COMMISSIONER OF INCOME TAX Vs. P K NOORJEHAN

JUDGEMENT

(1.) These two References are at the instance of the Revenue and are compelled under S.256(2) of the Income Tax Act, by this Court. The Assessee is a Muslim lady aged approximately about 20 years during the previous year relevant for the assessment year 1968-69. The two assessment years with which we are concerned are 1968-69 and 1969-70. The Assessee's husband is a piece goods merchant in Broadway, Ernakulam. The Assessee by herself has no business, profession or, vocation, which earns her any income nor has she any heads of income such as what is mentioned in S.14 of the Income Tax Act, except a small property income. She was not at any time an income tax assessee. On notices issued by the Income Tax Officer, returns were filed for the two years in question. On 15 11 1967, that is in the accounting year relevant to the assessment year 1968-69 a property having an extent of about 16 cents situated in Ernakulam was purchased by the assessee. Inclusive of stamp and registration charges the investment came to Rs. 34;628,/-. On 27 11 1968 relevant to the assessment year 1969-70 another property of about 12 cents in Ernakulam Village was purchased. The total investment for this purchase was Rs. 25.902/-. The assessee's explanation as to the source for the purchase money for this investment was that the purchases were financed from out of the accumulated savings from the income of the properties which consisted of nearly one and a half acres of coconut plantation at Kaloor, Ernakulam, left by the assessee's mother who died in the year 1941, and out of the rent of the line building and income from a small coconut garden in Tirur. In support of the explanation, affidavits of her mother's first husband and brothers and a report of the income estimated from Ernakulam property prepared by a Retired Tahsildar, were produced. The Income Tax Officer also obtained a report of the probable yield from the property through his Inspector. The Income Tax Officer rejected the Assessee's explanation except to the extent of Rs. 2,000/-ghing credit to this amount. He made an addition of Rs. 32,628/-as income from other sources for the year 1968-69 and a similar addition of Rs. 25.902/-for the year 1969-70. On appeal, the Appellate Assistant Commissioner concurred, and dismissed the appeal. There was a further appeal to the Income Tax Appellate Tribunal by the Assessee. The Tribunal found the explanation about the nature and the source of the purchase money unsatisfactory. But it was of the opinion that the assessee being a Muslim lady aged 20 or 21 years had no other source of income, that it was impossible for the assessee to have earned the amounts invested in the properties, that these amounts should necessarily be one given to her by somebody else, and that by no stretch of imagination could the assessee be credited with having earned this income in the course of the assessment year, or even be in a position to earn it, for a decade and more. The Tribunal took the view that although the explanation of the assessee was liable to be rejected, S.69 of the Income Tax Act conferred only a discretion on the Income Tax Officer to deal with the investment as income of the Assessee, and that it did not make it mandatory on his part to deal with the income as income of the assessee as soon as the latter's explanation happened to be rejected. On this line of reasoning the Tribunal allowed the two appeals and cancelled the assessment of the Income Tax Officer. The following question of law has been referred for our opinion:

(2.) As the Tribunal rightly pointed out, the unsatisfactoriness of the explanation does not, and need not, automatically result in deeming the value of the investment to be the income of the Assessee. That is still a matter within the discretion of the Officer and therefore of the Tribunal. All the Authorities namely the Income Tax Officer, the Appellate Assistant Commissioner and the Tribunal having agreed in treating the assessee's explanation as unsatisfactory, the question for determination would be whether the Tribunal was right in interfering with the discretion of the Income Tax Officer and the Appellate Assistant Commissioner in having treated the value of the investment as the income of the assessee. The right of appeal to the Tribunal and the powers of the Appellate Tribunal are to be found in S.254 of the Act. Under S.254, the Tribunal is to pass "such orders on the appeal as it thinks fit". This is a wide power that is conferred upon the Tribunal. Unlike the case of a second appeal to this Court under S.100 of the CPC., the power of interference by the Tribunal is not in any way limited to consideration of questions of law or otherwise; so that it is open to the Tribunal to interfere with the judicial discretion exercised by the lower authorities and substitute the same by its own discretion. In the instant case, therefore, it cannot be said that the Tribunal was wrong in having differed from the Income Tax Officer and the Appellate Assistant Commissioner in the matter of exercising judicial discretion as to whether, even after rejecting the explanation of the assessee, the value of the investments were to be treated as the income of the assessee. We are not prepared to hold that in so differing from the two authorities below and exercising its own judicial discretion, the Tribunal acted arbitrarily or capriciously. It took into account the complete absence of resources of the assessee and also the fact that having regard to her age and the circumstances in which she was placed, she could not be credited with having earned any income of her own. It was in these circumstances that despite the rejection of the explanation as to undisclosed source of income, the Tribunal refused to make an addition of the value of the investment to the income of the assessee. We think, in the circumstances, the Tribunal was right. We answer the question referred in the affirmative i. e. in favour of the assessee and against the Revenue. There will be no order as to costs.