SHAIK IBRAHIM Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN compliance with the directions of this Court, the Tribunal has referred the following questions, namely :

(2.) THESE questions arise for determination in respect of the asst. yrs. 1954 55, 1955 56 and 1956 57 for which the relevant accounting years are the official years ending with 31st March, 1954, 31st March, 1955 and 31st March, 1956, respectively. The assessee filed a voluntary return in respect of the asst. year 1954 55 and in respect of the other two years he filed returns in response to notices issued under S. 34 by the ITO. In all these returns, the assessee admitted income from property and from business, which comprises of selling soda water, maintaining "killi" shop and plying a motor lorry. In addition to this income, he showed in section D of the return under which an assessee is required to show "any income, profits or gains which are not included in sections. A, B and C but which the assessee claims to be not taxable for any reason such as....." a sum of Rs. 5,850, Rs. 9,400 and Rs. 24,460 for the three years respectively. Before the ITO it was admitted that the assessee carried on business, commonly known as "bracket business" which consisted of betting on the New York cotton rates. No accounts were maintained by the assessee in respect of this transaction. In the absence of accounts, the ITO determined the income for each year on the basis of investments and property acquisitions in each of the years and arrived at the figures of Rs.

(3.) MR . Kondaiah for the Department also takes the stand that as the assessee while making the return stated that the income was from the business of New York cotton futures, he cannot now say that it was not from business. We cannot accept this contention. The mere fact that the assessee has not raised this contention before the ITO or the AAC would not, in our opinion, bar him from raising the same before the Tribunal. It has been held times without number that there is no estoppel on a question of law. Whether, in fact, the transactions of the assessee in respect of the New York cotton futures, known as "brackets" are exempt from tax under S. 4(3)(vii) or it would amount to "business" is a question of law. The mere fact that the assessee, not having appreciated his legal rights, failed to raise the contention before the ITO or the AAC, where he was not represented by a lawyer but by his auditor who not being qualified in law, is not competent to appreciate the principles of law or its subtleties, he cannot be denied the right to raise that question at the stage of the appeal before the Tribunal, which is also a forum both on question of fact as well as law. The assessee cannot, therefore, be denied an opportunity to raise such questions as would be open to him under the Act, before the Tribunal. This is a typical case which demonstrates the need and necessity for an assessee to have the services of a lawyer, at any rate before the Tribunal, because after that stage, no question of law which does not arise on facts as found by the Tribunal would arise or could be raised in an application for reference to the High Court. It is, therefore, imperative for the assessee to consider all aspects of his legal rights and liabilities arising under the Act at that stage, which in this case he has done. This is how the two questions which we had directed the Tribunal to refer, arise for our determination.