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Commissioner of Income-tax Vs. Agha Abdul Jabbar Khan - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case Nos. 130 of 1965, 668 of 1972 and 144 of 1973
Judge
Reported in[1980]122ITR803(MP)
ActsIncome Tax Act, 1922 - Sections 16(3), 66(1), 66(2), 66(4), 66(5) and 66(6)
AppellantCommissioner of Income-tax
RespondentAgha Abdul Jabbar Khan
Appellant AdvocateP.S. Khirwadkar, Adv.
Respondent AdvocateK.A. Chitaley, ;G.N. Purohit and ;A.G. Dhande, Advs.
Cases ReferredDuni Chand Rataria v. Bhuwalka Brothers Ltd.
Excerpt:
.....are correct on fact as well as on law, there can be hardly any doubt that the income of the property in question cannot come within the scope of section 16(3)(a)(iii).'9. it was, however, urged on behalf of the revenue that, on the face of it, the transfer pleaded by the assessee was an invalid one and the story put forward by him was unbelievable. '12. with respect, the division bench failed to realise that the matter was at the stage of section 66(4) of the indian i. in the circumstances, we think it appropriate to decline to answer the question on the ground that the tribunal has failed to consider and decide the question whether the expenditure was laid out or expended wholly and exclusively for the purpose of the business of the company and has not considered all appropriate..........to the conclusion that ever since the transfer, the wife of the assessee was in possession of the property transferred to her name. hence, the income of that property could not be considered as the income of the assessee.3. it will be noticed that the validity of the transfer was never in question before the tribunal. however, feeling aggrieved, the commissioner sought a reference under section 66(1) of the indian i.t. act, 1922, on certain questions of law, said to arise out of the order of the tribunal, namely :' (1) whether, having regard to the evidence on record, the appellate tribunal was justified in holding that the transfer of property under dispute was not a gift ? (2) whether there was any material before the appellate tribunal to support its finding that the assessee had in.....
Judgment:

A.P. Sen, C.J.

1. This judgment will also dispose of Miscellaneous Civil Case No. 668 of 1972 (CIT v. Agha Abdul Jabbar Khan) and Miscellaneous Civil Case No. 144 of 1973 (CIT v. Agha Abdul Jabbar Khan).

2. These three cases pertain to the assessment year 1961-62, the previous year of which ended on March 31, 1961. The assessee is a Sunni Mohomedan. The question before the Income-tax Appellate Tribunal was whether the income from the property standing in the name of the assessee's wife, could be assessed as income of the assessee under the provisions of Sub-section (3)(a)(iii) of Section 16 of the Indian I.T. Act, 1922. According to the assessee, he had transferred for consideration the property, from which the income in question arose, to his wife for a consideration of Rs. 1,00,000. His case was that at the time of his marriage with the transferee, in 1930, a meher of Rs. 10,000 had been fixed. But, in February or March of the year 1960, in consultation with his legal advisers, he enhanced the meher to Rs. 1,00,000 and on April 1, 1960, he is supposed to have verbally transferred the property in question to his wife to discharge his meher, and mutation was effected in her name accordingly. The ITO did not accept the claim of the assessee. In his view, the transfer was a gift and not a transfer for consideration. In appeal, the AAC affirmed the conclusion reached by the ITO. On further appeal, the Income-tax Appellate Tribunal, Bombay Bench ' A ', came to the conclusion that the transfer was genuine as well as valid. In its view, it was open to the assessee to increase the meher, fixed at the time of marriage, on a subsequent date. It further held that the evidence on record established the enhancement pleaded by the assessee as well as the plea of transfer put forward by him. It also came to the conclusion that ever since the transfer, the wife of the assessee was in possession of the property transferred to her name. Hence, the income of that property could not be considered as the income of the assessee.

3. It will be noticed that the validity of the transfer was never in question before the Tribunal. However, feeling aggrieved, the Commissioner sought a reference under Section 66(1) of the Indian I.T. Act, 1922, on certain questions of law, said to arise out of the order of the Tribunal, namely :

' (1) Whether, having regard to the evidence on record, the Appellate Tribunal was justified in holding that the transfer of property under dispute was not a gift ?

(2) Whether there was any material before the Appellate Tribunal to support its finding that the assessee had in fact increased the dower debt from Rs. 10,000 to Rs. 1,00,000 ?

(3) Without prejudice to the questions Nos. 1 and 2 above, whether the Appellate Tribunal was justified in holding that the property transferred to the wife in consideration of dower debt did not attract the provisions of Section 16(3)(a)(iii) '

4. The Appellate Tribunal was, however, of the view that the only question of law that arose for reference was the one mentioned below :

'Whether, in the facts and circumstances of this case, the income from the property transferred to the assessee's wife for a consideration of Rs. 1 lakh could be assessed in the hands of the assessee under Section 16(3) of the Act?'

5. When the reference under Section 66(1) of the Act came up before the High Court, i.e., CIT v. Agha Abdul Jabbar Khan : [1968]69ITR36(MP) , Dixit C.J., speaking for the court, felt that the question, as formulated by the Tribunal, did not pointedly bring out the real question in controversy, but he thought that it was sufficiently wide to include within its ambit the following two questions :

' (i) Whether, on the facts and circumstances of the case, there could be, in law, an oral transfer of the property in lieu of rupees one lakh due as dower debt ?

(ii) If so, whether the income from the property is liable to be included in the assessable income under Section 16(3) of the Act '

6. The questions so framed were undoubtedly new questions of law. Nevertheless having regard to the fact that the transfer in question was a Hiba-bil-iwaz as contrasted from hiba, which according to the view expressed by the Nagpur High Court in Zaina Bi v. Jamalkhan, ILR [1949] Nag 426, was in reality a sale, it was observed (p. 38 of 69 ITR) :

' For the purpose of this reference, we accept the Tribunal's conclusions of fact. But it is plain that there cannot be oral transfer of immovable property worth a lakh of rupees in lieu of a dower debt of rupees one lakh. Such a transaction is a Hiba-bil-iwaz and requires a registered document : Mahabir Prasad v. Mustafa Husssin , and Zaina Bi v. Jamalkhan, ILR [1949] Nag 426. In the absence of any such document, the intended transfer was ineffective and the title to the property still resided in the assessee. That being so, no question can arise of invoking Section 16(3) of the Act and the income from the property continues to be, as before the intended and ineffective transfer, includible in the assessee's income. '

7. Feeling aggrieved, the assessee went up in appeal before the Supreme Court. Their Lordships of the Supreme Court in Agha Abdul Jabbar Khan v. CIT [1971] 82 ITR 872, while allowing the appeal, observed that the course adopted by the High Court was not permissible, stating (p. 875) :

' In our opinion, the High Court had no jurisdiction to raise new questions of law. The questions raised by it do not flow from the question referred to it for its opinion. The High Court's power under the Act is only to give its opinion on the questions of law referred to it by the Tribunal. It cannot take into consideration questions of law which have not been referred to it for its opinion. '

8. Earlier, their Lordships were pleased to observe that the question framed by the Tribunal appeared to them to be self-contradictory, stating (p. 874):

' If its findings are correct on fact as well as on law, there can be hardly any doubt that the income of the property in question cannot come within the scope of Section 16(3)(a)(iii).'

9. It was, however, urged on behalf of the revenue that, on the face of it, the transfer pleaded by the assessee was an invalid one and the story put forward by him was unbelievable. Their Lordships declined to go into the questions dealt with by the High Court, stating (p. 875) :

' We cannot go into those questions in this appeal because this court is subject to the same limitations, while hearing appeals against the orders of the High Courts in references under Section 66(1), as the High Courts are. Our advisory jurisdiction is no more extensive than that of the High Courts. '

10. In the result, their Lordships held that the question No. (1) as formulated by the High Court, relating to the validity of the transfer, was not covered by the questions referred by the Appellate Tribunal to the High Court for its opinion, and, therefore, the High Court could not, on the reference made under Section 66(1) of the Act, reframe new questions and answer the same. Their Lordships accordingly allowed the appeal and set aside the order of the High Court, with the direction that the case would go back to the High Court ' for considering the question referred to it for disposal, according to law. '

11. Totally misapprehending the decision of their Lordships in Agha Abdul Jabbar Khan v. CIT [1971] 82 ITR 872, a Division Bench of this court, consisting of Bishambar Dayal C. J. and Shiv Dayal J. by their order dated April 4, 1972, made the following directions :

' We accordingly direct that the case be sent back to the Tribunal to submit for our opinion the real question arising for decision in the case. It is for the Tribunal to decide what is the real question that arises for decision on the facts of the case. '

12. With respect, the Division Bench failed to realise that the matter was at the stage of Section 66(4) of the Indian I.T. Act, 1922, and not that of Section 66(2). Faced with the piquant situation, the Appellate Tribunal had no other alternative but to make a fresh reference under Section 66(1) because, in the meanwhile, the Commissioner had moved an application under Section 66(1) of the Indian I.T. Act, 1922 (Miscellaneous Civil Case No. 668 of 1972--CIT v. Agha Abdul Jabbar Khan), referring to the High Court the following question for its opinion, namely :

' Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the income from the property standing in the name of the assessee's wife could not be included in the assessable income of the assessee under Section 16(3) of the Income-tax Act, 1922 '

13. It will be noticed that the question now referred is substantially the same as the one originally referred under Section 66(1) of the Indian I.T. Act, 1922, which gave rise to this reference under Section 66(1) of the Act. In this connection, we may mention that in Misc. Civil Case No. 144 of 1973 (CIT v. Agha Abdul Jabbar Khan) the Commissioner has come forward with an application under Section 66(2) of the Act for requiring the Tribunal to refer the following two questions, namely :

' 1. Whether, on the facts and circumstances of the case, there could be, in law, an oral transfer of the property in lieu of rupees one lakh due as dower debt ?

2. If so, whether the income from the property is liable to be included in assessable income under Section 16(3) of the Act '

14. Incidentally, these are the questions which were sought to be framed by the High Court in CIT v. Agha Abdul Jabbar Khan : [1968]69ITR36(MP)

15. Shri Khirwadkar, learned counsel for the Commissioner, strongly relies upon the following observations of their Lordships of the Supreme Court in Agha Abdul Jabbar Khan v. CIT [1971] 82 ITR 872:

' If the High Court thought that the question referred to it did not bring out the real point in issue it was open to it to call for a fresh statement of the case and direct the Tribunal to submit for its opinion the real question arising for decision.'

16. He contends that this was in the nature of a direction made by the Supreme Court while remitting the reference under Section 66(1) of the Act for rehearing. It is urged that the Division Bench consisting of Bisham-bhar Dayal C.J. and Shiv Dayal J. was, therefore, competent in passing the order dated April 4, 1972, to require the Tribunal to submit for its opinion ' the real question arising for decision in the case '. Obviously, their Lordships were unable to find out what the real question was. We, however, refrain from going into the matter any further.

17. Learned counsel for the Commissioner further contends that the Supreme Court had remanded the case to the High Court for its disposal ' according to law '. This, according to the learned counsel, meant that the court had to decide the question referred, according to law, i.e., according to the provisions of Section 66(1) of the Indian I.T. Act, 1922. If it felt that the question referred to it did not bring out the real point in issue, it was open to it to call for a fresh statement of the case and direct the Tribunal to submit, for its opinion, the real question arising for decision. We are afraid, that again, would bring it back to the stage of Section 66(4) of the Act and not to that of 66(2). If the Commissioner felt aggrieved by the refusal of the Tribunal to refer the question, as to the validity of the transaction, under Section 66(1) of the Act, he should have moved the court on the earlier occasion, under Section 66(2). Not having availed of that remedy at the appropriate stage, he cannot now resort to Section 66(2). That apart, on the findings reached by the Appellate Tribunal, the question as to the validity of the transaction does not really arise, at least in the assessment year in question.

18. The Appellate Tribunal has referred the self-same question, over again, to the High Court for its opinion. There are only two alternatives open, as indicated by their Lordships in CIT v. Indian Molasses Co. P. Ltd. : [1970]78ITR474(SC) in these words (p. 482) :

' Two courses are now open to us : to call for a supplementary statement of the case from the Tribunal ; or to decline to answer the question raised by the Tribunal and to leave the Tribunal to take appropriate steps to adjust its decision under Section 66(5) in the light of the answer of this court. If we direct the Tribunal to submit a supplementary statement of the case, the Tribunal will according to the decisions of this court in New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax : [1959]37ITR11(SC) , Petlad Turkey Red Dye Works Co. Ltd. v. Commissioner of Income-tax : [1963]48ITR92(SC) and Keshav Mills Co. v. Commissioner of Income-tax : [1965]56ITR365(SC) be restricted to the evidence on the record and may not be entitled to take additional evidence. That may result in injustice. In the circumstances, we think it appropriate to decline to answer the question on the ground that the Tribunal has failed to consider and decide the question whether the expenditure was laid out or expended wholly and exclusively for the purpose of the business of the company and has not considered all appropriate provisions of the statute applicable thereto. It will be open to the Tribunal to dispose of the appeal under Section 66(5) of the Indian Income-tax Act, 1922, in the light of the observations made by this court after determining the questions which ought to have been decided.'

19. As to the first course, no useful purpose will be served in calling for a supplementary statement of the case under Section 66(4). This is because, as indicated by their Lordships, the Tribunal will, according to the decisions of the Supreme Court in New Jehangir Vakil Mills Ltd. v. CIT : [1959]37ITR11(SC) , Petlad Turkey Red Dye Works Co. Ltd. v. CIT : [1963]48ITR92(SC) and Keshav Mills Co. v. CIT : [1965]56ITR365(SC) be restricted to the evidence on the record and may not be entitled to take additional evidence. Indeed, the Tribunal, in this particular case, has come to a definite conclusion that (1) there was, in fact, a transfer, and (2) the transfer was for adequate consideration. This being the position, there is no other alternative but to decline to answer the reference.

20. Shri Khirwadkar, learned counsel for the Commissioner, then pointed out the decision of their Lordships in Raghunath Prasad Poddar v. CIT : [1973]90ITR140(SC) . There, Mr. Sen, appearing for the assessee, relying upon the decision of the Supreme Court in Duni Chand Rataria v. Bhuwalka Brothers Ltd., : [1955]1SCR1071 , urged that the court should accept the trade practice pleaded by the assessee and straightaway allow the appeals. Neither the ITO, nor the AAC, nor even the Appellate Tribunal, had gone into the questions, firstly, as to whether what was the trade practice at the relevant time, and, secondly, whether the last buyers had taken actual delivery of the goods covered by the pucca delivery orders. They concentrated their attention solely on the question whether the assessee had given delivery of the goods covered by the pucca delivery orders to the transferees. That was not the relevant issue. The crucial question of fact to be decided was whether the last buyers of the pucca delivery orders had taken actual delivery of the goods covered by the pucca delivery orders. In these circumstances, their Lordships in Raghunath Prasad Poddar v. CIT : [1973]90ITR140(SC) remanded the case to the Tribunal for rehearing the appeals, stating (p. 147) :

' All that we can do is either to call for a supplementary statement from the Tribunal or to remand these cases to the Tribunal for a fresh hearing. As seen earlier, the authorities under the Act have completely misdirected themselves as to the questions of fact to be decided. Hence, there is need for a fresh enquiry. Therefore, it will be in the interest of the parties to remand the cases to the Tribunal for a fresh enquiry on the lines suggested earlier. We order accordingly. The Tribunal may take additional evidence on the questions mentioned earlier. The parties may be given reasonable opportunity to adduce additional evidence, both documentary as well as oral.'

21. We may also mention that a similar course was adopted in CIT v. George Henderson & Co. Ltd. : [1967]66ITR622(SC) and CIT v. Greaves Cotton & Co. Ltd. : [1968]68ITR200(SC) .

22. Their Lordships' decision in CIT v. Indian Molasses Co. Ltd. : [1970]78ITR474(SC) and Ragunath Prasad Poddar v. CIT : [1973]90ITR140(SC) lays down the proposition that if the court declines to answer the question but merely lays down the legal principles, the Tribunal is entitled, while disposing of the case under Section 66(5) and (6) of the Indian I.T. Act, 1922, to' take additional evidence. Kanga and Palkivala's Income-tax, Seventh Edn., Vol. I, p. 1164.

23. For the foregoing reasons, the answer, to the question referred by the Tribunal is self-evident, as observed by their Lordships in Agha Abdul Jabbar Khan v. CIT [1971] 82 ITR 872 and, therefore, we decline to answer it. In consequence, the application made by the Commissioner underSection 66(2) of the Indian I.T. Act, 1922, is rejected as untenable. There shall be no order as to costs.


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