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TMI Blog1956 (5) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ces. The previous year in the present case is from the 1st of July, 1946, to the 30th of June, 1947. He filed a return showing a profit of ₹ 6,184. It is claimed that the accounts were found to be correct and in order but three items stated to be from undisclosed sources were taken into the revenue account by the Income-tax Officer. The items were- 1.Rs. 40,000 found to be in fixed deposit on the 16th of July, 1946, in the name of the assessee's wife. 2.Rs. 34,778 in the assessee's personal account out of which ₹ 18,350 were dated after the 31st March, 1947. 3.Rs. 5,000 also in the assessee's bank accounts, all of which were before the 31st of March, 1947. It is necessary to see as to what was raised before the various officers and tribunals at various stages by the assessee. When the matter was taken to the Income-tax Appellate Assistant Commissioner the question with regard to ₹ 40,000 was raised in the form that this ₹ 40,000 which was in deposit in the name of the wife of the assessee was obtained by her by selling her jewellery for a sum of ₹ 20,000 and that she took a loan of ₹ 15,000 from her father and the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20,000 but did not interfere with the order of the Appellate Assistant Commissioner in regard to the rest. Notice was served on the assessee on the 18th of August, 1951, and he made an application under section 66(1) of the Indian Income-tax Act. This application is printed at page 4, but the printed copy does not show as to when it was filed. We take it that it must have been filed within the sixty days allowed by section 66(1) of the Income-tax Act. The assessee sought to raise six questions of law and I need only refer to the first question which was: 1. Whether on the facts and in the circumstances of the case the Tribunal was correct in law in finding that out of ₹ 40,000, a fixed deposit receipt, the assessee had not been able to prove the source of ₹ 20,000 ? On the 26th of October, 1952, the assessee made an application under section 35 of the Income-tax Act and in clause (3) he stated : ......The following items included in ₹ 29,000 do not fall within the financial year covering the assessment year 1948-49. On the other hand, as indicated by the dates, the same fall within the year preceding, i.e , assessment year 1947-48.... . The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner against the assessment............. . This appeal has to be presented within thirty days of the receipt of notice of demand and has to be in the prescribed form which is to be verified in the prescribed manner ; and the form is prescribed under rule 21 made under section 59 of the Income-tax Act. At the hearing of an appeal before the Appellate Assistant Commissioner an appellant can be allowed to go into any ground of appeal not specified in the grounds of appeal if the Appellate Assistant Commissioner allows it. Appeals against the order of an Appellate Assistant Commissioner are provided in section 33 of the Act for which a period of sixty days is prescribed. This appeal also has to be in the prescribed form and has to be verified in the prescribed manner and is to be accompanied by a fee of ₹ 100. The prescribed form requires that grounds of appeal should be separately paragraphed. The order of the Income-tax Appellate Tribunal is final subject to the provisions of section 66. Now, section 66(1) provides for a statement of the case by the Appellate Tribunal to the High Court and when quoted it runs as under : ''66. Statement of case by Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of law which are raised. Under section 59 of the Act rules have been made giving the prescribed form for an application under section 66 and sub-section (5) of this section makes the rules published under, this section as if they were enacted in the Act. Rule 22A gives the form for reference under section 66(1). In clause 4 it requires the applicant to mention the questions of law which arise out of the order of the Tribunal, and clause 5 requires the applicant to indicate the questions out of the questions mentioned in clause 4 on which he requires a reference to be made to the High Court. A combined reading of section 66 and the statutory rules made under section 59 shows that an application for reference to the High Court has to be made (i)within sixty days from the date of service of the order ; (ii)on a prescribed form ; (iii)the applicant has to indicate the questions which he wants to be referred to the High Court and on which he requires the case to be stated; (iv)the Tribunal cannot suo motu refer any question which is dehors paragraph 5 of the application made on the prescribed form. Rules have also been made in regard to the proceedings an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns in support of his relief ; and that it is not bound to refer to the High Court the question of law that really arises on the facts found by it if the assessee does not raise the question of law in a particular form at the hearing of the appeal before the Tribunal or in his application under section 66(1) of the Act . This it was held is a serious misconception about the duties of the Appellate Tribunal . With great respect I am unable to accept the view taken by Mangalmurti, J., and for reasons which I have given above. Besides the rules under section 59 which are deemed to be a part of the statute do not seem to have been considered by the learned Judges. In Seth Gurmukh Singh v. Commissioner of Income-tax, Punjab [1941] 12 ITR 393 at p. 402 it was held by the Full Bench that the Commissioner cannot travel beyond the question originally indicated by the assessee nor can the High Court raise any question suo motu which is not covered by the reference. The form of the question before us, however, is confined to the power of the Tribunal to refer a point which was not raised before or considered by the Tribunal, and in this case this particular question was not in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efused to state a case on the ground that no question of law arises. It shows therefore that a case must be raised before the Tribunal before it can make the reference or refuse to make the reference, and in these circumstances it cannot be said that a question would arise merely because the facts justify the deduction of a question of law from the facts found even though the question is never raised before the Tribunal. In support of the view that unless a question has been raised and decided by a Tribunal no question of law can be said to arise there is a large number of authorities. In this Court this matter was decided by a Division Bench consisting of Khosla and Harnam Singh, JJ., in Punjab Distilling Industries Limited v. Commissioner of Income-tax [1952] 22 ITR 232 . It was held in this case after referring to rules 12 and 36 of the Appellate Tribunal Rules that the Tribunal could not be directed to state a question of law which had not been decided by the Tribunal. The reference there was to two questions Nos. 3 and 4 which had not been raised before the Tribunal and therefore could not be considered or decided by the Tribunal. In T.N. Swamy Co. v. Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Privy Council pointed out at page 50 that any claim as to liability to tax based on that argument was a matter outside the letter of reference and was irrelevant to the questions submitted. In Commissioner of Income-tax, Bengal v. Shaw Wallace and Company [1932] ILR 59 Cal. 1343 it was held that a question framed by the Commissioner which is not happily worded can be recast so as to make it more precise. After reference to all these cases a Full Bench of the Lahore High Court in Seth Gurmukh Singh v. Commissioner of Income-tax, Punjab [1944] 12 ITR 393 at 404 held that the word any before the words question of law arising out of such order does not indicate that by merely making an application under sub-section (2) an assessee can call upon the Commissioner to delve deep into the case and find out for him what questions of law arise in the case and to refer them to the High Court; and further in case of the Commissioner's refusal he can similarly require the High Court to hunt up all questions of law arising in the case and order the Commissioner to refer them. In my view, what the word 'any' really connotes in this context is that, if, for example, ten qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of mandamus and a direction will not ordinarily be issued to the Tribunal unless the Tribunal was required to do and had an opportunity of considering the question, in other words, unless there was evidence of a distinct demand and such a demand was met by refusal. Thus it comes to this that according to the nature of the proceedings under section 66 which gives to the High Court not a supervisory but merely an advisory jurisdiction the High Court can be asked to give an opinion on a question which has been stated by the Tribunal or which the High Court calls upon the Tribunal to state, and in the latter case it can only arise where the Tribunal was asked by the assessee in the form indicated by section 66(1) to consider the question and to state it to the High Court. What then is the meaning of the words any question of law arising out of such order , that is, the order of the Tribunal. The revenue contended that the question can only arise if it is raised before the Tribunal and considered by it. Seth Gurmukh Singh's case (supra) supports this contention. Reliance was also placed on Jamna Dhar Potdar Co. Limited v. Commissioner of Income-tax, Punjab [1935] 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of a question of law being raised in the High Court where although a question has been raised and argued before a Tribunal but has been absolutely ignored even though such a question may be of very great importance, but the observations of the learned Judge must be confined to the facts of that case where the two questions which were then sought to be raised had never been either raised or argued before the Tribunal. It cannot apply to other set of circumstances which may have a different answer. But when we are considering the powers of the Tribunal we must presume that they will be exercised in accordance with law in that all questions which are in the grounds of appeal and are raised and argued before the Tribunal will be decided by it, and if they are not so decided it is open to the assessee or the Commissioner, as the case may be, to indicate in the application made under section 66(1) that the questions were raised and argued but not decided, and if even then the case is not stated an application under section 66(2) might be a proper remedy. But it is not necessary to decide this question really, because it does not arise on the facts of the present case. In two other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income-tax [1952] 21 ITR 169 and Abboy Chetty's case (supra) and reference was made to a judgment of the Supreme Court in Commissioner of Income-tax, West Bengal v. Calcutta Agency Limited [1951] 19 ITR 191 where it was pointed out by that Court that as the statement of the case prepared by the Appellate Tribunal under the rules framed under the Income-tax Act is prepared with the knowledge of the parties concerned and they have a full opportunity to apply for an addition or deletion from that statement, the High Court in dealing with the questions should find and restrict itself to the facts contained in the statement of the case and it should answer the question of law on that footing. It should not depart from that rule and convert itself into a fact finding authority which is no part of its advisory jurisdiction. It was because of this that the assessee was not allowed to raise the question which he had expressly conceded before the Tribunal. In this Madras case, The Trustees, Nagore Durgah v. Commissioner of Income-tax [1954] 26 ITR 805 at 813, it was observed : The question was not one which was raised and debated and considered by the Appellate Tribunal and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the applicant are enlarged and he is entitled to a consideration of any question that might arise out of the facts. Such cannot possibly be the intention of the sub-section and the phrase I have quoted must be read as meaning that in the view of the Tribunal no question, such as the question formulated by the applicant, arises . The same view was taken by Harries, C.J., and Banerjee, J., in Commissioner of Excess Profits Tax v. Jeewanlal Ltd. [1951] 20 ITR 39 , and the following observations from that judgment are relevant: We are unable to take that view. It has been clearly laid down in Abboy Chetty v. Commissioner of Income-tax, Madras [1947] 15 ITR 441, that a question of law can be said to arise out of an order of the Appellate Tribunal only if such order discloses that the question was raised before the Tribunal. A question of law not raised before the Appellate Tribunal cannot be said to arise out of its order even if on the facts of the case appearing from the order, the question fairly arises. We respectfully agree with the view expressed by the Madras High Court. The decision of the Madras High Court accords with the principle underlying a mandamus . The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tty's case (supra ) and to the Privy Council deprecating the practice of departing from the strict terms of the question referred, Commissioner of Income-tax, Bihar and Orissa v. Maharajadhiraj Kameshwar Singh [1933] 1 ITR 94 at 107, National Mutual Life Association of Australasia v. Commissioner of Income-tax, Bombay Presidency [1936] 4 ITR 44 at 53, and Sir Rajendra Narayan Bhanja Deo v. Commissioner of Income-tax, Bihar Orissa [1940] 8 ITR 495, In the last case Luxmoore, L. J., delivering the judgment of the Board observed that although the question actually referred did not arise, but some other question might emerge with regard to the assessee's liability to income-tax in respect of the same income, it would be clearly contrary to their Lordships' practice to attempt to formulate any such question even if they had before them the material for so doing . It is true that this last case has reference only to the practice of the Privy Council but it is significant that the Privy Council has pronounced decisively in favour of the stricter view of section 66(1) of the Income-tax Act. The view taken in Patna also accords with the Madras and the Calcutta views. In Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Coming now to this High Court and the Lahore High Court in Punjab Distilling Industries v. Commissioner of Income-tax [1952] 22 ITR 232 , a case which I have already referred to, a Division Bench held that two questions which had not been raised before the Appellate Tribunal could not be said to arise from the order passed by it as a perusal of the order showed that the questions of law sought to be raised were nowhere decided by the Tribunal and, therefore, they did not arise from the order passed by the Tribunal. In an older Lahore case Jamna Dhar Potdar and Co. v. Commissioner of Income-tax, Punjab [1935] 3 ITR 112 , which was an application for mandamus and where a question of law was not raised in the appeal to the Assistant Commissioner or decided by him, it was held that it did not arise out of the order under section 31. It is true that there are no reasons beyond reference to section 31, but this view is in accord with the opinion given in the Full Bench decision in Seth Gurmukh Singh's case (supra) and was also the opinion of this Court in Punjab Distilling Industries v. Commissioner of Income-tax [1952] 22 ITR 232 decided by Khosla and Harnam Singh, JJ., and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble importance affecting the jurisdiction of the Court was raised by the Advocate-General in that as the question was not dealt with by the Tribunal it was not open to the Tribunal to raise it nor was it open to the High Court to decide it. Tendolkar, J., referring to this objection said : Since the Tribunal has, although the question was not argued before it, raised the question of law and referred it to us we are bound to determine it under sub-section (5), and in this view of the matter the learned Judge did not discuss the wider question as to the correct meaning to be placed on the words question of law arising out of such order and was of the opinion that these words would fall to be determined only under an application under section 66(2) of the Income-tax Act. Chagla, C.J., although he recognised that the question had been given up and not argued before the Tribunal and that the case had been stated by the Tribunal, gave his opinion as to the meaning of the words arising out of such order and said: Now, looking at the plain language of the section, apart from any authority, I should have stated that a question of law arose out of the order of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sary and we may refuse to give our opinion on such a question, but I do not think that it is competent to a party to challenge the jurisdiction of this Court to answer a question which has been raised by the Tribunal. The Tribunal wants our advice on a particular question of law and it is our statutory duty to give that advice to the Tribunal . Besides being obiter the observations of the learned Chief Justice are not in accord with the scheme of section 66 and the rules made under section 59 of the Act which show that section 66 becomes operative only if the jurisdiction is invoked in a particular manner and if the Tribunal was first invited to give its decision on the questions sought to be referred. This view finds further support from the language of sub-sections (2), (3) and (4) of section 66 where the satisfaction of the High Court with the order of the Tribunal is indicated and this can only arise if the Tribunal has been called upon and has given its decision on the question sought to be raised. I, therefore, respectfully dissent from the view taken by Chagla, C.J., that a question can be said to arise out of the order of the Tribunal if it can fairly be deduced from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra). Referring to this Din Mohammad, J., was of the opinion that if it was laid down in this judgment that new questions can be put and not merely that the form of questions can be recast, then the interpretation put upon the words of sub-section (2) of section 66 was erroneous. Beaumont, C.J., in Vadilal's case (supra) was of the opinion that under section 66(2) the assessee was not required to formulate precise questions of law. What he had to do was to require the Commissioner to refer to the High Court any question of law arising out of the order or decision of the Assistant Commissioner, and then the Commissioner had to draw up a statement of the case within sixty days and refer it with his own opinion thereon. It is not only the High Court of Lahore which has dissented from this view, but a Full Bench of the Rangoon High Court also in Commissioner of Income-tax v. C.P.L.E. Cheityar [1934] 2 ITR 201 , has taken a contrary view. In this case the assessees under section 66(2) applied to the Commissioner requiring him to refer three questions of law which he contended arose out of the order of the Assistant Commissioner which the Commissioner refused to do. The assessees the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er heads (iv) and (v) of sub-section (1) . Therefore, this case also does not support the proposition. Mohanlal Hiralal v. Commissioner of Income-tax [1952] 22 ITR 448 is the judgment of the Nagpur High Court where a mandamus was issued to refer a question that had not been raised before the Tribunal. In this case observations of Chagla, C.J., were followed and it was held that it is a fundamental principle of administration of justice that a litigant has a right to present at any stage any question of law arising from the facts found by a Tribunal and that the assessee has to plead facts and not law and the Tribunal is always under an obligation to apply the appropriate law to the facts found by it. This view of the law I would respectfully say is too widely stated and is opposed to the whole scheme of the Income-tax Act which I have already discussed. Ordinarily, a Tribunal has to decide those questions which are raised before it and it does not and cannot decide questions which are not raised before it or are given up and in income-tax matters the jurisdiction is very much more limited because the function of the Court is nothing more than advisory and it has to advise th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal but the High Court calls for a statement of the case and the Tribunal refers the question of law to the High Court, the Bench to whom the reference was made must deal with the question and answer it on the merits and cannot refuse to answer on the ground that it did not arise out of the Tribunal's order. The cases that have been discussed above show that- (i)the jurisdiction of the High Court under the Income-tax Act is advisory and a limited one ; (ii)only such questions of law arise out of an order of the Tribunal which have been raised and dealt with by it; (iii)in order to raise a question of law the assessee or the Commissioner, as the case may be, must make an application within a specified time on a prescribed form raising the questions of law which arise out of the order and specify the question on which reference is sought; (iv)on such an application being made it is for the Appellate Tribunal to decide whether the questions are questions of law and if they are questions of law, to refer them for the opinion of the High Court; (v)if the Appellate Tribunal refuses to refer the questions the applicant can approach the Court under section 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t arising out of a judgment have been argued ably and at length before us and our opinion has been invited thereon. The learned Advocate-General while arguing that the first question in the present case should be answered in the negative, nevertheless expressed the view that the decision of Khosla, J., and myself in Commissioner of Income-tax v. Punjab National Bank Ltd. [1951] 21 ITR 526 was correct. There we decided that it could not be said that under no circumstances could a point of law be said to arise out of the appellate order of the Tribunal simply because it had not been raised and discussed in the order itself. The matter in issue in that case was the jurisdiction of the Appellate Tribunal itself to deal with the appeal, and I am still of the opinion that a fundamental issue of this kind can be raised under section 66 even if it has not been raised and dealt with in the appellate order. I think that the suggestion of the learned Advocate-General that a point of this kind should be deemed to have been dealt with, and so to arise out of the appellate order, was sound and sensible. The other kind of case I have in mind is one where a point has been raised and argued i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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