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Commissioner of Income-tax, Gujarat Iii Vs. Western India Engineering Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Application No. 7 of 1969
Judge
Reported in[1970]77ITR165(Guj)
ActsIncome Tax Act, 1922 - Sections 66(1) and 66(3); Limitation Act - Sections 5 and 29(2)
AppellantCommissioner of Income-tax, Gujarat Iii
RespondentWestern India Engineering Co. Ltd.
Appellant Advocate J.M. Thakore, Advocate-General
Respondent Advocate J.P. Shah, Adv.
Cases ReferredVasanji Ghela v. State
Excerpt:
(i) direct taxation - limitation of period - sections 66 (1) and 66 (3) of income tax act, 1922 and sections 5 and 29 (2) of limitation act - petition praying that decision of income tax appellate tribunal (iat) that application for reference was time barred erroneous - relief based on section 66 (3) - section 66 (3) states what remedy available if iat erroneously rejects reference as time barred - application for reference not made within time allowed under section 66 (1) - contention that iat should have condoned delay while admitting application for reference as there was sufficient cause which prevented petitioner from making timely application - decision of iat that application for reference made by petitioner time barred cannot be challenged under provisions of section 66 (3) -.....bhagwati, c.j.1. the question arising in this petition is a question of considerable importance relating to the applicability of section 5 of the limitation act, 1963, to an application for reference made to the income-tax appellate tribunal under section 66, sub-section (1), of the indian income-tax act, 1922. the question lies in the narrow compass but in order to appreciate it, it is necessary to notice briefly the facts giving rise to the petition. 2. in the course of the assessment to income-tax for the assessment year 1961-62, the assessee, who is the respondent before us, claimed that a sum of rs. 1,05,900 was liable to be deducted in computing the total income of the assessee but this claim was disallowed by the income-tax officer and the sum of rs. 1,05,900 was included in the.....
Judgment:

Bhagwati, C.J.

1. The question arising in this petition is a question of considerable importance relating to the applicability of section 5 of the Limitation Act, 1963, to an application for reference made to the Income-tax Appellate Tribunal under section 66, sub-section (1), of the Indian Income-tax Act, 1922. The question lies in the narrow compass but in order to appreciate it, it is necessary to notice briefly the facts giving rise to the petition.

2. In the course of the assessment to income-tax for the assessment year 1961-62, the assessee, who is the respondent before us, claimed that a sum of Rs. 1,05,900 was liable to be deducted in computing the total income of the assessee but this claim was disallowed by the Income-tax Officer and the sum of Rs. 1,05,900 was included in the total income of the assessee. The assessee preferred an appeal to the Appellate Assistant Commissioner but the appeal was unsuccessful. This was followed by a further appeal to the Income-tax Appellate Tribunal and in this appeal the assessee succeeded in getting the relief claimed by it. The Commissioner of Income-tax, who is the petitioner before us, thereupon prepared an application to be presented to the Income-tax Appellate Tribunal and in this appeal the assessee succeeded in getting the relief claimed by it. The Commissioner of Income-tax, who is the petitioner before us, thereupon prepared an application to be presented to the Income-tax Appellate Tribunal for referring certain questions of law arising out of the order of the Income-tax Appellate Tribunal and this application for reference was despatched by him by registered post to the office of the Income-tax Appellate Tribunal at Bombay on 9th August, 1968. It was common ground between the parties that the return of income for the assessment year 1961-62, having been filed by the assessee before the commencement of the Income-tax Act, 1961 (hereinafter referred to as 'the new Act'), the proceedings for assessment were governed by the Indian Income-tax Act, 1922 (hereinafter referred to as 'the old Act'), and the application for reference made by the Commissioner was, therefore, governed by section 66, sub-section (1), of the old Act, and was required to be made within a period of sixty days from the date of service of the order of the Income-tax Appellate Tribunal was served on the Commissioner on 15th June, 1968, and the time for making the application for reference was, therefore, due to expire on 14th August, 1968. Now, ordinarily, the application for reference despatched from Ahmedabad on 9th August, 1968, should have reached the office of the Income-tax Appellate Tribunal at Bombay within a couple of days and that would have been in time but due to heavy floods in the rivers of South Gujarat, the railway communication between Ahmedabad and Bombay was seriously disrupted and the application for reference did not, therefore, reach the office of the Income-tax Appellate Tribunal at Bombay, until 17th August, 1968, when the period of limitation had already expired on 14th August, 1968. The Commissioner, therefore, made an application to the Income-tax Appellate Tribunal for condoning delay in filling the application for reference on the ground that he was prevented by sufficient cause from presenting the reference application within the prescribed time. The Income-tax Appellate Tribunal found that there was sufficient cause which prevented the Commissioner from filing the application for reference in time, but there was no provision in the old Act for condonation of delay in filing an application for reference, nor was section 5 of the Indian Limitation Act, 1908, available and the Income-tax Appellate Tribunal had, therefore, no jurisdiction or power to condone the delay in filing the reference-application. The Income-tax Appellate Tribunal, accordingly, by an order dated 17th April, 1969, rejected the reference application as time-barred. The Commissioner thereupon preferred the present petition challenging the validity of the view taken by the Income-tax Appellate Tribunal.

3. The Principal relief claimed in prayer (A) of the Petition was that the decision of the Income-tax Appellate Tribunal that the application for reference was time-barred was erroneous and the Income-tax Appellate Tribunal should, therefore, be required to treat the reference-application as made within the time allowed under section 66, sub-section (1). This relief was based on section 66, sub-section (3), but we do not think the claim for this relief is well-founded. Section 66, sub-section (3), has, in our opinion, no application to the facts of the present case. Section 66, sub-section (1), allows a period of sixty days within which the assessee or the Commissioner may file an application for reference and this period of sixty days is to be calculated from the date on which the assessee or the Commissioner, as the case may be, is served with notice of the order of the Income-tax Appellate Tribunal. Section 66, sub-section (3), proceeds to state what remedy shall be available to the assessee or the Commissioner if the Income-tax Appellate Tribunal erroneously rejects the reference application as time-barred. That sub-section says :

'66. (3) If on any application being made under sub-section (1) the Appellate Tribunal rejects it on the ground that it is time-barred, the assessee or the Commissioner, as the case may be, may, within two months from the date on which he is served with notice of the rejection, apply to the High Court, and the High Court, if it is not satisfied of the correctness of the Appellate Tribunal's decision, may require the Appellate Tribunal to treat the application as made within the time allowed under sub-section (1).'

4. If on an application made under section 66, sub-section (3), the High Court comes to the conclusion that the decision of the Income-tax Appellate Tribunal rejecting the reference-application as time-barred is incorrect, the High Court can require the Income-tax Appellate Tribunal to treat the reference application as made within time. The only question before the High Court in an application under section 66, sub-section (3), would, therefore, be whether the application for reference was admittedly not made within the time allowed under section 66, sub-section (1). Now in the present case the application for reference was admittedly not made within the time allowed under section 66, sub-section (1), since it reached the office of the Income-tax Appellate Tribunal at Bombay on 17th August, 1968, after the time allowed under section 66, sub-section (1), had expired on 14th August, 1968. The decision of the Income-tax Appellate Tribunal that the application for reference made by the petitioner was time-barred could not therefore be challenged as erroneous and indeed no attempt was made on behalf of the petitioner to do so. The only argument advanced on behalf of the petitioner was that though the application for reference was not made within the time allowed under section 66, sub-section (1), there was sufficient cause which prevented the petitioner from making the application for reference within time and the Income-tax Appellate Tribunal should have, therefore, condoned the delay and admitted the application for reference. This argument clearly does not fall within the scope and ambit of section 66, sub-section (3), and no relief can, therefore, be granted to the petitioner under that sub-section and prayer (A) must be rejected.

5. But that does not put an end to the petition for there is an alternative relief claimed in prayer (B) of the petition and that relief is directed against the decision of the Income-tax Appellate Tribunal holding that it had no jurisdiction or power to condone the delay in presenting the application for reference.

6. It is clear from the order of the Income-tax Appellate Tribunal that in the view taken by it the Commissioner was prevented by sufficient cause from filing the reference application within the time allowed under section 66, sub-section (1), and in the circumstances if the Income-tax Appellate Tribunal had the power, the Income-tax Appellate Tribunal would have certainly condoned the delay, but the Income-tax Appellate Tribunal felt unable to do so, as in its view there was no provision which conferred power on it to condone delay for sufficient cause. The question is whether this view taken by the Income-tax Appellate Tribunal is correct. Now it was not disputed on behalf of the Commissioner that unlike the proviso to section 256, sub-section (1), of the new Act, there was no provision in the old Act which empowered the Income-tax Appellate Tribunal to relieve the Commissioner against the period of limitation prescribed in section 66, sub-section (1), but the argument of the Commissioner was that by reason of section 29, sub-section (2), of the Limitation Act, 1963, section 5 of that Act was applicable and if the Commissioner satisfied the Income-tax Appellate Tribunal that he had sufficient cause for not preferring the application for reference within the prescribed period as he had done in the present case, the Income-tax Appellate Tribunal had power to condone delay and to admit the application for reference. This attempt on the part of Commissioner to invoke the aid of section 5 of the Limitation Act, 1963, was resisted on behalf of the assessee. The assessee contended that section 29, sub-section (2), had no application in relation to applications presented to authorities other than courts and since the Income-tax Appellate Tribunal was not a court, the application for reference made to the Income-tax Appellate Tribunal was not within the ambit and coverage of section 29, sub-section (2), and if section 29, sub-section (2), had no application, then obviously section 5 was not attracted. On these rival contentions two questions arise for consideration : one is whether the applicability of section 29, sub-section (2), is confined only to applications to courts or does it also extend to applications made to authorities other than courts and the second is - and this question arises only if section 29, sub-section (2), is held limited to application to courts - whether the Income-tax Appellate Tribunal can be said to be a 'court' within the meaning of the Limitation Act, 1963.

7. So far as the first question is concerned, it stands concluded adversely against the Commissioner by two recent yet unreported decision of the Supreme Court. Before we refer to these decisions we may conveniently at this stage reproduce section 29, sub-section (2), of the Limitation Act, 1963, on which the strongest reliance has been placed on behalf of the Commissioner. That sub-section reads :

'29. (2) Where any special or local law prescribes for any suit, appeal or application a period of limitation different from the period prescribed by the Schedule, the provisions of section 3 shall apply as if such period were the period prescribed by the Schedule and for the purpose of determining any period of limitation prescribed for any suit, appeal or application by any special or local law, the provisions contained in section 4 to 24 (inclusive) shall apply only in so far as, and to the extent to which, they are not expressly excluded by such special or local law.'

8. Section 5 could, therefore, apply for the purpose of determining the period of limitation prescribed for an application for reference under section 66, sub-section (1), if such an application could be said to be an 'application' within the meaning of and intendment of section 29, sub-section (2). Now it is no doubt true that section 29, sub-section (2) refers 'to any suit, appeal or application' without any words of limitation and, therefore, it might appear at first blush to be a plausible argument that any application, whether made to a court of law or to any other authority, would be within the language of the section. But a clear scrutiny of the scheme of the Limitation Act, 1963, shows that the sweep of section 29, sub-section (2), is not so broad and its ambit not so wide. If we turn to the third division in the Schedule to the Limitation Act, 1963, we find that all the articles in the third division to applications made to the courts were governed either by the Code of Civil Procedure or the Code of Criminal Procedure. Sections 4 and 5 also postulate that the applications to which these sections can apply must be applications to courts. It is indeed difficult to believe that the Legislature could have intended to make the provisions of section 4 to 24 applicable to applications made to authorities other than courts. If the contention of the Commissioner were right, the result would be that sections 4 to 24 would be applicable even to applications made to executive authorities. That surely could not have been the intention of the legislature.

9. This would appear to be clear and beyond doubt on an examination of the scheme of the Act but we find that there are at least two decision of the Supreme Court which support this view. The first is the decision given by the Supreme Court which support this view. The first is the decision given by the Supreme Court in Town Municipal Council, Athani v. Presiding Officer, Labour Court, Hubli, where the question was whether article 137 of the Limitation Act, 1963, applied to an application made to the labour court under section 33C of the Industrial Disputes Act, 1947. The Supreme Court, following its earlier decisions in Sha Mulchand and Co. Ltd. v. Jawahar Mills Ltd. and Bombay Gas Co. Ltd v. Gopal Bhiva, which related to the construction of the corresponding article 181 in the Indian Limitation Act, 1908, held that though there were some minor changes made in the Limitation Act, 1963, the scope and ambit of article 137 remained the same and it was not possible to hold 'that the intention of the Legislature was to drastically alter the scope of this article so as to include within it all applications, irrespective of the fact whether they had any reference to the Code of Civil Procedure.' The Supreme Court also pointed out that in any event it was clear from the articles in the Third Division of the Schedule that the applications contemplated by the Limitation Act were applications made to courts governed either by the Code of Civil Procedure or the Code of Criminal Procedure. Bhargava J., speaking on behalf of the Supreme Court, expressed himself in these terms :

'When this court earlier held that all the articles in the third division to the Schedule, including article 181 of the Limitation Act of 1908, governed applications under the Code of Civil Procedure only, it clearly implied that the applications must be presented to a court governed by the Code of Civil Procedure. Even the applications under the Arbitration Act that were included within the third division by amendment of articles 158 and 178 were to be presented to courts whose proceedings were governed by the Code of Civil Procedure. At best, the further amendment now made enlarges the scope of the third division of the Schedule so as also to include some applications presented to courts governed by the Code of Criminal Procedure. One factor at least remains constant and that is that the application must be to courts to be governed by the articles in this division. The scope of the various articles in this division cannot be held to have been so enlarged as to include within them applications to bodies other than courts, such as a quasi-judicial tribunal, or even an executive authority. An industrial tribunal or a labour court dealing with applications or references under the Act are not courts and they are in no way governed either by the Code of Civil Procedure or the Code of Criminal Procedure. We cannot, therefore, accept the submission made that this article will apply even to applications made to a industrial tribunal or labour court. The alternations made in the article and in the new Act, cannot, in our opinion, justify the interpretation that even applications presented to bodies, other than courts, are now to be governed for purposes of limitations by article 137. .. In the long title, thus, the words 'other proceedings' have been added; but we do not think that this addition necessarily implies that the Limitation Act is intended to govern proceedings before any authority, whether executive or quasi-judicial, when, earlier, the old Act was intended to govern proceedings before civil courts only... The Bombay High Court also attached importance to the circumstance that the scope of the new Limitation Act has been enlarged by changing the definition of 'applicant' in section 2(a) of the new Act so as to include even a petitioner and the word 'application' so as to include a petition. The question still remains whether this alternation can be held to be intended to cover petitions by a petitioner to authorities other than courts. We are unable to find any provision in the new Limitation Act which would justify holding that these changes in definition were intended to make the Limitation Act applicable to proceedings before bodies other than courts.'

10. These observations - and particularly the latter part - clearly show that the Limitation Act, 1963, is not intended to be made applicable to proceedings before authorities other than courts governed by the Code of Civil Procedure or the Code of Criminal Procedure.

11. This view as to the proper scope and ambit of the Limitation Act, 1963, expressed in Town Municipal Council's case was reaffirmed by the Supreme Court in the subsequent decision given in Nityanand M. Joshi v. Life Insurance Corporation of India. Here also the question was as to the applicability of article 137 of the Limitation Act, 1963, to an application to the labour court under section 33C of the Industrial Disputes Act, 1947. Sikri J., delivering the judgment of the Supreme Court, observed :

'In our view article 137 only contemplates applications to courts. In the third division of the Schedule to the Limitations Act, 1963, all the applications mentioned in the various articles are applications filed in a court. Further, section 4 of the Limitation Act, 1963, provided for the contingency when the prescribed period for any application expires on a holiday and the only contingency contemplated is 'when the court is closed'. Again under section 5 it is only a court which is enable to admit an application after the prescribed period has expired if the court is satisfied that the applicant had sufficient cause for not preferring the application. It seems to us that the scheme of the Indian Limitation Act is that it only deals with applications to courts, and that the labour court is not a court within the Indian Limitation Act, 1963.'

12. We find from these observations that the same view has been reiterated by the Supreme Court, namely, that having regard to the scheme of the Limitation Act, 1963, and particularly sections 4 and 5, the articles in the third division of the Schedule of the Limitation Act, 1963, deal only with applications to courts and applications to authorities other than courts are not within the contemplation of the Limitation Act, 1963.

13. We find from these observations that the same view has been reiterated by the Supreme Court, namely, that having regard to the scheme of the Limitation Act, 1963, and particularly sections 4 and 5, the articles in the third division of the Schedule of the Limitation Act, 1963, deal only with applications to courts and applications to authorities other than courts are not within the contemplation of the Limitation Act, 1963.

14. On this view of construction of section 29, sub-section (2), it becomes necessary to consider whether the Income-tax Appellate Tribunal could be said to be court governed by the Code of Civil Procedure or the Code of Criminal Procedure. To this question the answer is obvious. Quite apart from the wider question whether the Income-tax Appellate Tribunal is a court, it is indisputable that in any event it could not be said to be a court governed by the Code of Civil Procedure or the Code of Criminal Procedure. Section 5A, sub-section (8), of the old Income-tax provided in so many terms that, subject to the provisions of that Act, the Appellate Tribunal shall have power to regulate its own procedure and the procedure of Benches of the Tribunal in all matters arising out of the discharge of its functions, and in exercise of the powers conferred by this sub-section, the Appellate Tribunal Rules, 1946, were made by the Income-tax Appellate Tribunal and these rules and not the Code of Civil Procedure governed the procedure in relation to proceedings before the Income-tax Appellate Tribunal. The Code of Civil Procedure was made applicable by section 37 of the old Income-tax Act but that was only in respect of certain limited matters such as discovery and inspection, enforcing the attendance of any person, including any officer of a banking company, and examining him on oath; compelling the production of books of account and other documents; and issuing commissions. The Income-tax Appellate Tribunal could not, therefore, be said to be a court governed by the Code of Civil procedure or the Code of Criminal Procedure so as to be within the intendment of the Limitation Act, 1963.

15. But quite apart from this argument, it is not possible to say that the Income-tax Appellate Tribunal is a 'court'. Though 'court' is an institution as old as civilisation itself and it constitutes a basic and essential features of every State, it is difficult to formulate a precise definition of its meaning and import. The word 'court' is not defined in the Limitation Act, 1963. It is not defined in the Code of Civil Procedure. The definition in the Indian Evidence Act is not exhaustive and is for the purposed of that Act. In the New English Dictionary, the meaning given is : 'an assembly of judges or other persons legally appointed and acting as a Tribunal to hear and determine any cause, civil, ecclesiastical, military, or naval' and we may add to this list two other categories, namely, 'criminal and revenue'. All tribunals are not courts, though all courts are tribunals. The word 'courts' is used to designate those tribunals which are set up in an organised State for the administration of justice. By administration of justice is meant the exercise of judicial power of the State to maintain and uphold rights and to punish wrong. Whenever there is an infringement of a right or an injury, the courts are there to restore the vinculam juris which is disturbed. The best definition of judicial power is that given by Griffith C.J. in Huddart Parker & Co. Proprietary Ltd. v. Moorehead, which, though not a comprehensive definition, accurately gives its broad features. Judicial power, according to the learned Chief Justice, means :

'The Power which every sovereign authority must of necessity have to decide controversies between its subjects, or between itself and its subjects, whether the rights relate to lief, liberty, or property. The exercise of this power does not begin until some tribunal which has power to give a binding and authoritative decision (whether subject to appeal or not) is called upon to take action.'

16. The courts are tribunals invested with the judicial power of the State and their authority is derived from the Constitution or some Act of the legislature constituting them. Their number, as pointed out by Hidayatullah J., as he then was, in Harinagar Sugar Mills v. Shyam Sunder Jhunjhunwala, is ordinarily fixed and they are ordinarily permanent, and can try any suit or cause within their jurisdiction. Their number may be increased or decreased, but they are almost always permanent and go under the compendious name of 'courts of civil judicature'. This is of course a compendious name which includes not only civil courts but also criminal courts.

17. With the growth of civilisation and the problems of modern life, particularly the vast increase in Government activity in a welfare State, a large number of administrative tribunals have come into existence. These tribunals have the authority of law to pronounce upon valuable rights; they act in a judicial manner and even on evidence on oath, but they are not part of the ordinary courts of civil judicature. They share the exercise of the judicial power of the State, but they are brought into existence to implement some administrative policy or to determine controversies arising out of some administrative law. We may in this connection usefully refer to the following observations in the judgment of Ganjendragadkar C.J. in Associates Cement Companies Ltd. v. P. N. Sharma :

'Tribunals which fall within the purview of article 136(1) occupy a special position of their own under the scheme of our Constitution. Special matters and questions are entrusted to them for their decision and in that sense, they share with the courts one common characteristic : both the courts and the tribunals are 'constituted by the State and are invested with judicial as distinguished from purely administrative or executive functions'... They are both adjudicating bodies and they deal with and finally determine disputes between parties which are entrusted to their jurisdiction. The procedure followed by the courts is regularly prescribed and in discharging their functions and exercising their powers, the courts have to conform to that procedure. The procedure which the tribunals have to follow may not always be so strictly prescribed, but the approach adopted by both the courts and the tribunals is substantially the same, and there is no essential difference between the functions that they discharge. As in the case of courts, so in the case of tribunals, it is the State's inherent judicial power which has been transferred and by virtue of the said power, it is the State's inherent judicial function which they discharge......It is really not possible or even expedient to attempt to describe exhaustively the features which are common to the tribunals and the courts, and features which are distinct and separate. The basic and the fundamental feature which is common to both the courts and the tribunals is that they discharge judicial functions and exercise judicial powers which inherently vest in a sovereign State.'

18. The judicial power of the State is thus divided between two bodies, one being 'courts' and the other being 'tribunals'. By 'courts' is meant courts of law and by 'tribunals', those bodies of men who are appointed to decide controversies arising under certain special laws. Their procedures may differ but the functions are not essentially different. Both exercise the judicial power of the State and it is often difficult to distinguish between them. There is no single test that can be applied to determine whether a particular tribunal is a court or a mere judicial tribunal. Lord Stamp said that the real distinction is that court have 'an air of detachment.' But this is more a matter of age and tradition and is not of the essence. Many tribunal, in recent years, and particularly the Income-tax Appellate Tribunal, have acquitted themselves so well and with such detachment as to make this test wholly insufficient. But broadly speaking it may be stated that a 'court' in the strict sense is a tribunal constituted by the State as a part of the ordinary hierarchy of courts of law invested with the State's inherent judicial power. It is, to quote from the judgment of Hidayatullah J. in Harinagar Sugar Mills case 'a part of the ordinary hierarchy of courts of civil judicature power of the State.' The courts perform all the judicial functions of the State except those special matters and questions, often arising out of some administrative law, which are excluded from their jurisdiction and given to tribunals. It is in the light of this discussion that we have to decide whether the Income-tax Appellate Tribunal can be said to be a 'court' or it is merely a judicial tribunal.

19. Before we embark upon a discussion of this question an authority exercising judicial power of the State and an authority exercising executive power though in the discharge of the executive power, there may be a duty cast on the authority to follow a standard of conduct which may be considered judicial. This distinction between quasi-judicial act of an executive authority and judicial act of a court or tribunal was emphasized by the Supreme Court in the following words in C. Nageswara Rao v. Andhra Pradesh State Road Transport Corporation :

'The concept of a quasi-judicial act implies that the act is not wholly judicial; it describes only a duty cast on the executive body or authority to conform to norms of judicial procedure in performing some acts in exercise of its executive power.'

20. It would, therefore, seem that merely because an authority is under a duty to act judicially in the discharge of its functions, it does not mean that it is exercising the judicial power of the State. A true judicial decision pre-suppose an existing dispute between two or more parties, and then involves four requisites : (1) the presentation (not necessarily orally) of their case by the parties to the dispute; (2) if the dispute between them is a question of fact, the ascertainment of the fact by means of evidence adduced by the parties to the dispute and often with the assistance of argument by or on behalf to the parties on the evidence; (3) if the dispute between them is a question of law, the submission of legal arguments by the parties; and (4) a decision which dispose of the whole matter by a finding upon the facts in dispute and an application of the law of the land to the facts so found, including where required a ruling upon any disputed question of law. These are the requisites of judicial power adumbrated in Cooper v. Wilson, and approved by the Supreme Court in Brajnandan Sinha v. Jyoti Narain. But even these requisites do not furnish an infallible test for determining whether the power exercised is a judicial power. Lord Simonds, delivering the opinion of the Judicial Committee of the Privy Council pointed out in Labour Relations Board of Saskatchewan v. John East Iron Works :

'....there are many positive features which are essential to the existence of judicial power, yet by themselves are not conclusive of it...'

21. And Lord Sankey L. C., speaking on behalf of the Judicial Committee in Shell Co. of Australia v. Federal Commissioner of Taxation, enumerated a number of negative propositions on the subject : (1) A Tribunal is not necessarily a court in this strict sense because it gives a final decision. (2) Nor because it hears witness on oath. (3) Nor because two or more contending parties appear before it between whom it has to decide. (4) Nor because it gives decisions which affect the rights of subjects. (5) Nor because there is an appeal to a court. (6) Nor because it is a body to which a matter is referred by another body. Now so far as the Income-tax Officer is concerned it can hardly be contended that he is invested with the judicial power of the State. He is undoubtedly under a duty to act judicially in the discharge of his functions but he is merely an assessing officer and his functions are primarily of an executive nature. 'The taxing department', as pointed out by Hidayatullah J. in Ujjam Bai v. State of Uttar Pradesh : 'are instrumentalities of the State. They are not a part of the Legislature; nor are they a part of the judiciary. Their functions are the assessment and collection of taxes, and in the process of assessing taxes, they have to follow a pattern of action, which is considered judicial. They are not thereby converted into courts of civil judicature. They still remain the instrumentalities of the State......In this view of the matter, their actions must be regarded, in the ultimate analysis, as executive in nature, since their determinations result in the demand of tax which neither the Legislature nor the judiciary can collect.'

22. But when we come to the Income-tax Appellate Tribunal it is apparent that the judicial power of the State is reposed in it. The Income-tax Appellate Tribunal has to decide the dispute between the assessee and the revenue and in deciding this dispute between the assessee and the revenue and in deciding this dispute it has to adjudicate upon questions of fact and law and it is bound to act on the evidence adduced by the parties and in accordance with law. As a matter of fact it was not disputed on behalf of the assessee that the Income-tax Appellate Tribunal exercise the judicial power of the State and indeed it could not be so disputed having regard to the fact that the Supreme Court has, in several cases, entertained appeals against the decisions of the Income-tax Appellate Tribunal with special leave granted under article 136(1) of the Constitution. The only question debated before us was whether the Income-tax Appellate Tribunal is a 'court' stricto sensu or a mere tribunal exercising the judicial power of the State.

23. To answer this question we must turn to examine the nature of the powers and functions of the Income-tax Appellate Tribunal. It may be pointed out straightway that the Income-tax Appellate Tribunal is not a tribunal constituted by the State as a part of the ordinary hierarchy of courts for administration of justice in exercise of the judicial power of the State. It has been brought into existence to determine controversies arising out of the implementation of the Income-tax Act. It is not governed by the Code of Civil Procedure, but as set out in section 5A, sub-section (8), of the old Income-tax Act, it has power to regulate its own procedure, and in fact it has made the Appellate Tribunal Rules, 1946. Rule 32A of these Rules provides that the proceedings before the Income-tax Appellate Tribunal shall not be open to the public. Moreover, the Income-tax Appellate Tribunal is not fettered by technical rules of the law of evidence and is entitled to act on material which may not be accepted as evidence in a court of law. Section 37, sub-section (1), of the old Income-tax Act, no doubt, confers on the Income-tax Appellate Tribunal the same powers as are vested in the court under the Code of Civil Procedure, but as already pointed out above, those powers are limited only in respect of certain specified matters. This provisions also shows that the Income-tax Appellate Tribunal is not a court in the strict sense of the term. It has merely some of the trappings of the court and the existence of these trappings of the court is not sufficient to convert it into a court. These circumstances leave no doubt that the Income-tax Appellate Tribunal is merely a judicial tribunal and not a court but even if any doubt were to remain, it is completely laid at rest by section 37, sub-section (4), which provides that any proceedings before the Income-tax Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code. This provision would be totally unnecessary if the Income-tax Appellate Tribunal was a 'court'. It is no doubt true that the word 'deemed' is apt to include not only the uncertain and the impossible but also the obvious and it might, therefore, be said that this fiction was introduced ex abundanti cautela but in the context of the various circumstances to which we have referred, it is not possible to regard the enactment of this fiction as without significance. Moreover, there is one other circumstance which also impels us to the same conclusion. And that is the constitution of the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal consists not only of judicial members who are trained in the law, but also of accountant members who have sufficient experience in the practice of accountant members who have sufficient experience in the practice of accountancy as a chartered accountant. This circumstance is quite inconsistent with the Income-tax Appellate Tribunal being regarded as a 'court'. We are, therefore, of the view that the Income-tax Appellate Tribunal is not a court but is merely a tribunal exercising the judicial power of the State.

24. We are fortified in this view by a decision of the Madras High Court in R. M. Seshadri v. Second Additional Income-tax Officer. There the question was whether the Central Legislature had power under the Government of India Act, 1935, to levy a fee as a condition for preferring an appeal to the Income-tax Appellate Tribunal under section 33(3) of the old Income-tax Act and in order to decide this question it became necessary to consider whether the Income-tax Appellate Tribunal was a 'court'. If it was a court, the Central Legislature would not have power to enact the impugned section 33, sub-section (3). But if it was not a court, the Central Legislature would have undoubted power. Satyanarayana Rao and Rajagopalan JJ. constituting a Division Bench examined the relevant provisions of the old Income-tax Act and came to the conclusion that the Income-tax Appellate Tribunal was not a 'court' as commonly understood and section 33, sub-section (3), enacted by the Central Legislature was, therefore, valid. The view taken in this decision was followed by a Division Bench of the Andhra Pradesh High Court consisting of Subba Rao C.J. and Jaganmohan Reddy J. : Satyanarayanamurthi v. Income-tax Appellate Tribunal. So also in Commissioner of Income-tax v. Walchand and Company, Shah J., speaking on behalf of the Supreme Court, accepted as an indisputable proposition that the Income-tax Appellate Tribunal is not a court. He said at page 384 :

'It is necessary to emphasise that, though the tribunal is not a court, it is invested with judicial power to be exercised in a manner similar to the exercise of power of an appellate court acting under the Code of Civil Procedure.'

This statement of the law was reaffirmed by the Supreme Court in a subsequent decision in Income-tax Officer v. K. M. Mohammed Kunhi.

'It is well known that the Income-tax Appellate Tribunal is not a court but it exercise judicial powers. The Tribunal's powers in dealing with appeals are of the widest amplitude and have in some cases been held similar to an identical with the powers of an appellate court under the Code of Civil Procedure.'

25. Having regard to the aforesaid discussion and in view of the above quoted observations of the Supreme Court in Walchand and Company's case and Mohammed Kunhi's case we must reach the conclusion that the Income-tax Appellate Tribunal is not a court and an application for reference made to it cannot be regarded as an application to a court so as to be comprehended within the scope and ambit of section 29, sub-section (2). This view is of course contrary to that taken in a recent decision of the Bombay High Court in Vasanji Ghela v. State, but with great respect to the learned judges who decided the Bombay case, we do not think that that decision of the Supreme Court in Town Municipal Council's case and Nityanand M. Joshi case and proceeds on an erroneous construction of section 29, sub-section (2). We, therefore, hold that the Commissioner was not entitled to rely on section 29, sub-section (2), for the purpose of invoking the aid of section 5 and the Income-tax Appellate Tribunal was right in taking the view that it had no power to condone delay in filling the reference applications.

26. The petition, therefore, fails and the rule is discharged with costs.

27. Petition dismissed.


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