Income-Tax Officer, Lucknow Vs. M/S.
S.B. Singhar Singh & Sons & ANR  INSC 178 (17 August 1976)
SARKARIA, RANJIT SINGH SARKARIA, RANJIT SINGH
KHANNA, HANS RAJ SINGH, JASWANT
CITATION: 1976 AIR 2512 1977 SCR (1) 214 1976
SCC (4) 325
Constitution of India, 1950--Art. 226--High
Court---if could interfere with the appellate orders of Income Tax Appellate
Tribunal under Art. 226.
Since the assessee had not maintained
complete and regular accounts for the purpose of Excess Profits tax, the Excess
Profits Tax Officer assessed tax on the basis of accounts of certain previous
years chosen by the assessee as his "standard period", pointing out
that because of this position it was not possible to make any adjustment for
variations in average capital. The Assistant Appellate Commissioner upheld the
assessment order. In appeal to the Appellate Tribunal one of the specific
grounds taken by the assessee was that the Excess Profits Tax Officer and the
Assistant Appellate Commissioner had erred in not allowing proper standard
profits in accordance with the standard period subject to the adjustment on
account of increase and decrease of capital in the relevant chargeable
accounting period and that they were prepared to file computation of average
capital. Without discussing the ground relating to the standard profits the
Tribunal disposed of the appeals.
The assessee's second application alleging
that the ground relating to the standard profits was not disposed of by it was
rejected by the Tribunal. In an application under s. 66(2) of the Income Tax
Act before the High Court, the assessee did not ask for a reference on this
ground. But during proceedings for preparation of statement of case, the
assessee's application requesting the Tribunal to refer this ground to the High
Court was rejected by it. The assessee's petition for a writ of Mandamus
requiring the Tribunal to consider the ground relating to standard profits was
allowed by the High Court.
Allowing the Department's appeal to this
HELD: The High Court could not justifiably
interfere, in the exercise of its extraordinary jurisdiction under Art.
226 of the Constitution, with the appellate
orders of the Tribunal. The question as to whether the omission to record a
finding on Ground No. 1 by the Tribunal was due to the failure of the appellant
to urge that ground or due to a lapse on the part of the Tribunal, which
deserved rectification, was a matter entirely for the authorities under the
statute to decide. [219 G] Shivram Poddar v. Income-tax Officer (1964) 51,
823, 829 (,S.C.) applied.
In the instant case the High Court had
assumed jurisdiction on the assumPtion that a certain ground had been urged
before the Tribunal which had arbitrarily refused to consider the same and record
a finding thereon. This assumption, stood thoroughly discounted by the
concomitant circumstances of the case including the dilatory and questionable
conduct of the assessee. This was not a fit case for the exercise by the High
Court of its' special jurisdiction under Art.
226. [220 C]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No.1539 of 1971.
(From the Judgment and Order dated 5-8-1969
of the Allahabad High Court in Special Appeal No. 58/65).
B.B. Ahuja and R.N. Sachthey, for the
A.T.M. Sampath and Ram Lal, for Respondent
215 The Judgment of the Court was delivered
by SARKARIA, J.-This appeal on certificate is directed against an appellate
judgment, dated August 5, 1969, of a Bench of the High Court of Allahabad. It
arises as follows:
M/s. S.B. Singar Singh and Sons (hereinafter
called the assessee) were assessed to Excess Profits tax for the chargeable
accounting periods, ending March 31, 1945 and March 31, 1946. under two
assessment orders dated August 26, 1949. The previous years 193637 was chosen
by the assessee as his standard period." The profits of that year were Rs.
38,703/-. After deducting the profits of the standard year, the Excess Profits
Tax Officer, assessed the tax on the remaining amounts of profits. The Excess
Profits Tax thus assessed for the accounting years, was to the tune of Rs.
1,06,181.5 and Rs. 48,978/-, respectively. In his orders, the assessing Officer
said that "for reasons detailed in the earlier assessment orders no
adjustments are made for capital variations in the standard period and the
chargeable accounting period". These reasons as given in the earlier
assessment order, dated October 30, 1947, pertaining to the chargeable
accounting period ending March 31, 1944, were:
"As complete and regular accounts are
not maintained by the assessee, it is not possible to make any adjustment for
variations in average capital which cannot be accurately ascertained".
Against the orders of assessment, the
assessee preferred two appeals on September 24, 1949 to the Assistant Appellate
Commissioner. By two separate applications dated October 24, 1949, the assessee
took an additional ground of appeal which obviously he had not taken in the
original memorandum of appeal that the Excess Profits Tax Officer had erred in
not allowing adjustments on account of the increase and decrease of capital in
the relevant chargeable accounting period. The assessee added that he "was
always prepared to file his computations of average capital". Dismissing
the appeals by his orders, dated November 24, 1949, the Assistant Appellate
Commissioner negatived the assessee's contention, in these terms:
"As in these years no regular accounts
have been maintained and it is not possible to make any adjustment for
variations in average capital which cannot be exactly ascertained. No figures
have been shown to me, nor has any exact working been furnished at this stage.
The accounts are left in the same manner as for the earlier years. Profits in
the major accounts had to be worked out by the application of a rate to the
turnover. I am, thus, unable to allow this contention." Aggrieved, the
assessee carried appeals to the Incometax Appellate Tribunal. In the memoranda
of appeals, one of the specific grounds taken was, that "the Excess
Profits Tax Officer and the Assistant Appellate Commissioner had erred in not
allowing to the assessee proper standard profits in accordance with the
standard period subject to the adjustment on account of the increase and
decrease of capital in the relevant chargeable accounting period." It was
reiterated that "the 216 appellant was always prepared to file his
computation of average capital." This ground relating to standard profits
was not discussed by the Tribunal and no finding was recorded thereon.
The Excess Profits Tax Appeals and other
Income-tax appeals filed by the assessee were heard together by the Tribunal
and disposed of by common orders dated February 24, 1951.
In the Income-tax appeals, some relief was
granted, but in the Excess Profits appeals, no relief was granted due to the
variation of the capital in the chargeable accounting period of 1945-46 and
The assessee on July 27, 1951, made an
application under s. 35 of the Income-tax Act, 1922 for rectification of its
order to the Tribunal on grounds other than the one regarding variation in the
standard profits due to increase and decrease of the capital. This application
was dismissed on August 27, 1951 by the Tribunal on the ground that there was
no mistake apparent on the record. No grievance was made in this application
that the Tribunal did not consider and decide the ground relating to adjustment
of standard profits according to variation in capital during the relevant period.
On March 11, 1954, the assessee made a representation
to the Central Board of Revenue praying for reopening of the assessments. In
this representation, also, he did not take up Ground No. 1. Subsequently
however on May 24, 1954 he wrote a letter to the Income-tax Officer saying that
he was sorry to omit 'one important point' i.e., Ground No. 1, from his
representation to the Board, and that the Income-tax Officer should
"supplement the same while making (his) report to the higher authorities.'
His representation dated March 11, 1954 and the petition dated May 24, 1954,
both were rejected and the Commissioner communicated those rejections to the
assessee by a letter dated May 25, 1955, saying that he did not see any
justification for re-opening the assessments which had become final and closed.
Thereafter on April 2, 1956, the assessee
made a second application to the Tribunal (which in substance was one for
review of its orders, dated .February 24, 1951), contending that Ground No. 1
raised in his two appeals, relating to the standard profits of the two
chargeable accounting periods and pointing out the failure of lower authorities
to make necessary adjustments in such profits according to s. 6 of the Excess
Profits Tax Act (hereinafter referred to as Ground No. 1 ) was not disposed of
by the Tribunal. It was prayed that the appeals relating to excess profits tax
matters which should be deemed to be still pending owing to the non-decision of
Ground No. 1 be disposed of after hearing the assessee. The Tribunal rejected
this contention with the remark that the appeals were decided as early as 24th
February, 1951 and it is now futile to contend that the matter was pending when
the Tribunal had already passed orders and the orders were served on the
assessee." The Tribunal further observed that the absence of a reference
"to the contention of the assessee regarding the standard profits and the
necessary adjustments would not render the Tribunal's order a nullity, nor
would it mean that the Tribunal had partially disposed of the appeals and some
residue is pending". In the alternative, it held that even on the
assumption that 217 Ground No. 1 was argued and was not disposed of by the
Tribunal, the proper remedy for the assessee was either to apply for
rectification under s. 35 or to move an application under s. 66. The Tribunal
refused to treat this application as one for rectification because, in its
opinion, such an application would be much too time-barred. In the result, the
Tribunal dismissed that application by an order dated June 9, 1956.
The assessee had filed a reference
application, also under s. 66(1) the Income-tax Act in these cases. That
application was dismissed by the Tribunal on August 28, 1951. The assessee then
made applications under s. 66(2) of the Income-tax Act before the High Court
requesting for reference on certain question of law arising out of the order,
dated February 24, 1951, of the Tribunal. In these applications, also, he did
not ask for reference on a question relating to Ground No. 1 (regarding
adjustment of standard profits). These applications were allowed by the High
Court by an order, dated April 12, 1956, whereby the Tribunal was directed to
state a case and refer for decision certain questions of law to the High Court.
Thereafter, during the proceedings before the
Tribunal for preparation of the statement of the case, the assessee moved an
application, dated July 23, 1957, requesting it to refer the question of
adjustment of standard profits on account of increase and decrease in the
capital in the relevant periods to the High Court, in addition to the questions
of law directed by the High Court to be referred to it. This application was rejected
for the reason that the question had not been raised in the reference application,
nor did it arise out of the appellate orders of the Tribunal.
On July 24, 1957, the Tribunal stated the
case and made a reference on the other question to the High Court in compliance
with that Court's order, dated April 12, 1956.
On November 4, 1968, the assessee filed a
writ petition in the High Court praying for a writ of Mandamus requiring the
Tribunal to consider his Ground No. 1 mentioned in the Excess Profits Tax
Appeals Nos. 651 and 660 of 1949 and 1950 and his subsequent application dated
April 2, 1956.
The writ petition was heard by a learned
single Judge of the High Court who held that while disposing of the appeals, it
was the duty of the Tribunal to record a finding on Ground No. 1 which had been
specifically raised in the memoranda of appeals before it, that the Tribunal therefore,
could and should have reviewed its orders and rectified its mistake in the
exercise of its inherent powers when that mistake was brought to its notice by
the assessee by his application dated April 2, 1956; that s. 35 of the
Income-tax Act which provides a period of four years' limitation for seeking
rectification of mistakes in assessment orders, was not applicable to
assessment orders made by the. Tribunal under the Excess Profits Act; that
consequently, the Tribunal was in error in refusing to treat the assessee's
application, dated April 2, 1956,.as one for rectification of a mistake of the
Tribunal on 16--1003 8C1/76 218 the ground of limitation. In the result, the
learned Judge set aside the Tribunal's order, dated June 9, 1956, and directed
the Tribunal to dispose of the assessee's application dated April, 2, 1956,
afresh in accordance with law.
The Revenue filed a Special Appeal against
the order of the learned single Judge before the Appellate Bench of the High
Court. The Bench dismissed the appeal and affirmed the findings and orders of
the learned single Judge.
Hence this appeal.
Mr. Ahuja, appearing for the appellant, contends
that the writ petition of the assessee should have been thrown out by the High
Court on the preliminary ground that he had not come with clean hands. In this
connection Counsel has pointed out several circumstances which according to
him, belie the main plea of the assessee that the Tribunal had not considered
his Ground No. 1 although the same was urged before it at the hearing of the
It is stressed that .Ground No. 1 was not
originally taken by him in the grounds of appeal filed before the Assistant
Appellate Commissioner, although subsequently in the Additional grounds filed
about one month after the institution of the appeals, he, as an after-thought,
did introduce "Ground No. 1", that he did not make any grievance
whatever on the score of Ground No. 1 in his application for rectification of
the Tribunal's orders, filed on July 27, 1951; that for more than 5 years after
the announcement of the appellate orders of the Tribunal, he made no
application to the Tribunal for review and rectification of its appellate
orders in relation to Ground No. 1; that the assessee delayed the making of the
application, dated April 2, 1956 presumably with a view to ensure that at the
time of its presentation, none of the members of the Tribunal who had
originally decided the assessee's appeals, was there to hear the application;
that even in this inordinately delayed application, review and rectification
was not asked for in a straight forward manner but it was disguised as an
application for decision of the appeals which on account of non-decision of
Ground No. 1 were alleged to be still pending; that the writ petition was filed
after an abnormal delay of ten years; that a perusal of the assessment orders
made by the Excess Profits Tax Officer and the Assistant Appellate
Commissioner, and even the memoranda of appeals filed before the Tribunal shows
that at no stage the assessee furnished complete accounts or even a statement
showing variation in the capital during the relevant periods. It is emphasised
that all that the assessee said in the memoranda of appeals was that he was
"prepared" to furnish a statement of such computation and accounts.
It is further pointed out that no certificate of Shri Surinderjit Singh,
Advocate who is supposed to have argued the appeals before the Tribunal, was
filed. It is maintained that the only reasonable inference from these
circumstances was that Ground No. 1 was not pressed or argued at all by Shri
Surinderjit Singh before the Tribunal who consequently, did not think it
necessary to deal with it.
Mr. Sampath, appearing for the
assessee-respondent has not been able to deny the existence of the
circumstances pointed out by Mr. Ahuja. His argument is that in the affidavit
accompanying the writ petition, the deponent had sworn that Ground No. 1 was,
in fact, argued before the Tribunal and that this sworn statement had been
believed by the High Court. This being the case, it is argued, this Court
should not re-open the question as to whether Ground No. 1 was, in fact, argued
or not before the Tribunal. According to .Mr. Sampath, over 5 years' delay in
making the application dated April 2, 1956, partly stood explained by the
circumstance that he had made a representation to the Board supplemented by the
assessee's letter of May 24, 1954 to the Income-tax Officer, seeking relief on
the basis of Ground No. 1.
We find a good deal of force in the
submissions made by Mr. Ahuja. The sheet-anchor of the assessee's case in the
writ petition was that at the hearing of the appeals, his Counsel had argued
Ground No. 1 set out in the memoranda of appeals, but the Tribunal did not consider
it at all. The question whether or not this Ground had been argued, was one of
fact. The tell-tale circumstances enumerated by Mr. Ahuja, unerringly lead to
the conclusion that, in all probability, Ground No. 1 was not argued by the
Counsel, possibly because he was aware that in the absence of a complete
statement of accounts showing variations in the capital during the relevant
periods, a contention rounded on Ground No. 1 would be an exercise in futility.
It is noteworthy that at no stage before the Revenue authorities or the
Tribunal, did the assessee categorically say that he had actually produced a
complete statement of accounts and computation of the increase and decrease in
capital. All that he said in his Additional Grounds of appeal before the
'Assistant Appellate Commissioner and the Appellate Tribunal in Ground No. 1,
was that he was prepared to file such a statement. Shri Surinderjit Singh,
Counsel who argued the appeals, has not thought it fit to certify that Ground
No. 1 was actually argued, and not abandoned, by him. The affidavit of another
person who could not be the best informed person on this point, was of little
value and could hardly displace the irresistible inference arising from the surrounding
circumstances and the conduct of the assessee, namely, that his Counsel had not
argued on Ground No. 1, at all and had thus given it up.
In the light of what has been observed above,
we are of opinion that the High Court could not justifiably interfere in the
exercise of its extraordinary jurisdiction under Article 226 of the
Constitution with the appellate orders of the Tribunal. In any case, the
question as to whether the omission to record a finding on Ground No. I by the
Tribunal was due to the failure of the appellant to urge that ground or due to
a lapse on the part of the Tribunal, which deserved rectification, was a
.matter entirely for the authorities under those Taxation statutes. It will be
well to recall once more what this Court speaking through J.C. Shah J. (as he
then was,) had stressed in Shivram Poddar v. Income-tax Officer(1).
"Resort to the High Court in exercise of
its extraordinary jurisdiction conferred or recognised by the Constitution in
(1)  51 I.T.R. 823, 829 (S.C.).
220 matters relating to assessment, levy and
collection of income-tax may be permitted only when questions of infringement
of fundamental rights arise, or where on undisputed facts the taxing
authorities are shown to have assumed jurisdiction which they do not possess.
In attempting to bypass the provisions of the Income-tax Act by inviting the
High Court to decide questions which are primarily within the jurisdiction of
the revenue authorities, the party approaching the court has often to ask the
Court to make assumptions of facts which remain to be investigated by the
revenue authorities." In the instant case, the High Court had assumed
jurisdiction on the assumption that a certain ground had been urged before the
Income-tax Appellate Tribunal which had arbitrarily refused to consider the
same and record a finding thereon. This assumption, in our opinion, stood thoroughly
discounted by the concomitant circumstances of the ease, including the dilatory
and questionable conduct of the assessee. This was therefore not a fit ease for
the exercise of its special jurisdiction under Article 226 by the High Court.
Accordingly, on this short ground we allow
the appeal and dismiss the writ petition. As the appeal succeeds on a
preliminary ground, we do not feel it necessary to express any opinion on the
question as to whether or not the Appellate Tribunal under the Excess Profits
Tax Act has statutory or inherent power to review and rectify mistakes in its
orders. The assessee shall pay one set of the costs of the appellant.
P.B.R. Appeal allowed.