1. This appeal, by certificate granted under s. 66A(2) of the IndianIncome-Tax Act, 1922, hereinafter referred to as the Act, read with s. 261 ofthe Indian Income-Tax Act, 1961, is directed against the judgment of theRajasthan High Court in a consolidated reference made to it by the Income TaxAppellate Tribunal, Delhi Branch, under s. 66(1) of the Act. This appealrelates to the assessment year 1943-44 and the relevant question with which weare concerned is as follows :
'Whether the profit on the amounts received by theassessee's bankers in British India as price of goods sold by the assessee onrailway receipts in the names of the consignees or as price of goods deliveredex-godown Bhilwara was liable to tax under the Indian Income-Tax Act ?'
2. This question was referred at the instance of the appellant and the itemin dispute now before us is the item amounting to Rs. 2,73,488, which was heldnot liable to taxation by the Appellate Tribunal. The question which arises inthis appeal is whether the Tribunal was right. The first submission, however,of Mr. A. V. Viswanatha Sastri, the learned counsel for the appellant, is thatthe High Court has not dealt with this question in- so far as it relates to thissum. Mr. Desai, on the other hand, contends that the appellant has not appealedas far as this item is concerned; and, therefore, before we attempt to answerthe question we must first see whether the appellant's appeal covers this item.
3. Mr. Desai refers us to the petition for leave to appeal to the SupremeCourt, filed in the High Court, and says that there is no express mention ofthe item of Rs. 2,73,488. He is right as far as this is concerned, but theappellant apparently felt it was not necessary to mention expressly this item.Mr. Sastri points to paras 12 and 13 of the petition which read as follows :
'12. That on account ofapplying the principle of accrual basis and allowing apportionment of profitbetween the manufacturing and selling processes in the ratio of 75% : 25% therevenue that would be lost to the Department would be approximately Rs. 36,000.
13. That the point of law decidedby this Hon'ble Court while returning the answer to question No. 2, namely,whether the liability to pay tax can be fastened on the assessee on receiptbasis or accrual basis is a substantial question of law and is or great publicand private importance and would from important precedent governing thenumerous other cases. The tax effect is also of considerable value.'
4. Further, Mr. Sastri points out that the first seven paras of the petitionwhich deal with the facts and the proceedings before the income Tax Authoritiesare general and cover the said item of Rs. 2,73,488; also the grounds of appealNos. 1 and 2, are very general and cover the item in dispute. It is true, aspointed out by Mr. Desai, that the High Court in granting leave to appeal tothe Supreme Court did not expressly deal with this item at all, but then theHigh Court was dealing with the question of law as such and was not advertingto the facts in detail. Be that as it may, the appellant has filed an appeal inrespect of the assessment year 1943-44 and the only possible question that canarise in this appeal is regarding the disputed item of Rs. 2,73,488, and we donot feel justified in accepting this technical objection and debarring theappellant from urging that this item is taxable.
5. Now, coming to the merits of the submission of Mr. Sastri, we find thatthe Rajasthan High Court has omitted to consider the question of the taxabilityof this item. This item was exempted by the Appellate Tribunal. In thisconnection the Appellate Tribunal observed as follows :
'... but the assessee would not be liable to tax inrespect of goods sold by the assessee to the purchasers on railway receipts inthe names of consignees. In respect of these goods, the delivery of the goodswas in Bhilwara, the goods were appropriated there and not in British India andthe title in the goods had passed in the Indian State and not in British India.The assessee cannot, therefore, be assessed on the amounts received by theassessee from consignees on railway receipts in the names of the consignees. Itis true that the consignees did pay the price of the goods to the assessee'sbankers in British India but thereby the bankers in British India had becomethe agents of the consignees and not the agents of the assessee. In this viewof the matter the inclusion of the receipts on railway receipts addressed tothe consignees cannot be justified. In the assessment years 1944-45 and 1945-46none of the railway receipts was in the name of the consignees. The sales wereon railway receipts in the name of self or were in cash. It was only in theassessment year 1943-44 that the railway receipts were in the names of theconsignees and they were to the tune of Rs. 2,73,488. The amount will,therefore, be excluded from the total receipts of Rs. 12,62,911.'
6. The High Court noticed the exclusion of Rs. 2,73,488 in these words :
'The Tribunal also found that it was only in theassessment years 1944-45 and 1945-46 that sales were effected by the assesseeon railway receipts in the names of the consignees and that such sales amountedto Rs. 2,73,488. The Tribunal accordingly deleted from the aggregate amountsales of Rs. 12,72,911 and Rs. 2,73,488 obviously treating the amounts deletedas not liable to tax.'
7. Apparently the mention of 1944-45 and 1945-46 is a clerical mistake andwe should read it as 1943-44. Apart from the above words, we do not find anyreference to the figure of Rs. 2,73,488 in the rest of the judgment. Further,the main reasoning of the High Court concerns the items of Rs. 1,14,687 in theyear 1945-46 and Rs. 3,55,289 during the year 1946-47. These amounts had beenreceived by the assessee by discounting hundies with the Bharat Bank, Bhilwara,and the Rajasthan High Court held that the assessee was liable to tax inrespect of these items not on receipt basis but on accrual basis. The item ofRs. 2,73,388 was not realised in Bhilwara by discounting of hundies but inother circumstances.
8. Two courses are open to us in this appeal; either we should on thematerial here on the record decide whether Rs. 2,73,488 is taxable or not orremand the case to the High Court for decision. We have decided to take thelatter course because the relevant facts in respect of this item of Rs.2,73,488 are not clear and the counsel for the assessee and for the revenuehave not been able to agree upon the facts on which we should decide thisquestion. We regret having to adopt the latter course because this appealconcerns the assessment year 1943-44 and it is now 1965; but under thecircumstances we have no choice except to send the case back to the High Court.
9. We may mention, however, that Mr. Desai contends before us that the factsare clear and he relies on six documents which are printed in the paper-book,namely :-
(1) The Contract form - AnnexureEx. 'T';
(2) Copy of the postcard fromShiv Nath Radha Krishna Somani, Beawar, to M/s. Mewar Textile Mills, Bhilwara,dated March 7, 1942 - Annexure Ex. 'U';
(3) Copy of the advice fromUmedmal Abheymal, Ajmer to Mewar Textile Mills, dated March 7, 1942 - AnnexureEx. 'V';
(4) Copy of the despatchinstructions from Shiv Nath Radha Krishna Beawar to M/s. Mewar Textile MillsLtd., Bhilwara, dated March 11, 1942; Annexure Ex. 'W';
(5) Copy of letter to M/s.Shivnath Radha Krishna Beawar, dated March 12, 1942, Annexure Ex. 'X'; and
(6) Copy of the Journal Entry inthe Books of the Mills of Rs. 9,000 Annexure Ex. 'Y'.
10. He invites us to treat these documents as a sample of the manner inwhich the goods were sent from Bhilwara, to the consignee in British India andthe amount of Rs. 2,73,488 was received. But we notice that these verydocuments were filed an annexures to the assessee's application under s. 66(1)of the Act in respect of questions other than question No. 2, which wasreferred by the Tribunal at the instance of the appellant and, therefore, wefeel a doubt whether these documents could safely be treated as relating to theitem of Rs. 2,73,488.
11. Before we conclude we must mention a matter of procedure. The AppellateTribunal at the instance of the assessee attached a number of documents to thestatement of the case, including the six documents mentioned above, but we findno mention of these documents either in the Appellate Order of the AppellateTribunal or in the body of the statement of the case. We feel that it is notconsistent with the advisory jurisdiction of a High Court under the Act thatthe Appellate Tribunal should attach to the statement of the case documents,other than the proceedings of the income Tax authorities, which are notmentioned and discussed either in its own appellate order or in the statementsof the case. Suppose a dispute arises as to the interpretation of a document whichis annexed in the manner above mentioned. If the High Court decides the disputeit would be deciding questions not decided by the Tribunal, and which the HighCourt would be incompetent to decide, under the Indian Income Tax Act.
12. In the result we accept the appeal, set aside the order of the HighCourt of Rajasthan as far as the assessment year 1943-44 is concerned andremand the case to the High Court. The High Court will dispose of the referencein accordance with law. In view of the circumstances of the case, there will beno order as to costs.
13. Appeal allowed.