Commissioner of Income Tax vs Hari Chand and Lakhpat Singh

A.N. Verma, J.—These are three Income Tax applications u/s 256(2) of the Income Tax Act, 1961, seeking a direction to the Income Tax Appellate Tribunal to refer a common question stated to be a question of law for the opinion of this court.

Income Tax Applications Nos. 215 of 1991 and 216 of 1991 relate to the assessment years 1979-80 and 1980-81, respectively, and are directed against Hari Chand and Income Tax Application No. 217 of 1991 is directed against Lakhpat Singh and arises out of the proceedings for the assessment year 1978-79. As the questions proposed arise out of common facts, it is convenient to dispose of these applications by a common order.

Having heard learned counsel appearing for the Commissioner of Income Tax as well as the assessee, we are not satisfied that, on the facts of these cases as found by the Tribunal, any statable question of law arises out of its orders. The question on which the reference is sought is :

"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was legally correct in confirming the order of the Appellate Assistant Commissioner cancelling the penalty u/s 271(1)(c) and holding that the assessment has been made on agreed basis and that the penalty is not eligible ?"

The finding recorded by the Appellate Assistant Commissioner and affirmed by the Tribunal is "In the case of the appellant, it cannot be said that there was a conscious concealment or fraud or willful neglect on the part of the appellant." On this finding which is indisputably one of fact, it is apparent that no question of law arises. If an authority for this proposition is needed, we may refer to a decision of the Supreme Court in Commissioner of Income Tax, Andhra Pradesh Vs. Kotrika Venkataswamy and Sons, .

Learned counsel for the Revenue, however, made an attempt to challenge the correctness of the finding of the Appellate Assistant Commissioner and affirmed by the Tribunal and quoted above on the ground that the same is perverse or is not supported by any evidence. He submitted that this court can reframe the question so that this aspect may also be considered.

We are unable to agree. The question proposed by the Revenue is a limited one. It is whether penalty could be legally levied u/s 271(1)(c) in view of the fact that the assessment has been made on agreed basis and that the penalty is not eligible.

The only question on which a reference is sought by the Commissioner of Income Tax, therefore, is whether, in view of the fact that the assessment was made on agreed basis, penalty could be levied u/s 271(1)(c) of the Income Tax Act, 1961. This question does not, in our opinion, take within its sweep the above question sought to be raised before us by learned counsel for the Revenue.

It is settled law that the court cannot, u/s 256(2), disturb or go behind any finding of fact recorded by the Tribunal even on the ground that the same is not supported by any evidence, unless it is expressly challenged by a question raised in the application u/s 256(1).

An authoritative voice on the subject may be discerned in the decision of the Supreme Court in Commissioner of Income Tax, Bombay Vs. Scindia Steam Navigation Co. Ltd., , a case which dealt with the provisions of Section 66(2) of the Indian Income Tax Act, 1922, a provision which was in pari materia with and corresponds to the provisions of Section 256(2) of the Income tax Act, 1961. The Supreme Court pointed out that the power of a court to issue a direction to the Tribunal u/s 66(2) is in the nature of a mandamus and it is well-settled that no mandamus will be issued unless the applicant had made a distinct demand on the appropriate authorities for the very relief which he seeks to enforce by a mandamus and that had been refused. It was pointed out that the power of the court to direct a reference u/s 66(2) was subject to two limitations, namely, that the question must be one which the Tribunal was bound to refer u/s 66(1) and, secondly, the applicant must have required the Tribunal to refer it. The court referred to the prescribed form contained in the Income Tax Rules for making the application u/s 66(1) and observed that it shows that the applicant must set out the questions which he desires the Tribunal to refer and that, further, those questions must arise out of the order of the Tribunal. It was held that, u/s 66(2), the court cannot direct the Tribunal to refer the question unless it is one which arises out of the order of the Tribunal and was specified by the applicant in his application u/s 66(1).

Again, in India Cements Ltd. Vs. Commissioner of Income Tax, Madras, , the Supreme Court has held that, in a reference, the High Court must accept the findings of fact made by the Appellate Tribunal, and it is for the person who has applied for a reference to challenge those findings first by an application u/s 66(1) of the Indian Income Tax Act, 1922. If he has failed to file an application u/s 66(1) expressly raising the question about the validity of the findings of fact, he is not entitled to urge before the High Court that the findings are vitiated for one reason or the other. This view has been reiterated from time to time by the Supreme Court in a number of cases decided by it on this subject. However, we do not think it necessary to bvirden this judgment by making a reference to all these decisions, except to the decision in the case of Commissioner of Income Tax, Andhra Pradesh Vs. Kotrika Venkataswamy and Sons, , which is most apposite to the controversy in the instant case. That case was concerned with penalty for concealment of income, which was deleted by the Appellate Tribunal on the finding that, on the facts disclosed, no concealment of income was proved. On rejection of the reference application u/s 66(1) of the Indian Income Tax Act, 1922, by the Income Tax Appellate Tribunal and u/s 66(2) by the High Court, the matter was taken up to the Supreme Court by a special leave petition. While rejecting the special leave petition, the Supreme Court pointed that, in a petition u/s 66(2) of the Act, the High Court cannot be asked to call for a statement of the case on a question on which the Tribunal was not asked to submit a statement of the case. Further, the question whether the Tribunal was justified in coming to the conclusion, on the facts and in the circumstances of the case, that no concealment was proved, cannot include an enquiry whether the Tribunal had jurisdiction to reach a different conclusion from the one it had reached in the proceedings for assessment.

It is not in dispute that, in the applications u/s 256(1) filed by the Revenue in these cases, no specific question was raised challenging the findings of the appellate authorities as now sought to be challenged before us. In this view of the matter, we cannot accede to the submission of the Revenue.

These applications are also liable to be rejected for another reason that, even in these applications no question has been proposed assailing the findings of fact recorded by the appellate authorities including that of the Tribunal on the basis of which the penalties have been deleted. We may also observe that the assumption on which the proposed question proceeds, namely, that the impugned penalties were cancelled because the assessments were made on agreed basis is factually incorrect. On the contrary, the penalties were deleted because of other considerations and the ultimate finding that there was no concealment or fraud or neglect on the part of the assessee-respondents.

Learned counsel for the Revenue then submitted that we could reframe the question so as to include the issues sought to be raised by him in these applications. We cannot agree. While it is true that this court has power to reframe the question in an appropriate case, such jurisdiction must be strictly sought within the four corners of Section 256 of the Income Tax Act, 1961, which is rather restricted. An occasion to reframe the question would have arisen when the issue sought to be raised fell within the purview of the question proposed or to bring forth the real issue on the facts found by the Tribunal. That is not, however, the position here. The court''s power to reframe a question implies only the power to amplify the question in order to embrace a different approach to it or to bring out the essence of the question referred or proposed or to clarify some obscurity therein or to pinpoint the real issue between the taxpayer and the Department or for some identical reasons. However, under the purported exercise of the power to reframe the question, this court has no jurisdiction to raise a new question of law not flowing from the question posed before it, the reason being that this court, u/s 256 of the Income Tax Act, 1961, does not exercise original or appellate jurisdiction but exercises only advisory jurisdiction. If a plea was never raised in the application u/s 256(1), it cannot be allowed to be raised by refraining the question before this court, hardship to the assessee or the Revenue notwithstanding.

On the facts found by the Tribunal, in our opinion, no question of law arises.

In the result, all the three applications are dismissed with costs which we assess at Rs. 200 in each case.