JUDGMENT

The judgment of the court was delivery by

MANCHANDA J. - This is a case stated u/s 66 (2) of the Indian Income Tax Act, 1922 (hereinafter referred to as the Act). The question of law referred is :

"Whether, on the facts and in the circumstances of the case, the income from the quarries of Rs. 20,360 was includible in the assessment of the assessee under the provisions of section 16 (3) (iii) of the Act ?"

The material facts are these : The relevant assessment year is 1948-49, the previous year being the financial year 1947-48. By a registered lease deed dated 16th April, 1947, the assessee made a lease of certain quarries in favour of his wife in perpetuity. Paragraph 3 of the deed reads :

"That the lessee is highly educated and accomplished daughter of Ruling Chief of Alas State in Kathiawar, famous for its industry and business instinct.

In consideration of the royalty and lessees convenient hereafter reserved and contained the lessor hereby transfers to the lessee the quarries of stone, ballasts, kankar morum and sand, etc., described in the schedule A hereto mentioned with the said quarries subject to the restrictions and conditions as to the exercise and enjoyment of the said liabilities, powers and privileges which are specified hereafter."

In clause 8 of the covenant is mentioned royalty which the lessee was to pay to the assessee. This reads :

"8. During the term of this demise, the lessee shall pay a royalty at the rate of Rs. 4,000, four thousand only, annually in two equal installments, the first installment to be due on the 1st June, and the second installment on the 1st December, every year whether the lessee quarries or carries on any operations or not."

Paragraph 9 of the convenant provides :

"9. The lessee will not be entitled to any remission in the royalty hereby reserved or revision of the term of this lease by reason of any quarry or quarries hereby demised becoming exhausted or not being worked for any reason."

In schedule A the names of the 46 villages in which the quarries are situated and which were being leased out under this indenture are set out. There was no mention in this lease deed, which was duly registered, of any other consideration which might have necessitated the execution of the lease. It is not at all clear as to at what stage of the assessment proceedings the assessee set up the case for the first time that, in addition to the royalty mentioned under the lease deed, there was an earlier agreement entered into, two years or so, before the marriage of the lessee to the assessee, whereunder the assessee is said to have promised to give the lessee Rs. 500 per mensem in cash and transfer certain quarries to her. It would seem that this case was put up after the Income Tax Officer had made the assessment and included the sum of Rs. 20,360 and only when the matter was remained by the tribunal to determine whether the transaction of the lease of quarries was a genuine transaction or not. We will however revert to this aspect a little later. After the remand, the assessment order, which was passed on the 5th March, 1951, shows that no real attempt was made to establish that there was in fact any earlier contract between the assessee and his future wife or her father to provide her with Rs. 500 in cash and the transfer of certain quarries. Only some letters at that stage appear to have been produced. There are letters exchanged between the secretary of the assessee and the Dewan of Bara Raj, during the period 2nd June, 1945, and 11th June, 1945. At best, they go to show that some kind of assurance was given by the secretary of the assessee to the Dewan of Dewan of Bara Raj; but certainly no enforceable contract came into existence between the assessee and the lessee or anyone authorised on her behalf to enter into any such contract.

The order of the Income Tax Officer also shows that no one on behalf of the assessee after the remand went into the witness box to give any evidence to prove these letter