B. C. MITRA J. - This is an appeal against a judgment and order of Sinha J., dated March 19, 1964, whereby a rule nisi issued in a petition under article 226 of the Constitution was made absolute. The facts involved in this appeal, and the question of law, are similar to what was raised and dealt with by us in our judgment in Appeal from Original Order No. 186 of 1965, Smt. Bagsu Devi Bafna v. Commissioner of Income-tax, in which, however, Banerjee J. had discharged the rule. In the appeal now before us, the rule was made absolute.
I shall briefly refer to the facts before dealing with the judgment of the trail court. The appellant filed a return regarding her income for the year 19060-61, some time in February 1961, pursuant to a notice under section 22(1) of the Income-tax Act, 1922 (hereinafter referred to as the Act). Thereupon the Income-tax Officer called for the returns of earlier years. The appellant filed such returns for the years 1953-54 to 1959-60. On February 18, 1961, the assessment orders were passed for the year 1953-61. On January 20, 1963, the Commissioner of Income-tax, the appellant No. 1, herein, issued a notice on the respondent under section 33B of the Act. The contents of this notice as set out in the judgment of the trial court are as follows :
'On calling for and examining the records of your case for the assessment years 1953-54, 1954-55, 1955-56, 1956-57, 1957-58, 1958-59, 1959-60 and 1960-61 and other connected records, I consider that the orders of the assessment passed by the Income-tax officer, 'D' Ward, Howrah, on 18-2-1961 are erroneous in so far as they are prejudicial to the interests of the revenue for the following reasons amongst others.
2. Enquiries made revealed that no business was carried on by you as the alleged in the returns. Also the Income-tax Officer was not justified in accepting the initial capital, the income from business, the acquisition and sale of jewellery, etc., without any enquiry or evidence whatsoever.
3. I, therefore, propose to pass such orders thereon as the circumstances of the cases justify after giving you an opportunity of being heard under the powers vested in me under section 33B of the Income-tax Act, 1922. The cases will be heard at 11 a.m. on 7-2-1963 at my above officer when you are requested to produce the necessary evidence in support of your contentions. Objections in writing accompanied by ther necessary evidence, if any, received on or before the appointment for personal hearing will also be duly considered.
4. Please note that no adjournment of the hearing will be granted.'
On January 29, 1963, the notice was served by an inspect or of the income-tax department at premises No. 48, Nandalal Mitra Lane, Howrah, that being the address given by the respondent in her returns. One R. S. Khemka, the respondents son, received the notice. This notice was also sent under registered postal cover to the said address and one Gitabhai Khemka, the respondents daughter, received the same and signed the acknowledge receipt. On February 2, 1963, the said R. S. Khemka sent back the two covers unopened, containing the notice, to appellant No. 1 with the letter in which he stated that a notice was served on him for Smt. Rampiyari Khemka. He also stated in the letter that the husband of the lady died on January 19, 1963, that the lady was out of Calcutta, and that he was neither authorised to receive any letter on the ladys behalf nor was he in a position to communicate with her. It was further stated that he was unwilling to accept the cover, but had to accept the same owning to the importunities of the departments inspector. But he could not transmit the cover to the lady. It is to be noticed that in this letter the son suppressed the fact that the lady concerned was his mother. Regarding the cover delivered to Gitabhai Khemka, the said R. S. Khemka stated that it was delivered by the open to his minor sister by misrepresentation and distortion of facts.
On February 5, 1963, the respondent solicitor addressed a letter to appellant No. 1 in which it was stated that a closed cover was left with the said R. S. Khemka, who neither resided with the respondent, nor was he the authorised agent of the respondent. There is also a reference in the solicitors letter to the delivery of the registered cover to the minor daughter.
On February 7, 1963, appellant No. 1 passed an order under section 33B of the Act. At the time when this order was made appellant No. 1 was not aware of the solicitor letter. The reason as explained in the affidavit affirmed by Krishna Rao Bhadra Narasimham on August 6, 1963, was that the solicitors letter dated February 5, 1963, gave no reference to the particular income-tax assessment in connection with which the letter was addressed. The letter was received by the receiving in section on February 5, 1963, and was placed before the assessment section on February 16, 1963. The said letter was brought to the Income-tax Officer in charge of the section who put up the letter before appellant No. 1. The matter was placed before the appellant No. 1 on February 18, 1963, but the order under section 33B of the Act had already been made on February 7, 1963. As the solicitor did not file any authority with the department, authorizing them to act on behalf of the respondent, the representation made by them on the respondents behalf was not considered. On the question of the service of the notice, however, the trial court held that the service was valid, and rejected the respondents contention that no notice was served on her. It is, therefore, not necessary for us to go into that question any further in this appeal.
In the petition the respondents had taken various other grounds, namely, that appellant No. 1 had no power, authority or jurisdiction to initiate proceeding under section 33B of the Act as the Income-tax Act, 1922, was repealed by the Income-tax Act, 1961. The next point taken is that the powers under section 298 of the Income-tax Act, 1961, could be exercises only in respect of matter dealt with by section 297 of the said act and did not deal with proceeding under section 33B of the Act. The third point taken is that the power under section 298 of the Income-tax Act, 1961, could be exercised only for the purpose of removal of difficulties arising in giving effect to the Income-tax Act, 1961, and, lastly, that the Income-tax (Removal of Difficulties) Order, 1962, is invalid being ultra vires articles 14, 19 and 31 of the Constitution and also the Income-tax Act, 1961, and section 298 thereof. It appears, however, that these grounds were not canvassed before the trial court, and for the reason, have not been dealt with by Sinha J. in his judgment. These other grounds were also not argued before us in this appeal. But these pointed are covered by the judgment of this Bench in Appeal from Original Order No. 281 of 1963, Kalawati Devi Haralalka v. Commissioner of Income-tax. It is not necessary therefore, for me to refer to these grounds in this judgment.
The principal question in this appeal is whether the order made by appellant No. 1 on February 7, 1963, under section 33B of the Act had been made in violation of the principles of natural justice. On this question, Sinha J. held that the said orders was bad as it had been made in violation of the principles of natural justice and for that reason he made the rule absolute. This has been discussed by me at length in the judgment of this Bench in Appeal from Original Order No. 186 of 1965, Bagsu Devi Bafna v. Commissioner of Income-tax. For the reasons mentioned in that judgment we are of the opinion that the respondents contention that the impugned order had been made in violation of the principles of natural justice cannot be sustained. I should, however, refer to certain other features of the case which were pressed before us by the learned counsel for the parties.
The trial court came to the conclusion that the impugned order under section 33B of the Act was made as appellant No. 1 came to the conclusion that the assessment orders were fraudulent. It has also been held that, although the word 'fraudulent' had not been specifically used, the facts disclosed show that the charge against the respondent was one of the collusion and fraud. it has further been held that the orders were not properly made, but there were interpolations in the record which were made for the purpose of showing that the order was properly made. The view taken by the trial court was that the assessment orders could have been made only with concert between the Income-tax Officer and the assessee. These, according to the trial court, were serious charges, 'of which no inkling was given' to the respondent in the notice that was served upon her. The Trial court further held that appellant No. 1 had held that there was conspiracy and collusion between the assessee and the Income-tax officer.
Mr. G. Mitter, learned counsel for the appellant contended that no charge of fraud or collusion had been made by appellant No. 1 against the respondent in the impugned order. Further it was argued that it has nowhere been held in the said order that the assessments were fraudulent. it was also contended that no charge of conspiracy and collusion between the respondent and the Income-tax Officer had been made against respondent No. 1 in the said order. It was argued that Sinha J. was entirely wrong in holding 'that every single step in the assessment smells of fraud'. It was argued before us that these findings of the trial court could not be sustained on the material on the record. In the impugned order indeed it had been found that interpolations had been made, in so far as the dates of issue of notice and assessment orders were predated by a month as appeared from the order sheets themselves. It was further been held that the assessment orders were made by the Income-tax Officer post-haste without making any enquiry or investigation into the antecedents of the respondent, and without making any enquiry if she was actually carrying on any business. In our opinion, Mr. Mitter is right in his contention that no charge of fraud, collusion or concert has been made by appellant No. 1 in the impugned order. Appellate No. 1 has recorded his views about the manner in which the assessment was done, as indeed he was entitled to do, and he has also taken notice of interpolations in the records. Whether he was justified in taking notice of these facts and in expressing his views on the facts as they appear from the records is a matter with which this court is not concerned. Appellant No. 1 had acted on the evidence on the record and this court would not enter into an appraisal of the evidence on which appellant No. 1 had acted in exercise of his powers under section 33B of the Act.
The only question with which this court is concerned is if the impugned order has been made in violation of the principles of natural justice. So far as the irregularities in the manner of making the assessment orders are concerned, they appears from the records themselves. These are matters with regard to which it can by no means be said the appellant No. 1 acted on evidence or materials collected by the income-tax department behind the back of the respondent. The dates of filing the returns, namely, February 13, 1961, and February 14, 1961, the date of taking cognizance by the Income-tax Officer, namely, February 10, 1961, the dates in the returns themselves, namely February 13, 1961, and February 18, 1961, are all known to the respondent. These are matters with regard to which she could not claim any special notice as they were all within her knowledge. Appellant No. 1 in taking notice of these dates in the records and in coming to the conclusion that there had been interpolation in the records had acted on materials which were well known to the respondent. It cannot, therefore, be said that rules of natural justice have been violated by the appellant in relying upon the assessment records, and in drawing his own inference on the materials on the records. In our opinion the trial court was in error in holding that the charge of fraud had been made against the respondent or that the appellant set aside the assessment order on the ground that they were all fraudulent.
The next charge against the respondent in the notice was that she did not carry on any business and that the Income-tax Officer was not justified in accepting her statements regarding initial capital, the income from business, acquisition and sale of jewellery, etc., without any enquiry or evidence whatsoever. On this charge appellant No. 1 held in the impugned order that no books of account were produced before the Income-tax Officer. Respondent No. 1 claimed to have invested an initial capital of Rs. 17,000 in the assessment year 1953-54, which was collected by sale of ornaments in 1953 out of ornaments of the value of Rs. 15,000 received by her at the time of her marriage in 1911. She also claimed to have carried on money-lending and speculation business for all the years from 1953-54 to 1960-61. But no evidence whatsoever was produced as to in what commodity and with which broker the speculation business was carried on, and how the profit earned was arrived at. Further, it was noticed that there was no evidence at all in respect of the money-lending business and the interest received thereon; no names were furnished as to the parties to whom loans were advanced, the rate of interest charged, and when the interest was received. Furthermore, no evidence was produced with regard to the sale of ornaments; and the loans of Rs. 7,501, Rs. 10,000 and Rs. 25,000 were made to firms in which her husband and son were interested. It is because of this lack of evidence that appellant No. 1 came to the conclusion that the statements made by the respondent regarding initial capital, income from business, interest earned, etc., could not be sustained. Can it be said that rules of natural justice had been violated as the order was made by the appellant No. 1 on the ground that there was no evidence to support the case made out by the responden I think not. The conclusion was drawn by the appellant No. 1 not on materials collected by the income-tax department behind the back of the appellant, but on the materials on the record adn on the ground that there was no evidence whatsoever to support the claims and contentions made on behalf of the respondent. It was for the respondent to support by evidence the case made out by her regarding initial capital, income from business, interest, etc. This she totally failed to do. And it is because of this failure on her part that appellant No. 1 came to the conclusion that the orders made by the Income-tax Officers relying upon the respondents claim regarding initial capital, income from business, interest, etc., could not be sustained and must be set aside. It cannot, therefore, be held that, in setting aside the assessment orders, in exercise of the powers under section 33B of the Act, appellant No. 1 acted in violation of the rules of natural justice, as he came to the conclusion that there was no evidence to support the claims and contentions of the respondent, regarding initial capital, income from business, interest, etc., advanced before the Income-tax Officers. With regard to these claims and contentions by the respondent, the position is not that the appellant acted on materials collected behind the back of the respondent or on the result of enquiries made by the department, but that he held that there was no evidence at all to support the assessment orders of the Income-tax Officers.
Some criticism of the impugned order was advanced by Mr. Khaitan, learned advocate for the respondent, on the ground that it was held that the Income-tax officer, 'D' Ward, Howrah, had no jurisdiction to deal with the respondents case, as his jurisdiction over cases of new assessees was confined to those assessees whose names started with any of the letters from 'S' to 'Z'; it was held that the assessees name being Rampiyari Khemka, the said Income-tax Officer had no jurisdiction to deal with her case. It was argued that as the question of jurisdiction of the Income-tax officer was decided on this point, of which no notice was given to the respondent, rules of natural justice had been violated. There is no substance in this contention. In the first place, the question of allocation of the work among the Income-tax Officers on the basis of the first letter in the names of assessees is not a material collected behind the back of the respondent. In the second place, even if notice or intimation of lack of jurisdiction of the Income-tax Officer on this ground was given to the respondent, there is no material which she could have produced to rebut the contention that the Income-tax Officer had no jurisdiction on that ground.
In the third place, allocation of work to Income-tax Officers and Inspecting Assistant Commissioners is made by the Commissioner of Income-tax under the statutory direction issued by him under sections 5(5) of the Act. Such direction issued by the Commissioner is a statutory direction conferring jurisdiction on Income-tax Officers. It cannot, therefore, be held that appellant No. 1, in holding that the Income-tax Officer had no jurisdiction as the name of the respondent did not commence with any of the letters between 'S' and 'Z', had violated the principles of natural justice.
In support of the contention that rules of natural justice have not been violated Mr. S. Mukherjee, learned junior counsel for the appellant, relied upon a decision of the Mysore High Court in United Karnatak Insurance Co. Ltd. v. Goverdhana Rao Venkata Rao, in which Hegde J. held that the concept of natural justice could not put in a 'straight jacket' and that the essence of natural justice was rendering justice, that it was not merely a dogma or ritual to be adhered to and observed without regard to the consequences, that, unless a statute so required, it could not be urged that violation of the concept of natural justice by itself would invalidate a decision irrespective of its merits and, finally, that if the court was satisfied that the decision was essentially just, then the same could not be set aside on the ground that the principles of natural justice had not been observed. Mr. Mukherjee also referred to a decision of the Patna High Court in Hardutt Mull Jute Mills v. State of Bihar. That was a case of assessment under the Bihar Sales Tax Act, and in that case the assessee did not produce books of accounts and other papers to rebut the allegations made in the report of an inspector, nor did he adduce any oral or documentary evidence for that purpose. After observing 'that the concept of natural justice could not be imprisoned within the straight jacket of any fixed formula', it was held that there was no violation of the principles of audi alteram partem, as at the appellate stage the assessee had an opportunity of showing cause against the inspectors report and of producing evidence to rebut the allegations made in the report. Ramaswami C.J. (as he then was) quoted with approval an earlier Bench decision of the same High Court, which is as follows :
'But as a matter of law it is not correct to state that the party adversely affected should be heard at each and every stage of the administrative process. There is no such general requirement in the principle of audi alteram partem. On the contrary, the principle is satisfied if the party adversely affected is given sufficient opportunity to know the case he has to meet and to answer that case at some stage and not at all the stages of the administrative proceeding.
As I have said, the question as to whether a fair opportunity has been given to the party adversely affected depends very much on the particular facts of each case. I think that the concept of natural justice cannot be imprisoned within the straight jacket of any fixed formula. It is not a mechanical instrument applicable to all situations.'
We are in agreement with the views expressed in the two above-mentioned decisions. I should refer to one other decision of the Supreme Court on which reliance was placed by Mr. Khaitan, namely, Kaushalya Devi v. Bachittar Singh, in which it was held that a finding based on no evidence was an error of law apparent on the record, but errors in appreciation of documentary evidence or in drawing inferences from such evidence could not be said to be errors of law because such errors could be corrected only by a court sitting as a court of appeal and not in appeal and not in an application under article 226 of the Constitution. This decision has no application to the issues before us in this appeal.
As I have observed earlier in this judgment, the question of the violation of the principles of natural justice has been discussed at length in Appeal from Original order No. 186 of 1965, Bagsu Devi Bafna v. Commissioner of Income-tax. But as the facts in this appeal were somewhat different, I have gone into the facts to deal with the contentions of the respondent that appellant No. 1 violated the principles of natural justice in making impugned order. In our opinion, the order made by appellant No. 1 on February 7, 1963, cannot be held to be bad on the ground that it had been made in violation of the principles of natural justice.
For the reasons mentioned above, this appeal is allowed with costs of this court and also of the trial court. The judgment and order of Sinha J. dated March 19, 1964, are set aside and the rule is discharged.
Certified for two counsel so far as the costs of this court are concerned.