J.K. Synthetics Ltd. vs Commissioner of Income Tax

B.N. Kirpal, J.

(1) This application u/s 256(2) has been filed in which it is contended that the following question should be referred :

" WHETHER, on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was justified in holding that the reference application filed by the respondent was not late as per the provisions of sec. 256(2) of the Act ?"

(2) Briefly stated the facts are that penalty proceedings had been initiated and penalty levied on the petitioner herein. An appeal was filed and the same was allowed by the Cit (Appellate). The department thereafter filed second appeal to the Income Tax Tribunal, but without any success. The department then filed a reference application u/s 256(1). Vide order dated 5th December, 1989 the application of the department was dismissed on the ground that no question of law arose. It may here be stated that application had been filed before the Tribunal by the petitioner herein requiring the Tribunal to check a date on which service of the order u/s 254 had been affected on the department. While disposing of the department''s application u/s 256(1) the Tribunal held that the said application was within time.

(3) It is against the aforesaid decision of the Tribunal holding that the application was within time that the present application .under Section 256(2) has been filed.

(4) In our opinion the application u/s 256(2) is clearly not maintainable. As is evident from the bare perusal of Section 256(2) an application can be filed under that sub-section before the High Court when the Appellate Tribunal, while dealing with the application under sub-section (i), refuses to state the case on the ground that no question of law arises. This clearly postulates that application u/s 256(1) has to precede an application u/s 256(2). If an applicant u/s 256(2) has not filed an application u/s 256(1) or asked the Tribunal to refer the question of law then no application u/s 256(2) can be filed.

(5) There is another reason why, in our opinion, the present application cannot be filed. An application u/s 256, whether under sub-section (1), or under sub-section (2), can only be filed requiring the Tribunal to state the case for referring a question of law arising out of an order passed u/s 254. In other words, if no question of law arises from the order of the Tribunal u/s 254, an application u/s 256(1) or sub section (ii) cannot succeed. A decision of the Tribunal entertaining an application u/s 256(1) on the ground that it is not barred by time cannot give rise to a question of law as envisaged by Section 256. The question whether the application u/s 256( I ) was time barred or not is not a question which arises from the decision of the Tribunal wader Section 254.

(6) Counsel for the petitioner seeks to rely upon the decision of the Supreme Court in the case of Commissioner of Income Tax, Kerala Vs. V. Damodaran, . In our opinion that decision can be of no assistance to the petitioner. In that case the Tribunal had decided one of the points against the assessed, while part of the decision was against the department. Against this order passed u/s 254 by the Tribunal, the Revenue filed an application for reference to the High Court. It is when that application was being taken up for hearing by the Tribunal that the assessed requested the Tribunal to refer one more question at their instance. The Tribunal referred two questions to the High Court-one at the instance of the assessed and one at the instance of the department. After the High Court answered the two questions, the department came up in appeal to the Supreme Court. One of the contentions raised was that the Tribunal should not have referred the second question at the instance of the assessed. While repelling this contention is was observed by the Supreme Court that "it is only the party applying for a reference who it entitled to specify the questions of law which should be referred." It was further observed by the Supreme Court that if a reference application is filed by an aggrieved party and the Tribunal agrees to refer a question of law to the High Court then the non-applicant can ask for reference of those questions of law which may also arise out its submissions which had been negatived in appeal by the Tribunal. Such a situation does not arise here. Firstly, the question now proposed was not sought to be raised before the Tribunal, when it was dealing with the application u/s 256(1) and, secondly, the question sought must arise from "submissions negatived in appeal by the Appellate Tribunal". The question now proposed does not arise from the order passed by the Tribunal u/s 254.

(7) We, Therefore, have no hesitation in coming to the conclusion that the present application is completely misconceived and is accordingly dismissed.