MAHARANI KANAK KUMARI SAHIBA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) RAMASWAMI and AHMAD, JJ. - In this case the assessee is the Maharani of Dumraon and the assessment relates to the year 1947-48. The accounting year is the period from 1st of November 1945, to 31st of October, 1946. The assessee is the owner of house properties and she also carries on the business of manufacture of lanterns and mosquito nets in her factory known as Bihar Lantern Factory. For the assessment year 1947-1948 the assessee returned a total income of Rs. 54,726. After the promulgation of the High Denomination Bank Notes (Demonetization) Ordinance, the assessee exchanged high denomination notes to the value of Rs. 3,97,000 on 22nd January, 1946. In her declaration made before the Imperial Bank the assessee stated that the reason for keeping high denomination notes was that "she had always kept large sums with her personally as was the custom with the ladies of her status and position". In column 16 of the declaration the assessee made the further statement that she had received the money from her father and mother and other relations. The Income-tax Officer called upon the assessee to explain the source of the money. The assessees agent appeared before the Income-tax Officer and explained that the high denomination notes really belonged to the husband of the assessee, namely, the Maharaja of Dumraon. The Income-tax Officer thereafter required the assessee to give proof of this statement. But the assessee did not give any further evidence. The Income-tax Officer then completed the assessment including the whole amount of Rs. 3,97,000 as the secreted profits of the assessee. The assessee took the matter to the Appellant Assistant Commissioner and it was contended on her behalf that the high denomination notes to the extent of Rs. 3,97,000 should be excluded from the assessment. In proof of her statement the assessee produced before the Appellate Assistant Commissioner a certificate from the Imperial Bank showing that on the 11th of November, 1942, the Maharaja of Dumraon had withdrawn from the Imperial Bank a sum of Rs. 8,00,000 and on the 20th of November, 1944, he had withdrawn a sum of Rs. 3,00,000. The assessee also offered evidence to show that on the 18th of January, 1946, the Maharaja had exchanged from the Imperial Bank high denomination notes to the value of Rs. 10,00,000. On the 19th of January, 1946, the Maharajas son Kumar Kamal Singh had exchanges high denomination notes to the extent of Rs. 1,15,000. The case of the assessee was that the amount of Rs. 1,15,000 exchanged by Kumar Kamal Singh and the amount of Rs. 3,97,000 exchanged by the assessee herself after the passing of High Denomination Bank Notes (Denometization) Ordinance really belonged to the Maharaja of Dumraon. In proof of this statement the agent of the assessee pointed out that on a comparison of the high denomination notes withdrawn by the Maharaja in 1942 and 1944 it was clear that notes to the extent of Rs. 8,50,000 tallied with the notes exchanges by the Maharaja of Dumraon on the 18th January, 1946, and that notes to the extent of Rs. 2,00,000 tallied with the notes exchanges by the Maharani on the 22nd of January, 1946, and that notes to the extent of Rs. 50,000 tallied with the notes exchanged by the Maharaj Kumar Kamal Singh on the 19th of January, 1946. It was also pointed out on behalf of the assessee that after the high denomination notes were exchanges by the assessee, the amount of Rs. 3,97,000 was credited to the Imperial Bank on the same date in the name of the Maharaja of Dumraon and not in the name of the assessee. The amount of Rs. 1,15,000 exchanged by the Maharaj Kumar Kamal Singh was also credited in the account of the Maharaja of Dumraon on the 19th of January, 1946. The Appellate Assistant Commissioner examined the estate account books of the Maharaja for over twenty-five years and ascertained from those books that the Maharaja had withdrawn sums of money to the extent of Rs. 53,00,000 from time to time. The Appellate Assistant Commissioner also took note of the fact that the annual income of the estate was about Rs. 30,00,000 and the Maharaja had occasion to handle large surplus amount from the income of the estate. Considering all these circumstances the Appellate Assistant Commissioner reached the finding that the entire amount of Rs. 3,97,000, which is the amount of high denomination notes encashed by the assessee, represented the surplus collections of the Dumraon Raj Estate, which were withdrawn by the Maharaja from time to time and later on encashed through the assessee. The Income-tax Department preferred an appeal to the Income-tax Appellate Tribunal against the order of the Appellate Assistant Commissioner. It was contended on behalf of the Department that there was no evidence before the Appellate Assistant Commissioner to show that Rs. 1,97,000 out of the total amount of Rs. 3,97,000 really belonged to the Maharaja of Dumraon and not the assessee. The Appellate Tribunal accepted this argument and remanded the case back to the Income-tax Officer "to bring on record further evidence after proper investigation on the following lines : (1) To examine the lady on oath and to record her deposition; and (2) to investigate the claim of the lady that the sum of Rs. 3,97,000 could have come out of her husbands cash balance in the way that she alleges it to be". The Appellate Tribunal also stated : "In this connection, the books of account of the husband, if produced by the lady in support of her case, should be examined with regard to the likelihood of the husband having been in possession of the entire sum of Rs. 15,12,000 that should have been encashed by him of which this sum of Rs. 3,97,000 is alleged to form a part. The nature of the entries that have been made in the Roker in the neighbourhood of the date of demonetisation and the date of banking these high denomination notes in the husbands Imperial Bank account should throw further light on this aspect of the matter. The Income-tax Officer is given full discretion as to the nature of the enquiry that he feels called upon to make into the books of the husband or otherwise, in order that he may be able to support the assessment."

(2.) AT the instance of the High Court, the Income-tax Appellate Tribunal has submitted the following questions of law : "(1) Whether in the circumstances of this case the order of remand by the Tribunal is legal and valid ? (2) Whether the Tribunal was entitled in law to order for further investigation regarding the sum of Rs. 3,97,000 ? (3) Whether the Tribunal was entitled in law to permit the Income-tax Officer to make further enquiry to support the assessment ?"