The Commissioner of Income Tax, Punjab, Jammu and Kashmir and Himachal Pradesh, Patiala vs Kartar Singh

Mahajan, J.—The Commissioner of Income Tax, Punjab; Jammu & Kashmir & Himachal Pradesh at Patiala, has moved this Court u/s 66 (2) of the Indian Income Tax Act, 1922, asking us to issue a Mandamus to the Tribunal concerned to refer the following two questions of law for our opinion:--

"(i) Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in entertaining the so-called Memorandum Book which was never admitted or produced in the assessment proceedings?

(ii) If the answer to the first question is in the affirmative, whether on the facts and in the circumstances of the case, the requirement of the first proviso to Section 10 (2) (vii) of the Indian Income Tax Act, 1922, was satisfied by the entries in the Memorandum Book?"

The assessee, an individual, carried on contract business for the supply of ballast. He employed his own trucks for the purpose of the contract business. No accounts of his business were produced by him. His income from such business was assessed by applying a rate on the receipts and depreciation on the trucks. In the assessment year 1960-61, the assessee claimed a loss of Rs. 50,679/- u/s 10 (2) (vii) of the Act. This loss was allowed by the Income Tax Officer by his order dated the 12th of July. 1961. The assessee appealed against the order of the Income Tax Officer on certain other matters. During the course of the hearing, the Appellate Assistant Commissioner noticed that loss of Rs. 50,679/- arising in the sale of trucks had been wrongly allowed. He took the view that the assessee had not maintained account-books and so the condition for allowing the loss under the first proviso to Section 10 (2) (vii) of the Act was not satisfied; inasmuch as the amount should have been actually written off in the books of the assessee. Accordingly, a notice was issued to the assessee to show cause why his income should not be enhanced by the amount of Rs. 50,679/-. After hearing the assessee, the Appellate Assistant Commissioner enhanced the amount of income by the figure of the loss claimed, by his order dated the 15th of March, 1963. The assessee then appealed to the Tribunal; and the Tribunal reversed the decision of the Appellate Assistant Commissioner and agreed with the Income Tax Officer in allowing the amount of Rs. 50,679/- as loss.

The contention before the Tribunal by the Revenue was that the Memorandum Book produced by the assessee was not a book within the meaning of Section 10 (2) (vii). This contention was negatived by the Tribunal. The Revenue then moved the Tribunal for reference of the questions already referred to above. This application was rejected by the Tribunal by its order dated the 4th of December, 1964, with the observations that, "on the facts of this case, it could not be stated that the Tribunal was not legally justified in entertaining the said note-book and using it as a piece of evidence in deciding the case." It is in these circumstances that the present petition has been preferred.

It may be said at the outset that a question of law does arise. But in view of the clear pronouncements of the Madras and Bombay High Courts in P. Appavu Pillai Vs. Commissioner of Income Tax, Madras, and Commissioner of Income Tax, Bombay City II Vs. London Hotel, , we decline the prayer for Mandamus. Normally speaking, if a matter is settled by a High Court in this country, that should be enough for the purposes of the Revenue, unless this Court comes to a conclusion that that decision is patently erroneous. This avoids multiplicity of decisions on the same question and is really a commendable course. We do not see anything wrong with the view adopted by the Madras High Court. The Revenue has so far taken no steps to assail its correctness by taking the matter to the Supreme Court. That view appeals to commonsense and reason. This is what the learned Judges said while dealing with Section 10 (2) (vii) of the Act:--

"* * * The expression "books of the assessee" in the context in which it appears in Section 10 (2) (vii) cannot give any indication of the particular type of accounts which the assessee should maintain. That the accounts maintained by the assessee are defective, in the sense that they do not lead to a correct assessment of the income, profits and gains of the business, has nothing whatever to do with the allowance that can be granted u/s 10 (2) (vii). * * * *"

In the present case, the Memorandum Register was produced which showed the relevant entry regarding the purchase and sale of vehicles wherein the loss had been calculated and written off within the meaning of Section 10 (2) (vii). The decision of the Madras High Court is fully applicable to the facts of the present case.

In this view of the matter, we see no reason to grant the application for mandamus. The application is dismissed but there will be no order as to costs.

Sandhawalia, J.

I agree.