judgement:
N: Criminal Appeal Nos.
345 346 of 1976.
(Appeals by Special Leave from the Judgment and Order dated 30 9 1975 of the Karnataka High Court in Crl.
Peti tions Nos. 248 and 253 of 1975).
D. Mookherjee, and B.R.G.K. Achar, for the Appellant, Frank Anthony, K.B. Rohtagi and M.N. Kashyap, for the Respondents.
The Judgment of the Court was delivered by CHANDRACHUD, J.
These two appeals by social leave arise out of a judgment dated september 30, 1975 rendered by the High Court 115 of Karnataka in Criminal Petitions Nos. 248 and 253 of 1975.
By the aforesaid judgment the High Court in the exercise of its inherent powers has quashed proceedings initiated by the State of Karnataka appellant herein, against the respond ents.
The incident out of which these proceedings arise took place on December 6, 1973 in the Central Avenue of the Indian Telephone Industries Colony, Bangalore.
Thyagaraja Iyer, accused No. 1, who was an employee of the Indian ' Telephone Industries Ltd. was dismissed from service on September 20, 1973 on the allegation that he had assaulted a Canteen supervisor.
The complainant Ajit Dutt, Works Manager of the Crossbar Division, attempted to serve the dismissal order on him but he refused to accept it and threatened the complainant that he, the complainant, was primarily responsible for the dismissal and would have to answer the consequences.
It is alleged that the I.T.I. Employees ' Union took up cudgels on his behalf and re solved to support his cause.
The case of the prosecution is that accused Nos. 1 and 8 to 20 conspired to commit the murder of the complainant and that in pursuance of that conspiracy accused Nos. 1, 8 and 10 hired accused Nos. 2, a notorious criminal, to execute the object of the conspiracy.
Accused No. 2 in turn engaged the services of accused Nos. 3 to 7 and eventually on the morning of December 6, 1973 accused Nos. 1 to 6 are alleged to have assaulted the complainant with knives, thereby committing offences under sections 324, 326 and 307 read with section 34.
of the Penal Code.
Accused No. 2 was charged separately under section 307 or in the alternative under section 326, Penal Code.
By his order dated October 23, 1974 the learned Metro politan Magistrate, V Court, Bangalore directed all the 20 accused to take their trial before the Sessions Court for offences under section 324, 326 and 307 read with section 34 of the Penal Code.
At the commencement of the trial before the learned First Additional District and Sessions Judge, Bangalore, two preliminary questions were raised, one by the prosecution and the other by the, accused.
It was contended by the prosecution that the specification of particular sections in the committal order did not preclude the Sessions Court from framing a new charge under section 120 B of the Penal Code.
On the other hand it was contended by the accused that there was no sufficient ground for proceeding with the prosecu tion and therefore they ought to be discharged.
The learned Additional Sessions Judge accepted the contention of the prosecution that he had the power to frame a charge under section 120 B.
The correctness of that view was not challenged before us by Mr. Frank Anthony who appears on behalf of the accused.
That is as it ought to be because the power of the Sessions Court to frame an appropriate charge is not tram melled by the specifications contained in the committal order.
The Sessions Court, being seized of the case, has jurisdiction to frame appropriate charges as the facts may justify or the circumstances may warrant.
The contention of the accused that they ought to be discharged was accepted by the learned Additional Sessions Judge partly.
lie held that there was no case against accused Nos. 11, 12 and 16 and that 116 they were therefore entitled to be discharged.
By an order dated August 8, 1975 the, learned Judge.
discharged those three.
accused in the.
exercise of his powers under section 227 of the Code of Criminal Procedure, 1973.
We are informed that the correctness of that order is under challenge before the High Court in a proceeding taken by the State of Karna taka.
We are not concerned with that order in these ap peals.
After discharging accused Nos. 11, 12 and 16 the learned.
Judge, turning to the case against the remaining accused, observed that there was "some material to hold that they have had something to do with the incident which occurred on 6 12 1973 in the I.T.I. Colony Bangalore".
The learned Judge adjourned the case to September 1, 1975 "for framing specific charges as made out from the material on record against the rest of the accused persons." Two revision petitions were filed against this order, one by accused Nos.
10, 13, 14 and 15 and the other by accused Nos.
17 to 20.
Those petitions were allowed by the High 'Court on the view that there was no sufficient ground for proceeding against the petitioners before it.
The High Court accordingly quashed the proceedings in regard to.
them which has led to these appeals.
Mr. Mookerjee who. appears on behalf of the State of Karnataka contends that the High Court ought not to have exercised its; powers to quash the proceedings against the respondents without giving to the Sessions Court, which was seized of the case, an opportunity to consider whether there was sufficient material on the record on which to frame charges against the respondents.
It is argued that the Sessions Court had adjourned the case for a consideration of that very question and it was not proper for the High Court to withdraw the case, as it were, and to exercise its ex traordinary powers, thereby preventing the Trial Court from examining the sufficiency of the material which it is the primary duty and function of that Court to examine.
There is some apparent justification for this grievance because the language in which the sessions Court couched its order would seem to suggest that it had adjourned the case to September 1, 1975 for consideration of the question as to.
whether there was sufficient ground for proceeding against the respondents.
But a careful reading of the Sessions Courts judgment would reveal that while discharg ing accused Nos. 11, 12 and 16 it came, to the conclusion that insofar as the other accused were.
concerned there was some material to hold that they were connected with the incident.
The case was, therefore, adjourned by the Court for flaming specific charges against them.
In other words, the learned Judge adjourned the case not for deciding wheth er any charge at all could be framed against the remaining accused but for the purpose of deciding as to which charge or charges could appropriately be framed on the basis of the material before him.
The grievance therefore that the High Court interfered with the sessions Court 's order prematurely is not justified.
The second limb of Mr. Mookerjee 's argument is that in any event the High Court could not take upon itself the task of assessing or appreciating the weight of material on the record in order to find whether any charges could be legiti mately framed against the respondents.
So 117 long as there is some material on the record to connect the accused with the crime, says.
the learned counsel, the case must go on and the High Court has no jurisdiction.
to put a precipitate or premature end to the proceedings on the belief that the prosecution is not likely to succeed.
This, in our opinion, is too broad a proposition to accept.
Section 227 of the Code of Criminal Procedure, 2 of 1974, provides that: "If, upon consideration of the record of the case and the documents submitted there with, and after hearing the submissions of the accused and the prosecution in this be half, the Judge considers that there is not sufficient ground for proceeding against the accused, he shall discharge the accused and record his reasons for so doing." This section is contained in Chapter XVIII called "Trial Before a Court of Sessions".
It is clear from the provi sion that the Sessions Court has the power to discharge an accused if after perusing the record and hearing the parties he comes to the conclusion, for reasons to be re corded, that there is not sufficient ground for proceeding against the accused.
The object of the provision which requires the Sessions Judge to record his reasons is to enable the superior court to examine the correctness of the reasons for which the Sessions Judge has held that there is of is not sufficient ground for proceeding against the accused.
The High Court therefore is entitled to go into the reasons given by the Sessions Judge in support of his order and to determine for itself whether the order is justified by the facts and circumstances of the case.
Section 482 of the New Code, which corresponds to section 561 A of the Code of 1898, provides that: "Nothing in this Code shall be deemed to limit or affect the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under this Code or to prevent abuse of the process of any Court or otherwise to secure the ends of justice.
" In the, exercise of this.
whole some power, the High Court is entitled to quash a proceeding if it comes to the conclu sion that allowing the proceeding to continue would be an abuse of the process of the Court or that the; ends of justice require that the proceeding ought to be quashed.
The saving of the High Court 's inherent powers, both in civil and criminal matters, is designed to.
achieve a salu tary public purpose which is that a court proceeding ought not to be permitted to degenerate into weapon of harassment or persecution.
In a criminal case, the veiled object behind a lame prosecution, the very nature of the material on which the structure of the prosecution rests and the like would justify the High Court in quashing the proceeding in the interest of justice.
The ends of justice are higher than the, ends of mere law though justice has got to be.
administered according to laws made by the, legislature.
The compelling necessity for making these observations is that without a proper realisation of the object and pur pose of the provision which seeks to.
save the inherent powers of the High Court to do justice between the State and its.
subjects, it would be impossible.
to appreciate the width and contours of that salient jurisdiction.
118 Let us then turn to the facts of the case to see, wheth er the High Court was justified in holding that the proceed ings against the respondents ought to be quashed in order to prevent abuse of the process of the court and in order to secure the ends of justice.
We asked the State counsel time and again to point out any data or material on the basis of which a reasonable likelihood of the respondents being convicted of any offence in connection with the attempted murder of the complainant could be predicated.
A few bits here and a few bits there on which the prosecution proposes to rely are woefully inadequate for connecting the respond ents with the crime, howsoever, skilfully one may attempt to weave those bits into a presentable whole.
There is no material on the record on which any tribunal could reason ably convict the respondents for any offence connected with the assault on the complainant.
It is undisputed that the respondents were nowhere near the scene of offence at the time of the assault.
What is alleged against them is, that they had conspired to commit that assault.
This, we think, is one of those cases in which a charge of conspiracy is hit upon for the mere reason that evidence of direct involvement of the accused is lacking.
we have been taken through the statements recorded by the police during the course of investigation and the other material.
The worst that can be said against the respondents on the basis thereof is that they used to meet one another frequently after the dismissal of accused No. 1 and prior to the commission of the assault on the complainant.
Why they met, what they said, and whether they held any deliberations at all, are matters on which no witness has said a word.
In the circumstances, it would be a sheer waste of public time and money to permit the proceedings to continue against the respondents.
The High Court was therefore justified in holding that for meeting the ends of justice the proceedings against the respondents ought to be quashed.
Learned counsel for the State Government relies upon a decision of this Court in R.P. Kapur vs The State of Punjab (1) in which it was held that in the exercise of its inher ent jurisdiction under section 561A of the Code of 1898, the High Court cannot embark upon an enquiry as to whether the evi dence in the case is reliable or not.
That may be so.
But in the instant case the question is not whether any reli ance can be placed on the veracity of this or that particu lar witness.
The fact of the matter is that there is no material on the record on the basis of which any tribunal could reasonably come to the conclusion that the respondents are in any manner connected with, the incident leading to the prosecution.
Gajendragadkar, J., who spoke for the Court in Kapur 's(1) case observes in his judgment that it was not possible, desirable or expedient to lay down any inflexible rule which would govern the exercise of the High Court 's inherent jurisdiction.
The three instances cited in the judgment as to when the High Court would be justified in exercising its inherent jurisdiction are only illustrative and can in the very nature of things not be regarded as exhaustive.
Considerations justifying the exercise of inherent powers for securing the ends of justice naturally vary from case to (1) 119 case and a jurisdiction as wholesome as the one conferred by section 482 ought not to be encased within the strait jacket of a rigid formula.
On the other hand, the decisions cited.
by learned counsel for the respondents in Vadilal Panchaly.
D.D. Gha digaonkar(1) and Cen tarS, Spinning & Manufacturing Co. vs State of Maharashtra(2) show that it is wrong to say that at the stage of flaming charges the court cannot apply.
its judicial mind to the consideration whether or not there is any ground for presuming the commission of the offence by the accused.
As observed in the latter case, the order framing a charge affects a person 's liberty substantially and therefore it is the duty of the court to consider judi cially whether the material warrants the framing of the charge.
It cannot blindly accept the decision of the prose cution that the accused be.
asked to face a trial.
In Vadilal Panchal 's case.
(supra) section 203 of the old Code was under consideration, which provided that the Magistrate could dismiss a complaint if after considering certain matters mentioned in the section there was in his judgment no sufficient ground for proceeding with the case.
To art extent section 227 of the new Code contains an analogous power which is conferred on the Sessions Court.
It was held by this Court, while considering the true scope of section 203 of the old Code that the Magistrate.
was not bound to accept the result of an enquiry or investigation and that he must apply his judicial mind to the material on which he had to form his judgment.
These decisions show that for ' the purpose of determining whether there is sufficient ground for proceeding against an accused the court possesses a comparatively wider discretion in the exercise of which.
it can determine the question whether the material on the record, if unrebutted, is such on the: basis of which a conviction can be said reasonably to be possible.
We are therefore in agreement with the view of the High Court that the material on which.
the prosecution proposes.to rely against the respondents is wholly inade quate to.
sustain the charge that they are in any manner connected with the assault on the complainant.
We would, however, like to observe that nothing in our judgment or in the .judgment of the High Court should be taken as detract ing from the case of the prosecution, to.
which we have not applied our mind, as against accused Nos. 1 to 9.
The case against those accused must take its due and lawful course.
The appeals are accordingly dismissed.
S.R. Appeals dismissed.
(1) A.I.R. 1969 S.C. 1113.

summary:
The apellants are accused Nos. 10, 13, 14, 15 and 17 to 20 before the Sessions Court for trial under various offences, viz., . 324, 326, and 307 read with section 34 of the Penal Code.
While discharging accused Nos. 11, 12 and 16 u/s 227 of the Criminal Procedure Code 1973, on 8.8.1975, the learned Sessions Judge observed that there was "some materi al to hold that the remaining accused have had something to do with the incident which occurred on 6.12.1973 in I.T.I. Colony, Banglore" and adjourned the case to September 1, 1975, "for framing specific charges as made out from the material on record against the rest of the accused person .
Two revision petitions were filed against this order, one by accussed Nos. 10, 13, 14 and 15 and the other by accused Nos.
17 to 20.
These petitions were allowed by the High Court on the view that there was no sufficient ground for proceeding against the petitioners before it.
The High Court accordingly quashed the the proceedings in regard to them.
In appeal by Special Leave, the appellant State contended: (1) The High Court ought not to have exercised its power to quash the proceedings against the respondent without giving to the Sessions Court, which was seized of the case, an opportunity to consider whether there was sufficient material on the record on which to frame charges against the respondents.
(ii) In any event the High Court could not take upon itself the task of assessing or appreci ating the weight of material on the record in order to find whether any charges could be legitimately framed against the respondents.
Dismissing the appeal, the Court HELD: (1) The High Court was justified in holding that for meeting the ends of justice the proceedings against the respondents ought to be quashed.
It would be a sheer waste of public time and money to permit the proceedings to continue against the respondent, when there is no material on the record on which any tribunal could reasonably convict them for any offence connected with the assault on the com plainant.
This is one of these cases in which a charge of conspiracy is hit upon for the mere reason that evidence of direct involvement of the accused is lacking.
[118 A, D E] (2) The saving of the High Court 's inherent powers, both in civil and criminal matters, is designed to achieve a Salutary public purpose which is that a Court proceedings ought not to be permitted to degenerate into a weapon of harassment or persecution.
In a criminal case, the veiled object behind a lame prosecution, the very nature of the material on which the structure of the prosecution rests and the like would justify the High Court in quashing the pro ceeding in the interest of justice.
[117 F G] (3) Considerations justifying the exercise of inherent powers for securing the ends of justice vary from case to case and a jurisdiction as wholesome as the one conferred by section 482 ought not to be encased within the strait jacket of a rigid formula.
The three instances ' cited in the Judgment to when the High Court would be justified in exercising its inherent jurisdiction are only illustrative and can in the very nature of things not be regarded as exhaustive.
[118 F H, 119 A] 114 R.P. Kapur vs State of Punjab explained. (4) It is wrong to say that at the stage of framing charges the Court cannot apply its judicial mind to the consideration whether or not there is any ground for presum ing the commission of the offence.
[119 B] (5) While considering whether there is sufficient ground for proceeding against an accused.
the court pos sesses a comparatively wider discretion in the exercise of which it can determine the question whether the material on the record.
if unrebutted, is such on the basis of which a conviction can be said reasonably to be possible.
[119 B E] Vadilal Panchal vs D. D. Ghadigaonkar ; ; Century Spinning & Manufacturing, Co. vs State of Maharashtra applied.
(6) In the instant case the High Court is right in its view that the materials on which the prosecution proposed to rely against the respondents is wholly inadequate to sustain the charge that they are in any manner connected with the assault on the complainant.
[119 E F] (7) The grievance that the High Court interfered with the Sessions ' Court 's order prematurely is not justified.
The case was adjourned by the Sessions Judge not for deciding whether any charge at all could be framed against the remaining accused, but for the purpose of deciding as to which charge or charges could appropriately be framed on the basis of the material before him.
[116 G H] (8) The object of section 227 of the Code of Criminal Procedure, Act 2 of 1974, is to enable the superior Court to examine the correctness of the reasons for which the Sessions Judge has held that there is not sufficient ground for proceed ing against the accused.
[117 C D] (9) The High Court is entitled to go into the reasons given by the Sessions Judge in support of his order and to determine for itself whether the order is justified by the facts and circumstances of the case.
[117 D E] .
(10) In the exercise of the wholesome power u/s 482 of the Act 2 of 1974 (section 561 of 1898 Code), the High Court is entitled to quash a proceeding if it comes to the conclusion that allowing the proceeding to continue would be an abuse of the process of the Court or that the ends of justice require that the proceeding ought to be quashed.
[117 E F] Observations: The ends of justice are higher than the ends of mere law though justice has got to be administered according to laws made by the legislature.
Without a proper realisation of the object and purpose of the provision which seeks to save the inherent powers of the High Court to do justice between the State and its subjects, it would be impossible to appreciate the width and contours of that salient jurisdiction.
[117 G H]


judgement:
Appeal No. 950 of 1972.
(From the Judgment and Order dated the 5 7 1971 of the Calcutta High Court in Appeal No. 130/71).
N.R. Khaitan, A.T. Patra and Praveen Kumar, for the appel lant.
126 Lal Narain Sinha, Sol.
General, S.N. Prasad and Girish Chandra not present for respondents.
The Judgment of the Court was delivered by BHAGWATI, J.
The appellant ,owns a jute mill situate at Rajgunj, Railway Station Andul, District Howrah in the State of West Bengal and among other jute products, it manufac tures jute carpet backing cloth at its jute nUll.
The appellant exported diverse quantities of jutecarpet backing cloth manufactured by it to various countries during the period 13th July 1966 to 30th November 1966.
There was a Tax Credit certificate Scheme framed by the Central Gov ernment under Section 280 ZE read with Section 200 ZC of the Income 'tax Act 1962.
The Scheme was called the Tax Credit Certificate (Exports) Scheme 1965.
The Scheme pro vided for grant of Tax Credit Certificate in respect of certain categories of goods or merchandise specified in column 2 which were exported to destinations specified in column 4 and the dates of export of which fell after 28th February 1965, for an amount calculated at the rates speci fied in column 3 of the Table attached to the Scheme.
Jute carpet backing cloth was covered by Item 1 in column 2 of the Table which specified "goods made of jute not otherwise specified".
If the Scheme had remained unamended, the appellant would have been entitled to tax credit certifi cates in respect of the exports made by it of jute carpet backing material, but a notification was issued by the Central Government on 6th June, 1966 in exercise of the powers conferred by Section 280 ZE read with Section 200 ZC, whereby paragraph 3 of the Scheme which .provided for grant of tax credit certificates was amended by re numbering that paragraph as sub paragraph (1) and adding a sub paragraph (2) to the following g effect: "No certificate shall be granted under sub paragraph (1) in respect of any sale proceeds referred to in that sub paragraph or part of such sale proceeds, received after the 5th day of June 1966 in India in according with the Foreign Exchange Regulation Act, 1947 (VII of 1947) and the rules made thereunder".
This amendment had the effect of disentitling an ex porter to taxcredit certificate in respect of goods or merchandise exported by him in all cases where sale proceeds or part thereof were received in India after 5th June, 1966.
The necessity for making this amendment in the Scheme arose on account of devaluation of the Indian rupee which was made by the Central Government, as it was felt that in view of the devaluation it was not necessary to give any further incentive for export.
But it was 'soon realised that this amendment of the Scheme might work hardship in those cases where goods or ' merchandise were exported before 5th June 1966 on the faith of the Scheme but for some reason or the other, the sale proceeds were not received until after that date and, therefore, a second notification dated 8th Au gust, 1966 was issued by the Central Government further.
amending the scheme in exercise of the powers conferred under Section 280 ZE read with Section 280 ZC by deleting sub paragraph (2) and instead, adding a proviso which pro vided for grant of tax credit certify 127 cate in respect of goods or merchandise exported on or before 5th June 1966 even if the said proceeds were re ceived after that date and declared that in ease of goods exported after 5th June 1966 the ' rate specified in column 3 of the Table shall be deemed to be nil and no certificate shall be granted in respect of such goods or merchandise.
The exports of jute carpet backing cloth made by the appel lant were admittedly after 5th June, 1966 and hence both the notifications adversely affected the appellant by disentitling it to tax credit certificates in respect of these exports.
The appellant, therefore, filed a Writ Petition in the High Court of Calcutta for a writ of manda mus for quashing and setting aside both the Notifications and directing the Central Government to consider the appli cation of the appellant for tax credit certificates in respect of the exports without taking into account the two Notifications.
Though there were several grounds on which the validity of these two Notifications was challenged in the Writ Petition before the High Court, only one ground was pressed before us on behalf of the appellant and we shall, therefore, refer only to that ground.
That ground was that both the Notifications were outside the power conferred on the Central Government under Seetion 260 ZE read with Section 280 ZC, since the Central Government had no power under these Sections to make a scheme providing that no tax credit certificate shaft be granted in case of any goods or merchandise at all.
This ground found favour with the single Judge of the High Court but on appeal under clause 15 of the Letters Patent, a Division Bench of the High Court took a different view and negatived the chal lenge.
Since the writ petition was dismissed by the Division Bench, the appellant preferred the present appeal after obtaining a certificate of fitness from the High Court.
The Indian Income Tax Act 1922 as originally enacted, did not contain the fasciculus of Sections under Chapter XXII providing for grant of tax credit certificates.
This Chapter comprising Sections 280 ZC and 280 ZE was inserted by the Finance Act 1965 with effect from lst April 1965 with a view to providing incentive for export purpose of which Section 280 ZC and 280 ZE are material, reads as follows : "280 ZC.
(1) Subject to the provisions of this Section, a person who exports any goods or merchandise out of India after the 28th day of February.
1965 and receives the sale proceeds thereon in India in according with the Foreign Exchange Regulation Act, 1947 (VII of 1947) and the rules made there under shall be granted a tax credit certifi cate for an amount calculated at a rate not exceeding fifteen per cent, on the amount of such sale proceeds.
(2) The goods or merchandise in respect of which a tax credit certificate shall be granted under sub section (1) (including the destination of their export) and the rate at which the amount of such certificate shall be calculated shall be such as ,may be specified in the Scheme: Provided that different rates may be specified in respect of different goods or merchandise.
128 (3) In specifying the goods or merchan dise (including the destination of their export) and the rates, the Central Government shall have regard to the following factors, namely: (a) the cost of manufacture or production of such goods or merchandise and prices of similar goods in the foreign markets;.
(b) the need to develop foreign markets for such goods or merchandise; (c) the need to earn foreign exchange; (d) any other relevant factor".
Section 280 ZE conferred power on the Central Government to frame one or more scheme or schemes to be called tax credit Certificate scheme or schemes in the following words: "(1) The Central Government shaH, by notification in the Official Gazette, frame one or more scheme or schemes to be called tax credit certificate scheme or schemes in rela tion to tax credit certificates to be grant ed under this Chapter.
(2) A scheme framed under sub section (1) may provide for : (a) the form and manner in which, and the authority to which, applications for the grant of tax credit certificates shall be made; (b) the form in which, and the intervals at which and the authority by which, such cer tificates shall be issued; (c) the verification of any information or particulars furnished, or contained in any application made, by or on behalf of any person entitled to tax credit certificates; (d) the determination of the rights and obligations of a person to whom such certifi cate has been granted and the circumstances in which any right in or title to the said certificate may be transferred to.
or devolve on any other person by succession or otherwise; (e) the determination of the rights and obligation of persons who jointly subscribe to an eligible issue of capital; (f) the determination of the rights and obligation of persons who subscribe to an eligible Issue of capital, on behalf, or for the benefit, of any other person; 129 (g) the appointment of any officer.
of Government or of the Reserve Bank of India to exercise any rights or perform any duties in connection with the grant of the said certifi cates; (h) the goods or merchandise and the rate or rates for the purposes of section 280 ZC and section 280 ZD and the destination of the export of such goods or merchandise for the purposes of section 280 ZC; (i) any other matter which may be neces sary or proper for the effective implementa tion of the provisions of this Chapter or the scheme.
(3)The Central Government may, by noti fication in the Official Gazette, and to, amend, vary or rescind any scheme made under this section".
It was in exercise of the power conferred on the Central Government under Section, 280 ZE read with section 280 ZC that the Central Government made the Tax Credit Certificate (Exports) Scheme, 1965.
The first Notification dated 6th June 1966 amended paragraph 3 of the Scheme by providing that no tax credit certificate shall be granted in respect of exports where the sale proceeds were received after 5th June, 1966.
This provision was.
relaxed by ' the second Notification dated 8th August 1966 by providing that in case of exports made on or before 5th June 1966 tax credit cer tificate shall be granted according to the provisions of the Scheme even if the Sale proceeds were received after that date, but in respect of exports made after 5th June, 1966, the rate specified in column 3 of Table A shall be nil and no tax credit certificate shall be granted in respect of such exports.
The argument urged on behalf of the appellant was that it was not competent to the Central Government to provide in the Scheme framed under Section 280 ZE read with Section 280 ZC that no tax credit certificate shah be granted in respect of exports of any goods or merchandise.
The only power, which, according to the appellant, the Central Government had under these two.
Sections, was to frame a scheme speci fying some goods or merchandise the export of which would entitle an exporter to tax credit certificate.
The appel lant conceded that the Central Government was.
not bound to specify any particular category of goods or merchandise in the Scheme framed by it but the limited contention was that some goods or merchandise must be specified in the Scheme and since in the present case the Scheme as amended provid ed that tax credit certificates shall not be granted in respect of exports of any goods or merchandise, the two Notifications making this amendment in the Scheme were ultra vires the power of the Central Government under Sections 280 ZE and 280 ZC.
This contention, though it found favour with the single Judge of the Calcutta High Court who heard the Writ Petition in the first 130 instance, is in our opinion wholly without force and cannot be sustained.
A mere look at the scheme of the provisions of Section 280 ZC and 280 ZE is sufficient to expose the invalidity of this contention.
Sub section (1) of Section 280 ZC undoubtedly provides that a person who exports any goods or merchandise out of India after 28th February 1965 and receives the sale proceeds thereof in India in accordance with the Foreign Exchange Regulation Act, 1947 and the rules made thereunder, shall be granted a tax credit certificate for an amount calculated at a rate not exceeding 15 per cent of the amount of such sale proceeds.
But this fight conferred on an exporter is subject to the other provisions of Section ZC and these other provisions include sub sections (2) & (3).
Sub sec tion (2) provides in so many terms that the goods or merch andise in respect of which a tax credit certificate shall be granted under sub section (1) and the rate at which the amount of such certificate shall be calculated, shall be such as may be specified in the Scheme.
It is, thus, left to the Scheme to be framed by the Central Government to specify the goods or merchandise in respect of which an exporter, shall be entitled to tax credit certificate as also the rate at which the amount of such certificate shall be calculated.
It is.
not in respect of every category of goods or merchandise that an exporter can claim to be enti tled to tax credit certificate but it is only in ' respect of such goods or merchandise as are specified in the Scheme.
The policy and the principle which would guide the Central Government in selecting the goods or merchandise for this purpose are set out in sub section (3) which provides that in specifying the goods or merchandise as also the rates, the Central Government shall have regard to the various factors set out in that sub section.
These are the factors which would influence the choice of the Central Government in selecting the goods or merchandise for the purpose of grant of tax credit certificate and also in determining the rates at which tax credit certificate should be given.
Sec tion 280 ZE, sub section (1) confers power on the Central Government to frame one or more Schemes in relation to tax credit certificate to be granted under Section 280 ZC and under sub section (2), such scheme or schemes may provide inter alia for the goods or merchandise and the rate or rates for the purposes of Section 280 ZC.
We fail to see how any obligation can be spelt out from these provisions re quiring the Central Government to frame a scheme specifying the goods or merchandise in respecter of which tax credit certificate shall be granted.
It would indeed be absurd to suggest that the Central Government is under an obligation to make a scheme and the requirement of the statute would be satisfied so long as the Central requirement specifies some goods or merchandise in the Scheme.
There is no reason why the Central Government should not be entitled to say that having regard to the factors set out in sub section (3) of section 280 ZC it does not think it desirable that tax credit certificate should be granted in respect of any goods or merchandise for the time being Sub section (3) of Section 280 ZC confers power on the Central Government in so many terms to rescind a Scheme made by it ,and that also supports the view that the Central Government may keeping in view the factors set out in sub section (3) of Section 280 ZC, 131 decline to make a scheme or provide in the scheme that there shall be no goods or merchandise in respect of which tax credit certificate shall be granted.
In the circumstances we think that the Division Bench of the High Court was right in holding that the Central Government was entitled to issue the two impugned Notifications directing that no tax credit certificates shall be granted in respect of goods or merchandise exported on or after 5th June, 1966.
We accordingly dismiss the appeal with costs.
S.R. Appeal dismissed.

dataset_name: IN-Abs

summary:
The jute carpet backing cloth manufactured by the appel lant in its jute mills and exported was covered by Item 1 in column 2 which specified "goods made of jute not other wise specified" of the Table appended to the Tax Credit Certificate (Exports) Scheme, 1965.
The notification issued by the Central Government in exercise of the powers vested under section 280ZE read with section 280ZC, dated 6 6 1966 and 8 8 1966, provided that no tax credit certificate shall be issued in respect of any goods exported after 5 6 1966.
The appellant, who exported diverse quantities of jute carpet backing cloth manufactured by it to various countries during the period 13 7 1966 and 30 11 1966, filed a writ petition in the Calcutta High Court for a writ of mandamus for quash ing and setting aside both the Notifications and directing the Central Government to consider the application of the applicant for tax credit certificate in respect of the exports without taking into account the two Notifications.
The ground of challenge was that the two Notifications were outside the powers conferred on the Central Government u/s 280ZE read with section 280 ZC, since the Central ' Government had no power under those sections to make a scheme providing that no tax credit certificate shall be granted in case of any goods or merchandise at all.
The single Judge granted mandamus, but the Division Bench on appeal took a different view and negatived the challenge.
Dismissing the appeal by certificate the Court, HELD: (i) The Division Bench of the High Court was right in holding that the Central Government was entitled to issue the two Notifications directing that no tax credit certifi cates shall be granted in respect of goods or merchan dise exported on or after 5 6 1966.
[131 A B] (ii) No obligation can be spelt out from Ss.
280 ZC and 280 ZE requiring the Central Government to frame a scheme specifying the goods or merchandise in respect of which tax credit certificate shall be granted.
The Central Government was entitled to say that having regard to the factors set out in subsection (3) of section 280 ZC, it does not think it desirable that tax credit certificate should be granted in respect of any goods or merchandise for the time being.
[130 F H]


judgement:
Appeal No. 284 of 1972.
(From the Judgment and Order dated 3 5 1971 of the Delhi High Court in I.T. Case No. 6 D of 1964) A.K. Sen, V.S. Desai and Bishamber Lal, for the appellant.
G.C. Sharma and S.P. Nayar, for the respondent.
The Judgment of the Court was delivered by BHAGWATI, J.
This is an appeal by special leave direct ed against the Judgment of the Delhi High Court answering in favour of the Revenue a question which was directed to be referred by the Tribunal under section 66(2) of the Indian Income Tax Act, 1922.
The controversy between the parties arises out of an assessment made on the assessee as a Hindu Undivided Family for the assessment year 1948 49, the corre sponding accounting year being the financial year 1947 48.
The assessee was at the material time a Hindu Undivided Family with one Roshan Lal as its manager and karta.
Till June 1947 the assessee was carrying on business in gold and jewellery at Chowk Surjan Singh in Lahore.
In view of the impending partition of India Roshan Lal decided to move out of Lahore and accordingly he transferred a sum of Rs. 12,094/ from the account of the assessee with the Lahore Branch of the Punjab National Bank Ltd. to the New Delhi Branch of that bank in June 1947.
He also transferred from the Lahore 156 Branch of the punjab National Bank Ltd. to the branch of that bank at New Delhi two sums of Rs. 13,000/ and Rs. 6,000/ , the former in his own name and the latter in the name of his wife and obtained fixed deposit receipts for these two amounts from the New Delhi Branch of the Bank in July 1947.
He left Lahore in June 1947 and proceeded to Mussoorie but on his way he stopped at Amritsar for a few days.
He opened an account with the Amritsar Branch of the Imperial Bank of India by depositing a sum of Rs. 300/ with a view to obtaining a locker in the safe deposit vault where he could deposit for sale custody a trunk which he had brought with him from Lahore containing gold ornaments, jewellery and cash.
It seems that a locker was not avail able and hence he deposited the trunk in a sealed condition with the Amritsar Branch of the Imperial Bank of India on 25th june, 1947.
The sealed trunk, according to the asses see, contained gold ornaments of the value of Rs. 1,19,320/ , gold rawa of the value of Rs. 1,69,020/ and stones of the value of Rs. 4,000/ .
Roshan Lal then went to Mussoorie via Haridwar and stayed at Mussoorie until about October 1947.
The case of the assessee was that during this period Roshan Lal did not carry on any business nor did he have any other means of income.
In October 1947 Roshan Lal came over to Delhi and rented a house in Kinari Bazar with a view to settling down in Delhi.
He started looking for suitable premises for commencing business and it was only in February 1948 that he succeeded in securing suitable prem ises at Dariba Kalan in Delhi.
He then started gold and jewellery business in these premises in the name and style of Roshan Di Hatti on 30th March, 1948.
The business was joint family business of the assessee and the first entry made in the books of account of the assessee was dated 30th March, 1948 and it was as follows: Gold Ornaments Rs. 1,19,320/ Gold Rawa Rs. 1,69,020/ Stones Rs. 4,000/ Bank balance with the Imperial Bank of India, Delhi Rs. 35,053/ Bank balance with Hindustan Commercial Bank, Delhi Rs. 221/ Cash Rs. 2,800/ .
The assessee thus brought in an aggregate capital of Rs. 3,33,414/in the business on 30th March, 1948.
It appears that the assessee prospered in this gold and jewellery business of Roshan Di Hatti but it did not file any return of income nor paid any income tax.
It came to the notice of the Income Tax Officer some time in the beginning of 1957 that the assessee had made considerable income in its gold and jewellery business but had failed to pay any tax on such income and hence the Income Tax Officer issued a notice to the assessee under section 34(1)(a) of the Indian Income Tax Act, 1922 for bringing the income of the assessee for the assessment year 1948 49 to tax.
The assessee filed its return of income and in the course of the assessment pro ceedings, the Income Tax Officer, called upon the assessee to explain the nature and source of the capital of Rs. 3,33,414/ brought by it into the business on 30th March, 1948.
The assessee pointed 157 out that gold rawa, ornaments and cash representing this capital were brought by Roshan Lal when he migrated from Lahore and they were kept in a sealed trunk with the Amrit sar Branch o[ the Imperial Bank of India and when Roshan Lal came over to Delhi in October 1947, he.
deposited the same in a locker in the safe deposit vault of Hindustan Commer cial Bank at Delhi and when the business of the assessee was commenced, he surrendered the locker and brought the entire gold, jewellery and cash into the business.
It was empha sised by the assessee as a supportive fact that after Roshan Lal migrated from Lahore in June 1947 until the assessee started the business of Roshan Di Hatti on 30th March, 1948, neither the assessee nor Roshan Lal had any other business or means of income from which the assets of Rs. 3,33,414/ could have been earned.
This explanation was given in the course of various statements made by the asses see from time to time before the Income Tax Officer.
The assessee also examined Hira Lal, Father in law of Roshan Lal and filed affidavits of Mulk Ram, Bills Mal, Dalai, Wazir Chand, Devidas Mehra and Panna Lal before the Income Tax Officer for the purpose of showing that the assessee was having a large gold and jewellery business in Lahore before migration and that it did not carry on any business in India before starting the business of Roshan Di Hatti on 30th March, 1948.
The Income Tax Officer also examined Prem Nath and Kishan Chand, brothers of Roshan Lal.
The statement of Prem Nath was to the effect that their father was a man of ordinary means who was almost reduced to penury by about 1940 and that he had given a sum of Rs. 2000/ to his son Roshan Lal for starting gold and jewellery business in 1935 and he had also subsequently lent some monies to Roshan Lal at nominal interest.
Prem Nath deposed that for the purpose of the business of the assessee, Roshan Lal was occupying a shop belonging to his father but he was not paying rent though demanded on the ground that he did not have sufficient income to pay the rent It was also stated by Prem Nath that before the partition of the country the standard of living of Roshan Lal and his family was no higher than that of Prem Nath who was getting a salary of Rs. 150/ per month.
The statement of Prem Nath was clear ly directed towards showing that the assessee did not have any flourishing business or large income prior to partition.
The Income Tax Officer, on the basis of this material before him, rejected the explanation offered by the assessee and came to the conclusion that it was not possible to believe that the assessee had been able to accumulate capital to the extent of Rs. 3,33,414/ out of income from the business carried on by it in Lahore and since the nature and source of the capital of Rs. 3,33,414/ credited in the books of account of the business on 30th March, 1948 was not satis factorily explained, the Income Tax Officer, gave credit only for a sum of Rs. 20,000/ and treated the balance of Rs. 3,13,414/ as income of the assessee from undisclosed sources.
The assessee appealed against this order of the Income Tax Officer and on appeal, the Appellate Assistant Commis sioner took the view that, on the facts as disclosed by the material placed on record in the proceedings, a much larger allowance should have been made in respect of the capital brought by the assessee from Lahore and he allowed a further sum of Rs. 80,000/ .
The reason given by the Appellate 158 Assistant Commissioner for taking this view are a little material and they may be reproduced as follows: "There is documentary evidence to show that assessee transferred an amount of Rs. 12,094/ from the Punjab National Bank account at Lahore to the same bank in New Delhi in June 1947.
It is also seen that he also transferred two amounts Rs. 13,000/ in his own name and Rs. 6,000/in his wife 's name from the Punjab National Bank, Lahore, to the same Bank at Minto Road, New Delhi and fixed deposit receipts were taken for this total sum of Rs. 19,000/from the Delhi Bank in July 1947.
All these monies including the realised fixed deposits later on went into the asses see 's account with the State Bank of India which reveals a credit balance of Rs. 35,053/ as on 30 3 1948.
This at least shows that the assessee was not a man of very small means while he was at Lahore.
He was having four accounts in different banks at Lahore.
The particulars, however, are not available and it is also stated that most of these accounts were very small; but even then a man of very modest means would not normally have so many bank accounts.
Moreover, while at Lahore Shri Roshan Lal had taken life insur ance Policies Rs. 22,000/ .
A number of letters and receipts regarding business trans actions in Lahore were also filed which indi cate that the Lahore business was not as small as the Income Tax Officer has taken it to be.
There are some papers which relate to deals worth Rs. 10,000/ or more at one time.
There are also several vouchers relating to adver tisement charges paid at Lahore All these things together with the fact that the asses see was in position to transfer a sum of Rs. 31,000/ approx.
through banks indicate that he was doing fairly well in the business at Lahore.
How he could have managed to evade tax at Lahore for all these years, is a mys tery; but from the circumstances of the case it appears that the assessee had certainly assessable incomes while he was doing business there during the pre partition period.
There is another factor which has also to be given its due weight.
While leaving Lahore and coming over to India in JUne 1947, the assessee stopped for few days at Amritsar.
There on the 25th June, 1947 he deposited a sealed box with the State Bank of India Amritsar Branch.
This box was withdrawn by him on the 20 10 47.
These facts are corroborated by the bank certificate.
The assessee claims that he had considerable amount of jewellery and gold etc.
(part of his trading stock in Lahore) as well as cash, in this box that is why he did not take the risk of carrying.
it with him on his way to Mussoo rie, but kept in deposit with the State Bank at Amritsar till such time.
as he was able to settle down in India.
The contents of the seated box are unknown to the bank and so it is not possible to ascertain what the box actually contained.
But it is reasonable to 159 presume that there must have been something quite valuable in the box as otherwise the assessee would not have kept it in the custody of a bank like State Bank of India.
It must also be noted that as early as June, 1947, the assessee hired a locker in the Hindustan Commercial Bank Ltd., New Delhi.
It is clear therefore, that when in June, 1947, the asses see was leaving Lahore he must have had with him quite a substantial amount either in the form of jewellery etc., or cash, as otherwise he would not have taken the precaution of either depositing the sealed box with the State Bank of India at Amritsar or opening a locker in a New Delhi Bank.
Considering all the evidence discussed above, I am of the opinion that the Income Tax Officer 's allowance of Rs. 20,000/ only as capital brought over from Pakistan is too low.
It is true that the capital disclosed in the books as on 30 3 1948 is mostly unverifiable and even assuming that the assessee was doing reasonably well in his business at Lahore, there are hardly any reasons to believe that he could have accumulated so much capital and could have brought all that capital safely into India; but the circumstances of the case do in my view justify a much larger allowance for old capital than has been allowed by the Income Tax Officer.
In my opinion, a reduction of the. assessment by Rs. 80 '000/will meet the requirement of the case.
" The Appellate Assistant Commissioner thus reduced the figure undisclosed income of the assessee to Rs. 2,33,414/ .
But this relief was not enough and the assessee pre ferred a further appeal to the Tribunal.
When the appeal came to.
be heard by the Tribunal, Roshan Lal, who was present at the hearing, was asked by the Members of the Tribunal as to how he had brought gold and jewellery from Lahore and he stated that it was brought in train in a box of the size of 2 1/2 'x l1/2 'x 1 ' and he was then asked what was the weight of the box, to which he replied stating that the weight of the contents of the box was about eight seers.
The Tribunal then, after hearing the arguments of the par ties, rejected the appeal.
The main arguments which weighed with the Tribunal in negativing the appeal of the assessee were: first, if the weight of the contents of the box was only eight seers, the value of gold and jewellery in the box could not be more than Rs. 66,000/ at the then current rate of gold at Rs. 90/ per tola; secondly, the Government of India had issued a Press Note in January 1952 requiring all evacuees to declare the amounts of money brought by them from Pakistan and assuring them that in case they did so, no further enquiries would be made from them as to how they had earned the same and whether they had paid any tax on it and yet the assessee had not declared 'before the Revenue au thorities until the commencement of the assessment proceed ings in 1957 that it had brought the capital of Rs. 2,33,414/ from Pakistan; thirdly, the assessee claimed to have a flourishing business in Lahore in the course of which it was supposed to have earned enough to enable it to save a capital of Rs. 3,33,414/ and yet it had not filed 160 any income tax return nor was it ever assessed to income tax in Lahore and fourthly, the depositions of Mulk Ram, Billa Mal, Dalai, Wazir Chand, Devidas Mehra and Panna Lal were vague and based on hearsay and they had no evidentiary value in the absence of contemporaneous primary evidence.
The Tribunal, accordingly, held that the assessee could not have brought assets worth more than Rs. 1,00,000/ from Lahore and the estimate made by the Appellate Assistant Commissioner did not call for any interference and in this view, the Tribunal confirmed the assessment of the bal ance of Rs. 2,33,414/ as the undisclosed income of the assessee for the assessment year 1948 49.
The assessee applied to the Tribunal for referring to the High Court the question of law arising out of its order but the Tribunal declined to make a reference on the ground that in its opinion no question of law arose out of its order.
This led to the making of an application to the High Court under section 66(2), but the High Court also took the same view and rejected the application.
The assessee there upon preferred an appeal to this Court by special leave and in the appeal, an order was made by this Court referring the following question for the opinion of the High Court: Whether there was material for coming to the conclusion that Rs. 2,33,414/ , out of the capital of Rs. 3,33,414/credited in the books of account of the assessee on 31st March, 1948, represented income from undis closed source ? Pursuant to this order the Tribunal stated a case for the opinion of the High Court and the High Court answered the question referred to it in favour of the Revenue by holding that there was material on the basis of which the Tribunal could come to the conclusion that Rs. 2,33,414/ represented the undisclosed income of the assessee.
Hence the present appeal by the assessee with special leave ob tained from this Court.
Now, the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him.
If he disputes the liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provi sions of the Act.
In the absence of such proof, the Revenue is entitled to treat it as taxable income.
This was laid down as far back as 1958 when this Court pointed out in A. Govindarajulu Mudaliar vs Commissioner of Income tax (1) that "there is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the ac counting year, the Income Tax Officer is entitled to draw the inference that the receipts are of an assessable nature".
To put it differently, where the nature and source of a receipt, whether it be of money or of other property, cannot be satisfactorily explained by the assessee, it is open to the Revenue to hold that it is the income of the assessee and no further burden lies on the Revenue to show that that income is from any particular source.
Vide Com missioner of Income Tax, U.P. vs Devi Prasad Vishwanath Prasad(2).
Here, (1) (2) 161 in the present case, the assessee introduces in the books of account of its business on 30th March, 1948, capital of Rs. 3,33,414/ which consisted of gold rawa, gold ornaments, stones and cash.
The burden of accounting for the receipt of these assets was clearly on the assessee and if the assessee failed to prove satisfactorily the nature and source of these ' assets, the Revenue could legitimately hold that these assets represented the undisclosed income of the assessee.
The assessee offered the explanation that these assets had been brought by Roshan Lal when he migrated from Lahore in June 1947 and they represented the entire savings of the assessee in Pakistan.
This explanation was disbe lieved.
by the Tribunal which took the view that, on the material on record, it was not possible to hold that the assessee must have brought more than Rs. 1,00,000/ from Lahore and hence the Tribunal added the balance of Rs. 2,33,414/ as undisclosed income of the assessee.
This conclusion reached by the Tribunal was clearly a finding of fact and hence it could be assailed only if it was shown that the Tribunal had acted without any material or upon a view of the facts which could not reasonably be entertained or the facts found were such that no person acting judicial ly and properly instructed as to the relevant law would have come to that determination.
Vide Mehta Parikh & Co. vs Commissioner of Income Tax, Bombay(1).
Let us consider what were the primary facts established by the material on record.
The assessee was admittedly carrying on the business of Roshan Di Hatti in Lahore from 1935 until June 1947 when Roshan Lal migrated from Lahore.
It is true that the assessee was not paying any Income tax in Lahore but, as pointed out by the Appellate Assistant Commissioner in his order, a number of letters and receipts regarding business transactions in Lahore were filed by the assessee which showed that the business in Lahore was not small and there were documents and papers which referred to.
dealings involving Rs. 10,000/ or more at a time and there were also several vouchers produced by the assessee relating to advertising charges paid at Lahore.
The busi ness carried on by the assessee at Lahore was, therefore, a reasonably large business though its extent could not be verified by any reliable material produced by the assessee.
The assessee undoubtedly filed affidavits of Mulk Ram, Billa Mal, Dalai, Wazir Chand, Devidas Mehra and Panna Lal, but, as commented upon by the Tribunal, these affidavits were vague and could not be regarded as having much evidentiary value.
Still they did go to show that the Lahore business of the assessee was a fairly large business.
The Tribunal was no doubt right in commenting that primary evidence with regard to the extent of the Lahore business of the assessee was not forthcoming, but it must be remembered that the assessee was being called upon to prove the extent of its business in a territory from which the members of the Hindu Undivided Family had to flee for their lives and from where it was totally impossible to produce any primary evidence.
Be that as it may, it was found as a fact by the Appellate Assistant Commissioner and this finding was not disturbed by the Tribunal that the assessee "was doing fairly well in the business in Lahore".
Roshan Lal, in anticipation of the partition of the country which was soon to follow, decided to move out of Lahore in June 1947 at a time when massacre and holocaust had not yet started 162 and he was in a position to remove his belongings.
He migrated from Lahore with all his belongings and came over to Amritsar and he brought with him a trunk which he wanted to keep in a locker in Safe Deposit Vault of the Imperial Bank of India.
He could not obtain a locker and hence he deposited the sealed trunk with the Amritsar Branch of the State Bank of India instead of carrying it with him to Mussoorie.
There is no documentary evidence to show as to what were the contents of the sealed trunk but, as pointed out by the Appellate Assistant Commissioner and not dissented by the Tribunal, "it is reasonable to presume that there must have been something quite valuable in the box as otherwise the assessee would not have kept the custo dy of a bank like the State Bank of India".
There can be no doubt, as observed by the Appellate Assistant Commissioner, and not disputed by the Tribunal that the assessee "must have had with him quite a substantial amount either in the form of jewellery etc.
or cash, or otherwise he would not have taken the precaution of either depositing the sealed box with the State Bank of India, Amritsar opening a locker in a New Delhi Bank".
The clear finding of the Appellate ASsistant Commissioner, affirmed by the Tribunal, therefore, was that Roshan Lal did bring ornaments, jewellery and cash with him when he migrated from Lahore in June 1947 and kept the same in a sealed trunk with the Amritsar Branch of the State Bank of India.
If that be so, then on what material could it be said that the ornaments, jewellery and cash brought by the assessee and kept in the sealed trunk were of the value of only Rs. 1,00,000/ and no more.
What were the materials on the basis of which the claim of the assessee that Roshan Lal had brought gold, ornaments and cash of the value of Rs. 3,33,414/ could be rejected ? The only materials relied upon by the Tribunal was that the assessee had never filed any income tax return nor ever paid any tax on the income of its business in Lahore and the presumption must, therefore, be that the assessee did not earn any assessable income before migration from Lahore.
Now, it is true that where an assessee has not paid income tax, the presumption ordinarily must be that the assessee had no assessable income, but here the fact remains that the assessee transferred no less than an aggregate sum of Rs. 31,094/ from Lahore to New Delhi and also brought sub stantial amount either in the form of jewellery etc.
or cash" and deposited the same in a sealed trunk with the Imperial Bank of India, Amritsar Branch in June 1947.
obviously the assessee could not have done unless it had a reasonably large business in Lahore and, therefore, the fact that the assessee did not pay income tax in Lahore cannot have much evidentiary value.
All that it would show is that, as pointed out by the Tribunal, "the assessee has not been very straightforward in his dealings with the income tax departments".
The Tribunal also relied upon certain answers given by Roshan Lal when he was questioned by the Members of the Tribunal at the hearing of the appeal.
It must be pointed out straight away that 163 these answers given by Roshan Lal could not be relied upon by the Tribunal for the purpose of coming to any conclusion adverse to the assessee, because there is a procedure pre scribed in Rules 29. 30 and 31 of the Income Tax Appellate Tribunal Rules for taking additional evidence before the Tribunal and if the Members of the Tribunal wanted to exam ine Roshan Lal on any aspects of the case they should have followed this procedure.
But unfortunately the Members of the Tribunal, disregarding the prescribed procedure, put questions to Roshan Lal in an informal manner unauthorised by the Rules.
The answers given by Roshan Lal could not in the circumstances form part of the record and the Tribunal was not entitled to reply upon the same in arriving at its findings of fact.
It may be noted that the High Court also took the view that the procedure adopted by the Tribunal was irregular and the answers given by Roshan Lal should be left out of account.
One other circumstance on which the Tribunal relied was that notwithstanding the Press Note issued by the Government of India in January 1952 the assessee did not declare that.
it had brought assets of the value of Rs. 3,33,4/4/ from Pakistan and this circumstance, according to the Tribunal, cast considerable doubt on the version put forward by the assessee.
Now, the Press Note of Government of India was not produced before us but we will assume that it did promise a certain concession to the evacuees.
who declared the assets brought by them from Pakistan.
Even so, we fail to see how it could be utilised as a circumstance militating against the explanation of the assessee.
Both according to the Appellate Assistant Commissioner as well as the Tribunal, the assessee did bring assets worth Rs. 1,00,000/ from Lahore in June 1947 and these assets were admittedly not disclosed by the assessee despite the Press Note issued by the Government of India.
Then, how could any inference be drawn from the non disclosure of the assets by the assessee that the assessee must not have brought assets represent in the balance of Rs 2,33 414/ 9 Whether the assets brought by the assessee were Rs 1,00,000/ or Rs. 3,33,414/ the fact remains that they were not disclosed by the assessee despite the Press Note of the Government of India and hence no adverse reference could be drawn from the fact of non disclosure of the assets by the assessee.
It will, therefore, be seen that there was no mate rial on the basis of which the Tribunal could come to the conclusion that though the assessee had a fairly large business in Lahore and had brought its entire ornaments, jewellery and cash from Lahore and deposited the same in a sealed trunk with the Amritsar Branch of the Imperial Bank of Inaia, these ornaments, jewellery and cash were worth not more than Rs. 1,00,000/ .
One may also ask the question that if the assessee did not bring assets worth more than Rs. l,00,000/ from Lahore, where and how did it get the remaining assets of the value of Rs 2 33 414/ ? Roshan Lal had come away from Lahore as a refugee and conditions in post partition India were also highly unsettled and the clear and undoubted evidence was that neither Roshan Lal nor the assessee had any business or other means of 164 income in India until 30th March, 1948.
In this situation, it is impossible to believe that the assessee could have earned such a huge amount of profit as Rs. 2,33,414/ within a few months, even if it be assumed that some business was started by it in October 1947 when Roshan Lal came down to Delhi.
The utter improbability, amounting almost to, impossibility, of the assessee having earned such a large amount of Rs. 2,33,414./ as profit within a few months in the disturbed conditions which then prevailed in India was a circumstance which ought to have been taken into account by the Tribunal but which the Tribunal unfortunately failed to do.
It may be pointed out that it was not the case of the Revenue that the books of account of the business were subsequently written up and the entry crediting the capital of Rs. 3,33,4.14/ on 30th March, 1948 was not a genuine entry and the undisclosed profits of the subsequent years were sought to be concealed by the showing a bogus entry of Rs. 3,33,414/ as capital contribution on 30th March, 1948.
If such had been the case, the present argument as to the improbability of the assessee having earned such a huge amount of Rs. 2,33,414/ within a few months, would not have been available to the assessee.
But the Revenue did not dispute the correctness of the entry and accepted that assets worth Rs. 3,33,414/ were introduced in the business on 30th March, 1948 and sought to include the amount of Rs. 3,33,414/ representing the value of these assets as undis closed income of the assessee for the assessment year 194849.
The only question could, therefore, be whether these assets were brought by the assessee from Lahore in June 1947 or they represented the concealed income earned by the assessee during the period June 1947 to 30th March, 1948.
The impossibility of the assessee having earned such a huge amount of profit within a a few months immediately after migration to India in the disturbed and unsettled conditions which then prevailed must, therefore, necessarily support the inference that the assessee must have brought these assets from Lahore.
We are, therefore, of the view that in reaching the conclusion that out of the capital of Rs. 3,33,414/ I credited in the books of the assessee on 30th March, 1948, assets of the value of Rs. 2,33,414/represented undisclosed income of the assessee for the assessment year 1948 49, the Tribunal acted without any material or in any event, the finding of fact reached by the Tribunal was unreasonable or such that no person acting judicially and properly instruct ed as to the relevant law would come to such finding.
We accordingly allow the appeal, set aside the order of the High Court and answer the question referred by the Tribunal in the negative.
The 'Commissioner will pay the costs of the appeal to the assessee.
P.H.P. Appeal allowed.

summary:
The assessee, a Hindu Undivided Family, was carrying on business in gold and jewellery in Lahore till June 1947.
In view of the impending partition of India Roshan Lal decided to move out of Lahore and accordingly transferred sums of Rs. 12,094/ , Rs. 13,000/ and Rs. 6,000/ from Lahore Banks to New Delhi Banks.
He left Lahore and pro ceeded to Mussoorie in June, 1947.
On his way, he stopped at Amritsar for a few days and opened an account with the Imperial Bank of India with a view to obtaining a locker in the Safe Deposit Vault but a locker was not available and hence he deposited a trunk which he had brought from Lahore containing gold ornaments, jewellery and cash with the Imperial Bank of India.
The assessee came to Delhi in October, 19.,7.
and rented a house.
In February, 1948.
he succeeded in securing business premises and started busi ness on 30.3.1948.
The first entry in the books of account on 30.3.1948 showed gold ornaments of Rs. 1,19,320/ , Gold Rawa Rs. 1,69,020/ Stones worth Rs. 4,000/ Bank balance with the Imperial Bank of India, Delhi Rs. 35,053/ Bank Balance with Hindustan Commercial Bank.
Delhi Rs. 221/ and Cash of Rs. 2.800/.
The assessee thus brought in an aggre gate capital of Rs. 3,33,414/ in the business on 30.3.1948.
in 1957.
it came to the notice of the Income Tax Officer that the assessee had made considerable income in his gold and jewellery business but had failed to pay any tax on such income and hence issued a notice to the assessee under section 34(1)(a) of the Indian Income Tax Act, 1922, for bringing the income of the assessee for the assessment year 1948 49 to tax.
The assessee flied his return.
In the course of the assessment proceedings the I.T.O. called upon the assessee to explain the nature and source of the capital of Rs. 3,33,414/ .
The assessee contended that he brought the gold Rawa, ornaments and cash representing the capital when he migrated from Lahore and they were kept in a sealed trunk with the bank at Amritsar and thereafter brought over to Delhi and deposited in the Safe Deposit Vault of Hindustan Commercial Bank at Delhi.
When the business of the asses see was commenced,he surrendered the locker and brought the entire gold, jewellery and cash into the business.
The assessee observed that till he started his business in March 1948, neither the ,assessee nor Roshan Lal had any other business or means of income from which the amount of Rs. 3,33,414/ could have been earned.
The assessee examined some witnesses.
The ITO also examined the broth ers of Roshan Lal who stated that the father of Roshan Lal was a man of ordinary means who was almost reduced to penury by about 1940 and that he had given a sum of Rs. 2000/ to his son Roshan Lal for starting gold and jewellery business in 1935 and he had also subsequently lent some tooroes to Roshan Lal on nominal interest.
The Income Tax Officer rejected the explanation offered by the assessee and came to the conclusion that it was not possible to believe that the assessee had been able to accumulate capital to the extent of Rs. 3.33,414/ out of income from the business carried on.
The Income Tax Officer gave credit for a sum of Rs. 20,000/ and treated the balance of Rs. 154 3,30,414/ as income of the assessee from undis closed source.
On appeal,the Appellate Assistant Commis sioner allowed a further sum of Rs. 80,000./ on the follow ing grounds: (1) That the assessee transferred a sum of Rs.12,004/ ,Rs./3,000/ and Rs. 6,000/ from Banks as Lahore to the Bank at New Delhi.
This shows that the assessee was not a man of very small means while he was at La hore.
(2) He was having accounts in 4 different Banks and a man of very modest means would not have normally so many Bank accounts.
(3) While at Lahore.
Roshan Lal had taken Life Insurance Policies worth Rs. 22.000/ .
A number of letters and receipts regarding business transactions in Lahore Indicated that the Lahore business was not as small as the Income Tax Officer had taken it to be.
The assessee stopped at Amritsar and opened an account and took Safe Deposit Vault where he deposited a sealed box.
It is reasonable to presume that there must have been something quite valuable in the box.
A further appeal filed by the assessee to the Tribunal failed.
The tribunal, when the appeal came to be heard, put a question to Roshan Lal as to how he had brought gold and jewellery from Lahore and enquired about the weight of the box.
The Tribunal after hearing the arguments of the parties rejected the appeal.
The main arguments which weighed with the Tribunal were: (1) that the weight of the box was too less: (2) that the assessee did not disclose his assets under the scheme of the Government of India published in the Press Note in January 1952, requiring all evacuees to declare the amounts of money brought by them from Paki stan.
(3) that the assessee did not file any income tax returns in Lahore.
The High Court con firmed the finding of the Tribunal in the reference.
Allowing the appeal, HELD: (1) The law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him.
[160 E] A A.Govindaralulu Mudaliar vs Commissioner of Income Tax and Commissioner of Income Tax, U.P. vs Devi Prasad Vishwanath Prasad followed.
(2) The conclusion of the Tribunal on a finding of fact can be assailed only if it is shown that the Tribunal had acted without any matenal or upon a view of the facts which could not reasonably be entertained or the facts found were such that no person acting judicially and properly instructed as to the relevant law would have come to that determination.
[161 C D].
Mehta Parikh & Co. vs Commissioner of Income Tax Bombay , followed.
(3) The Tribunal was right in commenting that primary evidence with regard to the extent of the Lahore business of the assessee was not forthcoming but it must be remem bered that the assessee was being called upon to prove the extent of his business m a territory from which the member of the Hindu undivided family had to .flee for their lives and from where it was totally impossible to produce any primary evidence. The.
finding of the AAC that the assessee was doing fairly well m the business m Lahore was not disturbed by the Tribunal. The .AAC found that it was reasonable to presume to at there Was something.
quite valuable m the box .and this finding was also not dissented by the Tnbunal.
There was no material to show that the orna 155 ments, jewellery and cash brought by the assessee and kept in the sealed trunk were of the value of only Rs. 1 lac and not more.
The circumstances that the assessee had not filed any Income Tax return could be of no avail to the Revenue because admittedly the assessee had brought substan tial amount from Lahore.
[161 D G] (4) The Tribunal was wrong in relying upon certain answers given by Roshan Lal, about the weight of the sealed box when he was questioned by the Tribunal at the hearing of the appeal.
It must be pointed out straightway that the answer given by Roshan Lal could not be relied on by the Tribunal because there is a procedure prescribed in rules 29.
30 and 31 of the Income Tax Appellate Tribunal Rules for taking additional evidence before the Tribunal and if the members of the Tribunal wanted to examine Roshan Lal on any aspects of the case.
they should have followed this procedure.
The answers given by Roshan Lal disregarding the perscribed procedure could not form part of the record and the Tribunal was not entitled to rely upon the same.
[162 H, 163 A C] (5) The Tribunal erred in relying on the Press Note be cause admittedly the assessee had brought a sum of Rs. 1 lac to India and even that was not declared to the Government of India.
[163 E F] (6) There was no material on the basis of which the Tribunal could come to the conclusion that the ornaments.
jewellery and cash were not worth than Rs. 1 lac.
It was not proved that Roshan Lal or the assessee had any business or other means of income in India until 30.3.1948.
The genuineness of the entry of March 1948 was also not chal lenged.
It is utterly improbably amounting almost to impossibility that the assessee could have earned such a large amount of Rs. 2.33.414/ as profit within a few months in the disturbed conditions which then prevailed in India.
[164 B E] (7) The Tribunal acted without any material and in any event, the finding of fact reached by the Tribunal was unreasonable or such that no person acting judicially and properly instructed as to the relevant law would come to such finding.
[164 F G]


judgement:
Civil Appeal Nos.
1546 1551 of 1971.
(From 1he Judgment and Order dated 20 12 1968 of the Calcutta High Court in Appeals from Original Orders Nos.
556 559, 571 and 572 of 1967) 150 Lal Narain Sinha, Sol.
General and G.S. Chatterice, for the appellants.
Purushottam Chatterjee and Ratbin Des, for the respondents.
The Judgment of the Court was delivered by BHAGWATI, J.
The short question which arises for deter mination in these appeals is whether green ginger falls within the category of goods described as "vegetables, green or dried, commonly known as "sabji, tarkeri or ask" in Item (6) of Schedule I to the Bengal Finance (Sales Tax) Act, 1941.
If it is covered by this description, it would be exempt from sales tax imposed under the provisions of that Act.
The Sales Tax authorities held that green ginger is used to.
add Havour and.
taste to food and it is, therefore, not vegetable commonly known as sabji, tarkeri or ask".
The orders of the Sales Tax authorities were challenged in a writ petition filed under article 226 of the Constitution and a Single Judge of the High Court who.
heard the writ petition disagreed with the view taken by the Sales Tax authorities and held that green ginger is vegetable within the meaning of that expression as used in Item (6) of the First Schedule to the Act.
This view of the learned Single ' Judge was affirmed by a Division Bench of the High Court on appeal under clause (15) of the Letters Patent.
Hence the present appeal by the State with special leave obtained from this Court.
The Bengal Finance (Sales Tax) Act, 1941 levies sales tax on the taxable turnover of a dealer computed in accord ance with the provisions of that Act.
Section 6, sub sec tion (1) provides that no tax shall be payable under the Act on the sale of goods specified in the first column of Sched ule I, subject to the conditions and exceptions, if any, set out in the corresponding entry in the second column thereof and Item (6) of Schedule I specifies in the first column "vegetable, green or dried, commonly known as "Sabji, tar kari or ask" so that No. tax is payable on the sale of goods falling within this category, subject to the exception set out in the second column, namely, that they would be liable to bear tax "when sold in sealed containers.
" It was common ground in the present case that green ginger was not sold by the assessee in sealed containers and the only question which, therefore, requires to be considered is whether green ginger can be regarded as vegetable commonly known as 'sabji, tarkari or sak '.
Now, the word 'vegetable ' is not defined in the Act but it is well settled as a result of several decisions of this Court of which we may mention only two, namely, Ram avatar Budhaiprasad vs Assistant Sales Tax Officer, kola(1) and M/s Motipur Jamindary Co. Ltd. vs State of Bihar(2)) that this word, being a word of every day use, must be construed not in any technical sense, nor from any botanical point of view, but as understood in common par lance.
The question which arose in Ramavatar 's case (supra) was whether betel leaves are "vegetables" (1) ; (2) ; 151 and this court held that they are not included within that term.
This Court quoted with approval the following passage from the judgment of the High Court of Madhya Pradesh in Madhya Pradesh Pan Merchants ' Association, Santra Market, Nagput vs State of Madhya Pradesh(1): "In our opinion, the word "vegetables" cannot be given the comprehensive meaning the term bears in natural history and has not been given that meaning in taxing statutes before.
The term "vegetables" is to be understood as commonly understood denoting those classes of vegetable matter which are grown in kitchen gardens and are used for the table.", and observed that "the word 'vegetable ' in taxing statutes is to be understood as in common parlance i.e. denoting class of vegetables which are grown in a kitchen garden or in a farm and are used for the table".
This meaning of the word 'vegetable ' was reiterated by this Court in Motipur zamindary case (supra) where this Court was called upon to consider whether sugarcane can be regarded as vegetable and it was held by this Court that sugarcane cannot be said to fail within the definition of the word 'vegetable '.
It is interesting to note that the same principle of construction in relation to words used in a taxing statute has also been adopted in English, Canadian and American courts.
Pollock B. pointed out in Grenfell vs I.R.C.(2) that "if a statute contains language which is capable of being construed in a popular sense, such a statute is not to be construed according to the strict or technical meaning of the language contained in it, but is to be construed in its popular sense, meaning, of course, by the words "popular sense" that sense which people conversant with the subject matter with which the statute is dealing would attribute to it. '" So also the Supreme Court of Canada said in Planters Nut and Chocolate Co. Ltd. vs The King,(3) while interpret ing the words 'fruit ' and 'vegetable ' in the Excise Act: "They are ordinary words in every day use and are, there fore, to be construed according to their popular sense".
The same rule was expressed in slightly different language by Story, J., in 200 Chests of Tea(4) where the learned Judge said that "the particular words used by the Legisla ture in the denomination of articles are to be understood according to the common commercial understanding of the terms used, and not in their scientific or technical sense, for the Legislature does "not suppose our merchants to be naturalists, or geologists, or botanists" ".
It will, therefore, be seen that the word 'vegetable ' in Item (6) of Schedule I to the Act must be construed as understood in common parlance and it must be given its popular sense meaning "that sense which people conversant with the subject matter with which the statute is dealing would attribute to it" and so construed, it denotes those classes of vegetables which are grown in a kitchen garden or in a farm and are used for the table.
Now, obviously green ginger is a vegetable (1) 7 S.T.C. 99 at 102.
(2) at 248.
(3) (4) (1824), 9 Wheaton (U.S.) 430 at 438.
11 240SCI/77 152 grown in a kitchen garden or in a farm and is used for the table.
It may not be used as a principal item of the meal but it certainly forms part of the meal as a subsidiary item.
It is an item which is ordinarily sold by a vegetable vendor and both the vegetable vendor who every day deals in vegetables and the housewife who.
daily goes to the market to purchase vegetables would unhesitatingly re and green ginger as vegetable.
The assessee in fact placed evidence before the Sales Tax authorities showing that the Railway authorities also treated green ginger as vegetable for the purpose of railway tariff and charged for the carriage of green ginger at the reduced rate applicable to vegetables and even the Corporation of Calcutta included green ginger in the category of vegetables in the market bulletin pub lished by it fortnightly showing the rates in the municipal market.
There can, therefore, be little doubt that green ginger is generally regarded as included within the meaning of the word 'vegetable ' as understood in common parlance.
That a part, we find that Item (6) speaks not simply of vegetables but "vegetables commonly known as sabji, tar kari or sak" and the Division Bench of the High Court held green ginger to fall within the meaning of the words "sabji, tarkari or sak".
We should certainly be very slow to disturb a meaning placed on these words in Bengali language by two judges of the High Court who may reasonably be expected to be quite conversant with that language.
We are accordingly of the view that green ginger is included within the meaning of the words "vegetables commonly known as sabji, tarkari or sak" in Item (6) of Schedule I and its sales must be held to be, exempt from tax under section 6 of the Act.
The result is that the appeals fail and are dismissed with costs.
Costs will be only m one set.
S.R. Appeals dismissed.

summary:
Section 6(1) of the Bengal Finance (Sales Tax) Act 1941 exempts from tax liability "vegetables, green or dried commonly known as subji, tarkari or sak" when not sold in sealed containers.
The Sales Tax Authorities levied sales tax on "green ginger" sold by the respondents, taking the view that inasmuch as green ginger is.
used to add flavour and taste to food.
it is not "vegetable commonly known as subji, tarkari or sak".
A writ petition challenging the validity of the orders of assessment was allowed by the Calcutta High Court which held that green ginger is vegeta ble within the meaning of that expression as used in Item 6 of the First Schedule to the Bengal Finance (Sales Tax) Act, 1941.
Dismissing the State appeals by Special Leave the Court, HELD: (1) Green ginger is included.
within the meaning of the words "vegetables commonly known as subji, tarkari or sak" in Item 6 of Schedule I and its sales are exempt from tax under section 6 of the Bengal Finance (Sales Tax) Act, 1941.
[152 D] (2) The word "vegetable" though not defined in the Act, being a word of every day use, must be construed not in any technical sense, nor from any botanical point of view but as understood m common parlance i.e. denoting class of vegeta bles which are grown in a kitchen garden or in a farm and are used for the table.
The word "vegetable" in Item 6 of Schedule I to the Act, so construed, by giving its popular sense meaning, "that sense which people conversant with the subject matter with which the statute is dealing would attribute to it" denotes those classes of vegetables which are grown in a kitchen garden or in a farm and are used for the table.
Green ginger obviously is a vegetable grown in a kitchen garden or in a farm and it is used for the table.
It may not be used as a principal item of the meal, but it certainly forms part of the meal as a subsidiary item.
Green ginger is generally regarded as included within the meaning of the word "vegetable" as understood in common parlance.
1[150 F H, 151 G H, 152 A] Ramavatar Badhaiprasad vs Assistant Sales Tax Officer Akola, ; ; M/s. Motipur Zamindary Co. Ltd. vs State of Bihar ; , applied.
Madhya Pradesh Pan Merchants ' Association, Santra Mar ket, Nagpur vs State of Madhya Pradesh 7 S.T. Cases 99 at 102, referred to.
Grenfell vs I.R.C. at 248; Planters Nut and Chocolate Co. Ltd. vs The King ; 200 Chests of Tea (1824) 9 Wheaton (U.S.) 430, at 438 quoted with approval.