1. The petitioner seeks a direction to respondent No. 2 to refer the two questions of law enumerated in para 8 of the petition to this court for opinion.
2. The assessee, proprietor of La Bela, Restaurant, Srinagar, opened his account with the Laxmi Commercial Bank on June 1, 1957, with a cash deposit of Rs. 4,763.81, This was followed by two further deposits of Rs. 4,700 on June 4, 1957, and Rs. 10,000 on July 5, 1957. In the subsequent financial year, there were two more cash deposits of Rs. 20,532.59 on June 11, 1958, and Rs. 29,000 on July 5, 1958. The explanation regarding the source of these deposits (made in 1957, 1958) was disbelieved by the ITO and an amount of Rs. 19,643 (for the financial year 1957) and Rs. 49,532 (for the financial year 1958) were added to the income of the assessee for the assessment years 1957-58 and 1958-59, as income of the assessee from 'undisclosed' sources. The assessee preferred an appeal against the said order of the ITO before the AAC, Income-tax, Jammu Range, Jammu, who rejected the same. A further appeal before the I.T. Appellate Tribunal, Amritsar Bench, also failed.
3. Before the ITO, the assessee explained that the deposits in 1957 and 1958, had been made from the following sources :
1. Cash received at the time of the marriage of the petitioner--Rs. 12,500.
2. Sale proceeds of jewels and ornaments--Rs. 10,516.
3. Amount received from Shri Jai Narayan and from past savings--Rs. 20,000.
4. Explaining further, the assessee stated that Rs. 10,000 were received by him from his father-in-law at the time of his marriage and Rs. 2,500 were collected as 'Hathdari' at the time of doli. He produced a confirmation certificate from his father-in-law, dated October 2, 1962, in support of this explanation.
5. Regarding the sale of jewellery, the assessee stated that he had received 55 tolas of gold, in ornaments, from his father-in-law at the time of marriage and, subsequently, had received a gift of jewellery from Smt. Sat Bahri, who treated him as her own son.
6. So far as the amount of Rs. 20,000 received from Shri Jai Narayan and past savings were concerned, the explanation of the assessee was that he had obtained a loan from Shri Jai Narayan to purchase a hotel, but since the deal did not go through, he deposited the amount in the bank, and had also saved up some amount from his known sources of income.
7. The ITO did not accept the explanation of the assessee on any of the accounts and did not believe the sources disclosed by him. The view of the ITO was upheld right up to the Income-tax Appellate Tribunal. While disbelieving the explanation of the assessee regarding the amount of Rs. 12,500, the ITO relied upon the statement of Dr. Jameet Rai Malhotra, father-in-law of the assessee, dated January 18, 1973, recorded by the Inspector of Income-tax at Delhi. In this statement, Dr. Jameet RaiMalhotra had given his financial position and status and stated that Rs. 500 only had been given to the assessee at the time of his marriage, besides other things. Before the Tribunal, an objection was raised by the assessee to the order of the ITO on two grounds, viz., (1) that the statement of Dr. Malhotra which had been relied upon to disbelieve the explanation of the assessee was inadmissible in evidence as it was a sworn statement, recorded by an Inspector of Income-tax who had no jurisdiction to administer oath before recording such a statement, and (2) that the said statement had been obtained behind the assessee's back and had not even been put to him. The Tribunal found both these contentions as not maintainable and went on to opine that even if the statement recorded by the Income-tax Inspector was not validly recorded as a sworn statement, its contents could none the less be used as 'constituting material gathered by the Income-tax Officer' and acted upon. The Tribunal further found that the contents of the statement of Dr. Malhotra had been put to the assessee, who, with a view to get rid of the statement, had filed an affidavit of his father-in-law stating therein that though he had told the Inspector that Rs. 12,500 had been given to the assessee, the Inspector had wrongly written Rs. 500 as having been so given.
8. So far as the sale of the jewellery is concerned, the Tribunal did not accept the explanation of the assessee on a consideration of the evidence and material on the record, and the same is true in regard to the explanation, regarding Rs. 20,000 as loan received from Shri Jai Narayan. The assessee filed an application under Section 256 of the I.T. Act, before the Tribunal, praying that the following questions of law be referred to the High Court for its opinion:
'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the deposits in the bank have not been explained by the petitioner and that these amounts represent the concealed income of the petitioner for the assessment year 1958-59
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in relying upon the statement of the Income-tax Inspector when the Inspector had no power to administer oath and record sworn statement and whether the affidavit filed by Dr. Malhotra can be disbelieved in view of the statement recorded by the Inspector of Income-tax when this statement has no force in law
3. Whether the Income-tax Appellate Tribunal was justified in concluding that the cash credits have not been sufficiently explained by the petitioner and that these amounts represent the concealed income for the assessment year 1958-59?
4. Whether the finding of the Tribunal with respect to cash credits is perverse and without any evidence in view of evidence produced and affidavits filed by the petitioner ?'
9. The Tribunal rejected the application by holding that questions Nos. 1 & 3 were misconceived and questions Nos. 2 & 4 did not arise out of the order of the Appellate Tribunal.
10. Mr. Subash Dutt, learned counsel for the assessee, has conceded that questions Nos. 1, 3 and 4 could not have been referred by the Tribunal to this court and has not assailed the order to that extent. It is, however, argued that question No. 2 is a question of law and arose out of the appellate order of the Tribunal and, therefore, the Tribunal fell in error is not referring the same to this court.
11. Mr. Thakur, learned counsel for the Commissioner of Income-tax, has on the other hand argued that in the face of the entire material available with the Tribunal, it need not have relied upon the statement of Dr. Malhotra, recorded by the I.T. Inspector, and that even if that statement was ignored there was ample material before the Tribunal from which it could return the finding about the deposits being the income of the asses-see from undisclosed sources and as such this court should not interfere with concurrent findings of fact in exercise of the powers under Section 256(2) of the I.T. Act.
12. There is no dispute that before a Tribunal can itself refer a question to the High Court or can be directed by the High Court to make a reference, it must be satisfied, inter alia, (1) that the question agitated is a question of law, (2) that the said question of law was raised before the Tribunal, (3) that the said question of law arises out of the appellate order of the Tribunal, We have, therefore, to consider whether the question raised by the assessee satisfies these conditions or not. Vide Section 131 of the I.T. Act, power has been given to an ITO to record the statement of any person on oath. The Act has for the purposes of this section not equated an I.T. Inspector with the ITO. No such power (to administer oath) has been given to an Inspector and. therefore, an Inspector of Income-tax would have no jurisdiction to administer an oath before recording a statement. Whether the administration of oath would render such statement inadmissible, is a question of law. Whether such an inadmissible statement, recorded by an I.T. Inspector, could constitute material gathered by the ITO and relied upon by him is also a question on these aspects. The argument of Mr. Thakur that the Tribunal, even in the absence of the statement of Dr. Malhotra would have come to the same conclusion even if correct, would not solve the problem, for, we do not know as to what extent was the mind of the ITO or the Tribunal influenced by the said statement. The admissibility or non-admissibility of a document or a statement is a question of law and it would be wrong to categorise it otherwise. The Tribunal was, in our opinion, wrong in saying that question No. 2 did not arise from the orderof the Appellate Tribunal. This question was raised before the Appellate Tribunal, which also dealt with the same in detail and negatived the contention of the assessee about the inadmissibility of the statement or the wrong reliance placed on the same by the ITO and the Tribunal. Question No. 2 is a question of law which arises out of the appellate order of the Tribunal. Apart from question No. 2, as framed by the assessee in his application, the other question whether or not such a statement can be relied upon by the Tribunal, as material collected by the ITO, as the Tribunal appears to have held in the present case, is also a question of law. Keeping in view the facts and circumstances of this case, in our opinion, this question also arises from the appellate order of the Tribunal. It is well settled that the powers of this court under Section 256, for directing a reference to be made to this court, are not confined only to the form of the question as raised before the Tribunal but the court can also direct the Tribunal to refer such other questions which was debated before the Tribunal and which arises out of the appellate order, provided, of course, it is a question of law. The court can even reframe the question of law so as to bring out the real nature of controversy. In our opinion, both these questions of law should have been referred to this court and the order of the Tribunal refusing to make a reference is not sustainable.
13. We, therefore, allow the petition and direct the Tribunal to state the case and refer the following questions of law to this court for opinion:
'1. Whether, on the facts and in the circumstances of the Case, reliance could be placed by the Tribunal on the statement of Dr. Malhotra, recorded by the Income-tax Inspector, who had no power to administer oath under Section 131 of the Income-tax Act ?.
2. Whether the statement recorded by the Income-tax Inspector, on oath, if not otherwise admissible, could constitute material gathered by the Income-tax Officer and acted upon by the Tribunal or the Income-tax Officer '