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L. Bansi Dhar and Sons Vs. the Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtDelhi High Court
Decided On
Case NumberCivil Writ Petition No. 1922 of 1974 and Income Tax Reference Nos. 82 and 83 of 1973
Judge
Reported inILR1977Delhi393; [1978]111ITR330(Delhi)
ActsIncome Tax Act, 1922; Income tax Act, 1961 - Sections 66(1); Code of Civil Procedure (CPC), 1908 - Sections 151
AppellantL. Bansi Dhar and Sons
RespondentThe Commissioner of Income-tax
Advocates: Ravnder Narain,; T.A. Ansari,; D.N. Mishra,;
Cases Referred and Ramkarandas v. Bhagwandas
Excerpt:
income tax act, 1922/1961--reference under section 66 (1)/256(1)--application under section 151, c. p. c., filed in, for restraining recovery of tax until disposal of--if lies--inherent jurisdiction, whether high court has, as a 'court', to act 'ex debito institiae'--whether high court (or supreme court) has in reference cases under the act--reference to section 265 in proviso to section 262(1), intendment of--shall be payable' and 'shall be paid' distinguished--whether act excludes court's inherent jurisdiction--whether appellate tribunal proper forum for stay application when reference pending in high court (or supreme court).; in the above references the income-tax tribunal referred to the court the question, 'whether....the amount....received by....[x] from the insurance company on.....t.v.r. tatachari, c.j.(1) this is an application filed by the assessed, lala bansi dhar and sons, under section 151 of the code of civil procedure in the two income-tax references nos. 82 and 83 of 1973 relating to the assessment years 1960-61 and 1962-63 respectively, praying that this court may grant an order of injunction restraining the commissioner of income-tax (1), central revenue, building and/or his subordinate officers including the income-tax officer, company circle (iii), from enforcing and/or realizing the demand raised in the aforesaid assessment years 1960-61 and 1962-63, and from taking any steps for the recovery thereof till the disposal of the references pending in this court. (2) for a proper appreciation of the above prayers, it is necessary to state the relevant.....
Judgment:

T.V.R. Tatachari, C.J.

(1) This is an application filed by the assessed, Lala Bansi Dhar and Sons, under Section 151 of the Code of Civil Procedure in the two Income-tax References Nos. 82 and 83 of 1973 relating to the assessment years 1960-61 and 1962-63 respectively, praying that this Court may grant an order of injunction restraining the Commissioner of Income-tax (1), Central Revenue, Building and/or his subordinate officers including the Income-tax Officer, Company Circle (III), from enforcing and/or Realizing the demand raised in the aforesaid assessment years 1960-61 and 1962-63, and from taking any steps for the recovery thereof till the disposal of the References pending in this Court.

(2) For a proper appreciation of the above prayers, it is necessary to state the relevant facts. The assessed is a Hindu Undivided Family (hereinafter referred to as the H.U.F). The karta of the H.U.F. is Lala Bansi Dhar. His father, Lala Murli Dhar, died in the year 1949 in an air-crash. On the death of the father, a sum of Rs. 2,49,874.00 was received by Lala Bansi Dhar from an Insurance Company on account of an accident insurance policy covering the risk to the life of the deceased. The income derived from the said amount was treated as the income of Lala Bansi Dhar and was assessed in his personal assessment. Lala Bansi Dhar was married on 3rd February, 1953, and a son, Tilak Kumar, was born on 3rd February, 1956. The income from the insurance amount continued to be assessed in the personal assessment of Lala Bansi Dhar even after the formation of the H.U.F. on his marriage and birth of a son, and continued to be so assessed till the assessment year 1959-60.

(3) For the first time in the assessment year 1960-61, the Income-tax Officer treated the income from the Insurance amount as that of the H.U.F. and assessed the same in the hands of the H.U.F. On appeal by the assessed H.U.F., the Appellate Assistant Commissioner set aside the assessment holding that the income was the personal income of Lala Bansi Dhar and not of the H.U.F. Against that order, the Revenue preferred an appeal to the Income-tax Appellate Tribunal. A similar appeal was also preferred to the Tribunal by the Revenue for the assessment year 1962-63. Both the appeals were disposed of by the Tribunal by a common order on 23rd November, 1970, whereby it held that the income in question was that of the H.U.F. and was liable to be assessed as such.

(4) Then, at the instance of the assessed H.U.F., the Tribunal referred to this Court the following question under Section 66(1) of the Income-tax Act, 1922/Section 256(1) of the Income-tax Act, 1961, as arising out of the said common order :-

'WHETHER on the facts and in the circumstances of the case, the amount of Rs. 2,49,874.00 received by L. Bansi Dhar from the Insurance Company on account of the accident insurance policy covering the risk to the life of his father, L. Murali Dhar, is correctly treated as ancestral property of the H.U.F. of which L. Bansi Dhar is the karta?'

The two references have since been registered as Income-tax References Nos. 82 and 83 of 1973, and it is in the said References, that the present application for injunction and stay has been filed by the assessed H.U.F. under Section 151 of the Code of Civil Procedure invoking the inherent jurisdiction of this High Court.

(5) It is stated in the application for stay that for the subsequent assessment years 1963-64 and 1964-65, similar appeals were filed by the Revenue before the Tribunal and the same were pending, that for the assessment years 1965-66 to 1969-7G, however, the orders of the Appellate Assistant Commissioner were against the assessed, and the assessed H.U.F. had preferred appeals to the Tribunal which were also pending, that in the said appeals preferred by the assessed H.U.F., on application by the assessed, the Tribunal granted stay of the recovery of the tax demanded on the condition that the assessed should furnish adequate security to the satisfaction of the Income-tax Officer, that since the matter relating to the two assessment years 1960-61 and 1962-63 is before this Court in References under Section 66(1) of the Income-tax Act, 1922/Section 256(1) of the Income-tax Act, 1961, similar order of stay should be granted by this Court, that no prejudice would be caused to the Revenue as in respect of the same income, tax had already been paid in full by Lala Bansi Dhar in his personal assessment and that on the other hand, great prejudice would be caused to the assessed if in spite of full tax being paid by its Karta in his personal assessment, the H.U.F. is again asked to pay tax over again in respect of the same income.

(6) In opposition to the application, a counter affidavit has been filed on behalf of the respondent in which a preliminary objection has been raised that under the provisions of the Income-tax Act, this High Court exercises only an advisory or consultative jurisdiction and has consequently no jurisdiction or power to grant stay of the recovery of tax as prayed for in the application, and that, in fact, the grant of stay by the High Court and the Supreme Court has been prohibited by the Act. On merits, however, it was admitted that tax had been paid by Lala Bansi Dhar in his personal capacity on the basis of the s:ame income which had been returned by him in his individual income-tax return. Yet, it was submitted that as a result of the impugned order of the Appellate Tribunal, the income from the insurance amount is assessable in the hands of the H.U.F. and the H.U.F. is obliged to pay the tax unless and until the question of law referred to this Court is answered in favor of the assessed, and that the assessed will not be prejudiced if no stay is granted and the tax is realised, as it will get a refund of the tax paid in case the references are answered in its favor.

(7) The assessed filed a rejoinder reiterating the prayers in the application, and asserting that this Court has ample powers to grant the stay orders as prayed for.

(8) Similar applications for stay viz. C.M. No. 576 of 1974, C.M. No. 1624 of 1974, C.M. No. 770 of 1974 and C.M. No. 1309 of 1976 have been filed by certain other assesseds in I.T.C. No. 11 of 1974, I.T.C. No. 29 of 1974, I.T.Rs. Nos. 1 and 2 of 1974 and I.T.R. No. 59 of 1976 respectively. As a similar preliminary objection was raised by the Revenue in them also, we heard the arguments of the learned counsel for the assesseds in those applications also. We shall now deal with the preliminary objection.

(9) The question for determination is as to whether this Court, in a Reference to it under Section 66(1) of the Income-tax Act, 1922, or Section 256(1) of the Income-tax Act, 1961, has jurisdiction or power to pass an order granting stay of recovery of the tax pending the disposal of the Reference.

(10) Section 66(1) of the Income-tax Act, 1922, and Section 256(1) of the Income-tax Act 1961, provide for a reference to the High Court at the instance of the assessed or the Commissioner of Income- tax on a question of law arising out of the order of the Appellate Tribunal under Section 33(4) of the Act of 1922, or Section 254 of the Act of 1961, as the case may be. The various High Courts to which references lie from different parts of India are set out in Section 66(8) of the Act of 1922 and Section 269 of the Act of 1961. Section 257 of the Act of 1961 provides for such a reference by the Appellate Tribunal direct to the Supreme Court in the case of a conflict in the decisions of High Courts. There was no such provision in the Act of 1922. Section 66(5) of the Act of 1922 and Section 260(1) of the Act of 1961 provide that upon such a reference, the High Court or the Supreme Court, as the case may be, shall decide the question of law that has been referred and shall deliver its judgment thereon containing the grounds on which such decision is founded. The aforesaid sub-sections further provide that a copy of the judgment shall be sent to the Appellate Tribunal, and that it is then for the Appellate Tribunal to pass such orders as are necessary to dispose of the case conformably to such judgment. Section 66(6) of the Act of 1922 and Section 260(2) of the Act of 1961 make it clear that the costs of the reference shall be in the discretion of the Court.

(11) The Act of 1922 or the Act of 1961 does not contain any express provision empowering the High Court or the Supreme Court to grant stay of recovery of the tax pending the disposal of the reference before it. That is why the assessed has sought to invoke the inherent jurisdiction or power of this High Court. The learned counsel for the assessed relied upon the decision of a Division Bench of the Andhra High Court in Polisetti Narayana Rao v. Commissioner of Income-tax, Hyderabad, : [1956]29ITR222(AP) . In that case, Subba Rao CJ. and Bhimasankaram J., held that in a proper case the High Court has power under Section 151 of the Code of Civil Procedure (i.e. inherent jurisdiction) and Article 227 of the Constitution to order A stay of recovery of tax pending the disposal of the reference before it. The learned Judges referred to the observations of Woodroffe J. and Mookerjee J. in Hukum Chand Boid v. Kamalanand Singh, I.L.R. 33 Cal 927, regarding the inherent powers of a Court. In that case, a Subordinate Court made delivery of possession to a decree- holder after an unconditional order by the Appellate Court for stay of execution, but before such order could be communicated to it. As Section 545 of the Code of Civil Procedure of 1882 did not apply after the execution of a decree had been carried out, the question arose as to why security should not be taken from the decree-holder (respondent in the appeal) for the due performance of any decree which may be made by the Court in the appeal. It was held that-

'UNDER the principle indicated by S. 583 of the Code of Civil Procedure a decree of reversal necessarily carries with it the right to restitution of all that has been taken under the erroneous decree, and the appellate court, having seizing of the appeal, has, as ancillary to its duty to grant restitution, an inherent power in the exercise of which it can, notwithstanding that the decree appealed against has been executed, call upon the respondent to furnish security for the due performance of any decree, which may be made on the appeal.'

It was also held that-

'THE code of Civil Procedure binds all courts so far as it goes. It is not, however, exhaustive and does not affect previously existing powers, unless it takes them away; in matters with which it does not deal the Court will exercise an inherent jurisdiction to do that justice between the parties, which is warranted under the circumstances and which the necessities of the case require.'

Woodroffe J. observed at page 931 that-

'THE Court has, thereforee, in many cases, where the circumstances require it, acted upon the assumption of the possession of an inherent power to act ex debito justitiae and to do that real and substantial justice for the adminis-tration, for which it alone exists.'

Mookerjee J. observed at page 941 that-

'IT may be added that the exercise by Courts, of what are called their 'inherent powers' or 'incidental powers' is familiar in other systems of law, and such exercise is justified on the ground that it is necessary to make its ordinary exercise of jurisdiction effectual, because, 'when jurisdiction has once attached, it continues necessarily and all the powers requisite to give it full and complete effect can be exercised, until the end of the law shall be attained'

(See Works on Courts and their jurisdiction, Section 27, and Wells on jurisdiction of Courts, Chapter XVII).'

(12) In the alternative, the Division Bench of the Andhra High Court referred to Article 227 of the Constitution of India. The learned Judges pointed out that the power of 'superintendence' vested in the High Court under Article 227 is not merely administrative, but also judicial, as held by the Supreme Court in Waryam Singh v. Amarnath : [1954]1SCR565 They rejected a contention urged before them that the Supreme Court observed in State of Orissa v. Madan Gopal Rungta, 1952 (4) S.C.R. 28 , that Article 226 cannot be used for the purpose of giving interim relief as the only and final relief, and an interim relief can be granted only in aid of and as ancillary to the 'main relief' which may be available to the party on the final determination of his rights in a suit or proceeding, that Article 227 should be read in the light of the said interpretation put by the Supreme Court on Article 226, and that since in a reference to the High Court under the Income-tax Act, there is no 'main relief', as such, 'available to the party on final determination of his rights in the pending proceedings' and the answer of the High Court to the reference may at best indirectly involve the refund of a certain amount of tax collected from the assessed, but there will be no final determination by the High Court of any rights of the parties to the proceeding, no order of stay by way of interim relief can be made by the High Court. The learned Judges were of the view that the Supreme Court did not intend to define in Rungta's case the scope of the judicial power under Article 227, and that the broad contention that the High Court can, in no case, pass an order of stay of the recovery of the tax pending disposal of the reference, cannot be accepted. However, on the facts and circumstances of the case before them, the learned Judges declined to grant stay.

(13) The above decision of the Andhra High Court had directly dealt with the question under consideration. The said decision was incidentally referred to by the Supreme Court in Income-tax Officer, Cannanore v. M. K. Mohammed Kunhi, 71 I.T.R. 815, while dealing with the question as to whether the Appellate Tribunal has the power to grant stay of recovery of tax pending the disposal of the appeal before it. The Supreme Court did not, however, disapprove the view of the Division Bench of the Andhra High Court. No other High Court has taken a contrary view. The decision of the Andhra High Court was rendered in 1956 and has remained without any dissent expressed by any other High Court or the Supreme Court. We are unable to find any infirmity in the reasoning or the conclusion of the Andhra High Court, or any reason for unsettling the proposition of law enunciated years ago.

(14) Mr. Kirpal, learned counsel for the Revenue, however, urged certain aspects in support of his contention that the High Court has no inherent power or jurisdiction to grant stay of recovery of the tax pending the disposal of the reference before it. He submitted firstly that in a reference under Section 66(1) of the Act of 1922 or under Section 256(1) of the Act of 1961, the High Court's jurisdiction has been pointed out in decisions to be neither original nor appellate nor revisional, but only advisory or consultative and, thereforee, the High Court cannot be said to have any inherent jurisdiction or power to grant stay of recovery of the tax pending the disposal of the reference. The learned counsel referred us to a number of decisions in this connection.

(15) It is true that it has been pointed out in various decisions that the jurisdiction of the High Court in a reference under the Income-tax Act is a special jurisdiction of advisory or consultative nature and not original or appellate or revisional jurisdiction. But, it has to be noticed that it was so pointed out in all those decisions in the context of the power or jurisdiction of the High Court for passing an order answering the question referred to it, which question is related to the merits of the order of the Appellate Tribunal. On the other hand, the question with which we are concerned is the power of the High Court to exercise its inherent jurisdiction which is De hors the Income-tax Act, and to pass an order of stay which is not related to the merits of the order of the Appellate Tribunal Section 66(8) of the Act of 1922 and Section 269 of the Act of 1961 make it clear that the High Court mentioned in Section 66(1) of the former Act and Section 256(1) of the latter Act is the High Court duly constituted as such for the State or the Union Territory, as the case may be. It is well-settled that the High Court, as a 'Court', has inherent jurisdiction to ex debito justitiae if the circumstances of a case so demand. The inherent jurisdiction or power is inherent in the High Court, because it is a 'Court', and is unrelated to and independent of the nature of its jurisdiction, advisory, consultative, original, appellate or revisional, in the case before it. The passing of an order of stay of recovery of tax by a High Court in exercise of its inherent jurisdiction is in no way connected with the nature of its jurisdiction in the reference before it. Though the High Court gets seizin of the case because of the reference, it is still a ''Court' in dealing with the reference. As pointed out by the Supreme Court in Brajinandan Sinha v. Jyoti Narayan, : 1956CriLJ156 'in order to constitute a Court in the strict sense of the term, an essential condition is that the Court should have, apart from having some of the trappings of a judicial tribunal, power to give a decision or a definitive judgment which has finality and authoritativeness which are the essential tests of a judicial pronouncement'. In a reference under the Income-tax Act, the High Court or the Supreme Court, as the case may be, gives 'a decision or a definitive judgment' on the questions referred. In the case of a High Court. its judgment in the reference is final unless altered on appeal to the Supreme Court, and it has authoritativeness as it is binding on the Appellate Tribunal and the parties, and the Tribunal has to pass necessary orders under Section 260(1) ''conformably to the judgment' The High Court or the Supreme Court is thus a 'Court' even when it deals with a reference under the Income-tax Act. As such, it has its own inherent jurisdiction irrespective of the nature of its jurisdiction in the reference. In other words, it has inherent jurisdiction by virtue of its being a 'Court', and it has consultative or advisory jurisdiction by virtue of the provisions in Section 66 of the Income-tax Act of 1922 or in Section 256 of the Income-tax Act of 1961. It can, thereforee, act in exercise of the former jurisdiction for granting stay of recovery of the tax pending the disposal of the reference. while it acts in exercise of the latter jurisdiction in hearing and answering the question referred to it. Hence, the fact that the nature of the jurisdiction of the High Court in the reference is advisory or consultative and not original or appellate or revisional is immaterial.

(16) We shall now refer to the decisions cited by the learned counsel. In Seth Premchand Satramdas v. The State of Bihar, : [1951]19ITR108(SC) , the Supreme Court held that no appeal lay to the Federal Court against an order of the Patna High Court dismissing an application under Section 21(3) of the Bihar Sales Tax Act No. Vi of 1944 (which is similar to Section 66(3) of the Income-tax Act of 1922) for directing the Board of Revenue, Bihar, to state a case and refer it to the High Court, as such an order is not a 'final order' within the meaning of clause 31 of the Letters Patent of the Patna High Court, and it is also not an order passed by the High Court in the exercise of either its appellate or original jurisdiction within the meaning of the said clause, but was one passed in exercise of its consultative jurisdiction.

(17) In New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax, : [1959]37ITR11(SC) , the Supreme Court held that the jurisdiction of the High Court under Section 66 of the Income-tax Act, 1922, is a consultative or advisory jurisdiction, and the High Court cannot under Section 66(4) refer the case back to the Tribunal to find new facts or embark upon a new line of enquiry which would enable either the assessed or the Commissioner to make out a case which had never been made during the course of the proceedings before the Income-tax authorities or the Tribunal so far.

(18) In Commissioner of Income-tax, Bombay v. Sciendia Steam Navigation Co. Ltd., : [1961]42ITR589(SC) . the Supreme Court held that the jurisdiction of the High Court in a reference under Section 66 of the Income-tax Act of 1922 is a special one. different from its ordinary jurisdiction as a Civil Court, that in hearing the reference it does not exercise any appellate or revisional or supervisory jurisdiction over the Tribunal, but acts purely in an advisory capacity, that it gives the Tribunal advice, but ultimately it is for the Tribunal to give effect to that advice, and that it is of the essence of such a jurisdiction that the Court can decide only questions which are referred to it and not any other question. It has to be noted that in granting stay of recovery of the tax under its inherent jurisdiction or power, the High Court does not decide any question at all.

(19) In Petlad Turkey Red Dye Works Co. Ltd. v. Commissioner of Income-tax, : [1963]48ITR92(SC) , the Supreme Court observed that the jurisdiction of the High Court under Section 66 of the Income-tax Act of 1922 is purely advisory and is confined to giving an opinion on a question of law arising out of the order of the Appellate Tribunal, that it has no jurisdiction to raise another question or to answer a different question, and that it may ask for a supplemental statement, but that statement also is to bs confined to the placing of facts already on the record.

(20) In K. S. Venkataraman and Co. (P) Ltd. v. State of Madras : [1966]60ITR112(SC) , the Supreme Court held that the Income-tax Appellate Tribunal being a creature of the statute, it can only decide the dispute between the assessed and the Commissioner in terms of the provisions of the Act, that the question of the virus of any of .the provisions is foreign to the scope of its jurisdiction, and that as no such question can be raised or can arise in the Tribunal's order, the High Court cannot possibly give in a reference any decision on the question of the virus of any provision. It was also held that an authority created by a statute cannot question the virus of that statute or any of the provisions thereof whereunder it functions, that it 'must act under the Act and not out side it', that if it acts on the basis of a provision of the statute which is ultra vires, to that extent it would be acting outside the Act, and that in that event a suit to question the 9 HCD/77-3 validity of such an order made outside the Act would certainly lie in a Civil Court. Mr. Kirpal sought to rely on the observation that an authority created by a statute must act under the Act and not outside it and to argue that the High Courts jurisdiction in the reference being one conferred by Section 66 of the Act of 1922 or Section 256 of the Act of 1961, it cannot exercise any other jurisdiction outside the Act. The observation that the authority created by a statute 'must act under the Act and not outside it' refers in the context obviously to the disposal or decision of the main matter brought before the authority. In the case of a reference to the High Court, the main matter brought before the Court is the question that has been referred to it for its opinion, and the 'act' of the High Court contemplated by the above observation is its act of answering that question. In answering that question, the High Court has necessarily to act under and within the scope of Section 66 or Section 256, as the case may be, and it cannot utilise any other jurisdiction or power outside the said Sections for answering the question. But, the question of granting stay of recovery of the tax under its inherent jurisdiction or power, has nothing to do with the Courts' act of answering the question referred to it. It is thus clear that the aforesaid observation of the Supreme Court relied upon by the learned counsel does not apply to the act of granting stay and cannot be regarded as implying that the High Court cannot exercise its inherent jurisdiction or power for granting stay of recovery of the tax.

(21) In C. P. Sarathy Mudaliar v. Commissioner of Income-tax Andhra Pradesh : [1966]62ITR576(SC) , the Supreme Court held that in a reference under Section 66 of the Income-tax Act of 1922, the High Court exercises advisory jurisdiction and does not sit in appeal over the judgment of the Tribunal, and that even if the High Court is of the view that the Tribunal had not considered the question which in its opinion should have been considered, it has no power to set aside the order of the Tribunal, but must only answer the question posted before it.

(22) In Commissioner of Income-tax, Bombay v. Greaves Cotton & Co. Ltd. : [1968]68ITR200(SC) , the Supreme Court held that it is well established that the High Court is not a Court of Appeal in a reference. under Section 66 of the Income-tax Act of 1922, and it is not, thereforee, open to it in such a reference to embark upon a re-appraisal of the evidence and to arrive a findings of fact contrary to those of the appellate Tribunal.

(23) In Roop Narain Ramachandra (P) Ltd. v. Commissioner of Income-tax 84, I.T.R. 181 (14), a Division Bench of the High Court of Allahabad, Satish Chandra and R. L. Gulati JJ., held that the Income-tax Act does not confer any power on the High Court to recall an order returning a reference unanswered. In that context, the learned Judges observed that Section 151 of the Code of Civil Procedure does not apply to the advisory jurisdiction conferred on the High Court by the Income-tax Act. The said observation cannot be of any assistance to the learned counsel, as it does not contain any reasoning or discussion, and the learned Judges were not considering the question that is being considered by us now. We may mention here that the proposition in the aforesaid observation of the learned Judges was not accepted by a Full Bench of the High Court of Kerala, P. Govindan Nair, C. J, M. U. Issak and George Vedakkel JJ., in K. Ahmed v. Commissioner of Income-tax, Kerala : [1974]96ITR29(Ker) .

(24) Thus, the fact that the nature of the jurisdiction of the High Court in a reference to it under Section 66 of the Act of 1922 or Section 256 of the Act of 1961 consultative or advisory and not original or appellate or revisional was mentioned in the various decisions referred to above in the context of the power or jurisdiction of the High Court for passing an order answering the question referred to it, which question is related to the merits of the order of the Appellate Tribunal. The said decisions are not, thereforee, of any assistance to the learned counsel in his submission that the High Court cannot be said to have any inherent jurisdiction or power to grant stay of recovery of the tax pending the disposal of the reference.

(25) In this connection, the learned counsel for the assesseds in I.T.R. Nos. 1 and 2 of 1974, etc. in which also applications for stay have been filed, referred us to two decisions. The first decision is that of a Division Bench of the High Court of Andhra Pradesh in Chaganti Raghava Reddy v. State of Andhra, Air 1969 A.P. 631 (16). The Division Bench held that the State can invoke the inherent powers of the Court by an application under Section 151 of the Code of Civil Procedure in regard to payment of income-tax, and it is not essential that a decree should be obtained in order to claim prior payment out of an amount lying in deposit in a Court. The Division Bench also held that Section 46 of the Income-tax Act is only an enabling provision and is not exhaustive of the remedies available to the department, and that the existence of that provision does not preclude the department from approaching the Court for realisation of the tax under Section 151 of the Code of Civil Procedure if moneys belonging to the assessed are available in that Court. The second decision is that of a learned single Judge of A the High Court of Bombay in Jatashankar Dayaram v. Commissioner of Income-tax : [1975]101ITR343(Bom) . The learned Judge,. J. L. Nain J. held that Section 141 of the Code of Civil Procedure, which provides that the procedure laid down in the Code in regard to suits, shall be followed as far as it can be made applicable in all proceedings in any court of civil jurisdiction, will be applicable to an application to the High Court under Section 256(2) of the Income-tax Act, 1961, which is an independent proceeding before a Court of Civil jurisdiction and not merely a continuation of the proceedings before the income-tax authorities) and that by virtue of Section 141, the provisions of Order 33 of the Code of Civil Procedure would be applicable to an application to the High Court under Section 256(2) of the Income-tax Act, 1961, to direct the Appellate Tribunal to state a case, so that such an application can be made in forma pauperis. The said decisions do not have a direct bearing on the question under consideration before us, except to show that the inherent jurisdiction or power of a 'Court' is available and can be invoked by an assessed or the Department in a proper case.

(26) The second submission of Mr. Kirpal on behalf of the Revenue was that the scheme of the Income-tax Act and particularly the provisions in Sections 260(1), 262(1) and 265 of the Act of 1961 and the corresponding provisions in Sections 66(5), 66A(3) and 1st Proviso, and 66(7) of the Act of 1922, show by necessary implication that the High Court has no jurisdiction or power to grant stay of recovery of the tax pending the disposal of the reference. Section 260(1) of the Act of 1961 (which is similar to Section 66(5) of the Act of 1922) reads as follows:-

'260.Decision of High Court or Supreme Court on the case stated- (1) The High Court or the Supreme Court upon hearing any such case shall decide the questions of law raised therein, and shall deliver its judgment thereon containing the grounds on which such decision is founded, and a copy of the judgment shall be sent under the seal of the Court and the signature of the Registrar to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to such judgment.'

Section 262(1) of the Act of 1961 (which is similar to Section 66A(3) and 1st Proviso) reads as follows :-

'262.Hearing before Supreme Court- (1) The provisions of the Code of Civil Procedure 1908 (V of 1908), relating to appeals to the Supreme Court shall, so far as may be, apply in the case of appeals under Section 261 as they apply in the case of appeals from decrees of a High Court: Provided that nothing in this Section shall be deemed to affect the provisions of Sub-section (1) of Section 260 or Section 265.'

Section 265 of the Act of 1961 (which is similar to Section 66(7) of the Act of 1922) reads as follows :-

'265.Tax to be paid notwithstanding reference, etc.- Notwithstanding that a reference has been made to the High Court or the Supreme Court or an appeal has been preferred to the Supreme Court, tax shall be payable in accordance with the assessment made in the case. ''

(27) The learned counsel argued (a) that the judgment of the High Court in a reference has by itself no force and it is for the Appellate Tribunal to pass such orders as may be necessary to disuse of the case; (b) that while no provision has been made regarding the applicability of any of the provisions of the Code of Civil Procedure to a reference proceeding before the High Court or the Supreme Court, the provisions relating to appeals to Supreme Court (i.e. Order 45) have been mude applicable to an appeal under Section 261 against an order of the High Court in a reference to it under Section 256, but subject, however, to the provisions Sub-section (1) of Section 260 and Section 265; and (e) that the provision in Section 265 clearly shows that the intention of the Legislature is not to give any jurisdiction or power to the High Court or the Supreme Court to stay the recovery of the tax pending the disposal of a reference or an appeal, as the case may be.

(28) In our opinion, there is no force in any of the above three arguments. As regards the argument (a), it is true that in a reference to a High Court under Section 256 or to the Supreme Court under Section 257, the Court delivers its judgment on the questions of law that have been referred. But, it is not correct to say that the judgment has by itself no force at all. The judgment decides the questions of law that have been referred, and the decision is binding on the Appellate Tribunal and the partics. No doubt, as pointed out by the Supreme Court in Commissioner of Wealth-tax, West Bengal v. Tungabhadra Industries Ltd. : [1970]75ITR196(SC) , referring to the observations of Chagla C.J. of the High Court of Bombay in Income-tax Appellate Tribunal, Bombay v. S. C. Cambatta & Co. Ltd., 20 I.T.R. 118 when a reference has been made to the High Court or the Supreme Court, the decision of the Appellate Tribunal out of which the reference has arisen cannot be looked upon as final; in other words, the appeal before it is not finally disposed of, and it is only when the High Court or the Supreme Court decides the questions that have been referred the Tribunal reconsiders the matter and decides it and thus finally disposes of the appeal. But, it has to be noticed that the Tribunal has to pass orders in the appeal only conformably to the judgment of the High Court or the Supreme Court in a reference. Also, it is final so far as the questions referred are concerned and is binding on the parties and the Tribunal. The judgment has thus as much force as any other judgment of a Court.

(29) As regards the first part of argument (b), we have already pointed out that we are concerned with the question of passing an order of stay of recovery of the tax, not in exercise of any jurisdiction or power conferred by the Income-tax Act or the Code of Civil Procedure, but in exercise of the inherent jurisdiction or power vested in the High Court or the Supreme Court as a 'Court'. Although an application invoking the inherent jurisdiction or power of a Court is usually des-cribed as one under Section 151 of the Code of Civil Procedure, it is well settled that inherent jurisdiction or power is inherent in a Court, and Section 151 of the Code of Civil Procedure does not confer such jurisdiction or power on the Court, but merely saves such jurisdiction or power which already exists in the Court. thereforee, the fact that there is no provision in the Income-tax Act making the provisions of the Code of Civil Procedure applicable to a reference proceeding before the High Court or the Supreme Court docs not mean that the High Court or the Supreme Court cannot exercise its inherent jurisdiction or power in a proper case.

(30) The second part of argument (b) and argument (c) can be considered together. It is true that while the main part of Section 262(1) makes the provisions in the Code of Civil Procedure relating to appeals before the Supreme Court (i.e. Order 45) applicable to appeals to the Supreme Court under Section 261, the proviso to Section 262(1) makes it clear that the said applicability shall not be deemed to affect the provisions of Section's 260(1) and Section 265. Section 260(1) prescribes the scope and the limitations of the decision of the High Court or the Supreme Court on the case stated in a reference. So far as the reference to Section 260(1) in the proviso to Section 262(1) is concerned, it is obviously to prescribe the same scope and limitations for the decision of the Supreme Court in an appeal to it under Section 261. In other words, Section 262(1) merely makes it clear that although the matter before the Supreme Court under Section 261 is an appeal, the scope and limitations of the decision of the Supreme Court in that appeal are the same as those of a decision in a reference before it or before the High Court. Thus, the reference to Section 260(1) in Section 262(1) has no bearing on the question of ordering stay of recovery of tax in exercise of the inherent jurisdiction or power of the Court.

(31) As regards the reference to Section 265 in the proviso to Section 262(1), the argument was that its language shows that the intention of the legislature is not to give any jurisdiction or power to the High Court or the Supreme Court to stay the recovery of the tax pending the disposal of a reference and even pending an appeal to the Supreme Court under Section 261, and that was why Section 262(1) provided that the applicability of the provisions relating to appeals to the Supreme Court, i.e., in Order 45 of the Code of Civil Procedure, shall not be deemed to affect the provision in Section 265. We are unable to accept the argument. Section 265 merely states that 'notwithstanding that a reference has been made to the High Court or the Supreme Court or an appeal has been preferred to the Supreme Court, tax shall be payable in accordance with the assessment made in the case'. In our opinion, it only means that the making of a reference or the filing of an appeal shall not render the tax not payable, or in other words, the making of a reference or the filing of an appeal shall not by itself operate automatically as stay of the recovery of the tax. The language used in the Section, the framing of the sentence and the words 'notwithstanding... ...a reference has been made or an appeal has been preferred... tax shall be payable' indicate, in our opinion, that what is intended to be provided is only that the making of the reference or the filing of the appeal shall not mean that the payment of the tax is automatically suspended or stayed pending the disposal of the reference or the appeal as the case may be. They do not imply at all any further intention that the payment of the tax can in no case be stayed or that no direction of any sort regarding the payment can be given by the High Court or the Supreme Court even if in the opinion of the Court the facts and circumstances of the case so demand. The use of the words 'shall be payable' instead of the words 'shall be paid' seems to be significant. Perhaps, if the words 'shall be paid' have been used, an intention to prohibit any order interfering with the payment can be said to have been implied by the legislature. But. those words have not been used. The words used are 'shall be payable'. 'Payable' means 'liable to be paid'. The use of the word 'payable' shows that the intention of the legislature is only to declare that the tax is liable to be paid notwithstanding that a reference has been made or an appeal has been preferred. In other words, the liability to pay the tax continues and is not suspended or stayed by reason of the making of the reference or the preferring of the appeal. If that is so, and if the position is that the section merely states that the liability to pay continues. It would not imply, and it would not follow from the provision in the section that the actual payment cannot be suspended or stayed by the Court ex debito justitiae and such an order is prohibited. In other words, as stayed earlier, the provision in Section 265 means only that the mere making of a reference or the filing of an appeal shall not by itself operate as a suspension or stay of the recovery of the tax, and the tax continues to be payable, and there is nothing in Section 265 to suggest that it precludes or prohibits the High Court or the Supreme Court from staying the recovery of tax in a proper case pending the disposal of the reference or appeal, as the case may be, in exercise of its inherent jurisdiction or power. Thus, the second part of argument (b) and the argument (c) cannot be accepted.

(32) Mr. Kirpal cited the decisions in Padam Sen v. State of Uttar Pradesh, 0065/1960 : 1961CriLJ322 Manohar Lal Chopra v. Rai Bahadur Rao Raja Seth Hiralal, : AIR1962SC527 Arjun Singh v. Mohindra, : [1964]5SCR946 , and Ramkarandas v. Bhagwandas, : [1965]2SCR186 , in which it has been held that the inherent powers are to be exercised by the Court in very exceptional circumstances, and that where an express provision has been made in a rule in the Code of Civil Procedure and a case does not come within the provisions of that rule, there is no scope to resort to inherent jurisdiction saved by Section 151 of the Code. This proposition has no bearing on the question under consideration by us. As stated earlier, we are concerned with the question of passing an order of stay of recovery of tax, not in exercise of any jurisdiction or power conferred by the Income-tax Act or the Code of Civil Procedure but in exercise of the inherent jurisdiction or power vested in the High Court or the Supreme Court as a 'Court'. We have pointed out above that there is nothing in the Income-tax Act which expressly or by necessary implication excludes the inherent jurisdiction.

(33) The third submission of Mr. Kirpal was that in any Case the assessed should apply to the Appellate Tribunal for stay of the recovery of the tax pending the disposal of the reference as the appeal before the Tribunal continues to be pending notwithstanding the reference, and that the High Court or the Supreme Court should not exercise its inherent jurisdiction or power and grant stay. It is true that. as observed by Chagla, C.J in the case of S.C. Cambatta & Co. (supra), when a reference has been made by the Tribunal, the appeal before it is not finally disposed of, and it is only after the reference is answered, the Tribunal finally disposes of the appeal conformably to the judgment in the reference. But. we consider that it is not necessary to decide in this case whether the Tribunal can grant stay when the High Court or the Supreme Court has at least partial seizin of the case by virtue of the reference, because, even assuming that the Tribunal can grant stay, it does not follow that the High Court or the Supreme Court should not exercise its inherent jurisdiction or power. It is entirely in the discretion of the High Court or the Supreme Court as to whether it would exercise its inherent jurisdiction or power and grant stay or not in the case before it.

(34) We were informed by Sri Ravinder Narain, learned counsel for the assessed, that the Supreme Court granted an ex parte order of stay of recovery of the tax in Special Leave Petition No. 1858 of 1975 filed against an order of the High Court of Allahabad in Income-tax Reference No. 719 of 1971, and subsequently confirmed the ex parte stay on 2-9-1976. Similar instances in C.M. No. 311/76 in Civil Appeal No. 262(NT) of 1976 by special leave, and in Special Leave Petition No. 2552 of 1975, were also mentioned. It is, however, not necessary to rely on the said instances as no reasoned or speaking orders are available.

(35) For the foregoing reasons, we hold that in a reference to the High Court under Section 66 of the Act of 1922 or Section 256 of the Act of 1961, the High Court has inherent jurisdiction or power to stay in a proper case the recovery of the tax pending the disposal of the reference. We, thereforee reject the preliminary objection. Now, coming to the merits of the application for stay, it is admitted that in respect of the two assessment years 1960-61 and 1962-63 with which we are concerned, the tax had already been paid in full by L. Bansi Dhar in his personal or individual assessment. There is, thereforee, considerable force in the submission of the assessed that great hardship would be caused to it if in spite of full tux having been paid by its karta in his personal assessment, the H.U.F. is asked to pay the tax over again in respect of the same income, and that too when the liability of the H.U.F. to pay the tax has not yet been finally decided. We, thereforee, consider that this is a fit case in which .the stay asked for should be granted, but on terms. We accordingly order that the recovery of the amounts of tax demanded in respect of the assessment years 1960-61, 1962-63, is stayed on the condition that the assessed should furnish adequate security for the said amounts to the satisfaction of the concerned Income-tax Officer within six weeks from this date.


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