2004 (9) TMI 97 - HC - Income Tax

Review of order of High Court - This application is for review of the ex parte judgment and order dated March 12, 2003, passed by this court - The omission to consider the circulars does not afford any ground for review to the assessee in the present case and is not an error rectificable within the limited scope within which the High Court can act under section 256 - We find that the High Court while exercising jurisdiction under section 256 has no power to review and the limited power within which the High Court can exercise power of rectification is very limited - It appears that the scope of review or rectification in this given case within the limited advisory power conferred upon the High Court under section 256 does not permit us to review the order on account of the reasons given above. - In the result, the application for review fails and is accordingly dismissed.

Issues Involved:
1. Jurisdiction of the High Court to review its order passed on reference under section 256 of the Income-tax Act, 1961.
2. Applicability of section 68 of the Income-tax Act to share capital.
3. Effect of non-requirement of furnishing PAN for transactions below Rs. 20,000.
4. Binding nature of circulars on the courts.

Detailed Analysis:

1. Jurisdiction of the High Court to Review its Order:
The High Court's jurisdiction under section 256 of the Income-tax Act, 1961, is a special jurisdiction distinct from its appellate or original jurisdiction. It is confined to obtaining the court's opinion on a question of law and does not extend to reviewing its own orders. The High Court cannot exercise inherent powers as conceived within section 151 of the CPC while exercising jurisdiction under section 256. It can only rectify mistakes that are ancillary to the exercise of its jurisdiction, such as granting adjournments or restoring dismissed references. This was supported by precedents such as CIT v. Bansi Dhar and Sons and CIT v. Scindia Steam Navigation Co. Ltd., which emphasize that the High Court acts purely in an advisory capacity and cannot assume the jurisdiction to review.

2. Applicability of Section 68 to Share Capital:
The contention that section 68, which deals with cash credits, does not apply to share capital was rejected. The court noted that establishing whether a transaction is a cash credit or share capital would require a long drawn argument and could result in two opinions, making it unsuitable for review. Furthermore, if the transaction labeled as share capital fails to meet the criteria of identity, creditworthiness, and genuineness, it would be treated as a cash credit under section 68. The assessee in this case failed to establish these three ingredients, thus justifying the application of section 68.

3. Effect of Non-requirement of Furnishing PAN for Transactions Below Rs. 20,000:
The argument that subscribers were not required to furnish PAN for transactions below Rs. 20,000 does not absolve the assessee from the burden of proving the creditworthiness of the subscribers under section 68. The non-requirement of PAN does not constitute a mistake apparent on the face of the record. The Department's finding that the assessee failed to establish the necessary ingredients for the transaction to be considered share capital stands, and thus, the transaction falls within the scope of section 68.

4. Binding Nature of Circulars on the Courts:
Circulars issued by the Union of India, while binding on the Department, do not bind the courts. Non-consideration of such circulars does not afford a ground for review unless it results in an error apparent on the face of the record, which does not require long drawn argument and where no two opinions are possible. The court referred to Bengal Iron Corporation v. CTO and Hindustan Aeronautics Ltd. v. CIT, which clarified that circulars cannot alter statutory provisions and are not binding on judicial or quasi-judicial authorities when they contradict the law declared by the courts.

Conclusion:
The application for review was dismissed as the High Court found no grounds within the limited scope of its advisory jurisdiction under section 256 to justify a review of its order. The arguments presented by the applicant did not reveal any mistakes apparent on the face of the record that could be rectified within the limited powers of the High Court under section 256.

Order:
The application for review fails and is accordingly dismissed with no order as to costs. Xerox certified copy of the judgment to be made available to the parties if applied for, on usual undertakings.

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