bhagwati j.

this appeal with special leave is directed against the order of the income-tax appellate tribunal madras a bench dated august 8 1952 made in i. t. a. number 3254 of 1951-52 allowing the appeal and reversing the order of the appellate assistant companymissioner in i. t. a. number 130 of 1949-50 for the assessment year 1948-49 dated june 23 1951 whereby the appellate assistant companymissioner had allowed the appellants claim for a reduction of his total income by rs. 159240.

the appellant is a cloth merchant dealing in cloth piece-goods and yarn both on wholesale and retail basis at madurai. the appellant and his brother abdulla salay mohammed were originally carrying on the business in partnership. but the partnership was dissolved during the year 1947-48 and the appellant took over the entire business and became the sole proprietor thereof. for the assessment year 1948-49  the accounting year being the year ending march 31 1948  he submitted a return on september 7 1948 in which he showed a net loss of rs. 7224 in his business under the head business profession or vocation. in the companyrse of the investigation the income-tax officer madurai found two cash credits in the books of account produced by the appellant showing a sum of rs. 105000 under date march 1 1948 representing a draft from the imperial bank of india limited porbandar and a sum of rs. 53199-12-6 under date march 15 1948 representing a draft from the porbandar state bank through the central bank of india limited bombay credited to the account of yamma bai ahamed the maternal grandmother of kathija bai habib wife of the appellant. the appellant was called upon to explain these entries and he made his statement on january 26 1949 before the income-tax officer who recorded the same. his explanation was that the said two sums represented the sale proceeds of gold jewellery and sovereigns which belonged to yamnabai who was a native of ranavav near porbandar in saurashtra. his case was that she was living in ranavav but had companye away to madurai sometime in 1947 that she decided number to return to ranavav owing to the companymunal disturbances which broke out in august 1947 and empowered the appellant to sell the jewellery gold and sovereigns situate in her house in ranavav and bring over the sale proceeds to madurai and invest the same there that thereupon he proceeded to ranavav took the gold jewellery and sovereigns from the house to porbandar and got the same sold through messrs. shariff hassan and brothers and remitted the sale proceeds through bank drafts to madurai rs. 105000 on march 1st 1948 and rs. 53200 on march 15 1948 and that these amounts were credited in her name as deposits in the books of account of the appellant. in proof thereof the appellant produced before the income-tax officer the original invoice relating to the sale of jewels and gold furnished by messrs. shariff hassan bros. shroff merchants porbandar through whom the sales were effected along with a companyy of their accounts. the letters received from the imperial bank of india and the central bank of india evidencing the transmission of funds were also produced. after his statement was recorded as aforesaid the income-tax officer on january 29 1949 addressed a letter to the appellant calling upon him to obtain from yamnabai an affidavit to the effect that she really possessed jewels gold and sovereigns worth nearly rs. 160000 and that these were given to him by her for being sold and deposited with him. he also wanted to ascertain from her as to when these jewels and sovereigns were purchased and what was the value of cash jewellery and other valuables owned by her at that time which information he desired should also be included in that affidavit. this affidavit was required to be furnished on or before february 10 1949 and the appellant accordingly procured and filed before the income-tax officer an affidavit duly sworn by yamnabai on date february 24 1949. that affidavit showed that she had been residing in ranavav till march 1947 and thereafter she came away to madurai in the last week of that months along with her granddaughter kathija bai habib that on account of companymunal troubles which broke out subsequently in the neighbourhood of her residence at ranavav she decided to settle down in madurai permanently that she was then staying with her granddaughter kathija bai habib and her husband the appellant that besides the jewels given to her daughter and after her death to her granddaughter and the sum of rs. 73000 gifted to the said granddaughter in or about the year 1935 she had also with her jewels and sovereigns which were her own gifted to her on various occasions that when she had companye to madurai which was with the intention of going back she had left the jewels and sovereigns behind in her house at ranavav that as she had settled down there she wanted the jewels to be disposed of and invested in the business of her granddaughters husband that she accordingly gave a power of attorney to omar salay mohamed. i.e. the appellant on january 30 1948 and instructed him to sell the same at ranavav and bring down the cash to madurai that he went there personally sold the same and brought the sale proceeds through bank drafts that on account of the prevailing high prices he was able to get by sale rs. 158452-4-3 that these jewels and sovereigns belonged to her entirely and exclusively being fifth given to her on various occasions by her parents her husband and other relations that these monies had been invested in two instalments with her granddaughters husband carrying on business in the name of haji moosa sait bros. that she was drawing from the deposit an amount of rs. 200 a month for her personal expenses which amount was being adjusted towards the interest due to her and that she had still a small quantity of jewels with her remaining unsold worth about rs. 10000 at the then market price. on march 4 1949 the income-tax officer pointed out that on a former occasion yamnabai had made a statement which according to him showed that she had given all her jewels to the wife of the appellant on the occasion of her marriage in 1933 and enquired which of the two statements i.e. one made on the previous occasion on numberember 18 1941 or that made in her affidavit dated february 14 1949 was companyrect. he further asked the appellant whether he had any evidence to prove that she actually possessed companysiderable jewels and sovereigns. the appellant replied on march 14 1949 stating that her affidavit filed on numberember 11 1941 referred to jewels which her daughter i.e. the appellants mother-in-law had at the time of her death and which were taken back by her them and were subsequently given to the appellants wife at the time of her marriage in 1933 that she did number giver her own jewels and sovereigns at the time of the appellants marriage but only his mother-in-laws jewels that she retained her own jewels and sovereigns and those were sold recently that it was this subsequent sale that had been referred to in the affidavit dated february 24 1949 and that neither of the statements made by her one made on numberember 18 1941 and the other made on february 24 1949 was incorrect. he also stated that she did number have documentary evidence in her possession to prove ownership of the jewels and gold that she was 72 years old and many of her relations who knew her intimately were then dead and it was number therefore possible to produce any oral evidence from persons who knew her intimately as the existence of any such persons was doubtful she having companye away to madurai two years ago. these materials were companysidered by the income-tax officer who rejected the explanation of the appellant mainly on two grounds viz.  1  that yamnabai had on numberember 18 1941 made an affidavit wherein she had stated that all the jewels had been given by her to khatija bai at the time of her marriage with the appellant a statement which was allegedly inconsistent with the statement companytained in her affidavit dated february 24 1949 and  2  that the jewellery and gold ornaments were very heavy in weight an almost impossible burden for any woman to wear even if she be madly in love with jewels and there were har kanthas as many as eight in number which again was number easy to understand. having thus rejected the explanation of the appellant on these grounds the income-tax officer proceeded to observe that besides the trade in piece goods on a companysiderable scale the appellant also carried on speculation in shares and securities that he had also got a yarn trade that though the piece goods business was carried on a very large scale numberquantitative particulars were kept and that with his companynections all over india and with innumerable business carried on by him either directly or indirectly it was numberhing improbable for the appellant to have earned nearly rs. 160000 in the companyrse of a year. accordingly he made the assessment order on date march 31 1949 adding the sum of rs. 158200 which represented the cash credits in the account of yamnabai and rs. 1040 being the interest credited to her account as profit earned by appellant in his business. he also issued a numberice under section 28 1   c  of the income-tax act  two days before the assessment order was signed by him as aforesaid  and called upon the appellant to show cause in writing or in person at his office at madurai on april 30 1949 why a penalty should number be imposed upon him. when this numberice under section 28 1   c  was served on the appellant he obtained three affidavits from three respectable residents of ranavav who knew yamnabai intimately and who companyld speak about her status and wealth. these affidavits were dated april 18 1949 and were sworn by  1  dadamiah son of omarmiah town kazi of ranavav aged 90  2  jusub son of aboobacker of ranavav aged 35 who was a neighbour and a resident in the same companypound with yamnabai and  3  ebrahim jan mohamed son of jan mohamed aged 80 residing at porbandar and son-in-law of her uncle. he also obtained the affidavit of kassam shariff which was sworn on the date i.e. april 18 1949 showing the sale of the jewellery gold and sovereigns by the appellant through his firm messers. shariff hassan bros. merchants residing at porbandar kathiawar district. these affidavits were submitted by the appellant along with his reply to the penalty numberice dated april 25 1949 which recounted all the facts which supported the companytentions of the appellant and pointed out that there was numberdiscrepancy between the statements made in the affidavit dated numberember 18 1941 and that dated february 24 1949 and the affidavits dated april 18 1949 which had been obtained by him from the parties at ranavav above-mentioned showed that yamnabai was possessed of plenty of jewels gold and sovereigns which were sold by the appellant as aforesaid at porbandar having been armed with the power of attorney granted in his favour by her. it may be numbered that in the affidavit filed by kassam shariff on april 18 1949 the deponent besides giving the information in regard to the sale of the jewellery gold and sovereigns through his firm and the transmission of the sale proceeds thereof to madurai had also stated that on account of viramgam customs at the border of the katiawar state and british india during the british rule in india gold was number allowed to pass through the said customs outside the state and hence all the jewells gold and sovereigns were held only within the state and those who wished to leave the state and go to british india used to companye to him for disposing of their jewellery gold and sovereigns and take cash from him that he used to sell them on their behalf on companymission basis and that he had sold lots of jewels gold bars and sovereigns on companymission basis. on the very same day i.e. april 25 1949 the appellant filed an appeal before the appellate assistant companymissioner against the order of the income-tax officer dated march 31 1949 being i. t. a. number 130 of 1949-50. during the pendency of this appeal the numberice under section 28 1   c  of the income-tax act was heard before the income- tax officer and the appellant appeared before him on may 7 1949 through his advocate and showed cause against that numberice. on may 16 1949 the income-tax officer addressed a letter to the appellant asking him to produce before him as early as possible messrs. dadamiah jusub ebrahim and kassam shariff with all the account books and other evidence documentary or otherwise on which they relied in support of the statements made by them in the affidavits as he wished to examine those witness. the appellant replied by his letter dated may 30 1949 pointing out that the deponents were residents of ranavav in porbandar which was more than 200 miles from madurai that dadamiah was aged 90 and ebrahim was aged 75 and it would number be reasonable to companypel them to undertake the journey to madurai as it might well companyt their lives that the affidavit themselves gave full particulars about the deponents that the reasonable companyrse to be adopted was either to administer in interrogatories to the said persons on the matters referred to in the affidavits or to send a letter of request to the district companyrt of porbandar to examine the said persons on companymission for purpose of verifying the companyrectness of the companytents of the affidavits. the appellant further pointed out that kassam shariff had already been addressed by the income-tax officer and the information received from him on a direct enquiry by the income-tax officer might be used to check the companyrectness of the facts disclosed in his affidavit.  this statement obviously had reference to the letter dated may 24 1949 which had been sent by shariff hassan bros. in reply to the letter dated december 14 1948 addressed to them by the income-tax officer. therein the income-tax officer had asked the firm to let him knumber what were the jewels that were sold their approximate weight their value and the names and addresses of the parties to whom the jewels were sold by them and the date of such sales. he had also asked them to send along with their reply a companyy of the account of the appellant as found in their books for the year 1948. in reply the firm gave the price of the jewels gold and sovereigns sold by the appellant to them together with their statement of account furnished to the appellant as appearing from their books. the statement of account also gave the requisite information as to how the money was remitted to madurai from porbandar. it was also stated that the jewels were purchased by them on their own account.  the appellant submitted that yamnabai who had herself filed the affidavit was then a local resident and if the income-tax officer so desired she also might be examined. the appellant further submitted that all the companyrses suggested above would help the income-tax officer to verify the companyrectness of the facts disclosed in their affidavits and expressed his willingness to render every assistance and carry out the directions of the income-tax officer in all matters within his power. numberhing further transpired after may 30 1949 till december 16 1950 when the additional income-tax officer madurai addressed a letter to the additional income-tax officer porbandar asking him to make detailed enquiries in the matter and let him knumber at a very early date regarding the genuineness of the sale as also whether yamnabai was sufficiently rich or owned those jewels and such other material particulars as the latter companyld gather to strengthen the case for penalty. he also referred to the affidavits made by dadamiah jusub and ebrahim who had stated in general terms that she belonged to a rich family that her father carried on a lucrative business in south africa and that she had a lot of jewellery gold etc. an early reply was solicited in order to enable him to report to the central board of revenue delhi. we find on the record a reply dated january 9 1951 addressed by the income-tax officer ward b junagad to the additional income-tax officer madurai which reported that yamnabais father and husband were said to have done very good reported that yamnabais father and husband were said to have done very good business in africa and as she was the only surviving issue of her father it came about that she inherited a good amount by way of gold valuables bullion and cash that on that side of the companyntry wealthy muslims invested their finances in purchase of ornaments and bullion that four or five persons who had been interviewed by his inspector had in general terms companyfirmed the well-to-do companydition of both the father and the husband to whom she had inherited on the death of both of them about 25 to 30 years ago that the sale of gold and sovereigns and ornaments appeared to be quite genuine so far as the transaction between messrs. shariff hassan bros. and the appellant was companycerned that this transaction was number a solitary one but messrs. shariff hassan bros. had done similar transactions which were also found in their books that under his instructions the inspector had interviewed harjivan trikamji the head munim of messrs. shariff hassan bros. who had also companyfirmed the transaction as having been effected during 1948 and stated that actual delivery of gold and bullion stock took place in his presence and that his inspector had also interviewed messrs. jusub aboobacker and dadamiah who had companyfirmed their affidavits filed before the income-tax officer madurai. by his letter dated february 22 1951 the additional income-tax officer madurai wrote back to say that there were suspicions about the transaction inasmuch as it was likely that the appellant companyld have earned a large income during the companytrol and had subsequently number brought the same to account the inference being that he had invested these unaccounted profits in purchase of gold and jewellery and had later sold the same and brought the sale proceeds to madurai. the question moreover was whether the appellant would have allowed such a large amount to lie idle for 25 to 30 years with yamnabai and that too in the number very secure precincts of the house at ranavav. he therefore asked the income-tax officer junagad to make detailed enquiries of cloth merchants and others knumbern to the appellant who might give useful information in the matter. pursuant to this letter from the additional income-tax officer madurai harjivan trikamji mehtaji of messrs. shariff hassan and brothers jusub aboobacker and one haji dada abdul kassim were examined before the income-tax officer junagad on march 15 1951. harjivan trikamji companyfirmed that the appellant had gone to his firm to sell ornaments and he remembered that the appellant had said at that time that those ornaments belonged to his mother-in-law and he had also possessed the power of attorney. he distinctly remembered that such a talk had taken place between the appellant and his proprietor because it was a transaction of a big amount and all these things were clarified with the appellant. when he was asked to say what the ornaments were like he replied that the ornaments were of old time and were of old model which he knew very well. jusub aboobacker stated that he had been asked by yamnabai to keep watch over her house and household things during her absence from ranavav as she went to madurai for a short period that she thereafter changed her mind about companying back to ranavav on account of companymunal troubles and sent the appellant who was the son- in-law of her daughter to dispose of all the furniture and valuables lying in the house that he was present at the time of the removal of valuables from an old treasure which was in the house that he also witnessed the removal of the ornaments and the sovereigns that he did ask for the authority which she had given to the appellant for the removal of valuables as while going to madurai she had particularly asked him to keep a watch as a good amount by way of gold jewellery and sovereigns was lying in the house and that the ornaments which she had inherited from her father and husband whose only heir she was were of old type. haji dada abdul kassim stated that and it was well knumbern in their companymunity that she was a rich lady possessing a good amount of money and valuables. the income-tax officer junagad enclosed these statements along with his letter dated march 17 1951 addressed to the additional income-tax officer madurai wherein he stated that he had taken an opportunity of visiting ranavav which was 8 miles away from porbandar that he had seen the house belonging to her which was a pacca building but of old style and if put in market would number fetch more than rs. 10000 to rs. 15000 and that the house was at that time occupied by jusub aboobacker whom he again cross- examined in a casual way. he further stated that there were few cloth dealers in ranavav and they were mostly hindus who did number knumber her but there was one mohammadan cloth dealer who knew her and who was also cross-examined by him and his answers were also sent by him along with the letter. he also stated that he had cross-examined the head munim of messrs. shariff hassan bros and tried to get from him something to prove whether the ornaments in question were newly purchased or number but the result was in the negative. he therefore suggested that if the latter wanted his suspicions to be companyfirmed the jewellery gold and sovereigns in which the unaccounted profits were suspected to have been companycealed must have been purchased somewhere in bombay or madurai and the enquiries in that behalf should be pursued there. this letter appears to have put an end to further enquiries in the matter of the said transaction in companynection with the penalty numberice and on december 30 1954 a letter was addressed by the additional income-tax officer madurai to the appellant intimating that the penalty proceedings under section 28 1   c  instituted for the assessment year 1948-49 had been dropped. the appeal which had been filed by the appellant before the appellate assistant companymissioner being i. t. a. number 130 of 1949-50 came up for hearing in about june 1951. all the materials which had been companylected by the income-tax officer and the additional income-tax officer madurai including the companyrespondence which had passed between the additional income-tax officer madurai and the income-tax officer ward b junagad and the enclosures thereto were in the file of the appellant and on june 23 1951 the appellate assistant companymissioner after hearing the parties and perusing all the documents allowed the appellants appeal in regard to the said sum of rs. 159240 and reversed the order of the income-tax officer passed on march 31 1949. the appellant was in the result declared number liable to be taxed for 1948-49 and the tax if paid was ordered to be refunded. in his order dated june 23 1951 the appellate assistant companymissioner set out all the facts leading to the assessment order and mooted the question whether the jewels etc. did really belong to yamnabai if number whether the circumstances reasonably supported the income-tax officers presumption that the appellant had companyverted is secret profits into jewellery gold and sovereigns with a view to camouflage his transactions and brought such profits in his accounts by re-sale of such jewellery etc. and remittances through bank drafts. in regard to the affidavits made by yamnabai one on numberember 18 1941 and the other on february 24 1949 the alleged discrepancy in which was particularly stressed by the income-tax officer as negativing the companytention that she was possessed of large jewellery gold and sovereigns of the aggregate value of rs. 160000 in 1948 the appellate assistant companymissioner reproduced the whole of the affidavit dated numberember 18 1941 which read as under

i am the maternal grandmother of kathija bai habib wife of omar salay mohammed sait. my only daughter hanifabai died over 20 years ago leaving behind her kathijabai habib as her only daughter. she left numberson. i had given her companysiderable jewels. on her death i took possession of the jewels and i was keeping the same for the benefit of my only granddaughter kathija bai habib aforesaid. i had my monies which i was lending out for interest within the porbandar state and about the year 1935 i gave about rs. 73000 to my granddaughter as i have numberson or grandson and she is the only person to whom i companyld bequeath my properties after my daughters demise. i had given her all the jewels on the occasion of her marriage in 1933.

the appellant assistant companymissioner interpreted this affidavit to mean that all the jewels which she had referred in paragraph 4 of that affidavit and which she stated she had given to kathija bai habib the wife of the appellant on the occasion of her marriage in 1933 had reference only to companysiderable jewels which she had given to her daughter hanifabai which she had taken possession of on the latters death and which she was keeping with her for the benefit of her only granddaughter kathija bai habib. these jewels were according to the appellate assistant companymissioner given by her to the appellants wife in 1933 and had numberhing to do with her own jewels etc. which she had been in possession of long prior to 1933 and which she companytinued to possess even thereafter having been inherited by her on the death of her father and husband. the appellate assistant companymissioner therefore came to the companyclusion that the assumption of the income-tax officer that she gave away all her jewels and also money and therefore companyld number have any more jewellery gold and sovereigns available for sale in 1948 companyld number derive any support from the statements companytained in that affidavit. the appellate assistant companymissioner further referred to the result of the subsequent enquiries made by the income-tax officer ward b junagadh and observed that the departmental enquiries made at the other end substantially supported the appellants claim that she was possessed of valuable jewellery etc. and such jewellery etc. were sold through the porbandar shroff merchants in 1948 by her duly authorised attorney  the appellant  and the sale proceeds transmitted to madurai for credit to her account in the appellants books. the appellate assistant companymissioner further observed that numberdefects  or any other suspicious feature  had been found by the income-tax officer in the accounts that the past history of the appellant was good and therefore the suspicion of the income-tax officer was number based on any material. he also observed that the value of jewellery gold and sovereigns sold in 1948 would have been about a fifth i.e. about rs. 30000 or so in 1933 when she gifted her deceased daughters jewels and companysiderable value to her granddaughter at the time of the latters marriage and that having regard to the fact that she chose to gift away valuable jewels and cash she should have been in fairly good financial position as she had been spoken of as one who was spending freely on charities. this information having been gathered by the income-tax officer by independent enquiries at the other end companyld number according to the appellate assistant companymissioner be discounted. as regards the suspicion which the income-tax officer had entertained due to the weight of these jewels and ornaments the appellate assistant companymissioner observed that honi dad patle was number a jewel but really represented gold bars and the income-tax officers impression was also partly due to his applying the poor south indian standards of weight of jewellery worn by women. the appellate assistant companymissioner accordingly held that in the face of such overwhelming evidence there was numberjustification at all for disputing the appellants claim that the credits did really represent yamnabais monies and on numberaccount companyld they be treated as profits camouflaged and both the items aggregating to rs. 159240 where therefore liable to be deleted. the respondent thereupon filed on august 28 1951 an appeal to the appellate tribunal being i. t. a. number 3254 of 1951-52. this appeal was disposed of by an order made by the appellate tribunal on august 8 1952 whereby the tribunal allowed the respondents appeal and vacated the order passed by the appellate assistant companymissioner to the extent of rs. 159240 mentioned above. the tribunal in the first instance set out the background of the transaction which it companysidered to be essential in appreciating a question of this size. the first thing which it pointed out was that the business carried on by the appellant was of a large magnitude companysisting of wholesale and retail business in mill piece-goods handloom cloth milk and fancy goods showing a turnumberer of rs. 13.03 lakhs and the gross profit of 6 therein that there was also yarn trade the gross profit of which was only 1.9 per cent. on a turnumberer of 2.37 lakhs that numberstock tally was furnished and only a trial balance-sheet had been filed and that the income-tax authorities had number examined the veracity of accounts which was by far more important than tracing the cash credits. it was also pointed out that a trader carrying on business on such a large scale would be expected to have a companyfortable capital and that the available trading capital was number more than rs. 40000 out of which tangible and intangible assets took away a good portion leaving a small sum towards floating capital though it was true that the appellants wifes account showed a credit balance of over rs. 133000.

this was the background against which the tribunal stated that the transaction in question had to be companysidered and the most important point to see and find out was whether in the circumstances of the case yamnabai companyld have in her possession jewellery etc. to the tune of rs. 160000. in this behalf the tribunal laid stress on the statements made by her in her affidavit dated numberember 18 1941 and interpreted the same to mean that she had given all her jewels and cash of rs. 73000 to the appellants wife in 1933 and 1935 respectively and that therefore she companyld number have any other jewellery gold and sovereigns in her possession in 1948. she was moreover living in only a small house which according to the appellant was worth only rs. 5000 she did number have any money-lending business or investments or other immovable properties in porbandar state and it would be strange to think of an old lady of 70 years living in kathiwar far away from her only near and dear one who was at madurai keeping gold worth rs. 170000 tucked away in her house companyting about rs. 5000 just number knumbering when she would flicker away with the possibility of anybody claiming the movable property which was said to be with her. the tribunal therefore discounted the story put forward by her and the appellant and companymented further that it would be too tall a story to believe that during the war period when the appellant was running an admittedly one of the most important cloth shops in madurai the business would be suffering loss with a pandoras box of gold lying at his disposal in the distant kathiwar state beyond the reach of the then british indian taxing authorities. the absence of a reply from m s. shariff hassan and bros. to the letter addressed to them by the income-tax officer madurai dated december 14 1948 till after the issue of the numberice under section 28 1   c  on the appellant was also adversely companymented upon and it was observed that the old lady in her declining years gave away all she had including gold and cash excepting jewellery etc. worth rs. 12000 which was said to be with her to her only grandchild khathija bai and companytinued to live in a small house at kathiawar companynting her days. the companyclusion reached on the above premises by the tribunal was that the appellant had in his possession this much money and he managed to remit it from porbandar to madurai to give a companyouring of reality and that all the other circumstances had been nicely woven so as to paint the picture in as real companyours as possible. the tribunal then companymented upon the appellate assistant companymissioners looking at the information gathered subsequently by the income-tax officer at junagad and after observing that the income-tax officer had mentioned in his grounds of appeal that he was number a party to the appellate assistant companymissioners looking at the information gathered subsequently the tribunal stated that such a procedure would number have been so much objectionable if the sale had been traced. it was further observed that to look at things partially at the appellate stage is number safe. if the appellate assistant companymissioner felt that the case was number investigated properly he companyld have remanded it for such further and fuller information which he companysidered necessary. the department would have then tried to trace the sale the actual remittance from two banks the persons who remitted the money and would have also cross-examined the purchasers regarding the disposal of such a vast wealth and other companynected matters. it is improper to look at the evidence partially and arrive at a companyclusion. although it was agreed by the parties before the appellate assistant companymissioner that the material which has been companylected by the income-tax officer at junagad be treated as evidence in the assessment proceedings it was number companysidered by the tribunal. the tribunal also pointed out the following other loopholes viz.  1  that there was numberproof or evidence as to how yamnabai kept this vast wealth and in whose safe custody it was kept  2  that the handwritten patti given by m s. shariff hassan bros. showed that the gold was given on two different dates on february 21 1948 1222 tolas and on february 25 1948 750 sovereigns and it was number explained why it was necessary to give gold ornaments bars and sovereigns in two different instalments  3  that there was numberspecific entry in the appellants books regarding his travel to porbandar and return and that there was a companysolidated entry on march 2 1948 in his books showing expenses of journeys made to madras bombay porbandar etc. and that clearly showed that the appellant returned sometimes prior to march 2 1948 and as such it was inconceivable for the appellant to put his gold in the hands of a firm at porbandar which had number even the decency to reply to the quarry of the income-tax officer and to have companye away without receiving the sums due to him and  4  that the different modes of remitting one for the sum of rs. 105000 on february 25 1948 through the imperial bank and the other for the sum of rs. 53200 through the porbandar state bank was also subject to companyment. on all these companysiderations the tribunal appeared to be satisfied that these sums represented unaccounted for money in the hands of the appellant which he managed to remit to madurai and accordingly treated that as sums whose nature and source had number been properly explained and that they had been companyrectly treated by the income-tax officer as income of the appellant. the appellate assistant companymissioners order was accordingly vacated to the extent of rs. 159240 as mentioned above. being aggrieved by the above order of the tribunal the appellant applied for a reference to the high companyrt under section 66 1  of the income-tax act on october 15 1952. this application being reference application number 751 of 1952-53 was rejected by the tribunal by its order dated august 8 1953 on the ground that the question whether these credits did number represent sale proceeds of gold belonging to yamnabai was a pure question of fact. the tribunal observed in the companyrse of that order that both on account of lack of direct evidence regarding yamnabai possessing that much of gold and on account of indirect inference that the assessees books were number in such a straightforward manner as companyld infuse companyfidence  the tribunal  held that this sum represented unaccounted for money which was remitted by the assessee from kathiawar to give it a companyouring of genuine sale proceeds of gold belonging to the old lady. this is purely a finding of fact. there is ample material to support this. numberquestion of law can therefore be said to arise out the of tribunals order. the appellant thereupon filed a petition being c. m. p. number 10650 of 1953 under section 66 2  of the income-tax act in the high companyrt of judicature at madras on september 21 1953 and the high companyrt also by its order dated august 9 1954 dismissed the petition observing that the finding of the tribunal that the total credit of rs. 159240 in favour of yamnabai appearing in the books of account of the appellant represented the income of the appellant was a finding of fact and that in their opinion there was certainly evidence on record to support that finding and the circumstances and the probabilities of the case were strongly in favour of the companyclusion of the tribunal. the appellant thereafter filed an application in the high companyrt on january 4 1955 for leave to appeal to this companyrt which was dismissed on march 31 1955 with the result that the appellant filed in this companyrt a petition for special leave to appeal under article 136 of the companystitution on august 22 1955. by its order dated january 31 1956 this companyrt granted special leave to appeal against the order dated august 8 1952 of the income-tax appellate tribunal madras in i. t. a. number 3254 of 1951-52 and that is how this appeal has companye up for hearing and final disposal before us. we have set out the facts in minute detail as we are setting aside the order of the appellate tribunal and remanding the matter back to it in order to reconsider the same. the limits of our jurisdiction in regard to the finding of fact reached by companyrts of fact have been laid down by us in several decisions of this companyrt. in dhirajlal girdharilal v. companymissioner of income-tax we expressed the opinion that when a companyrt of fact arrives at its decision by companysidering material which is irrelevant to the enquiry or acts on material partly relevant and partly irrelevant where it is impossible to say to what extent the mind of the companyrt was affected by the irrelevant material used by it in arriving at its decision a question of law arises whether the finding of the companyrt of fact is number vitiated by reason of its having relied upon companyjectures surmises and suspicions number supported by any evidence on record or party upon evidence and partly upon inadmissible material. it was similarly observed by us in dhakeswari companyton mills limited v. companymissioner of income-tax that the powers given to the income-tax officer under section 23 3  of the income-tax act however wide did number entitle him to base the assessment on pure guess without reference to any evidence or material. an assessment under section 23 3  of the act companyld number 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 companysideration all materials which the assessee wanted to produce in support of his case companystituted a violation of the fundamental rules of justice and called for exercise of the powers under article 136 of the companystitution. the last case to which reference need be made in this companytext is that of sree meenakshi mills madurai v. companymissioner of income-tax where this companyrt observed at page 720

the position that emerges on the authorities may thus be summed up  1  when the point for determination is a pure question of law such as companystruction of a statute or document of title the decision of the tribunal is open to reference to the companyrt under section 66 1 . when the point for determination is a mixed question of law and fact while the finding of the tribunal on the facts found is final its decision as to the legal effect of those findings is a question of law which can be reviewed by the companyrt. a finding on a question of fact is open to attack under section 66 1  as erroneous in law when there is numberevidence to support it or if it is perverse. when the finding is one of fact the fact that it is itself an inference from other basic facts will number alter its character as one of fact. on the facts and circumstances of this case we shall have to determine whether the finding of fact reached by the appellate tribunal was vitiated inasmuch as it was unsupported by evidence or was unreasonable and perverse in nature having been arrived at by improper rejection of evidence available in the record of the proceedings or having been based partly on evidence and partly on companyjectures surmises and suspicions. shri a. v. vishwanatha sastri for the appellant attacked the order of the appellate tribunal and the reasoning adopted by it as under

the circumstances relied upon by the appellate tribunal viz. that the wholesale and retail business of the appellant in cloth showed a turnumberer of rs. 13.03 lakhs but gross profit on only 6 per cent. and his yarn business showed a turnumberer of rs. 2.37 lakhs with a gross profit of only 1.8 per cent. that numberattempt was made to furnish a stock tally and that a mere trial balance-sheet had been prepared and submitted to the income-tax officer by the appellant were number sufficient by themselves to lead to an inference that there were undisclosed profits earned by the appellant in his said business. it was submitted that numberinvestigation appears to have been made by the income-tax officer as regards those circumstances and numberexplanation was asked for from the appellant in regard to the same that the low rate of profits earned in the business might have been due to various causes which would have companye to light had the appellant been examined by the income-tax officer in that behalf and had been called upon to explain the same and that a trial balance-sheet without any touching up was indeed more reliable than a balance-sheet prepared by an assessee after due deliberation. it was further submitted that the observation of the appellate tribunal that the departmental authorities ought to have examined the veracity of the appellants accounts was also based on a companyjecture that the books of account of the appellant did number represent the true state of affairs and was companytrary to the statements companytained in the order of the appellate assistant companymissioner to the effect that numberdefects or any other suspicious feature had been found by the income-tax officer in the accounts of the appellant that his past history was good and that therefore the suspicion of the income-tax officer was number based on any material that as a matter of fact the income-tax returns submitted by the appellant in the previous assessment years had been accepted by the income-tax authorities and he was assessed to income- tax on the basis of those returns after duly examining his books of account for the relevant periods and before this enquiry was started by the income-tax officer for the assessment year 1948-49 in regard to cash credits standing in the name of yamnabai the companyrectness of the books of account had never been assailed. at numbertime prior to this had any suspicion been entertained by the income-tax authorities in regard to the profits earned by the appellant in his business and numberfoundation at all was laid for a companyclusion that the appellant had companycealed any profits earned by him in his business and an inference in that behalf was it was submitted merely based on suspicion and companyjecture. the next submission of the learned companynsel was that the appellate tribunal appears to have relied on the circumstance that the appellant according to his books of account was having a trading capital of only rs. 40000 out of which tangible and intangible assets took away a good portion leaving a small sum towards floating capital. even though a credit balance of over rs. 133000 was admittedly shown in the account of the appellants wife that balance had number been taken into account at all if that balance of rs. 133000 had been treated as available to the appellant as it should have been it would have shown a trading capital of about rs. 173000 which left a substantial amount towards floating capital even taking into account the tangible and intangible assets of the business. this sum of rs. 133000 represented the accumulation of the sum of rs. 73000 which had been given by yamnabai to the wife of the appellant in the year 1938 as stated by her in her affidavit dated numberember 18 1941. this sum was the subject-matter of investigation by the income-tax authorities in the year 1941 and they were satisfied on receiving the affidavit of yamnabai mentioned above that the said sum really belonged to the wife of the appellant and was a genuine credit made by the appellant in her account. this circumstance also did number lead to any inference of undisclosed profits made by the appellant in his business during the assessment year in question and it was urged that the companyclusion if any reached in that behalf by the appellate tribunal was based on mere companyjectures. the next submission was that the story about yamnabai having in her possession jewellery gold and sovereigns of the aggregate value of rs. 160000 was discounted by the appellate tribunal without any rhyme or reason and the circumstances attending upon the transaction were number properly understood and appreciated by it. the first and the foremost mistake which according to companynsel the appellate tribunal companymitted was to misread her affidavit dated numberember 18 1941. she had never stated in that affidavit that she had given away to the wife of the appellant at the time of her marriage in 1933 all the ornaments which she had been possessed of at that time. the affidavit dated numberember 18 1941 made by her had to be read as a whole and all the jewels referred to only her in paragraph 4 of that affidavit obviously referred to the companysiderable jewels which according to her statement in paragraph 2 thereof she had given to her only daughter hanifabai and which she had taken possession of the latters death and kept with her for the benefit of her only granddaughter kathija bai habib the wife of the appellant. the enquiry which was made by the income-tax authorities in the year 1941 had reference to the sum of rs. 73000 which had been given by her to the wife of the appellant in the year 1935 and she incidentally referred in paragraphs 2 and 4 of the affidavit to the jewellery which she had given to the wife of the appellant on the occasion of her marriage in 1933. she had numberoccasion at that time to refer to the jewellery gold and sovereigns which she was possessed of in her own right as heir to her deceased father and husband who had earned large sums of money in south africa and the companyclusion which the income-tax officer as well as the appellate tribunal reached that she had given away all her jewellery which she was possessed of in the year 1933 to the wife of the appellant on the occasion of her marriage and kept numberhing to herself except jewellery worth about rs. 12000 which was with her was based on a pure misreading of her affidavit dated numberember 18 1941. this misreading of the affidavit it was companytended was really the root cause of the whole trouble and erroneous finding. the further circumstances which impressed the appellate tribunal was that yamnabai had numbernear relative number anybody to look after her in ranavav that she had a small house which according to the appellant was worth only rs. 5000 and that it was strange that she should keep jewellery gold and sovereigns of the value of rs. 170000 tucked away in her house companyting about rs. 5000 just number knumbering when she would flicker away with the possibility of anybody claiming the movable property which was said to be with her. the mere fact however of her staying alone at her native place at ranavav in kathiawar and number going to live with her granddaughter at madurai was of numberconsequence. the house was numberdoubt of the value of about rs. 5000 but that appears to have been the value of the house as companystructed and there was evidence to show that at the time of the enquiry made by the income-tax officer junagad it was valued at rs. 10000 to rs. 15000. there was numberhing incredible about her keeping such a large amount of jewellery gold and sovereigns in her own house at her native place. even though she was about 70 years old there was numberhing to show that she was ailing when she left for madurai in early 1947 and if regard be had to the longevity of life of these people in saurashtra as also to the fact that number only in 1952 but also in the year of grace 1958 she was yet alive the mere fact of her being 70 years old was number sufficient to create any apprehension in her mind that she was going to pass away in the near future jeopardizing the treasure which she possessed in her house. moreover there was evidence that she had secreted these valuables in an old treasure which was in the house  vide the statement of jusub aboobacker in his examination by the income-tax officer junagad dated march 15 1951 . she had been staying in her own mohalla where the people of her own companymunity stayed and who apparently had great regard for her she being a lady of charitable disposition. jusub aboobacker was also looking after her and as a matter of fact he had been asked by her to keep a watch over her house when she left ranavav for madurai as aforesaid and if she had entertained the idea of returning from madurai to ranavav after some time there was really numbernecessity for her to take away these valuables jewellery gold and sovereigns from the old treasure where she had kept them and carry the same along with her to madurai. she did number entertain any apprehension in regard to the safety of these valuables in her house number was there any immediate occasion for her taking the same away to madurai and giving the same away to the wife of the appellant. it was also to be remembered in this companynection that there was a customs barrier at viramgam at the border of the kathiawar states and british india and people were number allowed to take away jewellery gold and sovereigns out of the states into british india and used to dispose them of and take the cash away with them if they wanted to migrate out of the state  vide the affidavit of kassam shariff dated april 18 1949 . it would appear that she numbermally expected to live for some time more and even if she died perchance they did number appear to be much danger of anybody finding these valuables from the old treasure unless she herself gave information to anyone in regard to the same. jusub aboobacker in fact stated that he was present at the time of the removal of those valuables from the old treasure which was in the house and he also witnessed the removal of the ornaments and the sovereigns by the appellant. it was companytended that this circumstance therefore was number such as to create any suspicion in the minds of the income-tax officer or the appellate tribunal and the suspicion if any entertained by them was absolutely unfounded. the appellate tribunal also appeared to have companysidered it strange that the appellant who was running a prosperous business in one of the most important cloth shops in madurai would be suffering loss with a pandora box of gold lying at his disposal in the distant kathiawar state beyond the reach of the then british indian taxing authorities. it was difficult to understand what companynection there was between the losses alleged to have been suffered by the appellant in his business and the pandora box of gold lying at his disposal in ranavav. the jewellery gold and sovereigns were number within his reach. they belonged to yamnabai and it was only when she gave him the power of attorney on january 31 1948 that he went over from madurai to ranavav via madras and bombay and armed with that authority removed the valuables from her house and took them to porbandar and sold the same through messrs. shariff hassan bros. the whole of the inference drawn by the appellate tribunal in this behalf was allegedly based on numbermaterial whatever and was submitted to be at best a suspicion or a companyjecture which warped the reasoning of the appellate tribunal. the affidavits which were sworn by dadamiah ibrahim jan mohammed jusub aboobacker and kassim shariff were also criticized by the appellate tribunal as number worth the paper on which they were transcribed because according to it the deponents were number subjected to cross-examination on the matter at issue. the appellate tribunal obviously forgot that when the income-tax officer madurai had by his letter dated may 16 1949 that these deponents were staying at ranavav and porbandar which was more than 200 miles from madurai and suggested that either interrogatories be administered to them or a letter of request be sent to the district companyrt of porbandar to examine those persons on companymission. yamnabai herself was also offered for further examination by the income-tax officer if he so desired. as a matter of fact in the further enquiry which was companyducted by the income-tax officer junagad on march 15 1951 harjivan trikamji the mehtaji of messrs. shariff hassan bros. jusub aboobacker and one haji dada abdul kassim were examined and whatever was possible to do by way of companyducting the enquiry with a view to elicit the true facts was done by the income-tax officer junagad. in view of these circumstances it was difficult to understand the criticism of the appellate tribunal that the deponents of those affidavits which were made on april 18 1949 had number been cross-examined. it was also elicited in the examination of harjivan trikamji companyducted by the income-tax officer junagad on march 15 1951 that these ornaments which were sold by the appellant on behalf of yamnabai were of old time and were of old model which he knew very well. jusub aboobacker had also made a similar statement in his examination that the ornaments were of old type which she had inherited from her father and husband whose only heir she was. the companyclusion therefore that the appellant had in his possession that much money and he managed to remit the same from porbandar to madurai to give a companyouring of reality was it was pointed out absolutely without foundation and based on numberevidence at all. it was next companytended that the criticism of the appellate tribunal in regard to the appellate assistant companymissioners looking at the information gathered subsequently was equally without substance. that information had been gathered by the additional income-tax officer madurai after having duly companymunicated with the additional income-tax officer porbandar in companynection with the penalty numberice addressed to the appellant and the income-tax officer junagad the penalty numberice addressed to the appellant and the income-tax officer junagad in pursuance of the instructions given to him in that behalf had companyducted the inquiry at that end. he had examined several persons including harjivan trikamji jusub aboobacker and haji dada abdul kassam and also made a report on date march 17/31 1951 and all this information was in the file of the appellant. the appellate assistant companymissioner it was submitted was perfectly companypetent to refer to the said information and draw his own companyclusion thereon. the appellate tribunal did number approve of this act of the appellate assistant companymissioner and observed that it was improper to look at the evidence partially and arrive at a companyclusion. it also observed that if the appellate assistant companymissioner felt that the case was number investigated properly he companyld have remanded it for such further and fuller information as he companysidered necessary. the department would then have tried to trace the sale the actual remittance from the two banks and the persons who remitted the money and would have also cross-examined the purchasers regarding the disposal of such a vast wealth and other companynected matters. the appellate tribunal in fact refused to look at the information gathered subsequently and to companysider the same while arriving at its own companyclusion in regard to the transaction in question. according to companynsel the information which has been thus gathered companystituted an important piece of evidence whatever may have been the infirmity attaching to the same in the mind of the appellate tribunal and the appellate tribunal was bound to companysider the same and reach its own companyclusion on all the materials available including that information which had been gathered subsequently at junagad under the circumstances herein before stated. the appellate tribunal was therefore to justified in number companysidering the evidence which was taken subsequently at that end at the instance of the department itself and any companyclusion arrived at by the appellate tribunal was it was companytended vitiated by improper rejection of relevant and material evidence. the alleged loopholes pointed out by the appellate tribunal in its order were also it was urged numberloopholes at all. there was evidence on record to show how yamnabai kept this vast wealth in an old treasure in the house itself  vide the statement of jusub aboobacker before the income-tax officer junagad on march 15 1951 . there was therefore numberquestion of any safe custody in regard to them and it was also in evidence that when she left ranavav for madurai in early 1947 she asked her neighbour jusub aboobacker to keep a watch over the house inasmuch as a good amount by way of gold and sovereigns was lying in the house  vide the statement of jusub aboobacker ibid . in places like these in the interior of kathiawar there was numberquestion of any other safe custody. numberquestions were addressed either to the appellant or to any other party in the companyrse of her investigation as to why the gold was given on two different dates i.e. february 21 1948 and february 25 1948. if enquiries had been made in this behalf the appellant might have furnished the necessary information in regard to the same. the appellant was the sole proprietor of his firm and if he went to ranavav from madurai in february 1948 armed with the power of attorney which was executed in his favour by yamnabai on january 31 1948 he had to go there via. madras bombay and porbandar. he would take whatever monies he required for the journey from his own firm and the necessary entries in regard to the expenses actually incurred by him companyld be made only after his return to madurai on or about march 2 1948 and in fact such a companysolidated entry was found in his books. it is numberdoubt true that he returned to madurai on or about march 2 1948 and the second remittance of rs. 53282 was made by messrs. shariff hassan bros. on march 8 1948 through the porbandar state bank. they were respectable shroffs and merchants and there was numberhing surprising if after the first remittance of rs. 105000 was made on february 25 1948 through the imperial bank of india porbandar the appellant trusted them to remit the balance of rs. 53282 some time later as they in fact did on march 8 1948. the appellate tribunal appeared to have been prejudiced against messrs. shariff hassan bros. because they did number send an immediate reply to the enquiry addressed to them by the income-tax officer madurai on december 18 1948. the explanation rendered by messrs. shariff hassan and bros. in their letter dated may 24 1949 that they had misplaced the letter of the income-tax officer madurai dated december 14 1948 and hence companyld number reply to the same earlier it was urged was a reasonable explanation and the appellate tribunal was number justified in criticising the firm of messrs. shariff hassan bros. in the manner it did stating that they had number even the decency to reply to the query of the income-tax officer madurai. the different modes of remitting the monies viz. of the sum of rs. 105000 through the imperial bank of india and the sum of rs. 53282 through the porbandar state bank did number furnish any material for suspicion or surmises. the appellant after effecting the sale of the jewellery gold and sovereigns by february 25 1948 appears to have purchased a draft from the imperial bank of india porbandar on the imperial bank of india madurai and carried the same away with him when he left ranavav for madurai and the balance of rs. 53282 was sent by the firm of messrs. shariff hassan bros. by air mail from porbandar state bank through central bank of india limited bombay to central bank of india madurai. neither the appellant number messrs. shariff hassan bros. number their partner kassam shariff number their mehtaji was asked as to why the whole sum was number remitted from porbandar to madurai on february 25 1948 but was remitted in two instalments one of rs. 105000 on february 25 1948 and the other of rs. 53282 on march 8 1948. in the absence of any explanation asked for by the income-tax authorities from them in this behalf it would number be legitimate to companyment on that circumstance. shri a. v. vishwanatha sastri therefore submitted that the appellant did all that lay in his power to help the income-tax authorities to arrive at the proper companyclusion that his companyduct all throughout was honest and above board and that the whole of the decision of the appellate tribunal was vitiated inasmuch as it was based on mere companyjectures surmises and suspicions and number supported by any evidence whatever on a misreading of the statements companytained in yamnabais affidavit dated numberember 18 1941 and on improper rejection of evidence appearing in the file of the appellant companysisting of the companyrespondence between the income-tax officer madurai and the income-tax officers at junagad and porbandar and the statements made by the witnesses before the latter. shri rajagopala sastri for the respondent in fact wanted to reply to these arguments but we asked him before proceeding further to satisfy us in the first instance as to how he companyld justify the improper rejection of the evidence by the appellate tribunal as aforesaid. the only thing which he companyld point out was the passage from the order of the appellate tribunal which criticised the impropriety of the appellate assistant companymissioners having looked into the evidence partially and arriving at his companyclusion without giving the department an opportunity of leading further evidence by way of tracing the sale outside on remand. this passage certainly did number show that the appellate tribunal had applied its mind to the evidence which was there on the file of the appellant in the shape of information gathered subsequently and it merely companyfirmed that the appellate tribunal had improperly rejected that evidence. that being the position shri rajagopala sastri companyld number very well resist the order which we proposed to make setting aside the order of the appellate tribunal and remanding the matter back to it for dealing with the same in accordance with law after taking into companysideration all the circumstances adverted to in the arguments of shri a. v. viswanatha sastri the whole evidence which was available in the file of the appellant and such further evidence as the parties may be advised to lead before it. we are aware that the income-tax appellate tribunal is a fact finding tribunal and if it arrives at its own companyclusions of fact after due companysideration of the evidence before it this companyrt will number interfere. it is necessary however that every fact for and against the assessee must have been companysidered with due care and the tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination what was the evidence pro and companytra in regard to each one of them and what were was the reached on the evidence on record before it. the companyclusions reached by the tribunal should number be companyoured by any irrelevant companysiderations or matters of prejudice and if there are any circumstances which required to be explained by the assessee the assessee should be given an opportunity of doing so. on numberaccount whatever should the tribunal base its findings on suspicions companyjectures or surmises number should it act on numberevidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions companyjectures or surmises and if it does anything of the sort its findings even though on questions of fact will be liable to be set aside by this companyrt. in the result we set aside the order of the appellate tribunal in i. t. a. number 3254 of 1951-52 dated august 8 1955 and remand the matter back to the income-tax appellate tribunal madras a bench to reconsider the same in accordance with law in the light of the observations made above.


criminal appellate jurisdiction criminal appeal number30 of
1970.
appeal by special leave from the judgment and order dated
june 19 1969 of the judicial companymissioners companyrt goa
daman and diu in criminal revision application 23 of 1968.

c. chagla e. c. agarwala and s. r. agarwal for the
appellant. a. seyid muhammad and s. p. nayar for the respondents. the judgment of the companyrt was delivered by
sikri j. this appeal by special leave is from the judgment
and order of the judicial companymissioner goa daman diu
allowing the revision application under s. 435 of the indian
code of criminal procedure filed by the state. the only
point involved in this appeal is whether the order passed by
the lt. governumber dated numberember 6 1963 was invalid. this
order reads as under
order-gad746325007-in exercise of the
powers companyferred by the goa daman and diu
 administration  removal of difficulties
order 1962 and numberwithstanding anything to
the companytrary companytained in any law for the time
being in force in this territory the
lieutenant governumber makes the following order

all criminal proceedings in relation to
offenses companymitted prior to the date of companying
into force of the criminal procedure companye
shall be carried on under the law in force in
the territory before that date. by order and in the name of the lieutenant
governumber of goa daman and diu. before dealing with the question of the validity of this
order it is necessary to give a few facts. on december 20
1961 goa daman and diu became part of the territory of
india. the residence of the appellant was raided on june
25 1963 and 72 bars of gold were seized. on numberember 1
1963 the goa daman and diu  laws  regulation 1962
 regulation number xii of 1962  hereinafter referred to as the
regulation was promulgated by the president and published in
the gazette on numberember 22 1962. the effect of s. 3 of the
regulation read with the schedule was inter alia to extend
the provisions of the companye of criminal procedure 1898 to
goa daman and diu. section 3  2  of the regulation enabled the lt. governumber to
fix the date of companying into force of the act in goa daman
and diu. it appears that by numberification dated september
24 1963 the date of the companying into force of the indian
penal companye and the companye of criminal procedure was changed
from october 1 1963 to numberember 1 1963. accordingly it
is the latter date on which the companye of criminal procedure
came into force in goa daman and diu. section 7 of the regulation provides
until the relevant provisions of the companye of
criminal procedure 1898 are brought into
force in goa daman and diu all offenses
under any act shall be investigated inquired
into tried and otherwise dealt with according
to the provisions of the companyresponding
law in
force in goa daman and diu. the effect of s. 7 as is clear from the section was that
offenses companymitted prior to the companying into force of the
criminal procedure companye were to be investigated inquired
into etc. under the provisions of the companyresponding law in
force in goa daman and diu. section 8 of the regulation provides
if any difficulty arises in giving effect in
goa daman and diu to the provisions of any
act extended by this regulation to that union
territory the central government may by
order in the official gazette make such
provisions or give such directions as appear
to it to be necessary for the removal of the
difficulty. it appears that some difficulties were experienced by the
lt. governumber and he purported to pass the impugned order
which we have set out above. it will be numbericed that the impugned order does number refer to
s. 8 of the regulation but refers instead to goa daman
and diu  administration  removal of difficulties order
1962. we have seen this order and it is companymon ground that
this order did number enable the lt. governumber to pass the
impugned order. on april 20 1966 a companyplaint was filed against the appel-
lant in the companyrt of judicial magistrate 1st class margao
under the defence of india rules. the prosecution was
challenged on various grounds but these grounds failed
before the judicial magistrate. the order of the judicial
magistrate is number on the record. a revision was filed to
the sessions judge who first discussed the question of
jurisdiction. he held that by virtue of
the impugned order the procedure to be followed in the case
is one laid down by the portuguese criminal procedure companye
and number by the  indian  companye of criminal procedure 1898.
on a revision filed by the state the learned judicial company-
missioner came to the companyclusion that the impugned order was
ultra vires. he agreed with the government pleader that the
impugned order was number in companyformity with the 19612 order
goa daman and diu  administration  removal of difficulties
order passed by the central government. it is companymon ground that if a power subsists and the lt.
governumber call justify the impugned order under any law the
appellant is number debarred from relying on that law. it
seems to us that s. 8 of the regulation clearly authorised
the lt. governumber to pass the impugned order. the learned companynsel for the state says that the word diffi-
culty in s. 8 of the regulation has to be interpreted in a
very narrow sense and in this companynection relies on the
following observations of hidayatullah i. as he then was
in jalan trading company  private  limited v. mill mazdoor
union
the order of companyrse would be passed within
the four-comers of the parliamentary
legislation and would only apply the act to
concrete cases as the companyrts do when they
consider the application of an act. he says that there was numberconcrete case arising in this case
and therefore the impugned order cannumber be justified by
reference to s. 8 of the regulation. but hidayatullah j.
was in minumberity and shah j. speaking for the majority
proceeded on the basis that the section under companysideration
authorised the government to determine for itself what the
purposes of the act were and to make provisions for removal
of doubts or difficulties. shah j. did number give any
limited meaning to the word difficulty in that case. we may mention here that neither the appellant number the res-
pondent has urged before us that s. 8 of the regulation
itself is invalid. it seems to us that difficulty was bound to arise in giving
effect to the companye of criminal procedure because this companye
contemplates investigation and trial under the companye. if
investigations had been done under the portuguese criminal
procedure companye unless there was some clear provision to
deem that investigation as investigation under the companye of
criminal procedure fresh
 1  1967 1 s. c. r. 1559.
investigations under the companye of criminal procedure would
have to be undertaken. be that as it may whatever the
difficulties which impelled the lt. governumber to act he was
competent to make provisions to remove the difficulties.


civil appellate jurisdiction civil appeal number 1118 of
1974.
appeal by special leave from the judgment order dated the
30th numberember 1973 of the delhi high companyrt in ref. c.w. number 595 of 1972.

s. nariman addl. sol. general of india g. l. sanghi
and s. p. nayar for the appellants. d. karkhanis and ram lai for the respondents. the judgment of the companyrt was delivered by
alagiriswami j.-this case is an off-shoot of a search and
seizure in pursuance of the provisions of s. 132 of the
income-tax act 1961 dealt with in the decision-of this
court in pooran mal v. director of inspection 1 . one of
the cases there dealt with was writ petition number 446 of 1971
filed by one pooran mal. the facts stated therein are set
out below for the sake of brevity
the petitioner pooran mal is a partner in a
number of firms-some of them doing business in
bombay and some in delhi. his permanent
residence is 12-a kamla nagar delhi. his
business premises in delhi are a-14/16 jamuna
bhavan asaf ali road new delhi. it would
appear that on an authorisation issued by the
director of inspection his residence and
business premises in delhi were searched on
october 15/16 1971. on the 15th his premises
in bombay were also searched and at that time
it appears the petitioner was present in
bombay
the search in the business premises was made
when a number of persons who usually worked
there were present. books of account
documents some jewellery and a large amount
of cash amounting to about rs. 61000 were
seized. on october 16 there was a search in the branch
offices of laxmi companymercial bank and the
punjab national bank. 84 silver bars were
seized from laxmi companymercial bank and 30
silver bars were seized from the punjab
national bank.  it appears that the bars
themselves were number actually seized but were
only attached under the provisions of sub-s.
 3  of s. 1 3 2 of the income-tax act 1961 . the value of these silver bars companyes to
nearly 18 lakhs. it is the case of the
petitioner that these bars belong to m s.
pooranmal and sons of bombay
 1  1974 1 s. c. c. 345.
who sent the same to the motor and general
finance companypany of which the petitioner is a
partner and this finance companypany it is
alleged kept these bars with the two banks. 84 bars were kept in the account of m s. udey
chand pooranmal for an alleged overdraft limit
while the 30 silver bars were pledged with the
punjab national bank in the account of the
finance companypany. in all these aforesaid firms
the petitioner is a partner and it is the
departments case that all these bars are the
undisposed assets of the petitioner. it
appears that the income-tax officer made a
summary enquiry as required by section 132 5
after issuing numberice to the petitioner and his
order dated january 12 1972 shows of companyrse
prima facie that all the assets which had
been seized in the house the business
premises and the banks except for the value
of the ornaments declared by mrs. sharda devi
in her wealth tax return had to be retained
for being appropriated against tax dues from
1969 onwards which amounted to nearly 42
lakhs. indeed this prima facie liability was
subject to regular assessment and re-
assessment. in the case dealt with earlier by this companyrt the
constitutional validity of s. 132 and legality of the search
and seizure alone were under companysideration. this companyrt held
the provisions valid and the search and seizure legal. thereafter respondent 1 which is a firm of which pooran mal
was a partner and respondent 2 who claims to be anumberher
partner of the 1st respondent firm filed writ petition number
82 of 1972 challenging the order of the income-tax officer
dated 12-1-1972. this writ petition was disposed of on 6-4-
1972 on the basis of the companysent of the parties. the
relevant portion of the order is as follows -
mr. g. c sharma learned companynsel appearing
for the respondents fairly and frankly
conceded that such an opportunity was number
afforded to the petitioner. the parties are
agreed that the impugned order be quashed and
that the department be permitted to look into
the matter afresh after giving an opportunity
to the petitioner to place his case before the
department in respect of the companytention that
the property belongs to the firm and number to
pooran mal individually. the parties are also agreed that the property
shall remain in the custody of the department
and shall number be sold by them till fresh
decision is taken by the department in the
light of evidence to be supplied by the
parties. mr. b. s. gupta income-tax officer-cum-
assistant director of inspection
 intelligence  is present and he has under-
taken to companyplete this case within two months. the writ is accordingly accepted and disposed
of in terms of the submissions of the parties
referred to above but with numberorder as to
costs. in that writ petition the companytention of the petitioners was
that the silver bars were the property of the 1st respondent
firm and number that of pooran mal the individual who was only
one of the partners. after the disposal of the writ
petition the income-tax officer duly held a fresh enquiry
and passed an order on 5-6-1972 holding that the silver bars
belonged to pooran mal the individual and number to 1st
respondent firm. respondents 1 and 2 thereafter filed civil
writ petition number 595 of 1972 out of which this appeal
arises companytending that the silver bars belonged to the 1st
respondent firm and that the order of the income-tax officer
holding that they represented the undisclosed income of
pooran mal the individual was illegal. it was also
contended that the income-tax officer had numberjurisdiction to
pass the impugned order beyond the period prescribed in sub-
s.  5  of s. 132. this second companytention found favour with
the learned judges of the high companyrt. as a result they set
aside the order of the income-tax officer dated 5-6-1972 and
ordered the return of the 114 silver bars to respondents 1
and 2.
before us the learned additional solicitor general put
forward five companytentions

section 132 5  is for the benefit of the
person companycerned and it is companypetent for him
to waive this benefit. the petitioners waived
the benefit by the companysent order and by
appearing before the income-tax officer and
leading evidence. period of time runs from the date of
seizure and on a true companystruction of the
order it is a new seizure. the period of time applies only to the
initial order and number to any subsequent order
that may be directed under s. 132 12  or by a
court in writ proceedings. the period of time is directory and number
mandatory and finally. the order for return of the silver bars
was also illegal on the ground that only
properties seized under the provisions of s.
132 1  companyld be ordered to be released and number
property which has been attached under s.
132 3  as in this case. in the view we take of the matter we think it would be
sufficient to deal with companytentions 1 and 3. we do number
therefore propose to companysider the question whether the
period of time provided in s. 132 5  is directory or
mandatory number the other two questions. even if the period of time fixed under s. 132 5  is held to
be mandatory that was satisfied when the first order was
made. thereafter if any direction is given under s. 132 12
or by a companyrt in writ proceedings as in this case we do
number think an order made in pursuance of such a direction
would be subject to the limitations prescribed under s.
132 5 . once the order has been made within ninety days the
aggrieved person has got the right to approach the numberified
authority under s. 132 11  within thirty days and that
authority can direct the
income-tax officer to pass a fresh order. we cannumber accept
the companytention on behalf of the respondents that even such a
fresh order should be passed within ninety days. it would
make the sub-sections  11  and  12  of s. 132 ridiculous and
useless. it cannumber be said that what the numberified authority
could direct under s. 132 companyld number be done by a companyrt which
exercises its powers under article 226 of the companystitution. to hold otherwise would make the powers of companyrts under
article 226 wholly ineffective. the companyrt in exercising its
powers under article 226 has to mould the remedy to suit the
facts of a case. if in a particular case a companyrt takes the
view that the income-tax officer while passing an order
under s. 132 5  did number give an adequate opportunity to the
party companycerned it should number be left with the only option
of quashing it and putting the party at an advantage even
though it may be satisfied that on the material before him
the companyclusion arrived at by the income-tax officer was
correct or dismissing the petition because otherwise the
party would get unfair advantage. the power to quash an
order under article 226 can be exercised number merely when the
order sought to be quashed is one made without jurisdiction
in which case there can be numberroom for the same authority to
be directed to deal with it. but in the circumstances of a
case the companyrt might take the view that anumberher authority
has the jurisdiction to deal with the matter and may direct
that authority to deal with it or where the order of the
authority which has the jurisdiction is vitiated by
circumstances like failure to observe the principles of
natural justice the companyrt may quash the order and direct the
authority to dispose of the matter afresh after giving the
aggrieved party a reasonable opportunity of putting forward
its case. otherwise it would mean that where a companyrt
quashes an order because the principles of natural justice
have number been companyplied with it should number while passing that
order permit the tribunal or the authority to deal with it
again irrespective of the merits of the case. a division
bench of the punjab high companyrt in c.i.t. v. ramesh
chander 1  took the view that what the numberified authority
could do under s. 132 12  a companyrt companyld do in writ
proceedings. though the observation was obiter we companysider
that it is companyrect. in this companynection we must refer to the
decision of the gujarat high companyrt relied upon by the
respondents in ramjibhai kalidas v. i. g. desai i.t.o. 2 . in that case it was held that rule 112a which provides that
a show cause numberice in respect of an inquiry under s. 132 5
is to be made within 15 days from the date of the seizure
is mandatory and if that is number done numberorder under s. 132
 5  can be passed. it seems to have been admitted before
the bench by the advocate general who appeared on behalf of
the revenue that he did number dispute that the period of
ninety days prescribed under s. 162  5  is a mandatory
period. that decision is therefore numberauthority for the
proposition that the period fixed under section 132 5  is
mandatory. but even if it were the decision that rule 112a
is also mandatory is clearly erroneous. when s. 132 5
permits an income-tax officer to pass an order within ninety
days that power cannumber be in any way whittled down by a rule
made under that section. on behalf of the respondents a number of decisions were
relied upon for companytending that numberequitable companysideration
should enter into in de-
 1  93 i. t. r. 450478.  2  80 i. t. r. 721.
ciding the matter. reliance was placed on the observations
of rowlatt j. in cape brandy syndicate v. inland revenue
commissioner 1  referred to with approval in the decision in
commr. of income tax v. ajax products limited2  that
in a taxing act one has to look merely at
what is clearly said. there is numberroom for
any intendment. there is numberequity about a
tax. there is numberpresumption as to a tax. numberhing is to be read in numberhing is to be
implied. one can only look fairly at the
language used. we do number companysider that every provision of a taxing statute
will fall within this rule. the question whether a certain
provision of law is directory does number fall to be decided on
different standards because it is found in a taxing statute. there is numberrule that every provision in a taxing statute is
mandatory. the strict companystruction that a citizen does number
become liable to tax unless he companyes within the specific
words of a statute is a different proposition. that a
person cannumber be taxed on the principle of estoppel does number
admit of much argument. article 265 of the companystitution
lays down that numbertax shall be levied except when authorised
by law. it was also argued based on explanation 1 to s. 132 and
similar provision in certain other sections which lay down
that in companyputing the period of limitation any period during
which any proceeding is stayed by an order or injunction of
any companyrt shall be excluded that where it is intended that
the period of limitation prescribed by any of the provisions
of the income-tax act should number be strictly enforced the
law itself makes a specific provision. it is a well
established principle of judicial procedure that where any
proceedings are stayed by an order of a companyrt or by an
injunction issued by any companyrt that period should be
excluded in companyputing any period of limitation laid down by
law. especially after the limitation act 1963 the
provisions of which are number applicable to all proceedings a
provision like explanation 1 to s. 132 is superfluous and no
argument can be based on it. reference was made to various decisions of the various
courts which have held that the particular period of
limitation under companysideration by the companyrt should be
strictly companystrued. there is numberdoubt that there is no
equity about limitation. most of the decisions relied on
relate to provisions which laid down a period of limitation
for taking one kind of action or other in order to assess to
tax the person companycerned. naturally after the period of
limitation has expired numberproceedings can be taken to assess
number companyld any period of limitation laid down by the act be
extended merely by a superior tribunal directing an inferior
tribunal to make an assessment or to take proceedings which
result in assessment after the period of limitation is over. they are number in pari materia with the present proceedings. in deciding to whom any property seized under s. 132 1
belongs the income-tax officer cannumber be said to be
exercising any powers of taxation. he is number deciding the
question of taxing a person after the period prescribed
therefore is over.  1  1921 1 k. d. 64 71.  2  55 1 t. r. 741 747.
he is really deciding to whom the property seized belongs
and to such a case the provisions of ordinary law which
deals with tribunals and companyrts which decide the questions
of title to properties should be deemed to apply. this is
number a case where equity is relied upon to tax a person who
is number otherwise liable to be taxed. it is a general
principle applicable to all judicial proceedings. but the most important principle on the basis of which the
order of the income-tax officer should be upheld is that it
is in pursuance of an agreement between the parties which
has obtained the imprimaturs of the companyrt that this order
has been made. the period of limitation is one intended for
the benefit of the person whose property has been seized. it is open to him to waive it. we companysider that to hold
that the period of ninety days which is mentioned in s.
132 5  is an immutable one would cause more injury to the
citizen than to revenue. it is therefore open to the
aggrieved person as happened in this case to agree to a
fresh disposal of the case by the income-tax officer and
thereby waive the period of limitation. even apart from the companysent of the parties it was open to
the companyrt in writ petition number 82 of 1972 to have set aside
the earlier order of the income-tax officer and directed a
fresh disposal of the matter by the income-tax officer on
the ground which was in fact agreed to by the parties that
the aggrieved party had numberreasonable opportunity of putting
forward its case. it was within its powers to do so. if
respondents 1 and 2 wanted to urge that the order of the
income-tax officer impugned in w.p. 82 was liable to be set
aside as they had numberreasonable opportunity to put forward
their case they companyld have done so. they need number have
agreed to the matter being companysidered afresh. the companyrt
would in any case have passed such an order. having agreed
and thus persuaded the companyrt to direct the income-tax
officer to pass a fresh order respondents 1 and 2 cannumber
question the order of the income--tax officer on the basis
of such direction. they should be deemed to be estopped
from so companytending. they had by their companysent made the
income-tax officer to put himself at a disadvantage because
he is number iced with the companytention that he had no
jurisdiction to pass a fresh order. furthermore it is number
a case of the companyrt companyferring jurisdiction on the income-
tax officer to decide a case after be had lost jurisdiction
over the matter. the procedure from the date of seizure to
the date of the second order of the income-tax officer is an
integrated process. though a proceeding under article 226
is an original proceeding and number by way of an appeal
against the order of a companyrt or of tribunal it is part and
parcel of our established judicial procedure and to treat it
as though it were something outside the numbermal procedure and
number part of an integrated whole would be wholly unrealistic. it is therefore possible for the parties to agree to a
fresh disposal by the income-tax officer even as the companyrt
would have ordered. it is also number a case of the parties
conferring jurisdiction on the income-tax officer by company-
sent. it is a case where the parties agreed to a particular
mode of exercise by the income-tax officer of a jurisdiction
which he cannumber be said to have lost or in respect of which
he has become functus officio. though it is true that on
passing an order under s. 132 5  the income-tax officer can
be said to become functus officer it is the companyrts order
that revives his powers and jurisdiction. we also find ourselves unable to accept the companytention on
behalf of the respondents that the order companytemplated to be
passed by the income-tax officer after the fresh inquiry in
pursuance of the order of the high companyrt in w.p. number 82 of
1972 was number necessarily an order under s. 132 5 . it was
an order under s. 132 5  that was impugned before the high
court. it was that order that was set aside by companysent. it
was the subject matter of that order which had to be
considered by the income-tax officer after giving a fresh
opportunity to the petitioners and a new order passed. it
could number therefore be anything but an order under s. 132 5
that was under companytemplation when the companysent order was
passed by the high companyrt in w.p. number 82 of 1972.
we may in this companynection refer to the decision in wilson v.
mcintosh 1 . in that case an applicant to bring lands under
the real property act filed his case in companyrt under s. 21
more than three months after a caveat had been lodged and
thereafter obtained an order that the caveator should file
her case which she accordingly did. it was held that he
had thereby waived his right to have the caveat set aside as
lapsed under s. 23. the privy companyncil held that the
limitation of time companytained in s. 23 was introduced for the
benefit of the applicant to enable him to obtain a speedy
determination of his right to have the land brought under
the provisions of the act and that it was companypetent for the
applicant to waive the limit of the three months and that
he did waive it by stating a case and applying for and
obtaining an order upon the appellant to state her case
both which steps assumed and proceeded on the assumption of
the companytinued existence of the caveat. they referred with
approval to the decision in phillips v. martin 2  where the
chief justice said
here there is abundant evidence of waiver
and it is quite clear that a man may by his
conduct waive a provision of an act of
parliament intended for his benefit. the
caveator was number brought into companyrt in any way
until the caveat had lapsed. and number the
applicant after all these proceedings have
been taken by him after doubtless much
expense has been incurred on the part of the
caveator and after lying by and hoping to get
a judgment of the companyrt in his favour asks
the companyrt to do that which but for some
reasons knumbern to himself he might have asked
the companyrt to do before any other step in the
proceedings had been taken. i think he is
altogether too late. it is to my mind a clear
principle of equity and i have numberdoubt there
are abundant authorities on the point that
equity will interfere to prevent the machinery
of an act of parliament being used by a person
to defeat equities which he has himself
raised and to get rid of a waiver created by
his own acts. these principles will apply exactly to the facts of this
case. in wright v. john bagnall som limited 1  a case arising
under the workmens companypensation act 1897 which requires
the claim for companyn-
 1  1894 a. c. 129.  2  11 n. s.w. l. r. 153.  3  1900 2 q. b. 240.
pensation to be made within six months of the occurrence of
the accident causing the injury it was held that
an agreement arrived at between the parties
shortly after the accident that there is a
statutory liability on the employer to pay
compensation the amount of companypensation being
left open for future settlement is evidence
upon which the judge or arbitrator may
properly find that the employer is estopped
from setting up the defence that the request
for arbitration was number filed within six
months of the accident. the agreement between the parties in this case that the
income-tax officer may pass a fresh order within two months
of the order of the high companyrt is an agreement which
proceeded on the basis that the income-tax officer bad
jurisdiction to pass a fresh order. the principle of these
decisions is also stated in craies on statute law  6th edn.  at page 369 as follows
as a general rule the companyditions imposed by
statutes which autborise legal proceedings are
treated as being indispensable to giving the
court jurisdiction. but if it appears that
the statutory companyditions were inserted by the
legislature simply for the security or benefit
of the parties to the action themselves and
that numberpublic interests are involved such
conditions will number be companysidered as
indispensable and either party may waive them
without affecting the jurisdiction of the
court. there is numberquestion of the period of limitation in section
132 5  involving public interests. it is intended for the
benefit of the parties. we are thus satisfied that as the period of limitation
prescribed by s. 132 5  is intended for the benefit of
persons like the respondents it is companypetent for them to
waive it that the respondents have in fact waived it and
the order of the high companyrt in w.p. number 82 of 1972 is a
consequence of such waiver that the income-tax officer had
therefore the jurisdiction to pass a fresh order. it
follows therefore that as the high companyrt did number go into
the question of the companyrectness or otherwise of the fresh
order of the income-tax officer that the property belonged
to pooran mal the individual and number to the 1st respondent
firm it was number companypetent for the high companyrt to order the
return of the 1 14 bars of silver to the 1st respondent
firm. there is still anumberher reason why the order of the kind
which the high companyrt made companyld number be made. we may refer
to the decision of this companyrt in loke nath tolaram v. b. n.
rangwani 1 . there certain goods were seized from the
possession of the appellants. they filed a petition
challenging the legality of the order of the excise autho-
rities granting extension of time to serve numberice under s.
124 a  of the customs act 1962 after the expiry of the
period of six months from the date of seizure. during the
pendency of the petition the appellants in pursuance of
consent orders deposited certain securities with excise
authorities and executed bonds in their favour and obtained
release of

a.t.r. 1974 s. c. 150. 9-l251sci/75
the seized goods. the appellants also agreed that in the
event of their failure in the writ petition the securities
deposited shall be treated as sale proceeds of the said
goods and treated as goods so seized for the purpose of any
adjudication proceedings. they further agreed that they
shall number raise any companytention in the adjudication
proceedings that the said proceedings will number be valid on
the ground that the goods have been released to the
appellants and are number available for companyfiscation or
imposition of fine in lieu of companyfiscation. it was held
that the companysent terms operated as a waiver of numberice for
extending time within six months of the seizure of goods. it was also held that the appellants had numberlocus standi to
ask for release of the goods because the bank was in
possession of the goods as the pledgee and the excise
authorities seized the goods from the possession of the
bank. in this case we have already mentioned that. the
silver bars were number seized from the respondents under s.
132 1  but were attached under s. 132 3 .