JUDGMENT <NAME>, J.

1. This appeal is directed against an order of a Division Bench of <ORG> dismissing the writ petition filed by the appellants before us inter alia on the ground of undue delay in making the petition. By filing the writ petition, the appellants questioned the validity of acquisition of Plot Nos. 449 and 447 of Khata Number 29, Touzi No. 951 of Village Naraipur, Police Station Bagaha in the District of Champaran under the Land Acquisition Act . <ORG> held that the un explained delay in making the petition was itself a good ground for dismissing the writ petition, but also proceeded to consider the merits of the case and found that the petition was liable to be dismissed.

2. The Notification under Section 4 of the Land Acquisition Act was issued in this case on May 22, 1956. The Notification Under Section 6 is dated December 20, 1958 The Award was made on July 24, 1962 and Collector took possession of the disputed property on August 27, 1962. The writ petition was filed on March 12, 1964. <ORG> found that the dealty of more than 17 months from the date of the award has not been satisfactorily explained. Counsel for the appellant refers to a number of decisions of this Court which deal with the question of delay and all of them agree that in such matter each case would depend upon its own facts. We find no reason why the appellants, if they were convinced that the acquisition proceedings was invalid, could not file the writ petition within a reasonable time after the Section 6 Notification was made, which was in 1958. Really therefore, the dealy was longer than <ORG> thought. On these facts, we are of opinion that <ORG> was right in holding that the unexplained delay was a good ground for dismissing the writ petition. As the view we take on the question of delay is sufficient to dispose of the appeal, we do not consider it necessary to go into the other question raised on behalf of the appellants.

3. The appeal is dismissed with costs.


JUDGMENT

1. This industrial dispute has been referred to me under Clause (d) of Sub-section (1) of S. 10 of the Industrial Disputes Act, 1947, by the Labour and Social Welfare Department Order No. A.J.B. 41(2) 58, dated 21 August 1958. The demands of the workmen will be reproduced in due course.

2. This reference related to the 26 employees in the show room of the company located in the Fort area. <ORG> came into existence in the year 1860 as two separate concerns. They were amalgamated in the year 1920 or thereabout. The company manufactures cloth in its mills near Madras. It has five show rooms - 2 in Madras, 1 in Delhi, 1 in Bombay and 2 in Calcutta. The Madras show rooms have 10 and 17 employees respectively, the Delhi show room has 22 employees, the Calcutta show room has 23 employees and the Bombay show room has 26. It is stated in the statement of claim that on an average the daily sales from this show room amount to Rs. 8,000. The occupations in this show room are according to the statement of claim, cashier, clerks, salesmen, assistant salesmen, cutters, attenders, sweepers and darwan.

3. As regards the financial position of the company there is no dispute whatsoever. The statement of claim gives us the figures obtained from the balance sheets of the company. The written statement itself says in Para. 3 that "the financial position of the company is sound because of the careful accumulation of reserves in the past earmarked for specific purposes which are not continuously utilized in the business of the company." No doubt the written statement goes on to contend that it should not be supposed "that the company has the financial capacity to make indiscriminate increases in the wages of their employees." I shall not therefore dwell on the financial position of the company any more. The company as a whole employs over 15,000 workmen.

Demand No. 1 - Pay grades. - The following shall be the grades and scales of pay applicable to employees concerned with effect from 1 September 1957 :-

Clerical staff -

Clerk ... Rs. 100-10-140-12 1/2-190-15-250-17 1/2-302 1/2. Salesmen ... Rs. 120-10-160-12 1/2-210-15-270-17 1/2-322 1/2. Assistant salesman Rs. 85-6-115-8-155-10-205 Cashier ... Rs. 175-12 1/2-250-17 1/2-356-20-415. Clerical staff - cont. Cutter attender ... Rs. 65-5-90-7-160. Subordinate staff - Sweeper ... Rs. 40-2-50-3-80. Durwan ... Rs. 45-2-55-3-85. Note. - (1) Assistant salesman at present attending to show-case display shall be paid an additional monthly allowance of Rs. 40 for the special work he is doing. (2) Salesman who is also doing the work of handling cash in the ladies' section of the show room shall be paid a cash handling allowance of Rs. 20 per month in addition to the remuneration. Demand No. 4 - Dearness allowance. - (a) Clerical staff. - Dearness allowance on the following basis shall be paid to clerical staff with effect from the date of 1 September 1957 :- Dearness allowance when Variation for index 351-360 10 points On first 100 of salary ... 90 per cent or at the Rs. 5 rate payable to Bombay textile operatives from time to time but calculated for 30 or 31 days of the month, as the case may be, whichever is higher. On second 100 of salary ... 45 per cent 2 1/2 per cent On third 100 of salary ... 22 1/2 per cent. 1 1/4 per cent and above. (b) Subordinate Staff. - On the basis of 30 or 31 days' dearness allowance calculated at the daily rate payable to Bombay Mill workers, as from the date of 1 September 1957. 4. Since it is always better to take into consideration the total pay packet of a workman, these demands may be taken up together. The existing scales of pay are given in Ex C. 1. They are : Salary Dearness allowance per month Rs. Rs. Salesman ... 120-7 1/2-172 1/2 ... 50 Assistant salesman ... 85-5-120 ... 50 Clerk ... 100-5-115-7-171 ... 50 Cashier ... 130-10-300 ... 50 Attender ... 47-2-75 ... 40 Sweeper ... 40-1 1/2-57 1/2 ... 40 Chowkidar ... 40-1 1/2-61 ... 40 Cutter ... 60-3-81 ... 40

5. Although it is generally correct to say that the duties of a clerk in one concern are, broadly speaking, the same as the duties of a clerk in another concern, the duties of clerks in a show room are not as varied as those of clerks in other head offices. The duties mainly consist of correspondence with the head office and maintaining of stock registers and accounts. These clerks do not have to enter into any correspondence with the public. The salesman and their helpers bring length of cloth from the godown and arrange them on racks, receive customers, use their intelligence and persuasiveness to sell the goods and make out bills. The cashier is in sole charge of accounts - quite a responsible job in view of very good sales. He pays Rs. 80 per annum as premium towards fidelity insurance. Then there are the cutters who measure required lengths of cloth and cut it, the attenders re-fold and rearrange the cloth taken out for the customers' inspection tip up parcels and do such other odd jobs. The sweepers sweep the hall, dust the furniture and the counters, clean and polish the glass windows and be at the beck and call of the manager and other employees. The darwan stands at the door and sometimes takes heavy parcels out to the customers' waiting cars.

6. Before I take up the demands I would refer to the case of <ORG>), Ltd. [(1958-59) XIV F.J.R. 211], where their lordships of <ORG> laid down certain principles which should govern wage-fixation. Their lordships observe :

(1) that in the fixation of rates of wages which include within its compass the fixation of scales of wages also, the capacity of the industry to pay is one of the essential circumstances to be taken into consideration except in cases of bare subsistence or minimum wage where the employer is bound to pay the same irrespective of such capacity;

(2) that the capacity of the industry to pay is to be considered on an industry-cum-region basis taking a fair cross-section of the industry; and (3) that the proper measure of gauging the capacity of the industry to pay should take into account the elasticity of demand for the product, the possibility of tightening up the organization so that the industry could pay higher wages without difficulty and the possibility of increases in the efficiency of the lowest paid workers resulting in increase in production considered in conjunction with the elasticity of the demand for the product - no, doubt against the ultimate background that the burden of the increased rate should not be such as to drive the employer out of business."

In the present case, the capacity of <ORG> to pay wages which are higher than the bare subsistence or minimum wage is not in dispute. As regards the second principle of comparing the existing wages with those of a cross-section of the industry in the same, Greater Bombay - we must look to the salaries that exist in similar show rooms in Bombay.

7. At Ex U. 7 we have a table of salaries existing in (1) <ORG> (sales depot and cloth shop), (2) <ORG> (Show room), and (3) <ORG> (show room). It would not therefore be out of place to reproduced the pay-scales in these three concerns :

<ORG>, <ORG> Rs. Clerks ... 75-5-95-7 1/2- No scales ... No scales. Rs. 15 155-10-205-15-280 basic at start. Salesmen ... 75-5-95-7 1/2- Rs. 75 at start Rs. 190 basic at 155-10-195-210 plus Rs. 10 start. annual increase. Assistant salesmen ... Nil. Nil. Nil. Cashier ... 75-5-95-7 1/2- Nil. Nil. 155-10-205-15-280 Cutters; attenders ... Nil. Nil. Nil. Sweepers ... 35-2-65 for peons Rs. 35 basic at Rs. 50 basic 35-2-55 for plus Rs. 2 annual at start. sweepers increment Dearness allowance <ORG>, Ltd. - (1) Clerical - Index Variation 311 - 320 10 points Up to Rs. 100 ... Rs. 66 ... 3 per cent. 101 - 200 ... 20 per cent ... 1 1/2 per cent 201 - 300 ... 15 per cent ... 1 1/2 per cent 301 - 330 ... 10 per cent ... 1 per cent Above Rs. 330 dearness allowance on same basis as applicable to technical and supervisory staff. (2) Subordinate - Textile scale for 26 days. <NAME> - (1) Clerical - Less than Rs. 100 ... Rs. 100 Rs. 100 and over ... 75 per cent No ceiling. (1) Subordinate - Rs. 90. <NAME> - According to the <ORG> scale as per Bombay cost of living index figures.

It will be seen that except on the question of dearness allowance, the above table does not render much assistance on the question of salary scales. No incremental scales appear to exists in <ORG> and <ORG> show rooms. Moreover it is not shown whether the rates of pay existing in the <ORG> or <ORG> or <ORG> show room have been prescribed under any settlement award. It is always advisable to compare wage structures in comparable concerns where those wage structures are framed by awards or settlements. That obviates the danger of comparing one unsatisfactory salary scale with another equally unsatisfactory salary scale. [Vide Para. 19 of the Report of the Committee on Fair Wages.]

8. The union has produced pay-scales in various concerns in Bombay. The concerns are :

(1) <ORG>Private), Ltd.

(2) <ORG>Private), Ltd.

(3) G.B.C., <ORG>

(4) <ORG>, Ltd. <ORG>Private), Ltd.

(5) <ORG>, <ORG>, and <ORG>

(6) <ORG>

(7) <ORG>

(8) <ORG>) (Private), Ltd.

(9) <ORG> (see Ex. U. 1).

When <ORG> laid down in the case of <ORG> "that the capacity of the industry to pay is to be considered on an industry-cum-region basis,"

What their lordships obviously meant was comparable industry in a particular region. It is true that so far as peons, sweepers, clerks, typist, etc., are concerned, their nature of the work is about the same in any industry. But as I stated in Para. 5 above, in this particular case the show-room, employees do not have to do as varied type of work as the employees in the head office of any engineering or pharmaceutical or oil concern do. It will not therefore be proper to compare the salary scales of the employees in this show room with those, say, in <ORG> or <ORG> or such other concerns.

9. There can be no dispute that the salaries that are paid to the employees of this concern fall short of what is known as living wage. Only from that limited point of view if we were to look into the salary scale prevalent in the concerns mentioned at Ex. U1 we would find that those scales are much higher than those prevalent in the show room. There is therefore scope for improving the scales. The financial capacity of the concern being undisputed, there would be no danger of the financial burden becoming so heavy as to drive the employer out of business. In the case of <ORG>, Bombay [1955 - II L.L.J. 35], <ORG> prescribed the following scales for clerical staff in the textile industry :-

Semi-clerks ... Rs. 40-3-70-E.B.-4-90-5-105 Junior clerks ... Rs. 65-5-95-7-140-E.B.-8-180-10-210 (Matrics start, on Rs. 70 and graduates on Rs. 80). Senior clerks ... Rs. 210-10-270. Chief clerks ... Rs. 270-15-330. The dearness allowance that these categories of employees in the textile industry get is : Salary Dearness Plus allowance Rs. A. P. Up to Rs. 100 ... Allowed as for operatives 7 8 0 From Rs. 101 to Rs. 200 ... Do. 15 0 0 From Rs. 201 to Rs. 300 ... Do. 22 8 0 Rs. 301 and above. Do. 25 0 0

The company has compared the total emoluments of a member of the clerical staff in the textile industry in Bombay with those of a similar employee in the show room now before me (see Ex. C. 5) and it would be seen that the latter emoluments are lower than the former, that the latter reach a maximum of Rs. 221 at the end of 12 years whereas the former reach a maximum of Rs. 314.85 at the end of 21 years.

10. We may now take up the various categories of employees in the show room :

(i) Salesmen. - There are according to the evidence of the manager of the show room, <NAME>, seven salesmen. Their duties are described in the annexure to the statement of claim thus :

"Selecting qualities of cloth from the godown, arranging the same at the counter with the help of their assistants, attending to customers, preparing bills, advising the manager in indenting the quality. One of them works as a cashier in the ladies' section."

The arranging of cloth on the counters is generally done by workmen known as attenders. Attending to the requirements of customers, eulogising different varieties of cloth, persuading the customers to buy, preparing bills, are the main duties of salesmen. They constantly come in contact with the public. They have therefore to be very courteous in manners. The company pays them a starting salary which is Rs. 20 higher than the starting salary of clerks. The existing scale is Rs. 120-7 1/2-172 1/2. I revise it to Rs. 120-7 1/2-180-10-230.

(ii) Assistant Salesmen. - There are only two assistant salesmen. This is how their duties are described by <NAME> :

"The assistant salesman works under the instructions of the salesman of a particular counter. He attends to the customers, explains to them the quality of the cloth. He orders the cloth to be cut according to the customer's requirement."

That shows that the nature of their work is not materially different from the work of salesman except that the ultimate responsibility would be placed on the salesman's shoulders. The assistant salesman would, if found fit, be eligible for promotion as salesman. Their existing scale is Rs. 85-5-120. In my opinion it is always a good incentive to increase the rate of increment after an employee has put in some of assistant salesmen to Rs. 85-5-125-7-174.

(iii) Clerks. - There are seven clerks. They have to prepare daily sales analysis, qualitywise summaries, monthly statements maintain sales tax register, prepare sales tax returns, leave record, etc. There is a clerk who does typing. One looks to the indenting of cloth from the mills, preparing invoices and sales notes. Then there is a delivery clerk who is called an attender by the company. His name is <NAME>. He has given evidence before me and I am satisfied that his designation must be "clerk." He keeps a record of bill books issued, their numbers (?), salesmen to whom they are issued and so on. The company produced for my inspection the register that he maintains. The existing scale of clerks is Rs. 100-5-115-7-171. In my opinion this is very low. In other head offices the clerks have an opportunity of being promoted as senior clerks or even head or chief clerks. In this concerns there is no such likelihood. I would therefore revise their scale to Rs. 100-7(1/2)-160-210, taking care to maintain the initial difference of Rs. 20 between the starting salary of a salesman and that of a clerk.

(iv) Cashier. - There is one cashier who is placed in the scale of Rs. 130-10-300. He is responsible for collecting the amounts of bills, punch them on the cash registering machine and tally daily sales. Exhibit U. 10 shows that on an average there are more than 500 bills every day. In my opinion this scale should be Rs. 150-10-240-15-330. In fixing the scale I have taken into account the premium of Rs. 50 per annum which this employee has to pay for the fidelity insurance.

(v) Attenders; (vi) cutters. - The duties of these two categories of workmen are overlaping although the company has two different scales for them. Both these workmen bring cloth from the godown, arrange it on the counter as shown by the salesman, cut the required length of cloth, mark the rate of the cloth purchased and give it to the salesman for making out a bill. The duties of the two workmen are not watertight. Two of these workmen have given evidence before me and I find no ground to prescribe two separate scales for them. The existing scale of attenders is Rs. 47-2-75 and that of cutters is Rs. 60-3-81. In my opinion, their scale should be Rs. 60-3-84-4-112.

(vii) <NAME>. - He is the watchman during day-time. He opens and closes the shop, collects passes attached to parcels and hands them over to the salesman in the evening. His existing scale is Rs. 40-1 1/2-61. I raise it to Rs. 46-2-65-3-80.

(viii) Sweepers. - There are three sweepers. They keep the show room, its furniture, show windows, clean, keep an earthen chatty full of drinking water and do all other duties that peons do in other offices. Their existing scale is Rs. 40-1 1/4-57 1/2. I raise it to Rs. 40-2-60-3-75. Thus the revised scales shall be :

Rs.

(1) Salesmen ... 120-7 1/2-180-10-230. (2) Assistant salesman 85-5-125-7-174. (3) Clerks ... 100-7 1/2-160-10-210. (4) Cashier ... 150-10-240-15-330. (5) Attenders and Cutters ... 60-3-84-4-112 (6) Darwan ... 45-2-65-3-80 (7) Sweepers ... 40-2-60-3-75

11. Note No. 1 to demand No. 1 is in regard to an additional monthly allowance of Rs. 40 to the assistant salesman who arrange the show-case display. It was concerned by <NAME>, learned counsel for the workmen, that show-case display had been discontinued since January 1958. There is therefore no question of giving this allowance to anyone.

12. Note No. 2 demands that the salesman who handles in the ladies section should get a cash handling allowance of Rs. 20 per month. Beyond a contention in the statement of claim that the salesman in the ladies' section collects the amounts of bills from customers and hands then over to the cashier in the evening, there is no further proof on the point. Nor is there a denial of this practice in the company's written statement. I would therefore direct that if a salesman in the ladies' section remains in charge of the sales in the ladies' section for a whole day, tallies the amounts received with the bills issued and is responsible to the cashier for properly accounting for the amounts received in that section, then he should be paid a cash handling allowance of Rs. 10 per month.

13. This company pays a flat dearness allowance of Rs. 50 per month to the salesmen, assistant salesmen, clerks and cashier and Rs. 40 per month to the attenders, cutters, sweepers and darwan. This rate of dearness allowance has been in existence ever since 1952 when the show room was opened. As stated in the statement of claim, the average consumer price index number in Bombay in the year 1952 was 337 whereas during the last six or seven months is is in the vicinity of 400. There cab be no dispute about the need for a higher dearness allowance in view of the steep rise in the cost of living. All concerns which have been paying to their workmen dearness allowance linked with the consumer price index have been paying a much higher dearness allowance than what they were doing in 1952.

14. At the same time it is to be noted that in the case of the show room now before me, the starting salary of the different categories is fairly high. In fact, although I have revised the salary scales of the various categories, I have not raised their starting salary except in the case of cashier, attender and darwan. It is true that quite a number of concerns pay a sliding scale of dearness allowance to their employees. But paying a flat of dearness allowance also is not unknown. As <ORG> observed in the case of <ORG>, Bombay [1955 - I L.L.J. 329] :

Page 345. - "We say nothing about the propriety or the advantage of this flat rate of dearness allowance except that having regard to the fact that the lowest paid gets Rs. 30 and the highest paid Rs. 140, the payment of a flat dearness allowance of Rs. 66 or Rs. 75 does not in our view do any special injustice to the higher groups."

In view of the fact that I have considerably raised the maximum of the scales in the present case, given higher increments after the employees put in a service of eight years and extended the span to 15 years, I deem it proper to retain the practice of paying a flat rate of dearness allowance. I would, however, raise the dearness allowance by Rs. 15 and direct that those who are getting a dearness allowance of Rs. 50 shall be paid a dearness allowance of Rs. 65 and those who are getting a dearness allowance of Rs. 40 shall be paid a dearness allowance of Rs. 55 per month.

Demand No. 2. - Classification assignment. - Employees shall be assigned to appropriate grades taking into consideration the nature of their duties, educational qualifications, responsibilities, and service in consultation with the representatives of the employees.

15. I do not see need to classify the 26 employees. Their duties are clear-cut and are, in my opinion, properly assigned. There was actually a difference of opinion only as regard attenders and cutters and I have held in Para. 10 above that both these categories of workmen do practically the same kind of work. I have therefore prescribed for them a uniform scale of pay. I have also held that <NAME> who was designated as an attender was actually doing the work of a clerk and have held that his proper designation should be that of a clerk. Beyond this I see no reason to concede the demand.

Demand No. 3 - Adjustment. - Adjustment of salaries shall be on point-to-point basis but subject to the following conditions.

(a) Where an employee by virtue of adjustments effected as above is entitled to get a salary less than what he is drawing, he shall be stepped up to the nearest step in the grade and above the salary he now draws and he shall continue to get the increments due as according to the grade till he reaches the maximum of the grade.

(b) Where an employee is drawing an amount exceeding the maximum of the grade to which he has been assigned, he shall continue to get what he is drawing.

16. The only directions in regard to adjustment that I would give would be that those who are in receipt of a salary which is lower than the minimum prescribed for their category should be stepped up to the minimum; that those who are in receipt of a basic salary which is higher than the minimum but which is not a step in the scale should be stepped up to the next higher stage in the scale and those who are in receipt of a basic salary which is higher than the maximum prescribed for their category should continue to get it. No workmen should be adversely affected by reason of the revised salary scales.

17. Both for the revised salary scales and for the revised dearness allowance, the workmen have demanded retrospective effect as from 1 September 1957 on the ground that the charter of demands was served on the company on 28 August, 1957. Ordinarily where neither party is shown to be guilty of deliberately protracting the proceeding, the healthy practice is to grant retrospective effect as from the date of reference or from a date which is most conveniently nearest to the date of reference. The date of reference in the present case being 21 August, 1958, I grant retrospective effect to the revised pay-scales and dearness allowance as from 1 September, 1958. All arrears under this demand and other demand shall be paid to those entitled to them within three months of the date of the publication of this award.

Demand No. 5 - Washing allowance. - A washing allowance of Rs. 3 per month shall be paid to each member of the subordinate staff who is supplied with uniforms.

18. It is admitted that the sweepers and darwan get uniform but that they do not get any allowance for washing these uniforms. In my opinion Rs. 3 per month per employee who wears a uniform as washing allowance is a reasonable demand. I award accordingly. This part of the award shall come into force as from 1 May 1959.

Demand No. 6 - Privilege leave. - Privilege leave admissible to an employee shall be at the rate of one month after every eleven months' service and the leave so earned shall be accumulable for a period not exceeding 90 days at the end of each year.

Demand No. 7 - Sick leave. - Sick leave at the rate of 12 days per year of service as at present shall be available to an employee. The same shall be accumulable to the extent of 60 days at a time. It shall be granted on grounds of illness supported by a certificate from a registered medical practitioner. No medical certificate shall be required for sickness not exceeding three days at a time.

All the above leave shall be available with full pay and dearness allowance.

19. The employees of the show room enjoy 14 days' privilege leave, 12 days' sick leave, 10 days' casual leave and 16 paid holidays. In this reference the demand is restricted only to privilege leave and sick leave. Privilege leave is allowed to be accumulated up to 28 days. No accumulation is allowed for sick leave. In view of the fact that the employees thus get 52 days of paid leave (including 16 paid holidays), 52 days of weekly offs and 52 half working days, I consider the leave provision to be satisfactory. I, however, allow privilege leave to be accumulated up to 42 days and sick leave to be accumulated up to 36 days. This arrangement shall come into force as from 1 January 1959.

Demand No. 8 - Overtime. - (a) Employees shall be paid for work in excess of normal working hours, but not exceeding the statutory limits under the Shops and Establishments Act at the rate of basic pay plus dearness allowance, and

(b) for overtime work beyond the limits prescribed under the Shops and Establishments Act at double the basic pay and dearness allowance.

20. The normal working hours in the show room are 9-45 a.m. to 1 p.m. and 2 p.m. to 7 p.m. on Monday, Tuesday, Thursday to Saturday and 9-45 a.m. to 1 p.m. on Wednesday. They total up to 45 hours a week. Under the Shops and Establishments Act overtime payment is made of a workman works for over 48 hours a week or 9 hours a day. This payment is being made by the concern. The working hours each day are fairly long. I therefore direct that for working beyond the normal working hours of the show room but not exceeding the statutory working hours the concern shall pay an overtime allowance at the rate of basic pay and dearness allowance and that for working beyond the statutory limit the concern shall pay double the normal basic salary and dearness allowance. This part of the award shall come into force as from 1 January 1959.

Demand No. 9 - Acting allowance. - If an employee assigned to one grade is required to act in place of a person assigned to a higher grade, he shall be paid an acting allowance equal to 50 per cent of the difference between the salary drawn by him and the person for whom he acts, provided such officiating period exceeds 15 days at a time.

21. <NAME> conceded at the bar that if a workman worked for 15 days or more in a post carrying a higher scale of pay, he would be paid acting allowance. I therefore direct that if a workman works for 15 days or more in a post carrying a higher scale of pay, he shall be paid the difference between his salary and the starting salary of the higher grade if the latter is higher than the former. If the starting salary of the higher grade is lower or the same as the salary of the concerned workman, the difference between the actual salary of the workman and the step in the higher grade which is next higher to what he is getting will be calculated. This direction will come into force as from 1 January 1959.

Demand No. 10 - Uniforms. - Sweepers and darwans should be provided with 4 pairs of pants, 4 shirts, 4 coast. 2 caps and an umbrella each year to each employee.

Despatcher should be provided with raincoats during the monsoon once in every two years.

22. The sweepers and darwan got two sets of uniforms per year. I consider this to be quite satisfactory. The demand is rejected.

23. Neither of the parties advanced any arguments on the question of rain-coat for the dispatcher. I however direct that if there is any workman in this concern who has to deliver letters or packages outside the office, he should be provided with an umbrella once in two years.

Demand No. 11 - Gratuity. - Gratuity scheme shall be introduced in the following terms :

(a) On death of workman while in the service of the company or on his becoming physically or mentally incapable of further service - One month's basic salary for each year of service to the disabled workman or if a man has died, to his heirs or legal representatives, assignees or nominees subject to a maximum of 15 months' salary.

(b) On voluntary retirement or on resignation after 15 years' continuous service - One month's basic wages for every year of continuous service subject to a maximum of 15 months' salary.

(c) On termination of service by the company -

(1) After 5 years but less than 10 years' continuous service. - Half month's basic salary for each year of completed service.

(2) After 10 years but less than 15 years' continuous service. - Three-fourth month's basic salary for each year of completed service.

(3) After 15 years' continuous service or over. - Gratuity equivalent to 15 months basic salary.

24. This is one of the demands which was very strenuously argued by both counsel. <NAME> argument has been that a similar demand made by the employees at Madras and Delhi has been turned down by the industrial tribunals of those places; that where an industrial tribunal refused to prescribe a scheme of gratuity for over 14,000 workmen, it would not be wise to prescribe that scheme for only 26 workmen; that the show room was started only in 1952 and that in any case the workmen would not become entitled to claim any gratuity until they put in a service of ten years, i.e., not before 1962, then why could not the workmen wait and make the the same demand a few years later; that if this tribunal prescribes a scheme of gratuity for these 26 workmen, the other employees of the company elsewhere would demand the scheme and the total burden that the company would have to bear would be in the vicinity of two crores; that if a gratuity scheme is started for the operatives, the company would voluntarily apply it to the clerical staff everywhere. <NAME> for the workmen has stated that such an argument would be moving round a circle; that at no time can all the employees at all the show rooms come with a demand for a scheme of gratuity before a <ORG> industrial tribunal because they are working in different <ORG>s; that simply because the Madras and Delhi tribunals rejected the demand, this tribunal need not do so; that all that this tribunal need see is whether the company is well established, whether it has made profits in the past, whether it has a bright future, whether it can bear the burden of a second retirement benefit; that the company is not going to have to spend two crores of rupees all at once; that even if a gratuity scheme were to be prescribed in 1962 the company would have to make it applicable right from the commencement of the employees' service and would have to make provision for meeting the employees' claim, then why not start it today and enable the company to set apart some part of its profits towards a gratuity reserve.

24A. I have very carefully listened to the arguments of both counsel and I have come to the conclusion that <NAME> argument must prevail. At Ex. C. 4 the company produced a copy of the decision of Sri Justice <NAME> in an arbitration between the mills and their workmen. There his lordship considered the question of framing a scheme of gratuity and came to the conclusion that for the time being only a modified scheme of gratuity starting from 1 January, 1956, and ending on 31 December, 1960, should be framed. There was some kind of a gratuity scheme as early as in 1904. But in those days whatever amount the company kept aside for payment to the employee used to be paid to him from time to time. So at the end of his service he got very little benefit out of that scheme. Then in 1944 the company started a provident fund scheme. There too moneys which accrued to the credit of the workmen were paid to them from time to time. This continued till 1952 when the legislature enacted the Employees' Provident Funds Act , 1952, and fixed the rate of contribution at 6 1/2 per cent of the wages including dearness allowance. The learned arbitrator therefore observed :

Page 42. - "That scheme has been working only for the past four years, and so, it is likely to benefit the workmen who have yet to put in many years of service in the company, and not so much the workmen who are likely to retire from the service of the company within the next few years."

Therefore, he prescribed a short-term scheme of gratuity for those who were likely to retire in the next few years.

25. A scheme of gratuity for the clerical staff of the company has not been unknown in this mill. In the year 1951 an award was made prescribing a scheme of gratuity for the 700 members of the clerical staff of the mills [1951 - I L.L.J. Suppl. 68.] That scheme is still in force. In Paras. 367 and 368 of said award the tribunal referred to several authorities and held that a gratuity scheme could be introduced over and above a provident fund scheme. In 1950 I.C.R. Bom. 8 -

"the tribunal observed that there was no system of paying gratuity to the mill clerks in Bombay till then yet and it was granted under the award following the principle laid down in the Banks award, that either gratuity or pension should be paid in addition to provident fund."

"Page 369. - "It is true that in the Madras State there is no case where mill clerks are allowed gratuity in addition to a provident fund scheme. The same principle, however, as in Bombay applies here. It was of course alleged for the management that as no other mill in the Madras State has a gratuity scheme for textile clerks, they must not be subjected to the additional burden. Since the necessity for the scheme cannot to questioned, the circumstances that other mills have no such scheme cannot be a justification to decline to introduce in <ORG>."

So the tribunal introduced a scheme of gratuity, the rate being half a month's salary for each year of service subject to a maximum of 15 months' salary.

26. <ORG> has, in several cases, observed that a double retirement benefit could be introduced wherever possible. The following passage from the case of <NAME> [1952 - II L.L.J 29] is often quoted :-

Page 32, Col. 2. - "Before a scheme for gratuity can be sanctioned, other factors must be taken into consideration. The financial condition of the company must be considered in its broad aspects. Its profit earning capacity, the profits earned in the past, its reserves and the possibility of replenishing the reserves, if occasion arises, and the claim of capital to a fair share of the profits in the shape of dividend having regard to the risk of the investment, are material factors. In short, the general financial stability of the concern must be taken into consideration before a long-term scheme for gratuity is sanctioned."

27. Almost simultaneously with <NAME> case <ORG> had to deal with a case where several cinema theatres owned by <ORG>, were involved. Their decision in that case is at 1952 - II L.L.J. 207. There were 84 cinemas belonging to the company. It was stated that the tribunal should not prescribe a scheme of gratuity for the employees of only two theatres because the employees were transferable from one theatre to another and that there would be difficulty in the application of the scheme. It was also stated that the company was trying to evolve a scheme applicable to all the theatres. There was a provident fund scheme, the contribution by each party being one-twelth of the basic salary. The adjudicator declined to prescribe a scheme of gratuity for only two theatres as he thought that the company would constantly transfer employees from one theater to another and thwart the scheme. <ORG> observed as follows :

Page 209. - "The employees of these two theatres have made a claim for gratuity and their claim must be considered on its merits. It does not mean that because the employees of the other theatres have not yet pressed a claim for gratuity or secured a reference for it, the employees of these two theatres should remain without a scheme of gratuity. We see no practical difficulty in the application of a scheme. The employers have already accepted the principle that a scheme of gratuity ought to be applied and indeed they could not do otherwise, but have been tardy in making up their minds as to what it should be. We propose by our decision to help them to make up their minds on the subject."

27A. In the case of <ORG> [Bombay Government Gazette, Part I-L, dated 7 February 1952, p, 703] only the 23 workmen in the orthopaedic appliance section demanded a scheme of gratuity. <NAME>, the learned adjudicator, held that as all the workmen of the company were not before him, it would not be proper to prescribe a scheme of gratuity for only a section. <ORG> observed :

Page 705. - "We think that he was in error in the view that he took. The reference concerned a particular section and they should not be penalized into a limitation of their claims just because the other workmen had not asked for a reference ... The number of workmen out of the 23 who would become eligible for gratuity in a year would be small, and the payment of such gratuity will not be a burden to the concern, although we do appreciate that the company has not been prosperous of late. We are of the view that the gratuity scheme we have given in the case of <ORG> [1951 - II L.L.J. 31], would be appropriate."

28. <NAME> was quick to distinguish the cases of the cinema theatres and of <ORG>, from the case before me. He said that in those two cases other theatres or sections had not made a demand at all and that it was obviously unfair to the two theatres to the orthopaedic appliance section to turn down their demand simply because all the theatres, or all the sections had not made a similar demand. In our case, <NAME> pointed out, the facts were quite the opposite. All the other employees - except the 23 employees of the Calcutta show room and the 26 employees of the Bombay show room - had made a gratuity demand and that demand had been turned down : and that therefore it would be unfair to introduce it in the Bombay show room, He also drew my attention to the cases of <ORG> [1957 - I L.L.J. 226], and Baroda Borough Municipality [1957 - L.L.J. 8], where their lordships of <ORG> held that unless all the employees could be paid bonus the employees only of a section should not be paid bonus.

29. In my opinion, payment of bonus and payment of gratuity stand on different footing. The former is an immediate liability; the latter a further liability. In the former case the whole amount must be provided for out of the available surplus; in the latter case the company goes on making a provision year after year and builds up a reserve out of which payment is made as occasion arises. In the former case bonus becomes payable only if the concern makes profit; in the latter case the financial position of the concern in its broad aspect has only to be considered. So if the tests laid down in Arthur Butler Case [1952 - II L.L.J. 29] are fulfilled, there should be no harm in prescribing a scheme of gratuity for a section of the employees of a concern. The concerns would have to make a start in building up a gratuity reserve and there should be no objection to making the start now.

30. The next question is, what should be the rate at which gratuity should be paid. In the case of <ORG> [1951 - II L.L.J. 31], <ORG> allowed gratuity at the rate of half a month's salary or wages for each year of service but set no ceiling. The same scheme was prescribed by them in the case of the cinema theatres and in the case of <ORG> In my opinion, <ORG> are financially sound enough to pay gratuity at the rate of one month's basic salary for each year of service subject to a maximum of 15 months' salary. I therefore prescribe the following scheme of gratuity :

(1) On the death of a workman while in the service of the company or on his becoming physically or mentally incapable of further service - One month's basic salary for each year of service to be paid to the disabled workmen or if a man had died, to his heirs or legal representatives, assignees or nominees subject to a maximum of 15 months' salary.

(2) On voluntary retirement or on resignation after 15 years' continuous service - One months' basic wages for every year of continuous service subject to a maximum of 15 months' salary.

(3) On termination of service by the company -

(a) After 5 years but less than 10 years' continuous service. - Half month's basic salary for each year of completed service.

(b) After 10 years but less than 15 years' continuous service. - Three-fourth month's basic salary for each year of completed service.

(c) After 15 years' continuous service. - One month's basic salary for each year of completed service subject to a maximum of 15 months' salary.

Salary for the purpose of gratuity shall be the average of the basic salary (exclusive of all allowances) drawn by the workman during the 12 months next preceding the date entitling him to gratuity. I further direct that workmen dismissed for misconduct causing financial loss to the company should not be paid gratuity to the extent of the loss caused.

Demand No. 12 - Medical aid. - When an employee has to incur medical expenses due to sickness, such employees shall be compensated to the extent of the expenses incurred by him but not exceeding two months' wages in any one year.

31. Although it is true that the Employees' State Insurance Act is not applicable to this show room, the total emoluments of the employees are now sufficiently revised and I do not think there is any need to throw on the company the burden of medical aid to the employees. The demand is rejected.

32. This award may be submitted to <ORG>. No order as to costs.


PETITIONER: <ORG> Vs. RESPONDENT: INCOME TAX. OFFICERS & ORS. DATE OF JUDGMENT: 17/02/1998 BENCH: <NAME>, D.P. WADHWA ACT: HEADNOTE: JUDGMENT:

THE 17TH DAY OF FEBRUARY, 1998 Present:

Hon'ble Mrs. Justice <NAME> Hon'ble Mr. Justice <NAME> Mr. <NAME>, Sr, Advocate and mr. <NAME>, Advocate with him for the appellant.

Mr. <NAME>, Sr. Advocate and Mr. <NAME>, Advocate with him for the respondents.

J U D G M E N T The following Judgment of the Court was delivered: Mrs. <NAME>. J.

The appellant, <ORG> was, at all material times, a non-resident company having its registered office at Singapore. The appellant company owned 100% share in <ORG> which was a comp[any incorporated in India. The present appeals are concerned with assessment years 1949-50, 1950-51 and 1951-52.

An order under Section 23A of the Income-tax Act, 1922, before its amendment in 1955 was passed by the Income-tax Officer in the case of <ORG> as a result of which the undistributed portion of the assessable income of <ORG> was deemed to have been distributed as dividends among its shareholders for assessment years 1949-50, 1950-51 and 1951-

52. The dividend deemed to have been so received by the appellant-company as shareholder for the assessment years 1949-50, 1950-51 and 1951-52 was sough to be subjected to income-tax by the Income-tax Officer under Section 34 of the Income-tax Act, 1922. In the past an assessment had been made on M/s. <ORG> was deemed to have been distributed as dividends among its shareholders for assessment years 1949-50, 1950-51 and 1951-52. The dividend deemed to have been so received by the appellant- company as shareholder for the assessment years 1949-50, 1950-51 and 1951-52 was sought to be subjected to income-tax by the Income-tax Officer under Section 34 of the Income-tax Act, 1922. In the past an assessment had been made on M/s. <ORG> as agents for the appellant-company on a total income which was returned as nil. In vies of the above order under Section 23A , the Income-tax Officer sought approval of the Commissioner of Income-tax under Section 34 to tax the appellant-company as an assessee in respect of assessment years 1949-50, 1950-51 and 1951-52.

After obtaining approval of the Commissioner of Income- tax under Section 34 , the Income-tax Officer issued a notice for the assessment year 1949-50 to <ORG> as agents of the appellant-company on 24.3.1954. A return was filed pursuant to the notice by <ORG> as agents of the appellant- company for the assessment years 1949-50. The status of the company in the return was described as non-resident and the income was the dividend deemed to be received under Section 23A by the appellant-company from <ORG> On 29.10.1954 the Income-Tax Officer made an assessment and issued a demand notice on <ORG> as agents of the appellant non-resident company.

For the assessment years 1950-51 and 1951-52, the Income-tax Officer, after obtaining approval from the Commissioner of Income-tax to issue a notice under Section 34 on the appellant-company as the assessee, issued notices dated 11.2.1955 on the appellant-company. On 16.2.1955, returns were filed by the appellant-company. The residence was shown as at Singapore. The returns were accompanied by a covering letter from <ORG> As agents o behalf of the appellant-company. On 25.2.1955, the Income-Tax Officer made an assessment and issued a demand for assessment years 1950-51 and 1951-52 on <ORG> as agents of the appellant- company.

Thereupon <ORG> challenged the assessment orders so made for the three assessment years before the Appellate Assistant Commissioner. The Appellant Assistant Commissioner, by his order dated 29.11.1980, held that the Income-tax Officer had validly initiated proceedings for assessment years 1950-51 and 1951-52 on the appellant-company. However, he failed to make an assessment on the appellant-company directly and made an assessment on <ORG> as agents of the appellant. He held that such an assessment on the agent of a non-resident company was bared by limitation in the present case under the second proviso to Section 34(1) of the Income-tax Act, 1922. He directed the Income-Tax Officer to make a fresh assessment on the appellant-company on the basis of the valid returns already furnished by the appellant-company. In respect of assessment year 1949-50, the Appellate Assistant Commissioner held that the notice had been issued within the period of limitation. However, the proceedings should have been taken against the appellant-company directly. He, therefore, directed the Income-tax Officer to make a fresh assessment on the appellant-company from the stage of notice.

Accordingly, on 26th of October, 1961, three notices were issued on the appellant-company by <ORG> for the three assessment years. The appellant-company challenged these notice by filling a writ petition before <ORG> being writ Petition No. 1/1962. A learned Single Judge of <ORG> by his order dated 31.1.1972 dismissed the writ petition, holding that the assessment proceedings against the appellant-company were validly commenced by notices dated 26.10.1361. The appeal of the appellant-company before <ORG> of <ORG> was also dismissed by its judgment and order dated 13.8.1982. Hence, the present appeals have been filed before us.

The appellant-company contends that the Appellate Assistant Commissioner had no jurisdiction to give directions under Section 31 to the Income-Tax Officer to make the assessments on the appellant-company. Therefore, the notices which have been issued against the appellant- company on 26.10.1961 are beyond the period prescribed by Section 34 of the Income-tax Act, 1922. According to the appellant-company, since the direction given by the Appellate Assistant Commissioner is not covered by Section 31 , the second provision to Section 34(3) lifting the embargo of limitation in such cases is not attracted.

The Appellate Assistant Commissioner by his order dated 29.11.1960 gave the following directions:

"In view of the various reasons discussed above the assessment for 1949-50 made by the I.T.O. on the Resident Company M/s. Turner Morrison and Company Ltd. as agents of <ORG> M/s. Hungerford Investment Trust Ltd. in order to the tax the deemed dividend under Section 23A is set aside and the I.T.O. is directed to make a direct assessment on <ORG> .....and, therefore, the I.T.O. is direct to make the assessment direct on the Non-resident Company to tax the deemed dividend under Section 23A . In connection with the assessment for 1950-51 and 1951-52....... the notices under Section 34 were validly issued taking the assessee as Non-resident Company directly and the returns of income were also submitted showing the assessee as Non-resident Company and, therefore, the proceedings are set aside from the stage of issue of notice under Section 23(2) and the I.T.O. is directed to make the assessment on <ORG> after giving fresh opportunity to the assessee under Section 23(2) ."

Pursuant to these directions <ORG> has issued two notices dated 26.10.1961 in respect of assessment years 1950-51 and 1951-52 on the appellant-company under Section 23(2) of the Income-tax Act, 1922. The Income-Tax Officer has also issued a notice dated 26.10.1961 on the appellant-company under Section 34 of the Income-tax Act for the assessment year 1949-50.

Under Section 34(1)(a) of the Income-tax Act, 1922, if the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under Section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to income- tax has escaped assessment for that years, or has been under-assessed etc, as set out therein, the Income-tax Officer can serve on the assessee a notice and proceed to assess or re-assess such income. Similarly, under Section 34(1)(b) , notwithstanding that there has ben no omission or failure as mentioned in Clause (a) on the part of the assessee, if the Income-tax Officer has, in consequence of information in his possession, reason to believe that income chargeable to income-tax has escaped assessment for any year, or has been under-assessed he can serve on the assessee a notice and proceed to assess or re-assess such income as specified in that section. The period prescribed at the material time for issuing notice was eight years in the cases falling under Section 34 (1((a) and four years for cases falling under Section 34(1)(b) . The second proviso to Section 34(1) , at the material time, provided that the expiry of two years from the relevant assessment year if the person on whom the assessment or re-assessment is to be made in pursuance of the notice is a person deemed to be the agent of a non-resident person under Section 43 .

The second proviso to Section 34(3) , however, at the material time provided as follows:

"Provided further that nothing contained in this Section limiting the time within which any action may be taken or any order, assessment or reassessment may be made, shall apply to a reassessment made under Section 27 or to an assessment or reassessment made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under Section 31 , Section 33 , Section 33A , Section 33B , Section 66 or Section 66A ."

[Underlining ours] This is how the second proviso to Section 34(3) stood after its amendment in 1953 by the Income-tax (Amendment) Act of 1953 with effect from 1st of April, 1952. The appellant-company contends that this proviso has no application in the present case because the direction given by the Appellate Assistant Commissioner under Section 31 is a direction to assess a stranger to the assessment proceedings against <ORG> and hence it is not covered by the second proviso to Section 34(3) .

Since the impugned notices are dated 26.10.1961, and pertain to assessment years 1949-50 to 1951-52, it is clear that but for this proviso, the notices would be beyond the period prescribed under Section 34 of the Income-tax Act, 1922. The second proviso to Section 34(3) lifts the bar of limitation when, inter alia, an assessment or reassessment is made on an assessee or any person in consequence of or to give effect to any finding or direction contained in an order under Section 31 .

In the present case the original assessment orders were made on <ORG> as agents of the appellant-company. The order of the Appellate Assistant Commissioner giving directions to assess the appellant- company was passed in the appeals of <ORG> against the orders of assessment for the said three assessment years. Can the appellant-company on whom the notices have been issued pursuant to the Appellant Assistant Commissioner's order and directions f 29.11.1960, come within the scope of phrase "the assessee or any person" in respect of whom any direction can be given under Section 31 ?

The scope of this second proviso to Section 34(3) was examined by a Constitution Bench of this <ORG> in the case of <CITATION> . [(1963) 49 ITR 1]. This <ORG>, examining the second proviso to sub- section (3) of Section 34 which came into effect from 1st April, 1952, said that it patently introduced an unequal treatment in respect of some out of the same class of persons. Those whose liability to pay tax was discovered by one method would be proceeded against at any time and no limitation would apply in their case and in the case of others the limitation laid down by sub-section (1) of Section 34 would apply. Referring to the distinction made by the High <ORG> in that case on a somewhat narrower ground, this <ORG> observed that so far as assesses were concerned, there might be a rational ground of distinction because appeal proceedings etc might take a long time and the assessee being a party to the appeal could not complain of such delay. Therefore, an assessee did not occupy the same position as strangers. This <ORG>, therefore, held that the proviso, in so far as it affected strangers, must be held to be ultra vires as violating Article 14 of the Constitution.

The same Bench delivered another judgment on the same day in the <CITATION> [(1963) 49 ITR 70] in which it affirmed its finding in <NAME> case (supra). In the case of <NAME> (supra), the assessee before the <ORG> was <NAME> as representing his deceased father. The <ORG> in appeal held that the income in question should be deleted from <NAME>'s income. If the Income-tax Officer can include the same in the income of the firm of <NAME> (of which <NAME> was a partner) he is at liberty to do so. He can then apportion the income of <NAME> amongst the partners thereof as provided in Section 23 (50 of the Act. Thereupon the Income-tax Officer served a notice under Section 34 on the firm of <NAME>. This Court held that the firm of <NAME> was not before the <ORG> and, therefore, the firm was no batter than a stranger who was in some way associated with the assessee. Therefore, the second proviso to Section 3493 ) would have no application to the firm and the notice under Section 34 which was issued on the firm of <NAME> was barred by limitation.

In the second case of <NAME> (supra), the assessee and his father had filed separate returns of income in their individual capacity. But the Income-tax Officer amalgamated their income and assessed the total income as the income of the Hindu Undivided Family. He did not make any protective assessment with regard to the separate income shown in the return of the assessee. The Appellate Assistant Commissioner set aside the assessment of the Hindu Undivided Family. Thereafter, the Income-tax Officer made an assessment on the assessee in individual capacity on the basis of the original return filed by him. This was held to be barred by limitation.

In the subsequent case, however, of Income-tax Officer, A-Ward, Sitapur v. <NAME> [52 ITR 335], a <ORG> of this Court considered the ratio laid down in <NAME> case (supra). This Court observed (p.346) that the expression "any person" in the second proviso to Section 34(3) in its widest connotation may take in any person, whether connected or not with the assessee, whose income for any year has escaped assessment; but this construction cannot be accepted. For the said expression is necessarily circumscribed by the scope of the subject-matter of the appeal or revision, as the case may be. That is to say, that person must be one who would be liable to be assessed for the whole or a part of the income that went into the assessment of the year under appeal or revision. "If so Construed, we must turn to Section 31 to ascertain who is that person other than the appealing assessee who can be liable to be assessed for the income of the said assessment year. A combined reading of Section 30(1) and Section 31(3) of the Act indicated the cases where persons other than the appealing assessee might be affected by orders passed by the Appellate Commissioner. Modification or setting aside of assessment made on a firm, joint Hindu family, association of persons, for a particular year may affect the assessment for the said year on a partner or partners of the firm, member or members of the Hindu undivided family or the individual, as the case may be. In such cases though the latter are not eo nomine parties to the appeal, their assessments depend upon the assessments on the former. The said instances are only illustrative. It is not necessary to pursue the matter further. We would, therefore, hold that the expression "any person" in the setting in which it appears must be confined to a person intimately connected in the aforesaid sense with the assessments of the year under appeal."

Therefore, if the person against whom notices are issued under Section 34 pursuant to a direction given by the Appellate Assistant Commissioner under Section 31 , is a person intimately connected with the original assessee, the period of limitation will not apply to a notice issued against him under Section 34 . He would be covered by the phrase "assessee or any other person" under the second proviso to Section 34(3) .

The principle laid down in the above case of <NAME> (supra) was applied by this Court in the case of <CITATION> [(1970) 78 ITR 256]. In that case an individual <NAME>, had submitted the returns in various capacities and had appealed against the order of assessment. The income earned by the assessee was assessed to tax as income of an association of persons of which, on the findings of the Income-tax Officer, <NAME>, the <ORG> did not exercise its power qua a stranger to the assessment proceedings. Therefore, this Court held that the period of limitation would not be applied. The Appellate Assistant Commissioner was competent to set aside the assessment of an association of persons and to direct the Income-tax Officer to assess the members individually.

In the case of <CITATION> [79 ITR 505], the return had been filed by one <NAME> who died before the assessment order was made. The assessment order showed the name of the assessee as the estate of late Shri <NAME> by legal heirs and representatives -- these being the son, the (second) wife and her children. No notice, however, was served on the wife. Therefore, in appeal, a necessary direction was given that notice should be given to her and after hearing her assessment should be made. Interpreting the second proviso to Section 34(3) this Court said that she was no a stranger to the assessment, she was not merely intimately connected with the assessment. She was in fact an assessee. Therefore, the second proviso to Section 34(3) would apply.

In the case of <CITATION> [89 ITR 57], one <NAME> who was the sole owner of the business gifted his business to his two sons <NAME> and <NAME>. <NAME> died thereafter. The two sons submitted their returns of income in respect of the business. The Income-tax Officer, however, rejected their returns and proceeded to assess all the heirs of <NAME> as an association of persons. In appeal, the Appellate Assistant Commissioner held that the assessee, namely, the association of persons consisting of all the heirs of <NAME> was not liable to be taxed in respect of the business. He held that the business had been gifted to two sons, <NAME> and <NAME>. He set aside the order of the Income-tax Officer but directed him to assess the income from various sources in the hands of the respective persons to whom they arose. The Income-tax Officer thereafter issued notices to the two brothers. This Court held that the directions which were given by Appellate Assistant Commissioner did not fall within the scope of second proviso to Section 34 (30 and, therefore, the subsequent notices which were issued by the Income-tax Officer were barred by limitation. The brothers to whom the business was gifted were strangers to assessment proceedings against the association of persons consisting of heirs of <NAME>.

In the present case we have to consider whether the appellant-company is a stranger to the assessment proceedings against <ORG> as laid down in the case of <NAME> (supra) or whether the appellant-company can be said to be intimately connected with the assessee <ORG> as laid down in the case of <NAME> (supra).

The notices for the assessment years 1950-51 and 1951- 52 were sent to the appellant-company itself. For the assessment year 1949-50, the notice had been sent to <ORG> as agents of the appellant- company. Under Section 42 of the Income-tax Act, 1922, income arising whether directly or indirectly through or from any business in the taxable territories or through or from any asset or source of income in the taxable territories, shall be deemed to be income accruing or arising within the taxable territories; and where the person entitled to the income is not resident in the taxable territories, shall be chargeable to income-tax either in his name or in the name of his agent and in the latter case, such agent shall be deemed to be for all the purposes of this Act the assessee in respect of such income. Thus, in view of Section 42 , in the present case, there was an option to tax either the appellant-company or its agent <ORG> Therefore, when the initial notices under Section 34 were sent by the Income-tax Officer in 1954 and 1955, what was sought to be taxed was the income arising in taxable territories of the non-resident appellant-company. For the assessment years 1950-51 and 1951-52, the notice was addressed to the appellant company. But even in respect of the assessment year 1949-50, what was sought to be taxed was the appellant's income or deemed income arising in India. For the assessment years 1950-51 and 1951-52, the returns were also filed by appellant- company as an assessee. The status of the assessee was shown as non-resident. It was on the basis of these returns that the Income-tax Officer proceeded to make an assessment. For the assessment years 1950-51 and 1951-52, however, he made an assessment in the name of <ORG> as agents of the appellant-company. For the assessment year 1949-50 the return was filed by <ORG> as agents of the appellant- company. The status of the assessee was shown in the return as non-resident and the income which was shown was deemed dividend accruing to the appellant-company as provided under Section 23A . For the assessment year 1949-50, the assessment was made on <ORG> as agents of the appellant-company. Whether we look upon <ORG> as an independent assessee or otherwise, the assessment was clearly in respect of the income of the appellant-company deemed to arise by virtue of Section 23A in India for that assessment year. Therefore, the appellant-company was directly concerned with the assessment proceedings and the appeal arising in those assessment proceedings before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner directed, for reasons set out in his order, that the assessments should be made on the appellant-company itself and not on its agent. This direction cannot be considered as a direction to assess a stranger. In fact as the original assessment proceedings pertain to the income of the appellant-company, in any vies of the matter, the appellant- company must be considered as intimately connected with the assessment proceedings in which the Appellate Assistant Commissioner gave the impugned directions. The appellant- company is, therefore, covered by the expression on "assessee or any person" in the second proviso to Section 34(3) .

In the case of <NAME> (supra) this Court gave illustrations of persons who might be considered as intimately connected with the assessee in the light of Section 30(1) and Section 31 of the Income-tax Act. This Court referred to assessment of a partnership firm which may affect the income of individual partners or the assessment of an association of persons which may affect the income of the individual or the assessment of a joint Hindu family which may affect the assessment of members of the Hindu joint family. It, however, made it clear that these instances were only illustrative and not exhaustive.

The appellant-company, however, contends that "any person" in the said proviso would cover only such persons as were referred to by the <ORG> as illustrations in <NAME> (supra) because they are also referred to in Section 31(4) . We do not see any merit in this contention. Under Section 31(3) , in disposing of an appeal the Appellate Assistant Commissioner may, inter alia, set aside the assessments and "direct the Income-tax Officer to take a fresh assessment after making such further inquity as the Income-tax Officer thinks fit or the Appellate Assistant Commissioner may direct and the Income-tax Officer shall thereupon proceed to make such fresh assessment and determine where necessary the amount of tax payable on the basis of such fresh assessment." Under sub-section (4) of Section 31 , where as the result of an appeal any changes are made in the assessment of a firm or association of persons or a new assessment of a firm or association of persons is ordered to be made, the Appellate Assistant Commissioner may authorities the Income-tax Officer to amend accordingly any assessment made on any partner of the firm or any member of the association. This provision under Section 31(4) cannot be read as limiting the scope of the words "any person" in the second proviso to Section 34(3) as referring only to those persons who are covered by Section 31 , sub-section (4). The words are wide enough to cover all directions under Section 31 including those relating to the assessment of a person intimately connected with the assessee in the sense as laid down by this <ORG> in the case of <NAME> (supra). Whether the person is so connected will depend on the facts of each case. The illustrations given in the case of <NAME> (supra) do not limit the words "any person", but are only illustrative. The only reason why the words "any person" are read down to exclude total strangers, is to prevent infringement of Article 14 of the Constitution.

The directions in the present case, therefore, given by the Appellate Assistant Commissioner by his order of 29.11.1960 are directions property given under Section 31 of the Income-tax Act, 1922 and the notices, therefore, which are issued on 25.10.1981 by the Income-tax Officer pursuant to the directions so given, cannot be considered as notices on total strangers barred by limitation. <ORG> was, therefore, right in dismissing the writ petition.

The appeals are accordingly dismissed with costs.


PETITIONER: SIR SHADI LAL SUGAR AND GENERAL MILLSLTD. & <NAME>. Vs. RESPONDENT: COMMISSIONER OF INCOME TAX, DELHI. DATE OF JUDGMENT31/07/1987 BENCH: <NAME>, <NAME> (J) BENCH: <NAME>, <NAME> (J) OZA, G.L. (J) CITATION: 1987 AIR 2008 1987 SCR (3) 692 1987 SCC (4) 722 JT 1987 (3) 189 1987 SCALE (2)153 ACT: Income Tax Act , 1961: ss. 256 , 271 & 274 / Income Tax Act , 1922: s. 66- -Income-tax Reference--Finding of fact by Tribu- nal--When could be transformed into question of law and interfered with. HEADNOTE: The assessee company, which derived its income from the manufacture and sale of sugar and confectionery, was as- sessed for the years 1958-59 by the Income Tax Officer under the Income Tax Act , 1922 by making additions of Rs.48,500 for cane cost, Rs.67,500 for shortage in cane, and Rs.21,700 for salary of outstation staff. The assessee did not chal- lenge the said assessment order. Later in the year 1963 the Income Tax Officer issued notice under s. 274 read with s. 271 of the Income Tax Act, 1961 in respect of the assessment year 1958-59 for imposing penalty. Before the Inspecting Assistant Commissioner the assessee admitted that these amounts, which were not included in the return by the compa- ny, represented income. On finding that there was deliberate understatement of income he imposed a penalty of Rs.70,000. On appeal the <ORG> held that the mere fact that the amounts were agreed to be taken into account by the assessee did not ipsofacto indicate any criminality in its action to conceal any portion of the income, and that the assessee could very well have argued against the additions of the two sums, namely, Rs.67,500 and Rs.21,700. As regards the sum of Rs.48,500 it found that the assessee had agreed to similar addition in the earlier years and so the penalty was war- ranted in similar amount for this year and taking into consideration that the sum involved was Rs.48,500, it con- sidered that a smaller penalty of Rs.5,000 was imposable. <ORG> took the view that the onus of proving concealment was on the <ORG> because proceedings for penalty were penal in character, and held that so far as the sum of Rs.48,500 was concerned it was not proved that there was any deliberate concealment, that the <ORG> had not set aside the finding of the Assistant Inspecting Com- 693 missioner that the assessee surrendered the amount of Rs.67,500 when it was faced with facts which clearly estab- lished concealment, that the assessee in fact had surren- dered the amount only after the Income Tax Officer had conclusive evidence in his possession that the amount repre- sented its income, that acceptance by the assessee was material to give proper weight to judge the criminality of the action which in its opinion was not given, and that the <ORG> omitted to take into account the fact that the assessee had admitted that the amount of Rs.21,700 repre- sented its income. In the appeal by special leave on the question as to how far <ORG> in a reference could interfere with a finding of fact and transform the same into a question of law on the ground that there has been non-consideration of all relevant facts. Allowing the appeal, HELD: 1.1 In an income tax reference a finding on a question of pure fact could be reviewed by <ORG> only on the ground that there was no evidence to support it or that it was perverse. If <ORG> found that there was no such evidence, those circumstances would give rise to question of law and could be agitated in a reference. [700G-701A, 702H-703A] 1.2 When a conclusion has been reached on an apprecia- tion of a number of facts established by the evidence, whether that is sound or not must be determined not by considering the weight to be attached to each single fact in isolation, but by assessing the cumulative effect of all the facts in their setting as a whole. Where an ultimate finding on an issue is an inference to be drawn from the facts found, on the application of any principles of law, there would be a mixed question of law and fact, and the inference from the facts found in such a case would be a question of law. But where the final determination of the issue equally with the finding or ascertainment of the basic facts did not involve the application of any principle of law, an infer- ence from the facts could not be regarded as one of law. The proposition that an inference from. facts is one of law is, therefore, correct in its application to mixed questions of law and fact, but not to pure questions of fact. In the case of pure questions of fact an inference from the facts is as much a question of fact as the evidence of the facts. [701A-D] In the instant case, it is not said that the <ORG> had acted on material which was irrelevant to the enquiry or considered material 694 which was partly relevant and partly irrelevant or based its decision partly on conjectures, surmises and suspicions. It took into account all the relevant facts in a proper light in rendering a finding of fact. Therefore, no question of law arises. [703BC, 701DE] <CITATION> - tax, Madras, 31 I.T.R. 28; <NAME> v. Com- missioner of Income-tax, Madras, 37 I.T.R. 151; <CITATION> 1, 66 I.T.R. 462 and <CITATION> ., 87 I.T.R. 421, referred to. 2.1 <ORG> was wrong in saying that proper weight had not been given to all the evidence and admissions made by the assessee. The <ORG> had taken into considera- tion the fact that the assessee had admitted the additions as its income when faced with non-disclosure in assessment proceedings. The time when the assessee admitted the addi- tions was also considered. But to admit that there has been excess claim or disallowance is not the same thing as delib- erate concealment or furnishing inaccurate particulars. There may he hundred and one reasons for such admissions, i.e., when the assessee realises the true position it does not dispute certain disallowances but that does not absolve the <ORG> to prove the mens rea of quasi criminal offence. [703BC, 702AB, 701A, 702BC] 2.2 It is for the Income-tax authority to prove that a particular receipt is taxable. If however, the receipt is accepted and certain amount is accepted as taxable, it could be added. But in the instant case, it was not accepted by the assessee that it had deliberately furnished inaccurate particulars or concealed any income. [702EF] 3. <ORG> observed that the time of admission was not noted by the <ORG> and this fact had not been properly appreciated by the <ORG>. That is not correct. The <ORG> had made additions during the assessment pro- ceedings. In any event that would be appreciation of evi- dence in a certain way, unless in such misappreciation which amounted to non-appreciation no question of law would arise. Nonappreciation may give rise to the question of law but not mere misappreciation even if there he any from certain angle. Change of perspective in viewing a thing does not transform a question of fact into a question of law. [703CD] <ORG> in preferring one view to another view of factual 695 appreciation in the instant case, has therefore, trans- gressed the limits of its. jurisdiction under the Income-Tax Reference in answering the question of law. [703F] JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1660 (NT) of 1974.

From the Judgment and Order dated 23.12.1971 of <ORG> in Income-tax Reference No. 53 of 1968. <NAME> for the Appellants.

Miss <NAME> and <NAME> for the Respondent. The Judgment of the Court was delivered by <NAME>, J. This appeal by special leave is from the judgment and order of <ORG> dated 23rd December, 1971 in the Income Tax Reference. The assessee is a limited company under the Indian Companies Act and derived its income from the manufacture and sale of sugar and confectionery. The assessment for the assessment year 1958-59 was completed under the Indian Income Tax Act , 1922. The Income Tax Officer in the said assessment, inter alia made the following additions besides others in respect of the following items:

(i) For cane cost Rs.48,500/- (ii) For shortage in cane Rs.67,500/- (iii) For salary of outstation staff Rs.21,700/-

The assessee did not challenge the said assessment order passed by the Income Tax Officer in so far as the additions of the above amounts in appeal or otherwise. It was the case of the assessee that it did not appeal because it wanted to keep good relations with the revenue although, according to the assessee, the above additions made by the Income Tax Officer were totally unjustified and illegal. On 14th March, 1963 the Income Tax Officer issued notice under section 274 read with section 271 of the Income Tax Act, 1961 (hereinafter called 'the Act') in respect of the assessment year 1958-59 for imposing penalty. The assessee company demurred. After considering the reply the Inspecting Assistant Commissioner on 1st October, 1964 imposed a penalty of Rs.70,000 under section 274 read with section 271 of the Act holding inter alia that there was concealment of income to the tune of Rs.1,37,700 and the maximum penalty of Rs.1,06,317 was imposable in law but a sum of Rs.70,000 was imposed as penalty considering the facts and circumstances of the case.

The assessee preferred an appeal against the said order. The <ORG> after considering the entire matter, reduced the penalty to Rs.5,000. The <ORG> referred the three following questions, two at the instance of the assessee and one at the instance of the revenue, to <ORG> for determination:

"1. Whether, on the-facts and in the circum- stances of the case, the <ORG> was correct in holding that the provisions of section 271 of the Income Tax.Act, 1961 are applicable to the present case;

2.'Whether, there is any material to warrant the finding that the assessee company had concealed the particulars of its income or deliberately furnished inaccurate particulars thereof within the meaning of section 271(2) of the Income Tax Act, 1961; and

3. Whether, on the facts and in the circum- stances of the case, the <ORG> is correct in reducing the penalty under section 271(1)(c) from Rs.70,000 to Rs.5,000?" <ORG> was of the opinion that the third question did not clearly bring out the matter in dispute between the parties and as such it was reframed as follows:

"Whether, on the facts and in the circum- stances, the finding of the <ORG> that the assessee had not concealed income to the extent of Rs.67,500 and Rs.21,700 within the meaning of section 271(1)(c) of the Indian Income Tax Act, 1961, is correct in law?"

<ORG> noted that the Income Tax Officer had made certain additions and disallowed certain expenses and of the various amounts disallowed only three amounts were required to be considered by <ORG> namely; (i) inflation in price of sugar-cane of an amount of Rs.48,500,

(ii) excess shortage claimed for cane Rs.67,500 and (iii) salary of out-station staff of loading contractors of Rs.21,700. So far as the first question is concerned <ORG> held in favour of revenue and answered the question in the negative. The answer to this question is no longer in dispute here. So far as the second question is concerned <ORG> answered the question in the nagative and in favour of the assessee. There is no dispute about that question too, in so far as there is no appeal by the revenue. As regards the third question re- framed as mentioned hereinbefore, it was answered by <ORG> in the affirmative and in favour of the revenue. The assessee has come up in appeal to this Court challenging the correctness of that answer. In this appeal we are con- cerned with the correctness or otherwise of the answer given to this question and the appeal must be confined to the correctness of the answer given to the third question as reframed.

The Income Tax Officer in his assessment order out of which this penalty proceedings arose noted that there were several disallowances in various accounts and he mentioned altogether 19 items totalling Rs.3,01,787. All these were on account of disallowances. Main item was shortage in cane and the amount was Rs.67,500. Another items was salary of out- station staff and the amount was Rs.21,700. There was also addition of Rs.48,500 on account of inflation in the price of sugar cane. The Inspecting Assistant Commissioner in his order noted, inter alia three items, namely, (i) inflation in price of sugar cane Rs.48.500 (ii) excess shortage claimed for cane Rs.67,500 and (iii) salary of outstation staff of loading contractors Rs.21,700. It was found so far as the last item was concerned that the amount was disal- lowed being a false debit. It was found that the assessee attempted to understate the income by debiting a false expenditure of Rs.48,500. The Inspecting Assistant Commis- sioner noted that actual shortage was 21,143 Mds. valuing Rs.26,429 while the assessee had claimed Rs.1,34,661 for shortage at 2%. The excess claim was also indicative of the real position that the shortage was fictitiously claimed at a high figure. Faced with these facts the assessee eventual- ly surrendered Rs.67,500. Therefore, the Inspecting Assist- ant Commisioner held that the assessee was certainly reduc- ing the income by debiting false claims for excess shortage and the action amounted to intentional concealment. Salary amounting to Rs.21,700 paid by the contractors to their staff working at out-centres was debited in the books and while it was claimed that the staff working at these centres were actually employed by the company, on investigation the claim was found to be false. In this connec-

tion a reference was made to the statement of one <NAME>. He had stated that he had employed five per- sons at the out-centres and there was no employee of the mill working at the centres. The mill had kept there neither any clerk not any chowkidar. He confirmed that he had paid the employees out of his own funds and had categorically denied that they were the employees of the mill or that they were paid by it. In his statement he further stated that although the staff was actually paid by him yet the compa- ny's accountant had obtained their signatures on salary sheets and thus inflated the expenses by raising false debit in the salary account. This procedure was followed in re- spect of other contractors also. The salary bill was thereby inflated by Rs.21,700. The Inspecting Assistant Commissioner therefore, held that the assessee had concealed income to the extent of Rs.21,700. He had also come to the conclusion that the cane purchases noted against these last entries were false and fictitious and the quantity covered by these entries was 31, 561 Mds. valuing at Rs.48,500. This was a false debit. The assessee debited the three items of Rs.48,500, Rs.67,500 and Rs.21.700. The assessee admitted that these items represented income. It was also borne out by records that the amounts were not included in the return by the company. The offence of deliberate under-statement of income was, thus clearly established according to the In- specting Assistant Commissioner. He, therefore, found that the tax sought to be evaded came to Rs.70,914 and the maxi- mum penalty worked out to Rs. 1,06,37 1. Having regard to the facts and circumstances of the case, he imposed a penal- ty of Rs.70,000.

In appeal <ORG> was of the view that not much turned upon the fact that the assessee agreed to the additions of the amounts in the assessment. So far as the reliance placed upon <NAME>'s statement by the Inspect- ing Assistant Commissioner was concerned, it had no rele- vance or bearing to the facts of the assessment year in question. He was not the contractor employed by the assessee in the year of account. He came in only for a later year. One <NAME> was the contractor in the year in ques- tion. He had specifically stated that he was responsible for shortages. He had also admitted that there was staff main- tained by the mill at the centre at which he was the loading contractor. In fact he had gone to the extent of and stated as to what staff was maintained in that centre; there was a man in charge of the centre, a weighment clerk, a cane clerk and three to four chowkidars. He had also stated that they were not his employees. According to the <ORG> in these circumstances the assessee could very well have argued against the addition of the two sums, namely, Rs.67,500 and Rs.21,700. But the assessee as we have noted had agreed to the amounts being included. The <ORG> was of the view that the mere fact that the amounts were agreed to be taken into account by the assessee did not ipso facto indicate any criminality in its action to conceal any portion of the income. The <ORG> found that so far as Rs.48,500 was concerned in the inflation in the price of sugar-cane, the previous history was against the assessee. It had agreed to the similar additions in the earlier years 1955-56 and 1956-57 the <ORG> noted. From the above facts, it was seen that the penalty was warranted in similar amount for this year also, the <ORG> noted. Taking into consideration that the sum involved against this year was Rs.48,500 the tribunal considered that a smaller penalty was imposable. The <ORG> accordingly imposed a total penalty of Rs. 5,000.

<ORG> reiterated that the onus of proving concealment was on the revenue because the proceedings for penalty were penal in character. In that view of the matter <ORG> was of the opinion that so far as Rs.48,500 was concerned it was not proved that there was any deliber- ate concealment. So far as the other two amounts of Rs.67,500 and Rs.21,700 were concerned, it was contended that <ORG> noted the history of the order of the Inspecting Assistant Commissioner and the circumstances of the case and <ORG> was of the view that <ORG> had not at all considered the fact that the value of the shortage was only Rs.26,429. According to <ORG>, the <ORG> had brushed aside the fact that the assessee had agreed to the addition of this amount. According to <ORG>, the <ORG> had not set aside the finding of the Inspecting Assistant Commissioner that the assessee surrendered the amount of Rs.67,500 when it was faced with facts which clearly established concealment. The assessee according to the Inspecting Assistant Commissioner had surrendered the amount only after the Income Tax Officer had conclusive evidence in his possession that the amount repre- sented its income. In other words, what <ORG> sought to state was that acceptance by the assessee was material to give proper weight to judge the criminality of the action which according to <ORG> was not given. <ORG> highlighted that so far as Rs.67,500 was concerned only on being faced with facts from which there could possibly be no escape from the inference that the amount represented his income, that the assessee agreed to its inclusion. <ORG> was of the view that the <ORG> was in error in brushing aside consideration of these aspects while considering the question of concealment. In respect of the addition of Rs.21,700 the Inspecting Assistant Commissioner had relied upon the statement of <NAME> as also the fact that the assessee admitted that this item represented its income. The <ORG> did not place reliance upon the statement of <NAME>. It, however, omitted to take into account the fact that the assessee had admitted that these items represented its income. <ORG> was of the view that such admissions were made by the assessee but the <ORG> had not properly appreciated that aspect. Therefore in respect of these two items <ORG> was of the view that the <ORG> was not right in holding that the assessee was not guilty of any concealment. So far as question No. 2 was concerned which dealt with Rs.48,500 <ORG> confined itself to the disallowance in respect of purchase of cane. So far as this question was answered in favour of the assessee and there is no challenge by the revenue, it is not material any more. <ORG> came to the conclusion that the finding of the <ORG> in respect of the concealment of Rs.48,500 was not justified in law. It was urged before us that as the second question which was in general form has been answered in favour of the assessee, the third question as reframed could not have been answered otherwise. We are unable to accept this contention. As evident from the discussion by <ORG>, <ORG> confined to second question with regard to disallowance in respect of purchase of cane that amounted to Rs.48,500. So, therefore it cannot be said that in view of the answer given to the second question, the third question was no longer open. The second question was confined to only Rs.48,500.

So far as whether there was justification for the answer given to the reframed third question or was proper or not has to be judged on the basis as to how far <ORG> in a reference could interfere with a finding of fact and transform the same into a question of law on the ground that there has been non-consideration of all relevant facts. The law on this point is quite settled.

The question was considered by this Court exhaustively in <CITATION> - tax, Madras, 31 I.T.R. 28 where this Court reiterated that findings on questions of pure fact arrived at by <ORG> were not to be disturbed by <ORG> on a refer- ence unless it appeared that there was no evidence before the Tribunal upon which they, as reasonable men, could come to the conclusion to which they have come; and this was so, even though <ORG> would on the evidence have come to a conclusion entirely different from that of <ORG>. In other words, such a finding could be reviewed only on the ground that there was no evi-

When a conclusion had been reached on an appreciation of a number of facts established by the evidence, whether that was sound or not must be determined, not by considering the weight to be attached to each single fact in isolation, but by assessing the cumulative effect of all the facts in their setting as a whole. Where an ultimate finding on an issue was an inference to be drawn from the facts found, on the application of any principles of law, there would be a mixed question of law and fact, and the inference from the facts found was in such a case, a question of law. But where the final determination of the issue equally with the finding or ascertainment of the basic facts did not involve the appli- cation of any principle of law, an inference from the facts could not be regarded as one of law. The proposition that an inference from facts was one of law was, therefore, correct in its application to mixed questions of law and fact, but not to pure questions of fact. In the case of pure questions of fact an inference from the facts was as much a question of fact as the evidence of the facts. In the instant case there is a finding of fact and unless it could be said that all the relevant facts had not been considered in a proper light, no question of law arises. In our opinion, <ORG> took into account all the relevant facts. The <ORG> had been accused by <ORG> of not taking into con- sideration the fact that the assessee had admitted these amounts in the assessment. To admit that there has been excess claim or disallowance is not the same thing as delib- erate concealment or furnishing inaccurate particulars. At least in the background of the law as it stood at the rele- vant time that was the position. There have been some changes subsequentiy which we have not noticed for the present purpose.

<CITATION> - tax, Madras, 37 I.T.R. 15 1, this Court held that <ORG>tax Appellate <ORG> was a fact finding tribunal and if it arrived at its own conclusions of fact after due consideration of the evidence before it the court could not interfere. It was necessary, however, that every fact for and against the assessee must have been considered with due care and the <ORG> 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 contra in regard to each one of them and what were the findings reached on the evidence on record before it. The conclusions reached by the <ORG> should not be coloured by any irrelevant considerations or matters of prejudice and if there were any circumstances which required to be ex- plained by the assessee, the assessee should be given an opportunity of doing so. In this case, the <ORG> had taken into consideration the fact that the assessee had admitted the additions as its income when faced with non-disclosure in assessment proceedings. <ORG> accused the <ORG> of not considering the time when the assessee admitted the additions. We find that it was duly considered by the <ORG>. We find that the assessee admitted that these were the income of the assessee but that was not an admission that there was deliberate concealment. From agreeing to additions it does not follow that the amount agreed to be added was concealed. There may be hundred and one reasons for such admissions, i.e., when the assessee realises the true position it does not dispute certain disallowances but that does not absolve the revenue to prove the mens rea of quasi criminal offence. <CITATION> 1, 66 I.T.R. 462, the Court held that the Income-tax Appellate <ORG> performed a judicial function under the Income-tax Act and it was invested with authority to determine finally all questions of fact. The <ORG> must, in deciding an appeal, consider with due care all the material facts and record its findings on all contentions raised by the asses- see and the Commissioner in the light of the evidence and the relevant law. The <ORG> was undoubtedly competent to disagree with the view of the Appellate Assistant Commis- sioner, but in proceeding to do so, it had to act judicially i.e. to consider all the evidence in favour of and against the assessee. An order recorded on a review of only a part of the evidence and ignoring the remaining evidence could not be regarded as conclusively determinative of the ques- tion of fact raised before the <ORG>. It is for the Income-tax authority to prove that a particular receipt is taxable. If, however, the receipt is accepted and certain amount is accepted as taxable, it could be added but it was not accepted by the assessee, however, that it hard deliber- ately furnished inaccurate particulars or concealed any income. In our opinion, the <ORG> has properly considered all the evidence in the instant case. <CITATION> ., 87I I.T.R. 421, this Court again reiterated that it was for the <ORG> to decide questions of fact, and <ORG> in a reference under section 66 of the Act as at that time could not go behind the <ORG>'s findings of fact. <ORG> could only lay down the law applicable to the facts found by the <ORG>. <ORG> in a reference under section 66 of the Act, as at that time could, however, go into the ques- tion as to whether the conclusion of the <ORG> on a question of fact was based upon relevant evidence. If <ORG> found that there was no such evidence to support the finding of fact of the <ORG>, those circumstances would give rise to a question of law and could be agitated in a reference. Here in the instant case that is not the position. This Court again reiterated that it was also well-established that when a <ORG> acted on material which was irrelevant to the enquiry or considered material which was partly relevant and partly irrelevant or based on conjectures, surmises and suspicions and partly on evidence, then in such a situation an issue of law arose and the finding of the <ORG> could be interfered with. That is not the position here. In the instant case, it is not said that the <ORG> had acted on material which was irrelevant to the enquiry or considered material which was partly relevant and partly irrelevant or based its decision partly on conjectures, surmises and suspicions. <ORG> was wrong in saying that proper weight had not been given to all the evidence and admissions made by the asses- see. <ORG> further observed that the time of admis- sion was not noted by the <ORG> and this fact had not been properly appreciated by the <ORG>. That is also not correct. The <ORG> had made additions during the assess- ment proceedings. In any event that would be appreciation of evidence in a certain way, unless in such misappreciation which amounted to non-appreciation no question of law would arise. Non-appreciation may give rise to the question of law but not mere misappreciation even if there be any from certain angle. Change of perspective in viewing a thing does not transform a question of fact into a question of law. In the instant case we are of the opinion that in pre- ferring one view to another view of factual appreciation, <ORG> transgressed the limits of its jurisdiction under the Income-tax reference in answering the question of law.

In the premises, we are of the opinion that <ORG> was in error in so far as it held that the <ORG> had acted incorrectly. We are further of the opinion that the reframed question must be answered in the affirmative and in favour of the assessee.

The appeal is allowed and the judgment and order of <ORG> in so far as answer to the question No. 3 is concerned is set aside. The assessee is entitled to the costs of this appeal.

<ORG> al- lowed.


Court No. - 18 Case :- WRIT - A No. - 17050 of 1997 Petitioner :- <NAME> Respondent :- State Of U.P. And Others Petitioner Counsel :- S.A. Gilani Respondent Counsel :- C.S.C. Hon'ble Arun Tandon,J.

Nobody is present on behalf of the petitioner even in the revised reading of the cause list.

This writ petition, filed in the year 1997, is directed against an order of transfer. The writ petition appears to have become infructuous by passage of time.

It is dismissed accordingly. Interim order, if any, stands discharged. Order Date :- 30.7.2010 Pkb/