PETITIONER:
INCOME-TAX OFFICER, LUCKNOW
Vs.
RESPONDENT:
M/S. S.B. SINGHAR SINGH & SONS & ANR.
DATE OF JUDGMENT17/08/1976
BENCH:
SARKARIA, RANJIT SINGH
KHANNA, HANS RAJ
SINGH, JASWANT
CITATION:
1976 AIR 2512 1977 SCR (1) 214
1976 SCC (4) 325
ACT
Constitution of India, 1950--Art. 226--High Court---if
could interfere with the appellate orders of Income Tax
Appellate Tribunal under Art. 226.
HEADNOTE
Since the assessee had not maintained complete and
regular accounts for the purpose of Excess Profits tax, the
Excess Profits Tax Officer assessed tax on the basis of
accounts of certain previous years chosen by the assessee as
his "standard period", pointing out that because of this
position it was not possible to make any adjustment for
variations in average capital. The Assistant Appellate
CommisSioner upheld the assessment order. In appeal to the
Appellate Tribunal one of the specific grounds taken by the
assessee was that the Excess Profits Tax Officer and the
Assistant Appellate Commissioner had erred in not allowing
proper standard profits in accordance with the standard
period subject to the adjustment on account of increase and
decrease of capital in the relevant chargeable accounting
period and that they were prepared to file computation of
average capital. Without discussing the ground relating to
the standard profits the Tribunal disposed of the appeals.
The assessee’s second application alleging that the ground
relating to the standard profits was not disposed of by it
was rejected by the Tribunal. In an application under s.
66(2) of the Income Tax Act before the High Court, the
assessee did not ask for a reference on this ground. But
during proceedings for preparation of statement of case, the
assessee’s application requesting the Tribunal to refer this
ground to the High Court was rejected by it. The assessee’s
petition for a writ of Mandamus requiring the Tribunal to
consider the ground relating to standard profits was allowed
by the High Court.
Allowing the Department’s appeal to this Court,
HELD: The High Court could not justifiably interfere, in
the exercise of its extraordinary jurisdiction under Art.
226 of the Constitution, with the appellate orders of the
Tribunal. The question as to whether the omission to record
a finding on Ground No. 1 by the Tribunal was due to the
failure of the appellant to urge that ground or due to a
lapse on the part of the Tribunal, which deserved rectifica-
tion, was a matter entirely for the authorities under the
statute to decide. [219 G]
Shivram Poddar v. Income-tax Officer (1964) 51, I.T.R.
823, 829 (,S.C.) applied.
In the instant case the High Court had assumed jurisdic-
tion on the assumPtion that a certain ground had been urged
before the Tribunal which had arbitrarily refused to consid-
er the same and record a finding thereon. This assumption,
stood thoroughly discounted by the concomitant circumstances
of the case including the dilatory and questionable conduct
of the assessee. This was not a fit case for the exercise
by the High Court of its’ special jurisdiction under Art.
226. [220 C]
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal No.1539 of 1971.
(From the Judgment and Order dated 5-8-1969 of the
Allahabad High Court in Special Appeal No. 58/65).
B.B. Ahuja and R.N. Sachthey, for the Appellant.
A.T.M. Sampath and Ram Lal, for Respondent No. 1.
215
The Judgment of the Court was delivered by
SARKARIA, J.-- This appeal on certificate is directed
against an appellate judgment, dated August 5, 1969, of a
Bench of the High Court of Allahabad. It arises as follows:
M/s. S.B. Singar Singh and Sons (hereinafter called the
assessee) were assessed to Excess Profits tax for the
chargeable accounting periods, ending March 31, 1945 and
March 31, 1946. under two assessment orders dated August
26, 1949. The previous years 193637 was chosen by the
assessee as his standard period." The profits of that year
were Rs. 38,703/-. After deducting the profits of the
standard year, the Excess Profits Tax Officer, assessed the
tax on the remaining amounts of profits. The Excess Profits
Tax thus assessed for the accounting years, was to the
tune of Rs. 1,06,181.5 and Rs. 48,978/-, respectively. In
his orders, the assessing Officer said that "for reasons
detailed in the earlier assessment orders no adjustments are
made for capital variations in the standard period and the
chargeable accounting period". These reasons as given in
the earlier assessment order, dated October 30, 1947, per-
taining to the chargeable accounting period ending March 31,
1944, were:
"As complete and regular accounts are not
maintained by the assessee, it is not possible to
make any adjustment for variations in average
capital which cannot be accurately ascertained".
Against the orders of assessment, the assessee
preferred two appeals on September 24, 1949 to the
Assistant Appellate Commissioner. By two separate
applications dated October 24, 1949, the assessee
took an additional ground of appeal which obvious-
ly he had not taken in the original memorandum of
appeal that the Excess Profits Tax Officer had
erred in not allowing adjustments on account of the
increase and decrease of capital in the relevant
chargeable accounting period. The assessee added
that he "was always prepared to file his computa-
tions of average capital". Dismissing the appeals
by his orders, dated November 24, 1949, the Assist-
ant Appellate Commissioner negatived the assessee’s
contention, in these terms:
"As in these years no regular accounts have
been maintained and it is not possible to make any
adjustment for variations in average capital which
cannot be exactly ascertained. No figures have been
shown to me, nor has any exact working been fur-
nished at this stage. The accounts are left in the
same manner as for the earlier years. Profits in
the major accounts had to be worked out by the
application of a rate to the turnover. I am, thus,
unable to allow this contention."
Aggrieved, the assessee carried appeals to the Income-
tax Appellate Tribunal. In the memoranda of appeals, one of
the specific grounds taken was, that "the Excess Profits Tax
Officer and the Assistant Appellate Commissioner had erred
in not allowing to the assessee proper standard profits in
accordance with the standard period subject to the adjust-
ment on account of the increase and decrease of capital in
the relevant chargeable accounting period." It was reiter-
ated that "the
216
appellant was always prepared to file his computation of
average capital."
This ground relating to standard profits was not dis-
cussed by the Tribunal and no finding was recorded thereon.
The Excess Profits Tax Appeals and other Income-tax appeals
filed by the assessee were heard together by the Tribunal
and disposed of by common orders dated February 24, 1951.
In the Income-tax appeals, some relief was granted, but in
the Excess Profits appeals, no relief was granted due to the
variation of the capital in the chargeable accounting period
of 1945-46 and 1946-47.
The assessee on July 27, 1951, made an application
under s. 35 of the Income-tax Act, 1922 for rectification of
its order to the Tribunal on grounds other than the one
regarding variation in the standard profits due to increase
and decrease of the capital. This application was dismissed
on August 27, 1951 by the Tribunal on the ground that there
was no mistake apparent on the record. No grievance was made
in this application that the Tribunal did not consider and
decide the ground relating to adjustment of standard profits
according to variation in capital during the relevant peri-
od.
On March 11, 1954, the assessee made a representation to
the Central Board of Revenue praying for reopening of the
assessments. In this representation, also, he did not take
up Ground No. 1. Subsequently however on May 24, 1954 he
wrote a letter to the Income-tax Officer saying that he was
sorry to omit ’one important point’ i.e., Ground No. 1, from
his representation to the Board, and that the Income-tax
Officer should "supplement the same. while making (his)
report to the higher authorities.’ His representation dated
March 11, 1954 and the petition dated May 24, 1954, both
were rejected and the Commissioner communicated those rejec-
tions to the assessee by a letter dated May 25, 1955, saying
that he did not see any justification for re-opening the
assessments which had become final and closed.
Thereafter on April 2, 1956, the assessee made a second
application to the Tribunal (which in substance was one for
review of its orders, dated .February 24, 1951), contending
that Ground No. 1 raised in his two appeals, relating to the
standard profits of the two chargeable accounting periods
and pointing out the failure of lower authorities to
make necessary adjustments in such profits according to s. 6
of the Excess Profits Tax Act (hereinafter referred to as
Ground No. 1 ) was not disposed of by the Tribunal. It was
prayed that the appeals relating to excess profits tax
matters which should be deemed to be still pending owing to
the non-decision of Ground No. 1 be disposed of after hear-
ing the assessee. The Tribunal rejected this contention with
the remark that the appeals were decided as early as 24th
February, 1951 and it is now futile to contend that the
matter was pending when the Tribunal had already passed
orders and the orders were served on the assessee." The
Tribunal further observed that the absence of a reference
"to the contention of the assessee regarding the standard
profits and the necessary adjustments would not render the
Tribunal’s order a nullity, nor would it mean that the
Tribunal had partially disposed of the appeals and some
residue is pending". In the alternative, it held that even
on the assumption that
217
Ground No. 1 was argued and was not disposed of by the
Tribunal, the proper remedy for the assessee was either to
apply for rectification under s. 35 or to move an applica-
tion under s. 66. The Tribunal refused to treat this appli-
cation as one for rectification because, in its opinion,
such an application would be much too time-barred. In the
result, the Tribunal dismissed that application by an order
dated June 9, 1956.
The assessee had filed a reference application, also
under s. 66(1) the Income-tax Act in these cases. That
application was dismissed by the Tribunal on August 28,
1951. The assessee then made applications under s. 66(2) of
the Income-tax Act before the High Court requesting for
reference on certain question of law arising out of the
order, dated February 24, 1951, of the Tribunal. In these
applications, alsO, he did not ask for reference on a
question relating to Ground No. 1 (regarding adjustment of
standard profits). These applications were allowed by the
High Court by an order, dated April 12, 1956, whereby the
Tribunal was directed to state a case and refer for decision
certain questions of law to the High Court.
Thereafter, during the proceedings before the Tribunal
for preparation of the statement of the case, the assessee
moved an application, dated July 23, 1957, requesting it to
refer the question of adjustment of standard profits on
account of increase and decrease in the capital in the
relevant periods to the High Court, in addition to the
questions of law directed by the High Court to be referred
to it. This application was rejected for the reason that
the question had not been raised in the reference applica-
tion, nor did it arise out of the appellate orders of the
Tribunal.
On July 24, 1957, the Tribunal stated the case and
made a reference on the other question to the High Court in
compliance with that Court’s order, dated April 12, 1956.
On November 4, 1968, the assessee filed a writ petition
in the High Court praying for a writ of Mandamus requiring
the Tribunal to consider his Ground No. 1 mentioned in the
Excess Profits Tax Appeals Nos. 651 and 660 of 1949 and 1950
and his subsequent application dated April 2, 1956.
The writ petition was heard by a learned single Judge of the
High Court who held that while disposing of the appeals, it
was the duty of the Tribunal to record a finding on Ground
No. 1 which had been specifically raised in the memoranda of
appeals before it, that the Tribunal therefore, could and
should have reviewed its orders and rectified its mistake in
the exercise of its inherent powers when that mistake was
brought to its notice by the assessee by his application
dated April 2, 1956; that s. 35 of the Income-tax Act which
provides a period of four years’ limitation for seeking
rectification of mistakes in assessment orders, was not
applicable to assessment orders made by the. Tribunal under
the Excess Profits Act; that consequently, the Tribunal was
in error in refusing to treat the assessee’s application,
dated April 2, 1956,.as one for rectification of a mistake
of the Tribunal on
16--1003 8C1/76
218
the ground of limitation. In the result, the learned Judge
set aside the Tribunal’s order, dated June 9, 1956, and
directed the Tribunal to dispose of the assessee’s applica-
tion dated April, 2, 1956, afresh in accordance with law.
The Revenue filed a Special Appeal against the order of
the learned single Judge before the Appellate Bench of the
High Court. The Bench dismissed the appeal and affirmed the
findings and orders of the learned single Judge.
Hence this appeal.
Mr. Ahuja, appearing for the appellant, con-
tends that the writ petition of the assessee should
have been thrown out by the High Court on the
preliminary ground that he had not come with clean
hands. In this connection Counsel has pointed out
several circumstances which according to him, belie
the main plea of the assessee that the Tribunal had
not considered his Ground No. 1 although the same
was urged before it at the hearing of the appeals.
It is stressed that .Ground No. 1 was not original-
ly taken by him in the grounds of appeal filed
before the Assistant Appellate Commissioner, al-
though subsequently in the Additional grounds filed
about one month after the institution of the ap-
peals, he, as an after-thought, did introduce
"Ground No. 1", that he did not make any grievance
whatever on the score of Ground No. 1 in his appli-
cation for rectification of the Tribunal’s orders,
filed on July 27, 1951; that for more than 5 years
after the announcement of the appellate orders of
the Tribunal, he made no application to the Tribu-
nal for review and rectification of its appellate
orders in relation to Ground No. 1; that the
assessee delayed the making of the application,
dated April 2, 1956 presumably with a view to
ensure that at the time of its presentation, none
of the members of the Tribunal who had originally
decided the assessee’s appeals, was there to hear
the application; that even in this inordinately
delayed application, review and rectification was
not asked for in a straight forward manner but it
was disguised as an application for decision of the
appeals which on account of non-decision of Ground
No. 1 were alleged to be still pending; that the
writ petition was filed after an abnormal delay of
ten years; that a perusal of the assessment orders
made by the Excess Profits Tax Officer and the
Assistant Appellate Commissioner, and even the
memoranda of appeals filed before the Tribunal
shows that at no stage the assessee furnished
complete accounts or even a statement showing
variation in the capital during the relevant peri-
ods. It is emphasised that all that the assessee
said in the memoranda of appeals was that he was
"prepared" to furnish a statement of such computa-
tion and accounts. It is further pointed out that
no certificate of Shri Surinderjit Singh, Advocate
who is supposed to have argued the appeals before
the Tribunal, was filed. It is maintained that the
only reasonable inference from these circumstances
was that Ground No. 1 was not pressed or argued
at all by Shri Surinderjit Singh before the Tribu-
nal who consequently, did not think it necessary to
deal with it.
Mr. Sampath, appearing for the assessee-respondent has
not been able to deny the existence of the circumstances
pointed out by Mr.
219
Ahuja. His argument is that in the affidavit accompanying
the writ petition, the deponent had sworn that Ground No. 1
was, in fact, argued before the Tribunal and that this sworn
statement had been believed by the High Court. This being
the case, it is argued, this Court should not re-open the
question as to whether Ground No. 1 was, in fact, argued or
not before the Tribunal. According to .Mr. Sampath, over 5
years’ delay in making the application dated April 2, 1956,
partly stood explained by the circumstance that he had made
a representation to the Board supplemented by the assessee’s
letter of May 24, 1954 to the Income-tax Officer, seeking
relief on the basis of Ground No. 1.
We find a good deal of force in the submissions made by
Mr. Ahuja. The sheet-anchor of the assessee’s case in the
writ petition was that at the hearing of the appeals, his
Counsel had argued Ground No. 1 set out in the memoranda of
appeals, but the Tribunal did not consider it at all. The
question whether or not this Ground had been argued, was one
of fact. The tell-tale circumstances enumerated by Mr.
Ahuja, unerringly lead to the conclusion that, in all proba-
bility, Ground No. 1 was not argued by the Counsel, possibly
because he was aware that in the absence of a complete
statement of accounts showing variations in the capital
during the relevant periods, a contention rounded on Ground
No. 1 would be an exercise in futility. It is noteworthy
that at no stage before the Revenue authorities or the
Tribunal, did the assessee categorically say that he had
actually produced a complete statement of accounts and
computation of the increase and decrease in capital. All
that he said in his Additional Grounds of appeal before the
’Assistant Appellate Commissioner and the Appellate Tribunal
in Ground No. 1, was that he was prepared to file such a
statement. Shri Surinderjit Singh, Counsel who argued the
appeals, has not thought it fit to certify that Ground No. 1
was actually argued, and not abandoned, by him. The affida-
vit of another person who could not be the best informed
person on this point, was of little value and could hardly
displace the irresistible inference arising from the sur-
rounding circumstances and the conduct of the assessee,
namely, that his Counsel had not argued on Ground No. 1, at
all and had thus given it up.
In the light of what has been observed above, we are of
opinion that the High Court could not justifiably interfere
in the exercise of its extraordinary jurisdiction under
Article 226 of the Constitution with the appellate orders of
the Tribunal. In any case, the question as to whether the
omission to record a finding on Ground No. I by the Tribunal
was due to the failure of the appellant to urge that ground
or due to a lapse on the part of the Tribunal, which de-
served rectification, was a .matter entirely for the author-
ities under those Taxation statutes. It will be well to
recall once more what this Court speaking through J.C. Shah
J. (as he then was,) had stressed in Shivram Poddar v.
Income-tax Officer(1).
"Resort to the High Court in exercise of its extraordi-
nary jurisdiction conferred or recognised by the Constitu-
tion in
(1) [1964] 51 I.T.R. 823, 829 (S.C.).
220
matters relating to assessment, levy and collection of
income-tax may be permitted only when questions of infringe-
ment of fundamental rights arise, or where on undisputed
facts the taxing authorities are shown to have assumed
jurisdiction which they do not possess. In attempting to
bypass the provisions of the Income-tax Act by inviting the
High Court to decide questions which are primarily within
the jurisdiction of the revenue authorities, the party
approaching the court has often to ask the Court to make
assumptions of facts which remain to be investigated by the
revenue authorities."
In the instant case, the High Court had assumed juris-
diction on the assumption that a certain ground had been
urged before the Income-tax Appellate Tribunal which had
arbitrarily refused to consider the same and record a find-
ing thereon. This assumption, in our opinion, stood thor-
oughly discounted by the concomitant circumstances of the
ease, including the dilatory and questionable conduct of the
assessee. This was therefore not a fit ease for the exer-
cise of its special jurisdiction under Article 226 by the
High Court.
Accordingly, on this short ground we allow the appeal
and dismiss the writ petition. As the appeal succeeds on a
preliminary ground, we do not feel it necessary to express
any opinion on the question as to whether or not the Appel-
late Tribunal under the Excess Profits Tax Act has statutory
or inherent power to review and rectify mistakes in its
orders. The assessee shall pay one set of the costs of the
appellant.
P.B.R. Appeal
allowed.
221