judgement:
Civil Appeal No. 2728 of 1972.
Appeal by Special Leave from the Judgment and Order dated 22 2 1971 of the Bombay High Court in I.T.R. No. 76/63.
H. G. Advani, Ashok Advani Bar at Law, Hiranandan, Mrs. Sheila Sethi and K. Balasubramaniam for the Appellant.
P. J. Francis and Miss A. Subhashini for the Respondent.
The Judgment of the Court was delivered by BHAGWATI J.
The short question which arises for determination in this appeal by special leave is whether there was any material evidence to justify the finding that a sum of Rs. 1,07,350 was remitted by the assessee from Madras to Bombay and that it represented the undisclosed income of the assessee.
The assessee before us is the firm of M/s. Kishinchand Chellaram and the assessment year with which we are concerned is 1947 48, the relevant accounting year being the year ending 6th April 1947.
The original assessment of the assessee for this assessment year was completed long back, but it seems that some information was received by the Income Tax Officer that a sum of Rs. 1,07,350 was remitted by the assessee from Madras by two telegraphic transfers through the Punjab National Bank Limited and the Income Tax Officer therefore addressed two letters dated 14th January 1955 and 10th February 1955 to the Manager of the Punjab National Bank Limited making inquiries about this remittance.
Neither these two letters nor their copies 723 appear to have been brought on record and it was common ground between the parties that they were at no time disclosed to the assessee and even now the copies of these two letters which ought to be in the record of the Income Tax Departments have not been produced before us.
The Manager of the Punjab National Bank Limited replied to the inquiries made by the Income Tax Officer by his letter dated 18th February 1955 in which he stated: "one telegraphic telegraphic transfer of Rs. 1,07,350 sent by M/s. Kishinchand Chellaram from Madras was received by us on 16 10 46.
T.T. receipt was issued by us on the same day in favour of one Mr. Nathirmal and paid in cash on the same day.
" Though this letter of the Manager of the Punjab National Bank Limited was on the record of the Income Tax Officer, he did not disclose it to the assessee nor did he make any reference to it in the letters dated 24th February 1955 and 4th March 1955 which he addressed to the assessee making inquiries about the remittance of Rs. 1,07,350 said to have been made by the assessee from Madras to Nathirmal in Bombay.
These two letters addressed by the Income Tax Officer also make inquiries in regard to various other matters besides the remittance of Rs. 1,07,350 and the assessee replied to these inquiries by its letter dated 24th March 1955 in which amongst other things it pointed out that it was not able to trace any entry in its Madras books in regard to this remittance of Rs. 1,07,350 indicating clearly that no such remittance was sent by it from Madras to Nathirmal in Bombay.
There was no further communication from the Income Tax Officer to the assessee until 2nd February 1955 when the Income Tax Officer once again addressed a letter to the assessee reiterating that one telegraphic transfer of Rs. 1,07,350 was sent by the assessee from Madras on 16th October, 1946 in favour of Punjab National Bank Limited, Kalba Devi Road, Bombay and this amount was paid to one Nathirmal in cash on the same day and requesting the assessee to explain the nature of this transaction and to produce the relevant proofs of having accounted for this amount in its books of account.
The assessee reiterated by its reply dated 9th February 1956 that it had once again looked into its books of account but did not find any entry in regard to the remittance of Rs. 1,07,350 and in the absence of such entry, it was not in a position to say anything further in the matter.
Then again there was a lull in the correspondence for a period of about one year and on 4th March 1957, the Income Tax Officer once again addressed a letter to the assessee repeating its request to explain the nature of the remittance of Rs. 1,07,350 and to produce relevant books of account and complaining that the assessee did not seem to have given any reply 724 to his earlier letter dated 2nd February 1956.
This complaint was, of course, unjustified because the assessee had replied to the earlier letter of the Income Tax Officer by its letter dated 9th February 1956.
But even so the assessee once again reiterated in its reply dated 13th March 1957 that no amount of Rs. 1,07,350 was remitted by the assessee from Madras and pointed out that Nathirmal was a common name in the Sindhi community and requested the Income Tax Officer to kindly give his father 's name to enable the assessee to look into the matter further and also to inform the assessee as to who on behalf of the assessee purported to have sent the telegraphic transfer from Madras.
The Income Tax Officer did not give any further information to the assessee and proceeded to make an order of reassessment under section 34 of the Indian Income Tax Act, 1922 bringing to tax the amount of Rs. 1,07,350 on the ground that it represented the concealed income of the assessee.
The Income Tax Officer observed in the order that the Punjab National Bank Limited had stated that one telegraphic transfer of Rs. 1,07,350 was sent by M/s. Kishinchand Chellaram from Madras and received by them on 16 10 1946, and "there was no reason to doubt the banker 's statement that the amount was remitted by M/s. Kishinchand Chellaram from Madras.
" It was also stated in the order that the telegraphic transfer was encashed by one Nathirmal who was identified by an officer of the bank and whose address was the same as that of the Bombay office of the assessee, and it was found from assessee records that this Nathirmal was an employee of the assessee in the relevant accounting year and, therefore, the conclusion was irresistible that the telegraphic transfer was sent by the assessee from its Madras office and encashed by the assessee 's employee on its behalf in Bombay and since it was not accounted for in the books of account it must be held to be the undisclosed income of the assessee.
The assessee being aggrieved by the order of the Income Tax Officer preferred an appeal to the Assistant Appellate Commissioner.
It was pointed out on behalf of the assessee at the hearing of the appeal that Nathirmal who was supposed to have received the amount of Rs. 1,07,350 sent by telegraphic transfer from Madras and to have signed the voucher in regard to the receipt of this amount as 'N.B. Bani ' had left the service of the assessee long back and a grievance was made that it was not known as to who was the person who was supposed to have made the remittance on behalf of the assessee, because in the absence of this information, it was not possible for the assessee to meet the case of the Revenue.
The Appellate Assistant Commissioner thereupon obtained from the 725 Madras office of the Punjab National Bank Limited a copy of the telegraphic transfer application by which the amount of Rs. 1,07,350 was remitted and this copy which was disclosed to the assessee showed that the application was signed by one Tilok Chand as follows: "Tilok Chand, C/o M/s. K. Chellaram, 181, Mount Road, Madras".
The assessee pointed out to the Appellate Assistant Commissioner that there were two Tilok Chand 's working in the assessee 's office at Madras at the material time, one was Tilok Chand Thadani and the other was Tilok Chand Chellaram and both these Tilok Chands had left the service of the assessee long back.
The assessee informed the Appellate Assistant Commissioner that the whereabouts of Tilok Chand Thadani were not known and so far as Tilok Chand Chellaram was concerned, he was then at Hong Kong.
It was also pointed out to the Appellate Assistant Commissioner that the business in Madras was carried on by the assessee in the name of M/s. K. Kishinchand Chellaram and not M/s. K. Chellaram and that the remittance of Rs. 1,07,350 said to have been made by Tilok Chand was not on behalf of the assessee nor was it sent to the assessee and that its inclusion as undisclosed income of the assessee was not at all justified.
The Appellate Assistant Commissioner however negatived these contentions of the assessee and held that the remittance of the amount of Rs. 1,07,350 was by an employee of the assessee from Madras to another employee in Bombay and the Bank had also reported that the remittance related to the assessee and hence the burden was on the assessee to explain and prove the nature and source of the remittance and since this burden was not discharged, the inclusion of the amount in the assessment of the assessee was liable to be sustained.
The Appellate Assistant Commissioner accordingly rejected the appeal and confirmed the assessment of the assessee.
The assessee thereupon preferred a further appeal to the Tribunal but this appeal was also unsuccessful.
The Tribunal relied on the letter of the Bank dated 18th February 1955 to which we have already referred earlier, and surprisingly enough, though this letter was strongly relied upon both by the Appellate Assistant Commissioner and the Tribunal, and an extract of it was given in the order of the Appellate Assistant Commissioner, it was not produced before the assessee nor was a copy of it given to the assessee.
The Tribunal also placed reliance on another letter dated 9th March 1957 addressed by the Bank to the assessee where it was stated by the manager of the Bank that they had received one telegraphic transfer from Madras office on 16th October 1946 favouring Nathirmal and this amount was remitted by the assessee 726 through their Madras office.
This letter was admittedly written by the manager of the Bank to the assessee in reply to the assessee 's letter dated 7th March 1957 but obviously it did not carry the matter any further since it was in the same terms as the letter dated 18th February 1955 addressed by the manager of the Bank to the Income Tax Officer.
The Tribunal then proceeded to observe that: "The assessee was not in a position to show that the respective employees in Madras and Bombay were carrying on any business and were in a position to send from one place to another such a large sum of Rs. 1,07,350.
The assessee merely informed the Income Tax Officer that it had nothing to do with this amount.
It would have been easy for the assessee to have the said persons examined so as to show that the sum of Rs. 1,07,350 cannot represent any amount belonging to the assessee.
But for the reasons best known to itself it did not choose to do so.
By remitting the amount as cash and by not bringing it into its books the assessee cannot escape the consequences of having to explain the source for this and especially when the bank through which the amount was remitted has in categorical terms stated that the remitter from Madras was the assessee.
It would have been open to the assessee to establish the contrary by showing that the bank 's statement that the assessee did remit the amount is not correct and thus displace the evidence on record, but it did not choose to examine the bank officers with reference to this aspect either.
Therefore, this is a case where a sum of Rs. 1,07,350 has been remitted by the assessee as shown by the bank 's letter from Madras to its employee in Bombay which has not been brought to books.
In the said circumstances, it is for the assessee to explain the source for the fund and it cannot escape the consequence by merely adopting an attitude of non co operation.
" The Tribunal accordingly held that the assessee had not satisfactorily explained the source of the amount of Rs. 1,07,350 and the Income Tax Officer was therefore justified in adding this amount as the undisclosed income of the assessee.
This order of the Tribunal led to the filing of an application for a reference by the assessee and on the application being rejected by the Tribunal, the assessee preferred an application to the High Court for directing the Tribunal to make a reference and on this application, the High Court directed the Tribunal to refer the following question for the opinion of the High Court: 727 "Whether there was any material evidence to justify the findings of the Tribunal that the amount remitted by an employee of the Madras Branch to an employee of the Bombay Branch was the income of the firm of M/s. Kishinchand Chellaram from undisclosed source ?" The Tribunal thereupon drew up a statement of the case and referred the above question to the High Court.
The entire evidence in the case was considered by the High Court and taking the view that there was material evidence to justify the finding that the amount of Rs. 1,07,350 remitted by Tilokchand to Nathirmal was the undisclosed income of the assessee, the High Court answered the question in favour of the Revenue and against the assessee.
The assessee thereupon preferred the present appeal with special leave obtained from this Court.
The sole question which arises for determination in the appeal is whether there was any material evidence to justify the findings of the Tribunal that the amount of Rs. 1,07,350 said to have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee.
The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter dated 18th February 1955 said to have been addressed by the Manager of the Punjab National Bank Limited to the Income tax Officer.
Now it is difficult to see how this letter could at all be relied upon by the Tribunal as a material piece of evidence supportive of its finding.
In the first place, this letter was not disclosed to assessee by the Income Tax Officer and even though the Appellate Assistant Commissioner reproduced an extract from it in his order, he did not care to produce it before the assessee or give a copy of it to the assessee.
The same position also obtained before the Tribunal and the High Court and it was only when a supplemental statement of the case was called for by this Court by its order dated 16th August, 1979 that, according to the Income Tax Officer, this letter was traced by him and even then it was not shown by him to the assessee but it was forwarded to the Tribunal and it was for the first time at the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case that this letter was shown to the assessee.
It will therefore be seen that, even if we assume that this letter was in fact addressed by the manager of the Punjab National Bank Limited to the Income Tax Officer, no reliance could be placed upon it, since it was not shown to the assessee until at the stage of preparation of the supplemental statement of the case and no opportunity to cross examine the 728 manager of the Bank could in the circumstances be sought or availed of by the assessee.
It is true that the proceedings under the Income Tax law are not governed by the strict rules of evidence and therefore it might be said that even without calling the Manager of the Bank in evidence to prove this letter, it could be taken into account as evidence.
But before the Income Tax Authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the Manager of the Bank with reference to the statements made by him.
Moreover, this letter was said to have been addressed by the Manager of the Bank to the Income Tax Officer on 18th February 1955 in relation to a remittance alleged to have been sent on 16th October, 1946 and it is impossible to believe in the absence of any evidence to that effect, that manager who wrote this letter on 18th February 1955 must have been in charge of the Madras Office on 16th October 1946 so as to have personal knowledge as to who remitted the amount of Rs. 1,07,350.
What the Manager of the Bank wrote in this letter could not possibly be based on his personal knowledge and it does not appear from the letter as to what were the original documents and papers from which he gathered the information conveyed by him to the Income Tax Officer.
The statements contained in this letter addressed by the Manager of the Bank to the Income Tax Officer were in the nature of hearsay evidence and could not be relied upon by the Revenue authorities.
The Revenue authorities could have very well called upon the manager of the Bank to produce the documents and papers on the basis of which he made the statements contained in his letter and confronted the assessee with those documents and papers but instead of doing so, the Revenue authorities chose to rely merely on the statements contained in the letter and that too.
without showing the letter to the assessee.
There is also one other important circumstance which deserves to be noted.
It appears that when the letter dated 9th March 1957 was addressed by the manager of the Bank to the assessee, a copy of it was forwarded by the manager to the Income Tax Officer and this copy contained the following endorsement: "Copy to Mr. T. K. Surendran, 2nd Income tax Officer, Income Tax Office, C IV Ward, Bombay for information with reference to his summons dated 5 3 1957.
One only T. T. for Rs. 1,07,350 was received with particulars as above.
Mr. Nathirmal was identified by Mr. B. N. Mallaya, the then Officer in our office.
" 729 This copy of the letter dated 9th March 1957 was obviously in the record of the Income Tax Officer but it was not disclosed to the assessee at any stage and according to the Income Tax Officer, it was not traceable until the case came back to him for evidence in connection with the preparation of the supplemental statement of the case.
He then seemed to trace it and forwarded it alongwith his report to the Tribunal and it was at the hearing before the Tribunal in connection with supplemental statement of the case that it was shown to the assessee for the first time.
It is difficult to understand how this copy of the letter dated 9th March 1957 as also the letter dated 18th February 1955 said to have been addressed by the Manager of the Bank to the Income Tax Officer were not traceable in the records of the Income Tax Officer all this time and they came to be traced only when the supplemental statement of the case was called for by this Court.
There is no explanation given by the Revenue as to why these two important documents were not traceable and they were not disclosed to the assessee.
The reason perhaps was, and this was the suggestion made by the learned counsel appearing on behalf of the assessee, that the Revenue authorities did not wish to give an opportunity to the assessee to call the manager of the Bank for cross examination, lest the edifice which they wanted to construct for taxing the assessee on the amount of Rs. 1,07,350 might be jeopardised.
It is interesting to note that the endorsement made at the foot of the copy of the letter dated 9th March 1957 sent to the Income Tax Officer clearly shows that the Manager of the Bank was served by the Income Tax Officer with a summons dated 5th March 1957 and one can reasonably presume that the Manager of the Bank must have appeared in answer to the summons before the Income Tax Officer and given his statement.
But no such statement has been produced by the Revenue authorities nor are we told as to what happened when the Manager of the Bank appeared in obedience to the summons.
It is impossible to believe that the Manager of the Bank should have failed to appear before the Income Tax Officer in answer to the summons and there is no doubt that his statement must have been recorded.
The question then is, why has this statement been kept back by the Revenue authorities ? Even if we assume that the Income Tax Officer did not record the statement of the Manager of the Bank, it is difficult to appreciate why he should not have done so and probed into the matter further with a view to finding out what was the basis on which the manager had made the statement that the remittance was sent by the assessee.
We are clearly of the view that the letters dated 18th February 1955 and 9th March 1957 did not constitute any material evidence which 730 the Tribunal could legitimately take into account for the purpose of arriving at the finding that the amount of Rs. 1,07,350 was remitted by the assessee from Madras, and if these two letters are eliminated from consideration, it is obvious that there was no material evidence at all before the Tribunal which could support this finding.
But even if these two letters dated 18th February 1955 and 9th March 1957 were to be taken into account, we do not think they supply any reasonable basis for reaching the finding that it was the assessee which sent the remittance of Rs. 1,07,350.
It is undoubtedly true that the Manager of the Bank stated in these two letters that the amount of Rs. 1,07,350 was remitted by the assessee through the Madras office of the Bank, but this statement which was obviously not based on the personal knowledge of the manager, which was not supported by any documents or papers produced by the manager and in regard to which it was not known as to what was the material on which it was based, was clearly belied by the original application for remittance which was signed by Tilokchand in his own name and not on behalf of the assessee.
The primary evidence before the Tribunal in regard to the remittance of the amount of Rs. 1,07,350 was the application signed by Tilokchand and this application clearly showed that it was Tilokchand and not the assessee which remitted the amount of Rs. 1,07,350 from Madras.
There can be no doubt that if the amount had been remitted by Tilokchand on behalf of the assessee, he would have signed the application on behalf of the assessee and not in his own name.
We fail to appreciate how, in the face of this primary evidence showing Tilokchand as the person who remitted the amount of Rs. 1,07,350 the Tribunal could possibly accept the unsupported statement of the Manager of the Bank, based on hearsay, that the amount was remitted by the assessee.
Unfortunately, the Revenue authorities did not produce copies of the letters dated 14th January 1955 and 10th February 1955 addressed by the Income Tax Officer to the Manager of the Bank.
Copies of these letters, if produced, would perhaps have shown that the suggestion that the amount of Rs. 1,07,350 was remitted by the assessee was made by the Income Tax Officer and taking the cue from this suggestion, the Manager of the Bank might have stated that the telegraphic transfer of Rs. 1,07,350 was sent by the assessee.
It is to our mind impossible to hold, in the face of the application for remittance signed in the name of Tilokchand, that this amount was sent by the assessee and the finding to that effect reached by the Tribunal must be held to be unreasonable and perverse.
What at the highest could be said to be established by the material evidence on record is that Tilokchand remitted the 731 amount of Rs. 1,07,350 from Madras and this amount was received by Nathirmal in Bombay.
Even if we accept that Tilokchand and Nathirmal were employees of the assessee as held by the Tribunal, the utmost that could be said is that an employee of the assessee in Madras remitted the amount of Rs. 1,07,350 to another employee in Bombay.
But from this premise it does not at all follow that the remittance was made by the employee in Madras on behalf of the assessee or that it was received by the employee in Bombay on behalf of the assessee.
The burden was on the Revenue to show that the amount of Rs. 1,07,350 said to have been remitted from Madras to Bombay belonged to the assessee and it was not enough for the Revenue to show that the amount was remitted by Tilokchand, an employee of the assessee, to Nathirmal, another employee of the assessee.
It is quite possible that Tilokchand had resources of his own from which he could remit the amount of Rs. 1,07,350 to Nathirmal.
It was for the Revenue to rule out this possibility by bringing proper evidence on record, for the burden of showing that the amount was remitted by the assessee was on the Revenue.
Unfortunately, for the Revenue, neither Tilokchand nor Nathirmal was in the service of the assessee at the time when the assessment was reopened and the assessee could not therefore be expected to call them in evidence for the purpose of helping the Revenue to discharge the burden which lay upon it.
We must therefore hold that there was no material evidence at all before the Tribunal on the basis of which the Tribunal could come to the finding that the amount of Rs. 1,07,350 was remitted by the assessee from Madras and that it represented the concealed income of the assessee.
We accordingly allow the appeal, set aside the judgment of the High Court and answer the question referred by the Tribunal in favour of the assessee and against the Revenue.
The Revenue will pay the costs of the assessee throughout.
S.R. Appeal allowed.

summary:
The appellant firm M/s. Kishinchand Chellaram was assessed to tax for the assessment year 1947 48, the relevant accounting year being the year ending 6th April, 1947.
The concerned Income Tax Officer on an information that a sum of Rs. 1,07,350 purported to have been sent by the assessee by a telegraphic transfer through the Punjab National Bank Ltd., Madras, to its Bombay Branch favouring one Nathirmal on 16 10 1946, has escaped assessment, called upon the assessee, through his letters dated 24th February, 1955 and 4th March, 1955 to explain the same.
The Income Tax Officer did not refer to the letters dated 14th January, 1955 and 10th February, 1955 addressed by him to the Bank Manager nor the reply of the Manager dated 18th February, 1955 in the said two letters addressed to the assessee.
Nor were the copies supplied to the assessee nor even made available on record before all authorities including the Supreme Court.
The assessee through its letter dated 24th March, 1955 replied that as per its records no such remittance was ever sent by it from Madras to Nathirmal in Bombay.
On 2nd February, 1956, the Income Tax Officer for the second time called the very same particulars to which the assessee by its letter dated 9th February, 1956 once again denied the remittance by it.
Despite this, by his letter dated 4th March, 1957 addressed to the assessee, the Income Tax Officer repeated his earlier request to it to explain about the remittance, complaining at the same time of silence by the assessee to his letter dated 2nd February, 1956.
The assessee in its reply dated 13th March, 1957 while inviting attention to its earlier replies dated 24th March, 1955 & 9th February, 1956 reiterated that no amount of Rs. 1,07,350 was remitted by it from Madras to Nathirmal.
Disbelieving it, the Income Tax Officer, by his order brought to tax the amount of Rs. 1,07,350 on the ground that it represented the concealed income of the assessee and observed that "there was no reason to doubt the banker 's statement that the amount was remitted by M/s. Kishinchand Chellaram from Madras".
The assessee preferred an appeal to the Assistant Appellate Commissioner.
At this stage, it came to light that the purported telegraphic transfer was applied for by one "Tilok Chand C/o M/s. K. Chellaram, 181, Mount Road, Madras" and it was received at Bombay by one "N.B. Bani".
In spite of the plea of the assessee that the transaction did not relate to its firm, the Assistant Appellate 721 Commissioner holding that the assessee has not discharged the burden of proof lying on it to explain the amount, rejected the appeal.
Further appeal to the Tribunal and a reference called for by the High Court at the instance of the assessee was also answered against it.
Hence the appeal after obtaining special leave of the Court.
Allowing the appeal, the Court, ^ HELD: (1) There was no material evidence at all on the basis of which the Tribunal could come to the finding that the amount of Rs. 1,07,350 was remitted by the assessee from Madras and that it represented the concealed income of the assessee.
[731E].
In the face of the application for remittance signed in the name of Tilok Chand, that this amount was sent by the assessee and the finding to that effect reached by the Tribunal is unreasonable and perverse.
What at the highest could be said to be established by the material evidence on record is that Tilok Chand remitted the amount of Rs. 1,07,350 from Madras and this amount was received by Nathirmal in Bombay.
Even if it is accepted that Tilok Chand and Nathirmal were employees of the assessee as held by the Tribunal, the utmost that could be said is that an employee of the assessee in Madras remitted the amount of Rs. 1,07,350 to another employee in Bombay.
But, from this premise it does not at all follow that the remittance was made by the employee in Madras on behalf of the assessee or that it was received by the employee in Bombay on behalf of the assessee.
The burden was on the Revenue to show that the amount of Rs. 1,07,350 said to have been remitted from Madras to Bombay belonged to the assessee and it was not enough for the Revenue to show that the amount was remitted by Tilok Chand, an employee of the assessee, to Nathirmal, another employee of the assessee.
It is quite possible that Tilok Chand had resources of his own from which he could remit the amount of Rs. 1,07,350 to Nathirmal.
It was for the Revenue to rule out this possibility by bringing proper evidence on record, for the burden of showing that the amount was remitted by the assessee was on the Revenue.
[730H 731D] The two documents viz. the letters dated 18th February, 1955 and 9th March, 1957 did not constitute any material evidence which the Tribunal could legitimately have taken into account for the purpose of arriving at the finding that the amount of Rs. 1,07,350 was remitted by the assessee from Madras to Bombay because while the former was not disclosed to the assessee by the Revenue Authorities till the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case, giving the assessee an opportunity to cross examine the Manager of the Bank, the latter was not disclosed to the assessee at any stage.
Further, there is no explanation given by the Revenue as to how these two important documents were not traceable earlier.
Even if these two letters were to be taken into account, they did not supply any reasonable basis for reaching the finding that it was the assessee which sent the remittance of Rs. 1,07,350.
There can be no doubt that if the amount had been remitted by Tilok Chand on behalf of the assessee he would have signed the application for telegraphic transfer on behalf of the assessee and not in his own name.
This apart it is impossible to believe that the Manager of the Bank could have failed to appear before the Income Tax Officer in answer to the summons dated 5th March, 1957 and there is no doubt that this statement must have been recorded and the said statement also withheld.
[729H 730A; 729B, C; 730B, E; 729F G] 722 (2) It is true that the proceedings under the Income Tax law are not governed by the strict rules of evidence and therefore it might be said that even without calling the Manager of the Bank in evidence to prove this letter, it could be taken into account as evidence.
But before the Income Tax Authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the Manager of the Bank with reference to the statements made by him.
Moreover, this letter was said to have been addressed by the Manager of the Bank to the Income Tax Officer on 18th February, 1955 in relation to a remittance alleged to have been sent on 16th October, 1946 and it is impossible to believe in the absence of any evidence to that effect, that the Manager who wrote this letter on 18th February, 1955 must have been incharge of the Madras Office on 16th October, 1946 so as to have personal knowledge as to who remitted the amount of Rs. 1,07,350.
The Revenue authorities ought to have called upon the Manager of the Bank to produce the documents and papers on the basis of which he made the statements contained in his letter and confronted the assessee with those documents and papers but instead of doing so, the Revenue authorities chose to rely merely on the statements contained in the letter and that too, without showing the letter to the assessee.
[728A F]


judgement:
N: Criminal Appeal No. 115 of 1975.
Appeal by Special Leave from the Judgment and order dated 10 1 1972 of the Madras High Court in Crl.
Appeal No. 64 No. 657/70.
A. V. Rangam for the Appellant.
A. T. M. Sampath for the Respondents.
The Judgment of the Court was delivered by CHINNAPPA REDDY, J.
On November 1, 1969, a sample of gingelly oil was purchased by the Food Inspector, Madurai Municipality from the shop of the first respondent, who is now reported to be dead and against whom, this appeal, has, therefore, abated.
At that time respondent No. 2 was attending to the business.
After completing the necessary formalities the Food Inspector arranged to send one part of the sample to the Public Analyst at Madras for analysis.
The sample was analysed by the Public Analyst on November 11, 1969 and it was reported by him that it contained 5.1% of Free Fatty Acid as against the limit of 3.0% permissible under clause A.17.11 of Appendix B to the Prevention of Food Adulteration Rules, 1955.
In his report he also mentioned that the sample was properly sealed, it was air and moisture tight and packed in thick paper so as to be proof against light, and, the Free Fatty Acid content of the oil would, therefore, remain unchanged for several months.
On receipt of the Public Analyst 's report a complaint was filed against the two respondents for an offence under sec.
16(1) (a) and Sec.
7(i) read with sec.
2(i) (L) and Clause A.17.11 of Appendix 'B ' to the Prevention of Food Adulteration Rules.
Both the respondents denied the offence.
The 776 second respondent stated that he signed on the various documents produced by the prosecution as he was asked to do so by the Inspector.
He did not read the contents of those documents.
The brother of the second respondent was examined as a defence witness and he stated that he was in the shop when the Food Inspector came there and purchased the sample and that at the time of the sale the Food Inspector was told that the gingelly oil was not meant to be used as an article of food but was meant for "oil bath".
At the trial a request was made by the respondents that another part of the sample which had been produced by the Food Inspector in the Court might be sent to the Director, Central Food Laboratory, Calcutta, for analysis.
It was sent as desired.
The sample was analysed by the Director, Central Food Laboratory, Calcutta on February 6. 1970.
According to his report the gingelly oil contained 6.2% of Free Fatty Acid and was, therefore, adulterated.
The learned District Magistrate, Madurai acquitted both the respondents observing that the Free Fatty Acid had increased from 5.1% to 6.2% between November 11, 1969 and February 6, 1970 and it was, therefore, likely that the Free Fatty Acid content in the oil might have similarly increased between November 1, 1969 when the sample was taken and November 11, 1969, when the sample was analysed by the Public Analyst, Madras.
On that ground, the District Magistrate held that it was not possible to say that the prosecution had established that on the date when the sample was taken the Free Fatty Acid content of the oil exceeded 3%.
The State preferred an appeal to the Madras High Court against the order of acquittal.
The High Court confirmed the order of acquittal for the same reason as that given by the District Magistrate.
The State has filed this appeal after obtaining special leave of this Court under Art 136 of the Constitution.
Under Sec. 2(i)(L) (before it was amended in 1976) of the , an article of food is deemed to be adulterated "if the quality of purity of the article falls below the prescribed standard or its constituents are present in quantities which are in excess of the prescribed limits of variability".
Paragraph A.17.11 of Appendix 'B ' to the Rules made under the prescribes the standard in the case of Til oil (Gingelly or seasame oil) and to the extent relevant it reads as follows: ["A.17.11.
Til oil (Gingelly or sesame oil) means the oil expressed from clean and sound seeds of Til (Sesamum indicum), black, brown, white, or mixed.
It shall be clear, free 777 from rancidity, suspended or other foreign matter, separated water, added colouring or flavouring substances, or mineral oil.
It shall conform to the following standards: (a) Butyro rafractometer reading at 40oC . 58.0 to 61 (b) Saponification value . 188 to 193 (c) Iodine value . 105 to 115 (d) Unsaponifiable matter .
Not more than 1.5 per cent.
(e) Free fatty acid as Oleic acid.
Not more than 3.0 per cent.
(f) Bellier test(Turbidity temperature Not more than Acetic acid method).
22oC).] .]" Now, a sample of food purchased by a Food Inspector has to be divided by him into 3 parts and each part has to be marked, sealed and fastened separately.
Before the Act was amended in 1976, one part was to be delivered to the person from whom the sample was taken, another part was to be sent for analysis to the Public Analyst and the third part was to be retained with the Food Inspector to be produced by him in case legal proceedings were taken or it became necessary to send it for analysis to the Director of the Central Food Laboratory.
The Public Analyst was required to deliver a report of the result of his analysis and this report was ordinarily the foundation of the prosecution by the Food Inspector.
After the institution of the prosecution, the accused was given the right to request the Court to send the third part of the sample retained by the Food Inspector to the Director, Central Food Laboratory for a certificate.
The Director, Central Food Laboratory was required to send to the Court a certificate specifying the result of his analysis and the certificate of the Director, Central Food Laboratory, thereupon, superseded the Public Analyst 's report.
The Public Analyst 's report, if not superseded by the Certificate of the Director.
Central Food Laboratory and the Certificate of the Director, Central Food Laboratory might be used as evidence of the facts stated therein in any proceeding under the Act with this difference that the certificate of the Director, Central Food Laboratory was to be final and conclusive evidence of the facts stated therein.
In the present case the certificate of the Director showed that the sample of gingelly oil contained 6.2% of Free Fatty Acid whereas the permissible limit was 3% only.
We are not concerned with the Public Analyst 's report since that has been superseded by the certificate of the Director, Central Food Laboratory, and the latter certificate has been made conclusive evidence of the facts mentioned in it.
The sample, it must therefore be found, was adulterated.
778 The sample, as we mentioned earlier, was taken on November 1, 1969, the analysis by the Public Analyst was on November 11, 1969 and the analysis by the Director, Central Food Laboratory was on February 6, 1970.
The learned District Magistrate and the High Court thought that although the Free Fatty Acid content in that part of the sample which was sent to the Director, Central Food Laboratory was 6.2% on the date when the Director analysed the oil it could not be said to have been established that on the date when the sample was taken by the Food Inspector the Free Fatty Acid content exceeded 3%.
According to them it could well be that the Free Fatty Acid content increased due to natural causes.
We are unable to agree with the lower Courts.
There is nothing in the evidence, nor has anything been shown to us from any scientific work which would suggest that the Free Fatty Acid content would so rapidly increase in the space of about three months that what was less than 3% on November 1, 1969, when the sample was taken increased to 6.2% by February 6, 1970, when the sample was analysed by the Central Food Laboratory.
On the other hand in the New Encyclopaedia Britannica Volume 13 (pages 526 527) it is said: "Fats can be heated to between 200o and 250oC without undergoing significant changes provided contact with air or oxygen is avoided.
On exposure to air, oils and fats gradually undergo certain changes.
The drying oils absorb oxygen (dry) and polymerize readily; thin layers form a skin or protective film.
The semidrying oils absorb oxygen more slowly and are less useful as paint oils.
Still, sufficient oxygen is absorbed in time to produce distinct thickening and some film formation.
Oxidation of the drying and semidrying oils is accelerated by spreading the oil over a large surface.
On greasy cloths, for example, oxygen absorption may proceed so rapidly that spontaneous combustion ensues.
The nondrying oils, of which olive oil is typical, do not oxidize readily on exposure to air, although changes do take place gradually, including slow hydroysis (splitting to fatty acids and glycerol) and subsequent oxidation.
This slow oxidation causes a disagreeable smell and taste described by the term rancidity.
779 The chemical reactions involved in oil oxidation have been studied widely, when oils and fats are exposed to air, little change takes place for a period of time that varies from oil to oil depending upon the amount and type of unsaturation and the content of natural antioxidants.
During this so called induction period, there is virtually no change in either odour or chemistry of the oil because of the protective effect of natural antioxidants, especially tocopherol.
Gradually, the effectiveness of the anti oxidant is overcome and there is an accelerating rate of oxidation of unsaturated acids, called autoxidation.
Chemically, the first identifiable oxidation products are hydroperoxides.
These break down into a large variety of low molecular weight aldehydes, esters, alcohols, ketones, acids, and hydrocarbons, some of which possess the pungent, disagreeable odours characteristic of rancid fats.
In soyabean oil exposed to air to the point of incipient rancidity, more than 100 different oxidation products have been identified.
Natural oils such as coconut oil, with very low levels of unsaturation, are very stable to flavour deterioration, but the more highly unsaturated oils such as soyabean oil or safflower oil lose their flavour more quickly.
Sesame oil is unique in its flavour stability because of the presence of several natural antioxidants (sesamin, sesamolin, sesamol).
Synthetic antioxidants such as propyl gallate, butylated hydroxyanisole (BHA), and butylated hydroxytoluene (BHT) have been used to retard the onset of rancidity and increase the storage life of edible fats".
Gingelly (Til or seasame) oil we may mention is a semi drying oil.
From the extract from the Encyclopaedia Britannica it is only after prolonged exposure to air and light that there may be some discernible chemical changes in gingelly (til or seasame) oil.
In fact it is mentioned in the Encyclopaedia Britannica that seasame oil is unique in its flavour stability because of the presence of several natural antioxidants.
There is nothing to indicate that the samples were not packed as required by the rules.
The report of the Public Analyst mentions "The sample has been received properly sealed, to be air and moisture tight and packed in thick paper to be proof against access to light.
Under these conditions the Free Fatty Acid content of oils 780 remains unchanged for several months".
The certificate of the Director, Central Food Laboratory mentions "The seals were intact".
We are, therefore, clearly of opinion that there was no justification for the conclusion of the District Magistrate and the High Court that the Free Fatty Acid content of the oil on the date when the sample was taken might have been less than 3% and therefore, not adulterated.
We set aside the judgments of the District Magistrate and the High Court and convict the second respondent under Sec.
16(1)(a)(i) read with sec.
7(i) and 2(i) (L) of the and sentence him to pay a fine of Rs. 100 in default to undergo simple imprisonment for a period of two weeks.
We are imposing a nominal sentence having regard to the circumstance that we are interfering with a concurrent order of acquittal more than ten years after the commission of the offence.

dataset_name: IN-Abs

summary:
Under section 2(i)(L) (before it was amended in 1976) of the , an article of food is deemed to be adulterated "if the quality of purity of the article falls below the prescribed standard or its constituents are present in quantities which are in excess of the prescribed limits of variability".
On November 1, 1969, sample of gingelly oil was purchased by the Municipal Food Inspector from the shop of the respondents.
After completing the necessary formalities, the Food Inspector arranged to send one part of the sample to the Public Analyst for analysis.
The Public Analyst analysed the sample on November 11, 1969 and reported that it contained 5.1% of Free Fatty Acid as against the permissible limit of 3%.
On receipt of the report, the respondents were prosecuted for offences under Section 16(1)(a)(i) read with Section 7(i) and 2(i)(L) of the .
At the trial, in pursuance of the respondents request, another sample was got analysed on February 6, 1970 by the Director, Central Food Laboratory.
According to his report, the gingelly oil contained 6.2% of the Free Fatty Acid and was therefore, adulterated.
The District Magistrate observing that the Free Fatty Acid had increased from 5.1% to 6.2% between November 11, 1969 and February 6, 1970 and it was therefore, likely that the Free Fatty Acid content in the oil might have similarly increased between November 1, 1969 when the sample was taken and November 11, 1969 when the sample was analysed by the Public Analyst, held that it was not possible to say that the prosecution had established that on the date when the sample was taken the Free Fatty Acid content of the oil exceed 3% and acquitted the respondents.
The order of acquittal was confirmed by the High Court.
In the appeal to this Court, it was, ^ HELD:1 (i) The judgments of the District Magistrate and the High Court are set aside.
The second respondent is convicted under Section 16(1)(a)(i) and sentenced to pay a fine.
[780C] (ii) There was no justification for the conclusion of the District Magistrate and the High Court that the Free Fatty Acid content of the oil on the date when the sample was taken might have been less than 3% and therefore not adulterated.
[780B] 775 In the instant case, the Public Analyst report had been superseded by the certificate of the Director, Central Food Laboratory, and the latter certificate had become conclusive evidence of the facts mentioned in it.
The sample, must therefore be held, to be adulterated.
There was nothing in the evidence, nor had anything been shown from any scientific work which would suggest that the Free Fatty Acid content would so rapidly increase in the space of about three months.
If it was less than 3% on November 1, 1969 when the sample was taken it could not have increased to 6.2% by February 6, 1970 when the sample was analysed by the Central Food Laboratory.
[777H, 778D] 2.
Gingelly (Til or Sesame) oil is a semi drying oil.
It is only after Prolonged exposure to air and light that there may be some discernible chemical changes in gingelly (Til or sesame) oil.
[779G] New Encyclopaedia Britannica, Vol.
13 pages 526 527 referred to.


judgement:
Civil Appeal No. 785 of 1975.
Appeal by Special Leave from the Judgment and order dated 7 1 1973 of the Punjab and Haryana High Court in Civil Writ No. 6677/74.
A. K. Sen, section K. Gambhir, A. K. Panda and Miss Ramrakhiani for the Appellant.
Yogeshwar Prasad, A. K. Srivastava and Miss Rani Chhabra for the Respondent No. 2.
The Judgment of the Court was delivered by PATHAK, J.
This appeal by special leave is directed against a judgment of the High Court of Punjab and Haryana summarily dismissing a writ petition filed by the appellant.
The appellant is a private limited company which manufactures machine tools as its factory in Faridabad.
It employs 250 workmen.
The second respondent, Sadhu Singh, is one of them.
Demands by the workmen for an improvement in the conditions of their service led to conciliation proceedings under the , ("the Act"), and on June 20, 1969, a settlement under section 12 of the 770 Act in satisfaction of those demands was recorded by the Conciliation officer.
The settlement included a provision that the workmen would not raise any demand involving further financial burden on the appellant for a period of two years.
Before the expiry of that period, however, a fresh demand was raised on August 17, 1970 by the General Labour Union asking for dearness allowance at 25 per cent.
The management demurred, and explained that having regard to the structure of wages and allowances now payable under the settlement, there was no justification for the demand.
On August 26, 1970 the workmen resorted to a "sit down" strike, which continued the next day.
According to the appellant, on August 27, 1970, Sadhu Singh instigated the workmen to "down" tools and go on a "sit down strike.
Successive notices by the management the same day failed to dissolve the strike.
Charges were framed against Sadhu Singh alleging serious misconduct and a domestic enquiry was ordered.
The workman, it is said, declined to accept the charge sheet and, although he was directed to appear before the Inquiry Officer, Sadhu Singh did not participate in the inquiry.
On September 13, 1970, the Inquiry officer submitted his report to the management.
According to him, the strike was illegal, and Sadhu Singh was guilty of instigating the workmen to go on strike, and besides he was guilty of loitering in the factory.
The findings being accepted by the management an order followed on September 14, 1970 dismissing Sadhu Singh from service with immediate effect.
The President of the General Labour Union then pressed the management to reinstate Sadhu Singh.
Meanwhile the management had taken action dismissing other workmen also.
The dismissal of all the workmen formed the subject of a settlement under s.12 of the Act on November 21, 1970, and it was agreed that the dismissed workmen, including Sadhu Singh, should be regarded as retrenched from service.
The remaining workmen agreed to resume work unconditionally.
The memorandum of settlement was signed by the management on the one hand and the individual workmen on the other.
A few days after, Sadhu Singh wrote to the Labour Commissioner claiming that he was not a signatory to the settlement and that he would settle his dispute himself with the management.
The State Government referred the dispute in regard to the termination of Sadhu Singh 's service for adjudication to the Labour Court, Rohtak.
While the management took its stand on the facts found in the domestic inquiry report and relied on the circumstance that the settlement dated November 21, 1970 was binding on Sadhu Singh, Sadhu Singh asserted that he was not guilty of any misconduct on August 27, 1970.
He also contended that the charge sheet had never been served on him and therefore the exparte domestic inquiry was vitiated.
The 771 Labour Court by its order dated September 20, 1972 found that Sadhu Singh was not a signatory to the settlement of November 21, 1970, and was, therefore, not bound by it.
The Labour Court made its award on September 30, 1972.
It found that the domestic inquiry was not proper inasmuch as notice of the inquiry had failed to reach Sadhu Singh because it had been sent to a wrong address, thereby preventing him from participating in the domestic inquiry.
On the merits of the dispute the Labour Court found that Sadhu Singh had been ill from August 24 to September 9, 1970, and that was established by a medical certificate which, on inquiry from the Employees State Insurance Department, was found to be in order, and consequently it could not be believed that the workman had instigated or participated in the "tool down" and "sit down" strike.
In support of its case that Sadhu Singh was present within the factory premises on August 27, 1970, the management placed reliance on a document purporting to have been signed by the workmen and setting forth the assurance that he would conduct himself properly and be of good behaviour.
The Labour Court said that if the document be accepted as genuine there was sufficient reason for accepting the assurance and refraining from taking any action against the workman.
The Labour Court held that the dismissal was not justified and that Sadhu Singh was entitled to reinstatement with continuity of previous service and full back wages.
The appellant filed a writ petition in the High Court against the award, but the writ petition was dismissed.
And now this appeal.
The appellant challenges the findings of the Labour Court.
It is contended that the settlement dated November 21, 1970 was binding on Sadhu Singh and it was not open to him resile from it.
Now Section 36 of the Act provides for representation of the parties to a dispute.
The workmen are entitled by virtue of sub section (1) to be represented in a proceeding under the Act by a member of the executive or other office bearer of a registered trade union of which they are members or of a federation of trade unions to which that trade union is affiliated, and where the workman is not a member of any trade union, he can be represented by a member of the executive or other office bearer of a trade union connected with, or by any other workman employed in, the industry in which the workman is employed.
It is not obligatory, however, that a workman who is a Party to dispute must be represented by another.
He may participate in the proceeding himself.
Where conciliation proceedings are taken and a settlement is reached, it is a valid settlement and binding on the parties even if the workmen who are party to the dispute participate in the 772 proceedings personally and are not represented by any of the persons mentioned in section 36(1).
That is what happened here.
The evidence shows that the individual workmen negotiated the settlement themselves and individually signed the memorandum off settlement.
By executing a memorandum they bound themselves by the terms of the settlement.
In the present case, however, while several workmen signed the memorandum of settlement on 21st November, 1970, Sadhu Singh did not.
It is also established that Sadhu Singh did not authorise any of the other workmen to sign the memorandum on his behalf.
And what is of importance is that, as found by the Labour Court, the demand that the dismissal of Sadhu Singh be set aside and that he should be reinstated was never included in the charter of demands of the workmen which led to the conciliation proceedings, and those proceedings did not involve the consideration of such a demand.
According to the Labour Court, that was the admitted position, Consequently, the settlement of 21st November, 1970 can on no account be understood as covering and concluding the demand for recalling the order dismissing Sadhu Singh.
In the circumstances, it was open to Sadhu Singh to assail his dismissal from service and to contend that the settlement of 21st November, 1970 did not bind him.
The Labour Court was right in adjudicating on the propriety of his dismissal and, having found that the dismissal was not justified, in granting relief.
It is submitted that notice of the domestic inquiry was duly effected on Sadhu Singh and the finding of the Labour Court to the contrary is erroneous.
Plainly, the question turns on the evidence on the record and we see no reason why the finding of the Labour Court should not be accepted.
Having reached the conclusion that the domestic inquiry, in the circumstances, was improper it was open to the Labour Court to enter into the dispute on its merits and pronounce its award.
The finding that Sadhu Singh was ill and could not be said to have instigated or participated in the strike on August 27, 1970 is a finding of fact which proceeds from the material on the record.
We are not satisfied that the finding should be disturbed.
Considerable reliance was placed by the appellant on the document said to have been executed by the workman containing the assurance that he would be of good behaviour and, it is submitted.
773 that after executing the document Sadhu Singh went back on the assurance and set the strike in motion.
We see no force in the submission.
The evidence led by the management attempts to show specifically that Sadhu Singh instigated the strike at 10 O 'clock in the morning on August 27, 1970.
It would not be unreasonable to hold that the declaration of assurance was executed subsequently.
It was an assurance accepted by the management, and, therefore, there is no reason why the management should have insisted on initiating disciplinary proceedings thereafter against the workman.
In the result, the appeal is dismissed with costs to the second respondent, which we assess at Rs. 2,000.
The appellant has deposited that sum pursuant to the order of this Court dated April 30, 1974, and it is open to the second respondent to withdraw the money.
V. D. K. Appeal dismissed.

summary:
The appellant company manufactures machine tools at its factory in Faridabad employing 250 workmen including the second respondent, Sadhu Singh.
Demands of the workmen for an improvement in the conditions of the service led to conciliation proceedings and a settlement under section 12 was recorded on June 20, 1969 by the Conciliation officer.
The settlement included a provision that the workmen would not raise any demand involving further financial burden on the appellant for a period of two years.
Before the expiry of that period, however, a fresh demand was raised on August 17, 1970 by the General Labour Union asking for dearness allowance at 25 per cent.
The management having refused this demand the workmen resorted to a "sit down" strike on August 26 and 27, 1970.
The second respondent Sadhu Singh was charged with alleging serious misconduct.
Sadhu Singh did not participate in the inquiry.
Accepting the report submitted by the Inquiry officer that Sadhu Singh was guilty of instigating the workmen to go on strike the services of Sadhu Singh were terminated by the management with immediate effect by an order dated September 14, 1970.
The management dismissed some other workmen also.
The dismissal of all workmen formed the subject of another settlement under section 12 of the Act dated November 21, 1970 and it was agreed that the dismissed workmen including Sadhu Singh should be regarded as retrenched from service.
The remaining workmen agreed to resume work unconditionally.
Sadhu Singh, took up the matter before the Labour Court stating that not being a signatory to the settlement of November 21, 1970 he was not bound by it.
The Labour court accepted his plea and made its ward on September 30, 1972.
It found that the domestic inquiry was not proper inasmuch as notice of the inquiry had failed to reach Sadhu Singh, thereby preventing him from participating in the domestic inquiry.
Further it held that since Sadhu Singh had been ill from August 24, to September 9, 1970 he could not be said to have instigated the strike.
The appellant having failed before the High Court has come in appeal after obtaining special leave from this Court.
Dismissing the appeal, the Court, ^ HELD: Section 36 of the provides for representation of the parties to a dispute.
The workmen are entitled by virtue of sub section (1) to be represented in a proceeding under the Act by a member of the executive or other office bearer of a registered trade union of which 769 they are members or of a federation of trade unions to which that trade union is affiliated, and where the workmen is not a member of any trade union, he can be represented by a member of the executive or other office bearer of a trade union connected with, or by any other workman employed in the industry in which the workmen is employed.
It is not obligatory, however, that a workman who is a party to a dispute must be represented by another.
He may participate in the proceeding himself.
Where conciliation proceedings are taken and a settlement is reached, it is a valid settlement and binding on the parties even if the workmen who are party to the dispute participate in the proceedings personally and are not represented by any of the persons mentioned in section 36(1) of the Act.
In the present case; (1) by executing a memorandum the several workmen who individually signed it on 21st August, 1970 bound themselves by the terms of the settlement, but as Sadhu Singh had not signed the memorandum nor had he authorised any of the workman to sign the memorandum on his behalf he was not bound by the settlement.
(2) The settlement of 21st November, 1970 can on no account be understood as covering and concluding the demand for recalling the order dismissing Sadhu Singh, as his reinstatement was never included in the charter of demands of the workmen which led to the conciliation proceedings and those proceedings did not involve the consideration of such a demand.
In the circumstances, it was open to Sadhu Singh to assail his dismissal from service and to contend that the settlement of 21st November 1970 did not bind him.
(3) The Labour Court was right in adjudicating on the propriety of his dismissal and, having found that the dismissal was not justified, in granting relief.
[771 F 772E]


judgement:
Civil Appeal No. 1086 of 1973.
Appeal by Special Leave from the Judgment and Order dated 8 12 1971 of the Kerala High Court in T.I.T. Reference No. 91/69.
section C. Manchanda and Miss A. Subhashini for the Appellants.
K. T. Harindranath and T. T. Kunhikannan for the Respondent.
The Judgment of the Court was delivered by BHAGWATI J.
This appeal arises out of proceedings initiated by the Revenue authorities for levying penalty on the assessee.
The assessee is a lady and during the assessment year 1964 65 for which the relevant accounting year was the calender year ended 31st December, 1963, the assessee was a partner in two partnership firms, M/s. Malabar Tile Works and M/s. Malabar Plywood Works and alongwith her there were other partners including her husband and minor daughter.
The assessee filed a return of income for the assessment year 1964 65 showing Rs. 4754 as income from property and Rs. 4748 as income from other sources.
The assessee stated in the return under the column "Profits and Gains of Business and Profession" against item (b) which required share in the profits of a registered firm to be shown "Please ascertain from the firms ' files the Malabar Tile Works and Malabar Plywood Works.
" The assessee, however, did not show in the return the amounts representing the shares of her husband and minor daughter in the firms of M/s. Malabar Tile Works and M/s. Malabar Plywood Works though they were clearly includible in computing the total income of the assessee under section 64 sub section (1) clauses (i) and (iii) of the Income Tax Act, 1961.
The Income Tax Officer while making the assessment included the amounts representing the shares of the assessee 's husband and minor daughter in the profits of these two firms in the assessment of the assessee and taxed the assessee on a total income of Rs. 59,506 after including these amounts.
Since the assessee had not shown these amounts as forming part of her total income in the return submitted by her, though they were clearly includible in her total income under section 64, sub section (1) clauses (i) and (iii), the Income Tax Officer was of the view that the assessee had con 784 cealed the particulars of her income and rendered herself liable to penalty under section 271 sub section (1) clause (c), and since the minimum penalty leviable on the assessee was Rs. 1000, he referred the case to the Assistant Appellate Commissioner who issued notice under section 274 and after hearing the assessee, imposed a penalty of Rs. 1000.
The assessee appealed to the Tribunal against the order imposing penalty and one of the arguments urged on behalf of the assessee in support of the appeal was that there was no obligation of the assessee to show in her return the amounts representing the shares of her husband and minor daughter in the two firms and there was accordingly no concealment by her of the particulars of her income so as to attract the penalty under section 271 sub section (1) clause (c).
The Tribunal accepted this argument of the assessee and held that section 271 sub section (1) clause (c) could be invoked only if there was concealment of the "particulars of his income by the assessee" and the words "his income" referred only to be the income of the assessee himself and not to the income of any other person which might be liable to be included in the income of the assessee by reason of section 64 sub section (1) clauses (i) and (iii).
The Tribunal accordingly held that the omission or failure of the assessee to disclose in her return the amounts representing the shares of her husband and minor daughter in the two firms as forming part of her income could not be visited with penalty under section 271 sub section (1) clause (c) and in this view, the Tribunal allowed the appeal and set aside the order imposing penalty.
This led to the filing of an application for a reference by the Revenue and on the application, the Tribunal referred the following question of law for the opinion of the High Court: "Whether on the facts and in the circumstances of the case, the Tribunal is correct in law in cancelling the penalty levied under section 271(1)(c)?" The High Court took the view that the words used in section 271 sub section (1) clause (c) were "his income" and the amounts representing the shares of the assessee 's husband and minor daughter in the two firms could not be said to be the income of the assessee, though in computing her total income these amounts were liable to be included by reason of section 64 sub section (1) clauses (i) and (iii) and therefore, the assessee could not be said to have concealed her income when she did not disclose these amounts as forming part of her income in the return submitted by her.
The High Court accordingly answered the question referred to it in favour of the assessee and against the Revenue.
The Revenue thereupon preferred the present appeal with special leave obtained from this Court.
785 There is a decision of this court which is directly in point and it concludes the determination of the question arising in this appeal against the Revenue but before we refer to that decision, we might first examine the question on principle as a matter of pure interpretative exercise.
Section 271 sub section (1) clause (c) provides for imposition of penalty on an assessee if it is found inter alia that the assessee has concealed the particulars of "his income.
" The question is what is the scope and content of the words "his income" occurring in this penal provision.
Do they refer only to the income of the assessee himself or do they also take in the income of others which is liable to be included in the computation of the total income of the assessee by reason of the relevant provisions of the Act, such as section 64 sub section (1) clauses (i) and (iii)? The answer to this question obviously depends upon as to what is "his income" which the assessee is liable to disclose for the purpose of assessment for concealment can only be of that which one is bound to disclose and yet fails to do so.
Section 139 provides for filing of a return of income by an assessee and sub section (1) of this section lays down that every person whose total income during the previous year exceeds the maximum amount which is not chargeable to income tax, shall furnish a return of his income in the prescribed form and verified in the prescribed manner, and setting forth such other particulars as may be prescribed.
The return of income is required to be filed in order to enable the Revenue Authorities to make a proper assessment of tax on the assessee.
It must therefore follow a fortiorari that the assessee must disclose in the return every item of income which is liable to be taxed in his hands as part of his total income.
The charge of income tax is levied by section 4 on the total income of the assessee, and 'total income ' is defined in section 2 sub section (45) to mean "the total amount of income referred to in section 5 computed in the manner laid down" in the Act.
It is no doubt true that the definition of 'total income ' in Section 2 sub section (45) refers to section 5 and this latter provision lays down that all the income profits and gains accrued or arisen to the assessee or received by or on behalf of the assessee shall be liable to be included in his total income but this provision is subject to the other provisions of the Act and therefore if the income of any other person is declared by any provision of the Act to be includible in computing the total income of the assessee, such income would form part of the total income exigible to tax under section 4 of the Act.
Now, section 64 subsection (1) is one such provision which provides for inclusion of the income of certain other persons in computing the total income of an assessee.
Clauses (i) and (iii) of this sub section provide that in computing the total income of an assessee there shall be included all 786 such income as arises directly or indirectly to the spouse of such assessee from the partnership of the spouse in a firm carrying on a business in which such individual is a partner as also to a minor child of such assessee from the admission of the minor to the benefits of the partnership firm.
It is clear from this provision that though the share of the spouse or minor child in the profits of a partnership firm in which the assessee is a partner is not the income of the assessee but is the income of such spouse or minor child it is liable to be included in computing the total income of the assessee and it would be assessable to tax in the hands of the assessee.
The total income of the assessee chargeable to tax would include the amounts representing the shares of the spouse and minor child in the profits of the partnership firm.
If this be the correct legal position, there can be no doubt that the assessee must disclose in the return submitted by him, all amounts representing the shares of the spouse and minor child in the profits of the partnership firm in which he is a partner, since they form part of his total income chargeable to tax.
The words "his income" in section 139 sub section (1) must include every item of income which goes to make up his total income assessable under the Act.
The amounts representing the shares of the spouse and minor child in the profits of the partnership firm would be part of "his income" for the purpose of assessment to tax and would have to be shown in the return of income filed by him.
The assessee then contended that the return of income which was required to be filed by her under section 139 sub section (1) was a return in the prescribed form and the form of the return prescribed by rule 12 of the Income Tax Rules, 1962 did not contain any column for showing the income of the spouse and minor child which was liable to be included in the total income of the assessee under section 64 sub section (1) clauses (i) and (iii) and there was therefore no obligation on the assessee to disclose this income in the return filed by her.
This contention is also, in our opinion, fallacious and deserves to be rejected.
It is true that the form of the return prescribed by rule 12 which was in force during the relevant assessment year did not contain any separate column for showing the income of the spouse and minor child liable to be included in the total income of the assessee, but it did contain a Note stating that if the income of any other person is includible in the total income of the assessee under the provisions inter alia of section 64, such income should also bestow in the return under the appropriate head.
This Note clearly required the assessee to show in the return under the appropriate head of income, namely, "Profits and Gains of Business of Profession" the amounts representing the shares of the husband and minor 787 daughter of the assessee in the profits of the two partnership firms.
But even so, the assessee failed to disclose these amounts in the return submitted by her and there was therefore plainly and manifestly a breach of the obligation imposed by section 139 sub section (1) requiring the assessee to furnish a return of her income in the prescribed form.
It is difficult to see how the Note in the prescribed form of the return could be ignored by the assessee and she could contend that despite the Note, she was not liable to show in her return the amounts representing the shares of her husband and minor daughter in the two partnership firms.
The contention of the assessee, if accepted, would render the Note meaningless and futile and turn it into dead letter and that would be contrary to all recognised canons of construction.
There can be no doubt that the assessee was bound to show in her return the amounts representing the shares of her husband and minor daughter in the two partnership firms and in failing to do so, she was guilty of concealment of this item of income which plainly attracted the applicability of section 271 sub section (1) clause (c).
It is obvious that on this view the order imposing penalty on the assessee would have to be sustained but there is a decision of this Court in V.D.M.RM.M.RM.
Muthiah Chettiar vs Commissioner of Income Tax Madras which is binding upon us and where we find that a different view has been taken by a Bench of three Judges of this Court.
It was held in this case that even if there were any printed instructions in the form of the return requiring the assessee to disclose the income received by his wife and minor child from a firm of which the assessee was a partner, there was, in the absence in the return of any head under which the income of the wife or minor child could be shown, no obligation on the assessee to disclose this item of income, the assessee could not be deemed to have failed or omitted to disclose fully and truly all material facts necessary for his assessment within the meaning of section 34(1) (a) of the Indian Income Tax Act, 1922.
With the greatest respect to the learned Judges who decided this case, we do not think, for reasons already discussed, that this decision lays down the correct law on the subject, and had it not been for the fact that since 1st April 1972 the form of the return prescribed by rule 12 has been amended and since then, there is a separate column providing the "income arising to spouse/minor child or any other person as referred to in Chapter V of the Act" should be shown separately under that column and consequently there is no longer any scope for arguing that the assessee is not bound 788 to disclose such income in the return to be furnished by him, we would have referred the present case to a larger bench.
But we do not propose to do so since the question has now become academic in view of the amendment in the form of the return carried out with effect from 1st April 1972.
We would therefore follow this decision in Muthiah Chettiar 's case, which being a decision of a bench of three Judges of this Court is binding upon us, and following that decision, we hold that the assessee could not be said to have concealed her income by not disclosing in the return filed by her the amounts representing the shares of her husband and minor daughter in the two partnership firms.
We accordingly dismiss the appeal, but in the peculiar circumstances of the present case, we think that the fair order of costs would be that each party should bear and pay its own costs throughout.
S.R. Appeal dismissed.

summary:
The respondent assessee was a partner in the partnership firms of M/s. Malabar Tile Works and M/s. Malabar Plywood Works and alongwith her there were other partners including her husband and minor daughter.
In her returns for the assessment year 1964 65 for which the relevant accounting year was the calendar year ending 31st December, 1963, the assessee filed a return of income omitting the amounts representing the shares of her husband and minor daughter in the partnership firms from her income.
The Income Tax Officer, however, brought the amounts, namely, Rs. 59,506 to tax and referred the case for taking action under section 271(1)(c) of the Act to the Assistant Appellate Commissioner who imposed a penalty of namely, Rs. 7,000 on the assessee for having concealed her income.
In appeal the Tribunal set aside the order and the High Court on reference affirmed the Tribunal 's order.
Hence the appeal by Revenue to this Court after obtaining special leave.
Dismissing the appeal, the Court ^ HELD: (1) The assessee, in view of the fact that the prescribed form for filing of returns under section 139 of the Act, prior to 31st March, 1972, did not contain separate column to show "income arising to spouse/minor child or any other person referred to in Chapter V of the Act", and in view of the decision of three Judges Bench reported in SC could not be said to have concealed her income by not disclosing in the return filed by her the amounts representing the shares of her husband and minor daughter in the two partnership firms.
[788B] (2) The term "his income" for the purpose of section 271(1)(c) of the Act, is "his income" which the assessee is liable to disclose for the purposes of assessment and yet fails to do so.
The return of income under section 139(1) of the Act is required to be filed in order to enable the Revenue Authorities to make a proper assessment of tax on the assessee.
A fortiorari, it follows that the assessee must disclose in the return every item of income which is liable to be taxed in his hands under sections 4 & 5 of the Act.
[785B; F H] 782 (3) The definition of "total income" in section 2(45), no doubt refers to section 5 which lays down that all the income profits and gains accrued or arisen to the assessee or received by or on behalf of the assessee shall be liable to be included in his total income but this provision is subject to the other provisions of the Act and therefore if the income of any other person is declared by any provision of the Act to be includible in computing the total income of the assessee, such income would form part of the total income exigible to tax under section 4 of the Act.
section 64(1) is one such provision which provides for inclusion of the income of certain other persons in computing the total income of the assessee.
[785F H] Section 64(1) makes it clear that though the share of the spouse or minor child in the profits of a partnership firm in which the assessee is a partner is not the income of the assessee but is the income of such spouse or minor child it is liable to be included in computing the total income of the assessee and it would be assessable to tax in the hands of the assessee.
The total income of the assessee chargeable to tax would include the amounts representing the shares of the spouse and minor child in the profits of the partnership firm.
Obviously the words "his income" in section 139 sub section
(1) must include every item of income which goes to make up his total income assessable under the Act.
The amounts representing the shares of the spouse and minor child in the profits of the partnership firm would be part of "his income" for the purpose of assessment to tax and would have to be shown in the return of income filed by him.
[786B D] (4) It is true that the form of the return prescribed by Rule 12 of the Income Tax Rules, 1962 which was in force during the relevant assessment year did not contain any separate column for showing the income of the spouse and minor child liable to be included in the total income of the assessee, but it did contain a Note stating that if the income of any other person is includible in the total income of the assessee under the provisions, inter alia, of section 64, such income should also be shown in the return under the appropriate head.
This Note clearly required the assessee to show in the return under the appropriate head of income, namely, "profits and gains of business or profession" the amounts representing the shares of the husband and minor daughter of the assessee in the profits of the two partnership firms.
The assessee however failed to disclose these amounts in the return submitted by her and there was plainly and manifestly a breach of the obligation imposed by section 139 sub section
(1) requiring the assessee to furnish a return of her income in the prescribed form.
To accept the contention that despite the Note the assessee was still not liable to show in the return the amounts representing the shares of her husband and minor daughter in the two partnership firms would render the Note meaningless and futile and turn it into a dead letter 783 and that would be contrary to all recognised canons of construction.
The assessee was guilty of concealment of this item of income which plainly attracted the applicability of section 271 sub section
(1) clause (c).
[786G 787D] V.D.M.RM.M.RM.
Muthiah Chettiar vs Commissioner of Income Tax, , doubted