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Commissioner of Income-tax Vs. V. Natwerlal and Co. - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Ahmedabad
Decided On
Judge
Reported in(1985)11ITD382(Ahd.)
AppellantCommissioner of Income-tax
RespondentV. Natwerlal and Co.
Excerpt:
.....out of the tribunal's order in it appeal no. 2029 (ahd.) of 1982, dated 13-12-1983, to the hon'ble gujarat high court: whether, on the facts and in the circumstances of the case, the tribunal was right in law in upholding the order of the commissioner (appeals) setting aside the order of the income-tax officer and directing to make three separate assessments of the assessee-firm instead of making only one assessment for the entire accounting year 2.1 during the accounting period relevant to the assessment year under consideration, one of the partners died on 21-1-1975. the remaining partners admitted the widow of the deceased partner and her minor son to the benefits of partnership. this firm dissolved on 9-6-1975 when widow of the deceased and one of the earlier partners retired from.....
Judgment:
1. By this reference application, the Commissioner requires the Tribunal to refer the following question, said to be a question of law arising out of the Tribunal's order in IT Appeal No. 2029 (Ahd.) of 1982, dated 13-12-1983, to the Hon'ble Gujarat High Court: Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the order of the Commissioner (Appeals) setting aside the order of the Income-tax Officer and directing to make three separate assessments of the assessee-firm instead of making only one assessment for the entire accounting year 2.1 During the accounting period relevant to the assessment year under consideration, one of the partners died on 21-1-1975. The remaining partners admitted the widow of the deceased partner and her minor son to the benefits of partnership. This firm dissolved on 9-6-1975 when widow of the deceased and one of the earlier partners retired from the firm so that from 10-6-1975, two surviving adult partners and a minor constituted a new firm. Before the end of the relevant accounting year, the minor became major and elected to continue as a full-fledged partner.

2.2 The ITO rejected the claim of the assessee of three separate assessments of the firm and made only one assessment for the entire accounting period relevant to the assessment year.

2.3 The Commissioner (Appeals), in the order dated 20-7-1982, allowed the appeal of the assessee and directed the ITO to make three assessments separately relying upon the decision of the Gujarat High Court in the case of Addl. CIT v. Harjivandas Hathibhai [1977] 108 ITR 517.

2.4 On appeal by the revenue, the Tribunal upheld the order of the Commissioner (Appeals) following the decision of the Gujarat High Court in the above-mentioned case.

3. The reference application was fixed for hearing. On behalf of the assessee objection was raised in writing, the material part of which is reproduced below: The Income-tax Department has developed practice of filing unnecessary appeals on the same point which has already been decided against them by the Hon'ble Gujarat High Court. This is something very much aggrieving.

If the decision of the Gujarat High Court on the point involved is not accepted by the department; in particular case, it does not mean that they should file appeals in number of cases and thereby cause hardships to number of small assessees like us.

At the time of hearing of our original appeal, we had requested to keep the hearing pending till the decision of the Supreme Court in the case of Harjivandas Hathibhai's case (supra), because we were sure that the department would drag us before the Hon'ble Gujarat High Court and then before the Supreme Court, which would cause us undue hardships by waste of time and money.

The tax effect in our case is not very big. Moreover, it is certain that the Hon'ble Gujarat High Court is bound by their own decision in the case of Harjivandas Hathibhai's case (supra), and so fate of the Income-tax Department appeal before the Hon'ble Gujarat High Court is evident and when the Hon'ble High Court has decided the same point against the Income-tax Department it is futile to give them permission to file appeal before the Hon'ble Gujarat High Court.

The point of law decided by the Gujarat High Court against the Income-tax Department is final and applicable to whole of Gujarat till it is altered or reversed by the Hon'ble Supreme Court, and in view of above, we request the Hon'ble Tribunal to save us from further litigation by not granting permission to the Income-tax Department to file appeal before the Hon'ble Gujarat High Court. We request to reject the department's reference application and oblige.

4. On going through the reference application and considering the matters connected with the present reference, we are of the following views: 4.1 In this case, the revenue could have adopted any of the following ways: 1. On decision of the Hon'ble High Court of any State, it could have either issued necessary instructions to the Commissioner either to accept the decision in favour of the assessee or to move for necessary amendment in the Act including that for limitation where appeal is pending before the Supreme Court.

2. It could take the matter to the Supreme Court only in selected cases but not in all cases. This is on the basis that it is not necessary to take up all cases to the Supreme Court because the issue involved is not of universal or general importance. The point involved is also not recurring, affecting either all assessees or even the case of the same assessee. Besides, the revenue involved by way of loss of R.F. tax, if any, is bound to be insignificant.

3. To take an undertaking from assessee that if ultimately the Supreme Court decision is in favour of the revenue, the order shall be rectified in appropriate cases without being bound by limitation, if any.

4. To carry the matter to the Supreme Court in each and every case solely on the ground that decision of the High Court under consideration is not acceptable.

4.2 Basically, the proceeding for assessment, appeal, etc., is not proceeding in nature of Us or adjudication of civil dispute and, therefore, the revenue officials exercising power to assess and recover tax are not acting as judges deciding litigation between State and taxpayer; they are the administrative authorities, whose function and powers are to ascertain correct income and tax thereon in each case. This presupposes inherent duty of not dragging the individual assessee to litigation galore in appropriate cases.

4.3 In our opinion, this is not a fit case to allow the revenue to go to the High Court as, in our opinion, no referable question of law in this case arises. The reference applied for by the revenue begs a question, whether any question of law, even if arising out of the order of the Tribunal, requires to be referred. The answer is obviously no, as such application is not a fit case for reference.

1. I have considered the views of my learned brother but, with respect, I am unable to agree with him.

2. An application for referring a certain question for the opinion of the Hon'ble High Court has been made to this Tribunal. The question is, indisputably, a question of law. There is no decision of the Supreme Court on that question. We are, therefore, bound to make a reference to the High Court. The department might or might not have any options before it regarding the making of this application, but that is a matter for the department to consider. We cannot make any comment on it, much less reject the application on that ground. The position in law is as plain as that. In this situation, I am definitely and firmly of the view that the question has to be referred to the Hon'ble Gujarat High Court. Order under Section 255(4) of the income-tax act, 1961 - Following question is referred for the opinion of Third Member: Whether, on the facts and in the circumstances of the case, the question as proposed by the Commissioner of Income-tax, Surat, is required to be referred to the Hon'ble Gujarat High Court for its opinion 1. Consequent to a difference of opinion between the two learned Members before whom an application for reference to the Hon'ble High Court of a question of law came up for consideration, the following point of difference is referred to: Whether, on the facts and in the circumstances of the case, the question as proposed by the Commissioner of Income-tax, Surat, is required to be referred to the Hon'ble Gujarat High Court for its opinion 2. There were two changes in the constitution of the assessee-firm during the previous year relevant to the assessment year under appeal.

Thus, according to the assessee, there were three periods, for which separate returns were filed and separate assessments were sought to be made. The ITO made one assessment for the entire accounting period relating to the assessment year. The Commissioner (Appeals) accepted the assessee's plea that three separate assessments should be made one for each period. He relied on the decision of the Gujarat High Court in Harjivandas Hathibhai's case (supra). On appeal, the Tribunal confirmed the order of the Commissioner (Appeals). Hence, the application for reference to the High Court by the department.

3. The learned Accountant Member rejected the reference application, firstly, for the reason that the matter was covered by the decision of the Hon'ble High Court. He also felt that in the circumstances of the case including the tax involved, it was not proper to drag the individual assessee into litigation. The learned Judicial Member, however, suggested a reference for the simple reason that there was a question of law involved and there is no decision of the Supreme Court on that question.

4. In deciding the point of difference, it is not necessary for me to go into the circumstances pointed out by the learned Accountant Member or the blank acceptance of the reference application suggested by the learned Judicial Member. In Application No. 87 of 1980, decided on 15-9-1980, in the matter of Vipinchandra D. Shah, the Hon'ble Gujarat High Court has laid down that even though there is a decision of the Hon'ble High Court on a question of law, the Tribunal should refer the matter under Section 256(1) of the Income-tax Act, 1961. Even though there are decisions to the contrary of other High Courts such as the Punjab and Haryana High Court in CIT v. Shiv Parshad [1984] 146 ITR 397, in the light of the binding decision of the Hon'ble Gujarat High Court, the Tribunal has no option but to make the reference. I, therefore, agree with the learned Judicial Member that a reference must be made though not for the reasons stated by him. The matter will go back to the Bench, which heard the case for disposal.


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