# 941: DHAKESWARI COTTON MILLS LTD v. COMMISSIONER OF INCOME TAX, WEST BENGAL

- **Citation:** [1955] 1 S.C.R. 941
- **Court:** Supreme Court of India
- **Decided:** 1955
- **Bench:** Mehr Chand Mahajan C.J, · S.R. DAs, GHuLAM HASAN, Bhagwati, Venkatarama Ayyar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/941-dhakeswari-cotton-mills-ltd-v-commissioner-of-income-tax-west-bengal-1220
- **Pages:** 11

## Headnote

Constitution
of India, Art.
Supreme Court's powet-lndian
23(3)-Assessm'ent when invalid.
136-Appeal by Special
Leave-'-
Income-tax Act (XI of 1922), s.
It is not possible to define
with any
precision the limitations
of the
powe'rs conferred on the
Supreme Court by Art. 136 of
the Constitution. This is an overriding and exceptional power and
should be exercised sparingly
and . with
caution
and
only
in
special and
extraordinary situation.
Beyond this no set
formula
or rule can stand in the way of or fetter the exercise of the power
conferred on the Supreme Court under Art. 136 of the Constitution.
Sufficient safeguard and
guarantee for the
exercise of this
power lie in the trust reposed by the Constitution in the wisdom
and good sense of judges of the Supreme Court. This power
is
not hedged in by technical hurdles of any kind when it is called
in aid against any
arbitrary
adjudication
or for advancing
the
cause of justice or
for giving a fair deal to a litigant so that injustice may not be
perpetrated or perpetuated. Conclusiveness
or finality
given to any decision
by any domestic
law
cannot
deter the
Supreme
Court from exercising the power
conferred
under Art. 136 of the Constitution.
The powers given to the
Income-tax Officer under s. 23(3) of
the Indian Income-tax Act, 1922, however wide,
do not entitle
him to
base the assessment on pure guess without reference
to
any evidence or m~terial.
An assessment under s. 23(3) of
the
Act cannot be
made only
on bare suspicion.
An assessment
so
made without disclosing to the assessee the information supplied
by
the
departmental
representative
and
without
giving
any
opportunity to the
assessee to rebut the
information so supplied
and declining to take into consideration all materials . which
the
assessee wanted to produce in support of his case -constitutes
a
violation of
the
fundamental
rules of justice · and tails for the
powers under Art. 136 of the Constitution.
Seth Gurmukh Singh v. Commissioner of
Income-tax,
Punjab
( 1944 I.T.R. 393) approved.
CrvrL
APPELLATE
No. 217 of 1953.
JURISDICTION :
Civil
Appeal
" I'-
Appeal from the Judgment and Order dated
the
16th day of January, 1950, of the
Income-tax Appellate
!954·
, October 29.
1954
DhakJWtJri
Cotton Mills Ltd.
v.
Commissioner of
Jncomt~tax
Wesl Bengal.
942
SUPREME COURT REPORTS
[1955)
Tribunal, Calcutta in Income-tax
Appeal · · No. 4658 of
1948-49 and E.P.T.A. No. 1137 of 1948-49.
N. C. Chatterjee and Veda
Vyas, (S. K. Kapoor
and Ganpat Rai, with them) for the appellant.
C. K. Daphtary, Solicitor-General for India
( G. N.
Joshi, with him) for the respondent.
1954.
October 29.
The
Judgment of the
Court
was delivered by
MEHR
CHAND
MAHAJAN C.J.-The appellant is a
public limited joint stock company incorporated under
the Indian
Companies
Act, 1913, with its registered
office at Calcutta.
It carries on the business of manufacture and sale of cotton yarn and piece-goods.
On
the 28th of July, 1944, the
Income-tax
Officer issued a
notice to it under section 22(2) of the Indian Incometax Act calling upon it to file the return
of its income
for the assessment year
1944-45
(account year
being
1943-44).
Before the expiry of the due date for filing
the return the account books of the appellant company
together with the documents relevant to the accounts,
were taken into custody by the
Sub-Divisional
Officer,
Narayanganj and it is alleged that these remained.
in
the custody
of
the
court
of
the
Sub-Divisional
Magistrate till January, 1950, when they were
handed
back to the appellant.
In this
situation
the assessee
pleaded for extension of time to furnish
the
return.
This request was refused, and a show cause notice was
·issued under section 28(3) of the
Act calling upon the
appellant company why penalty should not· be imposed
upon it for its ofailure to file the return.
An officer of
the company appeared befor.e the · Income-tax
Officer
and explained the cause for this default.
In order to
ascertain whether the explanation
furnished
by
the
asse

## Text

-
,
S.C.R.
SUPREME COURT REPORTS
941:
DHAKESWARI
COTTON
MILLS LTD.
v.
COMMISSIONER OF INCOME TAX,
WEST BENGAL
[MEHR CHAND MAHAJAN C.J.,· S.R. DAs,
GHuLAM HASAN, BHAGWATI and
VENKATARAMA AYYAR JJ.]
Constitution
of India, Art.
Supreme Court's powet-lndian
23(3)-Assessm'ent when invalid.
136-Appeal by Special
Leave-'-
Income-tax Act (XI of 1922), s.
It is not possible to define
with any
precision the limitations
of the
powe'rs conferred on the
Supreme Court by Art. 136 of
the Constitution. This is an overriding and exceptional power and
should be exercised sparingly
and . with
caution
and
only
in
special and
extraordinary situation.
Beyond this no set
formula
or rule can stand in the way of or fetter the exercise of the power
conferred on the Supreme Court under Art. 136 of the Constitution.
Sufficient safeguard and
guarantee for the
exercise of this
power lie in the trust reposed by the Constitution in the wisdom
and good sense of judges of the Supreme Court. This power
is
not hedged in by technical hurdles of any kind when it is called
in aid against any
arbitrary
adjudication
or for advancing
the
cause of justice or
for giving a fair deal to a litigant so that injustice may not be
perpetrated or perpetuated. Conclusiveness
or finality
given to any decision
by any domestic
law
cannot
deter the
Supreme
Court from exercising the power
conferred
under Art. 136 of the Constitution.
The powers given to the
Income-tax Officer under s. 23(3) of
the Indian Income-tax Act, 1922, however wide,
do not entitle
him to
base the assessment on pure guess without reference
to
any evidence or m~terial.
An assessment under s. 23(3) of
the
Act cannot be
made only
on bare suspicion.
An assessment
so
made without disclosing to the assessee the information supplied
by
the
departmental
representative
and
without
giving
any
opportunity to the
assessee to rebut the
information so supplied
and declining to take into consideration all materials . which
the
assessee wanted to produce in support of his case -constitutes
a
violation of
the
fundamental
rules of justice · and tails for the
powers under Art. 136 of the Constitution.
Seth Gurmukh Singh v. Commissioner of
Income-tax,
Punjab
( 1944 I.T.R. 393) approved.
CrvrL
APPELLATE
No. 217 of 1953.
JURISDICTION :
Civil
Appeal
" I'-
Appeal from the Judgment and Order dated
the
16th day of January, 1950, of the
Income-tax Appellate
!954·
, October 29.
1954
DhakJWtJri
Cotton Mills Ltd.
v.
Commissioner of
Jncomt~tax
Wesl Bengal.
942
SUPREME COURT REPORTS
[1955)
Tribunal, Calcutta in Income-tax
Appeal · · No. 4658 of
1948-49 and E.P.T.A. No. 1137 of 1948-49.
N. C. Chatterjee and Veda
Vyas, (S. K. Kapoor
and Ganpat Rai, with them) for the appellant.
C. K. Daphtary, Solicitor-General for India
( G. N.
Joshi, with him) for the respondent.
1954.
October 29.
The
Judgment of the
Court
was delivered by
MEHR
CHAND
MAHAJAN C.J.-The appellant is a
public limited joint stock company incorporated under
the Indian
Companies
Act, 1913, with its registered
office at Calcutta.
It carries on the business of manufacture and sale of cotton yarn and piece-goods.
On
the 28th of July, 1944, the
Income-tax
Officer issued a
notice to it under section 22(2) of the Indian Incometax Act calling upon it to file the return
of its income
for the assessment year
1944-45
(account year
being
1943-44).
Before the expiry of the due date for filing
the return the account books of the appellant company
together with the documents relevant to the accounts,
were taken into custody by the
Sub-Divisional
Officer,
Narayanganj and it is alleged that these remained.
in
the custody
of
the
court
of
the
Sub-Divisional
Magistrate till January, 1950, when they were
handed
back to the appellant.
In this
situation
the assessee
pleaded for extension of time to furnish
the
return.
This request was refused, and a show cause notice was
·issued under section 28(3) of the
Act calling upon the
appellant company why penalty should not· be imposed
upon it for its ofailure to file the return.
An officer of
the company appeared befor.e the · Income-tax
Officer
and explained the cause for this default.
In order to
ascertain whether the explanation
furnished
by
the
assessee was genuine, the
Income-tax
Officer
made
inquiries from the
court concerned about this matter.
He also made a request to the
court
to allow · him
access to the books of account.
The court, however,
neither acceded to the demand that books of account
be made available to the assessee nor did it permit the
Income:tax
Officer
to. have
.. access . . to them..
The
/
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S.C.R.
SUPREME COURT REPORTS
943
Income-tax Officer having thus satisfied himself about
the genuineness of the- assessee's explanation,
condoned
the default in filing the
return
and
dropped the
proceedings taken against the company under section
28(3) of the Act.
It seems that no further
action in the matter was
taken by the department till the year 1947.
During
that year the company requested
the department
to
revive the proceedings.
The proceedings having been
revived the appellant company furnished -the return of
its income for the assessment year 1944-45 on the
16th
March, 1948.
This return, however, was not a complete document as without the assistance
of the
books
the profits could not be
computed according · to
the
provisions of law.
On receipt of the return the Incometax Officer issued a notice under
section 23(2) of the
Act calling upon the company to supply further information on a number of points and to prepare certain
statements indicated in the notice.
This
requisition
had to be complied with by the 19th · March, 1948.
On
that date the Chief Accounts Officer of the company
appeared before the
Income-tax Officer and asked for
further time till the middle of the following wt:ek for
furnishing the requisite particulars.
This request was,
however, · refused and assessment was completed on the
20th March, 1948.
The excess profits . assessment
was
also made final on the 23rd March, 1948. The relevant
part of the assessment order is in these terms :~
"From the point of view of profits, 1943 -was -a
very good year, if not the best, for all
cotton - mills.
Expenses on cotton and fuel shows
that - production
was undoubtedly higher whereas it is found that the
gross profit disclosed- by this company is low. · I conclude that full amount_ of sales have not been- accounted for.
It is expected that
actually the
rate of gross
profit ,should have been higher this year.
In view of
the higher costs of. establishment,
I take -it that the
rate of about 40%, i.e., near about ·the -rate disclosed
in 1942 accounts, should have been maintained.•
I add
back the Rs. 36 la:khs for unaccounted sales".
It may be mentioned - that in the. return the company had disclosed a gross profit of 28 per cent. on
Dhakeswari
Cotton Mills Ltd.
v.
Commissioner of
Income-tax
Wes.t Bengal.
Mehr Chand
Mahajan C.J.
1954
·Dhaktswari
Cotton Mills Ltd.
v.
Commissioner of
Income-tax,
West Bengal.
Mehr Chand
.Mahajan C. J.
944
SUPREME COURT REPORTS
[1955]
sales amountin·g · to Rs. 1,78,96,122.
The total amount
of sales in
the
year 1942
was of the
amount
of
Rs. 1,15,69,582, disclosing a gross profit of 41 per cent;
The _establishment expenses, however, during
that year
were in the sum of
Rs. 15,94,101,
while
during the·
accounting. year relevant to the year under. assessment
these had gone
up to
Rs. 34,74,735 on
account
of
labour troubles.
A number of
other
causes
were
mentioned by the assessee for
the low
rate of profit
during the relevant period; but the Income-tax Officer
took no notice of them.
On appeal
this order
was;
upheld by the
Appellate
Assistant Commissioner. The.
assessee then appealed to the
Tribunal
against
these
decisions.
What happened .before the
Tribunal may
well be stated in terms of the
Tribunal's order
itself.
This is what is mentioned
in the
judgment
of the
Tribunal:-
, "At the end of the hearing of this appeal on 25th
of November, 1949, the Income-tax Appellate Tribunal
requested the departmental representative to
produce
for the examination of the Income-tax Appellate
Tribunal
the
gross
profit rates
shown
or assessed in
the cases of other
similar cotton mills.
The
departmental representative wanted 3/4 day's time to collect
information on this point.
On this the appellant
also
wanted to be allowed to produce information regarding the gross profit rates shown or. assessed
by
other
similar cotton mills, and he was also allowed to produce
information on the
point.
On or about
the 29th
November the counsel for the appellant requested that
he should be allowed time till
Saturday
the 3rd of
December to file the above information
and time
for·
this purpose was allowed to him. On the 3rd December
Mr. Banerjee the appellant's counsel saw the
Accountant Member in his
chamber and
wanted to produce
written arguments
and · a trunk full
of
books and
papers in support
of his case.
Mr. Banerjee was told
that the arguments in the case had finished on the 25th
and he was allowed time only to supply to the court
the gross profit rates sho~n or assessed in the cases of
other similar cotton mills.
He was told that it was
not fair to the other side
to
take
notice
of any
'
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S.C.R.
SUPREME COURT REPORTS
945
additional :evidence
or ·record at
that
stage
and
his trunk of books · and
papers . was . returned
to
him.
During the discussion of Mr. Banerjee
with
the
Accountant· M.ember Mr. Banerjee
produced ·a
report
showing that
the gross
profit rates
of some mills
in Bengal on the average amounted to 23 per cent.
In
the statement showing 23 per cent. gross
profit
rates
there was another item called 'Pool profit'
which
was
bigger than the gross profits
rate.
Mr.
Banerjee was
asked to explain what this word
'Pool profit'
meant
but he had no information on this
point .......... For
want of this information we are afraid it is not possible
for us to attach_ a great deal of importance to the gross
profit percentage of 23 per cent. mentioned in the books
produced by Mr. Banerjee.
Mr. Banerjee
during this
discussion further produced a book showing the wastage expected.
In that
book certain quality of cotton had been mentioned
and
it was said that
wastage of 34 per cent.
was normal.
In the case of the assessee he has shown a wastage of
9 per cent. in. 1942, 26 per cent. in 1943 and 19 per cent.
in 1944.
The figure of 34 per cent. shown in that book
would therefore
seem to refer to a particular
quality
of cotton very much inferior to the
cotton
generally
used by the appdlant. The department's main case on
the question of wastage is based
on the appellant's
own books according to which "his wastage Tn the year
under review amounted to three times the wastage in
the year previous.
In the light
of all this information
it appears to us that the Incomeci:ax Officer was justified in making a substantial addition to the gross profit
shown by the appellant.
Coming to the question of what the amount of
addition should be the departmental representative has.
on our request filed a number of cases of other cotton
mills which show a gross profit rates varying between
49 per cent. and 22 per cent. and in one
case
even
13 per cent. has been shown ....... .
In the face of all the above facts it appears to us
that ·the Income-tax Officer was
justified in coming to
the condusion that all sales
had not been brought into
1954
· Dhakeswari
Cotton Mills Ltif.
v.
·Commissioner of
Income-tax,
West Bengal.
Mehr Chand
Mahqjan C. JA
1954
Dhaktswari
Cotton Mills Ltd.
v.
Commissioner of
Income-tax,
.West Bengal.
Mehr Charul
Mahajan C. J.
946
SUPREME COURT REPORTS
[1955]
the books.
We have,
however,
considered
all
facts
relevant to this case and are of the opinion that the
addition to
the sales
should be reduced
from Rs. 36
lakhs made by the
Income-tax Officer to Rs. 16 lakhs
which would reduce
the ·gross
profit
rate
to· about
35 per cent."
The sum and substance of these decisions is that the
Income-tax Officer estimated ·the gross profit on sales at
40 per cent. by a pure guess, while the Tribunal reduced
it to 35 per cent.· by applying some other rule of thumb.
It is not clear from either of these judgments on what
material these estimates were based.
Dissatisfied with the decision of the
Tribunal, the
assessee wanted the Tribunal to state a case and refer
to the High Court for its decision ten questions· of law.
It seems that Dr. Pal who represented
the
assessee
before the
Tribunal had only
argued
one
question
namely, whether the estimate of profit made
by
the
Income-tax Officer · was excessive or whether 1t
was
justified on the material on the record.
The other points
raised in the memorandum of
appeal
regarding
the
validity or the correctness of
the procedure of assessment had been abandoned. . The .questions which were
submitted to the
Tribunal and which it was asked to
refer to the High Court concerned all the points including those abandoned before the '.fribunal. The Tribunal came to the conclusion that ho question of. law arose
on its order, and it, therefore,
dismissed
the
application made by the assessee..
It appears that the assessee
then applied to the High Court under section 66(2) of
the Act for the issue of a mandamus to the Tribunal
directing It to refer to the
High Court the very same
questions of law which it had refused to refer.
This
application was summarily rejected.
The
High Court
also refused an application for leave to' appeal ·to this
Court.
Having exhausted all die remedies that
were
available to him under the· Income-tax Act, the assessee
then made an application to this Court for special leave
against the order of the Income-tax Tribunal under the
provisions of article . 136 ·of the
Constitution.
Leave
was allowed and ·this appeal is •now before us by virtue
of. that leave.
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f fS.C.R.
SUPREME COURT REPORTS
947
Mr. Chatterjee, the learned counsel for the appellant,
contended inter alia that the
assessment order
made
under section 23(3) of the
Income-tax
Act had
been
made in violation of the principles
of natural justice,
inasmuch as it was not based on any material whatsoever and that the evidence tendered by the appellant
had been improperly rejected.
It was further said that
the Trib11n:i \ acted without jurisdiction in relying on
the data
supplied
by the
Income-tax
department
behind the back of the appellant company,
and
without giving it an opportunity to rebut or explain the
same.
Reliance was placed on the decision of a Full
Bench of the Lahore High Court in Seth Gurmukh
Singh v. Commissioner of Income-tax, Punjab( 1 ), for the
proposition that while proceeding under sub-section (3)
of section 23, the Income-tax Officer, though not bound
to rely on evidence
produced
by the assessee as he
considers to be false, yet
if he proposes to make an
estimate in disregard of that evidence, he
should in
fairness disclose to the assessee the material
on
which
he is going to found that estimate; and that 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 utilized to such an extent as
to put the
assessee in possession of full particulars of the case he
is expected to meet and that he
should further give
him ample
opportunity to meet it.
It was said
that
the
Tribunal failed to disclose
to the
assessee
the
material
that
the
departmental
representative
had
given to it regarding the rates of gross profit of cotton
mills varying between 49 per cent. and 13 per cent.,
and that if that disclosure had been made, the assessee
would have satisfied the
Tribunal that the mills which
had shown gross profits at rates mentioned above · had
no similarity of any kind with the appellant company's
mill or to other mills in
Bengal and therefore those
rates had no relevancy in the enquiry as to gross profits
of the assessee company's mill.
It was also argued that
both the Income-tax
Officer and the
Tribunal
acted
arbitrarily and on suspicion in estimating the rate
of
(I) [1944] 12 I. T. R. 393·
1954
Dhakeswari
Cotton Mills Ltd.
v.
Commissioner of
Income·tax,
West Bengal.
Mehr Chand
Mahajan C. J.
1954
Dhakeswari
Cotton Milll Ltd.
v.
Commissioner of
Income-lax.
JVest Ben,14al.
Mehr Chand
Mahajan G.J.
948
SUPREME COURT REPORTS
[1955]
gross profit. In conclusion the learned
counsel
urged
that now that the books of account of the
company
were available, it
was only just and fair
that
the
Income-tax Officer and the
Tribunal
should examine
these books in order to determine the correctness of the
return furnished by the assessee.
The learned Solicitor-General who appeared for the
Commissioner of
Income-tax,
West Bengal, combated
the contentions raised by Mr. Chatterjee on a two-fold
ground : ( 1) in the first instance, without questioning
the jurisdiction of this
Court to grant
special
leave
against an order of an Income-tax Tribunal, he argued
that such leave should not be granted
when
remedies
provided by the
Income-tax
Act itself were available
for correcting errors of the
Tribunal, and had been
taken but without success.
It was said that the power
conferred on this Court by article 136 of the
Constitution being an extraordinary power, its exercise should
be limited to cases of patent and glaring errors of procedure, or where there has been a failure
of
justice
because of the violation of the rules of natural
justice
or like causes but that this discretionary power should
not be exercised for the purpose of
reviewing findings
of fact when the law
dealing
with
the subject has
declared those findings as final and conclusive. (2) That
the finding given by the Income-tax Officer and affirmed
by the
Appellate
Assistant
Commissioner
and
the
Tribunal was based on material and it could not be said
that these bodies had acted arbitrarily in this matter.
It was contended that the
Income-tax Officer has very
wide powers and is not fettered by
technical
rules
of
evidence and pleadings, and that the only restnct10n
on his judgment
is that he must act honestly on the
material however inadequate
before
him,
but
not
rnpriciously
or
arbitrarily.
It was suggested that
owing to the disparity
of the rate
of wastage
the
Income-tax
Officer
was
entitled to
reach
the
conclusion
that the
assessee
had
not
disclosed
the full sales made by him during the accounting year,
and that on that basis he was entitled on his own
information to make an estimate of the rate of gross
profit'.
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S.C.R:
SUPREME COURT REPORTS
949
As regards the first contention of the learned
Solicitor-General, we are
unable to accede to it.
It is
not possible to define with any precision the limitations
on the exercise of the discretionary jurisdiction vested
in this Court by the · constitutional
provision made in
article
136.
The limitations,
whatever they be, are
implicit in the nature and character of the power itself.
It being an exceptional and overriding power, naturally
it has to be exercised sparingly and with
caution
and
only in special
and extraordinary situations.
Beyond
that it is not possible
to fetter
the exercise
of this
power by any set formula or rule. All that can be said
is that the
Constitution having trusted the wisdom and
good sense of the Judges of this Court in this matter,
that itself is a sufficient safeguard
and guarantee
that
the power will only be used to advance
the
cause of
justice, and that its exercise will be governed by well
established principles
which
govern
the exercise of
overriding constitutional powers.
It is, however, plain
that when the Court reaches the conclusion that a person has been dealt with arbitrarily or that a
Court or
tribunal within the territory of
India has not given a
fair deal to a litigant, then no technical
hurdles
of
any kind like the finality of finding of facts or otherwise can stand in the way of the exercise of this power
because the whole intent and purpose of this article is
that it is the duty of this
Court to see that injustice is
not perpetuated or perpetrated
by decisions
of Courts
and tribunals because
certain
laws have made the
·decisions of these
Courts or tribunals final and conclusive.
What we have said above sufficiently disposes
of the first contention raised by the learned
SolicitorGeneral.
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
' 1954
Dhakeswari
Cotton Mills Ltd.
v.
Commissioner of
lncome-t@1
West Bengal.
Mehr Chand
Mahajan C. J.
1954
Dhakeswari
Cotton Mills Ltd.
v.
CommiJJioner of
income·tax,
West Bengal.
Mehr Chand
Mahajan C. J.
950
SUPREME COURT REPORTS
[1955]
make a pure gues·s and
make
an assessment
without
. reference to any evidepce or any material at all. There
must be something
more
than bare suspicion to _support the
~ssessmeni:- unde_r section _23(3).
The rule· of
law on this subiect has, m our opm1on, been fairly and
rightly stated by the Lahore High
Court in the case of
Seth Gurmukh
Singh v. Commissioner of Income-tax,
Punjab (supra).
In this case we are of the opinion that the
Tribunal
violated certain fundamental
rules of justice in reaching its conclusions.
Fi.rstly, it did not disclose
to the
assessee what information had been supplied to it by
the departmental representative.
Next, it did not give
any opportunity to the company to rebut the material
furnished to it by him, and lastly, it declined
to take
all the material that the assessee
wanted to produce in
support of its case.
The result is that the assessee had
not had a fair hearing. The estimate of the gross rate
of profit on sales, both by the Income-tax
Officer and
the Tribunal seems to be based on surmises, suspicions
and conjectures.
It is somewhat surprising that
tl1e
Tribunal took from the representative of
the
department a statement of gross profit rates of other
cotton
mills without showing that statement
to
the assessee
and without giving him an opportunity to
show that
that statement had no relevancy whatsoever to the case
of die mill in question.
It is not known whether
the
mills which had
disclosed these
rates were situate in
Bengal or
elsewhere, and
whether diese mills
were
similarly
situated
and circumstanced.
Not only did
the Tribunal not show
the information
given by the
representative of the department
to the
appellant, but
it refused even to look at the trunk load of books
and
papers which Mr.
Banerjee
produced
before
the
Accow1tant-Member in his chamber.
No harm would
have been done if after
notice to the department
the
trunk had been opened and some time devoted .to see
what it contained.
The assessment in this case and in
the connected appeal,* we are told,
was
above
die
figure of Rs. 55 lakhs and it was meet and proper when
dealing widi a matter of this magnitude not to employ
*Civil Appeal No. 21Rof 1953, not reported.
*; i
-
•
•
·•
' .
-
•
S.C.R.
SUPREME COURT REPORTS
951
unnecessary haste
and show impatience,
particularly
when it was known to the department that the books
of the
assessee
were
in · the
custody of
the SubDivisional
Officer, Narayanganj.
We think
that both
the Income-tax Officer and the
Tribunal in estimating
the gross profit rate on sales did not act on any material
but acted on pure guess and suspicion.
It is thus a fit
case for the exercise of our power under article 136.
In the result we allow this appeal, set aside the order
of the ·Tribunal and remand the case to it with directions that in arriving at its estimate
of
gross
profits
and sales it should give full opportunity to the assessee
to place any relevant material on the point that it has
before the Tribunal, whether it is found in the books of
account or elsewhere and it should also disclose to the
assessee the material on which the Tribunal is going to
found its estimate
~nd then afford him full opportunity
to meet the substance of·any private inquiries made by
the
Income-tax
Officer if it is intended to make the
estimate on the foot of those enquiries.
It will also be
open to the department to p1a·cc any evidence or material on the record to support the 11'.stimate
made by the
Income-tax Officer or by the
Tribunal in its judgment.
The
Tribunal if it thinks fit may remit the case to the
Income-tax Officer for making a fresh assessment after
taking such further ~vidence
as is furnished
by
the
assessee or by the department.
The costs of these
proceedings will abide the result.
5-89 S. C. Jndia/59 .
1954
· Dhakesu:ari
Cotton Mills Hf.
v.
Commission<r of
Income-tax,
West Bengal.
Mehr Chand
MahajanC.J