JUDGMENT
HARRIES, C.J. – This is a reference made by the Income-tax Appellate Tribunal, Calcutta Bench, under Section 66 of the Indian Income-tax Act. The question propounded i : -“Whether in the facts and circumstance of this case relief under section 25(3) was allowed by the Tribunal.”
To appreciate the point raised it will be necessary shortly to set out the facts. The assessee is and was a well known member of the Bar and an Advocate practising on the Original side of the Calcutta High Court. It is common ground that he was assessed to income-tax under the Act of 1918. On December 11, 1941, he was arrested at the instance of Government and was kept in detention until September 14, 1945, when he was released. During that period of course he was unable to carry on his practice as a Barrister and an Advocate and on his behalf it was said that Mr. Bose had given up all idea of practising in the future or, in short, had discontinued his practice. It is accepted by the Tribunal that Mr. Bose dismissed his clerk and also gave up his Chambers which were acquired by him for his professional work. On the other hand, the taxing authorities contended that he had not discontinued his practice, but had only suspended it temporarily during this period of imprisonment. They urged that Mr. Bose has now resumed practice which went to show he had never intended to discontinue and that the period of incarceration merely operated to suspend his professional work.
When the matter came before the Tribunal the Income-tax authorities sought to raise an entirely new points. It was suggested that Mr. Bose had previously been imprisoned and had been compelled to give up his practice. Mr. Bose, it was said, had applied for and obtained relief under Section 25(3) of the Act on the ground that he had discontinued practice as a result of this earlier period of imprisonment. That period of imprisonment, it was suggested, was from February 4, 1932, to July, 1935.
No reference had been made to this point at all be the Income-tax Officer and it was not raised before the Appellate Assistant Commissioner. As I have said it was first mentioned to the Appellate Tribunal and that Tribunal of course had no facts before it upon which it could hold whether relief had been given to Mr. Bose under Section 25(3) of the Indian Income-tax Act in respect of this earlier period of imprisonment.
What the Income-tax authorities wished to establish was that the present claim of Mr. Bose to relief under Section 25(3) of the Act could not possibly be allowed because no assessee can claim relief more than once under Section 25(3). If an assessee has claimed relief and been given relief under Section 25(3) of the Act then that particular business or that particular practice must be regarded as having come to an end. If a business or a practice is resumed at some later date it would be a business or practice which had never been charged under the provisions of the Indian Income-tax Act, 1918, and therefore even if such business had been discontinued, such discontinuance would not attract the provisions of Section 25(4) of the Act. In short, what the Income-tax authorities sought to establish before the Tribunal was that the practice which Mr. Bose was carrying on in 1941 was not a practice which had been charged to income-tax under the 1918 Act as the earlier practice had been discontinued in 1932 and relief had been given him in respect of such discontinuance. The Tribunal refused to allow the Income-tax authorities to raise this new point.
By the same judgment they held that the assessee was entitled to relief under Section 25(3) as he had discontinued his practice when he had been imprisoned in 1941.
The authorities asked the Tribunal under Section 66(1) of the Indian Income-tax Act to state case on three questions.
(1) Whether in the facts and circumstances of this case and in view of the provisions of the Section 25(3) of the Indian Income-tax Act, 1922, the Income-tax Appellate Tribunal legally justified in declining to consider whether the assessee had not discontinued his profession once before, long prior to the previous year.
(2) Whether in the facts and circumstances of the case there was any evidence upon which for purposes of Section 25(3) of the Indian Income-tax Act, 1922, the Tribunal could find that the profession discontinued in the previous year was identically that on which tax had been charged under the provisions of the Indian Income-tax Act, 1918.
(3) Whether in the facts and circumstances of this case relief under Section 25(2) was properly allowed by the Tribunal.
The Commissioner of Income-tax has preferred a petition to this Court praying that the Appellate Tribunal be called upon to state a case upon questions Nos. (1) and (2). But in our view the Tribunal cannot be compelled to state a case on these questions.
Whether Mr. Bose had discontinued his profession in the year 1931 and whether he had obtained relief under Section 25(3) of the Income-tax Act were matters specially within the knowledge of the Income-tax authorities. When the matter was before the Income-tax Officer that point could have been taken. But the Income-tax Officer preferred to rely upon a finding that in the year 1941 Mr. Bose did not discontinue practice but merely suspended practice. When the matter came on appeal before the Assistant Commissioner the Income-tax authorities could have taken the point that as the practice which Mr. Bose had in 1931 was discontinued, the practice which he discontinued in 1941 was not the practice the profits of which had been charged under the Indian Income-tax Act, 1918. However the point was never made and the facts now relied upon to support the point were never proved. It is only when the matter came before the Tribunal that the point was first raised.
In considering whether the taxing authorities should be allowed to raise this new point the Tribunal were entitled to have regard to a number of matters. They were asked not only to entertain a new point, that is to allow an additional ground to be added to the grounds of appeal, but further to allow additional and entirely new evidence to be called to establish this new point.
Ordinarily an appellate court is loath to allow a new point to be argued on appeal which is not taken in the grounds of appeal. But in a proper case an appellate court may give leave to an appellant to urge such a new point.
The power of an appellate court to admit additional evidence are very strictly limited and in appellate matters this court is governed by Order 41, Rule 27, of the Code Civil Procedure. For example, if the facts respecting which additional evidence is sought to be introduced were known to the parties then court will never allow additional evidence to be adduced. Further the court can only allow additional evidence when the court requires such additional evidence before it can decide the case. It matters not whether either of the parties requires such additional evidence to establish his case. The requirement must be the requirement of the court. Such is clearly the decision of their Lordship of the Privy Council in Parsotim v. Lal Mohar.
It is therefore clear that an appellate court would never accede to such an application as that made to the appellate Tribunal. It is true that the Appellate Tribunal is not governed by the rules of the Code of Civil Procedure, but the Tribunal has its own rules and i think it is tolerably clear that the Income-tax authorities were not entitled to raise this new point and call additional evidence by reason of Rule 29 of the Appellate Tribunal Rules, 1946. That rule provides :-
“The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be exclaimed or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or if the Income-tax Officer has decided the case without giving a sufficient opportunity to the assessee to adduce evidence either on points specified by him or not specified by him, the Tribunal may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced.”
It is clear from this rule that the powers of the Appellate Tribunal to admit additional evidence are strictly limited.
Dr. Gupta has however contended that the Tribunal could allow this new point to be taken and allow additional evidence to be given by reason of the provisions of Sub-section (4) of Section 33 of the Indian Income-tax Act. That sub-section provides :-
“The appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit and shall communicate any such orders to the assessee and to the Commissioner”.
Dr. Gupta laid stress on the powers of the Appellate Tribunal to pass such orders as it thinks fit. But the Tribunal is governed by its own rules and is governed by the ordinary rules of natural justice. If the Income-tax authorities are in this case entitled to raise this new point and call entirely fresh evidence to support it what is there to prevent them when the matter again comes before the Tribunal to raise a further new point and ask them for leave to call entirely fresh evidence on that point.
I do not think that this court can compel the Tribunal to state a case upon these two questions unless the court is satisfied that in refusing to do so the Tribunal acted arbitrarily. In matters of this kind the Tribunal must have a discretion and this court would undoubtedly intervene if the tribunal had exercised its discretion on improper materials. On the other hand, if there were materials upon which the Tribunal could properly refuse to allow the taxing authorities to raise the question then this court would not interfere with the order of the Tribunal. In the case of Byramji & Co. v. Commissioner of Income-tax, C.P. & U. P., a Bench of the Nagpur High Court held that the Appellate tribunal may grant level to urge an additional ground of appeal even though it has been added to the memorandum of appeal by means of a proper amendment. There is also nothing in the rules which provides that an application for level to urge an additional ground should be stamped or verified. The Bench further held that thought it is for the Appellate Tribunal to exercise its discretion in granting leave to urge an additional ground of appeal, this discretion has to be exercised judicially and not arbitrarily, and if it is found that it has been exercised arbitrarily, such exercise of discretion can be interfered with by the High Court. The court further held that where the additional ground of appeal sought to be urged was a question of law which did not involve any further investigation into facts and it was also one going to the root of the matter and the only grounds upon which the Appellate Tribunal refused to grant leave to urge it was that this new ground was not added to the memorandum of appeal by a proper amendment and the application for leave was neither stamped nor verified, the discretion was not properly exercised and the High Court was entitled to interfere.
In that case the new point sought to be raised was purely a legal one and did not require any further investigation into the facts. Permission had been refused to the parties to raise this new point on purely technical grounds and that being so the Nagpur High Court were of opinion that the refusal to allow this new point to be urged was an arbitrary decision.
The present case is however vastly different. Here an entirely new point is sought to be raised and entirely fresh evidence is sought to be adduced to establish this new point. The point was one within the knowledge of the Income-tax authorities and their failure to raise the point and to produce evidence to establish it was entirely due to their own fault or negligence. Even if the point was overlooked at first it could at least have been raised before the Assistant Commissioner but that was not done. It was only raised at this very late stage and in my view it cannot possibly be said that the Appellate Tribunal acted arbitrarily in refusing leave to the taxing authorities to raise this point and to adduce evidence to establish it. That being so, I am not inclined to call upon the Tribunal to state a case on questions Nos. (1) and (2) and this application for a Rule is dismissed.
Dr. Gupta on behalf of the Commissioner has contended that the finding of the Appellate that the assessee had discontinued his practice when he was imprisoned in 1941 cannot possibly be maintained. It is contended that at most the assessee only suspended his practice.
When a catastrophe such as imprisonment of this kind befalls a man actively pursuing a professional career, he can do one of two things. He can decide to give up his profession altogether or he may decide to resume it when his period of imprisonment is over. Where a person suffers an uncertain period of imprisonment of this kind he may well feel at the commencement that all hopes of further practising at the Bar have disappeared and that all he can do is to wind up his practice. Whether a man discontinues a practice or suspends it very largely depends upon the state of his mind. If when he is imprisoned he loses hope (sic) is determined to throw up his practice for ever then he can be said to have discontinued it. But if his state of mind is that he will return to practise if and when he is released, his practice is merely suspended.
Dr. Gupta however has urged that a man cannot be said to have discontinued his practice unless it is shown that be has never returned to the practice of his profession. If that argument be should then no member of the Bar would ever be entitle to relief under Section 25(4) of the Act, because it could never be stated with certainly that he would not return to practise until the day of his death and therefore he could never claim such relief. What determines the matter appears to me to be the state of mind of the assessee when some calamity such as this imprisonment occurs. What the Tribunal had to ask themselves was – did Mr. Bose when he was imprisoned in 1941 ever intend to return to his practice at the Ba ? If he did then he can be said to have discontinued his practice. If he did return to return then at most it was mere suspension.
Dr. Gupta however has pointed out that Mr. Bose has returned to his practice and therefore it cannot be said that he ever discontinued his practice. It appears to me that a man may genuinely discontinue his practice at the Bar and Return to it later. For example, a member of the Bar may be advised by this medical advisers that his state of health is such that he will never be fit to practise again. On receiving such advice an Advocate may send off his clerk, and dispose of his chambers and his books. If however the medical advisers were wrong and such members of the Bar recovery sufficiently to be able to practice would the fact that he resumed his practice disprove a contention that that man had after the receipt of medical advise discontinued his practic ? It appears to me on the facts which I have stated that such a member of the Bar could truly be said to have discontinued his practice. When he unexpectedly recovered good health it may well be said that he did not resume his old practice, but he started as it were a fresh practice. What determines the matter appears to me to be the state of the assessees mind and that is to a very large extent, if not altogether, a question of fact. The Tribunal in this case have considered all the relevant facts and have come to the conclusion that the assessee when he was imprisoned in 1941 gave up all further idea of practising or, in other words, he discontinued his profession. The fact that he has returned to it was evidence which the Tribunal was entitled to take into account. But it is evidence which in no way concludes the matter. The Tribunal have taken all the matters into account and in my view it cannot possibly be said that they were wrong in coming to the conclusion which they did. They did not misdirect themselves in any way and their finding cannot in my view be challenged.
In the result therefore I would answer the question propounded in the affirmative.
The assessee is entitled to the costs of this reference. Certified for two counsel.
CHATTERJEE, J. – I agree with my Lord the Chief Justice that in this case the Appellate Tribunal exercised its discretion judicially and not arbitrarily. In such case the High Court cannot interfere. The revenue authorities wanted to arise a new question of fact which was taken neither before the Income-tax Officer nor before the Appellate Assistant Commissioner. In my opinion the Tribunal was justified in not allowing them to urge the new point and to adduce fresh evidence in the proceedings them as it was in the nature of a second appeal.
On the merits the Tribunal in my view correctly came to the conclusion that Mr. S. C. Bose had discontinued his profession and was entitled to relief under Section 25(3) of the Indian Income-tax Act. The argument was advanced on behalf of the revenue authorities that Mr. Bose had been arrested by the Government and was forcibly taken away from the scene of his professional activity and he was thus compulsorily debarred from carrying on his profession. Inasmuch as there was a sudden and unforeseen interruption of his professional career, the authorities urged that there was a mere suspension of his vocation for reason of State. The carrying on of the profession was not given up by him as according to the Appellate Assistant Commissioner Mr. Bose was prevented by the State from continuing his profession.
It is really a question of fact whether there was a discontinuance of a profession or business in a particular case. We are bound by the Tribunals finding of fact that there was a discontinuance in the case of Mr. Bose under Section 25(3). I cannot accede to the argument of Dr. Gupta that there must be a complete cessation of the profession for the rest of a mans life in order to constitute discontinuance of a profession. If a member of the legal profession after giving up his profession and closing down his professional establishment changes mind some years later and resumes practice then there was no discontinuance because according to the revenue authorities discontinuance means complete cessation of the profession for ever. In that view in the case of a profession complete cessation can only be predicated with the death of the assessee. That would be an unreasonable view to take in the case of a professional gentleman. The language of Section 25(3) does not warrant such an extreme contention. If such contention is should then a professional man can never get the benefit of Section 25(3) until he dies and the relief can only be claimed or obtained by his legal representatives or his successor-in-interest. It is really a question of the intention of the assessee at the relevant point of time. As the learned Chief Justice has pointed out the Tribunal had certain facts before them and they were justified in coming to a finding on those facts. In a letter from Coorg addressed to the revenue authorities Mr. Bose informed them that he had been arrested by the Government on December 11, 1941, at Calcutta and that he had been kept in detention for an indefinite period and that he was still detained at Mercara in Coorg. Therefore he stated that he had been compelled to give up his profession. The reason given for the termination of the profession did not necessarily make it mere suspension of the profession. A person may be compelled to discontinue his profession owing to his illness or owing to his appointment to some office which compels him to give up his profession. Such cessation of profession activities, even if involuntary, would constitute discontinuance within Section 25(3). Reference may be made to the case of Mr. Justice Iqbal Ahmad. The nature of the detention and the impossibility of making any reasonable forecasts as to the length of such detention might lead the assessee to think at that it was all over with him so far as his profession was concerned.
There were other facts which had been found by the Tribunal. Mr. Bose had dismissed his clerk and given up his chambers and on the materials before them were justified in holding that there was discontinuance by Mr. Bose of his profession.
I agree with the answer proposed by the learned Chief Justice to the question put to us.
Reference answered accordingly.