1. JUDGMENT : Satish Chandra, C.J. - M/s. S. B. Singar Singh & 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 year 1936-37 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. 1,06,181-05 and Rs. 48,978-00, 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 reason as given in the earlier assessment order dated October 30, 1947 pertaining 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".
2. Against the orders of assessment, the assessee preferred two appeals on September 24, 1949 to the Appellate Assistant Commissioner. By two separate applications dated October 24, 1949 the assessee took an additional ground of appeal, which obviously he had not taken in the original memorandum of appeal, that the Excess Profits Tax Officer had erred in not allowing adjustments on a account of the increase and decrease of capital in the relevant chargeable accounting periods. The assessee added that he was always prepared to file his computation of average capital. Dismissing the appeals by his orders, dated November, 24, 1949 the Appellate Assistant Commissioner negatived the assessees contention in these terms; -
"As to these years to regular accounts have been maintained 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 furnished at this state. 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 turned over. I am thus, unable to allow this contention".
3. Aggrieved the assessee carried appeals to the Income-tax Appellate Tribunal. In the memorandum of appeals, one of the specific grounds taken was that the Excess Profits-tax Officer and the Appellate Assistant commissioner had erred in not allowing to the assessee proper standard profits in accordance with the standard period subject to the adjustment on account of the increase and decrease of capital in the relevant chargeable accounting period. It was reiterated that the appellant was always prepared, to file its computation of average capital.
4. This ground relating to standard profits was not discused 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 commom orders, dated February 24, 1951. In the income-tax appeals, some relief was granted, but in the excess profits tax appeals, no relief was granted due to the variation of the capital in the chargeable accounting periods of 1945-46 and 1946-47.
5. The assessee on July, 27, 1951 made an application u/s 35 of the Indian Income Tax Act, 1922 for rectification of its order to the Tribunal on grounds other than the one regarding variation in the standards 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 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 period.
6. 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 both were rejected and the Commissioner communicated those rejections to the assessee by a letter, dated March, 25, 1955 saying that he did not see any justification for reopening the assessments which had become final and closed.
7. 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 matter (which should be deemed to be still pending owing to the non-decision of ground No. 1) be disposed of after hearing 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 Tribunals 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 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 u/s 35 or to move an application u/s
66. The Tribunal refused to treat this application as one for rectification because, in its opinion 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.
8. The assessee had filed a reference application also u/s 66(1) of the Income-tax Act in these cases. That application was dismissed by the Tribunal on August, 28, 1951. The assessee then made application u/s 66(2) of the Income-tax Act before the High Court requesting for reference on certain question of law arising out of the orders 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 2, 1956 whereby the Tribunal was directed to state a case and refer for decision certain question of law to the High Court.
9. Thereafter during the proceeding 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 application, nor did it arise out of the appellate of the Tribunal.
10. 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 courts order, dated April 12, 1956.
11. On November, 4, 1963 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 1050 and his subsequent application dated April 12, 1956.
12. The writ petition was heard by a learned single Judge of 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, 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 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 tax Act; that, consequently, the Tribunal was in error in refusing to treat the assessees application dated April 2, 1956 as one for rectification of a mistake of the Tribunal on the ground of limitation. In the result, the learned Judge set aside the Tribunal order, dated June, 9, 1956 and directed the Tribunal to dispose of the assessees application dated April 2, 1956 afresh in accordance with law.
13. The Revenue filed a special appeal against the order of the learned single Judge before the Appellate Bench of High Court. The bench dismissed the appeal and affirmed the findings and orders of the learned single Judge.
14. The Department went up in appeal to the Supreme Court. The Supreme Court had wrongly assumed that the ground relating to adjustment of profits based on variation of the average capital had been urged before the Tribunal and the Tribunal had arbitrarily refused to consider it. This assumption stood discounted by the circumstances of the case and the questionable and dilatory conduct of the assessee which led to the irresistible inference that the assessees advocate had not argued that ground at all. This was, therefore, not a fit case for the exercise by the High Court of its special jurisdiction under Article 226 of the constitution of India. It was also held that the question whether the omission to record a finding on the ground relating to adjustment of profits by the Tribunal was due to the failure of the assessee to urge that ground or due to a lapse on the part of the Tribunal deserving rectification was a matter entirely for the authorities under the taxation statutes. In the result, the appeal was allowed, the judgments of the High Court were set aside and the writ petitions dismissed.
15. During the pendency of the case before the Supreme Court the Tribunal rectified its order in consequence of the directions issued by this court while allowing the writ petition. The matter was referred back to the Appellate Assistant Commissioner who allowed the assessees appeal partly on October 25, 1971. The assessee went up in appeal and the Tribunal allowed the assessees appeal by its order dated September 26, 1974.
After the decision of the Supreme Court, the Income Tax Officer had filed the present writ petition praying for the quashing of the subsequent orders by the Tribunal as well as the Appellate Assistant Commissioner.
16. It is not disputed that these subsequent orders were based upon directions issued by this court while allowing that the writ petition has been dismissed by the Supreme Court after setting aside the judgments of this court, the directions issued therein have become infructuous. Consequently, the orders passed by the Tribunal as well as the Appellate Assistant Commissioner are liable to fall with the dismissal of the writ petition.
17. We, consequently allow this petition and quash the orders of the Tribunal dated March 29, 1965 and September 26, 1974 as well as that of the Appellate Assistant Commissioner dated October 25, 1971. As no one has appeared on behalf of the assessee there will be no order as to costs.