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Petitioner: KESHAV MILLS Co. LTD. VS Respondent: COMMISSIONER OF INCOME-TAX, BOMBAY NORTH, AHMEDABADHonorable Justice GAJENDRAGADKARN. A. Palkhivala,C. K. Daphtary
1965 P T D 675
1965 P T D 675
[Supreme Court India]
Present: P. B. Gajendragadkar, C. J. K Subba Rao, K. N. Wanchoo, M. Hidayatullah, J. C., Shah, S. M. Sikri and R. S. Bachawat, JJ
KESHAV MILLS Co. LTD.
Versus
COMMISSIONER OF INCOME-TAX, BOMBAY NORTH, AHMEDABAD
Civil Appeal No. 1017 of 1963, decided on 8th February 1965.
(a) Reference - Supplementary statement of case-High Court-Whether can direct Tribunal to collect additional material not forming part of the record-Scope of provisions-Indian Income-tax Act, 1922, S. 66 (4).
In calling for a supplementary statement of the case under section 66 (4) of the Indian Income-tax Act, 1922, the High Court can require the Tribunal to include in such supplementary statement only such material and evidence as may already be on the record but which has not been included in the statement of the case made initially under section 66(1) or section 66 (2). It has no jurisdiction to direct the Appellate Tribunal to collect additional material and make it a part of the supplementary statement.
New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax (1959) 37 I T R 11 (S C) and Patlad Turkey Red Dye Works Co. Ltd. v. Commissioner of Income-tax (1963) 48 I T R 92 (S C) reconsidered and affirmed.
(b) Income-tax proceedings-Necessity for quick disposal--Stages at which evidence may be given-Indian Income-tax Act, 1922, Ss. 23 & 31(2)-Appellate Tribunal Rules, 1946, r. 29 -Income-tax (Appellate Tribunal) Rules, 1963, r. 29.
Proceedings taken for the recovery of tax under the provisions of the Income-tax Act are naturally intended to be over without unnecessary delay, and so it is the duty of the parties, both the Department and the assessee, to lead all their evidence at the stage when the matter is in charge of the Income-tax Officer. Opportunity is, however, given for adducing additional evidence by section 31 (2) of the Act, and rule 29 of the Appellate Tribunal Rules; but if further evidence is allowed to be taken under the directions of the High Court under section 66(4) of the Act, it is likely that tax proceedings may be prolonged interminably, and that could not be the object of the Act.
The scheme of the Income-tax Act indicates that evidence has to be led primarily before the Income-tax officer, though additional evidence may be led before the Appellate Assistant Commissioner or even before the Appellate Tribunal subject to the provisions of section 31(2) and rule 29 of the Appellate Tribunal Rules, respectively, and that means that when the Tribunal has disposed of the matter and is preparing a statement of the case either under section 66 (1) or under section 66 (2) there is no scope for any further or additional evidence. When the matter goes to the High Court it has to be dealt with on the evidence which has already been brought on the record. If the statement of the case does not refer to the relevant and material facts which are already on the record, the High Court may call for a supplementary statement under section 66 (4), but the power of the High Court can be exercised only in respect of material and evidence which has already been brought on the record.
If a question of law is framed in general terms and in dealing with it several aspects fall to be considered, they have to be considered, by the High Court even though the Tribunal may not have considered them.
(c) Supreme Court-Reconsideration of earlier decision-When made-Principle of stare decisis-Whether applicable.
In cases where the jurisdiction of the Supreme Court to reconsider and revise its earlier decision is invoked, the principle of stare decisis cannot be pressed into service ; but nevertheless the normal principle that judgments pronounced by the Supreme Court would be final cannot be ignored, and unless consideration of a substantial and compelling character make it necessary to do so, the Supreme Court should and would be reluctant to review and revise its earlier decisions.
[Cases referred to.]
N. A. Palkhivala, Senior Advocate (I. N. Shroff with him) for Appellant.
C. K. Daphtary, Attorney-General for India (R. Ganapathy Iyer, R. H. Dhebar and R. N. Sachthey with him) for Respondent.
JUDGMENT
GAJENDRAGADKAR, C. J.-When this appeal was argued before a Division Bench of this Court on October 23, 1964, it was urged on behalf of the appellant, the Keshav Mills Co. Ltd., that in view of the present decisions of this Court in New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax ((1963) 48 I T R 92 (S C)) and Petlad Turkey Red Dye Works Co. Ltd. v. Commissioner of Income-tax ((1963) 48 I T R 92 (S C)), the appeal must be allowed and the case sent back to the Bombay High Court for disposal in accordance with the principles laid down in the latter decision. At that stage, the learned Attorney General for the respondent, the Commissioner of Income-tax, Bombay North, Ahmedabad, urged that he wanted this Court to reconsider the said two decisions. He fairly conceded that if the said two decisions were to be followed, the appeal would have to be allowed and sent back as suggested by the appellant. The learned Judges constituting the Division Bench took the view that an opportunity should be given to the learned Attorney-General to press his contention, and so, they directed that the appeal be placed before a Bench of five Judges. Thereafter, this appeal came on for hearing before the Constitution Bench on November 5, 1964. On this occasion again, the same contentions were raised on behalf of the appellant and the respondent respectively. Mr. Palkhivala for the appellant urged that it would be inappropriate to reconsider the recent decisions on which he relied, and he argued that, on the merits, the view taken by this Court in the said two decisions was sound and correct. On the other hand, the learned Attorney-General contended that he wanted this Court to reconsider the said two decisions, and he pointed out that the matter was of importance, and so, the appeal should be referred to a larger Bench in view of the fact that the decision in the case of the Petlad Co. was a unanimous decision of a Bench consisting of five Judges of this Court. It was under these circumstances that the Court directed that the appeal should be placed before a Special Bench of seven Judges. That is how it has come on for a final decision before a Bench of seven Judges ; and the only point which has been raised for the decision of the Special Bench is whether the two decisions in question should be reviewed and revised.
Let us begin by stating the relevant facts leading up to the main point of controversy between the parties. The appellant is a company registered in the Baroda State as it then was. The assessment year with which the proceedings giving rise to this appeal are concerned is 1942-43 (the accounting year being calendar year 1941). During the said year, the appellant was a "non-resident". It carried on business of manufacturing and selling textile goods in the Baroda State. The operations in relation to all sales of goods manufactured by the appellant's mill were completed at the appellant's premises at Petlad on the footing of ex-mill delivery in every case.
It appears that on March 22, 1947, the Income-tax Officer, E. P. T. Circle, Ward B, Ahmedabad, passed an order under sections 23 (3) and 34 of the Indian Income-tax Act, 1922 (XI of 1922) (hereinafter called "the Act"), and held that sale proceeds in respect of the sales aggregating each of the following three items were received by the appellant in British India. These items were
Rs.
(i) Sale proceeds actually received in the accounting year through Messrs Jagmohandas Ramanlal & Co.
12,68,460
(ii) Sale proceeds through British Indian banks through drafts
4,40,878
(iii) Sale proceeds collected by collecting cheques on British Indian banks and hundis on British Indian Shroffs and merchants
6,71,735
It is with this last item that the present appeal is concerned.
Aggrieved by the order thus passed by the Income-tax Officer, the appellant preferred an appeal before the Appellate Assistant Commissioner of Income-tax, Ahmedabad Range. The appellate authority held that the Income-tax Officer was in error in not excluding items (i) and (iii) respectively from computation of -the taxable profits of the appellant. Thus, the appellant succeeded before the appellate authority in respect of the item in dispute.
This decision of the appellate authority led to two cross-appeals, one by the Income-tax Officer and the other by the appellant before the Income-tax Appellate Tribunal-hereafter called the Tribunal. The Tribunal dismissed the appellant's appeal in respect of Rs. 4 40 878 and allowed the Income-tax Officer's appeal in part and held that the item of Rs. 12,68,460 had been wrongly excluded by the appellate authority. In respect of item (iii) relating to Rs. 6,71,735, the Tribunal held that in the circumstances of the case the sale proceeds represented by the said item were not received in British India but in the State itself.
This decision of the Tribunal led to two cross-applications by the appellant and the Income-tax Officer for raising the questions of law before it in relation to the items in respect of which they had respectively failed. As a result of these proceedings, the Tribunal drew up the statement of the case on November 5, 1948, and raised the following question to the Bombay High Court;
"Whether, on the facts and in the circumstances of the case, the sums of Rs. 12,68,460, Rs. 4,40,878 and Rs. 6,71,735, or any (sic) them, which represents receipts by the assessee company of its sale proceeds in British India, include any portion of its income in British India ?"
In other words, all the three items in dispute between the appellant and the Income-tax Officer formed the subject-matter of the question raised by the Tribunal before the Bombay High Court. This reference was registered as Income-tax Reference No. 2 of 1949.
By its judgment and order delivered on the 14th/15th September 1949, is relation to items (i) and (ii) the High Court held that the two sums in question were not debts due from the British Indian merchants but sale proceeds of the goods sold by the appellant to merchants in British India and that such sale proceeds were received by the appellant in British India. In other words, the answers rendered by the High Court in respect of the said two items were against the appellant. The appellant came to this Court in appeal against the decision of the High Court but its appeal failed and the view taken by the High Court was affirmed : vide Keshav Mills Ltd. v. Commissioner of Income-tax ((1953) S C R 950). In the result, the controversy between the appellant and the Income-tax Officer in respect of the said items has been finally decided against the appellant.
Reverting then to item (iii) with which the present appeal is concerned, the High Court took the view that before it could render an answer to the question in relation to the said item, it would like the Tribunal to furnish to the High Court further facts. Accordingly, the High Court directed that the Tribunal should submit a supplementary statement of case and state therein as to whether there was any arrangement or agreement between the assessee and the merchants that the giving of cheques or hundis by the merchants to the assessee would result in an unconditional discharge of the liability of the merchants. The High Court also issued some other directions asking the Tribunal to clarify some of its relevant findings which appeared to the High Court to be somewhat confused.
As a result of this order, the case went back to the Tribunal which in turn remanded it to the Income-tax Officer for getting the requisite information. On receiving the report of the Income-tax Officer, the Tribunal submitted its supplementary statement of case to the High Court on August 13, 1954.
Whilst these proceedings were thus pending in the High Court, the decision of this Court in Commissioner of Income-tax v. Ogale Glass Works Ltd. ((1955) 1 S C R 185) was pronounced. In that case, one of the points which arose for decision was whether the post office which takes the cheque from the sender to the addressee is the agent of the sender or the addressee ; and on this point, the Court held that as between the sender and the addressee, it is the request of the addressee that makes the post office the agent of the addressee and after such request, the addressee cannot be heard to say that the post office was not his agent. On the other hand, if there is no such request by the addressee, express or implied, then on delivery of the letter or the cheque to the post office by the sender, the post office acts as the agent of the sender. This decision had a significant impact on the further progress of the present dispute.
After receiving the supplementary statement of case from the Tribunal, the matter was argued before the High Court on the 15th February 1955. On this occasion, the High Court referred the matter back again to the Tribunal with the direction : "that the Tribunal will determine on the evidence led by both parties whether the sum in question was paid by various merchants by sending drafts, hundis or cheques by post and that if the Tribunal found that in some cases the amount was not sent by post, then the Tribunal should determine what amount was sent otherwise than by post and the Tribunal should then submit a supplementary statement of the case." It would be noticed that this direction was given by the High Court obviously because the High Court wanted to deal with the question referred to it in the light of the decision of this Court in the case of 0gale Glass Works Ltd. ((1954) 25 I T R 529). In fact, in giving this second direction, the High Court observed that when it had called for the first supplementary statement of the case, it did not have the benefit of the decision of this Court in the case of Ogale Glass Works Ltd. and that after the said decision was pronounced, the position with regard to receipt of the cheque by the appellant had been considerably simplified.
Pursuant to the second order of remand made by the High Court, the Tribunal submitted its second supplementary statement of the case on the 26th October 1959. After receipt of the second supplementary statement, the reference again came up for hearing before the High Court. After hearing the parties, the High Court has rendered its answer against the appellant on the question in relation to the item in dispute. It is against this order passed by the High Court on the 30th and 31st March 1960, that the appellant has come to this Court with a certificate granted by the High Court : and on its behalf, Mr. Palkhivala has urged that in view of the decisions of this Court in the New Jehangir Mill's case and Petlad Co's. case the appeal must be allowed and the case remitted to the High Court to be dealt with in accordance with the principles laid down by this Court in the latter case.
It is common ground that as a result of the two orders of remand passed by the High Court in the present reference proceedings, some material evidence which was not on the record when the question was framed by the Tribunal and sent to the High Court under section 66 (1) of the Act has been collected and made a part of the supplementary statement of the case ; and basing himself on this fact, Mr. Palkhivala contends that the High Court had no jurisdiction to direct the Tribunal to collect additional material and form it a part of the supplementary statement under section 66 (4) of the Act. It is in support of this contention that reliance is placed on the two decisions in question. Before addressing ourselves to the problem as to whether the view taken by this Court in the said two decisions needs to be reconsidered and revised, it is necessary that we should refer to the said two decisions as well as other decisions on which both the parties have relied before us in the course of their arguments.
The first decision on which Mr. Palkhivala relies is the New Jehangir Mill's case. In that case, the question which was referred by the Tribunal to the High Court was whether the receipt of the cheques in Bhavnagar amounted to receipt of the sale proceeds in Bhavnagar. Before rendering its answer to this question, the High Court had directed the Tribunal to furnish a supplementary statement of the case on the following points:
"On the finding of the Tribunal that all the cheques were received in Bhavnagar, the Tribunal should find what portion of these cheques were received by post, whether there was any request by the assessee, express or implied, that the amounts which are the subject-matter of these cheques should be remitted to Bhavnagar by post."
It would be noticed that as a result of this direction, the question which would really have to be considered by the High Court would be whether the posting of the cheques in British India at the request, express or implied, of the appellant, amounted to receipt of sale proceeds in British India. It was urged by the appellant in that case that as a result of the direction issued by the High Court calling for a supplementary statement of the case, the nature of the question formulated by the Tribunal had been altered, and that was beyond the competence of the High Court under section 66 (4). In substance, this plea was upheld by this Court and it was held that in calling for the supplementary statement of the case, the High Court had misconceived its powers under section 66 (4) of the Act. According to this -decision section 66 (4) must be read with section 66 (1) and section 66 (2), and so read, it did, not empower the High Court to raise a new question of law which did not arise out of the Tribunal's order or direct the Tribunal to investigate new and further facts necessary to determine the new question which had not been referred to it under section 66 (1) or section 66 (2) of the Act and direct the Tribunal to submit supplementary statement of case. The additions and alterations in the statement of case which can be directed under section 66 (4) could, in the opinion of this Court, relate only to such facts as already formed part of the record but were not included by the Tribunal in the statement of the case. Mr. Palkhivala contends that in the light of this decision, we ought to hold that in so far as the two orders of remand passed by the High Court in the present reference proceedings have led to the collection of additional material and evidence and their inclusion in the supplementary statements of the case, the High Court has exceeded its jurisdiction under section 66 (4).
The other case on which Mr. Palkhivala strongly relies is the decision of this Court in the Petlad Co. Ltd. In that case, one of the points decided by this Court had reference to the extent of the powers and authority of the High Court under section 66 (4). It was held that though the High Court had power to direct a supplemental statement to be made, it was beyond its competence to direct additional evidence to be taken. In other words, this Court took the view that when the High Court makes an order of remand under section 66 (4) and directs the Tribunal to furnish a supplemental statement of the case, it can require the Tribunal to include in such supplemental statement material and evidence which may already be on the record, but which had not been included in the statement of the case initially made under section 66 (1). The result of this decision is that section 66 (4) does not confer on the High Court power to require the Tribunal to take additional evidence before it renders its answers on the questions formulated under section 66 (1) or section 66 (2). In accordance with the view thus taken by this Court, the direction issued by the High Court to submit a supplemental statement of the case after taking additional evidence was reversed ; and following the precedent in the New Jehangir Mills' case an order was passed that the appeals should be allowed and the matter remitted to the High Court to give its decision on the question of law referred to it as required under section 66 (5) of the Act.
Before the decision of this Court in the Patlad Co. Ltd. was pronounced, a similar point had been raised in the case of Zoraster & Co. v. Commissioner of Income-tax ((1960) 40 I T R 552). In this latter case, the question referred to the High Court for its decision was whether, on the facts and circumstances of the case, the profits and gains in respect of the sales made to the Government of India were received by the assessee in the taxable territories? While dealing with this question, the High Court though it necessary to remand the case to the Tribunal for a supplemental statement of the case calling for a finding on the question whether the cheques were sent to the assessee-firm by post or by hand and what directions, if any, had the assessee-firm given to the Department in the matter? The validity and correctness of this direction was challenged by the appellant before this Court in view of the decision of this Court in the case of New Jehangir Mills: While dealing with this objection raised by the appellant, this Court held that the question as it was framed, was wide enough to include an enquiry as to whether there was any request, express or implied, that the amount of the bills be paid by cheques so as to bring the matter within the dicta of this Court in the Ogale Glass Works case or in Sri Jagdish Mills Ltd. v. Commissioner of Income-tax ((1959) 37 I T R 114) and since it did not appear from the order of remand passed by the High Court that the High Court intended that the Tribunal should admit fresh evidence before submitting its supplemental statement, the impugned direction could not be said to be invalid. This decision shows that when a question is framed for the decision of the High Court in wide terms, and the High Court finds that before rendering its answer on the said question some new aspects have to be considered and it feels that for dealing with the said new aspects of the matter, a supplemental statement of the case should be called for, the High Court is authorised to call such a supplemental statement, provided, of course, the High Court does not require the Tribunal to collect additional material or evidence before submitting its supplemental statement.
The same view has been expressed by this Court in the case of Commissioner of Income-tax v. M. Ganapathi Mudaliar ((1964) 53 I T R 623 (S C)). According to this decision a supplementary statement of case may contain such alterations or additions as the High Court may direct, but the statement must necessarily be based on facts which are already on the record. While exercising its jurisdiction under section 66 (4), the High Court has no power to ask for a fresh statement of case with a direction that the Tribunal should go into the matter again and record further evidence.
There is one more decision to which reference may incidentally be made before we part with the series of decisions on which Mr. Palkhivala relies. In Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd. ((1962) 1 S C R 788) this Court had occasion to consider the scope and denotation of the expression "any question of law arising out of such order" occurring in section 66 (1) of the Act. The majority decision has summed up the result of the discussion as to the scope and effect of the provisions of section 66 in these words:
" (1) When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order.
(2) When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order.
(3) When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order.
(4) When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it."
In substance, these propositions mean that it is only a question that has been raised before or decided by the Tribunal that could be held to arise out of its order.
Let us now refer to the decisions on which the learned Attorney-General has relied in support of his contention that the High Court has power under section 66 (4) to call for new additional evidence if it takes the view that such additional evidence is necessary to enable it to determine the question raised for its decision satisfactorily. The learned Attorney-General has fairly conceded that he has not been able to find any decision where this question has been answered in favour of the view for…
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