Full Judgment Text
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PETITIONER:
THE KESHAV MILLS CO. LTD.
Vs.
RESPONDENT:
COMMISSIONER OF INCOME-TAX, BOMBAY NORTH
DATE OF JUDGMENT:
08/02/1965
BENCH:
GAJENDRAGADKAR, P.B. (CJ)
BENCH:
GAJENDRAGADKAR, P.B. (CJ)
SUBBARAO, K.
WANCHOO, K.N.
HIDAYATULLAH, M.
SHAH, J.C.
SIKRI, S.M.
BACHAWAT, R.S.
CITATION:
1965 AIR 1636 1965 SCR (2) 908
CITATOR INFO :
R 1966 SC1466 (7)
RF 1967 SC1643 (120)
R 1968 SC 779 (12)
R 1970 SC2067 (14)
R 1972 SC 236 (5)
F 1972 SC1880 (3,27,49)
RF 1972 SC1982 (91)
R 1976 SC1141 (5)
RF 1980 SC2056 (61)
F 1989 SC1298 (7)
R 1989 SC1933 (24)
ACT:
Indian Income-tax Act (11 of 1922), s. 66(4)-Power of High
Court to ask Tribunal to submit supplementary statement of
case after further investigation of facts-Stare decisis-
Power of Supreme Court to review and revise earlier
judgments-When should be exercised.
HEADNOTE:
The appellant was a company registered in the erstwhile
Baroda State. In connection with the assessment year 1942-
43 the Income-tax Officer Ahemdabad held that certain sale
proceeds were received by the appellant in British India and
the profit thereon was taxable under the Indian income-tax
Act, 1922. One of the items in dispute related to the sale-
proceeds collected by collecting cheques on British India
Shroffs and Merchants. In respect of the said item the
Appellate Assistant Commissioner as well as the Appellate
Tribunal decided against the appellant, and thereafter,
reference was made to the High Court. The High Court felt
that it required further facts to decide the reference and
twice remanded the case to the Tribunal for investigation of
those facts. The Tribunal after taking evidence submitted a
supplementary Statement of Case on each occasion. Finally
the High Court decided the question against the appellant,
but granted it a certificate of fitness to appeal to the
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Supreme Court.
It was contended on behalf of the appellant that the High
Court had no jurisdiction to direct the Tribunal to collect
additional material and make it a part of the supplementary
Statement of Case under s. 66(4) as had been decided by this
Court in the cases of the Petlad Co. and the New Jahangir
Mills. On behalf of the Revenue it was contended that these
two cases required reconsideration. The Court therefore had
to consider whether it should review and revise its earlier
view taken in the said two cases.
HELD : (i) The view contended for on behalf of the Revenue
namely, that the High Court had power to ask the Tribunal to
investigate further facts and submit a supplementary
Statement of Case was a reasonably possible view. But on
the other hand the opposite view taken by this Court in the
Petlad Co. case and the New jahangir Mills case was also
reasonably possible. The latter view had been followed by
this Court on several occasions and it had regulated the
procedure in reference proceedings in the High Courts ever
since the decision in the New Jahangir Mills case was
pronounced. Besides, no reported decision had been cited at
the bar where the question about the constitution of s.
66(4) was considered and decided in favour of the view con-
tended for by the Revenue. No case therefore was made out
for a revision or review of the Court’s decisions in the
Petlad Co. and New Jahangir Mills cases. [928 C-F]
Case law discussed.
The New jahangir Vakil Mills Ltd. v. Commissioner of Income-
tax, Bombay North, [1960] 1 S.C.R. 249 and’ The Petlad
Turkey Red Dye
909
Works Co. Ltd. Petland v. Commissioner of Income-tax,
Bombay, Ahemdabad, [1963] Supp. 1 S.C.R. 871, affirmed.
(ii) The principle of stare decisis cannot be pressed into
service in cases where the power of this Court to reconsider
and revise its earlier decisions is invoked, because that
power is inherent in this Court; but nevertheless the normal
principle that judgments pronounced by this Court would be
final cannot be ignored. Unless considerations of a subs-
tantial and compelling character make it necessary to do so
this Court should and would be reluctant to review and
revise its earlier decisions. [923 B-D]
Bengal Immunity Company Ltd. v. State of Bihar [1955] 2
S.C.R. 603, distinguished.
(iii) If the Court is satisfied that its earlier
decision was clearly erroneous, it should not hesitate to
correct the error; but before a previous decision is
pronounced to be plainly erroneous, the Court must be satis-
fied with a fair amount of unanimity amongst its members
that a revision of the said view is fully justified. It is
not possible or desirable, and in any case it would be
inexpedient to lay down any principles which should govern
the approach of the Court in dealing with the question of
reviewing and revising its earlier decisions. It would
always depend upon several relevant considerations-What is
the nature of the infirmity or error on which a plea for a
review and revision of the earlier view is based ? On the
earlier occasion, did some patent aspects of question remain
unnoticed, or was the attention of the Court not drawn to
any relevant and material statutory provision, or was any
previous decision of this Court bearing on the point not
noticed ? Is the Court hearing such plea fairly unanimous
that there is such an error in the earlier view? What would
be the impact of the error on the general administration of
law or on public good ? Has the earlier decision been
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followed on subquent occasions either by this Court or by
the High Courts ? And, would the reversal of the earlier
decision lead to public inconvenience, hardship or mischief
? These considerations become still more significant when
the earlier decision happens to be a unanimous decision of a
Bench of five learned Judges of this Court [922 B-F]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1017 of 1963.
Appeal from the judgment and order dated March 30th and
31st, 1960 of the Bombay High Court in Income-tax Reference
No. 2 of 1949.
N. A. Palkhivala and I. N. Shroff, for the appellant.
C. K. Daphtary, Attorney-General, R. Ganapathy Iyer, R. H.
Dhebar and R. N. Sachthey, for the respondent.
The Judgment of the Court was delivered by
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 The
New Jehangir
910
Vakil Mills Ltd. v. The Commissioner of Income-tax, Bombay
North, Kutch and. Saurashtra(1), and The Petlad Turkey Red
Dye Works Co. Ltd., Petlad v. The Commissioner of Income-
tax, Bombay, Ahmedabad (2), 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.
Palkhilvala 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. (2) 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.
’Mat 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
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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
(1) [1960] 1 S. C. R. 249. (2) [1963] Supp. 1 S. C. R.
871.
911
selling textile goods in the Baroda State. The operations
in relation to all sales of goods manufactured by the
appellant’s Mills 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 sec-
tions 23 (3) and 34 of the Indian Income-tax Act, 1. 922
(No. 11 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 :
(i) Sale-proceeds actually received in the accounting Year
through M/s Jagmohondas Ramanlal & Co.
Rs. 12,68,460
(ii) Sale-proceeds through British Indian Banks through
Drafts:
Rs, 4,40,878
(iii) Sale proceeds collected by collecting cheques on
British Indian Banks and Hundis onBritish Indian Shorff and
Merchants
Rs. 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
912
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 of 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
appeal]ant and the Income-tax Officer formed the subject-
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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 Sep-
tember, 1949, in relation to items (i) and (ii) the High
Court held that the two sums in question were not debts due
from 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,
Bombay)(). 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
(1) [19531 S. C. R. 950.
913
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 The Commissioner of
Income-tax, Bombay South, Bombay v. Messrs. Ogale Glass
Works Ltd., Ogale Wadi(1) 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
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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
Ogale Glass Works Ltd." 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.,(1) and that after the said
decision was pronounced, the position with regard’
(1) [1955] 1 S. C. R. 185.
914
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 Mills(1) case and Petlad Co.(2) 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 s. 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 s. 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 the arguments.
The first decision on which Mr. Palkhivala relies is the New
Jehangir Mills(1) 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 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
(1) [1960] S. C. R. 249.
(2) [1963] SUPP. S. C. R. 871.
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915
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 s.
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 s. 66(4) of the Act. According to this decision, S.
66(4) must be read with S. 66(1) and S. 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 S. 66(1) or s. 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 S. 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 the 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 s. 66(4).
The other case on which Mr. Palkhivala strongly relies is
the decision of this Court in the Petlad Co. Ltd (1). 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 s. 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
(1) [1963] Supp. 1 S. C. R. 871.
916
words, this Court took the view that when the High Court
makes an order of remand under S. 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 Is. 66(1). The result of this
decision is that S. 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 S. 66(1) or s. 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(1) 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
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question of law referred to it as required under s. 66(5) of
the Act.
Before the decision of this Court in the Petlad Co. Ltd. (2
was pronounced, a similar point had been raised in the case
of M/s. Zoraster and Co. v. The Commissioner of Income-tax,
Delhi, Ajmer, Rajasthan and Madhya Bharat (now Madhya
Pradesh(2). 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 thought 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 care of New Jehangir Mills(3). 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(4) case or in Shri Jagdish
Mills Ltd. v. The Commissioner of Income-tax, Bombay North,
Kutch and Saurashtra, Ahmedabad(5) and since it did not
appear
(1) [1960] 1 S. C. R. 249.
(2) [1963] Supp. 1 S. C. R. 871.
(3) [1961] 1 S. C. R. 210.
(4) [1955] 1 S. C. IL 185.
(5) [1960] 1 S. C. R. 236.
917
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, Madras v. M. Ganapathi Muda-
liar(1). 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 S. 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 inciden-
tally be made before we part with the series of decisions on
which Mr. Palkhivala relies. In the Commissioner of Income-
tax, Bombay v. The Scindia Steam Navigation Co. Ltd., (2)
this Court had occasion to consider the scope and denotation
of the expression "any question of law arising out of such
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order’ occurring in S. 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 s. 66 in these
words :
(1) When a question is raised before the Tribunal and is
dealt with by 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 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 will not be a question arising
(1) [1964] 53 1 I.T.R. 623.
(2) [1962] 1 S. C. R. 788,
918
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 s. 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 which he contends after
construing the relevant provisions of S. 66(4) of the Act.
He, however, urges that there is high authority in support
of the practice for which he contends inasmuch as the Privy
Council appears to have assumed that the High Court can, in
exercise of its powers under S. 66(4), call for additional
evidence. The first decision of the Privy Council on which
he relies is in the case of (Sir Sunder Singh Majithia v.
The Commissioner of Income-tax, C.P. & U.P.(1). In that
case, two of the questions which arose were : whether the
steps taken by the assessee to vest in his wife and sons an
interest in the immovable assets of the business were not
legally effective, e.g., for want of a registered instrument
of transfer; and if the factory, land and buildings in
question were joint family property, whether it was shown
that a partition at the hands of the father of the said
properties could not be effected without a written
instrument ? The question of law formulated for the decision
of the High Court was : "In all the circumstances of the
case, having regard to the personal law governing the
assessee and the requirements of the Transfer of Property
Act (IV of 1882) and the Stamp Act (11 of 1899), has the
deed of partnership dated February 12, 1933, brought into
existence a genuine firm entitled to registration under the
provisions of s. 26-A of the Act?" While answering this
question, one of the points which had to be decided was
whether the immovable properties were the self-acquisitions
of the father or not. The Privy Council took the view that
before a satisfactory answer could be rendered on the
question framed, several facts had to be ascertained, and in
its judgment the Privy Council has indicated the nature of
these facts. "It is necessary to know", says the judgment,
"as regards (a) the business, machinery, plant
(1) [1942] 10 I.T.R. 457.
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919
and other movables; (b) the factory buildings and land
whether they were before 1931 the self-acquired property of
the father or his ancestral property or joint family
property or whether they fall into some other and what
category according to the customary law". The judgment also
points out that the rights of the members of the family in
respect of the said property would have to be ascertained
and the conduct of the parties considered. Then, in regard
to the agreement in question, the Privy Council pointed out
that it would be necessary to enquire what agreement, if
any, was made prior to February 12, 1933, and when as to a
partnership being constituted to carry on the sugar factory
and as to the assets which it was to have as a firm. "None
of these essential facts", says the judgment, "have been
found and stated by the Commissioner, with the result that
the question referred cannot be answered until the High
Court has exercised its powers under sub-section (4) of
section 66 of the Act". Having made these observations, the
Privy Council left it to the discretion of the High Court to
specify the particular additions and alterations which the
Commissioner should be directed to make. In the result, the
advice tendered by the Privy Council was "that the case be
remanded to the High Court for disposal after taking such
action under sub-section (4) of s. 66 of the Act as the High
Court may think fit in the light of this judgment". The
argument is that the facts which the Privy Council thought
it necessary to ascertain before answering the question,
indicate that they could not have been on the record at the
time when the question was originally framed by the
Commissioner, and so, the suggestion is that inasmuch as the
Privy Council indicated that the High Court should call for
a supplemental statement in regard to facts which were
apparently not already on the record, this decision should
be taken to support the contention that s. 66(4) authorised
the High Court to call for new additional material before it
renders its answers to the questions formulated under s.
66(1) or s. 66(2).
A similar argument is based on another decision of the Privy
Council in Trustees of the Tribune Press, Lahore v.
Commissioner of Income-tax, Punjab, Lahore(1). In that
case, the questions which were referred to the High Court
were : "(1) whether the income of the Tribune Trust was
liable to be assessed in the hands of the Trustees under the
provisions of the Income-tax Act ?; and (2) if it was,
whether it was not exempt under s. 4(3) (1) of the Act?" In
the High Court, there was a sharp difference of opinion
between the Judges who heard the reference; but ultimately
the
4 Sup./65-13
920
answers went against the Tribune, and so, the dispute was
taken to the Privy Council by the Trustees of the Tribune
Trust. At the first hearing of the said appeal before the
Privy Council, it was considered by the Board to be
desirable that the powers conferred by sub-s. 4 of s. 66 of
the Act should be employed to obtain further information.
Accordingly, by an Order in Council, dated July 29, 1937, it
was directed in accordance with the advice tendered by the
Board that the case ought to be remitted to the High Court
of Judicature at Lahore with a direction that the said High
Court shall refer the case back to the Commissioner under s.
66(4), first for the addition of such facts during the life-
time of the testator Sardar Dayal Singh as may bear upon the
proper interpretation of the expression ’keeping up the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 17
liberal policy of the said newspaper in clause XXI of the
will of the said testator dated the 15th Day of June, 1895,
and secondly, for the addition of such facts as to a
compromise dated the 1st day of December, 1906, as may show
whether the said compromise is binding on all parties
interested in the estate of the said testator. Thereafter,
a supplementary statement made by the Commissioner was filed
and it appears that before he made the said statement, the
Commissioner "carefully assembled considerable material
explanatory of the direction given by the testator in the
phrase ’keeping up the liberal policy of the said newspaper,
and showing as their Lordships think, very fairly, the
nature and purpose of the trust". After considering the
said material, the Privy Council allowed the appeal
preferred by the Trustees, because in its opinion the second
question framed for the decision of the High Court had to be
answered in favour of the assessee. It is urged that this
decision also shows that the Privy Council called for
additional material and evidence by requiring the High Court
to exercise its powers in that behalf under s. 66(4) of the
Act.
The learned Attorney-General also stated that there were
some other decisions of the High Courts in India where
similar additional evidence had been called for by the High
Courts under s. 66(4), and by way of illustration, he cited
before us the decision of the Bombay High Court in Messrs.
Govindram Bros. Ltd. v. Commissioner of Income-tax,
Central, Bombay(1). It is, however, clear that in none of
the decisions on which the learned Attorney-General relies
has the question about the construction of S. 66(4) been
argued, considered and decided. That, broadly stated, is
the position disclosed by the judicial decisions bearing on
the point with which we are concerned in the present appeal.
(1) [1946]14 I.T.R. 764.
921
In dealing with the question as to whether the earlier
decisions of this Court in the New Jehangir Mills(1) case,
and the Petlad Co. Ltd.(1) case should be reconsidered and
revised by us, we ought to be clear as to the approach which
should be adopted in such cases. Mr. Palkhivala has not
disputed the fact that in a proper case, this Court has
inherent jurisdiction to reconsider and revise its earlier
decisions, and so, the abstract question as to whether such
a power vests in this Court or not need not detain us. In
exercising this inherent power, however, this Court would
naturally like to impose certain reasonable limitations and
would be reluctant to entertain pleas for the
reconsideration and revision of its earlier decisions,
unless it is satisfied that there are compelling and
substantial reasons to do so. It is general judicial
experience that in matters of law involving questions of
construing statutory or constitutional provisions, two views
are often reasonably possible and when judicial approach has
to make a choice between the two reasonably possible views,
the process of decision-making is often very difficult and
delicate. When this Court hears appeals against decisions
of the High Courts and is required to consider the propriety
or correctness of the view taken by the High Courts on any
point of law, it would be open to this Court to hold that
though the view taken by the High Court is reasonably
possible, the alternative view which is also reasonably
possible is better and should be preferred. In such a case,
the choice is between the view taken by the High Court whose
judgment is under appeal, and the alternative view which
appears to this Court to be more reasonable; and in accept-
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 17
ing its own view in preference to that of the High Court,
this Court would be discharging its duty as a Court of
Appeal. But different considerations must inevitably arise
where a previous decision of this Court has taken a
particular view as to the construction of a statutory
provision as, for instance, s. 66(4) of the Act. When it is
urged that the view already taken by this Court should be
reviewed and revised, it may not necessarily be an adequate
reason for such review and revision to hold that though the
earlier view is a reasonably possible view, the alternative
view which is pressed on the subsequent occasion is more
reasonable. In reviewing and revising its earlier decision,
this Court should ask itself whether in the interests of the
public good or for any other valid and compulsive reasons,
it is necessary that the earlier decision should be revised.
When this Court decides questions of law, its decisions are,
under Art. 141, binding on all courts within the territory
of India, and so, it must be the constant endeavour and
concern of
(1) [1960] 1 S.C.R. 249.
(2) [1963] Supp. 1 S.C.R. 871.
A Sup./65-14
922
this Court to introduce and maintain an element of certainty
and continuity in the interpretation of law in the country.
Frequent exercise by this Court of its power to review its
earlier decisions on the ground that the view pressed before
it later appears to the Court to be more reasonable, may
incidentally tend to make law uncertain and introduce
confusion which must be consistently avoided. That is not
to say that if on a subsequent occasion, the Court is
satisfied that its earlier decision was clearly erroneous,
it should hesitate to correct the error; but before a
previous decision is pronounced to be plainly erroneous, the
Court must be satisfied with a fair amount of unanimity
amongst its members that a revision of the said view is
fully justified. It is not possible or desirable, and in
any case it would be inexpedient to lay down any principles
which should govern the approach of the Court in dealing
with the question of reviewing and revising its earlier
decisions. It would always depend upon several relevant
considerations :What is the nature of the infirmity or error
on which a plea for a review and revision of the earlier
view is based ? On the earlier occasion, did some patent
aspects of the question remain unnoticed, or was the
attention of the Court not drawn to any relevant and
material statutory provision, or was any previous decision
of this Court bearing on the point not noticed ? Is the
Court hearing such plea fairly unanimous that there is such
an error in the earlier view ? What would be the impact of
the error on the general administration of law or on public
good ? Has the earlier decision been followed on subsequent
occasions either by this Court or by the High Courts ? And,
would the reversal of the earlier decision lead to public
inconvenience, hardship or mischief ? These and other
relevant considerations must be carefully borne in mind
whenever this Court is called upon to exercise its
jurisdiction to review and revise its earlier decisions.
These considerations become still more significant when the
earlier decision happens to be a unanimous decision of a
Bench of five learned Judges of this Court.
It is true that in the case of the Bengal Immunity Company
Ltd. v. The State of Bihar & Ors. (1) this Court by a
majority of 4 : 3 reversed its earlier majority decision (4
: 1) in the State of Bombay and Another v. The United Motors
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 17
(India) Ltd. and Ors. (2); but that course was adopted by
the majority of Judges in that case, because they were
persuaded to take the view that there were several
circumstances which made it necessary to adopt that course.
(1) [1955] 2 S.C.R. 603.
(2) [1953] S.C.R. 1069.
923
On the other hand, dealing with a similar problem in the
case of Sajjan Singh etc. v. The State of Rajasthan etc.(1),
this Court unanimously rejected the request made on behalf
of the petitioners that its earlier decision in Sri Sankari
Prasad Singh Deo v. The Union of India and State of Bihar
(2) should be reviewed and revised. Hidayatullah and
Mudholkar, JJ. who were somewhat impressed by some of the
pleas made in support of the contention that the earlier
decision should be revised, in substance agreed with the
ultimate decision of the Court that no case had been made
out for a review or revision of the said earlier decision.
The principle of stare decision, no doubt, cannot be pressed
into service in cases where the jurisdiction of this Court
to reconsider and revise its earlier decisions is invoked;
but nevertheless, the normal principle that judgments
pronounced by this Court would be final, cannot be ignored,
and unless considerations of a substantial and compelling
character make it necessary to do so, this Court should and
would be reluctant to review and revise its earlier
decisions. That, broadly stated, is the approach which we
propose to adopt in dealing with the point made by the
learned Attorney-General that the earlier decisions of this
Court in the New Jehangir Mills(3) case, and the Petlad Co.
Ltd. (4 ) case should be reconsidered and revised.
Let us then consider the question of construing S. 66(4) of
the Act. Before we do so, it is necessary to read sub-
section (1), (2) and (4) of s. 66. Section 66(1) reads thus
:-
"Within sixty days of the date upon which he
is served with notice of an order under sub-
section (4) of section 33, the assessee or the
Commissioner may, by application in the
prescribed form, accompanied where application
is made by the assessee by a fee of one
hundred rupees, require the appellate Tribunal
to refer to the High Court any question of law
arising out of such order, and the Appellate
Tribunal shall within ninety days of the
receipt of such application draw up a state-
ment of the case and refer it to the High
Court".
There is a proviso to this sub-section which
is not relevant for our purpose. Section
66(2) reads thus :
"If on any application being made under sub-
section (1), the Appellate Tribunal refuses to
state the
(1) [1965] 1 S.C.R. 933.
(2) [1952] S.C.R. 89.
(3) [1960] 1 S.C.R. 249.
(4) [1963] Supp. 1 S.C.R. 871.
924
case on the ground that no question of law
arises, the assessee or the Commissioner, as
the case may be, may, within six months from
the date on which he is served with notice of
the refusal, apply to the High Court, and the
High Court may, if it is not satisfied of the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 17
correctness of the decision of the Appellate
Tribunal, require the Appellate Tribunal to
state the case and to refer it, and on receipt
of any such requisition the Appellate Tribunal
shall state the case and refer it
accordingly".
That takes us to sub-section (4) which reads
thus
"if the High Court is not satisfied that the
statements in a case referred under this
section are sufficient to enable it to
determine the question raised thereby, the
Court may refer the case back to the Appellate
Tribunal to make such additions thereto or
alterations therein as the Court may direct in
that behalf".
Section 66(5) provides that the High Court upon hearing of
any such case shall decide the questions of law raised
thereby and shall deliver its judgment thereon containing
the grounds on which such decision is founded and shall send
a copy of such judgment to the Appellate Tribunal which
shall pass such orders as are necessary to dispose of the
case conformably to such judgment.
It is clear that when the Tribunal draws up a statement of
the case and refers a question of law to the High Court
under s. 66(1), the said question must arise out of its
order, and the statement of the case would necessarily be
limited to the statement of facts already brought on the
record either before the Income-tax Officer or before the
Appellate Assistant Commissioner, or before the Tribunal.
There is no doubt and indeed no dispute before us that the
question of law must arise from the Tribunal’s order and the
statement of the case must be confined to the facts already
brought on the record. The same would be the position where
the High Court requires the Tribunal to state the case and
refer to it under s. 66(2). The position, therefore, is
that when the High Court is exercising its advisory
jurisdiction under S. 66(4), it is dealing with a question
of law arising from the order of the Tribunal and has to
answer the said question in the light of the statement of
the case submitted to it by the Tribunal. in normal course,
the statement of the case would refer to facts selected by
the Tribunal from out of the material already on the record
and it is in the light of the said statement of the case
that
925
the question has to be answered by the High Court. Thus
far, there is no controversy or dispute.
Section 66(4), however, authorises the High Court to refer
the case back to the Tribunal to make such additions to the
statement of the case or alterations therein as the Court
may direct in that behalf. This power can be exercised by
the High Court if it is satisfied that the statement of the
case is not sufficient to enable it to determine the
question raised by it. If the High Court feels that in
order to answer satisfactorily the question referred to it
is necessary to have additional material included in the
statement of the case, the High Court can make an
appropriate direction in that behalf. If the High Court is
satisfied that some alterations should be made in the
statement of the case to enable it to determine the question
satisfactorily, it can make an appropriate direction in that
behalf. The question is whether in issuing appropriate
directions under $. 66(4), the High Court can ask the Tribu-
nal to travel outside the record and call for and collect
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material which is not already produced on the record. If s.
66(4) is read along with s. 66(1) and s. 66(2), it may tend
to show that the power of the High Court is limited to
requiring the Tribunal to add to or alter the statement of
the case in the light of the material and evidence already
on the record. If the question that can be raised under s.
66(1) and s. 66(2) can arise only out of the order of the
Tribunal and if the statement of the case required to be
drawn up by the Tribunal under the said two provisions would
inevitably be confined to the facts and material already on
the record, it seems unlikely that s. 66(4) would authorise
the High Court to direct the Tribunal to collect additional
material or evidence not on the record.
The scheme of the Act appears to be that before the Income-
tax Officer all the relevant and material evidence is
adduced. When the matter goes before the Appellate
Assistant Commissioner, he is authorised under s. 31(2) to
make such further enquiry as he thinks fit, or cause further
enquiry to be made by the Income-tax Officer before he
disposes of the appeal filed before him. Section 31 (2)
means that at the appellate stage additional evidence may be
taken and further enquiry may be made in the discretion of
the Appellate Assistant Commissioner. When the matter goes
before the Appellate Tribunal under s. 33, the question
about the admission of additional evidence is governed by
Rule 29 of the Income (Appellate Tribunal) Rules, 1963.
This Rule provides that the parties to the appeal shall not
be entitled to produce additional evidence either oral or
documentary before the Tribunal, but if
4 Sup./65-15
926
the Tribunal requires any documents to be produced or any
witness to be examined or any affidavit to be filed to
enable it to pass orders or for any other substantial cause,
or if the Income-tax Officer has decided the case without
giving sufficient opportunity to the assessee to adduce
evidence either on points specified by him or not specified
by him, the Tribunal may allow such document to be produced
or witness to be examined or affidavit to be filed or may
allow such evidence to be adduced.
After the Tribunal has passed orders on the appeal before
it, the stage is reached to take the matter by way of
reference proceedings before the High Court under s. 66.
This scheme 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 Tribunal, subject to the provisions of s.
31(2) of the Act and Rule 29 respectively, and that means
that when the Tribunal has disposed of the matter and is
preparing a statement of the case either under s. 66(1) or
under S. 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 s. 66(4), but the power of the
High Court under s. 66(4) can be exercised only in respect
of material and evidence which has already been brought on
the record.
There is another consideration which is relevant in dealing
with the question about the scope and effect of the
provisions contained in S. 66(4). Proceedings taken for the
recovery of tax under the provisions of the Act are
naturally intended to be over without unnecessary delay, and
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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. Oppor-
tunity is, however, given for additional evidence by s.
31(2) and Rule 29; but if further evidence is allowed to be
taken under the directions of the High Court under s. 66(4),
it is likely that tax proceedings may be prolonged
interminably, and that could not be the object of the Act as
it is evidenced by the relevant provisions to which we have
already referred. These mainly are the grounds on which the
earlier decisions of this Court in the New
927
Jehangir Mills(1) case and the Petlad Co. Ltd. (2) case
substantially rest.
On the other hand, it must be conceded that the words used
in s. 66(4) are wide enough and they may, on a liberal
construction, include the power to call for additional
evidence by directing the Tribunal to file supplementary
statement of the case. It is true that S. 66(4) in terms
does not confer such a power and it may be that having
regard to the scheme of s. 66(1) and (2), one would have
expected specific and express terms conferring such power on
the High Court in s. 66(4) if the Legislature had intended
that the High Court would be competent to call for
additional evidence; but there are no terms of limitation in
s. 66(4), and it would be reasonably possible to construe s.
66(4) as enabling the High Court to call for additional
evidence if it is satisfied that the material in the
statement of the case is not sufficient to answer
satisfactorily the question raised by the statement of the
case. When the High Court is dealing with the statement of
the case under s. 66(4), it is its duty to answer the
question submitted to it. As has been held by this Court in
Rajkumar Mills Ltd. v. Commissioner of Income-tax,
Bombay(1), where the question involved is one of law and the
High Court finds it difficult to answer the question owing
to the unsatisfactory nature of the statement of the case
submitted by the Tribunal, the proper procedure is to call
for a further statement of the case and then decide the
question itself. The High Court would be adjuring its
advisory function if it merely gives some directions and
orders the Tribunal to dispose of the matter according to
law and in the light of the directions given by it without
referring the matter again to the High Court; and so, if the
High Court finds that in order to deal with the question
referred to it satisfactorily it is necessary to ascertain
some relevant and material facts, it should be open to the
High Court to direct the Tribunal to make a supplementary
statement containing the said material and facts. There is
no provision in s. 66(4) which prevents the exercise of such
a power.
In some cases, the question of law referred to the High
Court may have to be considered in several aspects some of
which may not have been appreciated by the Tribunal. There
is no doubt that 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. In
such a case, if in dealing with some aspects
(1) [1960] 1 S.C.R. 249.
(2) [1963] Supp. 1 S.C.R. 871.
(3)(1955] 28 I.T.R. 184
928
of the matter it becomes necessary to ascertain additional
facts, it would be unsatisfactory to require the High Court
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to answer the question without such additional facts on the
ground that they have not been introduced on the record
already. Refusal to recognise the jurisdiction of the High
Court to call for such additional evidence may lead to
hardship in many cases, and since there are no words
expressly limiting the powers of the High Court under S.
68(4), there is no reason why the said powers should receive
a narrow and limited construction. That is the view for
which the learned Attorney-General contends.
It must be conceded that the view for which the learned
Attorney-General contends is a reasonably possible view,
though we must hasten to add that the view which has been
taken by this Court in its earlier decisions is also
reasonably possible. The said earlier view has been
followed by this Court on several occasions and has
regulated the procedure in reference proceedings in the High
Courts in this country ever since the decision of this Court
in the New Jehangir Mills(1) was pronounced on May 12, 1959.
Besides, it is somewhat remarkable that no reported decision
has been cited before us where the question about the
construction of S. 66(4) was considered and decided in
favour of the Attorney-General’s contention. Having
carefully weighed the pros and cons of the controversy which
have been pressed, before us on the present occasion, we are
not satisfied that a case has been made out to review and
revise our decisions in the case of the New Jehangir
Mills(2) and the case of the Petlad Co. Ltd. (2) . That is
why we think that the contention raised by Mr. Palkhivala
must be upheld. In the result, the order passed by the High
Court is set aside and the matter is sent back to the High
Court with a direction that the High Court should deal with
it in the light of the two relevant decisions in the New
Jehangir Mills(1) and the Petlad Co. Ltd. (2 ).
Before we part with this appeal, however, we would like to
add that in the course of the debate in the present appeal,
Rule 39 of the Income-tax (Appellate Tribunal) Rules was
incidentally referred to, though neither party based any
argument on it. That being so, the question as to the true
scope and effect of the provisions contained in the said
Rule does not fall to be considered in the present
proceedings and we express no opinion on it. There would be
no order as to costs throughout.
Appeal allowed and remanded.
(1) [1960] 1 S.C.R. 249,
(2) [1963] Supp, 1 S.C.R. 871,
929