ABDUL RAZAK vs COMMISSIONER OF INCOME TAX, BIHAR and ORISSA.

COURTNEY-TERRELL, C. J. :- This is a statement of case u/s 66, Sub-Section (3), Income Tax Act. The circumstances are a little unusual. The assessee is said to carry on a business of Arhatadar or commission agent for the sale of commodities. He was called upon by the Income Tax Officer to show his books and the Income Tax Officer made an assessment. The Income Tax Officer therein stated that he had assessed an income of about Rs. 10,000 in respect of transactions by the assessee outside his ordinary business as an Arhatadar, that is to say in respect of private transactions in the sale and purchase of goods. The matter than went on appeal to the Assistant Commissioner. The Assistant Commissioner on reading the report of the Income Tax Officer and the estimate that had been made was unable to understand on what precise material the estimate of Rs. 10,000 has been made, and with a comment to the effect that the estimate must be on a basis and not a wild guess, he sent the matter back to the Income Tax Officer for a report on the facts and figures which would justify the estimate made by the Income Tax Officer who was requested, therefore, to give reasons for his estimate and to hold such further local inquiry as he thought fit and examine the railway register showing the transport of the goods before submitting his report. It would appear that the Income Tax Officer then summoned the assessee to appear before him, give evidence and produce his books and furthermore paid a surprise visit to the place of business of the assessee and there discovered certain books which in the report which he made, he said were books of the assessee relating to the business beyond the books which he had in fact disclosed, that is to say, the report to the Income Tax Officer went somewhat beyond the matters upon which he was directed to deal with and the material part of the report which he submitted was a statement of the fact of this surprise visit and the discovery of these books. On receipt of this report by the Income Tax Officer, the Assistant Commissioner recited in his order that he had read the report but reduced the assessment from Rs. 10,000 at which it had been estimated by the Income Tax Officer to a sum of Rs. 7,000, otherwise the order of the Income Tax Officer was maintained. He apparently gave no opportunity to the assessee to explain the books which the Income Tax Officer had reported as having been found at the assessees place of business. The assessee then went on appeal, to the Commissioner and the Commissioner dismissed the appeal, and amongst other points dealt with the contention of the assessee that he has not been able to deal with the allegations of fact made in the Income Tax Officers report and that the Assistant Commissioner has not heard such evidence as he, the assessee, wished to offer on that topic. If it had been the fact that the Commissioner had said that, notwithstanding the conduct of the case by the Assistant Commissioner he on his part would give the assessee an opportunity of dealing with those facts before him (the Commissioner), the assessee would have had no grievance at all. But it is not clear from the order of the Commissioner whether the fact he heard the assessee or such evidence as might have been tendered by him; he merely supported the view of the Assistant Commissioner and refused to state a case on any of the points formulated from the proposed reference to the High Court. The assessee then came to the High Court for an order asking that the Commissioner be directed to state case, as a result the Court directed a statement of the case on two points. The first was :-

"Whether or not the applicant is enttled to an opportunity to rebut the information which constituted the basis of the report of the Income Tax Officer and whether an assessment made on information which the assessee had no opportunity to rebut or explain is invalid in law".

The question in this particular form had been formulated by the assessee himself and as formulated it is somewhat difficult to answer it in a satisfactory way. But, the first part of the first question is simple enough. It is clear on natural principles of justice that the new facts raised by the Income Tax Officers report, that is to say, the allegations of the finding of the books and railway receipts and that these books and railway receipts so found related to the business of the assessee, were matters which the assessee should have had an opportunity of dealing with, in order to enable justice to be done. Therefore, to the first part of the question put in a general form I would answer the affirmative, that is to say, that the assessee was entitled to an opportunity to rebut the allegation and an opportunity should be given to him by the Assistant Commissioner to do so. The second part of the first question does not arise. If after a reconsideration of the matter in the light of such evidence as the assessee may be able to produce the report of the Income Tax Officer is rebutted, the question formulated in the latter half of the question will have solved itself. The second question propounded for our consideration was also formulated by the assessee :-

"Whether or not the Income Tax Officer was justified in not recording or taking the evidence of the witness cited and produced before him, as per hazri, from which only a legal inference could have been drawn".

I know of no obligation on the part of an Income Tax Officer to compel him to receive evidence of this kind and he is indeed entitled to act upon such information as may come to him through some private source or otherwise. It may be pointed out that u/s 23, Sub-Section (3), the Income Tax Officer must hear such evidence as an assessee may produce, and such evidence as the Income Tax Officer may require on specified points to committed in writing, that is to say, during the course of the assessment. But in this case the Income Tax Officer was asked by the Assistant Commissioner simply to report the basis of the assessment and it is an accident that he went beyond that instruction. It was because after the receipt of the order the Income Tax Officer paid surprise visit to the business premises of the assessee and stated that fact in his further report that the difficulty has arisen. Therefore, as a general question the answer is to be found in Section 23 sub-Section (3), Income Tax Act. In this particular case the inquiry having been made at the appellate stage under the direction of the assistant Commissioner there is nothing to require the Income Tax Officer take the evidence produced.

As a result of this hearing the assessee is successful. He will receive back the Rs. 100 lodged by him and will be entitled to his costs and hearing fee, which we assess at ten gold mohurs.

MOHAMMAD NOOR, J. - I agree.

AGARWALA, J. - I agree.

Reference answered accordingly.