ANSARI A A Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference made to us by the CIT under s. 8(5) of the Taxation on Income (Investigation Commission) Act, No. XXX of 1947. The Central Government referred the case to the Commission for investigation under s. 5 (1) of the Act. The Commission has investigated the case and has made its report and on that report the Central Government has passed an order under s. 8(2) directing appropriate assessment proceedings being taken against the assessee under the Indian IT Act and the EPT Act with a view to assess or re-assess the incomes shown in the schedule which had escaped assessment.

(2.) ON this reference two questions of law have been raised, and in order to appreciate these two questions it is necessary to state a few facts. The assessee is a lorry driver and as pointed out in the report of the Commission he started life from humble beginning. At one time he owned four lorries, but by 1945 he had 24 lorries to his credit. In 1941-42 he did not show an income which was assessable, but from 1942-43 upto 1948-49 he showed an assessable income and he was assessed to tax. In 1941-42, 1942-43 and 1943-44 he produced books of account and he was assessed by the IT Department on those books. From 1944-45 to 1948-49 no books of account were produced by the assessee before the Department and he was assessed on an estimate of his income. Before the Commission certain books for the asst. yrs. 1944-45 and 1945-46 were produced. These were produced by the employees of the assessee. The case of the assessee with regard to his books of account was that the books had been destroyed by fire that took place in an adjoining building. The commission came to the conclusion that the case of the assessee was false, that the books were being suppressed, and they succeeded in getting some of the books which were produced by the employees. The finding of the Commission with regard to the books that were produced for the asst. yrs. 1941-42, 1942-43 and 1943-44 was that these books were not genuine. The Commission appointed an authorised official to collect various materials and the ultimate report of the Commission was based on the rates for lorry hire that prevailed in the various years. They also considered the ratio of expenditure to income, they took into consideration the difficulty on the part of the assessee to procure petrol during the war years, they further gave a concession to the assessee by taking into consideration the fact that traffic was not at all times of the same character merely on the basis of a mathematical average, and taking all these into consideration they estimated the income of the assessee for various years.

(3.) SIR Jamshedji says that what the Commission has done in effect is to assess the assessee under s. 23(4) according to best judgment assessment and SIR Jamshedji's contention is that unless express power was conferred upon the Commission as is conferred upon the ITO under s. 23(4), it is not open to the Commission to estimate the income of the assessee on a best judgment basis. SIR Jamshedji draws attention to the fact that when the EPT Act was enacted, certain sections of the IT Act were incorporated in that Act, and SIR Jamshedji says that if the intention of the Legislature was to confer the power upon the Commission which the ITO has under s. 23(4), we would have found a provision whereby s. 23(4) would have been incorporated in the Act. The difference between the EPT Act and the Act we are considering is obvious. The EPT Act was a taxing statute. The excess profits under that Act were brought to tax and charged to taxation and therefore the charging section had to provide the machinery which was similar to the machinery employed for taxing income to income-tax. The Act in question which we are considering is not a taxing statute. It does not deal with assessment of income. It does not bring any income to tax. Its only purpose is to bring about an investigation into the income of certain persons which has escaped tax, and therefore there was no reason to incorporate in this Act s. 23(4) or other sections of the IT Act, because after the report is made by the Commission, the Central Government under s. 8(2) after considering the report has to direct that proceedings will be taken against the person whose case was reported by the Commission and upon such direction proceedings have to be taken and completed under the appropriate law, notwithstanding the restrictions contained in s. 34 of the IT Act or s. 15 of the EPT Act. Therefore the scheme of the Act is that the Central Government on a prima facie case being made out first refers a matter to the Commission, the Commission investigates and determines the income which has escaped tax and makes a report, the report is then considered by the Central Government and if the Central Government is satisfied by the report it refers the matter to the IT Department and the Excess Profits Tax Department, and on that reference being made the person concerned is assessed or re-assessed and he is then liable to pay tax which is determined by the proper authority. Therefore the Commission does not assess the tax which the assessee is liable to pay on his income nor does it employ any assessing machinery because it is not its function to carry out any assessment, and that is the reason why we do not find the sections of the IT Act incorporated in this Act as we find in the EPT Act.