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Krishna Mining Company Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberI.T.C. No. 20 of 1969
Judge
Reported in[1972]83ITR868(AP)
ActsIncome Tax Act, 1922 - Sections 66(1) and 66(2)
AppellantKrishna Mining Company
RespondentCommissioner of Income-tax
Appellant AdvocateUltam Reddy and ;K. Venkataraman Reddy, Advs.
Respondent AdvocateP. Rama Rao, Adv.
Excerpt:
......commissioner, the assessee as well as the department preferred appeals to the income-tax appellate tribunal. the request of the petitioner to state a case on this question was rejected by the tribunal as no regular application in the prescribed form accompanied by prescribed fee was filed, as well as on merits as it felt that the question was one of fact based on ample material. if on any application being made under sub-section (1) the appellate tribunal refuses to state the case on the ground that no question of law arises, the assessee or the commissioner, as the case may be, may, within six months from the date on which he is served with notice of the refusal apply to the high court, ana the high court may, if it is not satisfied of the correctness of the decision of the..........indian income-tax act (11 of 1922), (hereinafter called ' the act'), is to require the income-tax appellate tribunal, hyderabad beanch, to state a case for our opinion on the following question :' whether the tribunal was right in law in upholding the addition of rs. 61,350 based on suspicion, conjecture and surmise '2. a preliminary objection was raised by sri p. ramarao, the learned standing counsel for the income-tax department, for the maintainability of this application on the ground that no reference application under section 66 was filed by the petitioner before the tribunal.3. sri uttam redd), the learned counsel for the petitioner, contended that the preliminary objection is not sustainable as the assessee or the commissioner of income-tax is entitled to prefer an application.....
Judgment:

Kondaiah, J.

1. This application by the petitioner, under Section 66(2) of the Indian Income-tax Act (11 of 1922), (hereinafter called ' the Act'), is to require the Income-tax Appellate Tribunal, Hyderabad Beanch, to state a case for our opinion on the following question :

' Whether the Tribunal was right in law in upholding the addition of Rs. 61,350 based on suspicion, conjecture and surmise '

2. A preliminary objection was raised by Sri P. Ramarao, the learned standing counsel for the income-tax department, for the maintainability of this application on the ground that no reference application under Section 66 was filed by the petitioner before the Tribunal.

3. Sri Uttam Redd), the learned counsel for the petitioner, contended that the preliminary objection is not sustainable as the assessee or the Commissioner of Income-tax is entitled to prefer an application under Section 66 if any application has been filed by either of the parties before the Tribunal under Section 66(1) of the Act.

4. In order to appreciate the respective contentions relating to the maintainability or otherwise of this reference application, it is relevant and necessary to state briefly the material facts. Messrs. Krishna Mining Co., Gudur (hereinafter referred to as ' the assessee ') is a firm carrying onmica business at Gudur. For the assessment year 1958-59 corresponding to the accounting year ending with March 31, 1958, the Income-tax Officer, rejecting the book results, made an addition of Rs. 1,20,000 towards the deficit yield of cut mica, to the income returned by the assessee. He sustained an addition of Rs. 60,000 towards unexplained cash credits and a sum of Rs. 1,350 towards the interest paid thereon as income from 'other sources '. On appeal, the Appellate Assistant Commissioner sustained only the addition of Rs. 1,20,000 and deleted the further addition of Rs. 61,350 made under the head 'other sources'. Aggrieved by the decision of the Appellate Assistant .Commissioner, the assessee as well as the department preferred appeals to the Income-tax Appellate Tribunal. The Appellate Tribunal, on a consideration of the material on record, sustained the addition of Rs. 60,000 towards the low yield in cut mica and gave relief to the assessee in respect of -the other additions. The appeal preferred by the department was rejected. Aggrieved by the decision of the Appellate Tribunal, the Commissioner of Income-tax filed R.A. Nos. ,1498 and 1499/1965-66 1499/1965-66 under Section 66(1) before the Appellate Tribunal to state a case for the opinion of this court on the two questions raised by him. The assessee did riot file any reference application under Section 66(1) in so far as the addition of Rs. 60,000 towards the deficit yield of cut mica sustained by the Tribunal is concerned. In the reply filed by the assessee to the applications under Section 66(1) filed by the Commissioner of Income-tax, the question whether the Tribunal was right in upholding the addition of Rs. 61,350 based on suspicion, conjecture and surmise, was sought to be referred for the opinion of this court. The Tribunal has stated a case on one question relating to the addition of Rs. 60,000 towards the cash credits and the same was ultimately numbered as R.C. No. 3/68 Commissioner of Income-tax v. Krishna Mining Co. : [1972]83ITR860(AP) and has been answered by this court in favour of the department. The request of the petitioner to state a case on this question was rejected by the Tribunal as no regular application in the prescribed form accompanied by prescribed fee was filed, as well as on merits as it felt that the question was one of fact based on ample material. Hence, the present application.

5. The short question that falls for decision is whether, on the facts and in the circumstances, the assessee's application requiring the Tribunal to state a case for the opinion of this court on the question not raised before it under Section 66(1) of the Act, is or is not maintainable.

6. Section 66(1) provides for a reference application to be filed by the assessee or the Commissioner whoever is aggrieved by the order of the Income-tax Appellate Tribunal passed under Sub-section (4) of Section 33 in the prescribed form within sixty days of the date of the service, requiring the Tribunal to refer to the High Court any question of law arising out of its order. The aggrieved party has to request the Tribunal, placing the question sought to be answered by the High Court, to refer it, and the application must be signed by the applicant or his authorised agent. The Tribunal has a statutory duty and obligation to state the case for the opinion of the High Court on the questions framed by it if, in its opinion, those questions do arise out of its order passed under Section 33(4) of the Act. No discretion or choice is left to the Tribunal to refuse to draw up a statement of the case and refer the questions to the High Court if the questions of law really arise out of its order. If the Tribunal refuses to state a case on the ground that no question of law does arise out of its order, the provisions of Sub-section (2) of Section 66 would come into play. Section 66 reads:

' If on any application being made under Sub-section (1) the Appellate Tribunal refuses to state the case on the ground that no question of law arises, the assessee or the Commissioner, as the case may be, may, within six months from the date on which he is served with notice of the refusal apply to the High Court, ana the High Court may, if it is not satisfied of the correctness of the decision of the Appellate Tribunal, require the Appellate Tribunal to state the case and to refer it, and on receipt of any such requisition the Appellate Tribunal shall state the case and refer it accordingly. '

7. Sri Uttam Reddy seeks to derive support for his contention that the assessee or the Commissioner will be entitled to prefer an application under Section 66(2) if an application has been filed under Section 66(1) by either of them, from the use of the expression ' any application ' in the beginning of Sub-section (2) of Section 66. This submission of the assessee does not appear to us to be well-founded. The expression ' any application ' used in the beginning of Sub-section (2) of Section 66 must be read in the context and set up in which it was used. It must also be construed reasonably and fairly, The provisions of Sub-section (2) to Section 66 are attracted only when the Appellate Tribunal refused to state the case on the ground that no question of law arises out of its order passed under Section 33(4). Such a refusal to refer the questions for the opinion of the High Court must be on the application made by the assessee or the Commissioner under Sub-section (1) of Section 66. The assessee or the Commissioner can prefer an application under Section 66 if they are aggrieved by the order of the Tribunal under Section 33(4) giving rise to questions of law. On questions of fact, the Tribunal cannot be compelled to state a case at the instance of the assessee or the Commissioner. The jurisdiction of the Appellate Tribunal as well as the High Court relating to reference applications has been circumscribed and regulated by the provisions of Section 66. The jurisdiction being of advisory nature, this court cannot entertain any application preferred by the assessee or the Commissioner of Income-tax except as provided under Section 66. Where the application under Section 66(1) either by the assessee or the Commissioner of Income-tax is ordered by the Tribunal agreeing to state a case for the opinion of the High Court on the questions specified therein, the provisions of Sub-section (2) are not attracted at all. Where the Income-tax Appellate Tribunal refused to state the case for the opinion of the High Court in respect of some questions on the ground that they are not questions of law or such questions of law do not arise out of its order and agrees to refer only the other questions, the aggrieved applicant may invoke the jurisdiction of this court and file an application under Section 66(2) in so far as those questions in respect of which the Tribunal refused to state the case, are concerned. On a combined reading of the provisions of Sub-sections (1) and (2) of Section 66, we are of the opinion that it is only the assessee or the Commissioner of Income-tax, whoever has preferred an application under Section 66(1) and was aggrieved by the refusal of the Income-tax Appellate Tribunal to state a case for the opinion of the High Court on the question of law that arises out of its order, but not others who did not prefer any application under Section 66(1), that can approach and invoke the jurisdiction of this court under Section 66(2). Such an interpretation gains strength from the use of the expression ' the assessee or the Commissioner, as the case may be ' in Section 66. This court, under Section 66, is empowered in appropriate cases where the requisite conditions specified therein are satisfied, to direct the Income-tax Appellate Tribunal to state the case. The direction is in the nature of command which has to be obeyed by the Tribunal, The jurisdiction of this court under Section 66(2) is, therefore, in the nature of a mandamus which can be issued only if the applicant satisfies this court that the statutory demand or request was made by him and the Tribunal, which was bound in law to state the case, has refused to do so. The interpretation sought to be placed by Sri Uttam Reddy is not permissible on the language of Section 66(2) read with Section 66(1). That apart, if such construction is acceded to, it would amount to reading something into the section which is not provided for by the statute. The party who did not feel aggrieved or was not diligent enough to take steps and failed to prefer an application in proper form within the period of limitation on payment of the requisite fee would be conferred with this right to approach the High Court at a subsequent stage. The heart of the matter is that it is only such of the persons who really made a demand for a reference to be made to the High Court under Section 66(1) and got a refusal from the Income-tax Appellate Tribunal, but none else, that can approach the High Court and invoke its jurisdiction under Section 66(2) to compel the Tribunal to do what it failed to perform according to the statutory provisions of Sub-section (1) to Section 66. The assessee or the Commissioner, as the case may be, must establish a statutory right under Section 66(2) to compel the Tribunal to perform its statutory duty which it failed to do at the stage of Section 66(1).

8. This view of ours derives support from the following observations of the Supreme Court in Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd., : [1961]42ITR589(SC) wherein the scope and application of the provisions of Sub-sections (1) and (2) of Section 66 of the Act fell for consideration :

' Section 66(2) confers on the court a power to direct a reference only where the Tribunal was under a duty to refer under Section 66(1), and it is, therefore, subject to the same limitations as Section 66(1). That has been held by this court in New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax, : [1959]37ITR11(SC) and Zoraster & Co. v. Commissioner of Income-tax., : [1960]40ITR552(SC) Moreover, the power of the court to issue direction to the Tribunal under Section 66(2) is, as has often been pointed out, in the nature of a mandamus and it is well-settled that no mandamus will be issued unless the applicant had made a distinct demand on the appropriate authorities for the very reliefs which he seeks to enforce by mandamus and that had been refused. Thus, the power of the court to direct a reference under Section 66(2) is subject to two limitations--the question must be one which the Tribunal was bound to refer under Section 66(1) and the applicant must have required the Tribunal to refer it. R(T) is the form prescribed under rule 22A for an application under Section 66(1), and that shows that the applicant must set out the questions which he desires the Tribunal to refer and that further, those questions must arise out of the order of the Tribunal. It is, therefore, clear that under Section 66(2), the court cannot direct the Tribunal to refer a question unless it is one which arises out of the order of the Tribunal and was specified by the applicant in his application under Section 66(1), Now, if we are to hold that the court can allow a new question to be raised on the reference, that would in effect give the applicant a right which is denied to him under Section 66(1) and (2), and enlarge the jurisdiction of the court so as to assimilate it to that of an ordinary civil court of appeal.'

9. We shall now turn to the decided cases cited by Sri Uttam Reddy in support of his contention. The first of the decisions is that of the Bombay High Court in Girdhardas & Co. Ltd. v. Commissioner of Income-tax, [1957] 31 I.T.R. 82, 91 (Bom.) wherein Chagla C.J., speaking for the court, observed thus:

'It is obvious that there may be cases where a winning party would be seriously prejudiced if it was precluded from raising a question of law merely because it had not made an application for a reference and the reference was asked for at the instance of the losing party. The winning party can never apply for a reference. But it may happen that if the court takes a particular view on the reference asked for by the losing party, certain other questions of law may arise which may have to be decided in the interest of the winning party. Therefore, it would not be proper to shut out a party before the Tribunal from raising a question of law which clearly arises from the) order of the Tribunal merely because it so happens that it has not made an application for a reference,'

10. The aforesaid view of the Bombay High Court followed by the Gujarat High Court in Smt. Dirajben R. Amin v. Commissioner of Income-tax, [1968] 70 I.T.R. 194 (Guj.) and by the Rajasthan High Court in Educational and Civil List Reserve Fund No. 1 v. Commissioner of Income-tax, [1964] 51 I.T.R. 112 (Raj.) is no longer good law in view of the authoritative pronouncement of the Supreme Court in the case of Scindia Steam Navigation Co. Ltd., : [1961]42ITR589(SC) . That apart, we respectfully agree to disagree with the opinion expressed by the learned Chief Justice Chagla as such an interpretation, in our considered opinion, is not warranted by the provisions of Sub-sections (1) and (2) of Section 66. We prefer to agree with the conclusion arrived at by the Madhya Pradesh High Court in Commissioner of Income-tax v. Dr. Fida Hussain G. Abbasi, [1969] 71 I.T.R. 314 (M.P.) and by the Madras High Court in Commissioner of Income-tax v. K. Rathnam Nadar, [1969] 71 I.T.R. 433 (Mad.).

11. We are not impressed with the submission of Sri Uttam Reddy that the present application must be entertained to obviate the prejudice caused to his client by the reference on the question relating to the addition of the unexplained cash credits of Rs. 60,000 appearing in the account of Arjundas Pokardas, made by the Tribunal at the instance of the Commissioner of Income-tax and aiiwered by this court in R.C. No. 3/1968 in favour of the department. We are not concerned in this application with the result of the R.C. No, 3/1968, nor is it material or relevant for the decisions of the points raised in this petition. The assessee could have filed a regular independent reference application under Section 66(1) in respect of the present question if it was really aggrieved by the decision of the Tribunal. In the circumstances, it has to be inferred that the assessee was satisfied with the addition of Rs. 61,350 sustained by the Tribunal towards the deficit yield of cut mica. If the petitioner feels aggrieved or prejudiced by the opinion expressed by this court on the question raised in R.C. No. 3/1968, Commissioner of Income-tax v. Krishna Mining Co. : [1972]83ITR860(AP) it is the petitioner but none else that should be blamedfor the same as it failed to avail the statutory remedy provided under Section 66(1).

12. For all these reasons, we must uphold the preliminary objection raisedby the learned standing counsel for the revenue that this application bythe assessee under Section 66(2) of the Act without preferring an application under Section 66(1) and obtaining a refusal thereon, is notmaintainable.

13. In any event, on a perusal of the orders of the Income-tax Appellate Tribunal, we are satisfied that no case has been made out even on merits by the assessee to direct the Income-tax Appellate Tribunal to state a case on the question specified in the application. On a consideration of the relevant entries in the registers, records and accounts maintained by the assessee and the book results disclosed, the Income-tax Appellate Tribunal has found that an estimate was called for and it estimated the deficit yield of cut mica on the basis of the data and figures considered and explained in detail in the order of the Tribunal. Whether an estimate of the low yield of cut mica is justified and whether the quantum of the estimate is reasonable or not, are questions of fact. The finding of the Tribunal estimating the deficit yield of cut mica at Rs. 61,350 is based on ample material and no question of law does arise out of the order of the Tribunal. Judged from any angle, this application merits rejection and is hereby dismissed with costs. Advocate's fee is fixed at Rs. 150.


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