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Additional Commissioner Of Income-Tax v. Hasmat Rai Raj Pal.

Allahabad High Court

Apr 15, 1987

Judgment

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Judgment Summary — R.K. Gulati, J.

Factual and Procedural Background

This application was filed under Order 47, rule 1 read with section 151, Code of Civil Procedure, seeking review or recalling of this Court's order dated 22 January 1987 (I.T.R No. 1141 of 1977 / Additional Commissioner of Income-Tax v. Hasmat Rai Raj Pal, [1987] 167 ITR 794). The underlying matter concerned two questions referred by the Income-tax Appellate Tribunal under section 256(2) of the Income-tax Act, 1961, in relation to assessment year 1960-61.

The applicant (M/s. Hasmat Rai Raj Pal) asserted that the Revenue had sought two separate references for assessment years 1960-61 and 1961-62. A separate reference (I.T.R No. 370 of 1980) relating to assessment year 1961-62 had earlier been decided in favour of the applicant by a Division Bench on 8 April 1985 ([1985] UPTC 591). The applicant contended it was unaware of that favourable decision when the Court heard and decided the 1960-61 reference on 22 January 1987, and therefore asked this Court to review/recall its later order so as to conform it to the earlier decision.

The factual matrix relevant to the tax questions included several cash credits recorded in the assessee's books for the year relevant to assessment 1961-62. Two specific deposits, each for Rs. 25,000, fell in the financial year relevant to assessment year 1960-61, though recorded in books maintained for 1961-62. The Income-tax Officer assessed those two deposits as income of the assessee for assessment year 1960-61 (treating the financial year as the previous year), while remaining cash credits were assessed in 1961-62. Reassessment in both years proceeded under section 148 of the Act.

Legal Issues Presented

Whether the application to review or recall this Court's order dated 22 January 1987 (filed under Order 47, rule 1 read with section 151 CPC) is maintainable in proceedings under section 256 of the Income-tax Act, 1961.
Whether the disputed deposits (two items of Rs. 25,000 each) ought to be assessed in assessment year 1960-61 or in assessment year 1961-62 given they were recorded in books maintained for 1961-62 but fell in the financial year relevant to 1960-61.
Whether there was a failure or omission on the part of the assessee to disclose fully and truly all material facts necessary for the completion of assessment for assessment year 1960-61 (i.e., whether disclosure made only in 1961-62 assessment proceedings absolved the assessee for 1960-61).

Arguments of the Parties

Applicant's Arguments

The applicant argued that this Court's order dated 22 January 1987 was contrary to an earlier Division Bench decision in I.T.R No. 370 of 1980 (decided 8 April 1985 in favour of the applicant) concerning assessment year 1961-62, and that the earlier decision should have been brought to the Court's notice when the 1960-61 matter was heard.
The applicant asserted it was unaware of the favourable decision in I.T.R No. 370 of 1980 at the time the 1960-61 matter was decided and therefore sought review/recall so that the 1960-61 decision could conform to the earlier favourable ruling.

No detailed account of any contrary arguments advanced by Revenue or other parties is contained in the provided opinion.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
CIT v. Tehri Garhwal State, [1934] 2 ITR 1 (Privy Council discussion of prior High Court reference)	That a judgment given by a High Court in a reference under the Income-tax Act (section corresponding to section 256(2)) is binding between the parties in the particular case; where a judgment has been delivered and not appealed from, its conclusions govern the parties and there is no alternate procedure to correct it other than appeal.	The Court relied on this authority to illustrate the binding character of judgments delivered in references and to support the proposition that such opinions cannot be reopened or reviewed by an alternative procedure outside appeal.
Ramprasad, In re (AIR 1930 All 389) — (referenced within Tehri Garhwal State)	Earlier High Court judgment used in subsequent reference; treated as binding between parties in the particular case.	Referenced as part of the factual history in Tehri Garhwal State to show that an earlier unappealed judgment governed the parties' relations and could not be set aside except by appeal.
Seth Mathuradas v. CIT, [1940] 8 ITR 412 (Nagpur High Court)	Application for review of a judgment passed in a reference under section 66 of the 1922 Act is not maintainable because a tribunal determining questions under that section does not operate as a civil court subject to the Civil Procedure Code.	The Court cited this case to support the proposition that review of judgments given in tax references is not maintainable and that CPC review provisions do not automatically apply to such references.
Emperor v. Kajori Mal Kalyan Das, [1930] 4 ITC 60 (All)	An opinion given in such reference proceedings is not a decree or order subject to review; therefore review is not available.	Used to bolster the view that judgments/opinions in reference proceedings are not amenable to review as if they were ordinary civil decrees or orders.
CIT v. Hungerford Investment Trust Ltd., [1935] 3 ITR 188 (Calcutta High Court)	The Court acting under the power conferred by section 66 of the 1922 Act exercised a special/advisory jurisdiction; proceedings were not governed by the Code of Civil Procedure and no review lay.	The Court relied on this authority to support its conclusion that the jurisdiction under section 256 of the Income-tax Act, 1961, is advisory/special and does not permit a review by invoking Order 47, rule 1 or section 151 CPC.
I.T.R No. 370 of 1980 (1985 UPTC 591) — Division Bench decision on assessment year 1961-62	Held that the Tribunal was correct in finding there was no failure on the part of the assessee to disclose fully and truly all material necessary for assessment for 1961-62; this decision was fact-specific to assessment year 1961-62.	The Court distinguished that earlier decision on grounds of differing facts and held it did not conflict with the January 22, 1987 decision relating to assessment year 1960-61.

Court's Reasoning and Analysis

The Court's analysis proceeded in two linked strands: (A) assessment-year factual/legal analysis concerning the taxation of the disputed deposits; and (B) the procedural/constitutional analysis concerning whether a review or recalling of the Court's earlier opinion was permissible in proceedings under section 256 of the Income-tax Act.

A. Assessment-year analysis and disclosure

The Court noted that although various cash credits were recorded in books maintained for 1961-62, two deposits (each Rs. 25,000) fell in the financial year relevant to assessment year 1960-61. The Income-tax Officer assessed those two deposits in 1960-61; the rest were assessed in 1961-62. All reassessments proceeded under section 148 of the Act.
The Tribunal had given two reasons for sustaining the assessee's position: (i) that when action under section 148 was taken the old Indian Income-tax Act of 1922 had been repealed and therefore assessment must follow the Income-tax Act, 1961; under the 1961 Act, the disputed items—being unexplained deposits recorded in the books maintained for 1961-62—could only be assessed in assessment year 1961-62; (ii) there was no failure or omission by the assessee to disclose fully and truly all material facts for assessment year 1960-61, because disclosure of the disputed credits during assessment proceedings for 1961-62 absolved the assessee for 1960-61.
The Court examined the earlier Division Bench decision in I.T.R No. 370 of 1980 (which answered a different question specific to assessment year 1961-62) and found the facts there to be different from those in the 1960-61 matter.
On the particular facts of assessment year 1960-61, the Court held the Tribunal was not correct in concluding the impugned deposits were taxable in 1961-62; that issue was not the subject of I.T.R No. 370 of 1980. Further, on the second question, the Court held there was a failure or omission by the assessee within the meaning of section 147(a) of the Act because the assessee's own case showed disclosure of the cash deposits occurred only during assessment proceedings for 1961-62 and no disclosure was made in the 1960-61 proceedings. The Court therefore concluded that disclosure in 1961-62 did not absolve the assessee of its obligation to make full and true disclosure in the 1960-61 proceedings on the facts of this case.

B. Procedural analysis — reviewability of references under section 256

The Court reviewed authorities (including Tehri Garhwal State, Seth Mathuradas, Emperor v. Kajori Mal, and Hungerford Investment Trust Ltd.) to determine whether an application for review or recalling of an opinion delivered under the reference jurisdiction (section 256 of the 1961 Act, corresponding to section 66 of the 1922 Act) is maintainable by invoking Order 47, rule 1 or section 151 CPC.
Relying on the cited authorities, the Court concluded that the High Court's jurisdiction under section 256 is an advisory or special jurisdiction and is not original, appellate, or revisional in the ordinary civil sense. The proceedings in such references are not governed by the Code of Civil Procedure in the same manner as ordinary civil litigation.
Consequently, the Court held there is no power of review conferred on the High Court under the Income-tax Act to revisit such opinions simply by invoking Order 47, rule 1 or section 151 CPC. While recognizing the Court's inherent jurisdiction exists for limited purposes (e.g., to correct clerical mistakes, restore a case dismissed in default on sufficient cause, or to address decisions rendered without due notice), the Court emphasized that those exceptional grounds are distinct from the grounds invoked in the present application.
The Court found that the grounds advanced in the present application did not qualify as the kind of special circumstances warranting exercise of inherent jurisdiction to review or recall its earlier opinion delivered under section 256.

Holding and Implications

Holding: The application seeking review or recalling of the Court's order dated 22 January 1987 is REJECTED.

Implications:

The Court's January 22, 1987 order remains undisturbed and stands as decided.
The Court reaffirmed that (i) the earlier Division Bench decision in I.T.R No. 370 of 1980 concerned different facts and did not conflict with the January 22, 1987 decision; and (ii) facts of the 1960-61 assessment supported the Court's findings that the Tribunal was incorrect on the point of taxable year for the impugned deposits and that there was a failure to disclose within the meaning of section 147(a) for assessment year 1960-61.
The Court held, consistent with the authorities cited, that opinions delivered by the High Court in reference proceedings under section 256 are not amenable to review by ordinary CPC review mechanisms, and that inherent jurisdiction to correct narrow procedural or clerical errors is not attracted by the present application. The decision emphasizes that no broader mechanism to review such opinions is available in the absence of express statutory provision or an appeal where that avenue exists.
No new precedent beyond the application of existing authorities on the non-reviewability of tax-reference opinions was established; the direct effect is dismissal of the applicant's request to recall or review the earlier order.

Disposition: For the reasons stated, the application is rejected.

Show all summary ...

R.K Gulati, J.:— This application has been filed under Order 47, rule 1 read with section 151, Code of Civil Procedure, seeking review or recalling of our order dated January 22, 1987, passed in I.T.R No. 1141 of 1977 (Additional Commissioner Of Income-Tax v. Hasmat Rai Raj Pal, [1987] 167 ITR 794) by which two questions referred by the Income-tax Appellate Tribunal under section 256(2) of the Income-tax Act, 1961 (hereinafter to be referred as “the Act”), were answered against the applicant, M/s. Hasmat Rai Raj Pal. The aforesaid reference related to the assessment year 1960-61.

2. The assertions made in this application are that against a consolidated order passed by the Income-tax Appellate Tribunal for the assessment years 1960-61 and 1961-62, the Revenue had sought two references under section 256(2) of the Act, one for each year. The reference relating to the assessment year 1961-62, being I.T.R No. 370 of 1980 was decided in the absence of the applicant but in its favour, by a Division Bench of this court, vide its order dated April 8, 1985 ([1985] UPTC 591). It was held in this reference that there was no failure or omission on the part of the assessee to disclose fully and truly all material facts necessary for completing the assessment for the assessment year 1961-62 and thus reassessment proceedings initiated for that year were bad. As the applicant was not aware of the aforesaid decision given in I.T.R No. 370 of 1980, it could not bring to our notice that decision which was in its favour when the matter relating to the assessment for the year 1960-61 was heard and decided by us, vide our order dated January 22, 1987. It is asserted that the decision given by us runs counter to the earlier decision and, therefore, our order requires a review or recalling thereof and should be disposed of afresh in terms of the order passed in I.T.R No. 370 of 1980.

3. We have heard learned counsel for the applicant and do not find any merit in this application.

4. There were a number of cash credits found recorded in the books of the assessee maintained for the assessment year 1961-62. Two items, out of such deposits, each amounting to Rs. 25,000, fell in the financial year relevant to the assessment year 1960-61. Notwithstanding that those two items of cash credits were recorded in the books of the assessee maintained for the assessment year 1961-62, the Income-tax Officer assessed those deposits as income of the assessee from undisclosed sources in the assessment year 1960-61, taking the financial year as the previous year. The remaining items of cash credits were brought to tax in the assessment year 1961-62. It may be noted that all items of cash credits assessed in the respective two years were taxed by taking reassessment proceedings with the aid of section 148 of the Act.

5. The Income-tax Appellate Tribunal, while deciding the appeal for the assessment year 1960-61, took the view that the two items of deposits taxed in that year were not liable to be sustained. It gave two reasons for it. Firstly, when action under section 148 was taken, the Indian Income-tax Act of 1922 had been repealed and thus the disputed deposits could be assessed only in accordance with the provisions of the Income-tax Act, 1961. It held, according to the provisions of the latter Act, that the disputed items, being unexplained deposits, which were found recorded in the books of the assessee could only be assessed in the assessment year 1961-62 taking the previous year as adopted by the assessee and on which it maintained its books of account. These could not be assessed taking the financial year as the previous year which was possible only under the provisions of the Indian Income-tax Act, 1922, which had no application in the present case.

6. The second finding recorded by the Tribunal was that there was no failure or omission on the part of the assessee to disclose fully and truly all material facts necessary for assessment for the assessment year 1960-61. It held that the disclosure of the disputed credits in proceedings for the assessment year 1961-62 absolved the assessee of its obligation to make full and true disclosure for the assessment year 1960-61.

7. Now, in I.T.R No. 370 of 1980 (1985 UPTC 591), the only question referred to this court was “whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that there was no failure on the part of the assessee to disclose fully and truly all the material necessary for the completion of the assessment for the assessment year 1961-62?” That was answered in the affirmative. The facts on which that question was referred were different from the facts which were involved in the assessment year 1960-61.

8. In the assessment year 1960-61 with which we were concerned, two questions were referred which have been dealt with by us in detail in our order dated January 22, 1987. We have held that the Income-tax Appellate Tribunal was not right in entertaining the view that the impugned deposits were taxable in the assessment year 1961-62. This question was not at all the subject-matter of consideration in I.T.R No. 370 of 1980.

9. Regarding the second question, whether there was failure or omission on the part of the assessee to disclose all material facts, we have held that there was failure and omission, on the part of the assessee within the meaning of section 147(a) of the Act. According to the assessee's own case, it had made disclosure of cash deposits only during the course of assessment proceedings for the assessment year 1961-62. No disclosure of any nature was made in the proceedings relating to the assessment year 1960-61. We have taken the view that any disclosure made in the assessment year 1961-62, on the facts of the present case, did not absolve the assessee of its obligation to make full and true disclosure of the disputed amounts in the assessment proceedings for the assessment year 1960-61. This question also did not arise for consideration in 1961-62 in the manner it has been decided by us. In our view, it is totally incorrect to suggest that our judgment dated January 22, 1987, is in conflict with the decision rendered in I.T.R No. 370 of 1980.

10. That apart, the kind of application now filed by the applicant is wholly misconceived and untenable.

11. In CIT v. Tehri Garhwal State, [1934] 2 ITR 1, a case decided by the Privy. Council, the facts were that Tehri Garhwal State (for brief “the State”) had been subjected to tax by the income-tax authorities under section 3 of the Indian Income-tax Act, 1922, in respect of income in the year 1926-27. This liability was contested by the State and ultimately the matter came to this court by way of reference under section 66(2) of that Act (which corresponds to section 256(2) of the Income-tax Act, 1961). By the time the judgment had been delivered by this court, it had apparently been ascertained that the State had in fact no taxable income in the year 1926-27. Out of the tax liability determined against the State, a sum of Rs. 25,000 had been paid by the State before the reference leaving a balance of Rs. 18,294-14-0 to be paid. The State claimed the return of Rs. 25,000 on the ground that it had no taxable income in the year 1926-27 while the Revenue's case was that it was liable to payment of the balance amount. Thereupon, a second reference was made to the High Court for its opinion by the Commissioner on his own motion on the following two questions (at p. 5):

“(1) Does the judgment delivered by the High Court in Miscellaneous Case No. 671 of 1929 on November 21, 1929 (Ramprasad, In re, AIR 1930 All 389), operate of its own force to require the Income-tax Department to refund the sum of Rs. 25,000 paid by the Tehri Darbar, and to refrain from collecting the balance of Rs. 18,294-14-0?

(2) if the answer to question (1) is in the negative—

(a) Is the Tehri Darbar liable to pay the balance of Rs. 18,294-14-0?

(b) Is the Tehri Darbar entitled to a refund of the amount already paid, i.e, Rs. 25,000?”

12. The reference was heard by the same judges (who had decided the previous reference) who answered the first question in the affirmative and held that the State was not liable to pay the balance of Rs. 18,294-14-0 and that it was entitled to refund of Rs. 25,000 already paid. Against that decision, the matter was taken to the Privy Council at the instance of the Revenue. The Privy Council accepted the contention of the Revenue and pointed out that they might be prepared to endorse the view taken by this court regarding the true meaning of section 3 of the Act of 1922. The former judgment rendered by the High Court had not been appealed against and whether right or wrong must govern the relations of the parties in the particular case. The Privy Council further observed (p. 8):

“It is to be noticed that under section 66(5) of the Act of 1922, the judgment of the High Court is to contain the grounds upon which the decision is founded: that a copy of the judgment is to be sent to the Commissioner, and that the case is to be disposed of by the income-tax authorities conformably to such judgment. Under this provision, their Lordships think that the judgment as a whole is binding between the parties in the particular case. If the judgment expounded a wrong construction of the Act, as the appellant now contends, an appeal against it was open, and there is no other procedure by which it could be corrected.

13. In Seth Mathuradas v. CIT, [1940] 8 ITR 412, a Division Bench of the Nagpur High Court held that an application for a review of the judgment passed in a reference under section 66 of the Indian Income-tax Act, 1922, is not maintainable, for, a Tribunal which determines the questions referred under that section does not operate as a civil court so as to attract the provisions of the Civil Procedure Code.

14. In Emperor v. Kajori Mal Kalyan Das…Opposite Party., [1930] 4 ITC 60 (All), it has been held that for the reason that this kind of an opinion is not a decree or order, there could be no review of such a judgment.

15. The Calcutta High Court in CIT v. Hungerford Investment Trust Ltd., [1935] 3 ITR 188 have also laid down the same proposition where it was held that the court when acting under the powers conferred by section 66 of the Indian Income-tax Act, 1922, was exercising a special jurisdiction and that its proceedings were not governed by the Code of Civil Procedure and that no review lay. We are of the view that the jurisdiction, which the High Court exercises under section 256 of the Income-tax Act, 1961, is only an advisory jurisdiction and not that of original, appellate or revisional jurisdiction. Under the Income-tax Act, there is no power of review conferred on the High Court and we are not inclined to hold that in the absence of such specific conferment of such power, this court can exercise the power of review or of recalling its previous judgment purporting to exercise power under Order 47, rule 1, or section 151, CPC. We are conscious of the fact that the High Court may exercise its inherent jurisdiction in order to do justice in special circumstances, such as to rectify a mistake of clerical nature which had crept in by inadvertence or restore a case when dismissed in default on the cause being shown reasonable or even when the case was decided on merits without due notice to parties or to a party concerned on account of the mistake of the High Court office. The exercise of such power is different from those conferred under Order 47, rule 1 or under section 151, CPC. The grounds on which the present application has been moved seeking review or recalling of our order dated January 22, 1987, are not of the type on which any review can be sought invoking the inherent jurisdiction of this court.

16. For what has been stated above, this application is rejected.