SANKAR PRASAD MITRA J. - This is a reference under section 66(1) of the Indian Income-tax Act, 1922. The assessee is a shareholder of several limited companies. The assessment years are 1954-55, 1955-56, 1956-57 and 1957-58. The corresponding accounting years are years ending on July 31, 1953, 1954, 1955 and 1956 respectively. We are concerned in this reference principally with the assessment year 1954-55. For this assessment year the assessee had claimed a loss of Rs. 9,40,467 on account of depreciation in the value of shares in the stock and Rs. 28,518 on sale of shares.
The Income-tax Officer by his order dated November 29, 1957, disallowed the first loss and allowed the second loss only to the extent of Rs. 20,853. The Income-tax Officer was of the view that only shares which were held for not less than 24 months before the sale could be taken as part of the assessees trading stock. He also held that the holding of shares in 9 companies which according to him were associated concerns of Messrs. Surajmull Nagarmull were not part of the assessees trading stock. About the remaining companies the Income-tax Officer agreed to value the opening and closing stock at the cost price or market price whichever was lower and made the assessment accordingly. The Appellant Assistant Commissioner did not accept the segregation by the Income-tax Officer of shares in the companies which were associated concerns of Messrs. Surajmull Nagarmull. He thought that all the shares held by the assessee whether of associated concerns or not became part of the trading stock of the assessee on August 1, 1952. The Appellant Assistant Commissioner accordingly set aside the assessment of the Income-tax Officer and directed him to make a fresh assessment on the basis that the assessee became a dealer in shares on August 1, 1952. He further directed that the cost or the market price whichever was lower should be the basis of valuation on and from August 1, 1952. The department did not challenge the finding of the Appellant Assistant Commissioner that all the shares of the assessee became its trading stock on August 1, 1952. The assessee also did not challenge his direction that the cost or the market price whichever was lower should be the basis of the evaluation for all the shares.
The Income-tax Officer, when the matter came back to him, made a fresh assessment by his order dated July 31, 1958, on the basis of valuation prescribed by the Appellant Assistant Commissioner.
The assessee went against the Appellant Assistant Commissioner. Its grievances this time were confined to certain arithmetical errors in the order of the Income-tax Officer and wrong application of the principles laid down by the Appellate Assistant Commissioner in respect of certain shares.
The assessee then came up before the Tribunal with the contention that in respect of shares in two of the companies, viz., Naskarpara Jute Mill Co. Ltd. and West Bengal Jute Co. Ltd., the income-tax authorities were not justified in valuing the shares in the opening stock at cost price which was admittedly lower than the market price and that on the date on which the shares became a part of the trading stock, the shares would have been valued at market price so that loss on account of sales would have been higher. The department on the other hand contended before the Tribunal that the shares in dispute were not a part of the assessee trading stock on August 1, 1952.
The Appellate Tribunal took the view that the respective contentions aforesaid of the assessee and of the department were determined by the first order of the Appellant Assistant Commissioner made on February 27, 1958, and since there was no appeal against that order either by the assessee or by the department, no part of it could be challenged in the course of the appeal before the Tribunal. It is further pointed out by the Tribunal that the assessees challenge to the principle of valuation was not thrown even when the Appellant Assistant Commissioner was considering the matter for the second time. The Appellate Tribunal in these circumstances refused to entertain the assessees contentions relating to principles of valuatio :
The following question of law has arisen in this referenc :
'Whether, on the facts and in the circumstances of the case, it was competent for the assessee to contend that in respect of certain shares the method of valuation of shares laid down by the Appellant Assistant Commissioner in his earlier order was not correct, when that order of the Appellant Assistant Commissioner was not questioned before the Appellant Assistant Commissioner even in the second appeal.'
Mr. Sukumar Mitra, learned counsel for the assessee, has argued before us that the Tribunal has jurisdiction to allow any new question to be raised for the first time in the appeal before it, and should allow such a question to be raised if it is a question of law which can be decided on the facts already on record. Learned counsel has relied on a number of authorities in support of this proposition. Mr. Mitra urged further that, as a matter of public policy, the Tribunal should have taken into account the decision of the Bombay High Court in Commissioner of Income-tax v. Bai Shirinbai K. Kooka. The principle of valuation of shares laid down in this decision was contrary to the view taken by the Appellant Assistant Commissioner. The decision incidentally has now been approved by the Supreme Court.
On Behalf of the respondent the propositions of Mr. Mitra were not disputed but it was urged that they did not apply to the controversy raised in the present case.
This is a case in which an assessment was made by the Income-tax Officer. The assessee preferred an appeal to the Appellant Assistant Commissioner against the decision of the Income-tax Officer. The Appellant Assistant Commissioner by his order made on February 27, 1958, allowed the appeal. The assessee was held to be a dealer in shares with effect from August 1, 1952, and directions were given to the Income-tax Officer to value the shares as the assessees stock-in-trade on the basis of the original cost or the market price, whichever was lower. The Appellant Assistant Commissioner, it is well known, can under section 31(3)(b) make an order setting aside the assessment of the Income-tax Officer and asking the Income-tax Officer to make a fresh assessment as the Appellant Assistant Commissioner may direct. This is exactly what the Appellant Assistant Commissioner did in the instant case. Under section 33 of the Indian Income-tax Act, the assessee, if it was aggrieved by this order of the Appellant Assistant Commissioner, could prefer an appeal to the Tribunal within 60 days of the date on which the order was communicated to it. No such appeal was preferred and the time-limit prescribed, therefore, had expired.
The matter went back to the Income-tax Officer to determine the values of the shares in accordance with the principles laid down by the Appellant Assistant Commissioner by his order dated February 27, 1958. The Income-tax Officer made two of his orders of reassessment on July 31, 1958, and two other orders on August 7, 1958.
The assessee preferred an appeal against the Income-tax Officers orders of July 31, 1958, and August 7, 1958, to the Appellant Assistant Commissioner. The appeals were filed on September 9, 1958. When these appeals were heard by the Appellant Assistant Commissioner, no complaint was made on behalf of the assessee as to the method or principle of valuation. The assessees contentions were confined to arithmetical errors and other grounds. The Appellant Assistant Commissioner by his order dated November 29, 1958, accepted some of the assessees contentions and gave reliefs on the basis thereof.
The assessee then appealed to the Tribunal from the Appellant Assistant Commissioners order of November 29, 1958. We have looked into the grounds of appeal which by the consent of parties has been tendered as an exhibit in this reference and marked 'A'. We do not find that any challenge to the principle of valuation suggested by the Appellant Assistant Commissioner has been specifically made in these grounds of appeal in the light of the aforesaid decision of the Bombay High Court. When the matter however, was heard by the Appellate Tribunal, the point was sought to be raised and the Appellate Tribunal refused to entertain the contention.
On these facts, we are unable to come to the conclusion that the Appellate Tribunal has arbitrarily exercised its discretion against the assessee. The first order of the Appellant Assistant Commissioner laying down the method or principle of valuation made on February 27, 1958, had become final and binding on the parties since no appeal was preferred against it. That order, in our opinion, was not open to attack in the assessees appeal against the Appellant Assistant Commissioners order of November 29, 1958. In other words the assessee not having pursued his statutory remedies in respect of the first order of the Appellant Assistant Commissioner made on February 27, 1958, should not be allowed to attack that order by collateral methods.
We may incidentally refer to two decisions, one of the Privy Council and the other of the Supreme Court, in this connection. In Commissioner of Income-tax v. Tribunal Trust the respondent claimed in its assessment for the year 1932-33 that as its income was derived from property held under trust wholly for charitable purposes, it was exempt from tax under section 4(3)(i) of the Indian Income-tax Act. The High Courts decision went against the assessee and an appeal was preferred to the Judicial Committee. Pending the appeal, the assessments relating to six subsequent years as well as supplementary assessments for 1931-32 and 1936-37 were made in accordance with the High Courts judgment and the assessee paid the tax assessed. The Privy Council with respect to the assessment year 1932-33 decided in favour of the assessee holding that its income was exempt from tax under section 4(3)(i). The assessee then applied to the Commissioner under section 33 requesting him to cancel all the assessments and to grant a refund of the tax paid. The Commissioner granted the refund for the year 1932-33 only which was the subject-matter of appeal to the Judicial Committee and refused to re-open the other assessments on his ground that the assessee did not keep them alive by having them included in the reference to the Privy Council. This question of refund in respect of the other assessments ultimately came up before their Lordships of the Judicial Committee. Their Lordships upheld the view of the Commissioner on the ground that those other assessments were not nullities but were vailed and effective until they were set aside. In Bhopal Sugar Industries Ltd. v. Income-tax Officer, Bhopal the Appellate Tribunal gave certain directions to the Income-tax Officer. The assessee applied to the Income-tax Officer to give effect to the decision of the Tribunal; but the officer misreading the direction of the Tribunal wrote back on March 24, 1955, saying that no relief could be given to the assessee. The assessee applied to the Judicial Commissioner of Bhopal for issue of a writ to compel the Income-tax Officer to carry out the direction of the Appellate Tribunal. The Judicial Commissioner found that the Income-tax Officer had acted arbitrarily and in violation of the Tribunals direction. He proceeded, however, to consider the correctness of the Tribunals order and held that there was no manifest injustice done to the assessee. The Supreme Court found that the Income-tax Officer by his letter dated March 24, 1955, virtually refused to carry out the directions which the superior Tribunal had given him in the exercise of its appellate powers in respect of an order of assessment made by him and such refusal was in fact a denial of justice. The order of the Appellate Tribunal having become final, it was not open to the Judicial Commissioner to hold that the order was wrong. As the Income-tax Officer had failed to carry out a legal duty imposed on him such a failure was destructive of a basic principle of justice and a writ of mandamus should issue ex debito justice to compel him to carry out the directions given by the Appellate Tribunal.
The reason why I have cited above the two cases is that in the present reference also the order of the Appellate Assistant Commissioner passed on February 27, 1958, was not challenged in accordance with law having regard to the provisions of section 31(3)(b) and section 33 of the Indian Income-tax Act, 1922. That order having become final and binding on the parties, in our judgment, it was not open to the Appellate Tribunal to hold, when it was challenged in a collateral proceeding, that the order was wrong.
Mr. Debi Pal, learned counsel appearing as junior to Mr. Sukumar Mitra, tried to approach the problem before us from a different aspect. He said that the original order of assessment having been set aside by the order of the Appellant Assistant Commissioner there was a fresh assessment by the Income-tax Officer. Against theirs fresh assessment the assessee had a right to appeal under section 30 of the Income-tax Act. The assessee under section 30 had the right to object to the amount of income assessee under section 23 or to deny his liability to be assessed under the Act. In such a case, Mr. Debi Pal argued, that even if the direction given by the Appellant Assistant Commissioner in his first order was not challenged by way of an appeal before the Tribunal, in the second assessment stage, the assessee was entitled to question the valuation of the shares while objecting to the amount of income assessed. Mr. Debi Pal said to us that if at this second stage before Appellant Assistant Commissioner the assessee could have raised his objection to the method or principle of valuation it could also raise the same point before the Tribunal, subject, however, to the condition that the examination of the point raised did not involve investigation into new facts.
We are unable to accept this argument of Mr. Debi Pal. The assessee undoubtedly had a right of appeal under section 30 against the fresh assessment made by the Income-tax Officer pursuant to the direction of the Appellant Assistant Commissioner but this right of appeal was subject to the finality of the order of the Appellant Assistant Commissioner dated February 27, 1958. That order, as I have said, was and under section 31(3)(b) and was open to appeal under section 33.
In view of the judgment we have delivered in this reference, we feel that the question referred to us should be reframed. Learned counsel appearing for the parties do to dispute our power of reframing. In our opinion, the question which was suggested by the Commissioner (at page 73 of the paper-book) is the more appropriate question that arises on the facts and circumstances of this case. This question is as follow :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not allowing the assessee to raise the contention that in respect of the shares in Naskarpara Jute Mills Ltd. and the West Bengal Jute Co. Ltd., the Income-tax Officer and the Appellate Assistant Commissioner were not justified in valuing the said shares in the open stock at the cost price which was lower than the market pric ?'
Our answer to the reframed question is in the affirmative. The applicant will pay to the respondent the costs of the reference.
MASUD J. - I agree.
Question answered in the affirmative.