PETITIONER: KALYANJI MAVJI & CO Vs. RESPONDENT: C.I.T., WEST BENGAL-II DATE OF JUDGMENT10/12/1975 BENCH: FAZALALI, SYED MURTAZA BENCH: FAZALALI, SYED MURTAZA MATHEW, KUTTYIL KURIEN CITATION: 1976 AIR 203 1976 SCR (2) 966 1976 SCC (1) 985 CITATOR INFO : O 1979 SC1960 (14) ACT: <ORG> Act , 1922- Section 34(1)(b) -Scope, extent and ambit of, with, particular reference to the connotation and import of the word "information" used in s. 34(1)(b) -Escaped assessment-Reopening the original assessment on the basis of subsequent facts as also on the materials of the original assessment revealed by more careful and closer circumspection is "information" within the meaning of s. 34(1) (b) of the Act and not a case of mere change of opinion. HEADNOTE: The appellant company, a registered partnership firm, filed its income tax returns for the years 1956-57 and also for 1957-58 respectively showing a total income of' Rs. 7,44,551/-, after claiming a deduction of a sum of Rs. 43,116/-, being the amount of interest paid by the assessee on the debts incurred for the partnership business along with the balance sheet in support of the said deductions. The <ORG> officer accepted the claim on the basis of the balance sheet. When the assessee filed his return for the year 1958-59, the <ORG> officer discovered that the deduction claimed by the appellant was not correct and called upon the assessee to prove its plea. But, the assessee did not lead any evidence before him. The <ORG> officer finding that the deduction of interest claimed was utilised for giving interest free loans to the partners for clearing their income-tax dues and, as such, it could not be said to be a loan incurred for the expenses of the partnership firm, not only disallowed the deduction claimed for that assessment year, but also issued a notice under s. 34 (1) (b) for the re-opening of the original assessment of the previous years on the ground that the deduction having been wrongly allowed, taxable income escaped assessment. Accordingly, the <ORG> officer re-assessed him by including Rs. 43,116 to the total income. The appeal to the Appellate Assistant Commissioner failed. However, on second appeal, the <ORG> Appellate <ORG> "B" Bench, Calcutta, set aside the order of the reassessment opining that the information resulting in the reassessment notice under s. 34(1)(b) was not based on any fresh facts, but was derived from the materials on the record of the original assessment amounting to a change of opinion and, as such, was not sufficient to attract the provisions of s. 34(1)(b) . On the application of the respondent-Revenue, the <ORG> made a reference under s. 66(1) of the Act framing a question, namely, "Whether on the facts and in the circumstances of the case the <ORG> was right in holding that the reassessment made by the <ORG> officer under s. 34(1)(b) of the Indian <ORG> Act (1922) was incompetent ?" to <ORG>, which answered it in the negative and held that the case squarely fell within the ambit of s. 34(1)(b) of the Act inasmuch as the information on the basis of which the <ORG> officer sought to reopen the original assessment, was based on subsequent facts' as also on the materials of the original assessment revealed by more careful and closer circumspection of these materials. Negativing the following three contentions of the assessee appellant, namely, (i) The information relied upon by the <ORG> officer not having been derived from external sources, it amounted to a mere change of opinion on the very facts and materials that were present on the record of the original assessment not attracting the provisions of s. 34(1)(b) of the Act. 967 (ii) It was not open to the <ORG> officer to have reopened the original assessment merely because he took a different view of the matter in the assessment year 1958-59. (iii) That <ORG> has not appreciated the ratio laid down by <ORG> in <CITATION> , 67 I.T.R. 11, and dismissing the appeal by special leave, the Court ^ HELD: (1) S. 34(1) contemplates two categories of cases for reopening the previous assessment-(1) where there has been an omission or failure on the part of the assessee to make a return of his income under s. 22 or to disclose fully and truly all materials facts necessary for his assessment; and (ii) where there has been no such omission on the part of the assessee but the <ORG> officer, on the basis of the information in his possession, finds that income chargeable to tax has escaped assessment for any year. The first category deals with cases where an assessee is himself in default and the second category deals with cases where there is an default on the part of the assessee but where the income chargeable to tax has actually escaped assessment for one reason or the other and the <ORG> officer comes to know about the same[1971 E-F] (2) The word "information" which has not been defined in the Act is of the widest amplitude and comprehends a variety of factors. Nevertheless, the power under s. 34(1)(b) , however, wide it may be, is not plenary because the discretion of the <ORG> officer is controlled by the words "reason to believe". [973 <CITATION> , 41 I.T.R. 221 an <CITATION> , 32 I.T.R. 289, followed. (3) Since the <ORG> officer was to see that the tax collecting machinery is made as perfect and effective as possible so that the tax-payer is not allowed to get away with escaped income-tax, in view of the difficulty in laying down any rule of universal application, the following tests and principles would apply to determine the applicability of s. 34(1)(b) to the following categories of cases: (i) Where the information is as to the true and correct state of law derived from relevant judicial decisions; (ii) Where in the original assessment the income liable to tax has escaped assessment duel to oversight, inadvertence or a mistake committed by the <ORG> officer on the principle that the tax-payer would not be allowed to take advantage of an oversight or mistake committed by the taxing authority; (iii) Where the information is derived from an external source of any kind. Such external source would include discovery of new and important matters or knowledge of fresh, facts which were not present at the time of the original assessment; and (iv) Where the information may be obtained even from the record of the original assessment from an investigation of the materials on the record or the facts disclosed thereby or from other enquiry or research into facts of law. If these conditions are satisfied, then the <ORG> officer would have complete jurisdiction to reopen the original assessment. It is obvious that where the <ORG> officer gets no subsequent information, but merely proceeds to reopen the original assessment without any fresh facts or materials or without any enquiry into the materials which from part of the original assessment, s. 34(1)(b) would have no application. [973 C, D, 976 <CITATION> & orissa  Supp. (1) S.C.R. 10; <CITATION> .  Supp. S.C.R. 174; Commissioner of Income-tax. Excess Profits Tax. Hyderabad, Andhra Pradesh v. <NAME> and ors.  1 S.C.R. 726 and Commissioner of Income tax <CITATION> , 67 I.T.R. 11, discussed. 968 (4) In the instant case the subsequent information was the discovery by the <ORG> officer the deduction was wrongly claimed and the consequent disallowance of that deduction and the conduct of the assessee itself in not adducing any evidence or materials to prove its stand that the claim was validly made which led to the issue of the notice under s. 34(1)(b) for reopening the assessment [978 H] (5) The case really fell within the tests and principles laid down in A. Raman Company's case and within the ambit of s. 34(1)(b) inasmuch as the <ORG> officer proceeded on the basis of the information which came to him after the original assessment, by fresh facts revealed in the assessment for the year 1958-59 and consisted of the conduct of the assessee in not adducing any evidence to support its plea. It was not a case of a mere change of opinion by the <ORG> officer on the materials which were already on record. [1979 <CITATION> , 67 I.T.R. 11, applied. <CITATION> , 82 I.T.R. 831, 834, distinguished. [On the question "Whether it is open to the I.T.O. to change his opinion subsequently on the same materials and reopen the original assessment" which arose in the decision in <CITATION> , 85 I.T.R. 467, 479, relied on by the appellant assessee and also on the contention that in fact the amount sought to be deducted was paid towards the income-tax liabilities of the partners, the Court applied "Non liquet"] JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 522 of 1971. Appeal by special leave from the judgment and order dated the 26th April, 1968 of <ORG> in I. T. Reference No. 50 of 1965.

<NAME> and <NAME> for the Appellant. <NAME> and <NAME> for the Respondent. The Judgment of the Court was delivered by <ORG> This appeal by special leave involves the interpretation of the scope, extent and ambit of s. 34(1)

(b) of the Income-tax Act , 1922 with particular reference to the connotation and import of the word `information' used in s. 34(1) (b). Although the question appears to have been settled in one form or the other by the decisions of this Court, the changing and diverse society such as ours' dealing in complex commercial activities continues to produce multifarious facts of taxable income which has escaped assessment cloaked under difficult propositions and knotty legal problems. It is the onerous task of this Court to dispel the doubts and resolve and reconcile the differing views taken by <ORG> in various situations which every time poses a new problem.

The points involved in the instant case have baffled many a legal brain so much so that <ORG> also appears to have been in two minds whether to place the information in the instant case as based on the materials already on the record of the original assessment of 1956-57 revealed by closer circumspection or to the information derived from subsequent or fresh facts. Before, however, examining the legal incidents of s. 34 of the Income-tax Act, 1922, it may be necessary for us to travel into the domain of the facts of the present case which are short and simple.

The assessee appellant M/s Kalyanji Mavji & Company is a registered partnership firm dealing in various commercial activities. The said firm filed its return for the year 1956-57 corresponding to the accounting Gujarati Diwali Year 2001 showing a total income of Rs. 7,44,551/- after claiming a deduction of a sum of Rs. 43,116/-being the amount of interest paid by the assessee on the debts incurred for the partnership business. The Income-tax officer accepted the return but on appeal to the Appellate Assistant Commissioner the assessment was reduced by a sum of Rs. 9,200/- by his order dated July 3, 1958. For the assessment year 1957-58 the assessee showed the same income and the deduction claimed was allowed. The next year 1958-59, however, presented quite a different complexion. While the assessee filed his return in the year 1958-59, the Income-tax officer concerned suspected the correctness of the return particularly the deduction of interest and found that as the amount of the deduction claimed was utilised for giving interest-free loans to the partners for clearing up their income-tax dues it could not be said to be a loan incurred for the expenses of the partnership business and he accordingly disallowed the deduction claimed by the appellant. This discovery led the Income-tax officer to issue notice to the appellant under s. 34(1) (b) of the Income-tax Act , 1922-hereinafter referred to as `the Act'- for reopening the assessment of the year 1956-57-hereafter to be referred to as `the original assessment'-on the ground that the deduction having been wrongly allowed, taxable income and escaped assessment. After hearing the appellant the Income-tax officer completed the assessment and included the sum of Rs. 43,116/- to the total income shown, by the assessee. Thereafter the appellant filed an appeal before the Appellate Assistant Commissioner against the order of the Income-tax officer but the appeal was dismissed by the Appellate authority which confirmed the order of the Income- tax officer. It may be pertinent to note here, that in his order the Appellate Assistant Commissioner pointed out that in the assessment years 1958-59 and 1959-60 the Income-tax officer found that the appellant had no evidence with him to show that the funds borrowed on which the interest was paid were utilised for the purpose of the business and not diverted to the partners. Thereafter the appellant filed a second appeal to <ORG>, "B", Bench Calcutta. The <ORG> after having accepted the facts culminating in the order of the Appellate Assistant Commissioner was of the opinion that the information of the Income-tax officer resulting in the notice under s. 34(1)

(b) of the Act to the assessee was not based on any fresh facts but was derived from the materials on the records of the original assessment. The <ORG> further found that if the Income-tax officer while completing the original assessment would have been careful enough to scrutinise the balance-sheet he would have at once detected the infirmity on the basis of which the subsequent Income-tax officer issued the notice under s. 34(1) (b)` of the` Act to the appellant. The <ORG> further was of the opinion that the subsequent Income-tax officer merely changed his opinion on the basis of the very materials that were before him when the original assessment was made and that was not sufficient to attract the provisions of s. 34(1) (b) of the Act. The <ORG> accordingly allowed the appeal and set aside the order of the Income-tax officer issuing notice to the assessee under s. 34(1) (b) for reopening the original assessment. Thereafter the respondent, namely, the Commissioner of Income-tax approached the <ORG> for making a reference to <ORG> under s. 66(1) of the Act as a result of which the <ORG> referred the case to <ORG> at Calcutta after framing the following question:

"Whether on the facts and in the circumstances of the case, the <ORG>, was right in holding that the re-assessment made by the Income-tax officer under s. 34(1) (b) of the Indian Income-tax Act , 1922 was incompetent ?"

<ORG>, after hearing the parties, differed from the view taken by the <ORG> and held that the present case squarely fell within the ambit of s. 34(1) (b) of the Act inasmuch as the information on the basis of which the Income-tax officer sought to re-open the original assessment was based on subsequent facts as also on the materials of the original assessment revealed by more careful and closer circumspection of those materials. <ORG> referred to a number of decisions of this Court as also to the decisions of <ORG>. The appellant sought leave to appeal to this Court against the order of <ORG>, which having been refused, the appellant obtained special leave from this Court, and hence this appeal.

In support of the appeal it was contended by Mr. <NAME> that the view taken by <ORG> is legally erroneous inasmuch as the admitted facts of this case would disclose that the information relied upon by the Income-tax officer in order to re-open the original assessment was not derive from external sources but amounted to a mere change of opinion on the very facts and materials that were present on the record of the original assessment. It was also submitted that it was not open to the Income-tax officer to have re-opened the original assessment merely because he took a different view of the matter in the assessment year 1958-59. Lastly it was argued that <ORG> had not correctly applied the ratio laid down by this Court in <CITATION> (1).

Mr. <NAME> appearing for the <ORG> submitted that the order of the Income-tax officer was fully justified and <ORG> had taken the correct view of the law.

In order to appreciate the contentions advanced by counsel for the parties, it is necessary to make a brief survey of the provisions of s. 34(1) of the Income-tax Act, 1922. The section runs thus:

"34. (1) If-

(a) the Income-tax officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return 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, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed or assessed at too low a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed, or

(b) notwithstanding that there has been no omission or failure as mentioned in clause

(a) on the part of the assessee, the Income- tax officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment for any year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may in cases falling under clause (a) at any time and in cases falling under clause (b) at any time within four years of the end of that year, serve on the assessee, or, if the assessee is a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22 and may proceed to assess or reassess such income profits or gains or recompute the loss or depreciation allowance; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section Provided * * * *"

It would be seen that s. 34(1) contemplates two categories of cases for re-opening the previous assessment-(1) where there has been an omission or failure on the part of the assessee to make a return of his income under s. 22 or to disclose fully and truly all material facts necessary for his assessment; and (2) where there has been no such omission on the part of the assessee but the Income-tax officer on the basis of information in his possession finds that income chargeable to tax has escaped assessment for any year. It is, therefore, manifest that the first category deals with cases where an assessee is himself in default and the second category deals with cases where there is no fault on the part of an assessee but where the income chargeable to tax has actually escaped assessment for one reason or the other and the Income-tax officer comes to know about the same. In the instant case, however, we are concerned with clause (b) of s. 34(1) extracted supra. Before however proceeding to interpret the ambit and import of s. 34(1) (b) it may be necessary to consider the history of s. 34 of the Act which appears to have passed through different phases with amendments and additions made to the section from time to time.

Section 34 as it stood in 1922 was as follows: "34. If for any reason income profits or gains chargeable to income-tax has escaped assessment in any year, or has been assessed at too low a rate, the Income-tax officer may, at any time within one year of the end of that year, serve on the person liable to pay tax on such income, profits or gains, or in the case of a company on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22 and may proceed to assess or reassess such income, profits or gains, and the provisions of this Act shall, so far as may be apply accordingly as if the notice were a notice issued under that sub-section:

Provided that the tax shall be charged at the rates at which it would have been charged had the income, profits or gains not escaped assessment or full assessment, as the case may be."

It would be seen that in the section as it stood in 1922 the word `information' was not there at all and the section merely empowered the Income-tax officer to reopen the assessment of any year where income chargeable to tax had escaped assessment. No conditions or limitations on the power of the Income-tax officer were at all laid down under the section. It appears that the appropriate <ORG> in its wisdom thought that this would be too wide a power to be given to the Income-tax officer and may not be workable. In these circumstances, by the Indian Income-tax (Amendment) Act , 1939, this section was recast as under:

"34 (1) If in consequence of definite information which has come into his possession the Income-tax Officer, discovers that income, profits and gains chargeable, to income tax have escaped assessment in any year, or have been under-assessed, or have been assessed at too low, a rate, or have been the subject of excessive relief under this Act the Income-tax officer may, in any case in which he has reason to believe that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars 1, thereof, at any time within eight years, and in any other case at any time within four years of the end of that year, serve on the person liable to pay tax on such income, profits or gains, or, in the case of a company, on the principle officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22 , and may proceed to assess or re-assess such income, profits or gains, and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section:

It may be pertinent to note that by virtue of this amendment the concept of the Income-tax officer deriving definite information was introduced for the first time. The word 'information' was qualified by `definite' and an additional condition was incorporated namely that the Income-tax officer discovers that income chargeable to tax had escaped assessment. This provision led the <ORG> to approach the provisions of the section with greater circumspection and stricter scrutiny as a result of which many cases of escaped assessments had to be set at naught by some decisions of the <ORG>. This led the <ORG> to take a fresh view of the situation. Accordingly by the Income-tax and Business Profits Tax (Amendment) Act , 1948, the section was re-cast in the present form as quoted above. There were further amendments in 1954 and 1956 with which we are not concerned. Ultimately by the Income-tax Act , 1961, the section underwent a complete transformation and even the setting of the section was changed which now forms s. 147(a) & (b) of the Income-tax, 1961. We are now concerned in this case only with s. 34(1) (b) as it stood after the amendment of 1948.

Another pertinent fact which may be mentioned here is that although s. 34 was the subject of several amendments, yet the word `information' which was introduced in 1939 has not been defined at all. Since the word `information' has not been defined, it is difficult to lay down any rule of universal application. At the same time it cannot be disputed that the object of the Act was to see that the tax collecting machinery is made as perfect and effective as possible so that the tax-payer is not allowed to get away with escaped Income-tax. The fact that the adjective `definite' qualified the word `information' and the word `discovers' which were introduced in the Income-tax (Amendment) Act , 1939 were deleted by the Amendment Act of 1948 would lead to the irresistible inference that the word `information' is of the widest amplitude and comprehends a variety of factors. Nevertheless the power under s. 34(1)

(b), however wide it may be, is not plenary because the discretion of the Income-tax officer is controlled by the word "reason to believe". It was so held by this Court in <CITATION> (1), while affirming the decision of <ORG> in <CITATION> (1). This legal proposition, however, is not disputed. It, therefore, follows that information may come from external sources or even from materials already on the record or may be derived from the discovery of new and important matter or fresh facts. The word `information" will also include true and correct state of the law derived from relevant judicial decisions either of the Income-tax authorities or other courts of law which decide income-tax matters. Where the ground on which the original assessment is based is held to be erroneous by a superior court in some other case, that will also amount to a fresh information which comes into existence subsequent to the original assessment. A subsequent <ORG> decision is also included in the word `information'. Thus it is very difficult to lay down any hard and fast rule. But this Court has in two leading cases laid down some objective tests and principles to determine the applicability of s. 34(1) (b) of the Act which we shall now discuss.

<CITATION> (1) the word "information" fell for interpretation by this Court, where it was observed thus:

"We would accordingly hold that the word "information" in s. 34(1) (b) includes information as to the true and correct state of the law and so would cover information as to relevant judicial decisions. If that be the true position, the argument that the Income-tax officer was not justified in treating the <ORG> decision in question as information within s. 34 (1) (b) cannot be accepted.

* * * * * In our opinion, even in a case where a return has been submitted, if the Income-tax officer erroneously fails to tax a part of assessable income, it is a case where the said part of the income has escaped assessment. The appellant's attempt to put a very narrow and artificial limitation on the meaning of the word "escape" in s. 34(1)(b) cannot therefore succeed."

It will be seen that this <ORG> was in favour of placing not a narrow but a liberal interpretation on the provisions of s. 34(1) (b) of the Act. This decision was considered by this <ORG> in <CITATION> .(2) where <NAME>, J., speaking for this <ORG> observed as follows:

"It may be added that after the decision of this Court in <NAME> case it is now settled that "information in s. 34(1) (b) included information as to the true and correct state of law, and so would cover information as to relevant judicial decisions" and that such information for the purpose of s. 34(1) (b) of the Income-tax Act need not be confined only to cases where the Income-tax officer discovers as a fact that income has escaped assessment."

Similarly in <CITATION> .(3), while following the decision of this Court in <NAME> case (supra) it was observed as follows:

"In these circumstances it was held by this Court firstly that the word information in s. 34(1) (b) included information as to the true and correct state of the law, and so would cover information as to relevant judicial decisions, secondly that `escape' in s. 34(1) was not confined to cases where no return had been submitted by the assessee or where income had not been assessed owing to inadvertence or oversight or other lacuna attributable to the assessing authorities. But even in a case where a return had been submitted, if the Income-tax officer had erroneously failed to tax a part of the assessa-

ble income, it was a case where that part of the income had escaped assessment. The decision of <ORG>, therefore, was held to be information within the meaning of s. 34(1)(b) and the proceedings for re- assessment were validly initiated."

The matter was again fully considered by this <ORG> in <NAME> <ORG>'s case (supra), where <NAME>, <NAME>, speaking for the <ORG> extended the connotation of the word `information' to two different categories of cases and observed as follows:

"The expression "information" in the context in which it occurs must, in our judgment, mean instruction or knowledge derived from an external source concerning facts or particulars, as to law relating to a matter bearing on the assessment.

* * * * * Jurisdiction of the Income-tax officer to reassess income arises if he has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment. That information, must, it is true, have come into the possession of the Income-tax officer after the previous assessment,`but even if the information be such that it could have been obtained during the previous assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law, but was not in fact obtained, the jurisdiction of the Income-tax officer is not affected."

An analysis of this case would clearly show that the information as contained in s. 34(1) (b) must fulfil the following conditions:

(1) The information may be derived from an external source concerning facts or particulars as to law relating to matter bearing on the assessment;

(2) That the information must come after the previous or the original assessment was made. In fact the words "in consequence of information" as used in s. 34(1) (b) clearly postulate that the information must be subsequent to the original assessment sought to be reopened; and (3) That the information may be obtained even on the basis of the record of the previous assessment from an investigation of the materials on the record, or the facts- disclosed thereby or from other enquiry or research into facts or law.

These categories are in addition to the categories laid down by this <ORG> in <NAME> case which has been consistently followed in several decisions of this <ORG> as shown above.

On a combined review of the decisions of this <ORG> the following tests and principles would apply to determine the applicability of s. 34(1) (b) to the following categories of cases:

(1) Where the information is as to the true and correct state of the law derived from relevant judicial decisions;

(2) Where in the original assessment the income liable to tax has escaped assessment due to oversight, in advertence or a mistake committed by the Income-tax officer. This is obviously based on the principle that the tax-payer would not be allowed to take advantage of an oversight or mistake committed by <ORG>;

(3) Where the information is derived from an external source of any kind. Such external source would include discovery of new and important matters or knowledge of fresh facts which were not present at the time of the original assessment;

(4) Where the information may be obtained even from the record of the original assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law.

If these conditions are satisfied then the Income-tax officer would have complete jurisdiction to re-open the original assessment. It is obvious that where the Income-tax officer gets no subsequent information, but merely proceeds to re-open the original assessment without any fresh facts or materials or without any enquiry into the materials which form part of the original assessment, s. 34(1) (b) would have no application.

Learned counsel for the appellant heavily relied on the decision of this <ORG> in <CITATION> (1) in support of the proposition that in the instant case the Income-tax officer has proceeded to re-open the assessment on the basis of the very materials which formed the subject of the original assessment. It was submitted that in the original assessment the assessee had claimed a deduction and had produced the balance-sheet and these very factors were also present when the Income-tax officer sought to make the assessment for the year 1958-59 and 1959-60, and since no fresh facts were brought to his notice it was not open to him to re-open the original assessment. The facts of the case relied upon by the appellant are clearly distinguishable from the facts of the present case. In <ORG>) case it appears that the <ORG> had in its return placed all the materials with full details. The facts placed before the Income-tax officer were self-evident and no calculation or scrutiny was necessary to find out the effect of the materials placed before the Income-tax officer. In view of this peculiar situation, <NAME>, J., speaking for the <ORG> observed:

"The fact that the club had received certain amounts as guests charges from its members had been placed before the Income-tax officer. It is not the case of the Income-tax officer that he did not come to know all the relevant facts when he made the original orders of assessment. It is also not his case that at the time he made those orders he was not aware of the true legal position. It was for the Income-tax officer to show that he had received some information subsequent to his passing the original orders of assessment. No such material was placed before the <ORG>. That being so, the <ORG>, in our opinion, was right in holding that the Income-tax officer was incompetent to initiate proceedings under section 34(1)

(b)."

In the instant case it would appear that three additional facts had come into existence after the original assessment for the year 1956-57 was made by the Income-tax officer. These were-(i) that for the assessment year 1958-59 the Income-tax officer did not accept the assessee's plea that he should be allowed deduction for a sum of Rs. 43,116/-; (2) that the Income-tax officer came to a finding that the assessee had not proved that the amount of deduction claimed was really in connection with the partnership business but held that this was on account of interest-free advance to the partners to pay their income-tax dues; and (3) the conduct of the appellant in not clearing the doubts of the Income-tax officer when the appellant was given the notice to contest the assessment merely on the question of law also spoke volumes against the assessee and was also an additional factor which weighed with the Income-tax officer. It would be seen that the Income-tax officer in his order, which is Annexure-A to the statement of case filed by the <ORG>, observed as follows:

"In the course of the assessment proceedings for 1958-59 however it was discovered that the assessee's claim of payment of interest on money borrowed was not proper. Inasmuch as the entire money borrowed had been utilised not for the purpose of business but in giving interest free advance to the partners of the firm......................... In fact no argument as regards the allowance or disallowance of the interest amount in question was placed but the entire argument of the representative proceeded on the basis that the action u/s 34 itself was illegal............................ There is no doubt that there has been under assessment in this case and there is also no doubt that the fact of under assessment has been brought to the notice of the Income-tax officer only in the course of the income-tax proceedings for 1958-59."

Similarly the appellate Assistant Commissioner in his order, which is Annexure-B to the statement of the case, observed as follows:

"At the time of the original assessment the appellant claimed an interest of Rs. 43,116/- which was allowed by the I.T.O. in full. However, later on, while making the assessment for the assessment years 1958-59 and 1959- 60, the I.T.O. found that the appellant had no evidence with him to show that the funds borrowed on which the interest was paid, in fact, were utilised for the purpose of the business and not diverted to the partners."

These findings by the two authorities have been clearly mentioned in the order of the <ORG>, which, while narrating the facts, observed as follows:

"Subsequently, however, when the Income-tax officer was making the assessment for the assessment year 1958-59, he discovered that the assessee did not utilise the borrowed money for the purpose of the business but for giving interest free advances to its partners. The Income-tax officer, therefore, had reasons to believe that income to the extent of Rs. 43,116/- had been under-assessed and he issued notice under section, 34."

Thus in view of the findings given by the Income-tax authorities the following facts emerge:-

(1) that at the time of the original assessment the appellant had filed his return claiming a deduction of Rs. 43,116/- and filed the balance sheet in support of his plea; (2) that the balance-sheet showed that the capital of the firm was Rs. 8,70,000/-, total drawings by the partners stood at Rs. 29,31,998/- and the loans were Rs. 6,63,292/- The Income-tax officer who completed the original assessment appears to have accepted the claim of the appellant because the balance-sheet without any further scrutiny and a close calculation would not have revealed that the amount of deduction claimed was really in the nature of interest free loans given to the partners to meet their income-tax liabilities:

(3) that in 1958-59 the Income-tax officer discovered that the deduction claimed by the appellant was not correct and he accordingly called upon it to prove its plea but the appellant led no evidence before the Income tax officer. From this the Income-tax officer concluded that the amount sought to be claimed as deduction was not incurred for the purpose of the partnership business.

Thus, therefore, the subsequent information was-(1) the discovery by the Income-tax officer that the deduction was wrongly claimed and his disallowance of that deduction; and

(ii) the conduct of the appellant itself in not adducing any evidence or materials to prove its stand that the deduction was validly claimed.

We might mention that it was submitted by Mr. <NAME> that in fact the amount sought to be deducted was paid towards the income-tax liability of the partners and this was done to protect the business itself and to improve the credit of the partners. Even this specific plea does not appear to have been taken before the Income-tax officer. We are, however, not concerned with this particular plea because we are given to understand by the counsel for the appellant that the appeals against the assessment orders for the years 1958-59 and 1959-60 are pending before the Income- tax authorities. In these circumstances we are clearly of the opinion that the facts of the present case clearly fall within the tests and principles laid down by this <ORG> in <NAME> <ORG>'s case (supra) inasmuch as the Income- tax officer proceeded on the basis of the information which came to him after the original assessment by fresh facts revealed in the assessment for the year 1958-59 and consisted of the conduct of the appellant itself in not adducing any evidence to support its plea. We are, therefore, unable to agree with the view of the <ORG> that this was a case of a mere change of opinion by the Income-tax officer on the materials which were already on the record.

our attention was also drawn by the learned counsel for the appellant to the decision of <ORG> in <CITATION> (1). In this case, <NAME>, J., as he then was, speaking for the Court after review of the authorities of this Court and other <ORG>, observed as follows:

"What is obligatory in order to apply section 34(1)(b) is that he must have "information" in his possession in consequence of which he has reason to believe that the income has escaped assessment or is under-assessed, etc. The distinction really consists in a change of opinion unsupported by subsequent information on the one hand and a change of opinion based on information subsequently obtained, on the other. In the former class of cases, the assessment proceedings are attempted to be re-opened without the discovery of an error and without receiving any information as to fact or law............................ Such a reopening is based on a "mere" change of opinion and is without jurisdiction..... ........ In the latter class of cases, the reopening is based on information leading to the requisite belief and is therefore within the jurisdiction of the officer."

This decision is really based on the question whether it is open to the Income-tax officer to change his opinion subsequently on the same materials and reopen the original assessment. We are no doubt inclined to agree with the view expressed by <NAME>, J., in the aforesaid case, but as this question is not free from difficulty as there is some divergence of judicial opinion on the subject, we would refrain from giving any definite decision on this point, particularly when in the view we take in the instant case, this point does not really arise for determination in this case, which is really based on another principle, namely, that the information was derived by the Income-tax officer from fresh facts and is clearly covered by the principles laid down in <NAME> Company's case (supra).

For the reasons given above, we find ourselves in complete agreement with the view taken by <ORG>. Accordingly the appeal fails and is dismissed but without any order as to costs.

S.R. Appeal dismissed.


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.


PETITIONER: <ORG>. Vs. RESPONDENT: <ORG>. & ORS. DATE OF JUDGMENT20/03/1974 BENCH: <NAME>, V.R. BENCH: <NAME>, V.R. PALEKAR, D.G. BHAGWATI, P.N. CITATION: 1974 AIR 1331 1974 SCR (3) 678 1974 SCC (2) 213 CITATOR INFO : R 1984 SC1471 (26,54) ACT: Code Of Civil Procedure (Act 5 of 1908), O.21, r.90 and State Financial <ORG> Act , 1951, Sec. 31--Material irregularity in conduct of sale and substantial injury to judgment--debtor, what are. HEADNOTE: <ORG> lent a sum of Rs. 10 lacs to the first respondent on the security of a mortgage of its land etc. The first respondent having failed to repay, the <ORG> applied to <ORG> under the State Financial <ORG> Act , 1951, for recovering the amount by attachment and sale of the mortgaged properties. The sale proclamation was settled after notice to the parties, and after several adjournments, caused by the first respondent's dilatory tactics, the sale was held. The court felt that it was better to have some valuation report to serve as a basis and to guide it in deciding whether the offer of Rs. 11,10,000 was grossly unjust. The first respondent did not have the properties valued but the (<ORG> had the properties valued and the mortgaged properties were valued at about Rs. 17 lacs. Thereafter an auction was again held and the appellant was the highest bidder. His offer was less by about Rs. 40,000/- than the amount on the previous occasion. He however agreed to raise the offer to Rs. 11,50,000/- and the court concluded the sale at that amount. The first respondent applied under 0. 21, r. 90, C.P.C. for setting aside the sale but the application was dismissed. His appeal was allowed by <ORG>. Allowing the appeal to this Court. HELD : Under s. 32(8) of the Act, the Civil Procedure Code is attracted to proceedings for the realisation of the dues of the <ORG>. Therefore, 0. 21, r. 90 ,was applicable and if there was any material irregularity in the and if it caused a substantial injury to the judgment-debtor, ,aside. Where a court mechanically conducts the sale not bothering conduct of the sale the sale could be set to see if the offer is too low and a better price could have been obtained and if in factthe price is substantially inadequate, there is both irregularity and injury. But atthe same time the court should not go on adjourning the sale till a goodprice isgot as otherwise, decreeholders can never get the property of judgment debtors sold. There is always con- siderable difference between the court sale price and market price. A court sale '.is a forced sale, and notwithstanding the competitive element of a public auction, the best price is not always forthcoming. A valuer's report though good as a basis, is not as good as an actual offer and there are bound to be variations within limits between such an estimate, however careful, and the real bids by seasoned business:man. Mere inadequacy of price cannot demolish a court sale. Further, if court ,sales are too frequently adjourned with a view to obtaining a still higher price prospective bidders will lose faith in the actual sale taking place and may not attend at the auction'Nor is it right to judge the unfairness of the price in the light of the :subsequentevents which were not within the knowledge of the executing court at the time ofthe sale. What is expected of the court is to make a realisitic appraisals of the factors in a pragmatic way and if satisfied that in the given circumstances the bid is acceptable it should conclude the sale. The court may consider the fair value of the property, the general economic trends, the large sum required to be produced by the bidder, the formation of a syndicate, the futility of postponements and the possibility of litigation and several other factors depending on the facts of each case. If the court has fairly applied its mind to the relevant considerations while accepting the final bid it is not necessary to give a speaking order nor can its order be exa- mined meticulously. [682 A-E; 683C; 684 A-F] In the present case, the executing court had admittedly declined to affirm the highest bids on the previous occasions in its anxiety to secure a better price. Well known industrialists in the public and private sectors knew about it and bid at the auction. All interested parties were present at the auction and no one raised any objection regarding the conduct of the sale. The <ORG> could not be put off indefinitely in recovering its dues on baseless expectations and distant prospects. The sale proceedings had been Pending too long and the first respondent would not, even when given the opportunity, produce buyers by private negotiation. He ,did not even produce a valuer's report. He by his litigious attitude has contributed 679 to possible buyers being afraid of hurdles thereafter. Therefore, it must be held that the executing court had committed no material irregularity in the conduct of the sale in accepting the highest offer of the appellant and in concluding the sale at Rs. 11,50,000/- though the market value may be over Rs. 17 lacs. [684G- <CITATION> ,  3 S.C.R. 1, referred to. (2) The appeal is not against the approval of the sale by the executing court but against <ORG>'s order in appeal against an order refusing to set aside the sale, under 0. 21, r. 90. Therefore, the question of the appellate court's power to review the discretion exercised by the trial court does not arise. [685F] <NAME> v. <NAME>,  1 Q.B. 273 at 293, referred to. [It is odd that financial Organisation in the public sector should have readily lent huge amount of Rs 10 lacs and struggled for several years to recoup the amount. This aspect of the matter should receive the anxious attention of the concerned authorities so that public money may be handled by public servants with public responsibility and for public benefit. [685D-E] JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2150 of 1972.

From the judgment and decree dated the 7th /8th February, 1972 of <ORG> in Appeal No. 152 of 1970. <NAME> , <NAME>, <NAME> and <NAME>, for the appellant.

<NAME>, <NAME> and <NAME>, for respondents 1 and 2, <NAME>, <NAME> and <NAME> for respondents. 4 & 5.

The Judgment of the Court was delivered by <NAME>, J. The appellant in this appeal, by certificate is the auction purchaser whose sale has been set aside by <ORG> in reversal of the decision of <ORG> which dismissed the application of the judgment debtor (first respondent herein) under Order XXI rule 90, C. P. C. Although many points were urged and considerable time was taken in the arguments, attention was principally focussed on one issue which we will mainly deal with. Of course, a brief but sufficient reference will also be made to the other points.

<ORG> (for short "the <ORG>") plays the role of decree-holder in the present case. It had lent a sum of Rs. 10 lakhs to the first respondent, which is a drum manufacturing private limited company, in May 1961, on the security by way of mortgage of its land, factory building, plant and machinery situate at Kalwa,District Thana. Respondents 2 and 3 had guaranteed the repayment of the said loan. It is also seen from the facts that in or about 1964 <ORG>, now a nationalised institution but not a party to these proceedings had also advanced to the first respondent a sum of Rs. 20 lakhs presumably on the security of its plant and machinery and raw material stocks, although this aspect is not quite clear from the record and is not perhaps very relevant for the disposal of this appeal. We would only like to make it clear that the rights and remedies of the said <ORG>, whatever they are, against the appellant of the other respondents, are not dealt with in this appeal.

The first respondent which had taken the loan for an industrial purpose defaulted in making repayment and so a notice was issued to it by the fourth respondent, the <ORG>, under s. 30 of the State Financial <ORG> Act, 1951 (hereinafter referred to as the Act) demanding prompt discharge of the liability under the- mortgage and indicating that in default of payment legal proceedings under s. 31 of the Act to realise the dues would be undertaken. No fruitful response was forthcoming and the <ORG>, therefore, made an application, Miscellaneous Application No. 75 of 1965, in <ORG> against respondents 1, 2 and 3, under s. 31 of the Act, seeking to levy by attachment and sale of the properties covered by the mortgage, the amounts due to it. The total amount recoverable was stated to be a little over Rs. 16 lakhs, but we are not concerned with the figure as it is not in dispute before us.

In June 1966 the <ORG> moved the Court for the appointment of a receiver to take charge of the properties which had been by then attached and to sell them by court auction. A receiver was duly appointed, who entered on his duties and took steps for conducting the sale. A proclamation of sale was settled after notice to the parties, on December 5,1967, and the sale was fixed to take place on January 8, 1968. However,the sale did not take place that day and the happenings thereafter culminating in the sale on September 3, 1969, wherein the present appellant was the highest bidder, and consequent purchase, are the subject matter of the present appeal.

We will take a close-up of certain pivotal events on which the fate of the appeal depends. With the consent of both parties, the <ORG> decided to sell in two lots, presumably because that would fetch a better price, one lot being made up of the land and what was permanently fixed thereon, and the other the plant and machinery. There is no doubt that the items sold are of considerable value, land in that in- dustrial area escalating in price as time passed, the machinery being imported and costly and the industry for which they were needed being of growing importance for the country. Even so, let us look at the panorama of forensic events as they unfolded from stage to stage. On january 11,1966 the order for sale was made. Later the judgment debtor applied for time to negotiate a private sale but failed to find a suitable buyer. On January 12, 1967, the <ORG> applied for the sale of theentire unit. The sale was fixed to take place on January 8, 1968when, at the instance of <ORG>, it was Postponed on the plea that. the machinery not fixed to the earth had not been shown separately. In August, 1968, the judgment debtor again prayed for postponement to enable him to raise funds to discharge the debt privately and the District Judge acceded to the request conditionally. The prayer was made on August 7, 1968 and the <ORG> directed the judgment debtor to deposit Rs. 1-1/2 lakhs by October, 15, 1968 and postponed the sale till the last week of October. The judgment debtor could not deposit the preliminary sum by the time fixed. Even so, the sale did not take place on October 29, 1968 since the <ORG> and the <ORG> wanted the description of the machinery to be inserted in the proclamation of sale.

Early in December the judgment debtor applied that the sale should be of the whole property in one lot, which was turned down by the <ORG> on December, 12, 1968 since the sale in two lots was a course already consented to by him and the move was purely dilatory. However, the judgment-debtor moved <ORG> and obtained stay of sale, and the appeal was withdrawn by him on February 26, 1969 whereupon he filed a suit for declaration that the order for sale was without jurisdiction. When he found that an interim injunction against holding the sale was refused, he withdrew the suit on April 16, 1969. Naturally, the sale fixed for May 1, 1969 could not take place for want of bidders although a neighbouring industrial concern, <ORG>, gave an offer of Rs. 2.20 lakhs for the land and buildings only. The next attempt was to hold the sale on May 16, 1969 and the highest bids then offered were Rs. 2 lakhs for land and building and Rs. 80,000/-for the machinery. The <ORG> considered the bids too low and preferred to adjourn the sale. This circumstance certainly discloses that the <ORG> was alert to see that a fair price was obtained, and the fact that it was a court auction was not allowed to operate to the detriment of the judgment debtor. A sale was again attempted on June 5, 1969 when the highest offers for land and building went up to Rs. 2.60 lakhs and for machinery Rs.2. 10 lakhs. The judge endeavoured to secure a better price since the <ORG> pleaded that the offers were inadequate. In the circumstances, the judge postponed the sale.

We now come closer to the final. On August 28, 1969 a sale was held and the highest bids for land and buildings went up to Rs. 5.70 lakhs and for machinery 5.40 lakhs. It must be noted that at this time the Judge, who was then holding the sale, was not the presiding officer but another judge, since the former was on leave. it was felt by the latter that it would be better to have some valuation report to serve as a basis and to guide the court in concluding whether a grossly unjust offer was being fobbed off on it. The Receiver who was in charge requested both the judgment debtor and the <ORG> to get valuation reports from competent valuers and the sale itself stood adjourned. The judgment debtor did not bother to have the Properties valued but the <ORG> secured the services of a competent valuer, M/s. <NAME> Electricals of Bombay, who estimated the land and buildings to be worth Rs. 10,46,096/- and the machinery Rs. 7,02,000/-. The total value thus arrived at was Rs. 17,48,096/-. In the light of various facts, including the absence of an alternative evaluation report from the judgment debtor's side, these <NAME> figures were rightly treated by both courts as tentatively sound. The auction held on September 3, 1969, however, fetched the highest offer for the two lots of only Rs. 5,65,000/-and Rs, 5,00,000/- respectively, in the latter case Rs. 40,000/- less than on the previous occasion. After considerable persuasion by the Judge, the appellant agreed to raise the offer for both lots together to a gross sum of- Rs. 11,50,000/- and making an intelligent guess on the given circumstances the Court approved the sale, which is now being challenged in these proceedings as an insensible and injurious sanctioning of the sale, ignoring the hopeful prospects of higher prices had the auction been adjourned and better and fuller publicity given.

Certain salient facts may be highlighted in this context. A court sale is a forced sale 'and, notwithstanding the competitive element of a public auction, the best price is not often forthcoming. The judge must make a certain margin for this factor. A valuer's report, good as a basis, is not as good as an actual offer and variations within limits between such an estimate, however careful, and real bids by seasoned businessmen before the auctioneer are quite on the cards. More so, when the subject-matter is a specialised industrial plant, which has been out of commission for a few years, as in this case, and buyers for cash are bound to be limited. The brooding fear of something out of the imported machinery going out of gear, the vague apprehensions of possible claims by,<ORG> which had a huge claim and was not a party, and the litigious sequel at the judgment- debtor's instance, have 'scare' value in inhibiting intending buyers from coming forward with the best offers. Businessmen make uncanny calculations before striking a bargain and that circumstance must enter the judicial verdict before deciding whether a better price could be had by a postponement ,of the sale. Indeed, in the present case, the executing court had admittedly declined to affirm the highest bids made on May 16, 1969 June 5, 1969 and August 28, 1969, its anxiety to secure a better price being the main reason. If court sales are too frequently adjourned with a view to obtaining a still higher price it may prove a self-defeating exercise for industrialists will lose faith in the actual sale taking place and may not care to travel up to the place of auction being uncertain that the sale would at all go through. The judgment debtor's plea for postponement in the expectation of a higher price in the future may strain the credibility of the court sale itself and may yield diminishing returns as was proved in this very case.

A material circumstance which weakens the first respondent's case is that on both the dates-August 28 and September 3 <NAME> director of the judgment debtor company was present ;it the auction and never voiced any grievance about the conduct of the sale or asked for its postponement on the ground that better price may be obtained on a later date. Equally significant is the fact sworn to by the authorised officer of the <ORG> that 'the valuation of the total assets' was around Rs. 15 lakhs 'when the application was made by the petitioner <ORG> for sale of the assets under sec. 31 of the State Financial <ORG> Act ' and 'that the said estimate was given on the basis of the information supplied by the applicants at the time of the disbursal of the loan'. <ORG> the second charge holder with considerable stakes in the sale was present on the August and September auctions through a senior representative and did not think it necessary to raise any objection regarding the conduct of the sale or the price tendered. Nor do the proceedings disclose an unfair under- value on account of the absence of effective bidders or inertness of the Judge. On both occasions there were about 30 or 40 bidders. The judgment debtor. the second charge holder the Indian Oil <ORG> and other leading industrial concerns interested in the drum industry were represented. All the bidders on the 28th August were told of the next auction date and most of them participated passively or actively in the September sale. On both the sale dates the judges (they were different on the two days) were keen on maximising the' price. A total of Rs. 11,10,000/- was the highest bid in late August and in early September the best offer for lot No. 2 sagged from Rs. 5,40,000/- to Rs. 5,00,000/-.This downward trend could have persisted if further postponements of sale had taken place and the judge did his best to boost the total price to Rs. 11.5 lakhs and- finalised it taking no chances by adjourning the auction. The trend of to-day may be the silhouette of tomorrow and the reduced offer for lot No. 2 this time may well infect lot No. I next time. The <ORG> did a good job taking a cons- pectus of the circumstances and avoiding the ominous maybes of future auctions. Such are the broad facts to which the law must be applied. Section 32(8) of the Act attracts the Code of Civil Procedure as far as practicable in the realisation of the dues of the <ORG>. and so it may be right to apply the provisions of Order XXI r. 90. In short was there any material irregularity in the conduct of the sale and did it cause substantial injury to the debtor ? The first respondent's counsel <NAME> drew our attention to condition No. 3 in the present proclamation of sale which is as follows:

"The highest bidders for the two lots shall be declared to be the purchasers of the respective lots,. provided always that he or they are legally qualified to bid and provided that it shall be in the discretion of the undersigned Receiver holding the sale to decline acceptance of the highest bid for any lot when the price offered for any of the two lots appears so manifestly inadequate as to make its acceptance inadvisable. The highest bid offered by any bidders for any of the two lots shall be subject to the sanction and approval of the District Judge <NAME>."

Form 29 prescribed in Appendix E to the Code contains condition No. 3 which is in like terms. The court's activist obligation to exercise a discretion to make a fair sale out of a court auction and avert a distress sale is underscored by this provision. In all public sales the authority must protect the interests of the parties and the rule is stated by this <ORG> in <CITATION> (1) thus "The principles which should govern confirmation of sales are well established. Where the acceptance of the offer by the Commissioners is subject to confirma tion of the <ORG> the offerer does not by mere acceptance get any Vested right in the property so that he may demand automatic confirmation of his offer. The condition of confirmation by the <ORG> operates as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case it is the duty of the <ORG> to satisfy itself that having regard to the market value of the property the price offered is unreasonable. Unless the <ORG> is satisfied about the adequacy of the price the act of confirmation of the sale would not be a proper exercise of judicial discretion."

(1) [1970] 3 S.C.R. 1.

Be it by a receiver, commissioner, liquidator or court this principle must govern. This proposition has been propounded in many rulings cited before us and summed up by <ORG>. The expressions 'material irregularity in the conduct of the sale' must be benignantly construed to cover the climax act of the court accepting the highest bid. indeed under the Civil Procedure Code it is the court which conducts the sale and its duty to apply its mind to the material factors bearing on the reasonableness of the price offered is part of the process of obtaining a proper price in the course of the sale. Therefore failure to apply its mind to this aspect of the conduct of the sale may amount to material irregularity. Here substantial injury without material irregularity is not enough even as material irregularity not linked directly to inadequacy of the price is insufficient. And where a court mechanically conducts the sale or routinely signs assent to. the sale papers not bothering to see if the offer is too low and a better price could have been obtained and in fact the price is substantially inadequate there is the presence of both the elements of irregularity and injury. But it is not as if the court should go on adjourning the sale till a good price is got it being a notorious fact that court sales. and market prices are distant neighbours. Otherwise decree holders can never get the property of the debtor sold. Nor is it right to judge the unfairness of the price by hindsight wisdom. May be subsequent events not within the ken of the executing court when holding. the sale may prove that had the sale been adjourned a better price could have been had. What is expected of the judge is not to be a prophet but a pragmatist and merely to make a realistic appraisal of the factors and if satisfied that in the given circumstances the bid is acceptable conclude the sale. The court may consider the fair value of the property, the general economic trends the large sum required to be produced by the bidder, the formation of a syndicate, the futility of postponements and the possibility of litigation, and several other factors, dependent on the facts of each case. Once that is done, the matter ends there. No speaking order is called for and no meticulous post mortem is proper. If the court has fairly, even if silently applied its mind to the relevant considerations before him while accepting the final bid no probe in retrospect is permissible. Otherwise, a new threat to certainty of court sales will be introduced.

So viewed, we are satisfied that the district court had exercised a conscientious and lively discretion in concluding the sale at Rs. 11 .5 lakhs. If the market value was over 17 lakhs, it is unfortunate that a lesser price was fetched. Mere inadequacy of price cannot demolish every court sale. Here, the court tried its best, time after time, to raise the price, well-known industrialists in the public and private sectors knew about it and turned up. Offers reached a stationary level. Nor could the <ORG> be put off indefinitely in recovering its dues on baseless expectations and distant prospects. The judgment debtor himself, by his litigious exercises, would have contributed to the possible buyers being afraid of hurdles ahead. After all, producing around Rs. 11.5 lakhs openly to buy an industry is not easy even for an apparently affluent businessmen. The sale proceedings had been pending too long and the first respondent could not, even when given the opportunity, produce buyers by private negotiation. 'Not even a valuer's report was produced by him, we are satisfied that the District Judge had committed no material irregularity in the conduct of the sale in accepting the highest offer of the appellant on September 3, 1969.

<NAME> has levelled a number of criticisms of the court sale which we regret are more captious than substantial, more fictitious than genuine. Complaining about the rains in Bombay that day-, i.e. September 3, dissecting <ORG> valuation for minor omissions and errors, holding up the exaggerated figure of about Rs. 36 lakhs as the market value of the property and other like cir- cumstances can hardly convince anyone that the hoped-for happy day would arrive when a handsome price would be forthcoming if the auction were adjourned ad libitum at the instance of the judgment debtor. Prima 'facie it may look a little odd that a financial orgnisation in the public sector, with a special responsibility to the people not to play with public funds or advance for shady enterprises or persons should have readily lent a huge amount of Rs. 10 lakhs on a valuation obviously bloated as is established by the sequel, and struggled for long years to recoup the money. This aspect of the matter, we hope, will receive the anxious attention of the concerned authorities so that public money may be handled by public servants with public responsibility and concern for public benefit. However, we do not wish to express any opinion because we have no material before us as to what were the circumstances in which <ORG> advanced the loan, what were the other securities given by the <ORG>, and what was the then worth of the guarantors.

Several other unsuccessful grounds were urged before <ORG> by the judgment debtor and we need not go over those grounds again as they possess little merit. Nor need we consider the ambit of appellate power to review discretion exercised by the trial court (vide <NAME> v. <NAME> (1) since here we are concerned with no appeal against the approval of the sale by the executing court but with an order refusing to set aside the sale under Order XXI r. 90, and an appeal therefrom.

We see no merit in the application to set aside the sale and are constrained to allow the appeal. Mr. <NAME>, who argued the appeal with thoroughness and fairness, in his opening submissions, told the court that, regardless of the outcome, he had persuaded his client to raise the price to a sum equal to the amount at which the properties, lots I and 2, were estimated by M./s <ORG>, namely, Rs. 17, 48,096/-. He stuck to it to the end a good gesture. Consequently, we shall accept that as the price offered by the auction purchaser-appellant and direct that the appellant do deposit the balance of this amount of Rs. 17,48,096/- over what he has already paid into (1) [1966] 1 Q.B. 273 at 293.

court (Rs. 2,75,000/-) within two months from to-day, in <ORG>, Thana, in which event the appellant will be put in possession of the properties purchased by him forthwith. Liberty is given to the <ORG> to withdraw to the extent of its dues with up-to-date interest. We think that the circumstances of the case warrant the direction that parties will bear their costs throughout.

V.P.S. Appeal allowed,.