1. The assesses is a textile Mill situated in Bhavnagar and in the assessment years 1943-44 & 1944-45 it effected sales of the goods manufactured by it, and the Question that arose for the consideration of the Income Tax Tribunal was -- whether the sale proceeds had been received in Bhavnagar or in the taxable territories.
2. While this matter was pending before the Tribunal, this Court gave its judgment' in --'Kirloskar Bros. Ltd. v. Commissioner of Income-tax' AIR 1952 Bom 305 (A), and the judgment was delivered on 17-9-1951. In that case we pointed out that if sale proceeds were remitted by cheque to Bhavnagar, then the receipt of the cheque in Bhavnagar constituted the first receipt and therefore the amount so received was not liable to tax under Section 4 (1) (a), Income-tax Act.
In that case it was also sought to be argued by Mr. Joshi that even though cheques may be received by post the assessee may constitute the post office its agent and if the cheques were posted in the taxable territories then the receipt would be in the taxable territories and not in an Indian State.
On the facts before us in Kirloskar's case we came to the conclusion that there was no request, express or implied, by the assessee to the merchant, or in that case to Government, to remit the money by cheque, and therefore the post office was not constituted the agent of the assessee. We therefore rejected the contention put forward by Mr. Joshi in that case.
The matter went to the Supreme Court and the Supreme Court gave its Judgment in a sister case on 19-4-1954 -- See 'Commr. of Income-tax, Bombay South, Bombay v. Ogale Glass Works Ltd., Ogale Wadi' : 25ITR259(SC) .
The Supreme Court upheld our view with regard to the receipt by cheque, but it took the view on the facts of Kirloskar's case and Ogale'a case that inasmuch as the assessee had asked the Government to remit moneys to the Indian State an inference must be drawn that there was an implied request by the assessee to send those moneys by post and therefore the post office was constituted the agent of the assessee and the receipt was not in the Indian State but in the taxable territories.
3. The question that has been submitted to us by the Tribunal is whether the receipt of the cheque in Bhavnagar amounted to receipt of sale proceeds in Bhavnagar. This question overlooks the important aspect which was dealt with both by us in Kirloskar's case and also by the Supreme Court. Assuming the cheques, were received in Bhavnagar, the question still remains as to whether if the cheques were received by post the post office was constituted the agent of the asses-see or not.
The mere receipt of cheques by post in Bhavnagar is not conclusive of the question raised by the Tribunal. Unless we are in a position to say that the cheques were sent to Bhavnagar by post without there being a request, express or implied, by the assessee, the mere receipt of the cheque in Bhavnagar would not constitute the receipt ot sale proceeds in Bhavnagar. When we look at the statement of the case there is BO reference at all to this aspect of the case.
Mr. Kolah says that it is entirely the fault of the Department that this aspect of the case has not been referred to. He points out that even in Kirloskar's case Mr. Joshi had raised the question of the post office being constituted the agent of the assessee and therefore the Department should have led such evidence as was within their disposal for establishing that the post office was made the agent of the assessee.
Further, when the statement of the case waa prepared, the decision of the Supreme Court had already been given, and Mr. Kolah says that evea at that stage the necessary facts should have been inserted in the statement of the case and the Department should have made the necessary request for that purpose to the Tribunal.
It has also been pointed out that the finding of the Tribunal that the cheques were received in Bhavnagar is not based upon any evidence but upon presumption because in para 6 of the statement of the case the Tribunal says :
'There is no evidence that the Cheques from Government were received in Bhavnagar. It is not the Department's case that the assessee company has a registered office elsewhere. The presumption is that the letters containing the cheques were addressed to the assessee company at Bhavnagar. We therefore, hold that the cheques were received from Government at Bhavnagar and that the money was also received So Bhavnagar'.
Mr. Kolah says that if this finding is based on a presumption, it is difficult to see how there can be any further investigation with regard to the question as to whether the cheques were received by post, whether they were received by hand, and if received by post whether the post office was constituted the agent of the assessee or not.
It is also rightly, urged by Mr. Kolah that even after the statement of the case was submitted it was open to the Department to take out a notice of motion for requiring fresh facts to be stated by the Tribunal. The Department has failed to do so and Mr. Kolah says it is grossly unfair to the assessee to ask for a supplementary statement of the case at this stage, when years have expired since the transactions were entered into and all the records may not be extant.
While appreciating the contention of Mr, Kolah we cannot overlook the fact that if tax is legitimately due to the revenue, the revenue should not be deprived of that tax even though the Department may not have been as vigilant in prosecuting its claim as we should have desired. We are dealing here with a corporation which presumably preserves all its records from which it should be very easy to determine as to what the exact position was with regard to the receipt of those sale proceeds in Bhavnagar.
Mr. Joshi says that the burden is upon the Department to establish that the cheques which! were received by post were received at the request, express or implied, of the assessee, and therefore the post office was the agent of the assessee. and he says that he would be in a position to establish this by agreements entered into between the assessee and the Supply Department which was one of the customers of the Mills, and also between private merchants who also purchased goods from the Mills. He also says that there may be correspondence between the Supply Department and the assessee which he may be able to produce and place before the Tribunal.
4. All that we can do is to express our displeasure at the manner in which this matter hasbeen prosecuted by the Department and to directthat whatever the result of the reference may bethe Commissioner must pay the costs of the reference. But we cannot shut out the necessary inquiry which even from our own point of view isnecessary to be made in order that we shouldsatisfactorily answer the question raised in thisreference.
It must not be forgotten that under Section 66 (4), Income-tax Act we have a right indepen-dently of the conduct of the parties to direct the Tribunal to state further facts so that we can properly exercise our advisory jurisdiction. Therefore, the view that we take on this reference U that for our own satisfaction we want a supplementary statement of the case.
5. We will therefore direct that a supplementary statement of the case should be submitted by the Tribunal on the following points. On the finding of the Tribunal that all the cheques werd received in Bhavnagar, the Tribunal to find what portion of these cheques were received by post, and with regard to the cheques received by post, whether there was any request by the assessee, express or implied, that the amounts which are the subject-matter of those cheques should be remitted to Bhavnagar by post.
Mr. Joshi concedes that to the extent that the cheques were not received by post but by hand, the receipt will be for the purposes of tax at Bhavnagar.
6. Order accordingly.