M. C. DESAI C.J. - The following question has been referred to this court by the Income-tax Appellate Tribunal, Allahabad Bench, at the assessees instance under section 66(1) of the Income-tax Act :
'Whether on a proper construction of rule 27 of the Appellate Tribunal Rules, 1946, the assessee respondent having not appealed against the order of the Appellates appeal before the Tribunal, that the entire profit arising out of the sale of land was not liable to assessmen ?'
The facts as given in the statement of the case by the Tribunal are these : The assessee purchased certain land which was subsequently acquired by the State Government on behalf of the Development Board, Kanpur, for Rs. 10,000 and immediately the Development Board gave a part of it to him on lease for 999 years on a nominal rent after receiving the premium of Rs. 10,000. He was permitted to sell the land to anybody as a freehold property and accordingly he sold a major part of it during the accounting year for Rs. 1,26,870. During his assessment two questions arose, one whether the net receipts from the sale of the land amounted to profits of business, e.g., an adventure in the nature of trade or commerce liable to tax and the other being the quantum of the net receipts. The Income-tax Officer held that the receipts were profits and fixed the amount at Rs. 1,16,870 by deducting Rs. 10,000 paid as the premium from Rs. 1,26,870, the sale proceeds. The assessee filed an appeal to the Appellate Assistant Commissioner, who confirmed the Income-tax Officers finding that the receipts from the sale were profits but disagreed with the finding that Rs. 1,16,870 were the profits. There was no dispute that the sale of the land yielded to the assessee Rs. 1,26,870 and the real dispute was about the cost of the land to the assessee, which was to be deducted from the sale proceeds in order to determine the net receipts. The Appellate Assistant Commissioner was of the opinion that the market price of the land should be the cost to the assessee; he did not take Rs. 10,000 paid as the premium to be the cost because it was the amount of premium and was fixed by virtue of a compromise between the assessee and the State Government during the land acquisition proceedings. On receipt of a report from the Income tax Officer that the market price of the land was Rs. 1,12,056 he determined the net receipts at Rs. 14,814 and decided the appeal accordingly. The assessee accepted this decision, but the department did not and the Commissioner of Income tax filed an appeal before the Tribunal against it. During the hearing of the appeal the assessee filed an application before the Tribunal stating that he had not filed any appeal against the order of the Appellate Assistant Commissioner, that the appeal by the department was confined to the question of the amount of the net receipts and that 'under rule 27 of the Income tax Appellate Tribunal Rules, 1946, the respondent is entitled to support the order of the Appellate Assistant Commissioner on any of the grounds decided against him though the respondent has not appealed' and prayed that he be allowed 'to support the order... on the ground that the transaction was not an adventure in the nature of trade, this ground having been decided against the respondent'. The assessees counsel also pressed orally that he should be allowed to argue ' on the question of assessability also in view of rule 27'. The statement of case shows that the oral submission was to the same effect as the written submission mentioned above. The Tribunal understood this submission to be one for being permitted to argue that the sale of the land was not an adventure in the nature of trade or commerce and that, consequently, the net receipts were not profits at all and that even the amount of Rs. 14,814 did not form part of his taxable income and observed :
'It would mean that he would be cutting at the very root of the matter and if he is successful would completely destroy the Appellate Assistant Commissioners order and not support it. The point at issue is only the quantum of profits earned by the sale and in this appeal the assessee cannot be allowed to raise the fundamental issue of the assessability as such.'
So it disallowed the counsel to argue the matter. Coming to the question of the quantum of the net receipts it held that the price paid by him for purchasing the land in dispute should be taken to be the cost price and remanded the case for determining it and then arriving at the amount of the net receipts. The assessee applied to the Tribunal for referring the case to this court under section 66(1) and hence this reference.
The following are the relevant provisions of law. Section 30 of the Income tax Act provides for an appeal by an assessee objecting to the amount of the income assessed to the Appellate Assistant Commissioner against the assessment within a certain period of time. The Appellate Assistant Commissioners powers are stated in section 31(3). He can confirm, reduce, enhance or annul the assessment or set it aside and direct the Income tax Officer to make a fresh assessment or set it aside and direct the Income tax Officer to make a fresh assessment but cannot enhance a assessment without giving the assessee appellant a reasonable opportunity of showing cause against it. The Commissioner of Income tax is empowered by section 33(2) to appeal to the Tribunal from any order passed by an Appellated Assistant Commissioner under section 31; this appeal also is to be made within a certain time. The Tribunals power, vide sub-section (4), is to 'pass such orders thereon as it thinks fit'. Rule 27 of the Income tax Appellated Tribunal Rules is as follows :
'27. The respondent, though he may not have appealed, may support the order of the Appellate Assistant Commissioner on any of the grounds decided against him.'
This provision reminds on of Order 41, rule 22(1), Civil Procedure Code, to the effect that 'any respondent, though he may not have appealed from any part of the decree, may not only support the decree on any of the grounds decided against him in the court below but take any cross objection to the decree which he could have taken by way of appeal, provided he has filed such abjection in the Appellate Court within one month from the date of service on him or his pleader' and it is in the form of a memorandum of appeal.
When a trial court decrees or dismisses a suit entirely, no difficulty arises about the respondents rights in the appellate court. In such a case the appeal, whether it is by the plaintiffs or by the defendant, is in respect of the whole subject matter of the suit (unless he gives up a portion of it and it is therefore out of consideration). Whatever is the judgment of trial court, whether accepting the plaintiffs case, or rejecting it, in toto, it may be based upon one ground or more than one ground. A plaintiff may have one, or more than one, ground of defence. To simplify the discussion I would confine myself to one ground and two grounds of attack and one ground and two grounds of defence. When both grounds of attack are accepted by the trial court, it cannot be doubted that the defendant-respondent has a right to urge that both of them are wrong. Actually in order to succeed in the appeal he must show that both are wrong. When both grounds of attack are rejected the plaintiff has right to urge that both or either of them is valid and in order to succeed he must show at least that either of them is valid. When both grounds of defence are accepted the plaintiff has a right to, and must, urge that both of them are untenable. When both grounds of defence are rejected the defendant has a right to urge that both or either of them is valid and cannot succeed unless he shows that at least either of them is valid. Complications arise when one ground of attack is accepted and the other rejected or one ground of defence is accepted and the other is rejected. When one ground of attack is accepted the appeal must of necessity be by the defendant because on either ground being accepted the judgment is in the plaintiffs favour and he cannot file an appeal merely against the finding rejecting the other ground of attack. An appeal lies from the operative judgment and not from the reasons in support of it or the findings given on the issues whether of fact or law on which the operative part of the judgment is based. A successful party cannot appeal merely to have a finding given adversely to him corrected; as notwithstanding the adverse finding the operative judgment is in his favour he is not aggrieved by it and cannot gain anything by appealing against the adverse finding. Similarly, when one of the two grounds of defence is accepted and the other is rejected, the appeal must be by the plaintiff and there can be no appeal by the defendant since the operative judgment is in his favour. When a defendant appeals he appeals from the acceptance of one ground of attack and if he succeeds the appeal must be allowed and the suit must be dismissed. But if the rejection of the other ground of attack is wrong, justice requires that the suit must not be dismissed because if there is one valid ground of attack the plaintiff must succeed. Consequently he must have an opportunity of urging in the appeal that the rejection by the trial court of the other ground of attack was wrong. Since he could not appeal against the rejection of the other ground of attack there is no question of his being barred by res judicata or estoppel from contending that it was wrongly rejected. This is the reason behind rule 22(1) of Order 41, Civil Procedure Code. This result also follows from the doctrine that an appeal is a continuation of the suit and that in the absence of provisions to the contrary an appellate court has all the powers of the trial court in respect of the subject-matter of the suit and the whole suit is laid open before it (barring, of course, what has been given up in appeal). Both grounds of attack are again for consideration before the appellate court, the one accepted by the trial court and brought before the appellate court, the one accepted by the rejected by it and brought before it by the defendant-appellant and the other rejected by it and brought before it by the plaintiff-respondent in his oral argument. It is not necessary for the plaintiff even to file a cross-objection against the rejection of the ground of attack. If he could not file an appeal, he cannot file a cross-objection, which is merely a substitute for an appeal. In the same way when one ground of defence is accepted and the other rejected the defendant-respondent in the appeal filed by the plaintiff has a right to urge that the trial court had wrongly rejected the other ground; if he succeeds the appeal will fail even though the plaintiff succeeds in showing that one ground was wrongly accepted. So far I have been dealing with decreeing or dismissing a suit in toto.
Now I come to the complicated case of a suit being decreed in part and dismissed in part. This is a case different from that of a suit being decreed on accepting one ground of attack and rejecting the other or a suit being dismissed on accepting one ground of defence and rejecting the other. When a suit is partly decreed and partly dismissed either party can be the appellant the plaintiff in respect of the part of his claim that was rejected and the defendant in respect of the part that was accepted. If the plaintiff wants a decree for the remaining part of the claim he must file an appeal or a cross-objection as permitted by rule 22(1) of Order 41, Civil Procedure Code, in an appeal by the defendant and if a defendant wants that the decree for part of the claim should be quashed he must file an appeal or a cross-objection in the plaintiffs appeal as permitted by rule 22(1) of Order 41. It is to be noted that an appeal and the cross-objection filed in the appeal relate to two different subject-matters even though both arise out of one decree or judgment of the trial court. The subject-matter of a cross-objection has nothing to do with the subject-matter of the appeal. On account of part of the suit being decreed and part being dismissed the decree is split up into two parts or is treated as two decrees and the appeal is from one decree and the cross-objection from the other. This is made clear by rule 22, which speaks of an appeal from part of a decree and of the decree being supported by the respondent on any of the grounds decided against him. If the plaintiff had two grounds of attack and on of them was accepted and the other rejected by the trial court in respect of part of the claim and the defendant files an appeal from the decree passed in his favour he may support it on the other ground rejected by the trial court. But if he wants a decree for the remaining part of the claim he must file a cross-objection in the defendants appeal if he has not filed an appeal himself. This cross-objection is to the decree, e.g., the remaining part of the decree and not to the decree passed in his favour and forming the subject-matter of the appeal. The provision that he can support the decree on any of the grounds decided against him deals exhaustively with his right in respect of the decree passed in his favour for part of his claim and, consequently, the further provision relating to cross-objection must relate to the decree in respect of the other part of his claim which was rejected. The cross objection is to be in the place of an appeal which he could have filed and he could have filed an appeal only in respect of the decree regarding the other part of his claim. Therefore, the words 'the decree' with reference to the cross-objection must relate to the decree in respect of the other part of the decree other than that dealt with in the earlier part of the rule and in respect of with he has been given the right of supporting it on any of the grounds decided against him. It is important to bear this distinction in mind and the failure to do so has resulted in confusion and error.
The provision in rule 27, with which we are concerned, is to be distinguished from that in Order 41, rule 22(1). While rule 22(1) gives two rights to the other in respect of the part disallowed, rule 27 deals with the order of the lower court, viz., the Appellate Assistant Commissioner in its entirety. It does not contemplate the splitting of the Appellate Assistant Commissioners order into two parts for the simple reason that an assessment order is incapable of being treated as an order partly allowing something and partly disallowing the other thing. While in respect of a claim of a plaintiff it can be said that part of it is allowed and part disallowed the same cannot be said in respect of an assessment order and it cannot be said to involve two orders partly assessing something and partly disallowing assessment of another thing. When a person is assessed he is assessed on all the income found assessable. There are no two parties before an Income-tax Officer or an Appellate Assistant Commissioner and there is no claim by one party to be met by the other; so the analogy of a suit, part of which may be decreed and part rejected, does not apply to an assessment proceeding. A dispute may arise in an assessment proceeding about certain receipts being income or not income or the assesses being entitled to a certain deduction or being not entitled to it and the assessment order is passed after deciding this dispute. The dispute may be decided partly in favour of the assessee and partly against him. But since the assessability is indivisible the order assessing the income is treated as on indivisible order and the facts on account of which the various receipts are held to be assessable income are treated as various grounds of attack and the various facts on account of which deductions or exemptions are allowed or receipts are not treated as assessable income are treated as grounds of defence. So an assessment order is based upon allowing and disallowing grounds of attack and of defence. An appeal to the Tribunal whether by the department or by an assessee is like an appeal by a defendant or a plaintiff. There is no scope for any cross-objection and consequently no scope for the respondents, e.g., the assessees or the departments urging for reduction in the assessed income or increase in the assessed income, as the case may be. If the appellant before the Tribunal is the department claiming increase in the assessed income all that the assessee can urge is that there should be no increase; that is the only subject-matter of the appeal. If the assessee desires reduction in the assessed amount he himself must file an appeal; he has not been given the right to file a cross-objection. The only right given to him is of urging that there should be no increase, not only for the ground of defence accepted by the Appellate Assistant Commissioner but also for the other ground of defence rejected by him. This is the only right given to him by rule 27. There is only one order of the Appellate Assistant Commissioner that assessing the income at a certain figure, and the right given to him is of urging another ground, though rejected by the Appellate Assistant Commissioner, in support of it; he must support the order, i.e., must not ask for any variation (in his favour) in the order. In other words, he must not ask for any reduction in the assessed income. Asking for any reduction in the assessed income is not supporting the order assessing it.
As I said earlier the order is one assessing the income after accepting and rejecting various grounds of attack and defence. Grounds of attack and defence may be grounds of law or of fact. A ground of law may affect the assessability of the assessee or inclusion of the whole of a receipt or a part of a receipt in his assessable income. If an assessee is not liable to be assessed at all no part of his income can be assessed; if the whole of a receipt is not income no part of it can be included in his assessable income and if a part of a receipt is not income that part cannot be included in his assessable income. If an assessee is not assessable at all but is still assessed he and the department both can be aggrieved by the assessment order; he, on the ground that he was not liable to be assessed at all and other grounds, if any, and the department, on the ground that something more should have been included in his assessed income. So either of them can file an appeal. If he files an appeal, the department can urge in support of the assessed income any ground of attack that might have been rejected by the Appellate Assistant Commissioner but it cannot ask for an increase in the assessed income; it can ask for an increase only by appealing. If the department files an appeal, which must be for an increase in the assessed income, the subject-matter of the appeal is the increase claimed by the department and the assessee can urge any ground of defence, even though it might have been rejected by the Appellate Commissioner, for showing that there should be no increase. That he is not liable to be assessed is a ground for showing that there should be no further assessment. Whole includes part and if no receipt is assessable the particular receipt claimed by the department to be assessable also is not assessable and the departments appeal can be resisted on this ground. The Appellate Assistant Commissioner rejected this ground of defence and holding him assessable assessed his income. But since the non-liability to assessment on any income includes the non-liability to assessment on a particular receipt he can object to the inclusion of the receipt in his assessable income on the ground that he is not liable to be assessed on any receipt. This is supporting, and not demolishing, the assessment order passed against him, provided he does not ask for cancellation of the assessment order. He could have filed an appeal against his being assessed but was not bound to do so even though he believed that he was not liable to be assessed at all. If he did not mind paying the tax on the assessed amount nothing compelled him to file an appeal. But this fact that he did not file an appeal does not stop him from contending in the departments appeal for an increase in the assessed amount that there should be no increase. He is not barred either by the rule of estoppel or by the rule of res judicata on account of the fact that on that ground he should not have been assessed at all and that he has submitted to his being assessed. His submission to the assessment order does not amount to his submission to assessability. If the assessment order becomes final it may be said that he is barred by estoppel or res judicata from contending in a subsequent proceeding that he was not liable to be assessed at all. In an appeal against the assessment order itself there is no question of his being barred by estoppel or res judicata. The appeal being from the assessment order there is no question of its being final or operating as res judicata. There is no other doctrine which can be relied upon for barring his contention that he was not assessable at all. It is irrelevant to consider that on the ground on which he urges that there should be no increase he should not have been assessed at all; there is no law that in the absence of estoppel or res judicata a ground applicable to a whole cannot be urged in respect of a part if it is not urged, or is urged but rejected, in respect of the other part. No incongruity results from applying it to a part even though it is not applied to the other part not any shock to the conscience. There is no incongruity in maintaining the assessment order passed on the assessee and refusing to increase it on the ground that he was not liable to be assessed at all. What is irksome is incongruity in two orders and not incongruity in respect of reasons for the two orders. Two orders should not be incompatible with each other, so that one can be enforced and that other cannot be, but if two orders can both be enforced it is immaterial that they are based upon contradictory reasons. Two orders not mutually exclusive have been maintained even though they are based on mutually exclusive reasons : vide Dunn v. United States1, Bartkus v. Illinois, Hong v. New Jersey and In re William Barron. It is also irrelevant to consider what relief could have been allowed to the assessee if this ground of defence is allowed to be urged by him in the departments appeal if the appellant does not ask for it. No relief can be given to an assessee unless he asks for it and is entitled in law to get it; the Tribunal has no jurisdiction to give him any relief though he may be entitled to it, if he does not ask for it in the appeal. The power conferred upon it by section 33(4) is certainly very wide but is so wide only within the subject-matter of the appeal. However wide it may be, it is limited by the scope of the appeal. It cannot travel outside its scope and pass any order even though it thinks it a fit order. It has to pass an order on the appeal, i.e., in respect of the subject-matter of the appeal. The order that it thinks fit must be in respect of the subject-matter of the appeal and so long an it is in respect of it it can be passed regardless of its nature or contents. I respectfully agree with the observation of Sir Leonard Stone C.J. and Kania J. in Motor Union Insurance Co. Ltd. v. Commissioner of Income-tax at page 283, of Chagla C.J. and Tendolkar J. in Puranmal Radhakishan v. Commissioner of Income-tax at page 304 and in New India Life Assurance Co. Ltd. v. Commissioner of Income-tax and of Jagadisan and Srinivasan JJ. in Commissioner of Income-tax v. Sundaram & Company Private Ltd. at pages 759 and 770, that 'the word thereon used in section 33(4) only means on the appeal, which must mean on the grounds raised in the appeal.' In the last case the learned judges observed that 'the subject-matter of an appeal... is that which the Tribunal or the appellate court is called upon to decide and to adjudicate' and that 'the subject-matter cannot be identified with the grounds raised either by the appellant or by the respondent.' By its order an appellate court can dispose of the appeal and not something not included within its scope. In the departments appeal for an increase in the assessable income the only question for its consideration is whether the increase or part of it should be allowed or not. Whether the amount already assessed was wrongly assessed or not or whether the assessee is liable to be assessed at all or not is a question quite outside the scope of the appeal and any decision on it cannot be said to be an order on the appeal. Consequently it cannot be said that the Tribunal would have power to annul the assessment even without any prayer by the assessee to that effect, if it accepts his ground of defence that he was not liable to be assessed at all. On that ground being accepted it can only refuse to increase the assessed income; only that would be an order on the appeal by the department. Any other order such as annulling the assessment would be outside the scope of the appeal. Therefore, it would be erro-neous to say that the effect of accepting the ground of defence of the assessee would be the annulment of the assessment order and that this would be quite the reverse of supporting it by the ground of defence.
Sri Gulati cited before us a number of decisions in support of his contention that even when as assessee does not pray for annulment of an assessment order he cannot be permitted to urge the defence that he was not liable to be assessed in the departments appeal for an increases in the assessable income. In Shailesh Chandra Guha v. Bechai Gope there were two grounds of defence to a suit on the foot of a mortgage, one that it was defectively framed and the other that the amount due was less. The trial court rejected the former and accepted the latter ground and the plaintiff appealed for a larger amount. New would and Ghose JJ. held that in that appeal the defendant could not be permitted to urge that the suit was badly framed. It does not appear that the defendant asked for cancellation of the decree; presumable he only objected to the increase in the amount on the ground that the suit was so badly framed that no relief could have been given to the plaintiff at all. The learned judges observed at page 95 that the ground 'is not one in support of the decree made but which, if sustained, would render the decree invalid'. With great respect I find it difficult to appreciate this reason. To say that the plaintiff was not entitled to get anything was in support of the decree that he should not get a certain amount. By disallowing an increase to the plaintiff, even though on the ground that he was not entitled to anything would not automatically render the decree passed in his favour for a smaller amount invalid. No decree is rendered invalid merely on account of the subsequent discovery of a reason contradictory to the reason on which it was based. Hundreds of cases are decided on grounds which are subsequently held to be untenable without those decisions being automatically rendered invalid. The learned judges have not discussed the law and not given reasons for the view that the defendants plea was not in support of the decree passed and would, if allowed, render it invalid. R. C. Mitter and Khundkar JJ. observed in Farok ahmed Meah v. Lalit Mohan Choudhury at page 585 as follows :
'... he cannot urge a point which if accepted would totally or in part destroy the decree made in favour of the appellants. If this finding is reversed, the plaintiffs claim to the money for which they have got a part decree will have to be discharged.'
With great respect to the learned judges I may point our that no acceptance of a ground of defence automatically destroys a decree passed in the plaintiffs favour; there has to be an order by the appellate court setting aside the decree and without such an order it is not set aside even though it deserves to be set aside and as I said earlier the appellate court, if it has the some powers as the Income-tax Appellate Tribunal, is not bound to set aside the decree without any prayer to that effect. There is nothing conflicting with what I have said in Secretary of State v. Chimanlal Jamnadas. What was held in that case was simply that in a suit for decla-ration of title by adverse possession which was decreed only for continuance of possession, the plaintiff as respondent could not be allowed to pray for a declaration of title in his favour without his filing a cross-objection. He clearly asked for some positive relief in his favour; he did not merely defend the decree for continued possession in his favour and clearly Order 41, rule 22, was against him. In Mst. Mewa v. Amar Singh a plaintiff in a suit for partition got a decree for one-fourth share and appealed for one-fourth share more and the defendant was debarred by Bishan Narain J. from contending in the appeal that the plaintiff had no possession at all. The reasons given by the learned judge were that if the plea prevailed the plaintiffs suit was liable to be dismissed; that the defendant had not appealed from the decree and that it would be 'improper' to examine the plea. For the reasons given above I respectfully disagree with the observation of the learned judge that 'this objection goes to the root of the case and, if upheld, the suit necessarily fails' (page 516). The suit would not have failed automatically, the defendant-respondent had not prayed for the dismissal of the suit and the learned judge was not required by any law to dismiss it simply it simply on finding substance in the proposed ground of defence. In the case of Motor Union Insurance Co. when the learned judges observed that a respondent is not entitled to raise a ground so as to work adversely to the appellant and in his favour, if he has not appealed, he naturally meant that a respondent can support the trial courts decree on any ground but cannot pray for its being set aside without appealing and not that he cannot urge such a ground of defence not for the purpose of getting rid of the decree already passed but for that of preventing further decree being passed against him. Aground would work adversely to the appellant only if the decree already passed in his favour is altered to his disadvantage. If it is not altered, refusing to give him further relief cannot be said to be working adversesly to him. In the case of New India Life Assurance Co. Ltd., while discussing the rights of an appellant and the respondent, the learned judge did not lay down that the respondent cannot urge a ground, rejected by the trial court, even to defeat the appeal even though he does not seek to get rid of the order passed against him by the trial court. When they observed at page 855 that he cannot ' get a relief which would adversely affect the appellant', they meant that he cannot get a positive order in his favour in addition to defeating the appellant. A respondent to an appeal can either ask for the rejection of the appeallants claim or for rejection of the appellants claim and a positive order in his own favour; the learned judges obviously dealt with the latter and not the former. When they said that the respondent is content with the order passed adversely against him because he has not filed an appeal they did not mean to lay down that he is estoppel even from urging a ground which he could have urged if he had appealed from the decree. What is to be considered is not what could be the effect of the acceptance of the ground but what was the relief claimed by the respondent. He was content with the decree passed against him and had a right to remain content with it; when he urges that a further decree should not be passed against him on account of a certain ground he is not bound to appeal from the decree passed against him simply because on that ground he would have a right to do so.
The view that I take receive full support from Venkata Rao v. Satyanarayanamurthy decided by Leach. C.J. and Lakshmana Rao and Krishnaswami Ayyangar JJ. It was a case governed by Order 41, rule 22, Civil Procedure Code. The facts were that the plaintiff sued on a promissory note for Rs. 1,450 and the defence was that the promissory note was executed in lieu of a prior promissory note and that under the promissory note was executed in lieu of a prior promissory note and that under the Agriculturists Relief Act nothing was due from him under it. The trial court held that the promissory note was a new cash transaction and not in lieu of an earlier note, that the defendant was entitled to certain reliefs under the agriculturists Relief Act and that accordingly the plaintiff was entitled to decree for Rs. 274 only. The plaintiff appealed and the defendant did not file any cross-objection. The lower appellate court held that the defendant was not entitled to the relief under the Agriculturists Relief Act and did not allow him to urge that the trial court had erred in finding that the promissory note was a new cash transaction and not in lieu of an earlier note. The learned judges held that the lower appellate court was in the wrong and that the defendant was entitled to take the plea to defeat the plaintiffs claim for additional amount. They pointed out that the defendant stood by the decree for Rs. 274 passed against him and did not seek any relief from it and that what he sought was that no further decree should be passed against him by showing that the plaintiff was not entitled to get anything. Krishnaswami Ayyangar J. was at pains to point out that the decree sought by the defendant to be supported was refusing the plaintiff the additional amount claimed by him in the appeal; that was the decree from which the appeal had been filed. The trial court had passed it on the ground not that the promissory note was in lieu of a prior note but that the defendant was entitled to the benefit of certain provisions of the Agriculturists Relief Act. Even if he was not entitled to the benefit of those provisions and the trial court had erred in saying so he could urge in support of the decree that the plaintiff was not entitled to get anything because he had already satisfied the amount due under the earlier note. In Management of Itakhoolie Tea Estate v. Its Workmen the Supreme Court had an occasion to deal with the provisions of rule 22 of Order 41 and referred to the above decision in the case of Venkata Rao but did not express any opinian on its correctness or otherwise. The Full Bench decision in Venkata Raos case2 was followed by Schinde C.J. and Dixit J. in Gendalal v. Nanalal. The interpretation placed on rule 27 of the Appellate Tribunal Rules in the case of Sundaram & Company Private Ltd. 4 lends support to my view. So also Mahomed Ali v. Parma Nand.
Kesla Mal v. Cooper Allen & Co., relied upon on behalf of the assessee, is not to the point at all. There the plaintiffs suit was dismissed in toto on one ground of defence being accepted and the other ground being rejected and this court held that in the appeal by the plaintiff it was open to the defendant to urge the rejected ground of defence. It does not deal with a composite decree, e.g., a decree partly decreeing and partly dismissing the suit.
In the result I hold that the assessee could contend that the receipts were not profits of a business at all, but for the purpose of showing that the department was not entitled to succeed in the appeal, i.e., to an increase in the assessed income and not for the purpose of claiming the relief of the quashing of the assessment order. In other words, so long as it did not ask for the quashing of the assessment order its plea that the receipts were not profits ought to have been entertained.
It will become at once apparent from the above conclusion that the answer to the question referred to us depends upon what the assessee prayed for before the Appellate Assistant Commissioner. If it prayed that the assessment order be quashed it was not entitled to be heard whereas if it simply prayed that the departments appeal be dismissed it was entitled to be heard. What the assesee prayed before the Tribunal is essentially a question of fact, which cannot be investigated by this court and on which no finding can be given by it for the first time or given adversely to the finding recorded by the Tribunal. In Commissioner of Income-tax v. Calcutta Agency Ltd. the Supreme Court observed at pages 196-197 :
'It is therefore the duty of the High Court to start by looking at the facts found by the Tribunal and answer the questions of law on that footing. Any departure from this rule of law will convert the High Court into a fact-finding authority, which it is not under the advisory jurisdiction. The statement of the case under the rules framed under the Income-tax Act is prepared with the knowledge of the parties concerned and they have a full opportunity to apply for any addition or deletion from that statement of the case. If they approved of that statement, that is is agreed statement of facts by the parties on which the High Court has to pronounce its judgment. In the present case the parties perused he statement of case and as disclosed by the note made at the end of it had no suggestions to make in respect thereof. It is therefore clear that it was the duty of the High Court to start with that statement of the case as the final statement of facts... Instead of first ascertaining what were the facts found by the Tribunal in the present case, the process was reversed and the procedure adopted was to take Mitchells case as the law and argue that the facts in the present case covered the situation. In our opinion this is an entirely wrong approach..'
The Tribunal has not stated that the assessee sought before it the relief from the assessment altogether and not the relief from the additional amount claimed by the department but it is obvious from the statement of the case that this was the fact found by it. When I say so I am not investigating a fact or recording a finding of fact for the first time but simply interpreting what the Tribunal has found in respect of this question and what it has said in the statement of the case. The assessee in its application did not clearly and specifically distinguish between the two reliefs that it might have claimed from the Tribunal; it did not say expressly that it was claiming the relief only from the additional burden sought to be imposed upon it by the department through the appeal and not from the burden already imposed upon it. On the other hand the ground of defence was such as to apply with equal force to the assessment order already passed against it and when it asked for permission to urge it, the Tribunal naturally thought that it prayed for relief from the assessment altogether. It refused permission to the assessee 'to argue on the question of the assessability of the profit'. This means that it was refused permission to argue on the question of the assessability of the whole of the profits and not only part of the profits which was the subject-matter of the departments appeal. The reason given by the Tribunal was that, if it was allowed to argue it successfully, it would completely destroy the assessment order. This reason would have applied only if it had prayed for relief from the whole assessment. If it had prayed for relief only from the additional burden sought to be imposed upon it by the department, the burden already imposed would have remained intact and there would have been no occasion for saying so. The question formulated by itself makes it clear that the assessee desired to argue against the whole of the assessment; the words in the question are 'entire profit'. The draft statement of the case prepared by the assessee itself does not show that it had sought permission to argue only against increase in the assessed income and not against the assessment itself. It itself never distinguished between the contention that it wanted to raise and its effect and did not say that though its effect might be to render the assessment already done invalid it did not seek invalidation of it. Actually if it only desired that the appeal be dismissed and did not desire any position order it had the right, under rule 27 of the Appellate Tribunal Rules, to urge that the receipts were not profits at all without any permission from the Tribunal. The question framed by the Tribunal was suggested by the assessee itself. I, therefore, interpret the statement of the case to mean that the assessee desired to argue that the assessment order should be quashed because the receipts were not profits at all. It was suggested by Sri Brijlal Gupta that under section 66(4) we might ask the Tribunal to submit a further statement about what the assessee had attempted to contend. If I were satisfied that the statement of the case is not sufficient to indicate what the Tribunals finding was I would have referred the case back to the Tribunal, but for the reasons given above, I find that it is sufficient.
Since the fact as it appears from the statement of the case is that the assessee wanted permission to argue against the whole assessment and not against the increased assessment sought by the department through its appeal, it was rightly disallowed by the Tribunal. I see no force in the argument of Sri Brijlal Gupta that even then the Tribunal should have granted permission for the restricted argument against the increased assessment. He relied upon Commissioner of Income-tax v. Ogale Glass Works Ltd., United Commercial Bank Ltd. v. Commissioner of Income-tax 2, Zoraster and Co. v. Commissioner of Income-tax and Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd., but none of them is to the point or supports the proposition to be established. Whether argument can be permitted by a High Court when answering a question referred to it by the Tribunal is a question quite distinct from the question what can be argued by a respondent in an appeal before the Tribunal. Whether the receipts are profits or not is a question which cannot be split up into two questions and it is impossible to speak of its including the question whether a part of the receipts is profit or not. As I said earlier, rule 27 of the Appellate Tribunal Rules itself gave the assessee a right to argue that it was not liable to the increased assessment, there was no question of its being permitted to argue it before the Tribunal and, therefore, of the Tribunals giving to it a relief smaller than the one claimed by it. It was for itself to adopt the restricted argument without any permission. The Tribunal was not bound by any role to say that it should confine its argument to the question of the increased assessment.
The answer to the question is, therefore, in the negative.
I reject the contention of Sri Gulati that the reference is not maintainable because it is from a remand order passed by the Tribunal inasmuch as the assessee does not challenge the order of remand itself as being unjustified. It is true that under section 66(5) the Tribunal on receipt of the High Courts judgment has to dispose of the case conformably to it. But there is no difficulty in the Tribunals complying with this provision if the High Court rules that the remand order was unjustified. A remand order can be challenged not only on the ground that it could not be passed but also on the ground that it was preceded by an illegal order on an interlocutory matter. If the Tribunals order on the interlocutory matter was wrong on the High Courts holding it to be wrong, the Tribunal would be obliged to recall the case from the Appellate Assistant Commissioner and decide it afresh. There would be no difficulty in its recalling the case from the Appellate Assistant Commissioner. If it can recall the case on the High Courts holding the remand order to be invalid, there is no reason why it cannot recall it on the High Courts holding that its decision on an interlocutory matter was wrong. As a matter of fact the Tribunal becomes functus officio as soon as it decides any appeal, whether it allows it or dismisses it, and if it can still dispose of it conformably to the judgment of the High Court. I do not see why it cannot do so when it had remanded the case. It has been held in In re Trikamlal Maneklal that a reference is permissible even against a remand order passed by the Tribunal. The reference that was disallowed in Munna Lal & Sons v. Commissioner of Income-tax was not a reference from a final remand order but from an interlocutory order calling for a report from the Income-tax Officer on certain points. The order calling for a report was not an order remanding the case to the Income-tax Officer for fresh assessment or reassessment as in the instant case.
A copy of this judgment under the seal of the court and the signature of the Register shall be sent to the Tribunal as required by section 66(5) of the Income-tax Act. The Commissioner of Income-tax shall get his costs of the reference, which I assess at Rs. 200 from the assessee. Counsels fee is assessed at Rs. 200.
S. C. MANCHANDA J. - I agree.