Commissioner of Income Tax vs Kabir Das Investment Ltd. and another

M. Jagannadha Rao, C. J.

These two writ petitions are filed by the Commissioner of Income Tax, Delhi (Central-I), New Delhi, questioning the correctness of the orders of the Income Tax Appellate Tribunal, New Delhi (the second respondent). In each of the writ petitions, the assessed is Messrs. Kabirdas Investment Co., New Delhi (first respondent).

Civil Writ No. 926 of 1994 relates to the assessment year 1983-84. The Tribunal passed its appellate order u/s 254(1) of the Income Tax Act, 1961, on September 26, 1989, rejecting the Department''s appeal Income Tax Appeal No. 5886 of 1986/(Delhi) and thereafter the Department filed an application for reference u/s 256(1) as Application No. 346/(Delhi) of 1990 but the same was dismissed as time-barred on August 27, 1990. The Department filed a miscellaneous application on April 25, 1991, to recall the order dated August 27, 1990, on the ground that the date of commencement for computation of limitation for filing reference was wrongly computed, that the limitation started from the date on which the appellate order was later received by the appropriate Commissioner having jurisdiction over the case. This contention regarding proper computation was made on the basis of a decision of this court in Commissioner of Income Tax Vs. Arvind Construction Co. Pvt. Ltd, , the judgment in that case having been rendered by the High Court on January 24, 1991. The application for recall is said to be made u/s 254(2) or, at any rate, invoking the inherent powers of the Tribunal. The Department kept quiet till 1994, when on January 7, 1994 (on December 20, 1993, in Civil Writ No. 927 of 1994), they wrote to the Tribunal inquiring as to whether the said miscellaneous application dated April 25, 1991, was disposed of. On the ground that no orders were passed thereon, the present writ petition is filed on January 13, 1994.

The connected Civil Writ No. 927 of 1994 relates to the assessment year 1984-85, otherwise the point arising is similar. In both the writ petitions, filed on January 13, 1994, the Commissioner of Income Tax is seeking the quashing of the common orders of the Appellate Tribunal dated August 27, 1990, dismissing the reference application filed u/s 256(1) as time-barred. The Commissioner of Income Tax contends that limitation for filing the reference applications u/s 256(1) should be computed from the date of receipt of the Tribunal''s order u/s 254(1) by the particular Commissioner having jurisdiction over the case and not by any other Commissioner. Reliance for this purpose is placed upon the judgment of this court in Commissioner of Income Tax Vs. Arvind Construction Co. Pvt. Ltd, , delivered on January 24, 1991.

Learned counsel for the first respondent-assessed raised an objection that the Commissioner of Income Tax cannot be permitted to raise the question by way of a belated writ petition filed on January 12, 1994 (or December 1993 in the other writ), to question the orders of the Tribunal dated August 27, 1990, relying on Commissioner of Income Tax Vs. Arvind Construction Co. Pvt. Ltd, , dated January 24, 1991, and cannot be permitted to approach this court after nearly three years and the writ petitions are liable to be dismissed on the ground of laches. It is pointed out that similar applications for recalling earlier orders dismissing reference applications as time-barred on similar grounds, were rejected by the Tribunal in another case to which the Commissioner of Income Tax was a party, namely, in the case of Mohan Meakin Breweries, Solan, on November 26, 1991, and even after that, the Department did not wake up; did not do anything till January 7, 1994, when the Department wrote to the Tribunal inquiring about its application for recall dated April 25, 1991. In law, no application for recall can be filed in respect of an order u/s 256(1), it is argued.

In reply, learned counsel for the Department contends that the application for recall filed by the Department before the Tribunal on April 25, 1991, is maintainable if not u/s 254(2), at least under the inherent powers of the Tribunal. The pendency of that recall application from April 25, 1991, before the Tribunal is a good ground which explains the delay in the filing of the writ petitions.

The question, Therefore, is : whether these two writ petitions have to be dismissed on the ground of laches of three years, in questioning the orders dated August 27, 1990, of the Tribunal rejecting the reference application filed u/s 256(1) as time-barred ? The question also arises whether the fact that the Commissioner of Income Tax has filed applications in 1991 before the Tribunal, to recall the above said orders, would provide justification for the delay in the filing of these writ petitions in 1994.

After giving our anxious consideration to the above said question and after hearing lengthy arguments, we are of the view that the petitioner is guilty of laches of nearly three years and the writ petitions are liable to be dismissed on that ground, for the following reasons. We shall take the facts in Civil Writ No. 926 of 1994.

Admittedly, the Tribunal dismissed the Commissioner of income tax''s appeal Income Tax Appeal No. 5886/(Delhi) of 1986, on September 26, 1989, for the assessment years 1983-84 u/s 254(1). The said order was served on the Department, as per the procedure then followed and the Department filed its reference application u/s 256(1). Time was to be computed from the date on which the appellate order which was passed by the Tribunal u/s 254(1) was served on the particular Commissioner having jurisdiction over the case, as was decided by this court, later on, in Commissioner of Income Tax Vs. Arvind Construction Co. Pvt. Ltd, on January 24, 1991.

Learned counsel for the Department cited some rulings of the High Court to contend that the Tribunal could u/s 254(2), rectify its order passed in an appeal u/s 254(2), even if the basis for rectification is some other later judgment of the High Court/Supreme Court. No doubt, this proposition is not accepted by learned counsel for the respondent in view of Commissioner of Income Tax Vs. K.L. Bhatia, . But, we shall assume that for purposes of section 254(2) which permits a rectification application to be filed after an appeal is disposed of u/s 254(1), the Tribunal could rectify that order by virtue of subsequent changes in the law.

But, as rightly contended by learned counsel for respondent No. 1, a rectification application is contemplated by the Income Tax Act, 1961, only u/s 254(2) after an appeal is disposed of u/s 254(1) and there is no such provision for rectification contained in section 256 of the Act which deals with reference applications. Hence, section 254(2) is not available for cases of rectification u/s 256 of the Act.

An alternative argument was adduced before us for the Commissioner of Income Tax that the application for "recall" must be deemed to have been filed invoking the inherent powers of the Tribunal and in exercise of that power, earlier orders refusing to refer the matters u/s 256(1) could be recalled. As pointed out above, there is no provision in section 256 enabling the Tribunal to "rectify" its order passed u/s 256(1) as in the case of appellate orders passed u/s 254(1). In section 256, there is no clause corresponding to section 254(2), passed u/s 254(1). Then the question is whether the same result could be achieved by exercise of inherent powers or incidental powers.

In our view, even under the inherent powers, the Tribunal cannot recall an order passed u/s 256(1) (refusing to refer a matter), on the ground that subsequent to the order of refusal to refer the matter, there is some decision of the High Court, on the basis of which the earlier order of refusal could be treated as wrong.

Now, the order in Mohan Meakin''s case was rendered on November 26, 1991, and the Commissioner of Income Tax was party to it. The Commissioner of Income Tax, Therefore, was put on notice on November 26, 1991, by the Tribunal that no application for recalling earlier orders made u/s 256(1) was maintainable. Even so, the Commissioner of Income Tax allowed its applications dated April 25, 1991, filed in these two cases for recalling the orders of the Tribunal rejecting the reference applications as barred, to be pending and did not realise that the applications were already held to be not maintainable and it was time to file writ petitions straightaway without waiting for orders on the recall applications. In fact it was only on January 7, 1994, that the Department wrote to the Tribunal inquiring as to what had happened to its applications for recalling order dated April 25, 1991. For three years, the Department kept silent.

In these circumstances, learned counsel for respondent No. 1 is, in our view, amply justified in contending that the petitioner is guilty of serious laches in filing these writ petitions only on January 12, 1994.

In any event, on the dismissal of petition in Mohan Meakin''s case for recall, passed on January 26, 1991, the Commissioner of Income Tax must have moved this court within reasonable time. This was not done.

In the result, the writ petitions are dismissed on the ground of laches for the period of nearly three years which is not properly explained.