BISHESHWAR SINGH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this case the assessment year is 1947 -48 and the accounting year is the financial year ending with 31st March, 1947. On the 1st March, 1947, the assessee was appointed as a grain stockist at Begusarai. The assessee carried on the grain business till December, 1947. He maintained account books which showed that for the period from March to December, 1947, the income from the grain business was Rs. 1,838. On 12th March, 1947, the Commissioner of Excise had granted two permits for molasses in the name of the assessee. One permit was for 1,400 maunds from Hussainpur Sugar Mills and the other permit was for 4,000 maunds from Sasamusa Sugar Works. The ITO learnt this fact in consequence of the statement made by the Minister of Revenue in the Bihar Legislative Assembly on the 13th Oct., 1947. The Minister disclosed in the course of his statement that persons to whom molasses permits had been given had made huge profits. The ITO issued a notice upon the assessee under S. 22(2) of the IT Act. The ITO also issued a notice under s. 22(4) of the Act requiring the assessee to produce all the accounts maintained for its business. The assessee did not comply with the terms of these notices, but on 15th June, 1949, the manager of the HUF, Bisheshwar Singh, appeared before the ITO and produced the following letter :

(2.) THE ITO made enquiry and found that there was no Government control over the price of molasses in the market and that the permit holders indulged in black marketing. He also found that the assessee had built a big residential house and a dozen stalls at an estimated cost of forty to fifty thousand rupees. The ITO estimated that the assessee had made a net income of Rs. 61,450 from trafficking in the molasses permits. He found the commission on the rice business to be Rs. Begusarai Yours faithfully, 15 -6 -49 (Sd.) Bisheshwar Singh" 1,838. In the result the assessee was held liable to pay tax on a total income of Rs. 63,288. The assessee preferred an appeal to the AAC but the appeal was dismissed. The assessee took a further appeal to the Tribunal which held that the profits of the assessee from the molasses permits should be estimate at the rate of Rs. 7 per maund and not at the rate of Rs. 11 -12 per maund as the ITO ordered. The Tribunal accordingly reduced the estimated profit from the molasses permits to a sum of Rs. 37,500. As regards the grain business the Tribunal held that the income from 1st March, 1947, to 31st March, 1947, was Rs. 498. The Tribunal therefore held that the assessee was liable to pay income -tax on a total income of Rs. 37,998. As ordered by the High Court the Tribunal has stated a case on the following questions of law :

(3.) AS regards the second question Mr. R. J. Bahadur took the objection that the question of law was not taken on behalf of the assessee before the Tribunal and the question has not been discussed or answered by the Tribunal in its appellate order. Mr. Bahadur put forward the contention that the question was not argued before the Tribunal and the Tribunal had no opportunity to discuss the point or to pronounce upon its validity. Counsel said therefore that the question of law did not "arise out of the order" of the Tribunal within the meaning of ss. 66(1) and 66(2) of the IT Act. In support of his submission counsel referred to Maharaj Kumar Kamal Singh's vs. CIT (1954) 26 ITR 79 (Pat) in which a Bench of this Court observed that the correct interpretation of S. 66(1) was that the question of law which the assessee seeks to refer must be a question of law which has actually been raised before the Tribunal or actually dealt with by it in its order. On behalf of the assessee Mr. Untwalia however pointed out that the order under S. 66(2) was passed by a Bench of this Court after hearing counsel for both the parties and it was not open to this Bench to say that the order passed by the previous Bench was erroneous and ought to be overruled. In support of his submission counsel referred to the decision of the Calcutta High Court in Chainrup Sampatram's vs. CIT (1951) 20 ITR 484 (Cal). In my opinion the contention of Mr. Untwalia has great force. It is manifest that the question of law does not arise out of the order of the Tribunal within the meaning of S. 66(1) or 66(2) of the Act and the Bench of the High Court ought not to have called for a statement of the case on this question. But the assessee has succeeded in persuading the previous Bench to call for a statement. The question is whether at this stage we should say that the reference should never have been called for under S. 66(2). That would mean, in substance, that we overrule the order passed by the previous Bench. As the matter stands I think that the question must be dealt with and answered on its merits and the reference cannot now be thrown out on the ground that the question does not arise out of the Tribunal's order.