judgement:
l Appeals Nos.
2347 of 1968 and 1175 of 1971.
Appeals by certificate/special leave from the judgment and order dated November 15, 1967 of the Calcutta High Court in Income tax Reference No. 155 of 1963.
S.T. Desai, B. B. Ahuja, R. N. Sachthey and B. D. Sharma, for the appellant (in both the appeals).
B.Sen, N. R. Khaitan, B. P. Maheshwari and Krishna Sen, for the respondent (in both the appeals).
621 The Judgment of the Court was delivered by Hegde, J.
These appeals arise from the decision of the High.
Court of Calcutta in a Reference under section 66(1) of the Indian Income tax Act, 1922 (to be hereinafter referred to as the Act).
That was a Reference made by the Income tax Appellate Tribunal, 'A ' bench, Calcutta.
In that Reference after stating the case, the Tribunal referred the following question for obtaining the opinion of the High Court.
"Whether on the facts and in the circumstances of the case the Tribunal rightly excluded the sum of Rs. 61,656/ from being assessed as an extra dividend income of the assessee." The High Court answered that question in the affirmative.
Aggrieved by that decision, the Commissioner of West Bengal has brought Civil Appeal No. 2347 of 1968 on the strength of the certificate issued by the High Court under section 66 A(2) of the Act.
But the certificate given by the High Court is not supported by any reason.
Hence the same cannot be held to be a valid certificate.
Because of the invalidity of the certificate that appeal must be held to be not maintainable.
In order to get over this difficulty, the, Commissioner moved this Court for special leave to appeal against the judgment of the High Court.
Special Leave asked for was granted after condoning the delay in filing the appeal and the appeal arising therefrom was numbered as Civil Appeal No. 1175 of 1971.
The assessee is a company.
Herein we are concerned with its assessment for the assessment year 1959 60, the relevant previous year ending on March 31, 1959.
The assessee company was holding 458,071 shares In Pilani Investment Corporation Ltd. (which will hereinafter be referred to as the "parent company").
As per the resolution of the parent company declaring the dividends, the assessee company became entitled to receive on November 18, 1958 dividend amounting to Rs. 1,83,228/40 Np.
That was at the rate of 40 N.P. per share.
The amount of dividend receivable by the assessee company was paid to it partly in cash and partly in share scrips.
It may be noted at this stage that the parent company is an investment company.
The share scrips delivered to the assessee company were of M/s. Gwalior Rayon and Silk Manufacturing Co. Ltd. and Hind Cycles Ltd. The Income tax Officer valued those shares as per their market value on the date on which those shares became the assets of the assessee company.
The market value of those shares on that date was Rs. 2,44,526/ .
He, therefore, added to the amount of dividend purported to have been declared, a sum of Rs. 61,500/ in computing the assessable income of the assessee 622 ,company.
Aggrieved by that order, the assessee company went ,up in appeal to the Appellate Assistant Commissioner.
The Appellate Assistant Commissioner upheld the order of the Income tax Officer and rejected the contention of the assessee company, that those shares should be valued as per their face value.
Thereafter the assessee company took up the matter in second appeal to the Appellate Tribunal.
The Tribunal allowed the assessee 's appeal.
It held that in order to bring any distribution within the category of dividend, it must be proved as a fact that what was distributed by the company was its accumulated profits.
The Tribunal appears to have been of the view that the distribution of share scrips was not a distribution of profits.
Hence their value cannot be considered as dividend.
One other reason which persuaded the Tribunal to accept the appeal of the assessee company was that the share scrips received by the assessee company had been valued at their face value in the hands of the parent company 'for the purpose of assessment of its profits.
The Tribunal thought that it was impermissible for the Income tax Officer to value those shares in one manner in the hands of the parent company and in another manner in the hands of the assessee company.
Yet another consideration that weighed with the, Tribunal was that the assessee company had not sold those shares.
Therefore it made no profits in respect of those shares.
So long as it retained those shares in its ,own hands, it cannot be said that it made any profits in respect of those shares as it cannot be said that it sold those shares to itself for a higher price.
The High Court accepted the first two grounds relied on by the Tribunal.
In addition it relied on the circumstance that under section 18(5) of the Act, the assessee can get refund of tax only on the basis on which the parent company was taxed.
Before proceeding to examine the correctness of the conclu sions reached by the Tribunal and the High Court, it is necessary to note at this stage that one other firm which was a shareholder of the parent company is Ujjain General Trading Society (P) Ltd.
During the assessment year 1959 60.
the assessment year with which we are concerned in these appeals in accordance with the aforementioned resolution dated November 18, 1958, that Company had also been paid dividend by the parent company partly in cash and partly in shares of Gwalior Rayon and Silk Manufacturing Co. Ltd. and Hind Cycles Ltd. In the assessment of that firm also, the question arose whether it was open to the Income tax Officer to value the shares distributed to that company at a price higher than its face value.
The facts of this case and that, case are identical.
Therein the Appellate Tribunal (a different Tribunal) held that it was permisible for the Income 623 tax Officer to do so.
In appeal the Madhya Pradesh High Court upheld the decision of the Tribunal see Ujjain General Trading Society (P) Ltd. vs Commissioner of Income tax, Delhi(1).
Thus, on the same question of law two different High Courts have arrived at two different conclusions.
It is now well settled by the decision of this Court in Kantilal Manilal and ors.
vs Commisioner of Income tax, Bombay North, Kutch and Saurashtra, Ahmedabad(1) that dividend need not be distributed in money only.
It may be distributed by delivery of property or right having monetary value.
Further, the question whether a dividend has been lawfully distributed or not, in the matter of bringing the dividend declared to tax is also irrelevant so long as the distributing company passes a resolution distributing dividends.
In so doing, the distributing company may act illegally and thereby incur penalties.
But yet the amount so distributed as dividend is assessable in the hands of the receiver of the dividends in view of section 16(2) which provides that for the purpose of inclusion in the total income of an assessee, any dividend shall be deemed to be income of the previous year in which it is paid.
This position is made clear by the decision of this Court in Kishinchand Chellaram and ors.
vs Commissioner of Income tax Bombay(3).
Therefore the question whether dividend distributed by the parent company was out of the profits of that company or not is immaterial though in view of section 205 of the and section 2(6A) of the Act, only the profits earned in the year of assessment and the accumulated profits could have been distributed as dividends.
All that we have to see is as to what is the income received by the assessee company in the shape of dividends.
We have earlier seen that the income received by the assessee company need not be in the shape of cash only.
It may also be some other property or right which has monetary value.
Therefore when dividend is received in kind, in order to find out the true income received by an assessee, the property that has been received by him has to be valued on the basis of its market value.
Otherwise it is not possible to compute the income received by him.
It is well known that the face value of shares need not be their real value at a given point of time.
The market price of particular shares may be very much more than their face value or very much less.
It would be wrong to say that when shares a re distributed as dividend, the person who receives them gets only their face value in terms of money.
What he really receives is the market value of those shares as on the date he became entitled to those shares.
The value of (1) (2) (3)46 T.T.R. 640. 624 the shares distributed does not depend on the valuation made by the distributing company.
The income earned by an assessee has to be determined by the authorities under the Act and not by a third person.
If it is otherwise several companies may distribute their dividends in kind and under value the goods distributed and thereby facilitate evasion of tax by their share holders.
Acceptance of such a contention will be destructive of ,the very basis of taxation of dividends.
The question whether the shareholder retains those shares or sells them to others at profit or loss is irrelevant.
An income does not cease to be an Income merely because the person who receives it retains it in his hands.
The fact that he receives it in kind makes no difference in principle.
What is brought to tax in the concerned assessment year is theincome received by the assessee and not the profits earned by himby dealing with that income.
In our opinion, the Tribunal went wrong in thinking that as the assessee company had retained those shares in its own hands those shares should be valued at their face value.
At this juncture, it is necessary to mention that in some previous years also the parent company had distributed a portion of its share holding as dividend to its share holders.
It appears, in those years the market value of those shares was less than their face value and the parent company valued those shares for the purpose of its income tax on the basis of market value and not according to their face value.
The parent company appears to believe in the saying "Heads I win tails you loose".
But that is only by the way.
The only question that we have to decide is what is the income received by the assessee company during the assessment year in question the income in the real sense.
On this question there can be no two answers and the only answer is that the income received by it is the cash amount received plus the value of the shares received the real value of the shares as on the date the asesssee company became entitled to it.
Both the Tribunal and the High Court have attached con siderable importance to the fact that while assessing the parent company, the assessing authority had valued those shares at their face value.
That being so, they have opined that it was not open to the authorities under the Act to value those shares differently in the bands of the assessee company.
Here again we are unable to appreciate their reasoning.
Ile fact that the Department incorrectly valued those shares in the hands of the parent company does not confer a right on the assessee company to insist that the error should also be carried to the assessment of the assessee company.
No one gets a vested right in an erroneous order.
Because of erroneous valuation of the shares in the hands of the parent company, the assessee may conceivably get a lesser amount 625 as refund under section 18(5) but that circumstance cannot alter the levy to be imposed on the assessee company.
Mr. B. Sen, learned Counsel for the assessee company, tried to give a different shape to the case in the course of his argument.
He, in our opinion , rightly did not base his arguments on thegrounds relied on by the Tribunal and the High Court.
On theo ther hand, he contended that on a proper interpretation of therelevant provisions of the Act, it would be seen that the schemeof the Act, in the matter of levying tax on dividend income is that the Income tax Officer should adopt a uniform method in assessing both the company declaring dividends as well as its shareholders who receive the dividend.
In support of this theory of his he relied on sections 12(1 A), 16(2), 18(5), 20 and 35 (9) of the Act.
Dividend is treated as income in view of section 12(1 A).
Net dividend received by the shareholder is grossed up for inclusion in the total income of the assessee under section 16(2).
Section 18(5) provides for refund of the tax paid on the dividend income by the company which has distributed dividend.
Section 20 provides for the issuance of a certificate showing the gross dividend, tax payable on that dividend and the net dividend.
Section 35(9) empowers the Income tax Officer to recover from the person who receives dividend the tax in respect of the same, payable by the company which distributed the dividend but in fact not paid by that company within the prescribed time.
On the basis of these provisions, he urged that if the dividend paid in kind is valued in one manner in the hands of the company which distributed it and in a different manner in the hands of the person who received it, then the assessee will not be able to get the refund to which he would have been entitled to had that property been valued properly in the hands of the distributing company.
Therefore, he urged that we must spell out the scheme put forward by him.
Ingenious, though the argument is, it rests on no foundation.
There is no provision in the Act which makes the assessment of income dependent on refund.
The provisions relating to assessment are independent of refund though the provisions relating to refund may depend on assessment.
Equitable considerations are not relevant in interpreting the provisions of a taxing statute, apart from the fact the equity pleaded in this case is remote possibility.
None of the provisions relied on by Mr. Sen afford any basis for the scheme sought to be established by him.
In our opinion the High Court erred in answering the question referred to it in the affirmative and in favour of the assessee.
For the reasons ' mentioned above we discharge that answer and answer that question in the negative and in favour of the Department.
L 3Sup.
C.T./ /2 626 costs.
Civil Appeal No. 2347 of 1968 is dismissed as being not maintainable but without any order as to costs.
G.C, C.A. No. 1175 of 1971 allowed.
C.A. No. 2347 of 1968 dismissed.

summary/full:
The assessee company was holding certain shares in an investment company which was its parent company.
The amount of dividend receivable by the assessee company was paid to it partly in cash and partly in share scrips of two other companies.
The relevant assessment year was 1959 60.
For the purpose of assessment under the Income tax Act, 1922 the Income tax Officer valued those shares as per their market value on the date on which those shares became the assets of the assessee company.
He therefore added to the amount of dividend purported to have been declared a sum of Rs. 61,500/ in computing the assessable income of the assessee company.
The Appellant Assistant commissioner upheld the order of the Income tax Officer and rejected the contention of the assessee company that those shares should be valued as per their face value.
The Tribunal allowed the assessee 's appeal on the grounds that : (i) the distribution of share scrips was not a distribution of dividend, (ii) the share scrips received by the assessee company had been valued at their face value in the hands of the parent company for the purpose of assessment of its profits and (iii) the assessee company had not sold the shares and so there could be no profit in respect of those shares.
The High.
Court accepted the first two grounds relied on by the Tribunal.
In addition it relied on the circumstance that under section 18(5) of the Act, the assessee can get refund of tax only on the basis on which the parent company was taxed.
The certificate granted by the High Court for appeal to, this Court was found to be invalid because it did not give any reasons.
This Court however allowed the revenue to appeal by special leave.
On behalf of the respondent assessee it was submitted that on a proper interpretation of the relevant provisions of the Income tax Act, 1922 the scheme of the Act in the matter of levying tax on dividend income was that the Income tax Officer should adopt a uniform method in assessing both the company declaring dividend as well as its shareholders who receive the dividend.
HELD : (i) It is well settled by the decision in Kantilal Manilal 's case that dividend need not be distributed in money only.
It may be distributed by delivery of property or right having monetary value.
, [623 B] Kantilal Manilal and Ors.
vs Commissioner of Income tax, Bombay North, Kutch and Saurashtra, Ahmedabad, 67 I.T.R. 315, applied.
Further the question whether a dividend has been lawfully distributed or not is also irrelevant in the matter of bringing the dividend declared to tax so long as the distributing company passes a resolution distributing dividends.
In so doing the distributing company may act illegally and thereby incur penalties.
But yet the amount so distributed as dividend is assessable in the, hands of receiver of the dividend in view of section 16(2) which provides that for the purpose of inclusion in the total income of an 620 assessee, any dividend shall be deemed to be income of the previous year in which it is paid.
[623 C D] Kishnichand Chellaram and Ors.
vs Commissioner of Income tax, Bombay, , relied on.
(ii)It is well known that the face value of shares need not be their real value at a given point of time.
It would be wrong to say that when shares are distributed as dividend, the person who receives them gets only their face value in terms of money.
What he really receives is the market value of those shares as on the date he 'became entitled to those shares.
The value of the shares distributed does not depend on the valuation made by the distributing company.
The income earned by an assessee has to be determined by the authorities under the Act and not by a third person.
If it is otherwise several companies may distribute their dividend in kind and undervalue the goods distributed and thereby facilitate evasion of tax by their share holders.
[623 G 624 B] (iii)The question whether the shareholder retains those shares or sells them to others at profit or loss is irrelevant.
An income does not cease to be an income merely because the person who receives it retains it in his hands.
The fact that he receives it in kind does not make any difference in principle.
The Tribunal went wrong in thinking that as the assessee company had retained those shares in its own hands those shares should be valued at their face value.
[623 E H] (iv)The Tribunal and the High Court also went wrong in holding that it was not open to the authorities under the Act to value the shares differently in the hands of the assessee company when they had valued them at their face value in assessing the parent company.
The assessee company could not insist that the error should also be carried to the assessment of the assessee company.
No one gets any vested right in an erroneous order.
[624 G H] (v)Because of erroneous valuation of the shares in the hands of the parent company, the assessee may conceivably get a lesser amount as refund under section 18(5) but that circumstance could not alter the levy to be imposed on the assessee company.
There is no provision in the Act which makes the assessment of income dependent on refund.
The provisions relating to assessment are independent of refund through the provisions relating to refund may depend on assessment.
[625 E G] The appeal must accordingly be allowed.


judgement:
iminal Appeal No. 3 of 1971.
Appeal by special leave from the judgment and order dated October 30, 1970 of the Jammu and Kashmir High Court in Criminal Appeal No. 12 of .1969 and Criminal Reference No. 10 of 1969 628 Ram Asray Misra, Risi Ram, O. P. Rana and R. Bana, for the appellant.
D. Mukherjee and R. N. Sachthey, for the respondent.
The Judgment of the Court was delivered by Dua, J.
Only two points were argued at the bar in this appeal by special leave because if we agree with the appellant 's learned counsel on these points then the appeal must succeed ,and the appellant must be acquitted without going into the other points relating to the appellant 's guilt intended to be raised on his behalf by his counsel.
The relevant facts of the ease necessary for appreciating the two important points relating to the legality of the appellant 's conviction may briefly be stated On the morning of October 7, 1967 a football match was being played at the Srinagar Stadium between the Kashmir Uni versity and the Punjab University teams.
The Kashmir University team (hereafter called the home team) was the first to secure one goal against the Punjab University team (hereinafter called the visiting team).
The players of the home team were naturally ,cheered by the spectators, when they scored the first goal.
After ;a few minutes the visiting team equalised the score and a little later secured another goal against the home team.
This in turn brought cheers and applause for the visiting team from the spectators.
It appears that some of the more enthusiastic spectators rushed to the football ground and are said to have made some provocative gestures towards the players of the home team.
This apparently annoyed not only the players of the home team but also their sympathisers amongst the spectators and a clash between the rival sets of sympathisers of the two teams amongst the spectators followed.
As usually happens on such occasions stones were thrown at each other by the two rival groups.
These rival groups are stated to be those of Kashmir is on the one side and Punjab is on the other.
The headquarters of the P.A.C. (Police Armed Constabulary) are also stated to be located in the Stadium and some members of that force were present at the match.
The young men of the P.A.C. came to the spot and with their dandas put the people to flight.
Up to this stage there seems to be no controversy.
According to the prosecution case as stated by P. W. Abdul Gani Sheikh, on April 24, 1969 when the people bad left the Stadium the appellant, to use the words of the witness in his examination in chief. ". was seen descending the bund, in the direction of the stadium cycle shed.
The accused carried a gun in the hand.
He had a helmet on the bead.
629 Getting down the bund, the accused got near the cycle shed.
There he did something for a minute or a half.
Forthwith he opened the door of the cycle shed and came out.
The accused was facing the Militia wall.
As he turned his face that side, he fired a shot.
The shot hit the Militia wall.
I was at a distance of nearly 50 yards from the accused.
After firing the shot, the accused came on the main road which leads to the aerodrome.
A zamindar was going on it.
At the sight of the accused he stopped.
The accused fired a shot at him.
He fell along the drain adjoining the Militia wall.
Thereafter the accused turned to the right side.
There, on the other side of the road, in the direction of Hazuri Bagh Maidan, a young man in suit and boots was going there.
At the sight of the accused he too stopped.
There was exchange of some talk between him and the accused.
I did not hear what he spoke.
However, I saw that man facing the accused, with.
folded hands.
Then the accused fired a shot at him.
He fell down immediately on receiving the shot.
Then the accused again turned towards that Zamindar, at whom he had fired the first shot.
He fired another shot at him.
Thereafter, the accused turned towards a boy, aged 15 or 16 years, who was going towards Mira Kadal.
He fired a shot at him.
The boy did not fall down, may he took to his heels.
He ran in the direction of the tonga stand on the side of Mira Kadal.
Thereafter he fired again at the Young man in suit and boots, at whom he had already fired a shot.
Thereafter he fired another shot at the Zamindar.
The accused fired more shots as well after that.
In the meantime, three more men appeared there.
They were the accused 's men.
Besides.
a sardar of the K. A. P. also appeared at the spot.
They got hold of the accused and took him inside.
They were trying to snatch the rifle from the accused.
Another person held the rifle and the accused was taken inside the stadium.
I made a report of this occurrence at police station Sher Ghari, which may be at a distance of 150 yards from the place of occurrence.
I made an oral report.
I have heard the contents of the first information report.
The same are correct.
The police recorded what I stated.
I affixed my signatures to it.
It is correct.
(Note : It is marked Ext.
P/ I)" The learned Sessions Judge, Srinagar, Qazi Mirajudin, in whose court the appellant was tried for offences under sections 302 and 307, I.P.C. convicted him for both the offences imposing 630 the sentence of death under section 302 and rigorous imprisonment for five years under section 307, I.P.C. Charges under section 302 related to the death of Ghulam Mohd. Fuchey who died in the hospital on the day of the occurrence and also to the death of Aziz Teli who died two days later on October 9, 1967 at 5 50 p.m.
The charge under section 307, I.P.C; related to the injuries caused to P. W. Abdul Ghani Sheikh.
On appeal, the High Court which had before it also the sidered it necessary to examine the ballistic expert for elucidating certain points.
That Court permitted the appellant also to examine another ballistic expert Siyaram Gupta by name and also Shri Ratan Sahgal and C. L. Wasan, Commandant (U.P. P.A.C.).
,C. L. Wasan was allowed to be examined even though he had already been examined earlier as a prosecution witness.
It may also be stated here that the appellant wanted to produce some more witnesses in defence, but permission to do so was declined by the High Court and the appellant 's Counsel before us raised a grievance on this score as well.
The High Court, after considering the evidence, dismissed the appeal and confirmed the sentence of death.
An oral prayer for certificate to appeal to this Court was declined.
On behalf of the appellant it is not disputed before us that somebody did resort to firing during the disturbance in the course of the football match on October 7, 1967 and two persons were actually killed as a result thereof.
The first question raised before us in this connection is that there is no legal evidence that it was the appellant who fired the fatal and other shots in question on this occasion.
This indeed is the principal point urged.
And the second point which arises out of discussion on this point relates to the scope and effect of sections 161 and 162, Cr.
P.C. and the admissibility at the trial of the statements made by some of 'the witnesses to the police during investigation under section 161, Cr.
The High Court appears to have relied on such statements in their entirety for seeking corroboration of the statement made by the prosecution witnesses in court and ultimately for the purpose of sustaining the appellant 's conviction.
Incidentally, the manner in which the investigating agency conducted the investigation of this case also came up for serious criticism at the hands of the appellant 's counsel, it being urged that the investigation was not objective and impartial but smacked of prejudice against the appellant and was, therefore, unfair.
The investigation was however, sought to be justified by the counsel for the State.
The evidence of identification of the appellant on which the courts below placed reliance for convicting the appellant has to be with great care in order to see if such evidence is 631 legally admissible and on the facts and circumstances of this case this scrutiny must, in our opinion, include within its purview the manner in which the investigation of the alleged offences was conducted by the authorities concerned.
Before dealing with the evidence relating to identification of the appellant it may be remembered that the substantive evidence of a witness is his evidence in court but when the accused person is not previously known to the witness concerned then identification of the accused by the witness soon after the former 's arrest is of vital importance because it furnishes to the investigating agency an assurance that the investigation is proceeding on right lines in addition to furnishing corroboration of the evidence to be given by the witness later in court at the trial.
From this point of view it is a matter of great importance both for the investigating agency and for the accused and a fortiori for the proper administration of justice that such identification is held without avoidable and unreasonable delay after the arrest of the accused and that all the necessary precautions and safeguards are effectively taken so that the investigation proceeds on correct lines for punishing the real culprit.
It would, in addition, be fair to the witness concerned who was a stranger to the accused because in that event the chances of his memory fading are reduced and he is required to identify the alleged culprit at the earliest possible opportunity after the occurrence.
It is thus and thus alone that justice and fairplay can be assured both to the accused and to the prosecution.
The identification during police investigation, it may be recalled, is not substantive evidence in law and it can only be used for corroborating or contradicting evidence of the witness concerned as given in court.
The identification proceedings, therefore, must be so conducted that evidence with regard to them when given at the trial, enables the court safely to form appropriate judicial opinion about its evidentiary value for the purpose of corroborating or contradicting the statement in court of the identifying witnesess.
We may now turn to the evidence on the record.
Abdul Ghani Sheikh who claims to be the eye witness to the occurrence lodged the first information report (exhibit P 1) at 11 30 a.m. at the police station only about 200 feet away from the stadium.
In order to appreciate the value of this report and the value of the testimony of this witness in court in regard to the description of the alleged culprit we consider it proper to reproduce the whole of this report.
It says "At the Stadium a football match was being plaved.
From there the P.A.C. men chased and turned out the people.
All the people came out from the gates on 632 the East and North.
They were going back through the Hazuri Bagh Road.
I was standing near the cycleshop which is situated close to the Stadium chowk.
A P.A.C. jawan came out of the main gate.
He carried a rifle.
He fired a shot towards the road.
It went in the direction of the Militia wall.
Thereafter the P.A.C. Jawan came on the road and fired shots.
lie went towards the Militia gate and inflicted bullet injuries on three of the persons going on the Road.
Then a P.A.C. Sardar and a B.S.F. Jawan with three P.A.C. men who carried Dandas in the hands, got held of the said Jawan.
They took him inside the Stadium.
The said Jawan fired nine or ten shots recklessly, though the way farers were going on the road in a peaceful manner.
There was no crowd, nor was there any breach.
* * * In the trial court in his examination in chief he deposed that he had seen the accused coming down the bund with a gun in his hand and helmet on his head and that he fired the fatal and other shots.
The relevant portion has already been reproduced earlier in this judgment.
In cross examination he stated that apart from the first information report he did not make any statement to the police excepting that he signed the seizure memos.
He also could not remember if he had stated to the police that the accused was known to him.
He was further unable to remember if the police had asked him this question.
After the occurrence he saw the accused only in court and he was never required to identify putting on a helmetand had also grown a beard when seen in court though at thetime of the occurrence the accused had a helmet on his head.
At this stage we may appropriately point out that according to P. W. Chaudhuri Ghulam Nabi Mir, S.R.O., Maharajganj, who, on hearing reports of gun shots while he was in the police station, had come out on the road, the statement of Abdul Ghani Sheikh was actually recorded by him.
This, according to the S.H.O. was recorded near the Stadium gate at the chowk ' which means the police beat where three roads meet.
On this report witness endorsed a note to the thana for drawing up F.I.R. Chaudhri Ghulam Nabi Mir has also stated in cross examination that he recorded the statements of the pro secution witnesses during investigation under section 161, Cr.
Curiously all those statements were admitted in evidence and marked as exhibits by the trial court.
According to the concluding part of Ghulam Nabi Mir 's cross examination in court, Abdul Ghani Sheikh had at first met him near the verandah of the 633 police station and since he was leaving in the direction of the place of occurrence Abdul Ghani Sheikh followed him.
From the statements made to the police which were exhibited in evidence we find that Abdul Ghani Sheikh also made a statement on October 7, 1967 marked as exhibit D 2.
It is important to point out that, according to Abdul Ghani Sheikh, he had not made any statement to the police besides the report exhibit P 1.
From the testimony of P. W. Abdul Ghani Sheikh it is obvious that he did not give any description of the person alleged to have fired the shots in question in exhibit P 1 which was the first information given by him to the police and on which the investigation started; nor did he state in exhibit P 1 that he knew the appellant previously.
He was never made to identify the accused.
He has obviously told lies on a vital point when he says in the witness box that excepting exhibit P 1 he had made no other statement to the police.
Though the contents of those statements cannot be used for any purpose other than that laid down in section 162, Cr.
P.C. the fact of that statement having been made can certainly be relied upon for the purpose of showing how untruthful Abdul Ghani Sheikh is or at least, taking a charitable view of this contradiction on his part, how undependable his memory is.
No attempt was made on behalf of the State before us to show if this witness had identified the accused in the committing magistrates court.
We have referred to the statement of this witness under section 161, Cr. PC.
because the High Court seems to have taken into consideration not only the statement of this witness under section 161, Cr.
P.C. for seeking corroboration of his testimony in court but the statements of a large number of other witnesses during investigation have also been used for this purpose.
This is what the High Court has said in its judgment : "Lastly it was contended that although some of the eye witnesses have stated that the appellant Rameshvwar Singh was called by name at the spot by his fellow constables and saying that he would get involved, yet the name of the appellant was not mentioned in the FIR, nor was the fact that the appellant was called by name and warned by his fellow constables stated therein.
This circumstance in our opinion is not sufficient to demolish the prosecution case or cast any serious doubt thereon.
To begin with, the first informant, Abdul Ghani Sheikh, has not stated in his evidence about the fact of the accused being called by name by his fellow constables.
Furthermore, this was a matter of minute detail and since the FIR was lodged imme diately after the occurrence, it may be that this particular detail was not mentioned in the FIR by the informant.
What is more important is that all the eye 634 witnesses including the informant were examined by the police immediately after the occurrence was over and the defence has not cross examined the investigating officer on the question that the fact mentioned above was not stated by the eye witness before the Investigating Officer at that time.
Thus it should be taken for granted that this fact though not mentioned in the FIR was clearly stated by the eye witnesses in their state ments before the police soon after the FIR was lodged.
In fact the statements of the eye witnesses recorded by the police which have been marked by the court below as Exs.
D 1 to 6 clearly show that the above mentioned fact was stated before the police when they were examined soon after the FIR was lodged.
Thus the charge that said fact appears to be belated one appears to us to be groundless." The High Court was clearly in error in taking into consideration the contents of the statement recorded under section 161, Cr.
P.C. during the course of investigation for the purpose of finding corroboration of the statements made in court.
Section 162, Cr.
P.C. lays down the limited use of such statements.
It says "Statements to police not to be signed; use of statements in evidence.
in the course of an investigation under this Chapter shall, if reduced into writing, be signed by the person making it; nor shall any such statement or any record thereof, whether in a police diary or otherwise, or any part of such statement or record, be used for any purpose (save as hereinafter provided) at any inquiry or trial in respect of any offence under investigation at the time when such statement was made; Provided that when any witness is called for the prosecution in such inquiry or trial whose.
statement has been reduced into writing as aforesaid, any part of his statement, if duly proved, may be used by the accused, and with the permission of the Court, by the prosecution to contradict such witness in the manner provided by Section 145 of the and when any part of such statement is so used, any part thereof may also be used 635 in the re examination of such witness, but for the purpose only of explaining any matter referred to in his cross examination.
(2) Nothing in this section shall be deemed to apply to any statement falling within the provisions of Section 32, Clause (1) of the , or to affect the provisions of Section 27 of that Act.
" The language of this section is plain and explicit and it admits of no doubt as to its meaning.
We do not consider it necessary to refer to a large catena of decisions reported in law reports and cited in text books stating the legal position with regard to the restricted use of such statements as laid down in section 162, Cr.
P.C. prohibiting the court from using them as corroborative of the statements in court.
Once this part of the reasoning of the High Court is elimi nated all that is left is the statement of Abdul Ghani Sheikh in court and his report exhibit P 1 made to the police.
That report, it is not disputed, does not contain any description of the alleged culprit.
Had the witness known the culprit earlier, one would have reasonably expected him to so state in the report.
if, however, without knowing him earlier he had formed a distinct impression of the culprit 's looks and bearing so as to 'be able to identify him later, then also one would have expected this witness to give in the report the description of the culprit as seen by him so as to provide the investigating authorities with something tengible as guideline to start with the investigation.
His identification in court without any previous identification at a test parade and without any description in exhibit P 1 to corroborate it, is far too slender a piece of evidence to base the appellant 's conviction thereon.
So, Abdul Ghani Sheikh 's evidence seems to us to be of no value in bringing home the offence to the appellant.
In the opinion of the High Court the evidence of Abdul Ghani Sheikh and of Noor Hussain is corroborated by P.Ws.
Abdul Hamid and Noor Mohammed Sheikh.
This is what the High Court says "The evidence given by Abdul Ghani Sheikh the informant and also Noor Hussain, a resume of which has been given above is corroborated by Abdul Hamid and Noor Mad.
Sheikh PWs in all material particulars.
All these witnesses, Noor Hussain, Abdul Hamid and Noor Mohd. have stated that they know the accused before the occurrence and they had occasion to see him before.
They disclosed the name of the accused on the 636 very date of occurence when they said that they heard his three companions shouting at him "Ramesh what are you doing, don 't be mad, you will be involved." Ghulam Nabi Mir, S.I. P.W. has clearly stated that it was on the very day of occurrence that the name of Rameshwar Singh, accused, was disclosed by Abdul Hamid and by some other witnesses.
" Here again, the High Court has committed the same error in seeking corroboration from the statements said to have been made to the police by Abdul Hussain and others during investigation.
We have also to consider further the circumstance that the High Court has not adverted to the omission on the part of the investigating authorities to take steps to arrest the appellant soon after the alleged disclosure of his name to them by the said witnesses, According to Ch.
Ghulam Nabi Mr. S.H.O., the appellant 's name was disclosed on the very day of the occurrence.
There is no plausible reason discernible on the record as to why such steps were not taken if the appellant 's identity as a result of the disclosure of his name became known to the authorities the same day.
The High Court appears to us not only to have erroneously disregarded the forms of legal process but has also failed to advert to important and vital aspects, thereby causing serious prejudice to the appellant.
In view of what has just been stated prima facie grave and substantial injustice cannot but be considered to have resulted from the infirmities in the impugned judgment.
Let us now see if the evidence of Noor Hussain, Abdul Hamid and Noor Mohd. Sheikh in any way advances the case of the prosecution.
Abdul Hamid (P.W. 2) who has a cycle shop about 9 or 10 yards from the Stadium chowk claims to have gone to see the match in question.
When the P.A.C. young men are said to have turned the people out of the Stadium during the course of the trouble this witness also went out.
He claims to have watched the entire occurrence from the roof of his shop through the window panes because he was afraid of being seen in the open lest he may also, be fired at.
It is from there that he claims to have heard when the P.A.C. men addressed the appellant : "Have you turned mad ? Ramesh, have you turned mad This seems to us to be wholly unacceptable and it appears to us that these words have been introduced in the, evidence for the purpose of providing the missing link of identification of the appellant.
Noor Mohd. Sheikh is the brother of Abdul Ghani Sheikh.
He also did not know the appellant and he never saw him after the occurrence till he came to court, several months later.
Though he claims to have given the description of the culprit to the police and to have also expressed his ability to identify him, he was for reasons not disclosed on the record, never 637 made to identify the appellant at any test identification parade,, He also claims to have gone to the police station with Abdul Ghani Sheikh though the latter claims to have gone there all alone.
Now, if he had actually heard the name of the appellant being shouted by the P.A.C. men as claimed by him and had accompanied his brother to the police station then there is no reason why the name of the culprit was not disclosed to the police and not included in the report, exhibit P 1.
Noor Hussain has also stated that three young men of the appellant 's unit came to the place of occurrence after the appellant had fired 8 or 9 shots and they shouted addressing the appellant : "Ramesh what are you doing, you will 'be implicated" and according to him they continued shouting these words for some time, before they secured the appellant and took him inside.
In his cross examination he has admitted that on the day of the occurrence no police officer asked him whether he was an eye witness.
When he was approached by the police later he is stated to have told them : "The whole of the occurrence has taken place, outside the thana and you are not aware of it" Beyond this remark there was, according to him; no conversation between him and the police and indeed he asserts that no statement was taken from him on the day of the occurrence.
In fact his position is that the statement in court was the only statement he had ever made relating to the occurrence.
It is interesting to note that his statement before the police purporting to be under section 161, Cr.
P.C. is exhibited as D 6 and is dated October 7, 1967.
We are wholly unable to place any reliance on the testimony of anyone of these witnesses, who seem to us to be clearly untruthful.
Further, it appears from the evidence of C. L. Wasan (D.W. 2) who was again examined in the High Court that an informal identification parade of all the constables belonging to U.P. (P.A.C.) contingent had been held on October 7, 1967 in which the appellant was also present.
Some members of the public were also there who were asked to identify the culprit but none of them were able to do so.
, We need not dilate on this evidence as there was no formal record of any such test identification parade.
The significant fact, however, which casts serious doubt on the truth of the story of disclosure of the appellant 's name to the police on October 7, is the admitted omission by Ch.
Ghulam Nabi Mir, S.H.O. to summon the appellant for interrogation soon after the alleged discovery of his name.
No convincing or even intelligible explanation is forthcoming for interrogating the other P.A.C. men on the 8th and 9th October.
Such investigation can scarcely inspire confidence.
638 As a result of the foregoing discussion we do not consider it Possible to uphold the conclusion of the High Court on the legal evidence existing on this record.
In the absence of any, test 'identification parade and excluding from consideration the statements made under section 161, Cr.
P.C. we find no reliable material on which the appellant 's conviction can be sustained.
The High Court was in error in affirming the appellant 's conviction for the offence of murder and confirming the sentence of death.
It was equally in error in upholding his conviction and sentence under The appeal accordingly succeeds.
and allowing ,the same we acquit the appellant.

dataset_name: IN-Abs

summary/full:
The appeallant was convicted of the offence of murder by shooting and the High Court confirmed the ' conviction and the sentence of death.
In appeal to this Court, HELD : The conviction and the sentence should be set aside.
(1)The substantive evidence of a witness is his evidence in the trial court.
But then the accused person is not previously known to a witness when the identification of the accused by the witness soon after the former 's arrest is of vital importance because it furnishes to the investigating agency an assurance that the investigation is proceeding on right lines, in addition to furnishing corroboration of his own evidence in court.
[631 A C] In the.
present case, the evidence of the witness who gave the F.I.Rshowed that he did not give any description of the person who was alleged :to have fired the shots.
Nor did he state in the F.I.R. that he knew the appellant previously.
There was no evidence to show that the witness had identified the accused in the Committing Magistrate 's Court.
Therefore, his identification in the Sessions Court of the accused without any previous identification at a test parade, and without any description in the F.L.R. to corroborate it, is far too slender a piece of evidence to support the ' appellant 's conviction.
B E; 635 D, F] (2)Some of.the witnesses had stated in their evidence that they had heard the name of the accused being called but neither this fact nor the name of the accused was mentioned in the F.I.R.
The High Court was in error in taking into consideration the contents of the statements recorded under section 161, Cr.
P '.C., of the various witnesses, during the course of .investigation, km the purpose of finding corroboration of their statements.
in court that the name of the accused was disclosed to the police.
the accused 's name was really disclosed soon after the occurrence steps would have been taken by the investigating authorities to arrest him immediately but no such action was in fact taken.
[634 D; 636 C D]


judgement:
l Appeals Nos. 1301 of 1971 and 1981 of 1968.
Appeals by special leave from the Judgment and order dated November 15, 1956 of the Bombay High Court, Nagpur Bench in Special Civil Application No. 150 of 1963.
B. Sen, J. Ramamurthy, R. N. Sachthey and B. D. Sharma, for the appellant (in both the appeals).
A. section Bobde, G. L. Sanghi and B. R. Agarwal, for the respondent (in both the appeals).
615 The Judgment of the Court was delivered by Hegde, J.
Civil Appeal No. 1301 (NCT) of 71 is by special leave.
This appeal was filed under the following circumstances Civil Appeal No. 1981 of 1968 was brought on the strength of a certificate issued by the High Court.
That certificate, being not in accordance with law in as much as the High Court gave no reason in support of the same, the appeal filed on the strength of that certificate turned out to be not maintainable.
Hence the appellant had to move this Court for special leaveto appeal against the judgment of the High Court.
The same having been granted he has brought Civil Appeal No. 1301 of 7 1.
Hence these two appeals against the same judgment.
Now coming to the merits of the case, the Income tax Officer issued a notice to the respondent on January 5, 1962 under section 34(1) (a) of the Indian Income tax Act, 1922 seeking to reopen his assessment for the assessment year 1946 47 the relevant accounting year being the calender year 1945.
The assessee respondent challenged the validity of that notice by means of a writ petition under Article 226 of the Constitution before the High Court of Bombay.
The High Court accepted that writ petition ,and quashed the impugned notice by its order dated March 6, 1963.
On April 1, 1962 the Income tax Act, 1961 came into force.
Thereafter the Income tax Officer again issued a notice on March 26, 1963 under section 148 of the new Act in respect of the very assessment which he earlier unsuccessfully sought to reopen by means of a notice under section 34(1) (a) of the 1922 Act.
The assessee again challenged the validity of the notice issued to him by means of another writ petition, before the High Court of Bombay.
The High Court quashed that notice on the ground that the Income tax Officer was not competent to issue that notice.
It is against that decision, the present appeals have been brought to this Court.
Section 147 of the 1961 Act provides : If (a) the Income tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under Section 139 for any assessment year to the Income tax Officer or to disclose fully and truly all material facts necessary for his 'assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income tax Officer has 616 consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153 assess or re assess such income or re compute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereinafter in Sections 148 to 153 referred to as the relevant assessment year)".
Section 148 reads "(1) Before making the assessment, re assessment or re computation under Section 147, the Incometax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub section.
(2) of section 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub section.
(2) The Income tax Officer shall, before issuing any notice under this section record his reasons for doing so.
" Section 149 prescribes the time limit for issuing a notice under Section 148.
Sub section (i) of Section 149 says: "No notice under Section 148 shall be issued (a) in cases falling under Clause (a) of Section 147 (i) for the relevant assessment year, if eight years have elapsed from the end of that year, unless the case falls under sub clause (ii);(ii);. " Section 297 deals with repeals and savings.
Section 297 2 (d) (ii) reads thus : "Notwithstanding the repeal of the Indian Incometax Act 1922 (ii) of 1922 (hereinafter referred to as the repealed Act) (d) where in respect of any assessment year after the year ending on the 31st day of March 1940 : (i). . . . . . (ii) any income chargeable to tax had escaped assessment within the meaning of that expression in Section 147 and no proceedings under section 34 of the repealed Act in respect of any such 617 income are pending at the commencement of this Act, a notice under Section 148 may, subject to the provisions contained in Section 149 or section 150, be issued with respect to that assesment year and all the provisions of this Act shall apply accordingly".
(Emphasis supplied).
The only question for decision in these appeals is whether the proceedings initiated by the notice under section 34(1) (a) of the 1922 Act were pending at the time when the new Act came into force.
It is not denied that such proceedings were factually pending.
But what was contended by Mr. B. Sen, learned counsel for the department was that that notice being an invalid notice on the ground that that was barred by limitation, the proceedings initiated on basis of that notice should be considered as not pending in the eye of the law.
We are unable to accept this contention.
What section 297 (2) (a) (ii) requires is the factual pendency of a proceeding under section 34 of the repealed Act.
The question whether that proceeding was barred by limitation or not is irrelevant.
It is not denied that those proceedings were initiated by a competent authority.
Those proceedings were quashed for the reason that notice under section 34 of 1922 Act was issued beyond the time prescribed by law.
Hence it cannot be said that no proceeding under section 34 of the 1922 Act either factually or legally was pending at the time when the new Act came into force.
Our above conclusion receives support from the decision of this Court in Raja Kulkarni and others vs The State of Bombay(1).
Therein the question that arose for decision was whether an appeal under section 24 of the Industrial Disputes Act, 1950 can be said to have been pending if that appeal was incompetent or invalid for some reason.
This Court ruled that what was necessary was the factual pendency of the appeal and not that it should have been a valid or competent one under the provisions of the limitation Act or such other adjectival law.
The proceedings pending before a competent authority cannot be said to be not pending merely because that no relief can be granted in that proceedings because of the bar of limitation.
In Mela Ram & Sons vs Commissioner of Income Tax, Punjab( ':) it was contended before this Court that any appeal which is barred by limitation cannot be considered as an appeal properly presented under Section 30 of the Indian Income Tax Act, 1922.
This Court rejected that contention observing : (1) [1954] S.C.R. 384.
(2) 29 I.T.R. p. 607. 618 "it an appeal is not presented within that time (within the prescribed time) does that cease to be an appeal as provided under section 30(1) ? It is well established that rules of limitation pertain to the domain of adjectival law, and that they operate only to bar the remedy but not to extinguish the right.
An appeal preferred in accordance with Section 30(1) must, therefore, be an appeal in the eye of law, though having been presented beyond the period mentioned in section 30(2) it is liable to be dismissed in limine.
" We have no doubt in our mind that the proceedings initiated under Section 34(1) (a) of the 1922 Act were pending at the time 1961 Act came into force and that being so the Income tax Officer was not competent to issue any fresh notice under section 148 of the 1961 Act.
In the result Civil Appeal No. 1301 of 71 fails and the same is dismissed with costs.
Civil Appeal No. 1981 of 68 is dismissed as not being maintainable.
Parties to bear their own costs in this appeal.
K.B.N. Appeals dismissed.

summary/full:
The Income tax Officer issued a notice to the respondent on January 5, 1962 under section 34(1) (a) of the Indian income tax Act, 1922, seeking to reopen his assessment for the assessment year 1945 47.
The respondent challenged the validity of that notice.
The High Court quashed the impugned notice by its order dated March 6, 1963 on the ground that the notice was issued beyond the time prescribed by law.
On April 1, 1962 the Indian Income tax Act, 1961, came into 'force.
Under section 297(2) (d) (ii) of this Act if "any income chargeable to tax had escaped assessment within the meaning of that expression in section 147 and no proceedings under section 34 of the repealed Act in respect of any such income are pending at the commencement of this Act, a notice under section 148 may . be issued with respect to that assessment year.
" The Income tax Officer again issued a notice under section 148 of the New Act in respect of the assessment which he earlier unsuccessfully sought to reopen by means of notice under section 34(1) (a) of the 1922 Act.
The respondent again challenged the validity of the notice.
The High Court quashed that notice on the ground that the Income tax Officer was not competent to issue that notice.
In appeal to this Court it was contended that the notice under section 34(1) (a) being an invalid notice on the ground that it was barred by limitation the proceedings initiated on the basis of the notice should be considered as not pending when the new Act came into force.
Dismissing the appeal, HELD : What section 297(2)(d)(ii) requires is the factual pendency of a proceeding under section 34 of the repealed Act.
Whether that proceeding was barred by limitation or not is irrelevant.
The proceedings pending before a competent authority cannot be said to be not pending merely because no relief can he granted in that proceedings because of the bar of limitation.
The proceedings in the present case were initiated by a competent authority and those proceedings were quashed for the reason that the notice was issued beyond the time prescribed by law.
Hence it cannot be said that no proceedings under section 34 of the 1922 Act, either factually or legally, was pending at the time when the new Act came into force.
[617 D]


judgement:
Appeal No. 144 of 1953.
Appeal from the Judgment and Order dated the 28th November, 1951, of the High Court of Judicature at Calcutta in Reference No. 40 of 1950.
Sukumar Mitra (section N. Mukherjee, with him) for the appellant.
C. K. Daphtary, Solicitor General of India, (G. N. Joshi, with him) for the respondent.
November 1.
The Judgment of the Court was delivered by VENKATARAMA AYYAR J.
This is an appeal from the judgment of the High Court of Calcutta on a reference under section 66(1) of the Income tax Act.
The appellant is a Company which came into existence in 1870 as an unregistered association, and in 1906 it was registered under the provisions of the Indian Companies Act.
Its business consists exclusively in granting terminable pensions or annuities dependent on human life in favour of the subscribers or their nominees.
The dispute in this appeal relates to the assessment of the profits of the Company for income tax for the periods, 1943 1944, 1944 1945, 1945 1946 and 1946 1947.
To follow the points in issue, it will be useful to refer to the statutory provisions bearing on the matter.
Section 2(11) of the , defines "life insurance business" as meaning "the business of effecting contracts of insurance upon human life" and as including "the granting of annuities upon human life.
" The business of the appellant Company would therefore be life insurance business as defined in section 2(11) of the .
Under section 10(7) of the Indian Income tax Act, the profits and gains of any business of insurance are to be computed in accordance with the Rules in the Schedule to the Act.
Rule 2 in the Schedule is as follows: " The profits and gains of life insurance business shall be taken to be either 824 (a)the gross external incomings of the preceding year from that business less the management expenses of that year, or (b)the annual average of the surplus arrived at by adjusting the surplus or deficit disclosed by the actuarial valuation for the last intervaluation period ending before the year for which the assessment is to be made ' so as to exclude from it any surplus or deficit included therein which was made in any earlier intervaluation period and any expenditure which may under section 10 of this Act be allowed for in computing the profits and gains of a business, whichever is the greater.
"Rule 5(ii) defines "gross external incomings" as including profits on the sale or the granting of annuities.
These Rules came into force in 1939.
In 1945 the assessment of the profits of the appellant Company for the years 1943 1944, 1944 1945 and 19451946 was taken up by the Income tax Officer.
Under Rule 2, what the Income tax Officer had to do was to compute the profits of the Company under the two heads (a) and (b) in that Rule and to adopt whichever was higher as assessable profits.
What he actually did however is uncertain, because the orders of assessment themselves have not been exhibited as part of the record.
From the order of the Tribunal dated 5th March, 1949, it appears that the Income tax Officer firstly determined the profits under Rule 2(b) on the basis of actuarial valuation after making certain adjustments; and secondly on the basis of the figure arrived at under Rule 2(b), he worked out the profits under Rule 2(a) by making further adjustments.
These orders were made on 14th July, 1945.
The company preferred appeals against them to the Appellate Assistant Commissioner, who held by his order dated 30th November, 1945, that the annuity business contemplated by Rule 5(ii) was "purely annuity business", that the business carried on by the Company was "an admixture between an annuity and life insurance", and that there had been no adequate investigation by the Income tax Officer of the nature of the business of the Company.
He 825 accordingly remanded the case for further enquiry and for passing fresh orders of assessment.
By the time the matters came up for further enquiry before the Income tax Officer in pursuance of the order of remand, the assessment of the profits of the Company for the year 1946 1947 had also to be made.
By order dated 23rd December, 1946, the Income tax Officer determined the assessable profits of the Company for all the four years.
He held that there was no element of insurance in the business of the Company, and that the computation should be made under Rule 2(a).
Then he proceeded to assess the profits under that Rule precisely in the manner adopted by him in his order dated 14th July, 1945.
He first took the annual adjusted surplus calculated according to the actuarial valuation under Rule 2(b) and after making certain adjustments, adopted it as the figure under Rule 2(a).
These orders were clearly erroneous.
The statement that there was no element of life insurance in the policies was rightly hold to be erroneous by the Tribunal and has not been sought to be supported.
If the annuity business of the Company was not life insurance business, then even Rule 2(a) would have no application.
The Income tax Officer was likewise in error in adopting the figures reached under Rule 2(b) as the basis for computing the profits under Rule 2(a) without an independent enquiry into the materials requisite under that Rule.
The Company took up the matter in appeal to the Appellate Assistant Commissioner, who by his order dated 26th September, 1947, held that the annuity business of the appellant was life insurance business, and that the profits should be computed under Rule 2.
He further held that in the absence of a profit and loss ,statement for the previous year, the Income tax Officer could only act on the materials furnished by the actuarial valuation as a guide for computation under Rule 2(a).
He therefore confirmed the orders of assessment.
The Company then appealed to the Tribunal.
By its order dated 5th March, 1949, the Tribunal held that the business of the Company was "in a way" insurance, 826 and that computation of the profits should be made in accordance with Rule 2, after determining the profits both under Rule 2(a) and Rule 2(b).
It took exception to the modus adopted by the Income tax Officer in ,computing the profits under Rule 2(a), and observed that he should have made independent enquiry under Rule 2(a), and determined the profits and not merely adopted the figures computed under Rule 2(b) as the basis for computing the profits under Rule 2(a).
The Tribunal accordingly remanded the matter to the Income tax Officer for further enquiry for determining the profits in terms of Rule 2(a).
Dissatisfied with this order, the respondent applied for reference under section 66(1) of the Income tax Act, and on that application, the following questions were referred to the decision of the High Court: 1.
" Whether in the facts and circumstances of the case the business of the assessee Company consisted wholly of annuity business or whether it contained some elements of ordinary life insurance business as distinct from annuity business.
Whether the Income tax Officer was justified in making an estimate for calculations under Rule 2(a) of the Schedule attached to section 10(7) of the Income tax Act.
" The reference was heard by Chakravarti and section R. Das Gupta JJ.
They held that the first question did not arise on the order of the Tribunal, but all the same expressed their opinion thereon in the following terms : " Its business is *holly a business of granting annuities on human life, and no part of its business is ordinary life insurance business.
" As we are not concerned with this matter in this appeal, there is no need to further refer to it.
On the second question, they observed that business in annuities dependent on life as contrasted with "annuities certain" would be insurance business as defined in section 2(11) of the Act, and that the profits of that business being "gross external incomings" as defined in Rule 5(ii) must be determined under Rule 2(a).
Dealing next with the objection of the appellant that there had been no proper determination of the 827 profits under Rule 2(a), they held that in the absence of profit and loss statements for the previous years and other materials the Income tax Officer had no course open to him except to adopt the figures computed under Rule 2(b) as a basis for computation under Rule 2(a).
The second question was accordingly, answered in the affirmative.
It is against this decision that the present appeal has been preferred on a certificate granted under section 66A (2).
Mr. Mitra for the appellant does not dispute the position that the business of the Company on annuity policies dependent on human life is insurance business as defined in section 2(11), and that the profits of the business should therefore be computed in accordance with Rule 2 in the Schedule to the Income tax Act.
His contention is that the Income tax Officer had failed to make the computation in accordance with Rule 2(a), and that the Tribunal was right in remanding the matter for a correct computation of the profits in accordance with that Rule.
This contention must, in our opinion, succeed.
Under Rule 2, the Income tax Officer has to determine under clause (a) what the gross external incomings of the previous year were, and deduct out of them the managing expenses for that year.
He has also to find out in terms of clause (b) the annual average surplus on the basis of actuarial valuation in the manner prescribed therein.
He has then to adopt whichever is higher as the assessable profits of the year.
Now the complaint of the appellant is that while a computation was made under clause (b) no independent computation was made under clause (a), and that therefore the profits had not been determined as required by the Rules.
It is a fact that no independent computation has been made under Rule 2(a), and therefore there has been no compliance with the Rule.
The learned Judges declined to uphold this objection on the ground that the Company did not place any materials before the Income tax Officer so as to enable him to make a determination under Rule 2(a), and that in the absence of any materials the Income tax Officer was justified in acting on the actuarial report for computing the profits even under Rule 2(a).
828 The argument of the appellant is that having regard to the stand taken by either side at the stage of investigation and to the opinion expressed by the Income tax Officer that there was no element of insurance in the annuity business of the Company, the true position under the Rules had been missed by all of them, with the result that there was no attempt made to compute the profits in terms of the provisions of Rule 2(a), that the appellant had not wilfully failed to produce any evidence, and that the observation of the learned Judges that no profit and loss statement had been produced was based on a misapprehension, as no such statement had to be prepared by an Insurance Company.
We must now turn to the statement of the case by the Tribunal to see what had really happened before the Income tax Officer, for the last word on questions of fact is with it, and that is binding on the Courts.
Neither in the statement of the case by the Tribunal, nor in its order of remand is there any finding that the requisite materials had been withheld by the appellant.
The only statement bearing on this question in the order of the Tribunal is as follows: " . the Departmental Representative admitted before us that the calculations purported to have been made under Rule 2(a) were not in accordance with the requirements of Rule 2(a), but it was explained that as the information necessary for determining income under Rule 2(a) was not available, an estimate was made and the income determined under Rule 2(b) was adopted for determining the income under Rule 2(a).
" What is referred to in this passage is only a statement of the Departmental Representative and not a finding.
On the other hand, the whole tenor of the judgment of the Tribunal is that there had been no determination of the profits under Rule 2(a) by reason of the erroneous view taken by the Income tax Officer as to the true nature of the business of the Company.
If there had been a finding by the Tribunal that the requisite materials had been called for and withheld by the appellant, the decision of the High Court would be unassailable, and, indeed, that was the only one that 829 could have been reached.
But in the absence of such a finding, we are unable to see any ground on which the order of the Tribunal could be upset in a reference under section 66(1).
When once it is found that there was no proper determination of the profits as required: under Rule 2(a) and that was indeed conceded and there was no justification for it such as the High Court thought there was, the only order that could properly be made was to remand the case for further enquiry and fresh disposal in accordance with law.
That was the order which was passed by the Tribunal, and that, in our opinion, was right.
This appeal will accordingly be allowed, and the second question referred by the Tribunal answered in the negative.
The result of this will be that the Income tax Officer will proceed to enquire into the profits of the appellant Company for the years in question in accordance with the requirements of Rule 2.
Under the circumstances, we direct that the parties do bear their respective costs both here and in the High Court.
Appeal allowed.