Das, J.:— By this application under section 66(2) of the Indian Income-tax Act, 1922, the only question referred to this Court was:

“Whether in view of the statement of the Government Cold Storage and the affidavit filed by the assessee the Tribunal was justified to hold such storage at 2600 maunds in the relevant accounting period?”

2. These two applications deal with the two assessments of the petitioner for the assessment years 1951-1952 and 1952-1953, the relevant accounting years being the financial years 1950-1951 and 1951-1952 respectively. The assessee was a dealer in potatoes, fruits and vegetables. The potatoes sales are entirely self-transaction whereas most of the fruits and vegetables were sold by the assessee on commission basis. While passing the assessment order, the Income-tax Officer observed;

“That the assessee's dealings in potatoes are very extensive and he gets numberless wagons of potatoes from Madras and other areas.”

The Income-tax officer privately obtained certain figures from the Railway Administration and on verification of the account books produced by the assessee, he found that a number of transactions were missing from those books. On further information received from the Railway administration, he noted that the assessee was in the habit of getting potatoes in the names of other parties. The fact of the assessee getting goods in the name of other parties was corroborated by the fact that the assessee sold goods outside Cuttack in the names of different parties also. The Income-tax Officer further found that the assessee was suppressing stocks of potatoes in the Govt. cold storage every year to the tune of rupees one lakh.

3. It was further observed by him that the assessee always did not do business in his own name but in the names of other parties and mainly in the names of his employees. The Income-tax Officer also privately obtained certain figures from the Government Cold Storage and found the assessee to have stored potatoes in the names of Biswanath Khuntia, Dorjodhan Patra, Satyapriya Patra, Gourbari Patra etc., all being assessee's employees. Thus, in view of the numerous omissions and extensive suppression, the Income-tax Officer rejected the books of accounts produced by the assessee as unreliable, and while completing the assessment under sub-section (3) of Section 23 he applied the proviso to section 13 and estimated the profits of the assessee in accordance with his best judgment. The result was that he estimated Rs. 900/- for the house property and took the total turnover in potatoes business to be rupees two lakhs and computed the gross profit at 12 per cent thereon which came to Rs. 24,000/. This turnover of two lakhs was computed as follows: Rs. one lakh from his general potatoes business and Rs. one lakh from the potatoes stored in the cold storage. With regard to the fruits and vegetables, however, the income-tax officer estimated the total turn-over to be one lakh and computed the gross profits at 7 per cent which came to seven thousand rupees. At the end he deducted the over-head expenses at Rs. 5000/-. It may be mentioned here that the assessee was assessed at the same figures in both the years. Against the above order of the Income-tax officer, the petitioner carried an unsuccessful appeal to the Appellate Assistant Commissioner.

4. Two questions were raised before the Appellate’ Assistant Commissioner, (1) The Income-tax Officer has rejected the books of accounts on certain materials and incorrect presumptions; (2) Because of these incorrect materials and wrong presumptions the estimation of the income has been unduly excessive. The Appellate Assistant Commissioner dealt with the 1st question at great length and found as a fact that the Income-tax Officer was right in refecting the books of account which cannot be challenged now. With reeard to the 2nd question, he held that the Income-tax officer had made the estimates in view of the facts that (a) the appellant was one of the leading fruit cum-vegetable merchants of the city of Cuttack; (b) he has family consisting of forty members and dependents; (c) he maintains a car and lives in some style, (d) he owns a big building one-third of which is used as godown in addition to the commodious sale-stail and another godown in front of it, and also (e) in view of the reports carefully gathered by him about the extent of the appellant's business. Thus, he was of the opinion that the assessee had been under-assessed, but since the net estimate was after all an estimate, he retrained from issuing a notice to show cause why the assessment should not he enhanced. Against this order of the Appellate Assistant Commissioner the petitioner filed a second appeal before the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal in rather brief order held;

“We, however, find that potatoes preserved in the cold storage were about 2,600 maunds in the relevant accounting years, and therefore, in our opinion, the estimate of turn-over on this account should be Rs. 50,000/- and therefore in the potatoes account we estimate that the assessee's transaction in potatoes would be Rs. 1,50,000/- the rate of gross profit being 12 per cent quite reasonable. The assessment will be revised accordingly.”

Against this order an application under Sub-s. (1) of Section 66 was filed before the Appellate Tribunal which was rejected on the ground that no question of law arose. Thereafter an application under Section 66(2) was filed before this Court and two of the learned Judges of this Court by their order dated November 6, 1958, issued a writ of Mandamus on the Appellate Tribunal to state a case on the above question. Accordingly, the statement of the case was submitted by the Appellate Tribunal to this Court.

5. Mr. S.M Gupta, learned counsel on behalf of the petitioner did not challenge the applicability of the proviso to section 13 of the Indian Income-tax Act. He also did not challenge the gross turn-over of Rupees one lakh in the general potato business or the gross turnover he respect of the fruits and vegetables. He did not challenge the rate of profit adopted by the Revenue. All that he challenged before this Court was with regard to the estimate of Rs. 50,000/- as the value of 2.600, maunds of potatoes stored in the Cold storage. It may be remembered here that the Income-tax Appellate Tribunal in their order observed that the quantity of potatoes preserved in the cold Storage was about 2,600 maunds in the relevant accounting years, and therefore, in their opinion, the estimate of turn-over in this account should be Rs. 50,000/- Thus the sole contention of Mr. Gupta was that this estimate by the income-tax authorities is based on no material on record.

6. Before dealing with this question, I would like to state that section 13 of the Indian Income-tax Act does not justify a bald estimate of the income by the income tax officer without any evidence or other material on record. The Income-tax Officer is equally not entitled to make a guess without any evidence. Where accounts have been produced and the case is not dealt with under Section 23(4) the “basis and ‘manner’ of computing the profits under this proviso to section 13 have to be legal and judicial. Dunichand Dharuram v. Commr. of Income Tax, 2 ITC 188 : (AIR 1926 Lah 161); In Re, Radhevlal Balmukund, 4 ITC 454 : (AIR 1931 All 23): and In Re, Ramkhelawan and Sahu Thakurdas, 1939-7 ITR 607 (All). There is also a long line of cases to the effect that the Court will not interfere with the action of the Income-tax authorities under the proviso to section 13 unless their action is arbitrary, capricious and unreasonable.

7. Thus, we will have to examine whether the Income-tax authorities have referred to any material though not any strict legal evidence while estimating the gross turnover of the petitioner from the cold storage Account. While the appeal before the Income-tax Appellate Tribunal was pending, the petitioner filed a letter No. 419/08.Cuttack the 5th April, 1954, from the Manager, Government Cold Storage, Cuttack, to the assessee showing that he had deposited 504 maunds and 16 seers of potatoes in the year 1951 and 334 maunds in the year 1952. After the order of the appellate Tribunal, however, he filed an application under section 35 of the Income-tax Act for rectification of the figures taken as 2600 maunds per year and filed an affidavit denying that the persons mentioned in the order of the Income-tax Officer are neither his employees nor his relations. The appellate Tribunal, eventually, dismissed this application. Mr. Gupta sought to rely upon this affidavit which was filed before the appellate Tribunal. We are not concerned in the petition with the order raised by the appellate Tribunal under section 35 The question of law must arise out of the order passed by the Appellate Tribunal under Section 33 of the Act and not under Sec. 35. Hence the affidavit not having been filed even at the second appellate stage cannot now be taken into consideration.

8. The Income-tax Officer while making the assessment observed:

“From Cold Storage authorities it is gathered that the assessee does not stock anything less than one lakh of rupees worth of potatoes every year.” He also mentioned the names of certain people being his employees. While dealing with this part of the case the assessee claimed that he himself cultivates potatoes in his agricultural fields and the annual production amounts to 400 maunds. The Appellate Assistant Commissioner observed in his order that it is for the first time that the assessee made such a claim. “What is relevant is that this plea of his production is put forth when I asked the assessee to explain his Cold Storage affair.” Neither the Income-tax officer nor the Appellate Assistant Commissioner disclosed to the petitioner the details of the information that they received regarding the storing of potatoes in the Government Cold storage in the names of his employees. The petitioner, however, had been denying the fact ever since the assessment was made by the Income-tax officer. Since the details bereft of its confidential character were not disclosed to the petitioner, there was probably no necessity for filing an affidavit. The appellate Tribunal in a rather criptic order had stated that

“The consignments through the railways were not properly brought to the notice of the income-tax officer, neither was the receipt from the Government on account of Cold Storage etc. brought to his notice. We however find that the potatoes preserved in the cold storage were about 2600 maunds in the relevant accounting years.”

The appellate Tribunal did not appear to have referred to any legal evidence or any material in support of this finding. Doubtless having regard to the provisions of the Indian Income-tax Act, there may be some difficulty for any strict legal evidence; but there must be some material on record to support the finding with regard to the estimation of the gross turnover. It appears to us that the Appellate Tribunal had not referred to any material at all while estimating the gross turnover. On the contrary the revenue had indulged in a pure guess and adopted the figure without reference to any evidence or material at all.

9. It was contended on behalf of the Revenue that the Income-tax authorities had based their estimation of the gross turnover on materials available to them that is the information from the Cold Storage Authorities. There is no mention, however, in the body of the various orders of the Income-tax authorities as to what that information was and whether the petitioner had an opportunity to explain the same. It is true that there is no provision in the Indian Income-tax Act which imposes a duty on the Income-tax Officer to disclose to the assessee the material on which he proposes to act while computing the assessment under Section 23(3); but the principles of natural justice require that he should draw the assessee's attention to it and give him an opportunity to show that the Officer's information is wrong and he should also indicate in his order the material on which he has made his estimate; Gunda Subbayya v. Commissioner Of Income-Tax, Madras, Madras, (1939)-7 ITR 21 : (AIR 1939 Mad 371) (SB).

10. A similar question cropped up before the Lahore High Court in the case of Gurmukh Singh v. Commissioner of Income-tax, Lahore (1944) 12 ITR 393 : (AIR 1944 Lah 353 (2)) (FB). The following rules were laid down in that case: (1) While proceeding under sub-s. (3), of Section 23, the Income-tax Officer is not bound to rely on such evidence produced by the assessee as he considers to be false; (2) if he proposes to make an estimate in disregard of the evidence, oral or documentary led by the assessee, he should in fairness disclose to the assessee the material on which he is going to found the estimate; (3) he is not, however, debarred from relying on private source of information, which source he may not disclose to the assessee at all: (4) in case he proposes to use against the assessee the result of any private enquiry made by him he must communicate to the assessee the substance of the information so proposed to be utilised to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and should further give him ample opportunity to meet it, if possible. This decision was approved by the Supreme Court in the well-known case of Dhakeshwari Cotton Mills Ltd. v. Commr. of Income Tax West Bengal, (1955) SCR 941 : ((S) AIR 1955 SC 65). In that case it was laid down:

“As regards the second contention we are in entire agreement with the learned solicitor-general when he says that the Income-tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law, but there the agreement ends, because it is equally clear that in making the assessment under sub-section (3) of Section 23 of the Act, the Income Tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 23(3).”

11. The Revenue, it appears, had proceeded upon the footing that the several persons mentioned in the assessment order are the employees of the petitioner and he had been carrying on the business in the Cold Storage in their Benami names. In case of benami transactions, it is well settled that the onus of proof is on the person who seeks to show that the apparent is not the real. In this case the department having proceeded upon the footing that the suspected transactions were either sham or benami transactions the onus is upon them. Madura Knitting Co. v. Commr. of Income Tax and Excess Profits Tax, Madras, (1956) 30 ITR 764 : ((S) AIR 1957 Mad 488). When an assessment is made on the ground that the assessee is carrying on business in the name of orders, the authorities must produce some prima facie evidence to support their finding. It is no doubt open to the Income-tax authorities to find that the transaction was a Benami, but there should be material for such a finding. Thus, it is for the authorities to show that the ostensible owner or beneficiary is not the true owner: Mohammad Nagi v. Commr. of Income Tax Punjab 1945-13 ITR 452 (Lah). The assessee in that case being a Muslim family the learned Judges held that it is more so in a Muslim family where the individual holds the property for himself and not for the family.

12. An identical question arising under clause (f) of sub-section (2) of Section 10 of the Bihar Sales Tax Act (Bihar Act VI of 1944) came to be considered by the Supreme Court in the case of Ragubar Mandal Harihar Mandal v. State of Bihar, 1958 SCJ 22 : (AIR 1957 SC 810). In that case the sales tax authorities of Bihar, completed the assessment without any material whatsoever under section 10(2)(b) of the Bihar Act which virtually corresponds to sub-section (3) of Section 23 of the Indian Income Tax Act. Their Lordships of the Supreme Court referred to the Madras case in Gunda Subbayya and their own previous decision in Dhakeswari Cotton Mills Case 1955 SCR 941 : ((S) AIR 1955 SC 65) as also the Lahore decision in Seth Gurumukh Singh's case 1944-12 ITR 393 : (AIR 1944 Lah 353 (2)) and held that the assessment having been based on no material cannot stand. Thus, it was observed that the assessing authority purporting to act under clause (b) of Sub-s. (2) of Section 10 of the Bihar Sales-Tax Act cannot assess the amount of tax due from the dealer more or less arbitrarily or without basing the assessment on any material whatsoever and on pure guess.

13. In a more recent case in Omer Saley Mahammad Sait v. Commissioner of Income Tax, Madras, AIR 1959 SC 1238 their Lordships very clearly laid down that the Income-tax Appellate Tribunal is a fact-finding Tribunal and if it arrives at its own conclusion of fact after due consideration of the evidence before it, the Supreme Court will not interfere. It is necessary, however, that every fact for and against the assessee must have been considered with due care and the Tribunal must have come to its finding in a manner which would clearly indicate what were the questions which arose for its determination and what were the evidence pro and contra in regard to each one of them and what were the findings reached in the evidence on record before it. The conclusions reached by the Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and if there are any circumstances which required to be explained by the assessee, the assessee should be given an opportunity of doing so. On no account whatever should the Tribunal base its findings on suspicion, conjectures or surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings even though on questions of fact will be liable to be set aside by this Court.

14. This being the clear position in law, it appears that the Income-tax authority had not given any opportunity to the assessee in the instant case to explain the information received by them from the Cold Storage authorities, nor did the Revenue had placed any prima facie evidence to support the benami transactions carried on in the names of the employees of the assessee. Accordingly, we are clearly of the opinion that the income-tax authorities had based their orders on no visible materials and if they had any, they had not given any opportunity to the assessee to explain the same. There is, however, an admission by the assessee that he had been depositing potatoes to the tune of six hundred maunds every year in the Government Cold Storage, although the figures supplied by the Manager, Cold Storage appear to be less. However, we take the figures as have been admitted by the assessee.

15. Applying the same rate that has been applied by the appellate Tribunal and not disputed by the assessee, the deposit with the Government Cold Storage every year would be the value of Rs. 11,500/-, which figure the Department is certainly entitled to take into account while completing the assessment.

16. In the result our answer to the question would be in the negative, that is, the Tribunal was not justified to hold the Storage at 2,600 maunds in the relevant accounting period, in view of the statement supplied by the authorities of the Government Cold Storage.

17. Hearing fee Rs. 200/-.

18. Misra, J.:— I agree.

CD/K.S.B

19. Answered in the negative.