no proper evidence or proof of the sale of gold ornaments which, according to the assessee, was the genesis of the initial capital. In this state of affairs, the Commissioner of Income-tax, in our view, was amply justified in coming to the conclusion that the order of the Income-tax Officer making the original assessments accepting the assessee's story of the initial capital was made without proper enquiry or evidence and required investigation.

35. Having regard to the nature of the charges against the assessee in the proceedings under Section 33B of the Income-tax Act and the assessee's failure to adduce satisfactory evidence with regard to them, we are of the view that the Commissioner of Income-tax was fully justified in directing a fresh assessment. We hold that there were no basic materials which were considered behind the back of the assessee and of which the assessee did not have due notice.

36. Mr. Pronab Pal for the assessee next submitted that the Commissioner of Income-tax had proceeded on the basis that there was some kind of collusion between the assessee and the Income-tax Officer, B-Ward, 24-Parganas, and the original orders of assessment were procured as a result of such collusion. In support of this contention, Mr. Pal relies on the following observation in the order of the Commissioner of Income-tax which is to be found at paragraph 5 :

'As will be seen from the subsequent paragraphs, the Income-tax Officer has made the assessments without any enquiry and investigation and he has accepted the assessee's faked stories as gospel truth which could not have been done but with ulterior motive to oblige the assessee and which has resulted in erroneous assessment prejudicial to the interests of the revenue.'

37. In our view this does not amount to a finding by the Commissioner of Income-tax that there was any collusion between the assessee and the Income-tax Officer with regard to the orders of assessment. The real point which the Commissioner of Income-tax was seeking to emphasise in the portion of the order which has been quoted above is that as a result of the Income-tax Officer accepting the explanation offered by the assessee with regard to the possession of initial capital by her without proper enquiry and investigation the revenue has suffered prejudice and, consequently, action under Section 33B of the Income-tax Act, 1922, was called for. In any event, as we have said the entire thing is now wide open. The assessments for the respective years will have to be made afresh pursuant to the directions of the Commissioner of Income-tax and the assessee will have full opportunity of adducing proper evidence to establish her bona fides and the facts on which she wishes to rely. In this state of affairs, we do not think that the observation made by the Commissioner of Income-tax in any way vitiates the order.

38. The next submission of Mr. Pronab Pal for the assessee was that the real object of the order of the Commissioner of Income-tax under Section 33B of the Indian Income-tax Act, 1922, was to rope in the income of Shri Bahadur Singh, the husband of the assessee.

39. Relying on certain observations in the order of the Commissioner of Income-tax where he had expressed a prima facie view that the ornaments disclosed in the name of the assessee really belong to her husband, Mr. Pal submitted that the order was not bona fide in the sense that the real purpose of passing the order was to bring in the husband's income to tax.

40. We are unable to accept this submission of Mr. Pal. It is to be noted that it is the assessee herself and not the Commissioner of Income-tax who brought the husband into the picture in the first instance. As will be found from the declaration filed by the assessee which we have set out hereinabove that the assessee herself made a statement to the following effect :

'That I have run my business in my individual capacity, my husband having no connection with it.'

41. Therefore, the Commissioner of Income-tax was perfectly justified in considering this aspect of the matter. That consideration, it must be emphasised, was only of a prima facie nature so as to justify the settingaside of the previous assessment orders in respect of the assessee and to dispose of a point which had been expressly taken by the assessee in her declaration. It is also to be noted that the observations of the Commissioner of Income-tax have been made in the context of whether the orders of assessments were prejudicial to the revenue or not. The Commissioner had arrived at the prima facie conclusion that if these incomes were taxed in the hands of the husband on the basis that they were found to be belonging to the husband, the revenue would have gained much more. In that view of the matter the Commissioner of Income-tax observed that the revenue has suffered prejudice. It is further to be remembered that what has been set aside is the assessment of the assessee. There has been a direction also to reassess the assessee's income for the relevant assessment years. There has been no order of any kind whatsoever affecting the husband's assessments or his income-tax proceedings. For these reasons, we are of the view that the Commissioner of Income-tax acted within the powers conferred on him by law in passing the order that he did.

42. Lastly, Mr. Pal for the assessee submitted that the question of initial capita] was relevant only for the assessment year 1955-56, when the assessee is supposed to have sold the ornaments, received the sale proceeds and invested the amount in the various businesses which she alleges to have carried on. It was submitted that since the order of assessment and the order of the Commissioner under Section 33B of the Indian Income-tax Act 1922 for the year 1955-56 has been set aside by the Income-tax Appellate Tribunal, the Commissioner of Income-tax in passing the order under Section 33B of the Indian Income-tax Act, 1922, for the subsequent assessment years, namely, 1956-57 to 1961-62 was not justified in considering the question of the initial capital of the assessee.

43. This contention is also without any substance. As we have observed before, the acquisition of the initial capital is a link, and a crucial link at that, in the chain of the assessee's explanations with regard to the incomes that she had received. It is true that the order of the Commissioner of Income-tax under Section 33B of the Indian Income-tax Act, 1922, for the assessment year 1955-56 had been set aside on a technical ground, namely, that the order of assessment was time-barred. The historical fact of the assessee's acquisition of the initial capital does not, in our view, thereby become wiped out. It is further to be remembered that, in the subsequent years, the taxing authorities were concerned with the question of certain income of the assessee which she was receiving from her investment in money-lending and pawn-broking businesses as also her speculation business. The investments and the speculation businesses were carried on with the money which she alleges to have received as a result of the sale of the ornaments. It is evident therefore that in this context the question of how she acquired this capital initially which was subsequently alleged to have been invested or utilised in business becomes a very relevant and germane consideration. We are not to be understood, however, as saying that because the question of initial capital is relevant and germane in respect of the subsequent assessment years, namely, 1956-57 to 1961-62, there is any ground for re-assessing the assessment for the assessment year 1955-56 which has already been held to be had in law on the ground of limitation.

44. This disposes of all the contentions raised on behalf of the assessee.

45. For the reasons given above, we hold that, on the facts and in the circumstances of the case, the Tribunal was justified in maintaining the order of the Commissioner of Income-tax under Section 33B of the Indian Income-tax Act, 1922, setting aside the assessment and directing the Income-tax Officer to make fresh assessment in accordance with law.

46. The question is therefore answered in the affirmative and in favour of the revenue. The assessee will pay the costs of this reference.

P.B. Mukharji, C.J.

47. I agree.

Question answered in the affirmative.


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