Full Judgment Text
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PETITIONER:
THE NEW JEHANGIR VAKIL MILLS LTD.
Vs.
RESPONDENT:
THE COMMISSIONER OF INCOME-TAX, BOMBAYNORTH, KUTCH AND SAURA
DATE OF JUDGMENT:
12/05/1959
BENCH:
BHAGWATI, NATWARLAL H.
BENCH:
BHAGWATI, NATWARLAL H.
DAS, SUDHI RANJAN (CJ)
HIDAYATULLAH, M.
CITATION:
1959 AIR 1177 1960 SCR (1) 249
ACT:
Income-tax-Reference-Power of High Court-If can direct
investigation on a new question and call for "supplementary
statement of case--Indian Income-tax Act, 1922 (XI Of 1922),
s. 66(4).
HEADNOTE:
This appeal by special leave was directed against the order
of the High Court asking the Income-tax Appellate Tribunal
under s. 66(4) Of the Income-tax Act to submit a
supplementary’ statement of case on points, which were never
raised by the parties nor decided by the Income-tax
Authorities or the Tribunal. The only question canvassed
before them was whether certain cheques, which were received
by the assessee at Bhavnagar having been cashed in British
India, the monies in respect of them could be said to have
been received in British India. The Tribunal held that the
monies related back to the receipt of the cleques and were
as such received at Bhavnagar. The question was whether the
receipt of the cheques at Bhavnagar amounted to receipt of
the sale proceeds at Bhavnagar.’ The High Court held that
the mere receipt of the cheques by post at Bhavnagar was not
conclusive in absence of a further finding as to whether the
cheques were sent by post without any request, express or
implied, having been made by the assessee and observed as
follows-
" But we cannot shut out the necessary inquiry which even
from our own point of view is necessary to be made in order
that we should satisfactorily answer the question raised in
the Reference. It must not be forgotten that under sec.
66(4) of the Income-tax Act we have a right independently of
the conduct of the parties to direct the Tribunal to state
further facts so that we may properly exercise our advisory
jurisdiction."
Held, that the High Court had misconceived its powers under
s. 66(4) of the Act and its decision must be set aside.
Section 66(4) of the Indian Income-tax Act, which must be
read with ss. 66(1) and 66(2) Of the Act, 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
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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. Such additions and
alterations in the statement of case as s. 66(4) of the Act
empowered the High Court to direct, could
250
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.
Craddock (H. M. Inspector of Taxes) v. Zevo Finance Co.
Ltd., (1946) 27 T.C. 267; Commissioner of Income-tax, West
Bengal v. State Bank of India, [1957] 31 I.T.R. 455 ;
Industrial Development and Investments Co., Ltd. v.
Commissioner of Excess Profits Tax, Bombay, [1957] 31 I.T.R.
688; Vadilal Ichhachand v. Commissioner of Income-tax,
Bombay North, Kutch and Saurashtra, Ahmedabad, [1957] 32
I.T.R. 569 and Commissioner of Income-tax v. Bhurangya Coal
Co. [195S] 34 I.T.R. 802, referred to.
Commissioner of Income-tax, Bihar & Orissa v. Visweshwar
Singh, [1939] 7 I.T.R. 536 and Sir Sunder Singh Majithia v.
Commissioner of Income-tax, C. P. and U. P. [1942] 10 I.T.R.
457, considered.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 50 of 1957.
Appeal by special leave from the judgment and order dated
September 23, 1955, of the Bombay High Court in Income-tax
Reference No. 19 of 1955.
R. J. Kolah and I. N. Shroff for the appellant.
H. N. Sanyal, Additional Solicitor-General of India,
K. N. Rajagopala Sastri and D. Gupta, for the respondent.
1959. May 12. The Judgment of the Court was delivered by
BHAGWATIJ.-This appeal with special leave arises out of a
judgment and order of the High Court of Judicature at Bombay
dated September 23, 1955, delivered in Income Tax Reference
No. 19 of 1955 made by the Income-tax Appellate Tribunal
(hereinafter referred to as " the Tribunal ") to the Pligh
Court under s. 66(1) of the Indian Income-tax Act (XI of
1922)-(hereinafter referred to as " the Act ") whereby the
High Court directed the Tribunal to submit a supplementary
statement of case on the points mentioned therein.
The appellant is a limited liability company manufacturing
textile goods at Bhavnagar which was an Indian State during
the assessment years 1943-44 and 1944-45. For the said
assessment years the appellant was held to be a non-
resident, its years of account
251
being calendar years 1942 and 1943. For the assessment
years 1943-44 and 1944-45 (account years 1942, and 1943),
the Income-tax Officer computed the British’ Indian Income
of the appellant on a proportionate basis under s. 4(1)(a)
of the Act. In the account year 1942 its total sales
amounted to Rs. 66,14,852 out of which sale proceeds
amounting to Rs. 35,92,157 as detailed below were held by
the Income-tax Officer to have been received in British
India:-
Cheques on the Imperial Bank issued
by the Supply Department of the
Government of India Rs. 2,58,987
Sale proceeds received through Tri-
kainlal Mahasukhram Rs. 20,24,190
Other cheques received at Bhavnagar
but drawn on Banks in British
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India Rs. 13,08,980
---------------
Rs. 35,92,157
The Income-tax Officer computed the income of the appellant
at Rs. 27,11,136 on a proportionate basis, i.e.,
proportionate to the sales in and outside British India. He
held that the income amounting to Rs. 14,72,267 was received
in British India under s. 4(1)(a) of the Act. There was no
dispute in regard to the sale proceeds received through
Trikainlal Mahasukhram.
In respect of the assessment year 1944-45 corresponding to
the account year 1943 the Income-tax Officer held that the
sale proceeds amounting to Rs. 16,72,693 received by the
appellant by cheques from the Supply Department of the
Government of India on British India Banks were taxable
under s. 4(1)(a) of the Act. The figure of Rs. 16,72,693
according to the appellant, was a mistake for Rs. 12,97,631.
The appellant had contended that the amounts had been
received at Bhavanagar, by cheques drawn on banks in British
India. The Revenue had not disputed the fact that the
cheques had been actually received at Bhavnagarbut had
contended that payments by cheques, though such cheques were
received at Bhavnagar,
252
were received in British India at the time and the place
where the cheques were ultimately cashed and honoured by the
banks on which the cheques were drawn and that until such
encashment of the cheques, the monies could not be said to
have been received by the appellant.
The Appellant preferred appeals to the Appellate Assistant
Commissioner, Ahmedabad Range, against this order of the
Income-tax Officer for the said two assessment years. The
Appellate Assistant Commissioner by his two separate orders
confirmed the orders of the Income-tax officer and held that
the cheques were not legal tender and were not monies or
monies worth as such and that the receipt of cheques at
Bhavnagar was not receipt of money. The receipt of money
according to the Appellate,., Assistant Commissioner, took
place on actual payments by the drawee Banks and he
therefore held that the said amounts were taxable under s.
4(1)(a) of the Act.
A further appeal was taken by the appellant. to the Tribunal
against the said orders of the Appellate Assistant
Commissioner and the Tribunal by its consolidated order for
both the years, dated July 17, 1952, held that the cheques
for the said amounts of Rs. 2,58,987 and Rs. 13,08,987 in
respect of the assessment year 1943-44, were received at
Bhavnagar and that the sale proceeds were also received in
Bhavnagar. The Tribunal stated inter- alia as follows:-
There is no evidence that the cheques from Government were
received in Bhavnagar. It is not the Department’s case that
the assessee company has a registered office elsewhere. The
presumption is that the letters containing the cheques were
addressed to the assessee company at Bhawagar We therefore
hold that the cheques were received from Government at
Bhavnagar and that the money was also received in
Bhavnagar."
In doing so, the Tribunal followed the Judgment of the
Bombay High Court in the case of Kirloskar Brothers Ltd. v.
Commissioner of Income-tax Bombay (1). In view of the fact
however that an appeal had been filed
(1) [1952] 21 I.T.R. 82.
253
in this Court against that decision of the Bombay High Court
the Tribunal further stated:-
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" We might point out that in case the Supreme Court does not
uphold the Bombay High Court decision in Kirloskar case an
enquiry will have to be made as to whether the assessee
company’s banks at Ahmedabad acted as the assessee company’s
agents for collecting the money due on the cheques."
In respect of the assessment year 1944-45, the Tribunal,
after directing the Income-tax Officer to verify the
correctness of the figure of the amounts received by the
appellant by cheques from the Government (i. e., whether it
was Rs. 12,97,631 as contended for by the appellant or
Rs. 16,72,693 as held by the Income-tax Officer or any other
figure), held that the cheques representing the said amount
were received at Bhavnagar and the monies or sale proceeds
were also received in Bhavnagar. The Tribunal also held
that another amount of Rs. 5,53,447 in respect of the said
latter year, being the aggregate amount of the cheques
received at Bhavnagar from other merchants was also received
in Bhavnagar.
It may be pointed out that neither did the Incometax
Officer, when the proceedings were before him, or when the
proceedings were before the Appellate Assistant
Commissioner, nor did the Revenue, when the proceedings were
before the Tribunal, at any stage contend that the cheques
aggregating to the said amounts in the said two years were
not received at Bhavnagar because of the alleged posting of
the cheques in British India and/or by reason of the allega-
tion that the cheques were sent by post and/or that the post
office was the agent of the appellant and that too, in spite
of the decision in the case of Kirloskar Bros. Ltd. which
decision had already been pronounced by then and where the
said question had been debated and argued by the Revenue.
The only ground urged by the Revenue at all material stages
was that because the amounts which were received, from the
merchants or the Government, were received by cheques drawn
on Banks in British India which were ultimately encashed in
British India, the monies could not be
254
said to have been received in Bhavnagar though the cheques
were in fact received at Bhavnagar.
Being aggrieved by the said decision of the Tribunal, the
respondent (Commissioner of Income-tax) filed two
applications under s. 66(1) of the Act requesting the
Tribunal to draw up a statement of the case and refer the
question of law arising out of the order of the Tribunal to
the High Court.
In the said applications the facts which were admitted
and/or found by the Tribunal and which were necessary for
drawing up a statement of the case were stated as under:-
" Regarding items of Rs. 2,58,987 and Rs. 12,97,631 received
from the Government of India in the accounting years
relevant to the assessment for 1943-44 and 1944-45
respectively the amounts were received by cheques drawn on
the Imperial Bank of India. No evidence was produced by the
assessee at any stage even before the Appellate Tribunal,
that the cheques were received at Bhavnagar, nor was any
evidence produced to show that these cheques were received
as unconditional discharge of debtor’s liability. These
cheques were collected by the Company’s bankers in ’British
India. The Income-tax Officer, therefore, held that the
amount was received in British India. The Appellate
Assistant Commissioner confirmed the Income-tax Officer’s
action. The Tribunal, however, relied upon the Bombay High
Court decision in Kirloskar Brothers’ case and held that the
amount was received in Bhavnagar. "
" As regards items of Rs. 13,08,980 and Rs. 5,53,447
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received in the accounting years relevant to the assessments
for 1943-44 and 1944-45 respectively, the relevant facts are
that the company received these cheques and sent them to
their bankers in Ahmedabad for collection......... The
Tribunal, held that the sale proceeds were received at Bhav-
nagar on the basis of the Bombay High Court’s decision in
the Kirloskar Brothers’ case without enquiring as to whether
the cheques were received by the company in unconditional
discharge of the drawer’s liability.
255
On these facts the respondent submitted that the following
questions of law arose out of the order of the Tribunal:-
" (1) Was there any evidence on the record to justify the
Tribunal’s finding that the mere receipt by the assessee of
cheques of Rs. 2,58,987 and Rs. 13,08,980 in Bhavnagar
amounted to receipt of the above amounts in Bhavnagar even
though the said cheques had actually been cashed in British
India and the proceeds thereof were credited to the
assessee’s accounts with certain Banks in British India ?
(ii) Whether in the circumstances of this case, the income,
profits and gains in respect of the sales amounting,to Rs.
15,67,967 made to the Government of India and other
customers were received in British India within the meaning
of section 4(1)(a) of the Indian Income-tax Act. "
A similar statement of facts which were admitted and/or
found by the Tribunal was also made in regard to the
assessment year 1944-45 and similar questions of law were
asked to be referred as in the case of the assessment year
1943-44 except in regard to the change in the figures
necessitated by the differences in the amounts received.
These reference applications being Reference Applications
Nos. 615 and 616 of 1952-53 were kept pending until the
decision of this Court in the case of Commissioner of
Income-tax v. Kirloskar Bros. (1). This Court decided that
appeal and the companion appeal The Commissioner of Income-
tax, Bombay South v. Messrs. Ogale Glass Works Ltd. (2) on
April 17, 1954. and the said Reference Applications were
thereafter heard and decided by the Tribunal on November 3,
1954.
It is worthy of note that the decision of this Court in the
said two cases proceeded on the basis that on the particular
facts of those appeals the Post Office had acted as the
agent of the assessee and that though the cheques were in
fact received by post by the assessees outside British
India, nevertheless, by reason
(1) [1954]25 I.T.R. 547.
(2) [1955] 1 S.C.R. 185.
256
of the fact that the assessees in the said two appeals had
expressly requested the Government to remit the amounts by
cheques, the assessees had constituted the Post Office their
agent to receive, on their respective behaves, the said
cheques which were posted by the Government at Delhi having
addressed them to the assessees outside British India.
In spite of the said decisions, the Revenue did not urge
before the Tribunal that the said aspect of the matter
should in the present case also be referred to the High
Court for its decision and the Reference applications were
heard on the materials which were on the record before the
Tribunal when it made its orders dated July 17, 1952. The
said order of the Tribunal was based on the facts admitted
and/or found by the Tribunal as stated in the Reference
Applications made by the Revenue as aforesaid and this
aspect of the case, viz., whether any portion of these
cheques were received by post and if so whether there was
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any request by the appellant express or implied that the
amounts of those cheques should be remitted to Bhavnagar by
post, had certainly not been canvassed before any of the
income-tax authorities or before the Tribunal and did not
find its place in the order of the Tribunal and any question
of law appertaining thereto could not be said to arise out
of the said order of the Tribunal.
On the materials as they stood on the record then, the
Tribunal drew up on November 5, 1952, a statement of case in
which all the facts and events above referred to were set
out. Besides the same the Tribunal also referred in para. 8
thereof to two letters on the record which showed that the
cheques from the Supply Department were received by post.
It also annexed a sample agreement form on record between
the appellant and its customers other than the Government
and annexed thereto the copies of the Appellate Assistant
Commissioner’s orders for the assessment years 1943-44 and
1944-45. The two letters showing that the cheques from the
Supply Department were received by post were evidently put
in with a view to show that the order of the Tribunal dated
July 17,
257
1952, was correct in making the presumption that the letters
containing the cheques were addressed to the, appellant at
Bhavnagar and in holding that the cheques were received from
the Government at Bhavnagar. There was no other reason, so%
far as the record then stood, to make any reference to the
said two letters. Out of the facts stated above the
Tribunal raised the following question of law:-
Whether the receipt of the cheques in Bhavnagar amounted to
receipt of sale proceeds in Bhavnagar? "
The said Reference was heard by the High Court on September
23, 1955, and judgment was delivered the same day whereby
the High Court held that it was not possible to answer the
question in the absence of materials as to whether the
cheques which were received in Bhavnagar were posted by the
Government at the request of the appellant and the High
Court observed :-
" The question that has been submitted to us by the Tribunal
is whether the receipt of the cheques in Bhavnagar amounted
to receipt of sale proceeds in Bhavnagar. This question
over-looks the important aspect which was dealt with both by
us in Kirloskar’s case and also by the Supreme Court.
Assuming that the cheques were received in Bhavnagar, the
question still, remains as to whether if the cheques were
received by post, the post office was constituted the agent
of the asseessee or not. The mere receipt of cheques by
post in Bhavnagar is not conclusive of the question raised
by the Tribunal. Unless we are in a position to say whether
the cheques were sent to Bhavnagar by post without there
being a request express or implied by the assessee the mere
receipt of the cheques in Bhavnagar would not constitute
receipt of sale proceeds in Bhavnagar. When we look at the
statement of the case there is no reference at all to this
aspect of the case."
The High Court further observed that the burden would be
upon the Revenue to establish that the cheques which were
received by post were so received at the request express or
implied of the appellant and
258
that therefore the Post Office was the agent of the
appellant. But it observed in this context:-
" But we cannot shut out the necessary inquiry which even
from our own point of view is necessary to be made in order
that we should satisfactorily answer the question raised in
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the Reference. It must not be forgotten that under sec.
66(4) of the Income-tax Act we have a right independently of
the conduct of the parties to direct the Tribunal to state
further facts so that we may properly exercise our advisory
jurisdiction."
In the result, the High Court directed that a supplementary
statement of case should be submitted by the Tribunal on the
following points:-
" On the finding of the Tribunal that all the cheques were
received in Bhavnagar, the Tribunal to 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. Mr. Johi concedes that to
the extent that the cheques were not received by post but by
hand, the receipt will be for the purpose of tax in
Bhavnagar."
The appellant filed a petition in the High Court on November
22, 1955, for the grant of a certificate under S. 66A(2) of
the Act to appeal to this Court from the said judgment and
order of the High Court. This application was dismissed by
the High Court by its order dated December 8, 1955, with the
result that the appellant presented on December 22, 1955, a
petition in this Court for special leave to appeal from the
said judgment of the High Court dated September 23, 1955.
This Court by its order dated March 12, 1956, granted
special leave to appeal, such leave being limited to the
question whether the High Court had jurisdiction under
section 66(4) of the Act to call for a supplemental
statement of case. This is how the appeal has come up for
hearing and final disposal before us.
We have narrated the facts and events leading up to this
appeal in such detail in order that we may
259
have the proper perspective and the background against which
the High Court directed the Tribunal to submit a
supplementary statement of case on the points mentioned
therein. The appeal raises an important question as to the
nature, scope and extent of the jurisdiction vested in the
High Court under section 66(4) of the Act and we shall now
address ourselves to that question.
The relevant provision of sec. 66 of the Act may now be
referred to :-
" 66. (1) 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 statement of the case and
refer it to the High Court:
Provided that, if, in the exercise of its powers under sub-
section (2), the Appellate Tribunal refuses to state a case
which it has been required by the assessee to state, the
assessee may, within thirty days from the date on which he
receives notice of the refusal to state the case, withdraw
his application and, if he does so, the fee paid shall be
refunded.
(2) If on any application being made under sub-s. (1) the
Appellate Tribunal refuses to state the 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,
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apply to the High Court, and the High Court may, if it is
not satisfied of the 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........................................
260
(4) 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."
It is clear on a plain reading of the terms of s. 66(1) that
the only question of law which the assesssee or the
Commissioner can require the Tribunal to refer to the High
Court is " any question of law arising out of the order of
the Tribunal " so that if the question of law which the
assessee or the Commissioner requires the Tribunal to so
refer to the High Court does not arise out of its order the
Tribunal is not bound to refer the same. What has therefore
to be looked at in the first instance is whether the
question of law thus required to be referred arises out of
the order of the Tribunal. The Tribunal no doubt has got
before it #he facts which are admitted and/or found by the
Tribunal and which are necessary for drawing up a statement
of the case and it is the facts admitted and/or found by it
that would form the basis on which the statement of case
would be drawn and references of the question of law made by
the Tribunal to the High Court. If such facts were not
there whether in the order of the Tribunal or in the record
before it there would certainly not be any foundation for
the raising of any question of law either in the abstract or
otherwise and it is only a question of law which would arise
out of such facts which are admitted and/or found by the
Tribunal that would be the substratum of the reference to
the High Court. The facts admitted aD.d/or found by the
Tribunal would really be the foundation or the basis on
which such questions of law could be raised and neither
party would be entitled to require the Tribunal to refer to
the High Court any question of law which could not thus
arise out of the order of the Tribunal. Section 66(2) which
gives the power to the High Court to require the Tribunal to
state the case and refer the question of law to it also
proceeds on the same basis and even
261
where the High Court exercises the power under s. 66(2) it
can only require the Tribunal to state the case on any
question of law arising out of such order.’ The scope and
subject-matter of the reference under s. 66(2) therefore is
co-extensive with that of the reference under s. 66(1) of
the Act and the High Court has no power or jurisdiction
under s. 66(2) to travel beyond the ambit of s. 66(1).
Section 66(2) comes into play only when the Tribunal refuses
to state the case on the ground that no question of law
arises and if the High Court is not satisfied of the
correctness of the decision of the Tribunal, it has got the
power and jurisdiction to require the Tribunal to state the
case and refer the same to it.
On the conditions of s. 66(1) and s. 66(2) being thus
complied with the statement of case has to be drawn up by
the Tribunal and the question of law arising out of its
order referred to the High Court for its opinion. This
statement of case which is based, as stated above, on the
facts which are admitted and/or found by the Tribunal may
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not contain sufficient material to enable the High Court to
determine the question raised thereby and in that case the
High Court under s. 66(4) is vested with the jurisdiction to
refer the case back to the Tribunal to make such additions
thereto or alterations therein as the Court may direct in
that behalf only for the purpose of determining the question
referred to it. If the question actually referred does not
bring out clearly the real issue between the parties, the
High Court may reframe the question so that the matter
actually agitated before the Tribunal may be raised before
the High Court. But s. 66(4) does not enable the High Court
to raise a new question of law which does not arise out. of
the Tribunal’s order and direct the Tribunal to investigate
new or further facts necessary to determine this new
question which had not been referred to it under s. 66(1) or
s. 66(2) and direct the Tribunal to submit a supplementary
statement of case. This power and jurisdiction which is
vested in the High Court is to be exercised within the four
corners of s. 66. If under s. 66(1) and s. 66(2) the
statement of case has to be
262
drawn up on the basis of the facts which are admitted and/or
found by the Tribunal and this is the requirement also of
para. 3 of the prescribed form-the scope of such statement
of case cannot, in our opinion, be in any manner enlarged by
the power which is given to the High Court under s. 66(4) to
make such additions thereto or alterations therein in the
statement of case as the Court may direct in that behalf.
The jurisdiction of the High Court under s. 66 is a
consultative or advisory jurisdiction. In order to
satisfactorily discharge that advisory jurisdiction the High
Court must have before it all the facts which are admitted
and/or found by the Tribunal properly set out in the
Statements in the case. It is only in those cases where
the statement of case referred to the High Court under s.
66(1) and s. 66(2) are not sufficient to enable the High,
Court to determine the question raised thereby that the High
Court is empowered to refer the case back to the Tribunal,
so that the Tribunal within the four corners of s. 66(1) and
s. 66(2) may make such additions to those statements or
alterations therein as may be directed by the Court. Even
though the terms of s. 66(4) are wide enough to comprise "
such additions thereto or alterations therein as the Court
may direct in that behalf " the scope of such directions has
got to be read in the context of and in conjunction with the
provisions of s. 66(1) and s. 66(2) and under the guise of
that direction the High Court cannot refer the case back to
the Tribunal to find new facts or embark upon a new line of
enquiry which would enable either the assessee or the
Commissioner to make out a case which had never been made
during the course of the proceedings before the Income-tax
authorities or the Tribunal so far. Such additions thereto
or alterations therein as the Court may direct in that
behalf are additions of facts to the statement of case or
alterations therein which though they were part of the
record before the Income-tax authorities or the Tribunal
were not incorporated in the statement of case drawn up by
the Tribunal either because such facts or statements though
contained in the record were not found by the Tribunal or
were omitted to be incorporated in the statement of case
drawn up by it.
263
That this is the scope, nature and extent of the
jurisdiction of the High Court under s. 66(4) of the Act is
amply borne out by the authorities. In Craddock (H. M.
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Inspector of Taxes) v. Zevo Finance Co. Ltd.(’). Lord
Greene, M. R. observed at p. 277:-
" The Crown, therefore, failed before the Commissioners to
establish the only measure of value for which it was
contending. It was, however, suggested that this difficulty
could be avoided by sending the matter back to the
Commissioners, so as to give the Crown an opportunity of
setting up a different measure of value supported by
different evidence. Even assuming that this was the only
difficulty in the way of the Crown’s argument, it would not,
in my opinion, have been proper to take this course. The
Crown failed in its contention on a matter of fact and it
must abide by. the result: it would be contrary to all
principle to give it another chance to establish by fresh
and different evidence a quite different contention which,
if it was desired to rely upon it, ought to have been
advanced in the first instance. Our task is to deal with
the case on the basis of the facts as found by the
Commissioners upon the submissions made to them, and on this
basis the value of the investments has not been
established." I
In Commissioner of Income-tax, West Bengal v. State Bank of
India (2), Chakravartti, C.J., who delivered the judgment of
the High Court at Calcutta said at p. 551 :-
" We intimated to Mr. Meyer as soon as he formulated his
points that he could not be allowed to take the first of
them, since it did not appear to have been taken on behalf
of the Department at any stage of the proceedings and
certainly not before the Tribunal. It could not, therefore,
be said to arise out of the Tribunal’s order. The practice
followed in this Court in references under section 66(1) of
the Act has always been to limit the party, at whose
instance a reference has been made, to the points raised and
canvassed before the Tribunal. Questions
(1) (1946) 27 T.C. 267, 277.
(2) [1957] 31 I.T.R. 545, 551,
264
are often framed in a general form, such as whether the
assessment for a particular year made in a certain manner
was valid in view of the provisions of a certain section of
the Act. A question framed in that form might be said to
comprise all possible contentions to which the terms of the
relevant section might give rise, but this Court has always
refused to treat matters arising out of questions so framed
as entirely at large. It has adopted and acted on that view
for the reason that this Court is only an advisory body and
the advice which it can be properly asked to give is only
advice on matters which had been in contention before the
Tribunal and which had been decided in one way or another
such advice being sought in order that the parties
interested might know whether the decision on those conten-
tions had been in accordance with law. In hearing a
reference under section 66(1), this Court does not sit in
appeal from the assessment and it is not called upon to give
its advice on matters which the Tribunal was not asked to
decide and which the Tribunal neither decided, nor included
in the statement of case for the opinion of this Court."
The Bombay High Court also expressed the same opinion in the
case of Industrial Development and Investments Co., Ltd. v.
Commissioner of Excess Profits Tax, Bombay (1), Chagla,
C.J., who delivered the judgment of the Court pointed out to
the Tribunal what the correct procedure was with regard to
the submission of a statement of the case and observed:-
" It is true that very often the Tribunal may not refer to
all the evidence and all the facts in its appellate order.
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We quite appreciate the difficulty of the Tribunal as it has
to deal with a large number of cases, and it may be that in
many cases the decision may seem obvious to the Tribunal and
it might dispose of an appeal by a very short order. If a
statement of the case is, subsequently called for, naturally
the Tribunal would want to elaborate it,-, decision by
pointing out various materials and pieces of evidence to
which it had not referred in
[1957] 31 I.T. R. 688, 695.
265
the appellate order. But all that can be referred to in the
Statement of the case are materials and evidence which were
before the Tribunal when it heard the appeal. A statement
of the case is not intended for the purpose of buttressing
up the order of the Appellate Tribunal or further fortifying
it by requisitioning to its aid materials and evidence which
were not before the Tribunal but which it discovers by
investigation after the order was passed in appeal.
" Much more so would be the case where no such material and
evidence were at all in existence when the High Court in
exercise of its jurisdiction under s. 66(4) of the Act
referred the case back to the Tribunal and asked it to make
such additions thereto or alterations therein as the Court
may direct in order to enable it to determine the question
raised thereby. Adopting such a procedure would involve, in
effect, raising fresh issues and taking fresh evidence in
order that fresh facts may be found which facts certainly
were not there at the time when the matter was heard before
the Income-tax authorities or before the Tribunal in the
first instance.
Two more decisions may be referred to in this context. One
is a decision of the Bombay High Court in Vadital Ichhachand
v. Commissioner of Income-tax, Bombay North, Kutch and
Saurashtra, Ahmedabad (1) where Tendolkar, J., dealt with an
argument advanced by Counsel that the Court should send the
matter back to the Tribunal for determining the quantum of
penalty, and observed:-
Then Mr. Palkhivala says that we should, therefore, send
this matter back to the Tribunal for determining that
question. We do not find any power in this Court under the
provisions of section 66 of the Income-tax Act to remand a
matter back to the Tribunal for determining what might have
been left undetermined by them, because they took a
particular view of the law. We have merely the jurisdiction
to answer the question of law referred to us, and we are not
concerned with any questions which are pure questions of
fact or its determination by the Tribunal."
34 (1) [1957] 32 I.T.R. 569, 573.
266
The other is the decision of this Court in Commissioner of
Income-tax v. Bhurangya Coal Co. (1), where Venkatarama
Aiyar, J., dealt with a similar argument which was addressed
before this Court at p. 805 :-
" The matter then came before the High Court of Patna on a
reference under section 66(1) of the Income-tax Act, at the
instance of the appellant. There the contention was raised
that the differentiation between movable and immovables on
which the judgment of the Tribunal rested had not been made
at any time in the prior stages of the proceedings and that
was a matter on which further evidence would have to be
taken to ascertain the intention of the parties and that,
therefore, the matter should be remanded for further enquiry
to the Appellate Tribunal. The learned Judges refused to
accede to this contention for the reason that no such appli-
cation was made before the Tribunal and that it was a point
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which ought not to be allowed to be taken for the first time
in the High Court. On behalf of the appellant, it is stated
that the question as to what are immovables and what are
movables, arises only on the judgment of the Tribunal and
that, therefore’ an opportunity ought to be given for an
investigation of this aspect of the question. We are not
impressed by this argument. Surely, before the Tribmnal
there must have been a discussion as to the position with
reference to the movables as distinct from the immovables,
under the transaction and if the appellant considered that
in view of that distinction, further enquiry was called for,
it was incumbent upon it to apply to the Tribunal itself to
order it and not having done so, it had no right to call
upon the High Court to remand the matter for that purpose.
In our opinion the High Court was justified in declining to
entertain this point."
If there is no power in the High Court to remand the case to
the Tribunal for fresh findings of facts on further enquiry
in the manner stated above, much less would the High Court
have the power while exercising its jurisdiction under s.
66(4) of the Act to
(1) [1958] 34 I.T.R. 802, 805,
267
refer the case back to the Tribunal to make such additions
thereto or alterations therein as the Court may direct as
would require the Tribunal to embark upon a fresh line of
enquiry which had never been canvassed at any time before
the Income-tax authorities or the Tribunal in the first
instance and record fresh findings on evidence adduced by
the parties in that behalf.
Our attention was drawn on behalf of the Revenue to the
observations of Fazl Ali, J. (as he then was) in the
Commissioner of Income-tax, Bihar & Orissa v. Visweshwar
Singh(’) where the learned Judge dealt with the procedure
adopted by the Commissioner of Income-tax in sending up the
reference in question. The High Court sent the matter back
to the Commissioner in order that he may re-state the
statement of case. When the matter went back to the Commis-
sioner he sent up a restatement of the case, but
unfortunately without hearing the assessee. The High Court
sent the re-stated case back to the Commissioner once again
in order that the case might be re-stated with such further
finding of fact as the Commissioner may consider necessary
after hearing the assessee. The matter then went back to
another Commissioner who instead of re-stating the case, as
he was ordered by the High Court to do, sent up a letter to
the High Court stating that he had not heard the party in
regard to the opinion of the Commissioner, and that in any
event he should not consider that he had power within s.
66(4) to vary an opinion given under s. 66(2) if no new
facts were admitted. The learned Judge pointed out that the
Commissioner was in duty bound to carry out the order of the
High Court and he should have re-heard the parties, admitted
such further evidence as he considered relevant on the point
at issue and re-stated the case with his opinion thereon.
It is not clear, however, from the record as to whether the
re-hearing of the parties and the recording of such further
finding as was considered relevant on the point at issue
embraced a fresh line of enquiry which had not been
entertained at any earlier stage of the proceedings or was
merely
(1) [1939] 7 I.T.R. 536,554.
268
by way of elucidation of the very same points at issue which
had been canvassed earlier but had not been thrashed out
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completely and properly reflected in the finding of the
Tribunal. These observations, in our opinion, do not make
any difference to the position that we have adopted herein,
viz., it is not open to the High Court in the exercise of
its jurisdiction under s. 66(4) of the Act to raise a new
question and to require the Tribunal to entertain a fresh
line of enquiry, hear the parties in regard to the same and
record fresh finding of fact which would enable either the
assessee or the Commissioner to advance a case which had
never been made by it before the Income tax authorities or
the Tribunal and which therefore could not be said to arise
out of the order of the Tribunal.
The decision of the Privy Council in Sir Sunder Singh
Majithia v. Commissioner of Income-tax, C. P. and U. P. (1)
was also referred to by the Revenue in this context. In
that case the question of law which was formulated was in
the following terms:-
,, 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 (II of 1899) has the deed of partnership dated February
12, 1933, brought into existence a genuine firm entitled to
registration under the provisions of section 26-A of the
Act."
The High Court while answering this question did not advert
to the relevant aspect of the question and this result was
brought about because the Commissioner had taken pains to
state some matters very fully,. but he had not found the
material facts as he should have done. The various
essential facts were not found and stated by the
Commissioner and the Privy Council observed that the
referred question could not be answered until the High Court
had exercised its powers under sub-s. 4 of s. 66 of the Act
and left it to the discretion of the High Court to specify
the particular additions and alterations which the
Commissioner should be directed to make. Here also
(1) [1942] 10 I.T.R. 457,461.
269
the nature, scope and extent of the jurisdiction of the High
Court under s. 66(4) of the Act was not specific-, ally
discussed and the only order which was passed 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 might think fit in the light of the judgment.
The same observations which we have made earlier while
discussing the case of Commissioner of Incometax v.
Visweshwar Singh (1) would apply to this case also and the
observations of the Privy Council really do not militate
against the position as we have laid
down above.
On the facts of the present case before us it is abundantly
clear that the only question which was canvassed before the
Income-tax authorities and the Tribunal before it made its
order dated July 17, 1952, was whether the cheques which
were received at Bhavnagar having been cashed in British
India, the monies in respect of the same should be said to
have been received in British India and the Tribunal had
held following the case of Kirloskar Brothers’ Case that the
cheques were received from the Government at Bhavnagar and
the receipt of money in respect of these cheques from Banks
in British India related back to the receipt of the cheque
at Bhavnagar and therefore was also received in Bhavnagar.
At no time was the question as regards the posting of the
cheques in British India (Delhi) at the request, express or
implied, of the appellant and the consequent receipt of the
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sale proceeds in British India ever mooted before the
Income-tax authorities or the Tribunal before the Tribunal
made its order on July 17, 1952, or even in the reference
applications filed on September 15, 1952, nor was the said
question mooted before the Tribunal when it heard the
reference and drew up the statement of case on November 5,
1954, even though this Court had pronounced its decision in
Kirloskar Brothers’ Case (1) and the Commissioner of Income-
tax, Bombay South v. Messrs. Ogale Glass Works Ltd. (2) on
April 19, 1954. The facts admitted and/or
(1) [1939] 7 I.T.R. 536, 554. (2) [1954] 25 I.T.R. 547.
(3) [1955] 1 S. C. R. 185.
270
found by the Tribunal as stated in the said applications for
reference took count of the position as it had been adopted
by the Revenue in all these proceedings and it could not by
any stretch of imagination be urged that the question now
sought to be mooted was ever in the minds of the Revenue.
The question of law which was referred by the Tribunal to
the High Court for its decision was:-
Whether the receipt of the cheques at Bhavnagar amounted to
receipts of sale proceeds in Bhavnagar." and it was only
based on the facts admitted and/or found by the Tribunal
which had relevance only to that question and not to the
question which was sought to be mooted by the High Court in
its judgment under appeal. If the latter question was
allowed to be entertained the question would have to be
recast as under:-
" 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."
- a question quite distinct and separate from the question
of law which was actually referred by the Tribunal to the
High Court in the statement of the case drawn on November 5,
1954.
We are, therefore, of opinion that the High Court was in
error in not deciding the reference before it and answering
the question on the facts disclosed in the statement of
case. We are also of opinion that in the circumstances of
this case the High Court had no jurisdiction under s. 66(4)
to direct the Tribunal to submit a supplementary statement
of case on the points mentioned in its judgment.
The result, therefore, is that the appeal will be allowed
and the matter remanded to the High Court to arrive at its
decision on the question of law referred to it in the
statement of case already submitted to it by the Tribunal.
The respondent will pay the appellant’s costs throughout.
Appeal allowed.
271