1. In our opinion this Reference is incompetent and for the following reasons.
2. The assessee is a firm, going by the name of Khestsidas Ratanlall, Calcutta, and composed of two partners, named Khestsidas Dugar and Labhuram Nakhata, whose shares are equal. The firm is stated to have started business on 16-8-1944. The books of the firm showed that on that date two sums of Rs. 25,000/- each were deposited by the two partners, each depositing a sum of Rs. 25,000/-
Naturally, the Income-tax Officer asked the assessee to satisfy him as to the source of the deposits and the explanation given was that the partners had brought the money from their native place at Bikaner. The Income-tax Officer was not satisfied and brought the two sums under assessment income of the firm from undisclosed sources. The Appellate Assistant Commissioner confirmed that finding..
When the matter was taken on further appeal to the Appellate Tribunal, it was no longer contended that the explanation given as to the source of the money should be believed, but what was argued was that inasmuch as the deposits were made on the very first day that the firm commenced its business, they could not possibly be profits of the firm from any source, disclosed or undisclosed.
Consequentially to that submission, it was contended that the Hums Jell properly to be assessed in the hands of the two partners who had made the deposits as parts of their income. When the case was put before the Tribunal in that form, the Tribunal disposed of it by saying that inasmuch as the firm was a registered firm, whether or not the two sums in question were assessed as the income of the firm or the income of the two partners was of no practical consequence, since even if assessed, in the first instance, as the income of the firm, they would have to be taxed in the hands of the partners.
In that view, the Tribunal declined to entertain the argument of the assessee and observed that it was 'more or less academic'. It will be noticed that the Tribunal did not decide for themselves whether the two sums had been properly assessed as the income of the firm or whether, in view of the date when they made their appearance in the firm's books, they should have been taxed, if at all, in the hands of the two partners.
It should also be noticed that there was no contention before the Tribunal as to the two sums notbeing concealed income from undisclosed sources of either, the firm or the partners.
3. After the Tribunal had disposed of the appeal, the assessee asked for a reference to this Court and the Tribunal referred the two following questions:
'Whether the sum of Rs. 50,000/- appearing as cash credits on the opening date of the business can be treated as the income of the assessee firm from some undisclosed sources?'
(2) 'If not, whether on the facts and in the circumstances of this case the sum of Rs. 50,000/- should be included in the assessment of the two individual partners, one half each?'
4. On the Reference coming up for hearing, we pointed out that the Tribunal had not either held that the amount of the cash credits in question had been properly included in the assessable income of the firm or that they should be included in the personal assessments of the two individual partners.
Having pointed out the absence of any definite finding on the contention before the Tribunal, we proceeded to observe that what the Tribunal had done was simply to say that whether the amounts in question were concealed profits of the firm or such profits of the partners, the tax liability of the two partners would be the same and that out of a finding of that character, the only question which could possibly be said to arise was whether the Tribunal had been right in treating the question raised by the assessee as a purely academic one and refusing to go into the merits of the plea in that view.
We pointed out that in its application for a reference, the assessee firm had asked for a reference on a question more or less of the nature of the question we indicated. We did not, however, say that such a question would be a fit question to be referred.
5. It appears from the order passed by us on that occasion that we made 'inter alia' the following further observations:
'This Court cannot possibly be asked to advise the Tribunal as to whether the sum of Rs. 50,000/- could be treated as the income of the firm, unless the Tribunal itself had first held that it could be or could not be so treated.
The second question is contingent on the answer that might be rendered on the first and it suffers from the further difficulty that the Tribunal has not expressed any opinion or come to any finding on this question either. x x x Nevertheless, it has asked this Court to say whether the income was assessable on the first basis or the second.
This Court must protest against being treated in that fashion and having questions flung at it, which not only do not arise out of the appellate order but are entirely inconsistent with the basis on which the appellate order rests'.
In the result, we held that the questions referred did not arise out of the appellate order.
6. One should have thought that our order indicated clearly enough that the Reference, as made on the application of the assessee firm, had been disposed of once and for all. The Tribunal, now even, seem to have thought otherwise and they have taken it upon themselves to make a second Reference by which they have now referred the following question :
'Whether the Tribunal was right in holding that the contention of the assessee that the amount of Rs. 50,000/- should not on the facts and in the circumstances of the case be included in the total income of the firm, was 'more or less academic' because the firm was registered and the partners who were alleged to have contributed Rs. 25,000/- each had equal shares in the income of the firm?'
7. We are entirely unable to see under what provision of law the Tribunal could have considered themselves authorised to make a second Reference. When disposing of the first Reference, we did not make any order under Section 66(4) of the Act and did not call for a further statement of the case.
We simply held that the questions referred did not arise out of the appellate order and therefore there was nothing to answer. When that decision was given, not only was the Reference as made, disposed of, but all possibilities of the application made by the assessee firm for a Reference to this Court were also exhausted.
The Income-tax Act does not provide that even after the Tribunal have referred to the High Court certain questions of law, supposed to arise out of their order and even after the High Court has held that those questions do not arise, the application for a Reference still survives as a potent application and on the basis of that application, another and in fact, any number of References may successively be made till at last the questions really arising out of the order, if there be any, are discovered and hit upon.
What the Act plainly intends is that upon an application being made, there will be only a single Reference with a single Statement of Case. A supplementary statement can be submitted only when the High Court has called for such a statement under Sub-section (4) of Section 66.
It is not the law and there is no provision in the Act, either express or implied, that the Tribunal can go on making experiments with the application land learn from one or more reverses what the true question is and then make a successful Reference.
8. Mr. Sen Gupta, who appears for the assessee firm, contended that his client had made an application for a Reference and if a question of law did arise but the Tribunal had failed to refer the proper question, his client should not suffer. The answer is that the Income-tax Act has not consigned a party, desiring a Reference to the High Court, to the absolute mercy of the Tribunal or to a helpless condition.
If a party finds that although the Tribunal are making a Reference, they are not referring the proper question, it is always open to him to come up to this Court and move it under Section 66(2) of the Act for a direction on the Tribunal to refer the proper question, I find that in the present case the question which the assessee firm proposed was the following:
'Whether under the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in holding that the sum of Rs. 50,000/- credited in the accounts of the two partners on the starting day of the business is the income of the Registered firm for the years and taxable under the Act and whether the contention of the appellant was merely academic'?
9. It would be noticed that the question proposed by the assessee bears a close resemblance to the question which the Tribunal have referred in the course of their second effort. But what has to be pointed out is that the assessee, after having proposed the question to which I have referredshould not have remained idle when it found that the Tribunal were not referring that question, but were referring other questions which were not questions which it had proposed.
If it had come at the stage that the Tribunal had made the Reference and asked this Court to direct the Tribunal to refer the proper question, it could have saved itself from the frustration of its efforts to obtain a Reference to this Court, if, of course, this Court found that the question proposed was a proper question of law. Not having been vigilant at the point of time when the law requires it to be vigilant, it has allowed the only chance afforded by the Act to have a proper question referred to go by and cannot now be heard to complain.
10. In my view, there is no authority in the Tribunal to make a second Reference after it has been held by this Court that the questions referred, in the first instance, do not arise out of the appellate order, nor is there any right of the party at Whose instance the Reference was made to ask for and obtain a second Reference.
11. For the reasons given above, this Reference is rejected.
12. The Commissioner of Income-tax will have his costs from the assessee.
13. I agree.