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Commissioner of Income-tax (Central), Madras Vs. J.K.K. Angappa Chaettiar and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Judge
Reported in(1982)27CTR(Mad)123; [1983]144ITR775(Mad)
ActsIncome Tax Act, 1922 - Sections 66(2)
AppellantCommissioner of Income-tax (Central), Madras
RespondentJ.K.K. Angappa Chaettiar and ors.
Cases ReferredIt v. Daulat Ram
Excerpt:
direct taxation - assessment - section 66 (2) of income tax act,1922 - whether tribunal right in holding that transaction relating to import licenses income assessable in hands of assessee for assessment years as returned by assessee - in instant case revenue wanted tribunal to refer two questions - tribunal did not refer those questions on ground that they did not arise out of order of tribunal but had not referred those questions only on ground that questions actually referred comprehensive enough to include within its questions sought to be referred by revenue - question referred cannot in its widest amplitude take controversy sale of import license or sale of imported goods and not comprehensive to include controversy between parties as has been wrongly assumed by tribunal directed to.....ramanujam, j. 1. there are reference under s. 256(2) of the i. t. act hereinafter referred to as 'the act'. and ad the issues involved in all these case are interconnected they are dealt with together. 2. one j. k. k. angappa chettiar and his there brothers, j. k. k. nataraja, j. k. k. sundaraaja and j. k. k. munirajah of kumarapalayam, hereinafter refereed to as the j. k. k. group, entered into an agreement dated october 23, 1967, with three firms, (1) m/s. rajarajeswari textiles, (2) returns. income-tax respective their in em by shown duly also was firms e of each appropriated amount the and firms, retained lakhs 1.94 rs. balances the other. or years one for returns brothers four fro accounted group k k. j. to apportioned 91% representing 19.65 this out lakhs, 21.59 8.25 off value.....
Judgment:

Ramanujam, J.

1. There are reference under s. 256(2) of the I. t. Act hereinafter referred to as 'the Act'. and ad the issues involved in all these case are interconnected they are dealt with together.

2. One J. K. K. Angappa Chettiar and his there brothers, J. K. K. Nataraja, J. K. K. Sundaraaja and J. K. K. Munirajah of Kumarapalayam, hereinafter refereed to as the J. K. K. group, entered into an agreement dated October 23, 1967, with three firms, (1) M/s. Rajarajeswari Textiles, (2) returns. income-tax respective their in em by shown duly also was firms e of each appropriated amount the and firms, retained lakhs 1.94 Rs. balances The other. or years one for returns brothers four fro accounted group K K. J. to apportioned 91% representing 19.65 this out lakhs, 21.59 8.25 off value licence basis on imported goods sale purchase different earned been have stated which profits aggregate concerned. wee other as far years, later concerned Textiles Rajarajeswari from income so 1969-70, 1968-69 assessment returns, submitted while members share 4th 1 said equally. divided turn were allotted profit themselves. 9% appropriating then profits. certain had there he import accounts lakhs. came all names received licences basic transaction,. respect firm three be remaining such case year ever March, 31st Textile every JUly, ascertains transaction loss purpose behalf act employees authorities parties any with contracts into enter can agreement terms In licence. under market asked obtained, a find enough experienced not As Scheme. Promotion Export units, made handicrafts exports entitled Textiles, instance take To same. substantially th substance Company. Trading Thangamani s M styled 1968, 17, January dated another entered They Bros. Chettiar Subramania S. (3) Obiliswamy T.

3. The ITO who made a detailed examination of the case found that the sale by the four firms of imported goods was only a my, that evidence had been created in support of the claims put fourth by the members of e J. K. K group of e claims put further by the members of the J. K. K groups and the four firms, that in fact there has bene sales of import licenses, that the sale proceeds of the import licences to the extent of Rs. 40.85 lakhs had been remitted from bombay to Komarapalayam where the J. K. K group had its headquarters, band that the said sum represented the profits on the sale of licences. The ITO thereafter apportioned the remittances of rs. 40.85 lakhs according to the dates of receipts in Komarapalayam to various assessment year and out filed four appeal for the assessment year 1968-69 and four he found Rs. 12 lakhs related to the assessment year 1968-69 and Rs. 28.85 lakhs related to the assessment year 1969-70. for the ass essment year 1968-69, he apportioned the amount of Rs. 12 lakhs between the four brother and held that the amount of Rs. 3 lakhs was assessable in e hands of each of e four brothers. He, therefore, brought to tax in the assessment year 1968-69 in the hands of J. K. K Angappa Chettiar Rs. 3 lakhs against the amount of Rs. 1,51,487 returned by him. for the assessment year 1969-70 also he brought tax in e hands of Angappa Chettiar Rs. 7,06,268 as again the income of Rs. 1,25,000 returned by assessee. For the assessment year 1969-70, the ITO treated as un of Rs. 59,929 shown in the returns of Rajarajeswari textiles towards their 9% share of profits as the consideration paid by J. K. K. groups to the said firm for having lent its name and in that view he deducted the amount of Rs. 59,929 from e sum of Rs. 28,85,000 which was held by the him to be the profits in the sale of import licenses of the assessment years 1969-70 and treated the balances of S. 28,25,071 as the income of the members of the J. K. K group and brought to tax in their separate assessment Rs. 7,06,268 as against the income of Rs, 1,25,000 returned by each of them.

4. The members of J. K. K. group filed four appeals for e assessment year 1968-69 and four appeals fro the assessment year 1969-70. The AAC passed a common order in respect of the members of the J. K. K group for the assessment years 1968-69 and 1969-70 dismissing the appeals, Appeals had been filed before the Income-tax Appellate Tribunal for the two assessment year by each of the members of the J. K. K group. The Tribunal dealt with the apples filed by each member of the J. K. K group by passing a common order in relation to the assessment year 1968-69 and 1969-70. the Tribunal had held in its orders that the ITO was not justified in bringing to tax the amount Rs. 40.85 lakhs treated it as the profit from the sale of import license that the REvenue has not established its case that what was sold was only the import license and not the imported goods, and that the only amounts which could be brought to tax in the hands of e members of the J. K. K. group in the two assessment year under consideration on the state of the evidence on record would only be the amounts as returned by each of them of Rs. 1,51,487 for the assessment year 1968-69 and Rs. 1,25,000 for the assessment year 1969-70.

5. Aggrieved by the orders of the Tribunal the REvenue sought to this this court and the following common questions has been referred to this court in T. C. Nos. 664 and 665 of 1976, in respect of the assessment made against J. K. K Angappa Chettiar for the years 1968-69 and 1969-70, T. C. Nos. 696 and 697 of 1976, relating to J. K. K Munirajah Chettiar for the year 1968-69 and 1969-70, T. C. Nos. 702 and 703 for the assessment years 1968-69 and 1969-70 relating to J. K. K Sundaraaja and T. C. Nos. 705 and 706 for the assessment year 1968-69 and 1969-70, relating to J. K. K Nataraja.

'Whether, on the facts and in the circumstances of e case, the Tribunal was right in holding that in respect of the transaction relating to the import licences the income assessable in e hands of e assessee for the assessment year 1968-69 was only Rs. 1,51,487 and for the assessment year 1969-70 was only Rs. 1,25,000 as returned by the assessee ?'

6. In making e assessment for the assessment years 1968-69, 1969-70 and 1970-71 on J. K. K. Angappa Chettiar and J. K. K Sundararaj, the ITO had included the full share of income as arising from the firms of Sunderam Spinning Mills, Kandaswamy Spinning Mills, Alagapa Cotton Mills and M/s. Bell Textiles in which they were partners, as e income of the assessee, Anappoa Chettiar and J. K. K. Sundararaj. The contention off each of e said assessment was that only 1/3rd share in the case of Angappa Chettiar and half share in e case of J. K. K Sundarah should be treated as their income, and e per share belonged to their sons by virtue of a partition which had already taken place. However, the ITO did not uphold the said contention. Before the AAc, it was contended that e two-thirds share of the income arising from each of the aforesaid firm belonged the Angappa Chettiar's two sons, and half share of such income belonged were not t aken in as partner in firm before the partition in the family. The AAC had stated that the same point had come up for consideration, in e appeals filed in connection with the wealth-tax assessment for the assessment year 1962-63, 1963-64 and 1964-65 and had been consider by his predecessor in his order dated October 21, 1969, Accepting the view of his predecessor he held that the ITO was rich in treating the entire income as belonging to the assessment except the extent of interest of 6% on e monies belonged to the minor which had been used by e assessee in e aforesaid business. Both Anappa Chettiar and the Department filed appeals before e Tribunal; the assessee contending that the two-thirds share income should have been excluded from each of the aforesaid firms while the Department contending that the AAC shout not have allowed 6% referred to above. The TRibunal held that the as there was a divisi ons of the account of the family in e various partnership firms and the interest in the various partnership firms belonging to the family was to be held by e assessee and his sons as tenants in common with a right to division of he profession of the partnership firm, that the profits and accretions attributable to the minors interest in the partnership firm had to be treated as the wealth of the minor sons and that the share of the minors cannot be included in the assessment of the father, Angappa Chettiar. Similarly in Sundararj's case also the Tribunal has held that the share income of his minor sons cannot be included in the fathers assessment. aggrieved by the order of the Tribunal the REvenue sought reference to the court in T. c. Nos. 666 and 704for of 1976, respectively, and e following common question has been referred.

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that only one-third share in income from the firms of M/s. Sunderam Spinning Mills, s. Kandaswamy Spinning Mills, M/s. Alagappa Cotton Mills, and M/s. Bell Textiles can be included in the assessment of each of the year 1968-69, 1969-70 and 1970-71 ?'

7. The questions referred in relation to the clubbing of the son's incomes with their parents incomes may be taken up first and disposed of, as it does not involves any elaborate discussion. J. K. K Angappa Chettiar was a members of an HUF up to the assessment year 1961-62. The HUF had interest in various partnership firms in Indians well as outside India. There was a partition between the members of the HUF as a result of which the capital account of the family with the various firm were equally divided between the him and his two minor sons, Kandaswamy and Asokan. The claim of partition of the HUF was accepted by the ITO by an order under s. 25A of the I. T. Act for th assessment year 1962-63 and 1963-64. Angappa Chettiar filed wealth-tax returns contending that our that the total wealth earned comprising the profits, assets and investment form the various should be excluded from there computation of this net wealth. the weal th-tax assessment came up before the Appellate Tribunal which, ultimately by its order dated March 31, 1973, held (i) that there was a divisions of the capital account of the family in th4 various partnership firms and the interest in the various partnership firms belonging to the family was to be held by the assessee and his sons as tenants in common with right to the division of the profits of the partnership firm, and (ii) that since there has bene a partition of the family capital account in the four partnership firms, that is, M/s. Alagappa Cotton Mills and M/s. Bell Textiles and since he was exclusively receiving the income from the partnership firms, there is a legal liability to account for the minors 2/3rd share of the profits and since the assessee had gained an advantage in derogation of the rights of his one in th capital account, the profits and accretions attributable to the minors interest in the part nership firms had to be treated as the wealth of the minors sons and it case no longer be consider d as the wealth of the assessee. Angappa Chettiar. following the said reasoning it had adopted in e wealth-tax assessment for the year 1962-63 and 1963-64, the Tribunal excluded 2/3rd share of the profits belonging to the minors sons and rusticated the assessment only to 1/3rd share in e assessment of Angappa Chettiar for the year 1968-69, 1969-70 and 19700-71. Similarly, the Tribunal in the appeals filed by J. K. K. Sundararajan excluded half share of the profits belonging to his minor sons, K. K. S. Manickam, and restricted the assessment only to half share of income from certain firms in his assessment for the said three assessment year. The assessment order passed by the Tribunal tin the wealth-tax assessments referred to and followed in these proceedings have been affirmed by the High Court in CWT v. J. K. K Angappa Ch ettiar : [1979]116ITR456(Mad) . As against the same a petitioner for leave to appeal to Surepme Court in S. C. P. 290 of 1979, has also been dismissed. having regard to the fact that the wealth-tax assessments have becomes final, the minors share of the income from the partnership cannot be included in the share of the father. hence the question referred in T. C. Nos. 666 and 704 of 1976, has to be answered in the affirmative and against the Revenue.

8. Coming to the main questions as to what is the income assessable in the hand of the members of the J. K. K group for the assessment year 1968-69 and 1969-70, as arising from the transaction relating to import 1968-69 and 1969-70, as arising from the transaction relating to import licences, as already stated, the ITo had held that there was no import of goods on the basis of the import licences issued in favour of the four firms, but the import licences were sold by the assessee on behalf of the firms and the sale proceeds thereof to the extent of Rs. 40.85 lakhs had been received and that has bene shared by the J. K. K group and e four firms and that 91% of e same has been received by the J. K. K. group as its share of the income. He apportioned the said sum of rS. 40.85 lakhs as Rs. 12 lakhs for the assessment year 1968-69 and Rs. 28.85 lakhs for the assessment year 1969-70. On appeal, the AAC has also agreed with th e findings of the ITo and dismissed the appeals. The Tribunal, however, held that the REvenue has not established its case that there was a sale of import licences and sum of Rs. 40.85 lakhs had been realised thereby and, therefor, the members of the J. K. K group can be assessed only on the amounts, as returned by each of them as their share of the assessment years 1968-69 and 1969-70.

9. Before the Tribunal, the Commissioner of Income-tax had filed applications for reference requesting the Tribunal to refer to the High Court specified question as arising tout of the common order of the Tribunal dated January 31, 1975, out of which questions Nos, 1 to 8 related to the assessee dealing with import licences. However, the Tribunal, after related to referring to the main dispute, felt that all the said eight question related to Rs. 40.85 lakhs alleged to be the sake price of import licences and that those questions were only the various facts of the same question and not different question. The Tribunal, after stating that the main controversy was as to whether there was a sale of import licences as alleged by the Revenue or whether there was a sale of the imports goods as alleged by the assessee, has chosen to refer only the aforesaid question thinking that it is comprehensive. Even before the Tribunal the REvenue specifically prayed for referring the specific question whether the Tribunal decision that there was no sale of import licences but there was only a sale of import foods was correct or not but the Tribunal thought it gift to refer only one question of law as set out above on the assumption that the question referred was comprehensive enough to includes all the eight question sought to be refe rred by the REvenue on this aspect. As a matter of fact, at the stage of the finalisation of the statement of the case the Revenue requested that instead of the above questions proposed by the Tribunal the following two question may be referred :

' (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Income-tax Officer was not justified in estimating the profits oat Rs,. 40.85 lakhs

(2) Whether, on the materials available on record, the Tribunal was justified in holding that the sum of Rs. 40.35 lakhs did not represent the income of the J. K. K Brothers ?'

10. However, the Tribunal felt that the question proposed by it did not call for any alternation as it was comprehensive.

11. When the reference was taken up for the hearing, the learned counsel for the Revenue took use throughout the order of the Tribunal as also the voluminous documents which were filed before and considered by the Tribunal to convince us that the finding of the Tribunal that there has been materials on record and, therefor, e the order of the Tribunal holding that in respect of the transaction relating to import licences, the income assessable in the hands of the assessee as the income for the years 1968-69 and 1969-70, should be taken to be the income returned by the assessee. The learned counsel for the assessee, however, contended that on the questions referred, the correction or otherwise, of the finding of the Tribunal that there was no sale of import licences cannot be gone into in the absence of a specific questions questioning that finding, that in this case the Tribunal has specifically refused to refer that question, even t hough asked for by the REvenue, (on the ground) that the REvenue had not sough for a reference on that question under s. 256(2) and that, therefor, it was no longer open to the REvenue to go behind the said finding of fact arrived at by the Tribunal. Taking note of the said objection raised by the counsel for the assessee, the Revenue filed application R. C. M. P. Nos. 221 to 228 of 1981 by way of the notice of motion under ss. 256 and 260 of the I. T. ACt 4read with s. 151 of the CPC for reaffirming the question already referred to, or to frame the question of law which the Tribunal; refused to refer. The said notice of motion has bene op0posed by the assessee on the ground that such notice of motion cannot be maintained under ss. 256 and 260 of the Act, that the question suffested by the REvenue at the stage of the finalaisation of th refence did not survivie and that the Revneue canno tmove this court to consider them at this stage since the Tribunal has refused to refer those two questisosn suffestied bny e Revenue and the REvenue has not filed an application under s. 256(2) for referrign the sasi two questision whfich the Tribunal refeused to refer, and this court has no jurisdiczition which the ribuanal refused to refer, and this court has no jurisdication to reframe the questisdosn or to frame fresh questisosn sugfgested by the Revnue or to call for a fresh statement of the case on those questions from the Trtibunal.

12. In this case the questision actually referred for our opinion was as to whether the Tribunal was rifht in holding that in respect of the transaction relating to impport licences the income assessable in the hands of the assessee for the assessment year 1968-69 and 1969-70 was only Rs. 1,51,487 and Rs. 1,25,000 as retuned by the assessee. The said question has to be answered in the affirmative if the factual finding given by the Tribunal that there was no sale of import licences, by there wa only a sale of imported fgoods is accepted. As a matter of fact, the learned counsel for the assessment vehemently contended that it is not possible for this court to go being the finding of the Tribunal that there was no sale of import licence by the assessee but there wa a sale of imported goods, unless there is a specific questions raised by the Tribunal whether the findings of the Tribunal is borne out by the materials on record, and in this case, there being no such questions referred to this court at the instance of the Revenue, the revenue was bound by the finding of fact arrived at by the Tribunal, as to whether there was a sale of import licences or sale of imported goods by the assessee. It is in is context the learned counsel for the rEvenue position out that though the REvenue has asked for a reference of the two questions dispatching the finding of fact, m the Tribunal did not refer them on the ground that the questions the REvenue that the Tribunal cannot be taken to have rejected the Revenue request to refer those two questions, for, the Tribunal merely held that those questions were not necessary because the questions referred was comprehensive, and that in such a case, if this court is of the view that the questions refereed is not comprehensive enough the it is open to this court either to reframe the questions or to coals for a s upplement statement of the case form the Tribunal referring specifically those two questions.

13. A perusal of e statement of the case indicates that the TRibunal did not rejects the REvenue request to refer the two questions on e ground that they die not arise out the Tribunal order. But, it has been refused only on the ground that the question referred was comprehensive. Accordingly to e learned counsel for the assessee even in such a case where th4e Tribunal does not refer the question proposed by the REvenue on the ground that the questions referred is comprehensive, the Revenue should have moved this court under s. 256(2) of the Act of referring the questions proposed by them and the REvenue not having taken any steps in that regard, it is not open to them at this stage took ask the court either to reframe the question or to call for a fresh statement of the case, with reference to those questions from the Tribunal. It is no doubt true as contended by e learned counsel for the assessee that in the face of e question now refereed, it is not possible for the Revenue to questions the finding of fact arrived at by the Tribunal that there has been no sale of the import licence by the assessee as contended by the REvenue, as the questions is not comprehensive enough. however, is cannot be disputed that the main controversy between the REvenue and the assessee before the ITO, AAC and the Tribunal was whether the assessees have realised a sum of Rs,. 40.85 lakhs by the sale of import licences and all the authorities went into the question in considerable detail and gave their respective findins. The ultimates finding given by the Tribunal was that there was no sale of import licences as alleged by the Revenue. The REvenue has sough a reference to this court mainly to canvass that finding of the Tribunal. The Tribunal has, after referring to the controversy between the parties, taken the view that the question as framed is comp rehensive and will take in the dispute as to whether there was a sale of import licences fetching Rs. 40.85 lakhs. As against the refusal of the Tribunal to refer the question proposed by the REvenue the Revenue, of course, did not file as application under s. 256(2) of the act presumably on e impression, that the question referred was comprehensive as has bene held by the Tribunal. the questions in those circumstance is whether the Revenue can pray for reframing the question referred or for calling for a fresh statement of the cease, if this court were to hold that the question referred is not comprehensive enough to include the real controversy between the parties.

14. In one of e earliest cases N. V. Khandvala and Co. v. CIT : [1946]14ITR635(Bom) , the learned judge took the view that s. 66(2) of the I. T. Act of 1922 could be invoked where the Income-tax Tribunal has refused to refer all the questions of law that were property raised in the case an that the proper stage at which the objection of the assessee that other questions of law should have been referred or ought to be heard was when the main reference came up for hearing. The learned judges observed (p. 637) :

'When, a statement of case, with the question of law framed by the Tribunal. is filed in court for disposal, if a part is aggrieved and wants to contend that certain further facts ought to be stated, or certain question of law should be raised, he can make an application by way of notice of motion. That should be heard along with the case stated by the Tribunal for the courts opinion. At that time the court will consider whether the statement of case is complete for the question of law raised by e Tribunal. The court can also consider whether the statement of case is complete for the question of law raised by the Tribunal. The court can also consider whether on the case stated by the Tribunal the proper questions is raised or not. That is the proper time for an aggrieved party to bring to the notice of the court that certain further and other facts are necessary to be stated or certain further, or other questions, of l aw arise and should be brought for decision by the court.'

15. In Anglo French textile Co. v. Income-tax appellate Tribunal : [1950]18ITR234(Mad) , a Division Bench of this court has taken the view that where an assessee applied to the Income-tax Appellate Tribunal under s. 66(1) of the Indian I. T. Act, 1922, to refer certain questions to the High Court and the Tribunal refers only some of them and refuses to refer the other on e ground that they did not arise, it is open to the party to raise the objection that the other questions of law shout have been referred and file an application under s. 66(2) seeking a reference on that question. The learned application under s, 66(2) seeking a reference o n that question. the learned judges in that case observed (p. 237) :

'Whatever may be said as to he stage at which an application under section 66(2) should be heard, we are clearly of the opinion that section 66 itself contained with regard to the procedure to be adopted when an assessee or Commissioner is dissatisfied with the order of reefers and that it does provide for the contagions when the statement of the case is incomplete, as well as for that when no reference has bene made at all.'

16. In Mrs. Sarojini Rajah, v. CIT : [1969]71ITR504(Mad) , another Division Bench of this court has held that whether a questions referred to the High Court under s. 66(2) of the Indian I. T. Act, 1922, is comprehensive enough to include other questions not specifically raised will have to be decided in the light of the facts of each case and that a factual finding of the Tribunal cannot be distributed in a reference except when the conclusion of e Tribunal could not reasonably be entertained upon a reasonable view of the facts.

17. In CIT v. McLeod and Co. ltd. : [1970]78ITR22(SC) , the Supreme Court held that when a statement of case, with the questions of law framed by the Tribunal is filed in court for disposal if party is aggrieved and wants to contend that certain further facts ought to be stated, or certain questions of law should be raised, he can make an application by way of notice of motion and that shout be heard along with the case stated ny the Tribunal for the courts opinion. Accordingly to the Supreme /Court is is at that time the court has to consider whet4r the statement of the case is complete for the question of law raised by the Tribunal or whether on the case stated by the Tribunal the proper question is raised or not and that is the proper time for an aggrieved party to bring to the notice of e court that certain further or other facts are necessary to be stated or certain further or other question of law arise and should be brought for decisi on by the court. In this case the Supreme Court had approved the decision of the Bombay High Court N. V. Khandvala and Co. v. CIT : [1946]14ITR635(Bom) , and relied units earlier decision in Lakshmiratan cotton Mills Co. Ltd. v. CIT : [1969]73ITR634(SC) . Based on this decision of the Supreme Court, the Revenue has filed the notice of motion referred to above.

18. It is well, established that normally a finding of fact arrived at by the TRibunal on e basis of the material on record will not be interfered with by this court exercising reference jurisdiction. In Homi Jehangir Gheesta v. CIT : [1961]41ITR135(SC) , the Supreme Court had pointed out that in determining whether, an order off the Appellate Tribunal would given rise to a questions of law the court must read the order of the Tribunal as a whole and determined whether every material fact for and against the assessee, has bene considered fairly and with due care; whether, the evidence pro and con has bene consider in reaching the final conclusion; and whether the conclusion reached by the Tribunal has been coloured by irrelevant consideration or matter of prejudice or whether the Tribunal has indulged in conjectures, surmises or suspicions. In Oriental Investment Co. P. Ltd. v. CIT : [1969]72ITR408(SC) , the Supreme Court h ad laid down that the finding of fact recorded by the Tribunal must be regarded as conclusive in. proceeding under s. 66(1) but the said finding is open to challenge on e ground that it is not supported by any legal evidence or material or that the conclusion of fact drawn by the Tribunal is perverse and is not rationally possible, and that is is with these narrow limits that the conclusion of fact by the Tribunal can be challenged under s. 66. However, such conclusion of the Tribunal cannot be challenged on the ground that they are based on a misappreciation of evidence.

19. In CIT v. ICI (India) (P.) Ltd. : [1969]74ITR17(SC) , the Supreme Court has pointed out that the High court is not a court of appeal in a reference under s. 66(1) of the Act, that it is not open to the High Court in such a reference to embark upon a reappraisal of the evidence and to arrive at finding of fact contrary to those of e Tribunal, that while hearing the reference the High Court ought to confine itself to the facts as found by the Tribunal, and to answer the the question, of law in the context of those facts and that seven if the finding of fact is defective in law or there is no evidence to support it or if the finding is perverse it is not open to the assessee or the Revenue3 to challenge such a finding of fact unless there is a reference on the specific questions. In CIt v. Daulat Ram, Rawatmull : [1973]87ITR349(SC) , the Supreme e/Court again pointed out that the findings on questions of pure fact arrived at by th e Tribunal are not to be disturbed by the HIgh court on a reference unless it appears that the was no evidence before the Tribunal upon which, they, as reasonable men, could come to the conclusion to which they have come and this is so even though the High court would on the evidence have come to a conclusion entirely different from the of the Tribunal. In Kishenlala Roopchand & Co. v. CIt : [1976]104ITR422(Mad) , a Bench of this court to which one of use was a party had held that though the High Court cannot in. refers with the finding of the Tribunal on e basis that another view is possible on the same material if there are relevant material on which the findings arrived at by the Tribunal could reasonable be based, the High Court has undoubted jurisdiction to interfere with the finding to the Tribunal if it appears that either the TRibunal has arrived at a finding based on no evidence or its finding is inconsistent with the evidence on record or it has acted on material partly relevant and partly irrelevant or it draws upon its own imagination and imports facts and circumstances not apparent from the record or its bases its conclusion on mere conjectures and surmises or no persons acting judicial and property instructed as to the relevant laws could have come to the determination reached by the Tribunal. from the decision referred to above, it will be clear that the finding of the Tribunal that there was no sale of import licenses cannot be canvassed unless that finding has bene specifically challenged by raising a specific questions has been held by the Supreme Court in Aluminum Corporation of India Ltd. v. CIT : [1972]86ITR11(SC) . In that case the Supreme Court observed that if any party wants to challenge the correctness of the findings given by the Tribunal either on the ground that it is not supported by any ev idence on record or is based on irrelevant or inadmissible evidence or is unreasonable or perverse, a reference raising any once of these ground st must be sought for and obtained and that the jurisdiction of the High Court on a reference under s. 66 of the Indian I. T. Act, 1977, is only advisory and the High Court can pronounce it opinion only on the question referred to it and it cannot sit as an appellate court from the decision of the Tribunal.

20. In this case admittedly there is no specific question challenging e finding of the Tribunal that there is no sale of import licenses by the assessee. It is in this background, the Revenue has filed the notices of motion referred to above with a prayer either to reframe the question referred already or to call for a fresh statement of case from the Tribunal referring the two question proposed by then. In what circumstances this court reframe a question or call for a fresh statement of the case have need consider in e following decisions.

21. In Jethabhai Hirji & Co. v. CIT : [1949]17ITR533(Bom) , the Bombay High Court held that when the assessee or the Commissioner comes to the High Court under s. 66(2) it would be for the High Court after hearing the other side to determine what are the question of law which would arise or of the order of the TRibunal, and when a requisition is made by the High Court to the Tribunal to state a case, that requisitions should contain the question or questions of law which according to the High Court arise out the Tribunal order, and the function of th Tribunal, once a requisition is made upon it under s. 66(2), is to formulate proper question which arise out of those question of law and to state a case which is germane to the questions of law indicate by the High Court and it would be then open to the High Court either to answer the questions. formulated by the Tribunal or, if the High Court feels that the questions are not property raised , to reframe the questions or modify the question and answer those question as reframe or modified. In CIT v. Smt Anusuya Devi [1976] 8 ITR 750, the Supreme Court had taken the view that the power to reframe a questions may be exercise to clarify some obscurity in the question referred, or to pinpoint the real issue between the assessee and the Department or for similar other reasons, though it cannot be exercise for reopening an enquiry on a question of fact or law whcih is close buy the order of the Tribunal. In lakshmiraten Cotton Mills Co. Ltd. v. CIT : [1969]73ITR634(SC) , the Supreme Court while dealing with the scope of s. 66 observed that the High Court had no power to call for a statement of case on questions which are incorporated neither in the application under s. 6691) not in application under s. 6692). that the power under s. 66(4) might be exercised to call for a supplementary statement only when the cour t is satisfied that the statement in a case referred under s. 66(1) or 66(2) were not sufficient to enable it to determine the question raised by that statement that s. 66(4) did not confer a power to raise any additional question are to call for an additional statement of case on questions not referred by the Tribunal and that the court can decline to answer the question which did not in fact arise out of the order of the Tribunal or could not have bene raised because it was not incorporated in the application. The court further observed that a party can make an application by way of notice of motion for a further statement of the case or for framing a further question of law at e stage of hearing the reference made by the Tribunal. In V. L. Dutt v. CIt [1976] 103 ITR 534 , this court has pointed out that thre Tribunal is under a duty to ensure that e question of law raised bring out the controversy between the parties and the right of the High Court to re-draft the question if necessary even no new question is involved and that where that High Court find that the question as framed by the Tribunal are not proper., it has jurisdiction to reaffirmed the question so as to bring out the real controversy between the parties. In Hanutram Ramprasad v,. CIt [1978] 112 ITR 187, e Gauhati High Court had taken a somewhat extreme view. It has held that s, 260 of the I. T. ?Act, 1961, has not laid down that the High Court is to decide only the question referred and if a point of law has been raised before the Tribunal and considered by it, it arises out of th order of the Tribunal and that although this point was not referred by the Tribunal under s. 260, the High Court has jurisdiction to consider and give its opinion on it and reframe the question for the purpose in order rot bring out the true purport. The learned judges in that case have purposed to follow the decision of the Supreme Court in Kusumbent D. Mahandevia v. CIt and CIT v. Scindia Steam Navigation Co. Ltd. : [1961]42ITR589(SC) . In Agha Abdula Jabbar Khan v. CIt [1971] 82 ITR 872, the Supreme Court has ruled that the High Court had not jurisdiction to raise new question of law which did not flow from e question referred by the Tribunal and that if the High Court felt that the question referred to it did not bring out the real point in issue, it was open to it to call for a fresh statement of the case and direct the Tribunal to unit for its opinion the real questions arising for decision.

22. It is clear from the above decision that if the question already referred by the Tribunal under s,. 256(1) does not reflect or comprehend the real controversy between the parties, this court can reframe the question suitably or call for a fresh statement of case not the questions of law which the Tribunal has chosen to refer even thou asked for by the party and whcih question are necessary to bring out the real controversy between the parties. In this case, as already pointed out, the REvenue, wanted the Tribunal to refer the two question set out above, but the Tribunal did not actually refuse to refer those questions on the ground that they did not arise out of the order of the Tribunal but had not referred those questions only on the ground that the questions actual referred is comprehensive enough to include within is ambit questions sought to be referred by the Revenue. We are of thre view that in this case the question as referred cannot, even in its widest amplitude, take i the controversy as to whether there was really as sale of import licenses or a sale of imported goods, which was the main controversy between the parties before the Tribunal, as well as before us. As the Tribunal has not referred the real question in issued between the parties, it has to be directed to furnish an additional statement of e case covering those question as we find it difficult to answer the question referred to us for opinion in the absence of a specific question whcih is necessary to challenge the finding of fact rendered by the Tribunal that there has been no sale of import licenses and the reference is directed mainly against the finding of the Tribunal. Since we are of the view, after hearing the parties at length, that the question referred is not comprehensive enough ito include the controversy between the parties as has wron gly been assumed by the Tribunal while making the reference this is a fist case for directing the Tribunal to submits as further statement of e case on the two question set out above within three months from this date.


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