Bhimraj Pannalal vs Commissioner Of Income-Tax, Bihar

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 18 October, 1960

Coram: J.C. Shah, M. Hidayatullah, S.K. Das

In this matter, the parties were Bhimraj Pannalal and the Commissioner of Income‑Tax, Bihar. The case was listed on 18 October 1960 before the Supreme Court of India. The judgment was authored by Justice S.K. Das, and the bench comprised Justices J.C. Shah, M. Hidayatullah and S.K. Das. The three appeals that reached this Court were filed on certificates of fitness that had been issued by the High Court of Patna in accordance with section 66A (2) of the Indian Income‑tax Act, 1922. The appellant, who was before this Court, was a Hindu undivided family that carried on the trade of cloth and grain at Ranchi in the State of Bihar. The family had been assessed to income‑tax for the fiscal years 1944‑45, 1945‑46 and 1946‑47. After those original assessments were made, the Income‑tax Officer obtained definite information indicating that the appellant was engaged in business with Messrs Mangalchand Basantlal of Khurja, located in the district of Aligarh in the State of Uttar Pradesh, and that the business was being conducted under different names. The Officer also learned that the appellant had remitted certain sums from Ranchi to Messrs Mangalchand Basantlal; that Messrs Mangalchand Basantlal had forwarded a draft of Rs 2,500 to Amritsar on the appellant’s instructions; and that the appellant had derived profit from dealings in peas and related goods. In view of these circumstances, the question arose as to whether the proceedings that had been initiated on 10 December 1947, under section 34 of the Income‑tax Act as amended by Act XLVIII of 1948 for the purpose of reopening the assessments of the years 1944‑45, 1945‑46 and 1946‑47, were legally valid.

The reference to the information described above was not pressed before the High Court. Consequently, the appellant moved the High Court under section 66 (2) of the Indian Income‑tax Act, 1922, seeking a declaration of fitness. The High Court framed a specific question in each of the three appeals and invited the parties to present statements. The question pertinent to the assessment year 1944‑45 read as follows: “Whether in the circumstances of the case the assessment of a sum of Rs 28,000 to income‑tax in the hands of the assessee is legally valid under section 34 of the Income‑tax Act?” An identical formulation of the question was adopted for the other two assessments, the only variation being the respective amounts of escaped income for the years 1945‑46 and 1946‑47. The High Court answered the question against the assessee in its judgment and order dated 24 April 1957, and the answer was the same in each of the three cases. The present appeals arise from that judgment and order of the Patna High Court. Counsel for the appellant admitted that he was not in a position to maintain that the proceedings under section 34 were void from the outset. He conceded, as the High Court correctly observed, that the Income‑tax Officer possessed sufficient material on which to base proceedings under section 34 for the three assessment years involved. Nonetheless, counsel for the appellant sought to argue further points regarding the assessment.

The appellant’s counsel argued that the figure of escaped income identified for each of the three assessment years was arrived at without any documentary basis and amounted to pure speculation. He further maintained that in matters of this character there was no authority for the tax authority to make an assessment pursuant to section 23(4) of the Act. The Court examined this content­ion and concluded that it could no longer be pursued by the appellant. The High Court, when formulating the question for consideration, had indeed framed a sufficiently wide issue to permit the appellant to challenge the quantum of the assessment on the ground that it was unsupported by material. However, the appellant did not raise that point before the High Court. On the contrary, the judgment of the High Court recorded that the counsel appearing for the assessee, Mr S N Dutt, did not dispute the amount of assessment in any of the three cases. The High Court had therefore dealt with two separate arguments: first, that the assessed amount could not be characterised as “escaped income” within the meaning of section 34, and second, that the assessment under section 34 lacked any supporting material. Both arguments were fully examined by the High Court, and the appellant’s counsel was unable to demonstrate any error in the High Court’s reasoning on either point. Because the quantum of assessment was never contested in the High Court, the appellant could not now be permitted to revive a contention that had been expressly abandoned at the earlier stage.

Subsequently, the appellant’s counsel made an additional attempt to persuade the Court that the appellant had, in fact, challenged the quantum of the assessment and that the validity of the assessment, including its quantum, had been questioned before the High Court. The record of the High Court, however, settled the issue conclusively. Neither the application for leave to appeal before this Court nor the statement of case filed on behalf of the appellant indicated that the counsel had failed to make the concession recorded in the High Court judgment, nor did it allege that the quantum of assessment for any of the three years was disputed. For these reasons, the Court found that the appeals lacked any merit. Accordingly, the appeals were dismissed, and the appellant was ordered to pay costs, including a single hearing fee. The final order expressly dismissed the appeals.