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Judgment
K.S. Paripoornan, J.—The Income Tax Appellate Tribunal has referred two questions of law at the instance of an assessee and one question of law at the instance of the Revenue as arising from its common appellate order dated July 30, 1984. I. T. R. No. 500 of 1985 is a reference at the instance of the assessee and I. T. R. No. 501 is at the instance of the Revenue. As stated, these references arise out of the common order passed by the Appellate Tribunal, dated July 30, 1984, in I. T. A. Nos. 175/(Coch) of 1982 and 269/(Coch) of 1982. The matter relates to the assessment year 1977-78. The three questions of law referred for the decision of this court are as follows :
At the instance of the assesses :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee''s claim for deduction of Rs. 40,81,140 as an item of bad debt written off is not allowable ?
Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee''s claim for deduction of Rs. 40,81,140 as an item of business loss is not admissible ?"
At the instance of the Department :
"3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee''s claim for deduction of Rs. 11,36,779 as a revenue loss in respect of the sale of the current assets is allowable ?"
The previous year for the assessment ended on December 31, 1976. The assessee is a non-resident company running a tea plantation and carrying on manufacture and sale of tea. On August 15, 1973, the assessee-company entered into an agreement with one A. Velliangiri of Madras for the sale of the estate and the business of the assessee. Thereafter, on February 5, 1974, the assessee-company entered into an agreement with Messrs. Chennai Bottling Co. Pvt. Ltd., Madras, to sell the entire tea manufactured up to December 31, 1974, by the assessee to the company or its nominee. For the sale of the estate, permission of the Reserve Bank of India was required, It was refused. Meanwhile, a sum of Rs. 40,81,140 became due to the assessee-company from Messrs. Chennai Bottling Co. Private. Ltd., towards cost of tea supplied to it. Disputes arose with regard to this amount. The assessee filed an application before the Sub-Court, Cochin, u/s 20 of the Arbitration Act seeking a reference of the dispute to arbitration. The matter is stated to be still pending. Subsequently, the Reserve Bank of India granted permission for the sale of the estate. In pursuance thereof, the entire estate along with its assets and liabilities was sold by the assessee-company to a running concern of a Bombay company, on September 1, 1976. A day prior thereto, that is, on August 31, 1976, the entire amount due to the assessee-company from Messrs. Chennai Bottling Co. Pvt. Ltd. was written off as a "bad debt". During the course of the assessment for the year 1977-78, a plea was put forward that the said sum is a business loss or, at any rate, a bad debt. The Income Tax Officer rejected the plea. In appeal, the Commissioner of Income Tax (Appeals) reduced the total income by Rs. 11,36,779, holding that it is a "business loss" consequent on the sale of stock-in-trade and consumable goods in store.
The assessee, as well as the Revenue, filed appeals before the Appellate Tribunal, I. T. R. No. 175/(Coch) of 1982 and I. T. A. No. 269/(Coch) of 1982, respectively. In disposing of the appeals by a common order dated July 30, 1984, the Income Tax Appellate Tribunal affirmed the decision of the Commissioner of Income Tax (Appeals). It was held that the sum of Rs. 11,36,779 is an admissible deduction, since it is a loss on the sale of the current assets. It is thereafter at the instance of the assessee as well as the Revenue that the Appellate Tribunal has referred the three questions of law, extracted hereinabove, for the decision of this court.
We heard counsel for the assessee, Mr. Vellapally, as also counsel for the Revenue, Mr. P. K. R. Menon. The assessee has filed C. M. P. No. 28127 of 1989, praying that this court may be pleased to pass orders u/s 258 of the Income Tax Act, requiring the Appellate Tribunal to include 16 documents specified at pages 24 and 25 of the printed paper book, to be included in the annexure to the statement of the case and to send up copies of the said documents. According to the assessee, these 16 documents were produced before the Appellate Tribunal as early as January 16, 1984, in pursuance of the direction of the Tribunal at the hearing on January 4, 1984. What is more, these documents were listed in the list of documents filed under rule 36 of the Income Tax (Appellate Tribunal) Rules, 1963, along with the reference application. According to the assessee, these documents are necessary for a proper and satisfactory disposal of the references by this court. It is also brought to our notice that a Miscellaneous Petition No. 21/(Coch) of 1989 was filed before the Appellate Tribunal by the assessee to forward a supplementary statement of the case to this court for the purpose of making available the 16 additional documents by way of annexures. The Appellate Tribunal held that the assessee did not object to the draft statement of the case prepared by the Tribunal, though the assessee had two opportunities to do so on May 6, 1985, and June 28, 1985. It is also seen stated in the order of the Appellate Tribunal, that there was no requisition from the court stating that these documents were necessary for the disposal of the reference applications. Stating these factors, the Appellate Tribunal declined to entertain the miscellaneous petition.
We were taken through the statement of the case, dated June 20, 1985, forwarded by the Appellate Tribunal to this court. We went through the appellate order dated July 30, 1984, passed by the Appellate Tribunal. We heard the rival contentions of the assessee as well as the Revenue. A bare perusal of the appellate order of the Tribunal shows that the Appellate Tribunal referred to the following particular facts :
(1) The assessee moved the civil court on October 31, 1975, under the Arbitration Act to refer the dispute between it and the Chennai Bottling Company Pvt. Ltd., Madras, as per the provisions contained in the agreement between the parties.
(2) The Bombay company (the vendee of the estate along with its assets and liabilities) tried to get itself impleaded in the Sub-Court for pursuing the proceedings pending in that court. It was impleaded on July 6, 1978.
(3) The sale deed in favour of the Bombay company shows that all the assets and liabilities of the assessee have been transferred to the Born-bay company and that the amount due from Chennai Bottling Company Pvt. Ltd. was not kept back by the assessee.
(4) The sanction of the Reserve Bank of India shows that the entire undertaking, including its assets and liabilities, was to be transferred for the amount approved. On a reference to the sale deed, it could be seen that the sum of Rs. 11,36,779, for which bifurcation or allocation was furnished to the Income Tax Officer is a loss on the sale of current assets. It is a revenue loss.
The above facts, amongst others, referred to by the Appellate Tribunal, are evidently borne out by documents. Some of them have been referred to in detail, whereas some of them have been referred to in general and, regarding some others, only a casual reference has been made. In order to properly and satisfactorily answer the questions referred to us, it will be necessary and proper to refer to those documents in detail. But none of the documents referred to by the Appellate Tribunal in its appellate order form part of the statement of the case ; nor are they included in the paper book. We find that as many as 19 documents have been included in the list of documents in the reference application filed by the assessee before the Income Tax Appellate Tribunal. The Revenue has also, in the reference application filed by it, referred to some of them. But we are at a loss to know why some of the important documents, at least, on which the decision depends, have not been annexed to the statement of the case.
In answering the questions referred to this court, this court is exercising only an advisory jurisdiction. If the questions referred to this court are academic or concluded by a decision of the Supreme Court or otherwise the answer is self-evident, then this court is not bound to answer the questions referred to it. Similarly, in order to enable this court to answer the questions properly, this court should have the benefit of at least the essential or necessary documents and other materials on the basis of which the Appellate Tribunal formed its appellate decision. In this case, the Appellate Tribunal has not chosen even to annex the essential or vital documents referred to by it in its order to reach the conclusion it did. It is the duty of the Appellate Tribunal to draw up a proper statement of the case, containing a detailed statement of facts, as also including in the paper book all essential documents on the basis of which it rendered its decision. This has been made clear by more decisions than one-- HARAKCHAND MAKANJI and CO. Vs. COMMISSIONER OF Income Tax, BOMBAY CITY., , Commissioner of Income Tax Vs. Anamallais Timber Trust Ltd., and Kapurthala Northern India Tanneries Ltd. Vs. The State of Punjab, In so far as the Appellate Tribunal has not forwarded a proper statement of the case with all details and has also not included even the vital documents as enclosures in the paper book, we are not in a position to answer the questions referred to us. We, therefore, decline to answer the questions referred to us in both these references. We would only add that it is open to the Appellate Tribunal, if it is so inclined, to draw up a proper statement of the case and forward the same along with all essential and material documents and papers relied on by it in the appeals.
The reference is disposed of accordingly.
A copy of this judgment under the seal of this court and the signature of the Registrar will be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.