judgement:
Appeal No. 245 of 1965.
396 Appeal by special leave from the judgment and order dated October 31, 1962 of the Andhra Pradesh High Court in Appeal No. 563 of 1959.
K.R. Chaudhuri, for the appellants.
K. Sen and T. Satyanarayana, for respondents Nos. 1 to 3.
The Judgment of the Court was delivered by Mitter, J.
This is an appeal by special leave from a judgment and decree of the High Court of Andhra Pradesh confirming the decree passed by the Subordinate Judge at Eluru in O.S. No. 112 of 1955.
The only question involved in this appeal is, whether, under the terms of the will of one Boddu Adilakshmi, defendants 4 and 5 took her properties as joint tenants or tenants in common.
The facts leading to the litigation may be stated as follows.
The testatrix, Adilakshmi, who was childless herself brought up defendants 4 and 5, Boddu Ramarao and Kosury Lakshmamma, from their infancy.
At the date of the will executed on June 28, 1913 the girl (defendant 5) had been with her for 15 years and the boy (defendant 4) for 10 years and both were minors at the time.
In order to provide for them after her death she executed a will covering all her properties, movable and immovable.
The translation of the relevant portion of the will which was in vernacular is as follows : " . . my entire property should hereafter my lifetime pass to.
both these minors, Lakshmamma and Ramarao, that until their minority period is over, Banda Ramaswamy Garu should act as their guardian and deal with all the affairs, that after their minority period is over the entire property should be in possession of both of them, that both of them should enjoy throughout their lifetime the said property without powers of gift transfer and sale and that after their death the children that may be born to them should enjoy the same with powers of gift, transfer and sale.
" The testatrix died within a few days after the execution of the will.
Defendants 4 and 5 divided the properties left by the testatrix by a registered partition deed dated December 27, 1929 ' by which those mentioned in Schedule A to the plaint fell to the share of the 4th defendant while the others mentioned in Schedule B fell to the share of the 5th defendant.
The 4th defendant married the 1st defendant, Boddu Satyavathi who is the 'daughter of the 5th defendant.
The 2nd defendant is the daughter born out of this wedlock.
Some years thereafter, the 4th defendant married one Boddu Manikyam.
the plaintiffs 1 to 4 being the issues of the marriage of the 4th defendant with her.
The 5th defendant 397 and the 1st defendant mortgaged the B schedule properties with the 3rd defendant who brought a suit on the mortgage and obtained a decree.
The plaintiffs filed the suit against all the defendants in 1955.
for a declaration that after the death praying of defendants 4 and 5, the 1st defendant and the children of the 4th defendant or such of them as may be alive at the time would be entitled to share the properties in suit equally between them and that any alienation made by defendants 4 and 5 or their assignees or alienees would not bind the interests of 'the ultimate feversloners beyond their lifetime and further that the mortgage decree mentioned above was not binding on the plaintiffs or the ultimate reversioners.
In the trial court a 'number of issues were framed but the only question canvassed before the High Court on appeal related to the effect of the will of Adilakshmi.
The trial court came to the conclusion that defendants 4 and 5 were only the holders of life estate and that they had succeeded to the estate of Adilakshmi as tenants in common.
The High Court held that "the right of 'the children of defendants 4 and 5 to step into the shoes of the parents has been expressly mentioned in the instrument.
The residuary estate has been given to the children.
that may be bor n to the legatees who.
it is provided, should enjoy the properties with powers of gift.
transfer and sale.
A life estate has been given to defendants 4 and 5 and an absolute estate to their children.
On a fair construction of the language.
it is difficult to accede to the contention of the appellants that the children of defendants 4 and 5 who may be actually alive at the time of the death of defendants 4 and 5, would take the properties per capita." The High Court further held that the conduct of the defendants in partitioning the properties went to fortify the above conclusion.
The ultimate conclusion of the High Court was "the bequest in favour of defendants 4 and 5 was that of a life estate with a vested remainder in favour of their children and that the children should take the vested remainder per stripes and not per capita." In our view.
the High Court came to the correct conclusion.
Before examining the principles of law involved, we may consider the intention of the testatrix in giving her properties to defendants 4 ,red 5.
She brought them up like her own children but she did not want them to have the power of sale or alienation and desired that the properties be preserved for the benefit of their children.
would be reasonable therefore for her to make provision in such way that the 'foster children would enjoy the income of the properties for their lives and that their children should inherit the Ip.
C. l68 111 398 properties as full owners on the death of their parents.
The donees of the life estate were minors at the date of the will and there was no knowing when they would get married and how many children each would have.
It would therefore be reason able to expect that the testatrix would so arrange her affairs that each of the foster children should get half of the income of the property for life and that their children should succeed to the respective interest of their parents.
It is hardly likely that the testatrix would know the difference between joint tenants and tenants in common and she would naturally be eager to treat the foster children as her own children so that the heirs of the foster children would take share and share alike the properties be in divided per stirpes among them.
Let us now consider the position in law.
The law has bee n summarised in Mulla 's Transfer of Property Act (Fifth Edition at page 226.
As early as 1896 it was held by the Judicial Committee of the Privy Council in Jogeswar Narain Deo vs Ram Chand Dutt & others(1) that "The principle of joint tenancy appears to be unknown to Hindu law.
except in the case of coparcenary between the members of an undivided family." and that it was not right to import into the construction of a Hindu will an extremely technical rule of English conveyancing.
Many years later the principle was reiterated in the case of Babu Rani vs Rajendra Baksh Singh(2).
It was argued before us that there were indications in the will that the intention of the testatrix was that the foster children should take as joint tenants and that this was apparent from the clause in the will which provided that "the entire property should be in possession of both of them and that both of them should enjoy throughout their lifetime the said property and that after their death the children that may be born to them should enjoy the same . " We do not think that from this one can spell out a joint tenancy which is unknown to Hindu law except as above stated.
The testatrix did not expressly mention that on the death of one all the properties would pass to the other by right of survivorship.
We have no doubt on a construction of the will that 'the testatrix never intended the foster children to take the property as joint tenants.
The foster children who became tenants in common partitioned the property in exercise of their right.
(1) 23 I.A. 37 at 44.
(2) 60 l.
A.95 at 10 399 As by the will the foster children were to have a life interest with a vested remainder to their children, the latter could only take per stirpes and not per capita.
As Halsbury points out (Volume 39 Third Edition) at page 1106, article 1638 that a stirpital distribution would be adopted "where the gift was to a number of parents and their children in such a manner that the children were substituted for, or took on the death of, their respective parents; and gifts to several parents and at, or after, their deaths to their children, or to their issue, have received this construction as meaning at or after their respective deaths.
" It is not necessary to cite many instances where this construction has been adopted.
In re Hutchinson 's Trusts(1) the testatrix bequeathed personality in trust for A.B. for life and after his decease for his issue, and on failure of his issue to F.H.S. and R.S. share and share alike, and after the decease of the said F.H.S. and R.S. to their children share and share alike, and to their heirs for ever.
Kay, J. felt that he was bound by authority to say that the words "after the decease of the said Francis Hutchinson Synge and his brother Robert Synge mean after their respective deaths, or after the decease of each of them, and that there is a disposition of the share of each which was an absolute interest in the first instance upon his death." (see at page 816).
This rule was further amplified by Romer.
J. in Errington, In re.
Gibbs vs Lassam(1) where he said (at p. 425) "The rule, stated in its simplest way is this: Where a testator gives the income of his estate to two people, A. and B., for their lives and follows that gift by a direction that at their death, or at their deaths, or at or after the death or deaths of A. and B. the property is to go to their issue, the Court does not construe the gift as a gift only to take effect on the death of both in favour of the issue of both, but construes it as a gift, to take effect on the death of each, of the share to the income of which the deceased was entitled, to the issue of the deceased." (1) (2) 400 In Mcdonnell vs Neil(1) the Judicial Committee referred to the dictum of Kay, J. in re Hutchinson 's Trusts(2) and observed that the construction was borne out by a long line of authority.
In the result, the appeal will stand dismissed with costs.
appellant must pay the court fees.
G.C. Appeal dismissed.

summary:
A childless Hindu lady brought up a boy B and a girl K as foster children.
She made a will whereby after her death B and K were to get a life estate in her property and 'after their death the children that may be born to them should enjoy the same with powers of gift transfer and sale '.
After the lady 's death B and K divided the property in equal shares by a partition deed.
B married K 's daughter and had a child by her.
He then took another wife and had four children by her.
The said four children filed a suit for a declaration, inter alia, that after the death of B and K, their children namely, K 's daughter and B 's children would be entitled to take the property in equal shares.
The trial court as well as the High Court held that B and K had inherited a life estate as tenants in common and their descendants would inherit per stirpes and not per capita.
The plaintiffs appellants came to this Court.
It was urged on their behalf that B and K had inherited as joint tenants and not as tenants in common.
HELD: A joint tenancy is unknown to Hindu law except in the case of a coparcenary between members of an undivided family.
The terms of the will also did not in the present case spell out a joint tenancy.
As by the will the foster children were to have a life interest with a vested remainder to their children, the latter could only take per stirpes and not per capita.
[398 G 399 A] Jogeswar Narain Deo vs Ram Chund Dutt & Ors.
23 I.A. 37 and Babu Rani vs Rajendra Baksh Singh, 60 I.A. 95, relied on.
In re Hutchinson 's Trusts, , Errington, In re: Gibbs vs Lassam.
and Mcdonnel vs Neil. , referred to.
The donees of the life estate were minors at the date of the will and there was no knowing when they would get married and how many children each would have.
It would therefore be reasonable to expect that the testarix would so arrange her affairs that each of the foster children should get half of the income of the property for life and that their children should succeed to the respective interests of their parents.
It is hardly likely that the testatrix would know the difference between joint tenants and tenants in common and she would naturally be eager to treat the foster children as her own children so that the heirs of the foster children would take share and share alike the properties being divided per stirpes between them.
1398 A B]


judgement:
Appeals Nos.
708 to 710 of 1966.
Appeals by special leave from the judgment and order dated July 23, 1964 of the Andhra Pradesh High Court in Case Referred No. 42 of 1962.
Sukumar Mitra, Y. V. Anjaneyulu, Bhuvnesh Kumari, J. B. Dadachanji and O. C. Mathur, for the appellant (in all the appeals).
Niren De, Solicitor General, section K. Aiyar, R. N. Sachthey and section P. Naya; , for the respondent (in all the appeals), The Judgment of the Court was delivered by Ramaswami, J.
These appeals are brought by special leave from the judgment of the High Court of Andhra Pradesh dated 23rd July, 1964 in referred case No. 42 of 1962.
The assessment years involved in these appeals are and 1954 55, the relevant accounting periods being the years ending 30 9 1948, 30 9 1952 and 30 9 1953, respectively.
The assessee firm Khan Bahadur Ahmed Alladin & Sons (hereinafter referred to as the 'assessee firm ') consists of three partners, Khan Bahadur Ahmed Alladin, and his two sons, Khan Saheb Dost Mohammed Alladin and Noor Mohammed Alladin.
The assessee firm purchased the Brengun Factory and the properties attached to it consisting of 403 acres of land, 14 factory buildings, about on, hundred residential quarters, and railway sidings, furnitures etc., in addition to the stores, from the Government of India.
The price of the Brengun Factory and the properties together with the furniture etc.
was fixed at Rs. 27 lakhs while the price of the stores was fixed at Rs. 8 lakhs.
During the relevant accounting years, the assessee firm sold a part of the stores for Rs. 9,53,918 O.S. and 46 acres of land, 14 factory buildings, furniture, railway siding, etc.
for Rs. 26,48,215 O.S.
It was not disputed that the excess over the price realised for the re, sale of 441 stores was Rs. 2,26,484 O.S. and for the re sale of part of the factory land, building etc.
was Rs. 10,46,834 O.S.
It was admitted by the assessee firm before the Appellate Tribunal that the surplus realised by the resale of stores was not a capital accretion but an adventure in the, nature of trade.
With regard to the factory it was argued that it was an investment, and not an adventure in the nature of trade and as such the excess amount realised represented a realisation of capital asset.
The contention of ,he assessee firm was rejected by the Income tax Officer, by the Appellate Assistant Commissioner and by the Appellate Tribunal in appeal.
The view taken by the Appellate Tribunal was that the assessee firm had planned a well calculated scheme of profit making, that it had the intention of exploiting the properties which it had purchased to its advantage, that the transactions in question constitute an adventure in the nature of trade, and any surplus which it got by sale of the portions of the properties was liable to tax.
At the instance of the assessee firm, the Appellate Tribunal stated a case to the High Court on the following question of law : "Whether the purchase of the site and buildings known as "Brengun Factory" was in the course of a profit making scheme or an adventure in the nature of trade By its judgment dated 23rd July, 1964 the High Court, answered the question against the assessee firm.
On behalf of the appellant Mr. Sukumar Mitra argued that the assessee firm along with Abdullah Alladin, brother of Khan Bahadur Ahmed Alladdin had been carrying on business as a partnership firm under the name of Khan Bahadur Ahmed Alladdin and Company (hereinafter referred to Alladdin & Co.).
It had substantial interest in various joint stock companies, and was the managing agent of several joint stock companies, and possessed considerable financial resources.
The assessee firm acquired the Brengun Factory with the intention of starting a bicycle factory or some other industry as an investment, but not with the intention of resale.
The argument was stressed that the purchase and sale of land and buildings was not in the line of business of the assessee firm.
It was stated that the purchase was an isolated transaction and even after the sales, a major portion of the factory remained with the assessee firm.
It was contended that the, assessee firm had not developed the land or parcelled it out with the view to sell it to purchasers as a residential area, and make a profit.
The submission made on behalf of the appellant was that the transaction of purchase was in the nature of investment and was not an adventure in the nature of trade and the sales represented the realisations of capital asset.
442 The provision of law under which assessment was made for the assessment year 1358 F. was section 31(3) of the Hyderabad Income Tax Act (hereinafter referred to as the 'Hyderabad Act ') which corresponds to section 23 (3) of the Indian Income Tax Act, 1922 (hereinafter referred to as the 'Indian Act).
The mnents for the subsequent years were made under the Indian Act.
The charging section under the Hyderabad Act is section 3, which corresponds to section 4 of the Indian article The word "business is defined in section 3(1) of the Hyderabad Act which is identical with the language of section 2(4) of the Indian Act.
Section 8 of the Hyderabad Act states : "Save as otherwise provided by this Act, the following beads of income, profits.
and gains shall be chargeable to income tax in the manner hereinafter appearing, namely (iv) Profits and gains of business, profession or vocation".
It corresponds to section 6 of the Indian Act.
The question whether profit in a transaction is a capital accretion or has arisen out of an adventure in the nature of trade is a mixed question of law and fact.
In Venkataswami Naidu & Co. vs Commissioner of Income tax(1) it was pointed out by this Court that the expression 'in the nature of trade in sub section (4) of section 2 of the Indian Act postulates the existence of certain elements in the adventure which in law would invest it with the character of trade or business : and that a Tribunal while considering the question whether a transaction is or is not an adventure in the nature of trade before arriving at its conclusion on the facts, has.
to address itself to the legal requirements associated with the concept of trade and business.
In other words, in reaching the conclusion that the transaction is an adventure in the nature of trade, the Appellate Tribunal has to find the primary evidentiary facts and then apply the legal principle involved in the statutory expression "adventure in the nature of trade" used by section 2(4) of the Indian Act.
A question of this description is a mixed question of law and fact and the decision of the Appellate Tribunal thereon is open to challenge under section 66 (1 ) of the Indian Act.
The question whether the transaction is an adventure in the nature of trade must be decided on a consideration of all the relevant facts and circumstances which are proved in the particular case.
The answer to the question does not depend upon the application of any abstract rule, principle or formula but must (1) 443 depend upon the, total impression and effect of all the relevant facts and circumstances established in the particular case.
In Californian I Copper Syndicate vs Harris(1), Lord Justice Clerk observed, "It is quite a well settled principle in dealing with questions of assessment of income tax that where the owner of an ordinary investment chooses to realise it, and obtains a greater price for it than he originally acquired it at, the enhanced price is not profit. . assessable to income tax.
But it is equally well established that enhanced values.
obtained from realisation or conversion of securities may be so assessable where what is done is not merely a realisation or change of investment, but an act done, in what is truly the carrying on, or carrying out, of a business.
What is the line which separates the two classes of cases may be difficult to define, and each case must be considered according to, its facts; the question to be determined being Is the sum of gain that has been made a mere enhancement of value by realising a security or is it a gain made in the operation of business in carrying out a scheme for profit making ?" But in judging the character of such transactions several factors have been treated as significant in decided cases.
For instance, if a transaction is related to the business which is normally carried on by the assessee, though not directly part of it, an intention to launch upon an adventure in the nature of trade may readily be inferred.
A similar inference would arise where a commodity is purchased and sub divided, altered, treated or repaired and sold or is converted into a different commodity and then sold.
The magnitude of the transaction of purchase, the nature of the commodity, the subsequent dealings of the assessee the nature, of the organisation employed by the assessee and the manner of disposal may be, such that the transaction may be stamped with the character of a trading venture In Martin ' vs Lowry(2) the assessee purchased a large quantity of aeroplane linen and sold it in different lots, and for the purpose of selling it started an advertising campaign rented offices, engaged an advertising manager, a linen expert and a staff of clerks, maintained account books normally used by a trader, and passed receipts and payment in connection with the linen through a separate banking account.
It was held that the assessee carried an adventure in the nature of trade and so the profit was liable to be taxed.
The same view was taken in Rutledge vs Commissioners of Inland Revenue(3) in regard to an assessee who purchased very cheaply a vast quantity of toilet paper and within a short time thereafter sold the whole consignment at a considerable profit.
Similarly, in Commissioners of Inland Revenue vs Fraser, the assessee (4) a woodcutter bought for resale, whisky in bond, in three lots.
He (1) T.C. 159,165 6.
(2) 11 Tax Cases 297.
(3) 14 Tax Cases 490.
(4) 24 Tax Cases 498.
444 sold it later on at considerable profit.
The assessee had never dealt in whisky before, he had no special knowledge of the trade, he did not take delivery of the whisky nor did he have it blended and advertised.
Even so it was held that the transaction was not an adventure in the nature of trade.
Lord President Normend observed in the course of the judgment : "It is in general.
more easy to hold that a single transaction entered into by an individual in the line of his own trade (although not part and parcel of his ordinary business) is an adventure in the nature of trade than to hold that a transaction entered into by an individual outside the line of his own trade or occupation is an adventure in the nature of trade.
But what is a good deal more important is the nature of the transaction with reference to the commodity dealt in.
The individual who enters into a purchase of an article or commodity may have in view the resale of it at a profit, and yet it may be that that is not the only purpose for which he purchased the article or the commodity, nor the only purpose. to which he might turn it if favourable opportunity of sale does not occur.
In some of, the cases the purchase of a picture has been given as an illustration.
An amateur may purchase a picture with a view to its resale at a profit, and yet he may recognise at the time or afterwards that the possession of the picture will give him aesthetic enjoyment if lie is unable ultimately, or at his chosen time, to realise it at a profit.
A man may purchase stocks and shares with a view to selling them at an early date at a profit but, if he does so, he is _purchasing something which is itself an investment, a potential source of revenue to him while he holds it.
A man may purchase land with a view to realising it at a profit, but it also may yield him an income while he continues to hold it.
If be continues to hold it, there may be also a certain pride of possession.
But the purchaser of a large quantity of commodity like whisky, greatly in excess of what could be used by himself, his family and friends a commodity which yields no pride of possession, which cannot be turned to account except by a process of realisation, I can scarcely consider to be other than an adventurer in a transaction in the nature of a trade; and I can find no single fact among those stated by the Commissioners which in any way traverses that view.
In my opinion, the fact that the transaction was not in the way of business (whatever it was) of the respondent in no way alters the character which almost necessarily belongs to a transaction like this".
These are cases of commercial commodities but a transaction of purchase of land cannot be assumed without more to be an adventure in the nature of trade.
In Leeming vs Jones(", syndicate was formed to acquire an option over a rubber estate with a view to resell it at a profit, and finding the estate too small the (1) 15 Tax Cases 333.
445 syndicate acquired ' another estate and sold the two estates on profit.
It was held that the transaction was not in the nature of trade and the profit was not liable to be assessed to tax.
The same view was expressed in Saroj Kumar Mazumdar vs Commissioner of Income tax West Bengal(1), in which the assessee who carried on business of engineering works purchased land which was tinder requisition by the Government, negotiated a sale before the land was de requisitioned and sold it after the land was released.
Again in Commissioners of Inland Revenue vs Reinhold(2) the respondent who carried on business of wharehousemen bought four houses in January, 1945, and sold them at a profit in December, 1947.
He admitted that he had bought the property with a view to resale and had instructed his agents to sell whenever a suitable opportunity arose.
On behalf of the Crown it was contended that the purchase and sale constituted an adventure in the nature of trade and the profits, arising therefrom were chargeable to income tax.
It was, held by the Court of Sessions that the initial intention of the respondent to purchase the property with a view to resell did not per se establish that the transaction was an adventure in the nature of trade and the Com missioners were justified in treating the profit as not assessable to income tax.
But the circumstance of a particular case may lead to the conclusion that the purchase or resale of land is in the nature of trade.
In Venkataswami Naidu 's (3 ) case the appellant firm which acted as managing agents purchased, for a total consideration of Rs. 8,713 four contiguous plots of land adjacent to the place where, the mills of the company managed by it were situated.
The first purchase was made in October, 1941 and the second and subsequent purchases were made in November, 1941, June, 1942 and November.
1.942.
As long as the appellant was in possession of the land it made no effort, to cultivate it or erect any superstructure on it but allowed the land to remain unutilised except for the rent received from the house which existed on one of the plots.
The appellant sold the land to the company managed by it in two lots in September and November, 1947, for a total consideration of Rs. 52,600.
The question was whether the sum of Rs. 43,887 being the excess realised by the appellant by the two sales over its purchase price was assessable to income tax.
The Appellate Tribunal rejected the contention of the appellant that the properties were bought as an investment and that the plots were acquired for building tenements for the labourers of the mills but came to the conclusion that the transaction was an adventure in the nature of trade.
On a reference, the High Court expressed the same view.
It was held by this Court in appeal that the Appellate Tribunal was right in inferring that the appellant knew that it would be able (1) 37 Tax Cases 242.
(3) sup.c.1/68 14 (2) 34 Tax Cases 189.
446 to sell the lands to the managed company whenever it thought it profitable so to do, that the appellant purchased the four plots of land with the sole intention of selling them to the mills at a profit and that the High Court was right in holding that the transaction was an adventure in the nature of trade.
As we have already said it is not possible to evolve any legal test or formula which can be applied in determining whether a transaction is an adventure in the nature of trade or not.
The answer to the question must necessarily depend in each case on the total impression and effect of all the relevant factors and circumstances proved therein and which determine the character of the transaction.
What then are the material facts found in the present case ? Alladin & Co. was the managing agent of several joint stock companies viz., Hyderabad Asbestos Cement Products Limited (hereinafter referred to as the Asbestos Co.), Hyderabad Laminated Products Limited (hereinafter referred to as the Laminated Products), Hyderabad Allwyn Metal Works Limited (hereinafter referred to as the Allwyn Co.) and others.
Alladdin & Co. started Asbestos Co. in 1946 and the Laminated Products in 1947.
The Government of Hyderabad had 50% share holding in both these companies.
Negotiations for the purchase of Brengun Factory situate in the out skirts of Hyderabad commenced in December, 1946.
On 18th December, 1946, there took place a meeting between Khan Saheb Dost Mohammed Alladin and Noor Mohammed Alladin on behalf of Alladin & Co. and Khan Bahadur Obaidullah, the then Additional Financial Adviser to the Government of India.
The latter informed the two Alladin brothers that the Government of India had decided to sell the Brengun Factory as the war had ended and it was going cheap.
It was agreed that the price of the factory building should be fixed at Rs. 27 lakhs, and of the stores at Rs. 9 lakhs.
Alladdin & Co. asked for six months ' time for making the payment but finally it was agreed that the price should be paid in four equal monthly installments commencing from 1st January, 1947.
The contract of sale was made subject to the condition that the Hyderabad Government was no longer interested in the factory and also subject to the confirmation by the Board of Directors.
By its letter dated December 24, 1946, Alladdin & Co. accepted the proposal and informed the Additional Financial Adviser that the Board had agreed to purchase the Brengun Factory and the first payment would be made on 1st or 2nd January, 1947.
Not having ready cash to pay the first instalment the firm borrowed the sum from the State Bank and the Central Bank pledging the shares of the partners valued at about Rs. 20 lakhs for Rs. 9 lakhs.
It is significant that the assessee firm invested very little of its own money in the purchase of the factory and the stores.
It got six months 447 time from the Government of India to pay the price in instalments, and paid it by pledging its shares with the Banks, by obtaining further loan from the Banks on over drafts, and by selling portions of the factory to the Asbestos Co. and Laminated Products, and the Allwyn Co. The balance sheet of the assessee firm as on 31 9 1948 disclosed that the assessee firm owed about Rs. 7 lakhs to Government of India, though by that time it had sold properties valued over Rs. 30 lakhs.
It is a significant circumstance that on 23rd December, 1946 a meeting of the Board of Directors of the Asbestos Co. was held and in that meeting a resolution was passed that the Government should be approached in the matter of the valuation of the site and building in tile establishment of the "Asbestos Works" in the premises of the Brengun Factory purchased by the assessee firm and that the managing agents be authorised to address Nawab Medhi Nawaz Jung Bahadur in that behalf.
The notice convening the meeting was issued on the 23rd December, 1946, on which date, the assessee .firm had not even intimated their acceptance of offer made by the Government of India for the sale of Brengun Factory.
Pursuant to the resolution of 28th December, 1946, the Asbestos Co. resolved to purchase 14 acres of land, buildings etc.
for Rs. 5 lakhs.
It should be noticed that the valuation by the P.W.D. which was considered necessary on the 28th December, 1946 was given up and the price of Rs. 5 lakhs was accepted by the Board of Directors.
In the circumstances, the inference that that resolution was passed at the instance of the assessee firm is not unreasonable.
Pursuant to the resolution a sale deed appears to have been executed in favour of the Asbestos Company on 31st March, 1947.
It is apparent that the interval of time between the purchase of the factory and the sale was about 3 months, and this is hardly consistent with the contention of the assessee firm, that it had purchased the property as an investment.
It is also admitted that the sale deed in favour of the Asbestos Co. as well as the Laminated Products and Allwyn Co. were executed by the Government of India in their favour direct.
The sale was in favour of the Laminated Products pursuant to a resolution passed on 17th September, 1947.
On that day the company resolved that in view of the special facilities for power, water and railway siding at the Alladin Industrial Estate, Sanathnagar, sanction should be accorded for the acquisition of the, proposed area of 8 acres of land for the location of the company 's factory as per the rate offered to the company i.e., at O.S. Rs. 5,000 per acre and a sum of Rs. 40,000 was agreed to be paid towards the price.
A sale deed was executed pursuant to the resolution in June, 1948.
The next transaction relates to the purchase by the Allwyn Co.
The Board of Directors at its meeting on October 29, 1947, resolved to sell away their existing factory buildings at Azamabad to the Nizam 's State Railway, and purchase the new factory, 448 land and buildings as Sanathagar, for Rs. 25 lakhs.
The property purchased consisted of 24 acres, of land, factory buildings ,,Ind furniture, and the sale deed was executed on February 11, 1948.
It is manifest that within one year of the purchase of the Brengun Factory, the assessee firm realised Rs. 13,99,753 by the sale of stores and Rs. 33,90,908 by the sale of 46 acres of land and buildings, in all making a profit of Rs. 11,90,661.
It appears from the balance sheet as on September 30, 1948 that even after the extended date, it still owed Rs. 7 lakhs to the Government though by that time it had sold over Rs. 30 lakhs worth of property.
The assessee firm was thus paying off the dues to the Government and also discharging its debts by selling fractions of the property.
In other words, the assessee firm was purchasing, selling and liquidating the loans, which would all show the commercial nature of the transaction.
These facts establish that the assessee firm had not enough financial resources to invest Rs. 36 lakhs on the.
Bren Gun Factory and that the transaction was launched upon with a view to make profit and not as a permanent investment.
There is another aspect of the matter to be taken into account.
The property income from Bren Gun fac :tory during the year 1953 54 as would appear from the Assessment Orders of the years, 1953 54, 1954 55 was about Rs. 22,000 I.G.
The interest on loans on over drafts is paid to be 41 per cent.
on 27 lakhs the balance of price payable to the Government, the :annual interest would be about Rs. 1,21,500.
It is manifest that the assessee firm could not have borrowed the money to purchase the property as an investment when the income was about 1/6 of the interest payable on the amount borrowed.
Mr. Sukumar Mitra suggested that the assessee firm intended to develop the Bren Gun Factory as an Industrial Estate and referred to certain correspondence in this connection.
But the correspondence does not establish that any of the foreign companies agreed to start a cycle factory of their own or in collaboration with the assessee firm.
The correspondence between the parties admittedly ended in February 1946.
Mr. Sukumar Mitra also referred to the correspondence between January 8, 1947 to March 10, 1947 but this also does not show that there was any prospect of the assessee firm starting a cycle industry or any other industry either solely .or in collaboration with a foreign company.
Having regard to total effect of all the relevant facts and circumstances established in this case we are of the opinion that the High Court was right in its conclusion that the purchase of the site and the buildings of the Bren Gun Factory was an adventure in.
the nature of trade and was in the course of a profit making scheme and the question was rightly answered by the High Court .against the assessee firm.
449 We consider it necessary to add that the statement of the case made by the Appellate Tribunal is unsatisfactory and gives no information whatever about the arguments respectively advanced by the parties or the findings recorded by the Appellate Tribunal.
The statement of the case is not intended to be mere copy of the order sheet in a litigation but it must set out the points raised by the aggrieved party, the reply thereto, if any and the authorities or statutory provisions relied upon for the view taken by the Appellate Tribunal together with an intelligible summary of the facts found by the Appellate Tribunal.
A statement of the case should fully, clearly and precisely set out all the relevant facts, or if the facts have been fully set out in the judgment of the Tribunal they may be incorporated in the statement of the case by a reference to particular paragraphs of the judgment in which the facts are so set out.
In any event, it is important that the Appellate Tribunal should state clearly its conclusions and findings of fact and should not leave it to the High Court or this Court to deduce the findings or to collect the facts from a large number of documents which are part of the record of the case.
A statement of the case which does not set out precisely the findings of the Appellate Tribunal on the questions of law and fact serves no 'useful purpose.
It merely gives an opportunity to the parties to put forward arguments at the stage of reference which are often untenable, For the reasons already expressed we hold that these appeals must be dismissed with costs.
There will be one hearing fee.
G.C. Appeals dismissed.

dataset_name: IN-Abs

summary:
The assessee firm purchased a Brengun factory from the Government of India and sold the stores and part of the lands and buildings shortly afterwards At a higher price.
It admitted before the Income tax authorities that the purchase and sale in respect of the stores constituted an adventure in the nature of trade, but in respect of the land and buildings sold it contended that they had been purchased by way of investment, and the sale of a part of them did not result in assessable profit.
The claim was rejected by the Income tax Officer, by the Appellate Commissioner, and by the Appellate Tribunal.
The High Court in a reference under a. 66(1) also rejected it.
The firm appealed to this Court by special leave.
HELD : (i) In reaching the conclusion that a transaction is an adventure in the nature of trade, the Appellate Tribunal has to find the primary evidentiary facts and then apply the legal principle involved in the statutory expression "adventure in the nature of trade,, used in section 2(4) of the Indian Income tax Act.
A question of this description is a mixed question of law and fact and the decision of the Appellate Tribunal thereon is open to challenge under section 66(1) of the Act.
[442 F G] (ii) The question whether the transaction is an adventure in the nature of trade must be decided on a consideration of all the relevant facts and circumstances which are proved in the particular case.
The answer to the question does not depend on the application of any abstract rule, principle or formula but must depend upon the total impression and effect of all the relevant facts and circumstances established in the particular case.
[442 H] (iii) In the present case the appellant firm purchased the Brengun factory from borrowed money.
The income from the property was only about 1/6 of the interest payable by the company on the money borrowed.
The first sale was effected by the firm within three months of the purchase.
and the sums received from sale were utilised for paying off the debts as also the dues to the Government.
The firm had not enough financial resources to invest the money required to purchase the factory and the transaction could not therefore be with a view to making a permanent investment, but only for making profit.
It had not been established by evidence that the appellant firm purchased the Brengun factory for purpose of establishing a cycle factory.
Having regard to the total effect of all the relevant facts and circumstances established in the case it was rightly held by the High Court that the transaction was an adventure in the nature of trade and part of a profit making scheme.
[448 B H] (iv) The statement of case is not intended to be a mere copy of the order sheet in a litigation but it must set out the points raised by the .aggrieved party, the reply thereto, if any, and the authorities or statutory 440 provisions relied upon for the view taken by the Appellate Tribunal together with an intelligible summary of the facts found by the Appellate Tribunal.
The Tribunal should clearly state its conclusions and findings of fact and should not leave it to the High Court or this Court to deduce the findings or to collect facts from a large number of documents which are part of the record of the case.
[449 A D] Vankataswami Naidu & Co. vs Commissioner of Income tax, , Californian Copper Syndicate vs Harris, 5 T.C. 159, Martin vs Lowry, I I T.C. 297, Rutledge vs Commissioners of Inland Revenue, 14 Tax Cases 490, Commissioners of Inland Revenue vs Fraser, the assessee.
24 Tax Cases 498, Leeming vs Jones, 15 Tax Cases 333, Saroj Kumar Mazumdar vs Commissioner Income tax, West Bengal, and Commissioners of Inland Revenue vs Reinhold, 34 Tax Cases 389, referred to.


judgement:
vil Appeal No. 2457 of 1966.
Appeal from the judgment and order dated September 13, 1963 of the Calcutta High Court in Income tax Reference No. 29 of 1959.
section T. Desai, B. R. L. Iyengar and R. N. Sachthey, for the appellant.
A. K. Sen, R. M. Hazarnavis, and K. L. Hathi, for the respon dent.
The Judgment of the Court was delivered by Shah, J.
One Amritlal died on October 18, 1944.
For the assessment year 1945 46 his estate was assessed to tax on a total income of Rs. 22,160/ from salary and other sources.
In January 1946, Anusuya Devi widow of Amritlal encashed high denomination notes of the value of Rs. 5,84,000/ , and made a declaration as required by the High Denomination Bank Notes (Demonetisation) Ordinance, 1946 that: "A sum of Rs. 5,84,000/ in notes were made over and/or directed to be made over by the declarant 's deceased husband Amritlal Ojha at Rajkot in April, 1944, sometime before his death for the benefit of declarant and her 8 minor sons.
" In a proceeding for reassessment of the income of Amritlal for the assessment year 1945 46 the attorney who appeared on behalf of Anusuya Devi stated that "Amritlal was from time to time, during the last 30.
years of his life, giving gifts to his wife and also setting apart money exclusively for his wife and children and that the fund so accumulated which remained in a cupboard" was found after his death.
The Income tax Officer disbelieved the explanation furnished and brought the amount of Rs. 5,84,000/ to tax as income of Amritlal in the year of account 1944 45 from an undisclosed source, and with his decision the Appellate Assistant Commissioner agreed.
At the hearing of the appeal before the Income tax Appellate Tribunal, Anusuya Devi widow of Amritlal filed an affidavit in which it was stated, inter alia 469 5. "From time to, time during our married life, late Sri Amritlal Ojha used to make presents of cash moneys to me on occasion of birthday of myself and of my sons and daughter by him and also on the occasion of his own birthday and on the anniversary of our marriage.
" 6. "My husband late Sri Amritlal Ojha used to tell me that these presents of cash money that he made was to make provisions for me and my minor sons and daughter and also to meet the expenses of their education and marriage in the event of his death.
" 8. "The total amount of the money so paid by late Sri Amritlal Ojha was Rs. 5 84,600/ .
This amount was my stridhan property and was all along in my possession." This affidavit was admitted in evidence by the Tribunal, but the Tribunal declined to admit an affidavit of Gunvantray one of the sons of Amritlal, because in their view an attempt was made to bring on record a large number of new facts which were not disclosed before the departmental authorities.
The Tribunal declined to accept the case set up by Anusuya Devi.
Beside pointing out the discrepancies in the statements made from time to time, which rendered her case unreliable, the Tribunal expressed the view that gifts made during a long period of "20 to 30 years" could not all have been made only in thousand rupee notes.
The Tribunal accordingly upheld that order bringing to tax Rs. 5,84,000/ as income from an undisclosed source in the account year 1944 45.
In her application for stating a case to the High Court on eleven questions set out therein Anusuya Devi asserted that in her declaration under section 6 of the High Denomination Bank Notes (Demonetisation) Ordinance, 1946, she had given information pursuant to the queries as follows : Reasons for keeping above in No bank account.
The high denomination notes rather amount is held in trust than in current account, fixed for minors and as prices deposit or securities.
of securities very so for greater safety the amount is held in cash for the benifit of the defandent and in trust for the minors.
When and from what source did A sum of Rs. 5,84,000 in declarant come into possession notes were made over and or of bank notes now tendered.
directed to be made over by the declarant 's deceased husband Amritlal Ojha at Rajkot in April 1944 sometime before his death for benefit of the declarant and her eight minor sons.
in the latter part of August and beginning 470 of September 1945, Rs.4,94,000/was deposited with the Bank of India Ltd. at its Bombay Branch and transferred by T.T. to their Calcutta Branch in the account of the declarant 's major son Bhupatray Ojha who drew a self cheque for Rs. 4,94,000/ received payment by 494 pieces of 1,0001 notes (included in the list) and made them over to the declarant.
The Tribunal rejected the application.
The High Court of Judicature at Calcutta however directed the Income tax Appellate Tribunal to state a case on the following question : "Whether the Tribunal erred in law by basing their decision on part of the evidence ignoring the statement made as regards the withdrawal of Rs. 4,94,000/ by 494 pieces of Rs. 1,000/ notes from the bank?" In compliance with the order, the Tribunal observed that the extract from the statement incorporated in the petition under section 66(1) was materially different from the statement reproduced in the order of the Income tax Officer and that the Tribunal was not invited to consider at the hearing of the appeal the truth or otherwise of the alleged copy of the declaration incorporated in the petition under section 66(1) and that at the hearing of the appeal the original declaration had not been produced.
The learned Judges of the High Court who heard the reference were apparently of the view that the question referred did not arise out of the order of the Tribunal, but they felt bound by the view expressed in Chainrup Sampatram vs Commissioner of Income tax, West Bengal(1) that it is not open to the Court hearing a reference under section 66(2) to hold, contrary to the decision recorded at the time when the Tribunal was directed to state the case on a question, that the question did not arise out of the order of the Tribunal.
Bijayesh Mukherji, J., who delivered the principal judgment of the Court observed that the Tribunal had apparently ignored a part of the declaration made by Anusuya Devi that 494 high denomination notes out of those encashed in January 1946 were received from a Bank in Calcutta in realization of a cheque for Rs. 4,94,000/ drawn in September 1945 by Bhupatray her eldest son; that there was reason to doubt that statements referred to in his order by the Appellate Assistant Commissioner were made by Anusuya Devi or her attorney; and that in any event opportunity to "clear up the discrepancies" between the statement made at the time of the disclosure of the high denomination notes and the statements said to have been made before the Income tax Officer or before the Appellate Assistant Commissioner ought to have been given to her.
Holding that the (1) 471 order of the Tribunal suffered from those infirmities the learned Judges of the High Court answered the question in the affirmative.
In our, judgment the order of the High Court cannot be sus tained.
The statement that out of 584 high denomination notes disclosed by Anusuya Devi 494 notes were received in realization of a cheque drawn by Bhupatray at Rajkot was made for the first time in a petition under section 66(1): it did not find place in the statement before the Income tax Officer, nor in the grounds of objection raised before the Appellate Assistant Commissioner, and.
not even in the affidavit filed before the Tribunal.
The Tribunal was never apprised of that part of the case, and had no opportunity to test the correctness of that statement.
On the statements made before the Income tax Officer and in the affidavit there can be no doubt that it was the case of Anusuya Devi that she had encashed high denomination notes which she had received from her husband.
No fault can therefore be found with the observations of the Tribunal that it was "a peculiar fact that all the money stated to have been received and found in the cupboard was all in high denomination notes and the entire amount had to be exchanged under the High Denomination Bank Notes (Demonetisation) Ordinance".
In the question which was referred under the direction of the High Court, it was assumed that the Tribunal had before it the statement about the receipt of 494 currency notes of Rs. 1,000/each from a Bank at Calcutta in realization of a cheque.
But that evidence was not before the Tribunal, and the order of the Tribunal was not open to the objection that it had decided the appeal before it on a partial review of the evidence.
Even in the application made to the Tribunal under section 66(1) in the large number of, questions which it was claimed arose out of the order of the Tribunal it was not suggested that the finding of the Tribunal was vitiated because some relevant evidence was ignored.
If the Tribunal refuses to state a case under sub section
(1) of section 66 on the ground that no question of law arises, and the High Court is not satisfied with the correctness of that decision, the High Court nay in exercise of the power under section 66(2) require the Tribunal to state a case, and refer it.
When the Tribunal is not invited to state a case on a question of law alleged to arise out of its order, the High Court cannot direct the Tribunal to state it on that ques tion: see Commissioner of Income tax vs Scindia Steam Navigation Co. Ltd. (1).
The reason of the rule is clear: the High Court cannot hold that the decision of the Tribunal refusing to state a case on a particular question is incorrect if the Tribunal was not asked to consider whether the question arose out of its order, and whether it was a question of law.
(1) ; 472 We find it difficult to uphold the view of the Calcutta High Court that if an order is passed by the High Court calling upon the Tribunal to state a, case on a question which does not arise out of the order of the Tribunal, the High Court is bound to advise the Tribunal on that question even if the question does not arise out of the order of the Tribunal.
The High Court may only answer a question referred to it by the Tribunal : the High Court is however not bound to answer a question merely because it is raised and referred.
It is well settled that the High Court may decline to answer a question of fact or a question of law which is purely academic, or has no bearing on the dispute between the parties or though referred by the Tribunal does not arise out of its order.
The High Court may also decline to answer a question arising out of the order of the Tribunal, if it is unnecessary or irrelevant or is not calculated to dispose of the real issue between the tax payer and the department.
If the power of the High Court to refuse to answer questions other than those which are questions of law directly related to the dispute between the tax payer and the department, and which when answered would determine qua that question the dispute, be granted, we fail to see any ground for restricting that power when by, an erroneous order the High Court has directed the Tribunal to state a case on a question which did not arise out of the order of the Tribunal.
We are unable therefore to hold that at the hearing of a reference pursuant to an order calling upon the Tribunal to state a case, the High Court must proceed to answer the question without considering whether it arises out of the order of the Tribunal, whether it is a question of law, or whether it is academic, unnecessary or irrelevant.
We are of the opinion that the very basis of the question on which the Tribunal was called upon to submit a statement of the case did not exist.
The Tribunal cannot in this case be charged with recording its decision without considering all the evidence on the record : the decision of the Tribunal was clearly based on appreciation of evidence on the record before it, and the High Court was, in our view, incompetent to direct the Tribunal to state the case on the question which was directed to be, referred and dealt with by the High Court.
We are also unable, to agree with the observation of the High Court that the explanation which the Assistant Commissioner says was made by Anusuya Devi was not made by her or by her attorney.
No such plea was apparently raised before the Tribunal.
There is also no ground for believing that Anusuya Devi was not given an opportunity to " clear up the discrepancies" between the statements made by her or on her behalf from time to time in connection with the encashment of the high denomination notes.
That plea was not raised before the Tribunal, and the validity of the conclusion of the Tribunal on appreciation of evidence cannot be assailed before 473 the High Court on the ground that departmental authorities had violated the basic rules of natural justice without raising that question before the Tribunal.
Counsel for Anusuya Devi requested that in any event the question which has been referred by the Tribunal in pursuance of the order of the High Court may be reframed and a supplementary statement may be ordered to be submitted by the Tribunal.
But power to reframe a question may be exercised to clarify some obscurity in the question referred, or to pinpoint the real issue between the tax payer and the department or for similar other reasons : it cannot be exercised for reopening an enquiry on questions of fact which is closed by the order of the Tribunal.
Again, a supplementary statement may be ordered only on the question arising out of the order of the Tribunal, and if the Court is satisfied that the statements are not sufficient to enable the Court to determine the question raised thereby, and when directed may be only on such material and evidence as may already be on the record but which has not been included in the statement initially made: Keshav Mills Ltd. vs Commissioner of Income tax, Bombay North, Ahmedabad(1).
We do not think that the judgment of this Court in Narain Swedeshi Weaving Mills vs Commissioner of Excess Profits Tax(2) lays down any general proposition that the High Court hearing a reference is entitled to amend or reframe a question and call for a supplementary statement so as to enable a party to lead evidence which has not been led before the Tribunal or the departmental authorities.
In Narain Swadeshi Weaving Mills ' case(2) this Court merely reframed the question so as to bring out the real issue between the parties.
Finally counsel for Anusuya Devi submitted that the Tribunal was bound to state a case on the following question which was.
set out in the application under section 66 (1) : 6.
"Whether there is any material before the Tribunal to hold that the said sum of Rs. 5,84,000/representing the value of the encashed high denomination notes was the income of the deceased Amritlal Ojha of the period of the year 1944 45 prior to his death ?" Counsel submitted that since the Tribunal had failed to raise and state a case on that question, and the High Court had also in directing that a statement of case be submitted, ignored that question, in the interest of justice and for a final and satisfactory disposal of the case this Court may order a statement on that question.
Counsel said that merely because on the findings of (1) (2) 474 the Tribunal Amritlal was on April 30, 1944, possessed of a large sum of money it could not be assumed that the whole amount was earned after April 1, 1944, and was on that account taxable in its entirely in the year of assessment 1945 46.
The question whether the amount of Rs.
5,84,000/ was taxable in the proceeding for assessment for the year 1945 46 was considered by the Income tax Officer and by the Appellate Assistant Commissioner.
The Income tax Officer observed that by the explanation submitted on behalf of Anusuya Devi before him, contrary to what was stated at the time of encashment of the high denomination notes, it was attempted "as an afterthought, to spread over the amount over a number of years".
The contention that the amount of Rs. 5,84,000/ was not taxable in the .year of assessment 1945 46 was rejected.
The Appellate Assistant Commissioner observed that on the statement made by Anusuya Devi that she had received the amount from her husband in the year of account 1944 45 and that it was unfortunate that there was ' no complete record of the "earnings and withdrawals" .,of
Amritlal from the various businesses in which he was interested, and that in the absence of such a record all that was to be done was to examine whether the explanation was credible.
He observed that "the accounting year was very favourable for all types . of business, and in all probability the sum represented some income earned by the deceased in some ventures which were not known to the Department and therefore the sum could be treated as income of Amritlal from undisclosed sources".
The Tribunal observed that they were unable to believe the version of Anusuya Devi that the amount was accumulated by her husband during a long period, and since the assessee and his legal representatives had failed to prove the source of the fund, it "must be considered as of income character".
Apparently, no argument was raised before the Tribunal that the amount though taxable was not income of the year of account 1944 45 and could obviously not he referred.
The High Court may answer only those questions which are ,actually referred to it.
New questions which have not been referred cannot be raised and answered by the High Court.
If the Tribunal refuses to refer a case under section 66(1) which arises out of its order, the proper course is for the aggrieved party to move the High Court to require the Tribunal under section 66(2) to refer the same.
The question whether Rs. 5,84,000/ represented income of the year of account 1944 45 was not submitted by the, Tribunal to the High Court.
Even if it be assumed that the High Court was moved to direct the Tribunal to state a case on the sixth question which was set out in the, application filed 'before the Tribunal under section 66(1), the application must be 475 deemed to have been rejected, and the order of rejection has become final.
We have no power, without an appeal by the assessee, to set aside that order of the High Court and to direct the Tribunal to state a case on that question.
The appeal must therefore be allowed, and the order passed by the High Court set aside.
The answer to the question will be in the negative.
This case discloses a very disturbing state of affairs prevailing in the Income tax Department.
It is a startling revelation that the entire record of an assessee 's case both before the Income tax Officer and the Appellate Assistant Commissioner was found missing, and has not been traced thereafter.
Even if collusion be ruled out, the persons concerned in looking after the safety of the important record of proceedings of assessment cannot escape a charge of gross negligence.
In the circumstances of the case.
we think there shall be no order as to costs in the High Court and in this Court.
Appeal allowed.

summary:
The husband of the respondent died in October 1944.
For the assessment year 1945 46, his estate was assessed to income tax on a total income of Rs. 22,160.
In January 1946, the respondent encashed 584 high denomination notes of the value of Rs. 5,84,000.
There were proceedings for re assessment of the total income of the assessee, wherein it was stated before the Income tax Officer, on behalf of the respondent, that during the previous 30 years, her husband was giving gifts to the respondent and was also setting apart money exclusively for her and their children and, that the fund so accumulated amounting to Rs. 5,84,000 remained in a cupboard and was found after his death, and therefore, the amount was not liable to tax as the income of her husband in the previous year.
The Income tax Officer disbelieved her explanation and brought the amount of Rs. 5,84,000 to tax as tre income of the respondents ' husband from an undisclosed source in the year of account 1944 45.
The order was con firmed by the Appellate Assistant Commissioner who also referred to the respondent 's declaration under the High Denomination Bank Notes (Demonetisation) Ordinance that the amount was made over by the de,ceased, some time before his death, to her for her benefit and that of her 8 minor sons.
The Appellate Tribunal also upheld the order of the Income tax Officer.
The respondent then filed an application under section 66 (1) to state a case to the High Court.
In that application she asserted that 494 out of the 584 notes were received from a Bank in Calcutta in realisation of a cheque drawn for Rs. 4,94,000 in September 1945 by her eldest son.
The Tribunal rejected the application.
The High Court, under section 66(2) directed the Tribunal to state a case on the question6n: Whether the Tribunal erred in law by basing its decision on a part of the evidence ignoring the 'statement made as regards the withdrawal of Rs. 4,94,000 by 494 pieces of Rs. 1,000 notes from the bank.
The Tribunal, while submitting the statement of case, pointed out that the statement in the petition under section 66(1) was materially different from that made before the Income tax Officer and that the Tribunal was not invited to consider, at the hearing of the appeal, the truth of that statement.
The High Court, thereafter, heard the reference and decided in favour of the assessee, holding that: (1) the Tribunal ignored a part of the declaration made by the respondent that 494 high denomination notes were received from the bank in Calcutta in September 1945; (2) no opportunity was given by the Tribunal to the respondent to clear up the discrepancies in her statements made at the time of the disclosure of the high denomination notes and before the Income tax Officer; and (3) it was not open to the Court hearing a reference under section 66(2) to hold, contrary to the decision recorded at the time when the Tribunal was directed to state the case on a question, that the question did not arise out of the order of the Tribunal.
467 In appeal to this Court, HELD : (1) In the question which was directed to be referred it was assumed that the Tribunal had before it the statement about the receipt of 494 currency notes from the bank at Calcutta.
But that evidence was not before the Tribunal.
No such statement was made either before the Income tax Officer, or before the Appellate Assistant Commissioner or in the appeal before the Tribunal.
The statement was made for the first time in the petition under section 66(1).
Even in the application it was not suggested that the finding of the Tribunal was vitiated because some relevant evidence was ignored.
The order of the Tribunal was not therefore open to the objection that the appeal before it was decided on a partial review of the evidence.
[471 B, D F] (2) The plea of want of opportunity was not raised before the Tribunal, and therefore, the validity of the conclusion of the Tribunal on the evidence could not be assailed before the High Court on the ground that the departmental authorities had violated the basic rules of natural justice, without raising that question before the Tribunal.
[472 H] (3) The High Court was in error in holding that at the hearing of a reference pursuant to an order calling upon the Tribunal to state a case, the High Court must proceed to answer the question without considering whether it arises out of the order of the Tribunal or whether it is a question of law, or whether it is academic, unnecessary or irrelevant especially when by an erroneous order the High Court directed the Tribunal to state a case on a question which did not arise out of the order of the Tribunal.
[472 D E] Observations contra in Chainrup Sampatram vs Commissioner of Income tax, West Bengal, overruled.
(4) When the Tribunal was not invited to state a case on a question of law alleged to arise out of its order, the High Court could not direct the Tribunal to state it on that question.
[471 G H] Commissioner of Income tax vs Scindia Steam Navigation Co. Ltd., followed.
(5) The irregularities in the judgment of the High Court could not be cured by reframing the question referred to the High Court and calling for a supplementary statement from the Tribunal The power to reframe a question may be exercised only to clarify some obscurity in the question referred or to pinpoint the real issue between the tax payer and the department or for similar other reasons.
It cannot be exercised for reopening an enquiry on questions of fact, which was closed by the order of the Tribunal.
Similarly, a supplementary statement could be ordered only on a question arising out of the order of the Tribunal if the court is satisfied that the original statement is not sufficient to enable it to determine the question raised thereby, and, when directed the supplementary statement may be only on such material and evidence as may already 1 on record, but not included in the statement initially made.
[473 B D] Keshav Mills Ltd. vs Commissioner of Income tax, Bombay North, Ahmedabad, and Narain Swadeshi Weaving Mills Y. Commissioner of Excess Profits Tax, , referred to.
(6) The Tribunal was not in error in failing to raise and state a case on the question whether the amount of Rs. 5,84,000 was taxable in the accounting year 1944 45.
That question was considered by the Incometax Officer and by the Appellate Assistant Commissioner and the explana 468 tion of the respondent was rejected by them, and no argument was raised before the tribunal that the amount, though taxable, was not the income of the year of account 1944 45.
Further, when the High Court did not direct the Tribunal to state a case on the question, it must be deemed to have, rejected the application to refer that question, and the order of rejection having become final, this Court cannot set it aside without an appeal by the respondent.
[474 B, E, H; 475 A]