judgement:
ivil Appeal No. 4053 of 1985.
From the Judgment and Order dated 25.1.1985 of the Madhya Pradesh High Court in Civil Revision No. 378 of 1984.
U.R. Lalit, S.S. Khanduja, Y.P. Dhingra and Mrs. Madhu Kapoor for the Appellants.
T.C. Sharma and S.K. Gambhir for the Respondents.
The Judgment of the Court was delivered by DUTT, J.
This appeal by special leave is directed against the judgment of the Madhya Pradesh High Court, whereby the High Court affirmed the order of the District Judge, Bhopal, dismissing the counter claim by the appel lants on the ground that it was barred by section 14 of the , hereinafter referred to as 'the Act '.
The High Court also held that the counter claim was not maintainable under sub rule (1) of Rule 6A of Order VIII of the Code of Civil Procedure, as the same was filed by the appellants after the filing of the written statement.
The predecessor in interest of the appellants, namely, Babulal, purchased a house in Bhopal in the year 1947 from the sons of one Mannulal.
The appellants and the respondents Nos.
6 to 8 are the sons of the other three brothers of Mannulal.
In the year 1976, the respondents Nos. 2 to 5, who were the heirs and legal representatives of the said Babu lal, started reconstructing or renovating the house and for that purpose they commenced digging the plinth.
In the course of digging, a treasure consisting of gold and silver ornaments and also Government currency notes amounting to Rs.2,900 was found.
The respondents Nos. 2 to 5 intimated the discovery of the treasure to the Collector of the Dis trict, who issued a notification under section 5 of 159 the Act requiting all persons claiming the treasure,.
or any part thereof, to appear personally or by agent before him on the day and place mentioned in the notification.
Pursuant to the said notification, the respondents Nos. 2 to 5, and the appellants and the respondents Nos. 6 to 8 filed claims before the Collector.
It has been held by the Collector that the respondents Nos. 2 to 5, the finders of the treasure, are the owners of the house from where the treasure was found during excavation undertaken by them with a view to starting reconstruction, and he permitted them under section 8 of the Act to institute a suit in the Civil Court to establish their right before February 22, 1979.
The respondents Nos. 2 to 5 instituted a suit being Civil Suit No.1 A of 1979, in the Court of the District Judge, Bhopal, for a declaration of their title to the treasure found by them.
The respondents Nos. 2 to 5 did not, however, make the other claimants before the Collector including the appellants, parties to the suit.
The appel lants and the respondents Nos.
6 to 8 made an application for their addition as parties to the suit under the provi sion of Order I, Rule 10 of the Code of Civil Procedure.
The learned District Judge allowed the said application and, accordingly, they were made defendants in the suit.
Thereafter, the appellants and the respondents Nos. 6 to 8 filed their written statement, inter alia, denying the claim of the respondents Nos. 2 to 5 to the treasure.
They claimed title to the treasure.
After the filing of the written statement, the appel lants filed a counter claim claiming title to the treasure.
It is not necessary for us to state the basis of the claims of the parties to the treasure.
The respondents Nos. 2 to 5 filed an application praying that the counter claim should be dismissed contending that it was barred by limitation as prescribed under section 14 of the Act and that it was also not maintainable under Order VIII, Rule 6A(1) of the Code of Civil Procedure.
The learned District Judge came to the finding that the counter claim was barred by section 14 of the Act and, in that view of the matter, dismissed the counter claim.
Being aggrieved by the said order of the learned District Judge, the appellants and the said respond ents Nos. 6 to 8 moved the High Court in revision against the same.
The High Court upheld the order of the learned District Judge that the counterclaim was barred by limita tion as prescribed by section 14 of the Act.
The High Court further held that the counter claim having been filed after the filing of the written statement, it was not maintainable under Order VIII, Rule 6A(1) of the Code of Civil Procedure.
Hence this appeal by special leave.
160 At this stage, it is necessary to refer to some of the provisions of the Act.
Section 4 of the Act provides, inter alia, for the giving of notice by the finder of treasure to the Collector containing the details of the treasure.
The treasure may be deposited in the nearest Government Treasury or the finder may give the Collector such security as the Collector thinks fit to produce the treasure at such time and place, as he may, from time to time, require.
Under section 5, the Collector shall, after making such enquiry, if any, as he thinks fit, issue a notification requiting the claimants to the treasure to appear before him on a day and at a place mentioned in the notification, such day not being earlier than four days or later than six months, after the date of the publication of such notification.
Section 6 provides that any person having claimed any fight to such treasure or any part thereof, as owner of the place in which it was found or otherwise, and not appearing as required by the notification issued under section 5, shall forfeit such right.
Sections 7, 8, 9, 13 and 14 which are relevant for our purpose are extracted below: "section 7 On the day notified under section 5, the Collector shall cause the treasure to be produced before him, and shall enquire as to and determine (a) the person by whom, the place in which, and the circumstances under which, such treasure was found; and (b) as far as is possible, the person by whom, and the circumstances under which, such treasure was hidden.
If, upon an enquiry made under section 7, the Collector sees reason to believe that the treasure was hidden within one hundred years before the date of the finding, by a person appearing as required by the said notification and claiming such treasure, or by some other person under whom such person claims, the Collector shall make an order adjourning the hearing of the case for such period as he deems sufficient, to allow of a suit being instituted in the Civil Court by the claimant, to establish his right.
If upon such enquiry the Collector sees no reason to believe that the treasure was so hidden; or If, where a period is fixed under section 8, no suit is 161 instituted as aforesaid within such period to the knowledge of the Collector; or if such suit is instituted within such period, and the plaintiff 's claim is finally rejected; the Collector may declare the treasure to be ownerless.
Any person aggrieved by a declaration made under this section may appeal against the same within two months from the date thereof to the Chief Controlling Revenueauthority.
Subject to such appeal, every such declaration shall be final and conclusive." "section 13.
When a declaration has been made as aforesaid in respect of any treasure, and two or more persons have appeared as aforesaid and each of them claimed as owner of the place where such treasure was found, or the right of any person who has so appeared and claimed is disputed by the finder of such treasure, the Collector shall retain such treasure and shall make an order staying his proceedings with a view to the matter being enquired into and determined by a Civil Court.
section 14.
Any person who has so appeared and claimed may, within one month from the date of such order, institute a suit in the Civil Court to obtain a decree declaring his right and in every such suit the finder of the treasure and all persons disputing such claim before the Collector shall be made defendants.
" Under the scheme of the Act, two kinds of suits can be filed at two stages, namely, one under section 8 and the other under section 14 of the Act.
Section 8 provides that if the Collector has reason to believe that the treasure was hidden by any person appearing before the Collector within one hundred years or by some other person under whom such person claims, the Collector shall adjourn the hearing for such period as he deems sufficient to allow the claimant to institute a suit to establish his right to the treasure.
So under section 8, the suit has to be filed by the claimant within the period for which the hearing 162 of the case is adjourned for the establishment of his right to the treasure.
On the other hand, the question of filing a suit under section 14 will not arise unless the Collector makes a declaration under section 9 that the treasure is ownerless.
Such a declaration under section 9 will be made by the Collector if he sees no reason to believe that the treasure was not hidden within one hundred years or if no suit is instituted under section 8 within the period for which the hearing adjourned by the Collector or if the plaintiffs claim is rejected.
An appeal lies against a declaration by the Collector to the Chief Controlling Revenue Authority and subject to the appeal, such declaration shall be final and conclusive.
If, however, no such contingencies as mentioned in section 9 take place, the Collector will have no juris diction to make a declaration that the treasure is owner less.
If however, any of such contingencies happens and the Collector makes a declaration under section 9 and two or more persons have appeared before the Collector each claim ing the ownership of the place where such treasure was found or the finder of the treasure disputes the fight of any person who has so appeared and claimed, the Collector shall make an order under section 13 staying the proceedings with a view to the matter being enquired into by a Civil Court.
It may be noticed here that the claim made under section 13 by the rival claimants relate to the ownership of the place and not to the ownership of the treasure for, it has been already noticed that the declaration by the Collector under section 9 that the treasure is ownerless shall, subject to the appeal to the Chief Controlling Revenue Authority, be final and conclusive.
The object of an enquiry as to the ownership of the place by the Civil Court is necessary is as much as section 10 of the Act provides inter alia that when a declaration has been made in respect of any treasure under section 9, such treasure shall either be delivered to the finder or be divided between him and the owner of the place in which it has been found.
Thus it is manifestly clear that if no declaration is made under section 9, there is no question of filing a suit under section 14 of the Act.
While a suit under section 8 relates to the establishment of the right of the claimant to the treasure, a suit under section 14 relates to the estab lishment of the ownership of the place where the treasure was found for the purpose of division of the treasure be tween the finder and the owner of the place.
Section 14 lays down that such a suit has to be filed within one 163 month from the date of such order to obtain a decree declar ing his right.
It is manifestly clear from section 14 that the suit referred to therein is a suit to be filed by a person for the establishment of his right after the Collector had declared the treasure to be ownerless under section 9 after making a claim before the Collector under section 13.
The words "such order" in section 14, in our view, refer to the order passed by the Collector under section 13.
Further, the placement of section 14 after section 13 of the Act points only to the filing of the suit by a person after the Collec tor had made an order staying the proceedings under section 13.
The suit contemplated by section 8 of the Act has to be filed by the claimant within the period for which the hear ing of the case is adjourned.
Such period for which the hearing under section 8 is adjourned by the Collector, may be more than a month.
It is absurd to think that although section 8 provides that the suit has to be filed within the period for which the hearing is adjourned, yet it has to be filed within one month under section 14.
Section 8 and sections 13 and 14 contemplate two different situations.
While under section 8 the suit has to be filed within the period during which the hearing stands adourned, the suit under section 14 has to be filed within one month of the order of the Collector under section 13 of the Act.
To hold that suits under section 8 and section 13, are both governed by.the limitation prescribed by section 14, will be to do violence to the provisions of the Act and the clear inten tion of the Legislature as indicated in the provisions.
Another aspect in this regard may be considered.
It may be argued that as the Collector had not allowed the appel lants and the respondents Nos. 6 to 8 to file a counter claim or a suit, the suit was not maintainable.
In our opinion, the question of filing a counter claim arises after a suit is filed by the claimant under section 8.
It may be that there is no substantial difference between a counter claim and a suit, but nonetheless a defendant cannot be prevented from filing a counter claim under the Code of Civil Procedure.
In the instant case, as the respondents Nos. 2 to 5 have instituted the suit within the period during which the hearing before the Collector stands adjourned under section 8, the question of making a declaration by the Collector under section 9 of the Act does not arise and, consequently, there is no scope for filing any suit under section 14 of the Act for the establishment of the right to ownership of the place where the treasure was found by the respondents Nos. 2 to 5.
Thus 164 section 14 has no manner of application to a suit filed under section 8 of the Act.
The next point that remains to be considered is whether Rule 6A(1) of Order VIII of the Code of Civil Procedure bars the filing of a counter claim after the filing of a written statement.
This point need not detain us long, for Rule 6A(1) does not, on the face of it, bar the filing of a counter claim by the defendant after he had filed the writ ten statement.
What is laid down under Rule 6A(1) is that a counter claim can be filed, provided the cause of action had accrued to the defendant before the defendant had delivered his defence or before the time limited for delivering his defence has expired, whether such counterclaim is in the nature of a claim for damages or not.
The High Court, in our opinion, has misread and misunderstood the provision of Rule 6A(1) in holding that as the appellants had filed the coun ter claim after the filing, of the written statement, the counter claim was not maintainable.
The finding of the High Court does not get any support from Rule 6A(1) of the Code of Civil Procedure.
As the cause of action for the counter claim had arisen before the filing of the written statement, the counter claim was, therefore, quite maintainable.
Under Article 113 of the , the period of limitation of three years from the date the right to sue accrues, has been provided for any suit for which no period of limitation is provided elsewhere in the Schedule.
It is not disputed that a counter claim, which is treated as a suit under section 3(2)(b) of the has been filed by the appellants within three years from the date of accrual to them of the fight to sue.
The learned District Judge and the High Court were wrong in dismissing the coun ter claim.
For the reasons aforesaid, the appeal is allowed.
The order of the learned District Judge and the judgment of the High Court are set aside.
The learned District Judge is directed to proceed with the hearing of the suit and the counter claim in accordance with law.
The appellants shall pay court fee on the counter claim, if not already paid, within such time as may be fixed by the learned District Judge.
A.P.J. Appeal allowed.

summary/full:
The predecessor in interest of the appellants, namely, Babulal, purchased a house in the year 1947 from the sons of one Mannulal.
The appellants and the respondents No. 6 to 8 are the sons of the other three brothers of Mannulal.
In the year 1976 the respondents Nos. 2 to 5 started reconstructing or renovating their house and in the course of digging the plinth a treasure consisting of gold and silver ornaments and currency notes was found.
They intimated the discovery of the treasure to the Collector, who issued a notification under section 5 of the Indian Treasure Trove Act, 1878.
Respond ents Nos. 2 to 5, the appellants and the respondents Nos.
6 to 8 flied claims before the Collector.
The Collector held that the respondents Nos. 2 to 5, the finders of the treas ure, are the owners of the house from where the treasure was found and permitted them under section 8 to institute a suit to establish their right before February 22, 1979.
The respondents Nos. 2 to 5 instituted a suit for decla ration of their title to the treasure without making the other claimants before the Collector parties to the suit.
On an application filed under Order I, Rule 10 of the Code of Civil Procedure by the appellants and respondents Nos.
6 to 8, the District Judge made them defendants in the suit.
Thereafter, they filed their written statement, denying the claim 01 ' the respondents Nos. 2 to 5 to the treasure and claimed the title thereof to them.
After the filing of the written statement, the appel lants flied a counter claim claiming title to the treasure.
The respondents Nos. 2 to 5 156 filed an application praying that the counter claim should be dismissed contending that it was barred by limitation as prescribed in section 14 of the Act and that it was also not maintainable under Order VIII, Rule 6A(1) of the Code 01 ' Civil Procedure.
The District Judge dismissed the counter claim holding that it was barred by section 14 of the Act.
In the Revision, the High Court upheld the order of the District Judge and further held that the counter claim having been filed after the filing of the written statement, was not maintainable under Order VIII, Rule 6A(1) of the Code of Civil Procedure.
Allowing the Appeal to this Court, HELD: 1.
The order of the District Judge and the Judg ment of the High Court are set aside.
The District Judge is directed to proceed with the hearing of the suit and the counter claim in accordance with law.
[164F G] 2.
Under the scheme of the Indian Treasure Trove Act, 1878 two kinds of suits can be filed at two stages, namely, one under section 8 and the other under section 14.
Section 8 provides that if the Collector has reason to believe that the treas ure was hidden by any person appearing before the Collector within one hundred years or by some other person under whom such person claims, the Collector shall adjourn the hearing for such period as he deems sufficient to allow the claimant to institute a suit to establish his right to the treasure.
[161G H; 162A] 3.
On the other hand, the question of filing a suit under section 14 will not arise unless the Collector makes a declaration under section 9 that the treasure is ownerless.
Such a declaration under section 9 will be made by the Collector if he sees no reason to believe that the treasure was not hidden within one hundred years or if no suit is instituted under section 8 within the period for which the hearing is adjourned by the Collector or if the plaintiff 's claim is rejected.
[162B] 4.
If no such contingencies as mentioned in section 9 take place, the Collector will have no jurisdiction to make a declaration that the treasure is ownerless.
If, however, any of such contingencies happens and the Collector makes a declaration under section 9 and two or more persons have appeared before the Collector each claiming the ownership of the place where such treasure was found or the finder of the treasure disputes the right of any person who has so ap peared and claimed, the Collector shall make an order under section 13 staying the proceedings with a view to the matter being enquired into by a Civil Court.
157 5.
The object of an enquiry as to the ownership of the place by the Civil Court is necessary inasmuch as section 10 of the Act provides that when a declaration has been made in respect of any treasure under section 9, such treasure shall either be delivered to the finder or be divided between him and the owner of the place in which it has been round.
[162F] 6.
A suit under section 14 relates to the establishment of the ownership of the place where the treasure was found for the purpose of division of the treasure between the finder and the owner of the place and that such a suit has to be filed within one month from the date of such order to obtain a decree declaring his right after the Collector had de clared the treasure to be ownerless under section 9 after making a claim before the Collector under section 13.
The words "such order" in section 14, refer to the order passed by the Collector under section 13.
[163B] 7.
Section 8 and section 13 and section 14 contemplate two differ ent situations.
While under section 8 the suit has to be filed within the period during which the hearing stands adjourned, the suit under section 14 has to be filed within one month of the order of the Collector under section 13 of the Act.
[163C D] 8.
To hold that suits under section 8 and section 13 are both governed by the limitation prescribed by section 14, will be to do violence to the provisions of the Act and the clear intention of the Legislature as indicated in the provisions.
[163E] 9.
In the instant case, as the respondents Nos. 2 to 5 have instituted the suit within the period during which the hearing before the Collector stood adjourned under section 8, the question of making a declaration by the Collector under section 9 of the Act does not arise and, consequently, there is no scope for filing any suit under section 14 of the Act.
Thus section 14 has no manner of application to a suit filed under section 8 of the Act.
[163G H; 164A] 10.
Rule 6A(1) of Order VIII of Code of Civil Procedure does not bar the filing of a counter claim by the defendant after he had filed the written statement.
What is laid down under Rule 6A(1) is that a counter claim can be filed, provided the cause of action had accrued to the defendant before the defendant had delivered his defence or before the time limited for delivering his defence has expired, whether such counter claim is in the nature of the claim for damages or not.
[164B C] 11.
The High Court has misread and misunderstood the provision of Rule 6A(1) in holding that as the appellants had filed the counter 158 claim after the filing of the written statement, the coun ter claim was not maintainable.
Under Article 113 of the , the period limitation of three years from the date the right to sue accrues, has been provided for any suit for which no period of limitation is provided elsewhere in the Schedule.
in the instant case, the counter claim has been filed by the appellants within three years and as the cause of action for the counter claim had arisen before the filing of the written statement, the counter claim was, therefore quite maintainable.
[164C E]


judgement:
on Nos.
520.23of 1987.
IN Writ Petition Nos.
12437 12460 of 1985, 238 of 1986 and Transferred Cases Nos. 9 11, 12 13 of 1986.
K. Parasaran Attorney General and Ms. A. Subhashini for the Petitioners.
P.H. Parekh, Suhail Dutt, P.D. Sharma and R. Ramachan dran for the Respondents.
The following Order of the Court was delivered: In these petitions for review the learned Attorney General of India urges that certain observations and conclu sions expressed in the individual Judgments of Bhagwati, CJI and one of us (Ranganath Misra, J) appear to conflict with each other, and prays that clarification be made.
In the first place, he has drawn our attention to the observations of Bhagwati, CJI where the learned Chief Justice has taken the view that one of the two alternative options was open to the Government while appointing the Chairman, a Vice Chair man and administrative members of the Administrative Tribu nal.
The learned Chief Justice said that the appointment of Chairman, Vice Chairman and members of the Administrative Tribunal should be made by the concerned government only after consultation with the Chief Justice of India.
The alternative suggestion is that a High Powered Selection Committee should be appointed headed by the Chief Justice of India or a sitting Judge of the Supreme Court or the con cerned High Court to be nominated by the Chief Justice of India.
In his Judgment our brother Ranganath Misra, J. has opted for the latter alternative.
Having considered the matter carefully, we are of opinion that in the case of recruitment to the Central Administrative Tribunal the appropriate course would be to appoint a High Powered Selec tion Committee headed by a sitting Judge of the Supreme Court to be nominated by the Chief Justice of India, while in the case of recruitment to the State Administrative Tribunals, the High Powered Selection Committee should be headed by a sitting Judge of the High Court 235 to be nominated by the Chief Justice of the High Court concerned.
The second contention of the learned Attorney General is that the observations of Bhagwati, CJI that for the appoint ment to the post of Vice Chairman of the Administrative Tribunal, besides a District Judge an Advocate who is quali fied to be a Judge of the High Court should also be regarded as eligible, calls for reconsideration because an Advocate will not have the administrative experience which is re quired for a member of the Administrative Tribunal.
We are unable to accept the contention.
In the first place, an Advocate who is qualified to be a Judge of the High Court is an Advocate who by implication is qualified to perform not only the judicial duties but the administrative functions which a High Court Judge is expected to discharge.
Secondly, whether an Advocate applying for recruitment to the Adminis trative Tribunal has sufficient administrative potential can be examined and judged during the process of selection.
We, therefore, do not propose to interfere with the observations made by Bhagwati, CJI in his Judgment.
The Learned Attorney General then prays that the time fixed in the Judgment for setting up additional Benches of the Administrative Tribunal should be extended to December 31, 1987.
Having regard to the circumstances of the case and the administrative requirements of the situation, we have no hesitation in granting the time prayed for.
The learned Attorney General also prays that time may be extended upto July 31, 1987 for introducing legislation to give effect to the observations made by the Court in these cases.
We grant time accordingly.
The Review Petitions stand disposed of.
P.S.S. Petitions disposed of.

dataset_name: IN-Abs

summary/full:
In these Review Petitions, the Attorney General sought clarification of certain observations made in the individual judgments delivered on December 9, 1986 disposing of the Writ Petitions filed by the petitioners challenging the vires of the .
Disposing of the Review Petitions, HELD: 1.
In the case of recruitment to the Central Administrative Tribunal the appropriate course would be to appoint a High Powered Selection Committee beaded by a sitting Judge of the Supreme Court to be nominated by the Chief Justice of India, while in the case of recruitment to the State Administrative Tribunals the High Powered Selec tion Committee should be headed by a sitting Judge of the High Court to be nominated by the Chief Justice of the High Court concerned.
[234G 235A] 2.
The contention that an advocate will not have the administrative experience which is required for a Member of the Administrative Tribunal cannot be accepted.
An advocate who is qualified to be a Judge of the High Court is an advocate who by implication is qualified to perform not only the judicial duties but the administrative functions which a High Court Judge is expected to discharge.
Whether an advo cate applying for recruitment to the Administrative Tribunal has sufficient administrative potential can be examined and judged during the process of selection.
[235B D] (Time fixed for introducing legislation to give effect to the obser 234 vations made in the Judgment, and, for setting up Additional Benches extended upto July 31, 1987 and December 31, 1987 respectively).


judgement:
vil Appeal No. 1134 (NT) of 1987.
From the Judgment and Order dated 2.3.
1984 of the Allahabad High Court in Sales Tax Revision No. 146 of 1983.
Prithvi Raj, Ashok K. Srivastava for the Appellant.
S.T. Desai, K.B. Rohtagi, S.K. Dhingra, Baldev Atreya and Shashank Shekhar for the Respondent.
The following Judgments of the Court were delivered RANGANATH MISRA, J. Special leave granted.
Delay of six days is condoned.
The short question for consideration in this appeal at the instance of the Revenue is whether the High Court was justified in holding that in the absence of a notification withdrawing the earlier notification dated 25.11.
1958 made in exercise of power vested under section 4 of the U.P. Sales Tax Act, 1948, Sales Tax would not be exigible in terms of the notification dated 1.12.
1973 issued under section 3A of that Act.
The notification of 1958 exempted 'cotton fabrics of all varieties ' from sales tax.
It is not disputed that under it sale of patta, the goods in question on being treated as cotton fabric was exempted from sales tax.
The notification of 1973 made under section 3A of the Act prescribed sales tax of seven per cent on the sale of beltings of all kinds.
There is no dispute now that patta is a kind of belting material.
Section 3 of the Act contains the charging provision and prescribes a uniform rate of tax on sales.
Section 3A empow ers the State Government to modify the rate of tax by noti fication.
The notification of 1973 in fact prescribes a rate of tax higher than provided by section 3.
In 1958, under the notification referred to above, patta as an item of cotton fabric stood exempted from tax liability.
The High Court has 96 referred to some of its earlier decisions and has concluded thus: "Thus the consistent view of this court throughout has been that by issuing a separate notification under section 3A, the earlier exemption granted under section 4 of the Act cannot be negatived.
If the State wanted to tax 'beltings of all kinds ', it has to amend the general notification issued under section 4 by deleting cotton fabric belts from the notification issued under section 4 of the Act. ' ' As has been pointed out above, section 3 is the charging provision; section 3A authorises variation of the rate of tax and section 4 provides for exemption from tax.
All the three sections are parts of the taxing scheme incorporated in the Act and the power both under sections 3A as also under section 4 is exercisable by the State Government only.
When after a notification under section 4 granting exemption from liability, a subsequent notification under section 3A prescribes the rate of tax, it is beyond doubt that the intention is to withdraw the exemption and make the sale liable to tax at the rate prescribed in the notification.
As the power both for the grant of exemption and the variation of the rate of tax vests in the State Government and it is not the requirement of the statute that a notification of recall of exemption is a condition precedent to imposing tax at any prescribed rate by a valid notification under section 3A, we see no force in the contention of the assessee which has been upheld by the High Court.
In fact, the second notification can easily be treated as a combined notifica tion both for withdrawal of exemption and also for provid ing higher tax.
When power for both the operations vests in the State and the intention to levy the tax is clear we see no justification for not giving effect to the 2nd notifica tion.
We would like to point out that the exemption was in regard to a class of goods and while the exemption continues a specific item has now been notified under section 3A of the Act.
The appeal is allowed.
The order of the Tribunal which has been affirmed by the High Court is set aside and the assessment is restored.
Parties are directed to bear their respective costs throughout.
B.C. Ray, J. I have had the privilege of going through the judgment rendered by my learned brother but I am unable to concur with the reasonings recorded by my learned brother in his judgment so far as it relates to the scope and effect of the notification dated 1.12.1973 made under Section 3A of the U.P. Sales Tax Act, 1948 by providing for imposition of sales tax on "beltings of all kinds" for the reasons given hereunder: 97 Under Section 4 of the 1J.P. Sales Tax Act, 1948 the Government issued two notifications No. S.T. 4486/x dated 14.12.1957 and No. 4064/x 960(4)/58 dated 25.11.
1958 where by "cotton fabrics of all kinds" were exempted from the imposition of sales tax under the Act.
Thereafter on 1st of December 1973 a notification was issued by the Government under Section 3 A of the said Act which introduces in the Schedule in Item No. 8 "beltings of all kinds" for imposi tion of sales tax.
The sole question arising in this appeal is whether beltings of all kinds are excisable to sales tax by virtue of the notification dated 1.12.
1973 even though they fall within "cotton fabrics of all kinds" which are exempted from tax by virtue of the notifications dated 14.12.
1957 and 25.11.
Similar question arose in the case of Porritts & Spencer Asia Ltd. vs State of Haryana, [1978] 42 S.T.C. 433 (SC) before this Court for considera tion.
It was held by this Court that the words "all varie ties of cotton, woollen or silken textiles".
In item 30 of Schedule B to the Punjab General Sales Tax Act must be interpreted according to its popular sense, meaning "that sense which people conversant with the subject matter with which the statute is dealing would attribute to it.
" This Court further observed "whatever be the mode of weaving employed, woven fabric would be "textiles".
What is neces sary is no more than weaving of yarn and weaving would mean binding or putting together by some process so as to form a fabric.
Moreover a textile need not be of any particular size or strength or weight.
It may be in small pieces or in big rolls: It may be weak or strong, light or heavy, bleached or dyed, according to the requirement of the pur chaser.
The use to which it may be put is also immaterial and does not bear in its character as a textile.
It may be used for making wearing apparel, or it may be used as a covering or bed sheet or it may be used as tapestry or upholstery or as duster for clearing or as towel for drying the body.
A textile may have diverse uses and it is not the use which determines its character as textile.
" It was also held that the textile has only one meaning namely a woven fabric and that is the meaning which it bears in ordinary parlance.
The Court therefore held that dryer felts are textiles as these were made of yarn and the proc ess employed was that of weaving according to warp and woof pattern.
It therefore falls within the meaning of textiles and so exempted from tax.
Similar question arose in the case of State of Tamil Nadu vs Navinchandra & Company, [1981] (48) S.T.C. 118 (Madras) where exemption was claimed on the basis of a notification under Section 4 of the Tamil Nadu General Sales Tax Act 1959 in respect of hair belting 98 and cotton belting as falling within item No. 4 of the Third Schedule of the said Act.
This item No. 4 reads as follows: "All varieties of textiles (other than durries, carpets, druggets and pure silk cloth) made wholly or partly of cotton, staple fibre, rayon, artificial silk or wool includ ing handkerchiefs, towels, napkins, dusters, cotton velvets and velvetten, tapes, niwars and laces and hosiery cloth in lengths.
" It was held that textiles haying a wider meaning than fab rics cottonbelting and hair belting were included in the expression cotton fabrics and as such they are exempted from taxation falling within Item No. 4 of the Third Schedule as it stood prior to its amendment.
It is pertinent to mention in this connection that in the case of Delhi cloth and General Mills Co. Ltd. vs State of Rajasthan and Others, ; the question arose whether rayon tyre cord fabric manufactured by the appellate company included within item No. 18 inserted in the Schedule by the Rajasthan Taxation Laws (Amendment) Act, 1964 and rayon or artificial silk fabrics extended to exemp tion under Section 4(1) of the Rajasthan Sales Tax Act which provides for exemption of sales tax of goods specified in the Schedule.
It has been held that the product falls within the exempted item rayon or artificial silk fabrics in item No. 18 of the Schedule inserted by Section 4 of the said Act.
This judgment was rendered by this Court to which one of us was a party.
In the instant case the question arising for considera tion is whether patta covered by "cotton fabrics of all varieties" is excisable to sales tax under the notification dated 1.12.
1973 namely "beltings of all kinds".
In view of the decisions referred to hereinbefore cotton beltings fall within the textiles of all varieties as notified under Section 4 of the said Act being exempt from the imposition of sales tax.
The question that falls for consideration is what is the effect of the notification issued under Section 3 A of the said Act on 1.12.
1973 mentioned in the Schedule "beltings of all kinds".
There is no dispute nor any chal lenge that these beltings.are cotton beltings falling within cotton fabrics of all kinds and as there is a general exemp tion granted by the notification issued in 1957 and 1958 exempting 'cotton fabrics of all kinds ', it is not possible to hold in any view of the matter that it will be excisable to sales tax on the basis of the notification dated 1.12.1973 under Section 3 A of the said Act, by the Govern ment.
The next question for consideration is what is the effect of a 99 notification under Section 3 A including an item in the Schedule for imposition of sales tax though there is a general exemption from sales tax under Section 4 of the Sales Tax Act.
It has been held in the case of Commissioner of Sales Tax vs M/s Dayal Singh Kulfi Wala, Lucknow, [1980] U.P.T.C. 360 as follows: "A fiscal statute like the one before me has to be interpreted strictly.
If there is any ambiguity or doubt it should be resolved in favour of the subject.
There is no equity about tax.
The taxing liability must be express and absolute.
In the present case, the specification of the goods for purpose of section 3 A is one thing, but whether or not such goods would be exempted from tax is the power conferred upon the State Government under section 4 of the Act.
So long the exemption continues, the dealer can cer tainly urge and with jurtisification that the mere specifi cation of goods under section 3 A or declaring the point of sales at such turnover liable to tax would not take away the exemption from payment of tax which the goods enjoyed by virtue of the exercise of power by the State Government under Section 4 of the Act.
The operating fields of the two sections namely sections 3 A by itself cannot override the power under section 4.
On the other hand, if certain goods have been classified for purposes of by the State Govern ment, if such goods had been exempted from sales, the De partment cannot contend that the exemption should not be construed in favour of the assessee.
" In this case the question arose whether the general exemption granted under Section 4 of the Act in respect of milk and milk products is sufficient to exempt kulfi and lassi in respect of which a separate notification was issued under Section 3 A for imposition of tax.
A similar question also arose in the case of Commission er of Sales Tax vs Rita Ice Cream Co., Gorakhpur, [1981] U.P.T.C. 1239 and it was held that so long as the general exemption under Section 4 continues a particular item noti fied under Section 3 A of the Sales Tax Act cannot be taxed.
On a conspectus of all these decisions aforesaid, the only irresistible inference follows that so long as the general exemption granted under Section 4 with regard to cotton fabrics of all kinds continues no sales tax can be imposed on beltings of all kinds which fall within the cotton fabrics of all kinds and the general exemption under section 4 will prevail over the notification made under section 3 A of the Sales Tax Act.
I am unable to subscribe to the view that since the notification under section 3 A of the U.P. Sales Tax Act has been made subse 100 quent to the notification issued under Section 4 of the said Act, the subsequent notification under Section 3 A will prevail over the general exemption granted under Section 4 of the said Act.
In my considered opinion the reasonings and conclusions arrived at by the High Court are unexception able.
The appeal is accordingly dismissed and the judgment and order of the High Court of Allahabad is hereby affirmed.
N.P.V. Appeal allowed.

summary/full:
The State Government issued a Notification on November 25, 1958 In exercise of power vested under Section 4 of the U.P. Sales Tax Act, 1948.
This Notification exempted 'cotton fabrics of all varieties ' from sales tax.
Under it, patta as an item of cotton fabric stood exempted from tax liability.
Subsequently, another Notification was issued on December 1, 1973 under Section 3 A of the Act.
This Notification pre scribed a rate of tax higher than that provided by Section 3 of the Act which contains the charging provision and pre scribes a uniform rate of tax on sales.
Section 3 A empowers the State Government to modify the rate of tax by Notifica tion.
This Notification of 1973 was issued without withdraw ing the earlier Notification of 1958.
The High Court, affirming the order of the Tribunal, held that in the absence of a Notification withdrawing the earlier Notification of 1958, sales tax would not be exigi ble in terms of the Notification of 1973.
Allowing the Appeal, HELD: (Per majority Pathak, CJI and Ranganath Misra, J., Ray, J. dissenting) 1.
The High Court was not justified in holding that in the absence of a notification withdrawing the earlier Noti fication of 1958, sales tax would not be exigible in terms of the Notification of 1973.
The order of the Tribunal, which has been affirmed by the High Court, is set aside and the assessment restored.
[96G] 2.
The Notification of 1958 issued under Section 4 of the Act exempted 'cotton fabrics of all varieties ' from sales tax.
The Notification of 1973 under Section 3 A of the Act prescribed sales tax of 7% on the sale of beltings of all kinds.
There is no dispute that patta is a kind of 94 belting material and, on being treated as cotton fabric, was exempted from sales tax.
[95FG] 3.
Section 3 is the charging provision; Section 3 A authorises variation of the rate of tax and Section 4 pro vides for exemption from the tax.
When after a Notification under Section 4 granting exemption from liability, a subse quent Notification under Section 3 A prescribes the rate of tax, the intention is to withdraw the exemption and make the sale liable to tax at the rate prescribed in the Notifica tion.
[96B D] 4.
As the power both for the grant of exemption and the variation of the rate of tax vests in the State Government and it is not the requirement of the Statute that a Notifi cation of recall of exemption is a condition precedent to imposing tax at any prescribed rate by a valid Notification under Section 3 A, the second Notification can easily be treated as a combined Notification both for withdrawal of exemption and also for providing higher tax.
[96D E] 5.
The exemption was in regard to a class of goods and while the exemption continues, a specific item has now been notified under Section 3 A of the Act.
[96F] (Per Ray, J. dissenting) 1.
Cotton beltings fail within 'beltings of all kinds ' as notified under Section 4 of the Act, being exempt from the imposition of sales tax.
As there is a general exemption granted by the Notifications issued in 1957 and 1958 exempt ing 'cotton fabrics of all kinds ', it is not possible to hold, in any view of the matter, that it will be excisable to sales tax on the basis of the Notification dated December 1, 1973 under Section 3 A of the said Act, by the Govern ment.
i98F; G H] 2.
So long as the general exemption granted under Sec tion 4 with regard to 'cotton fabrics of all kinds ' contin ues, no sales tax can be imposed on beltings of all kinds which fail within the 'cotton fabrics of all kinds ' and the general exemption under Section 4 will prevail over the Notification made under Section 3 A of the Sales Tax Act.
[99GH] 3.
It is not possible to subscribe to the view that since the Notification under Section 3 A has been made subsequent to the Notification issued under Section 4 of the Act, the subsequent Notification under Section 3 A will prevail over the general exemption granted under Section 4 of the Act.
[99H; 100A] 95 Porritts & Spencer Asia Ltd. vs State of Haryana, [1978] 42 S.T.C. 433 (SC); State of Tamil Nadu vs Navinchandra & Company, [1981] (48) S.T.C. 118 (Madras); Delhi Cloth and General Mills Co. Ltd. vs State of Rajasthan and Others, ; ; Commissioner of Sales Tax vs M/s Dayal Singh Kulfi Wala, Lucknow, [1980] U.P.T.C. 360 and Commis sioner of Sales Tax vs Rita Ice Cream Co., Gorakhpur, [1981] U.P.T.C. 1239, referred to.


judgement:
Appeal No. 249 of 1954.
Appeal by special leave from the judgment and order dated January 8, 1952, of the Patna High Court in Misc.
Judicial Cases Nos. 13, 14, 15, 16, 17, 18 and 19 of 1949.
38 Bhawani Lal and K. L. Mehta, for the appellants.
L.K. Jha, B. K. P. Sinha and R. C. Prasad, for the respondent.
May 22.
The Judgment of the Court was delivered by S.K. DAS J.
The appellant Messrs. Raghubar Mandal Harihar Mandal, hereinafter referred to as the assessee, is a firm of bullion dealers carrying on its business at Laheriasarai in the district of Darbhanga in the State of Bihar.
The assessee was assessed to sales tax for seven quarters ending December 31, 1945, March, 31, 1946, June 30, 1946, September 30, 1946, December 31, 1946, March 31, 1947 and June 30, 1947, respectively.
For three of the aforesaid quarters, namely those ending on December 31, 1945, March 31, 1947 and June 30, 1947, the assessee failed to file the necessary returns as required by the provisions of the Bihar Sales Tax Act, 1944 (hereinafter referred to as the Act), which was the Act in force during the material period; therefore, the assessee was assessed for those three quarters under sub section
(4) of section 10 of the Act.
For the remaining four quarters, the assessee did file returns.
The Sales Tax Officer rejected those returns as also the books of account filed by the assessee for all the seven quarters and assessed the assessee under el.
(b) of sub section
(2) of section 10 of the Act.
The Sales Tax Officer passed separate orders assessing the tax for all the seven quarters simultaneously on October 9, 1947.
He assessed the tax on a taxable turnover of Rs. 2,94,000 for each of the five quarters ending December 31, 1945, March 31, 1946, September 30, 1946, December 31, 1946 and March 31, 1947; for the other two quarters ending on June 30, 1946, and June 30, 1947, he assessed the tax on a taxable turnover of Rs. 3,92,000.
The assessee then moved in appeal the Commissioner of Commercial Taxes, Tirhut Division, but the Commissioner dismissed the appeals by his order dated February 23, 1948.
The Board of Revenue was then moved in revision but, by its order dated July 31, 1948, the Board refused to interfere.
The Board expressed 39 the view that the finding of the Sales Tax Officer and the Commissioner that the books of account maintained by the assessee were not dependable was a finding of fact which could not be interfered with in revision ; therefore the assessing officer was bound to assess to ' the best of his judgment.
The Board was then moved under section 21 of the Act to refer certain questions of law to the High Court of Patna which, the assessee contended, arose out of its order.
By its order dated December 10, 1948, the Board rejected the applications for making a reference to the High Court on the same ground, namely, that no question of law was involved and the assessment orders were concluded by a concurrent finding of fact.
The assessee then moved the High Court and by its order dated April 27, 1949, passed in Miscellaneous Judicial Cases Nos. 13 to 19 of of 1949, the High Court directed the Board of Revenue to state a case on the following question: " Whether the Sales Tax.
Officer is entitled under section 10(2)(b) of the Act to make an assessment on any figures of gross turnover without giving any basis to justify the adoption of that figure ?" The Board of Revenue then stated a case, and the High Court disposed of the reference by answering the question in the affirmative by its judgment and order dated January 8, 1952.
The assessee then moved this Court and obtained special leave to appeal from the said judgment and order of the High Court.
The main contention of the assessee is that the High Court has not correctly answered the question of law referred to it.
Before we proceed to consider this contention of the assessee, it is necessary to clear the ground by delimiting the precise scope of the question referred to the High Court.
It is well settled that the jurisdiction of the High Court in the ' matter of incometax references is an advisory jurisdiction and under the Income tax Act the decision of the Tribunal on facts is final, unless it can be successfully assailed on the ground that there was no evidence for the conclusion on facts recorded by the Tribunal or the conclusion was such as no reasonable body of persons could have arrived at.
It is also well settled that the duty 40 of the High Court is to start with the statement of the case as the final statement of the facts and to answer the question of law with reference to that statement.
The provisions of the Indian Income tax Act are in pari materia with the provisions of the Act under our consideration, the main scheme of the relevant provisions of the two Acts being similar in nature, though the wording of the provisions is not exactly the same.
Under section 21 of the Act, the High Court exercises a similar advisory jurisdiction, and under sub section
(3) of that section, the High Court may require the Board of Revenue to state a case and refer it to the High Court, when the High Court is satisfied that the refusal of the Board to make a reference to the High Court under sub section
(2) is not justified.
Under sub section
(5) of section 21 the High Court hears the reference and decides the question of law referred to it, giving in a judgment the grounds of its decision.
In the case under our consideration, the question which was referred to the High Court related to the assessments made under section 10(2)(b) of the Act; in other words, the question related to those four quarters only for which the assessments were made under section 10(2)(b).
The question did not relate to the three quarters for which the assessee had filed no returns and assessments were made under section 10(4) of the Act.
At one place in its judgment, the High Court referred to a slight inaccuracy in the question framed, but it did not reframe the question so as to widen its scope and include the three quarters for which assessments were made under section 10(4) of the Act.
The question, as it stood and as it was answered by the High Court, did not relate to the propriety or legality of the assessments made under section 10(4) of the Act.
We must, therefore, make it clear at the very outset that the question relates to those four quarters only for which assessments were made under section 10(2)(b) of the Act, and the answer given to the question will govern those four quarters only.
Having thus indicated the precise scope of the question referred to the High Court, we proceed now to consider the main contention of the assessee.
We must first read the relevant provisions of the statute 41 under which the assessments were made.
Sub section (1) of section 10 of the Act states that if the Commissioner is satisfied without requiring the presence of a registered dealer or the production by him of any evidence that the returns furnished in respect of any period are correct and complete, he shall assess the amount of tax due from the dealer on the basis of such returns.
Clause (a) of sub section
(2) states what the Commissioner shall do, if he is not satisfied without requiring the presence of a registered dealer who furnished the returns or production of evidence that the returns furnished in respect of any period are correct and complete; the clause states that in that event the Commissioner shall serve on the dealer a notice in the prescribed manner requiring him either to attend in person or to produce or cause to be produced any evidence on which such dealer may rely in support of his returns.
Then comes cl.
(b) of sub section
(2) which must be quoted in extenso: " (b) On the day specified in the notice or as soon afterwards as may be, the Commissioner, after hearing such evidence as the dealer may produce, and such other evidence as the Commissioner may require on specified points, shall assess the amount of tax due from the dealer.
" These provisions are similar to the provisions contained in section 23 of the Indian Income tax Act.
Sub section (1) of section 10 of the Act corresponds to sub section
(1) of section 23 of the Indian Income tax Act; clause (a) of sub section
(2) of section 10 of the Act corresponds to sub section
(2) of section 23 of the Indian Income tax Act; and clause (b) of sub section
(2) of section 10 of the Act corresponds to sub section
(3) of section 23 of the Indian Income tax Act, though there are some verbal differences between the two provisions.
Sub section (3) of section 23 of the Indian Income tax Act requires the Income tax Officer to assess the total income of the assessee and determine the sum payable by him on the basis of such assessment, by "an order in writing"; but cl.
(b) of sub section
(2) of section 10 of the Act requires the Commissioner to assess the amount of tax due from the dealer and does not impose any liability as to "an order in writing.
" In spite of these differences, the 42 two provisions are substantially the same and impose on the assessing authority a duty to assess the tax after hearing such evidence as the dealer may produce and such other evidence as the assessing authority may require on specified points.
The point for our consideration is can the assessing authority, purporting to act under section 10(2)(b) of the Act, assess the amount of tax due from a dealer more or less arbitrarily or without basing the assessment on any materials whatsoever ? In the question referred to the High Court, the expression used is, "make an assessment on any figure of gross turnover without giving any basis to justify the adoption of that figure".
That expression is perhaps a little ambiguous, but read in the context of the statement of the case, the question can only mean this: can the assessing authority adopt a figure of gross turnover by pure guess and without referring to any materials on which the figure is based ? It is clear to us that, understood in that sense, the High Court has answered the question incorrectly.
The High Court went into an elaborate consideration, by way of comparison and contrast, of sub section
(4) and el.
(b) of sub section
(2) of section 10 of the Act.
It is unnecessary for us to make any pronouncement in this appeal with regard to the precise scope of sub section
(4) of section 10 of the Act, which corresponds more or less to sub section
(4) of section 23 of the Indian Income tax Act; nor is it necessary for us to decide if an assessment made under el.
(b) of sub section
(2) of section 10 of the Act, when the account books of the assessee are disbelieved, stands exactly on the same footing as an assessment made under sub section
(4) of section 10 when the assessee has failed to furnish his returns.
In some decisions relating to the corresponding provisions of the Indian Income tax Act, it has been said that the difference between the two is one of degree only, the one being more summary than the other.
These are questions which do not really fall for decision in the present appeal, which is confined to interpreting the true nature and scope of el.
(b) of sub section (2) of section 10 of the Act.
With regard to the corresponding provision in sub section
(3) of section 23 of the Indian Income tax Act, there is a decision of this 43 Court which, in our opinion, answers the question before us.
The decision is that of Dhakeswari Cotton Mills Ltd. vs Commissioner of Income Tax, West Bengal(1).
This Court observed: "As regards the second contention, we are in entire agreement with the learned Solicitor General when he says that the Income tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a Court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub section
(3) of section 23 of the Act, the Income tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all.
There must be something more than bare suspicion to support the assessment under section 23(3).
" In our view, the aforesaid observations clearly show that the High Court was in error in answering the question in the affirmative.
Firstly, the High Court treated the question referred to it as a pure question of fact; if that were so, then the High Court should have rejected the reference on the ground that it was not competent to answer a question of fact.
Then, the High Court proceeded to consider certain decisions relating to the interpretation of sub sections
(3) and (4) of section 23 of the Indian Income tax Act, and held that there was no difference between an assessment under sub section
(3) and an assessment under sub section
(4) of section 23.
The High Court applied the same analogy and on that footing held that there being no difference between an assessment under cl.
(b) of sub section
(2) and an assessment under sub section
(4) of section 10 of the Act, the answer to the question must be in the affirmative.
In our view, the approach of the High Court to the question referred to it was erroneous and the answer given to the question by it solely on the basis of sub section
(4) of section 10 of the Act was vitiated by that wrong approach.
It was not sub section
(4) of section 10 of the Act which the High Court had to consider; it had to consider the true scope and effect of cl.
(b) of sub section
(2) of section 10 of the Act.
(1) ; , 949.
44 Learned counsel for the respondent has strongly urged two points in support of the answer which the High Court gave.
Firstly, he has contended that, on a proper reading of the assessment orders and the orders of the Commissioner, it would appear that the gross turnover for the quarters in question was based on certain materials; therefore, the argument of learned counsel is that it is not correct to say that the figure of gross turnover was arbitrarily adopted or was adopted without reference to any evidence or any material at all.
We have examined the assessment orders in question, which form part of the statement of the case.
It is clear to us that what the Sales Tax Officer and the Commissioner did was to hold, for certain reasons, that the returns made by the assessee and the books of account filed by it were incorrect and undependable.
It is not necessary to repeat those reasons, because we must accept the finding of fact arrived at by the assessing authorities that the returns and the books of account were not dependable.
The assessing authorities rightly pointed out that several transactions were not entered in the books of account; and a surprise inspection made on July 15, 1947, disclosed certain transactions with a Bombay firm known as Messrs. Kishundas Lekhraj, which were not mentioned in the books of account; and finally, the assessee Was importing silver in the name of five confederates in order to suppress the details of the transactions etc.
The assessing authorities further pointed out that there was a discrepancy between the return filed for the quarter ending June 30, 1946, and the accounts filed in support of it; the return showed a gross turnover of Rs. 2,28,370 12 0 while the accounts revealed a gross turnover of Rs. 1,48,204.
All these we must accept as correct.
Having rejected the returns and the books of account, the assessing authorities proceeded to estimate the gross turnover.
In so estimating the gross turnover, they did not refer to any materials at all.
On the contrary, they indulged in a pure guess and adopted a figure without reference to any evidence or any material at all.
Let us take, for example, the assessment order for the quarter ending June 30, 1946.
45 The Sales Tax Officer said: "I reject the dealer 's accounts and estimate a gross turnover of Rs. 4,00,000. 1 allow a deduction at 2% on the turnover and assess him on Rs. 3,92,000 to pay sales tax of Rs. 6,125." For the quarter ending on September 30, 1946, the Sales Tax Officer said: "I reject his irregular account and estimate a gross turnover of Rs. 3,00,000 for the quarter and assess him on Rs. 2,94,000 to pay tax of Rs. 4,593 12 0." These and similar orders do not show that the assessment was made with reference to any evidence or material; on the contrary, they show that having rejected the books of account, the assessing authorities indulged in pure guess and made an assessment without reference to any evidence or any material at all.
This the assessing authorities were not entitled to do under cl.
(b) of sub.s.
(2) of section 10 of the Act.
Secondly, learned counsel for the respondent has referred us to several decisions on which the High Court relied and has argued that on the basis of those decisions, it must be held that the answer given by the High Court to the question referred to it was a correct answer.
We propose to examine briefly some of those decisions, though, as we have stated earlier, the question is really answered by the observations made by this Court in Dhakeswari Cotton Mills ' case (1).
The first decision is the Privy Council decision in Income tax Commissioner vs Badridas Ramrai Shop, Akola (2).
Lord Russell of Killowen in delivering the judgment of their Lordships made the following observations as respects a " best of judgment " assessment within the meaning of section 23 (4) of the Indian Income tax Act: " The officer is to make an assessment to the best of his judgment against a person who is in default as regards supplying information.
He must not act dishonestly, or vindictively or capriciously, because he must exercise judgment in the matter.
He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordships think, be able to take into consideration local knowledge and repute in regard to the assessee 's circumstances, and his own knowledge of previous returns by, and assessments of, the assessee, (1) , 949.
(2) (1937) 64 I.A. 102, 114 115.
46 and all other matters which he thinks will assist him in arriving at a fair and proper estimate: and though there must necessarily be guess work in the matter, it must be honest guess work.
" We find nothing in those observations which runs counter to the observations made in Dhakeswari Cotton Mills ' case(1).
No doubt it is true that when the returns and the books of account are rejected, the assessing officer must make an estimate, and to that extent he must make a guess; but the estimate must be related to some evidence or material and it must be something more than mere suspicion.
To use the words of Lord Russell of Killowen again, " he must make what he honestly believes to be a fair estimate of the proper figure of assessment" and for this purpose he must take into consideration such materials as the assessing officer has before him, including the assessee 's circumstances, knowledge of previous returns and all other matters which the assessing officer thinks will assist him in arriving at a fair and proper estimate.
In the case under our consideration, the assessing officer did not do so, and that is where the grievance of the assessee arises.
The next decision is Ganga Ram Balmokand vs Commissioner of Income Tax, Punjab (2).
It was held therein that where the income tax authorities were not satisfied with the correctness or completeness of the assessees ' accounts and, taking into consideration the state of affairs in general and the fact that the assessees had a large business and the profit shown by them was abnormally low in comparison with that of other persons carrying on the same business in the locality, calculated the taxable income by applying a flat rate of 7 per cent.
, the authorities were justified in applying such a flat rate, and the burden was on the assessees to displace the estimate.
There again, the estimate made was not a pure guess and was based on some materials which the Income tax Officer had before him.
Din Mohammad J. who gave the leading judgment, observed: " It cannot be denied that there must be some material before the Income tax Officer on which (1) ; , 949.
(2) 47 to base his estimate, but no hard and fast rule can be laid down by the Court to define what sort of material is required on which his estimate can be founded.
" With that observation we generally agree.
If, in this case, the Sales Tax authorities had based their estimate on some material before them, no objection could have been taken; but the question which was referred to the High, Court and which arose out of the orders of assessment was whether it was open to the said authorities to make an assessment on a figure of gross, turnover, without referring to any materials to justify the adoption of that figure.
In answering that question in the affirmative, the High Court has given a carte blanche to the Sales Tax authorities and has, in our opinion, misdirected itself as to the true scope and effect of cl.
(b) of sub section
(2) of section 10 of the Act.
The next decision is Gunda Subbayya vs Commissioner of Income tax, Madras (1).
This decision also does not help the respondent.
It was held in that decision that though there is nothing in the Indian Income tax Act which imposes a duty on an Incometax Officer, who makes an assessment under section 23 (3), to disclose to the assessee the material on which he proposes to act, natural justice requires that he should draw the assessee 's attention to it and give him an opportunity to show that the officer 's information is wrong and he should also indicate in his order the material on which he has made his estimate.
This decision is really against the respondent and does not lay down any rule which may be said to be inconsistent with the observations made by this Court in Dhakeswari Cotton Mills ' case (2).
The decision of the Lahore High Court in Seth Gurmukh Singh vs Commissioner of Income tax, Punjab (3) was specifically approved by this Court in Dhakeswari Cotton Mills ' case (2).
The rules laid down in that decision were these: (1) While proceeding under sub section
(3) of section 23 of the Income tax Act, the Income tax Officer is not bound to rely on such evidence produced by the assessee as he considers to be false; (2) if he proposes to make an estimate in disregard of (1) 1.
(2) ; , 949.
(3) 48 the evidence, oral or documentary, led by the assessee, he should in fairness disclose to the assessee the material on which he is going to found that estimate; (3) he is not however debarred from relying on private sources of information, which sources he may not disclose to the assessee at all; and (4) in case he proposes to use against the assessee the result of any private inquiries made by him, he must communicate to the assessee the substance of the information so proposed to be utilised to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and should further give him ample opportunity to meet it, if possible.
The decision does not lay down that it is open to the Income tax Officer to make an estimate on pure guess and without reference to any material or evidence before him.
The last decision to which we have been referred is the decision in Malik Damsaz Khan vs Commissioner of Income tax (1).
That again is a decision of the Privy Council.
In that case, the validity of the assessment under section 23 (3) of the Indian Income tax Act was not challenged by the assessee and the appeal was directed solely to the amount of assessment.
Their Lordships observed: 'But it appears to them that it was clearly competent for the Income tax Officer in the circumstances of the present case to accept the return as a valid return and proceed to assessment under section 23 (1) or section 23 (3) as the case might be.
Since he was not satisfied that the return was correct and complete he could not proceed under section 23 (1); he, therefore, as appeared upon the face of the assessment, proceeded under section 23 (3).
Neither in the incompleteness of the return nor in the fact that in any accompanying statement the appellant referred to his return as an estimate can their Lordships find any possible justification for the plea that the assessment was incompetent or that the Appellate Assistant Commissioner had no jurisdiction to entertain the appeal proceedings which the appellant himself initiated. " (1) 49 These observations do not help the respondent in any way; nor do they lay down any rule contrary to the rules laid down in Seth Gurmukh Singh 's case (1).
For these reasons we hold that the High Court, was in error in answering the question referred to it.
The appeal is accordingly allowed and the judgment and order of the High Court are set aside.
The answer to the question referred to the High Court is in the negative.
The appellant will be entitled to its costs both in this Court and in the High Court.
Appeal allowed.

summary/full:
The appellant filed the necessary returns, as required by the provisions of the Bihar Sales Tax Act, 1944, and produced the account books.
The Sales Tax Officer considered that the account books were not dependable and, after rejecting them as well as the returns, proceeded to estimate the gross turnover by adopting a figure by pure guess, without reference to any evidence or material, and made the assessment under section 10 (2) (b) of the Act.
Held, that under section 1O (2) (b) of the Bihar Sales Tax Act, 1944, a duty is imposed on the assessing authority to make the assessment after hearing such evidence as the assessee may produce and such other evidence as the assessing authority may require on specified points, and, in case the returns of the assessee and his books of account are rejected, the assessing authority must make an estimate, but this must be based on such evidence or material as the assessing authority has before him, including the assessee 's circumstances, knowledge of previous returns and all other matters which the assessing authority thinks will assist him in arriving at a fair and proper estimate.
Dhakeswari Cotton Mills Ltd. vs Commissioner of Income Tax, West Bengal, ; and Income tax Commissioner vs Badridas Ramrai Shop, Akola, (1937) L.R. 64 I.A. 102, relied on.