THE WELFARE FUND INSPECTOR Vs. KRISHNAN NAIR

JUDGEMENT

(1.) THIS appeal is from the Judgment in O.P.No.4667 of 1972,by the Welfare Fund Inspector,and the Chief Welfare Fund Inspector,functioning under the Kerala Toddy Workers Welfare Fund Act,1969,for short,the Act.The 1st appellant purporting to act under section 8(1)of the Act had passed two orders Exts.P -3 and P -7 produced along with the Original Petition disposed of by the judgment under appeal determining the contri­butions that the 1st respondent here had to make under the provisions of the Act.Ext.P -3 related to the period from 1st April 1971 to 30th November 1971 and Ext.P -7 for the period from 14th January 1970 to 31st March 1970.The complaint that was made by the 1st respondent before the learned Judge has been briefly stated in the Judgment thus: "The officer under sub -section(2)is invested with the powers of a court to summon witnesses and examine them on oath or on affidavits.The complaint made by the petitioner is that these powers vested in the Officer were not exercised,that no enquiry was conducted,or,if conducted at all,was so perfunctory in nature as to constitute a violation of the principles of natural justice and of the requirements of the section itself.

(2.) SECTION 8 of the Act is the relevant section and we shall extract the whole of that section: Determination of amounts due from employers."( 1)The Chief Welfare Fund Inspector or any other Welfare Fund Inspector authorised by him in this behalf may,by order,determine the amount due from any employer under the provisions of this Act or of the scheme and for this purpose may conduct such inquiry as he may deem necessary. (2)The officer conducting the inquiry under sub -section(1)shall,for the purposes of such inquiry,have the same powers as are vested in a court for trying a suit under the Code of Civil Procedure,1908,in respect of the following matters,namely:" (a)enforcing the attendance of any person or examining him on oath; (b)requiring the discovery and production of documents; (c)receiving evidence on affidavit; (d)issuing commissions for the examination of witnesses. (3)Any inquiry under this section shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purpose of section 196 of the Indian Penal Code. (4)No order determining the amount due from any employer shall be made under sub -section(1)unless the employer has been given a reasonable opportunity of being heard. (5)Any person aggrieved by an order under sub -section(1)may prefer an appeal to the Government or any other authority as may be specified by the Government within sixty days from the date of the receipt of the order and the decision of the Government or of such authority on such appeal shall be final.

(3.) WE think that there is justification for the appre­hension that parts of the judgment are capable of being understood,or perhaps mis -understood,as insisting that for every ˜inquiry ™under sub -section(1)of section 8 witnesses should be summoned and examined or their affidavits taken,as envisaged by sub -section(2)of section 8.Towards the end of paragraph 3 of the judgment it is categorically stated that the requirements of section 8(2)[inadvertently referred to as section 8(b)] had not been complied with.There are observations in paragraph 6 also which may point to the some conclusion.The question on this aspect is whether an officer empowered to enquire under sub -section(1)of section 8 must in all cases exercise his powers under sub -section(2)of section 8 before it can be held that there has been a proper enquiry under sub -section(1)of section 8.Sub­section(1)of section 8 uses the expression much inquiry as he may deem necessary &rsquo ;.The wording is very wide.Apparently the statute has left it to the officers to decide what should be the nature of the enquiry that should be conducted.In this connection it has to be remembered that the provision in section 8 has been made for the purpose of estimating and quantifying the liability of those who were required to make contributions under the Act but had failed to do so and had failed to comply with the requirements of filing returns.Similar provisions are con­tained in the Income -tax Act,in the Salestax Act,and under the Employees Provident Fund Act,to mention only a few statutes.Section 7(A)of the Employees Provident Fund,Act 1951 is in very similar terms to section 8 of the Act.In all these cases,a certain amount of latitude has been given to the officer to determine the liability whether it be that which arose under the Income -tax Act,or the Salestax Act,or the Employees Provident Fund Act.It has been held in Commissioner of Income -tax,Central and United Provinces v. Laxminarain Badridas (1937)5 I.T.R.170 by Lord Russell that the process involved is an ˜honest guess -work ™; and in that sense,too,the assessment must be to some extent arbitrary ;.There is one other passage in the judgment which is apposite for the purpose of this case and we shall extract it. Their Lordships can find no justification in the language of the Act for holding that an assessment made by an officer under section 23(4)without conducting a local inquiry and without recording the details and results of that inquiry cannot have been made to the best of his judgment within the meaning of the section.Nor can they find any such justification in the authorities upon which the Judicial Commissioners appear to have relied. This decision and the decision of a Full Bench of Lahore High Court in Gurmukh Singh v .Commissioner of Income -tax,Punjab A.I.R.1944 Lahore 353(2)have been referred to with approval by the Supreme Court,in more than one decision.We shall extract a passage from the decision of the Supreme Court in Dhakeswari Cotton Mills Ltd. v. Commissioner of Income -tax West Bengal .A.I.R 1955 S.C.65. As regards the second contention,we are in entire agreement with the learned Solicitor -General when he says that the Income -tax Officer is not fettered by technical rules of evidence and pleadings,and that he is entitled to act on material which may not be accepted as evidence in a court of law,but there the agreement ends;because it is equally clear in making the assessment under sub -section(3)of section 23 of the Act,the Income -tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all.There must be something more than bare suspicion to support the assessment under section 23(3 ).The rule of law on this subject has,in our opinion,been fairly and rightly stated by the Lahore High Court in the case of ˜A.I.R.1944 Lah.353(2 )(F.B.)(A ).™ In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions.Firstly,it did not disclose to the assessee what information had been supplied to it by the departmental representative.Next,it did not give any opportunity to the company to rebut the material furnished to it by him,and lastly,it declined to take all the material that the assessee wanted to produce in support of its case.The result is that the assessee had not had a fair hearing.The estimate of the gross rate of profit on sales,both by the Income -tax Officer and the Tribunal seems to be based on surmises,suspicions and conjectures. The matter was considered by this Court in the Full Bench in Varghese v. State of Kerala 1970 K.L.T.979(F.B.) where reference had been made to some of the Supreme Court decisions.As far as complying with the principles of natural justice is concerned all that the section requires is that before making such an honest guess or before making an estimate,a reasonable opportunity must be granted to the person for making representations against the proposed determination.This provision must not only be complied with but strictly complied with.Sufficient information containing all the necessary details which would enable a person sought to be made liable to make a representation which would enable the officer to change his mind must be given to the person sought to be made liable.We think that the information supplied should be such as would enable the person sought to be made liable to make an effective representation.This means that the basis on which the officer proposed to act must be fully disclosed to the person sought/to be made liable.All basic material on which the officer intended to rely and the necessary details which would enable the person sought to be made liable to effectively persuade the officer to desist from the proposed course must be made known to the person sought to be made liable and his representations duly considered before a decision is taken.