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TMI Blog1985 (7) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... 967, from the mother of one Murarilal Kedia. On those credits, the petitioner claimed that they were not taxable on the plea that they were only recoveries of earlier written-off bad debts of a partnership firm called M/s. Kishanlal Poddar (share) for the year 1949-50, which had been later taken over by it. For the assessment year 1967-6 8, the petitioner also claimed Rs. 18,585 under the head " Repairs to roads and buildings " as revenue expenditure. In his separate assessment orders made on January 30, 1972, and March 8, 1972, for the years 1967-68 and 1968-69, respectively (exhibits E and F), the ITO-C rejected the claim of the petitioner not to subject the credits of Rs. 45,000 and Rs. 67,500 to tax and subjected them to tax under the Act. Under the head " Repairs to roads and buildings ", the ITO-C disallowed a sum of Rs. 5,000 as capital expenditure. Against the said orders of the ITO-C, the petitioner filed appeals under section 246 of the Act before the Appellate Assistant Commissioner of Income-tax, Special Range, Bangalore, who by his common order dated July 31, 1974 (exhibit J), dismissed them. Without challenging the said orders of the Appellate Assistant Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit. " This section that corresponds to section 33A of the Indian Income-tax Act 1922 (" 1922 Act "), provides for a revision by an assessee before the Commissioner apart from conferring suo motu power of revision on him subject to the constraints referred to in sub-section (4) of that section, with which we are not concerned. The power of revision conferred on the Commissioner by this section is part of the appellate jurisdiction conferred by the Act (vide Shankar Ramchandra Abhyankar v. Krishnaji Dattatraya Bapat, AIR 1970 SC 1). The power of revision conferred on the Commissioner by this section is not an administrative power but is a judicial or quasi-judicial power and is, therefore, subject to judicial review under article 226 of the Constitution (vide Dwarka Nath v. ITO [1965] 57 ITR 349 (SC)). This section does not also place any limitation on the extent of the exercise of power by the Commissioner. Hence, the power of the Commissioner is co-extensive with that of the original an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r all these reasons, I reject this contention of Sri Srinivasan. The scope and ambit of the powers conferred on High Courts by articles 226 and 227 of the Constitution is now well settled by a large number of rulings of the Supreme Court and it is too late in the day to refer to all of them and extract the relevant principles from all of them. In Syed Yakoob v. K. S. Radhakrishnan, AIR 1964 SC 477, Gajendragadkar J., speaking for the majority of a Constitution Bench, reviewing all the earlier cases, has summarised them in these words (pp. 479, 480): " (7) The question about the limits of the jurisdiction of High Courts in issuing a writ of certiorari under art. 226 has been frequently considered by this court and the true legal position in that behalf is no longer in doubt. A writ of certiorari can be issued for correcting errors of jurisdiction committed by inferior courts or tribunals; these are cases where orders are passed by inferior courts or tribunals without jurisdiction, or is in excess of it, or as a result of failure to exercise jurisdiction. A writ can similarly be issued where in exercise of jurisdiction conferred on it, the court or tribunal acts illegally or impr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which is apparent on the face of the record. Where it is manifest or clear that the conclusion of law recorded by an inferior court or tribunal is based on an obvious misinterpretation of the relevant statutory provision, or sometimes in ignorance of it or may be, even in disregard of it, or is expressly founded on reasons which are wrong in law, the said conclusion can be corrected by a writ of certiorari. In all these cases, the impugned conclusion should be so plainly inconsistent with the relevant statutory provision that no difficulty is experienced by: the High Court in holding that the said error of law is apparent on the face of the record. It may also be that in some cases, the impugned error of law may not be obvious or patent on the face of the record as such and the court may need an argument to discover the said error; but there can be no doubt that what can be corrected by a writ of certiorari is an error of law and the said error must, on the whole, be of such a character as would satisfy the test that it is an error of law apparent on the face of the record. If a statutory provision is reasonably capable of two constructions and one construction has been adopted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tute will allow only an appeal on a point of law, as opposed to a question of fact. Rights of appeal exist only where conferred by statute; in modern law, there is no inherent appellate jurisdiction in the courts. Thus, appeals from the High Court to the Court of Appeal now lie under the Supreme Court Act, 1981, and appeals to the House of Lords lie under the Appellate Jurisdiction Act, 1876, and the Administration of justice Act, 1969. Statutes have created many special appeal tribunals, such as the Social Security Commissioners, the Lands Tribunal and Supplementary Benefit Appeal Tribunals. There are also many statutory rights of appeal from one administrative authority to another, for example from a local planning authority to the Secretary of State for the environment and from a police disciplinary authority to the Home Secretary. The complex system of statutory tribunals, explained later, has its own network of appeals. There is no automatic right of appeal from them to any court, but the policy of recent legislation has been to allow any question of law to be taken to the High Court on appeal, save in a few exceptional cases. Judicial review is a fundamentally different ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J. in Rukminidevi Jalan's case [1985] 153 ITR 223 (Bom) dealing with a case of a revision under section 25 of the Wealth-tax Act, 1957, which is somewhat analogous to section 264 of the Act, is not in any way different. Bearing these principles, it is now necessary to examine the order of the Commissioner. On the receipts of Rs. 45,000 and Rs. 67,000, which are undoubtedly nerve-racking if not strange and mysterious, the petitioner pleaded before the Commissioner, to borrow its own language, as hereunder: " Revision petition under section 264-M/s. Deepchand Kishanlal, Bangalore-Assessment years 1967-68 1968-69. NOTE Reg: Assessment of credit balances written off in the cases of Murarilal Kedia and mother of Murarilal Kedia for the assessment years 1967-68 and 1968-69 1. Credit of Murarilal Kedia-Assessment year 1967-68 M/s. Kishanlal Poddar (share) was a partnership firm. The last year of assessment for this firm was 1949-50. From the assessment year 1950-51, this firm's business became a branch of the assessee-firm. Thus, the assessee became successor in part to the firm of M/s. Kishanlal Poddar (share). In the assessment year 1949-50, the old firm claimed as bad deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and immediately after obtaining his consent, the amount standing to his credit in the assessee's book was adjusted as stated earlier. It is submitted that on the facts stated above both the Income-tax Officer and the Appellate Assistant Commissioner have erred in treating the sum of Rs. 45,000 as the assessee's income. Further, since the claim for bad debt made in the case of M/s. Kishanlal Poddar (share) had not been allowed, even the question of assessing the sum under section 41(1) of the Income-tax Act, 1961, does not arise. Even if it is considered as windfall, the same cannot be subjected to tax in the hands of the successor. Attention is invited to the decision of Hukumchanad Mohanlal [1971] 82 ITR 624 (SC), in which even under section 41(1), the successor is not liable to income-tax in respect of allowance made in the assessment of the predecessor. The question of taxing under section 41(1) what has not been allowed to the predecessor, it goes without saying, has to be answered in favour of the assessee. Even if the contention of the assessee was not acceptable, the Appellate Assistant Commissioner ought to have excluded the amount from assessment since it is only of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the narration in the account of the mother of Murarilal Kedia shows that the adjustment was towards the sum of Rs. 64,920 as also the balance still due from Murarilal Kedia, viz., Rs. 1,929. Thus, the excess adjusted towards the written-off amounts is Rs. 651. However, because of this, the Income-tax Officer treated the sum as amount forgone by Murarilal Kedia's mother and treated it as the assessee's income. The Appellate Assistant Commissioner confirmed this inclusion holding that in the absence of full details, the credit must be taken as unexplained and treated as income. It is submitted that full details have been furnished. Only the confirmation about the consent of Murarilal Khedia could not be given earlier. Both the Income-tax Officer and the Appellate Assistant Commissioner have gone wrong in treating the sum of Rs. 67,500 as the assessee's income. Further, since the claim for bad debt made in the case of M/s. Kishanlal Poddar (share) had not been allowed, even the question of treating the sum as income under section 41(1) of the Income-tax Act, 1961, does not arise. There is no case at all for treating the amount as forgone by the mother of Murarilal Kedia. Even if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and give him substantial work of mining. M/s. Karnataka Mining Company Pvt. Ltd., instead of paying the amount to M/s. Murari Trading Company, transferred the amount to the assessee-firm and credited it to the account of Shri Murarilal Khedia. The firm never realised till December, 1966, that this gentleman owed the old firm more than Rs. 46,000 which had been written off and suddenly transferred the amount to the profit and loss account on 31-12-1966. As stated earlier, the entire transaction appears to be unbelievable. This amount can only represent some secret business transactions between Karnataka Mining Company Private Limited and the assessee-firm who are controlled by the same persons. It is only when the amount became payable as income to the assessee-firm that it has been transferred to the profit and loss account and the amount has, therefore, been rightly treated as the income of the firm. The entire story of a bad debt of Shri Murarilal Khedia does not sound true for the simple reason that had the firm the intention of recovering the debt, they would have done it on 31-3-1964 itself ...... 18. The Income-tax Officer has also brought to tax an amount of Rs. 67,500 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question and they have not been influenced by any irrelevant material to justify this court's interference under article 226 of the Constitution. Assuming that the findings of the Commissioner, the Appellate Assistant Commissioner and the Income-tax Officer on questions of fact are perverse, which do not appear to be so, then also, it is not open to this court to interfere with their findings, in exercise of its extraordinary jurisdiction under articles 226 and 227 of the Constitution. In reaching his conclusions, the Commissioner has only examined the very case pleaded by the petitioner and the materials placed by him. He has not relied on any fact or information that was in his possession or knowledge and was not in the knowledge of the petitioner. In these circumstances, it is even inconceivable to contend that the principles of natural justice are violated. On the disallowance of Rs. 5,000 as capital expenditure under the head " Repairs to roads and buildings ", the Commissioner has found against the petitioner applying the correct legal principles in the determination of the same. Even here also the finding of the authorities is essentially on a question of fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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