Birla Cotton, Spinning And Weaving Mills Ltd. v. Commissioner Of Income-Tax, Rajasthan.

S. Ranganathan, J.:— There were two companies carrying on business in Jaipur known as M/s. Merchandise and Stores Ltd. and M/s. Rajputana General Dealers Ltd. By an order dated April 22, 1960, the Rajasthan High Court sanctioned a scheme of arrangement bringing about the amalgamation of the above two companies with the Birla Cotton Spinning and Weaving Mills Ltd., Delhi (hereinafter referred to as “the Birla company”). The clauses of the scheme were appended as a schedule to the order of the High Court which provided, inter alia, that all legal proceedings by or against the transferor companies could be continued by or against the Birla company and that the transferor companies would without winding up stand dissolved with effect from the date determined by the court. Since the Birla company had its registered office in Delhi within the then jurisdiction of the Punjab High Court, the above scheme had also to be approved by the Punjab High Court and the sanction of the Punjab High Court to the scheme was granted on May 20, 1960. In this order, it was mentioned, inter alia, that the transferee-company, i.e, the Birla company should within a month from the date of the order cause a certified copy thereof to be delivered to the Registrar of Companies, Rajasthan, for registration and that subject to the orders of the Rajasthan High Court in this behalf on such certified copy being delivered the transferor companies should stand dissolved. Thus, the result of these two orders of the two High Courts was that with effect from some date in June, 1960, the two amalgamating companies stood dissolved without a winding up.

2. For the assessment year 1960-61, M/s. Merchandise and Stores Ltd. had been assessed to income-tax on a total income of Rs. 1,45,143 and the Rajputana General Dealers Ltd. had been assessed to income-tax on a total income of Rs. 1,14,417. These assessments appear to have been made some time in 1961, i.e, after the companies had been dissolved by the orders of the courts. However, we are not concerned with the question of the validity of these assessments. The ITO found that the two companies had not declared any dividends and he was of opinion that proceedings had to be initiated against these companies under s. 23A of the Indian I.T Act, 1922, for the assessment year 1960-61. He, therefore, proceeded to issue notices in the names of the two companies and in reply thereto a chartered accountant appeared and objected to the proceedings on the merits. However, after hearing the representative who appeared, the ITO passed an order dated March 2, 1965, in the case of Merchandise and Stores Ltd. demanding an additional super-tax of Rs. 40,135 under s. 23A. On the same date, he similarly determined the additional super-tax payable by the other company, i.e, M/s. Rajputana General Dealers Ltd. at Rs. 31,465. In both the orders, the names of the assessees are given as M/s. Merchandise and Stores Ltd. and M/s. Rajputana General Dealers Ltd., respectively. These orders were passed by the ITO, Company Circle, Jaipur.

3. There were two appeals preferred before the AAC. The names of the appellants as set out in the order of the AAC are the names of the two transferor-companies and their address is given as c/o M/s. The Birla Cotton Spinning & Weaving Mills Ltd., Birla Lines, Kamla Nagan, Delhi. The principal ground of objection raised in the appeals was that the orders passed by the ITO under s. 23A were not tenable in law because they had been passed in the names of the companies which had since been amalgamated with the Birla company and had ceased to be in existence long ago. The AAC, however, rejected this contention. He found that the notices issued in the names of the companies had been duly responded to and that no objections had been taken before the ITO to the initiation of the proceedings. Moreover, the companies had been in existence throughout the previous year relevant to the assessment year 1960-61 and so the AAC was of opinion that the orders passed by the ITO were in order. On the merits, the AAC confirmed the levy of additional super-tax and dismissed the appeals.

4. There were two appeals before the Appellate Tribunal. The appellants are described in the order of the Tribunal as the two transferor-companies through the Birla company. The principal contention urged before the Tribunal was that the orders made against non-existent companies under s. 23A were invalid. It appears from the order of the Tribunal that the notices under s. 23A which had been issued by the ITO in the names of the transferor-companies had been served on M/s. Birla Cotton Spinning and Weaving Mills Ltd. and that the chartered accountant who appeared before the ITO and the AAC was the authorised representative of the Birla company. The Appellate Tribunal took the view that the effect of the amalgamation order passed by the High Courts was that the transferor-companies merely merged with the transferee-company and were not wound up as a result of the amalgamation. The transferee-company was in law held to represent the estate of the transferor-companies and to have undertaken to discharge all the liabilities and obligations of the transferor-companies. It was, therefore, held that the mere mention of the names of the transferor-companies without mentioning the name of the Birla company as their legal representative was a mere irregularity. The Tribunal held that in fact the proceedings had been initiated and continued against the Birla company and, therefore, the proceedings were valid in view of cl. 6 of the scheme of amalgamation. The Tribunal also made a reference to the provisions of s. 26 of the Indian I.T Act, 1922. On behalf of the appellants, it had been contended that the Birla company could not be said to be a successor to either of the amalgamating companies. The Tribunal disposed of this contention by observing that action under s. 23A had not been taken on the basis that the Birla company was a successor to the transferor-companies within the meaning of s. 26(2). The Birla company was the legal representative of the transferor-companies and the orders passed by the ITO were, therefore, held to be valid.

5. From the above order of the Tribunal, a reference to this court was sought under s. 66(1) of the Indian I.T Act, 1922. Since the Tribunal had disposed of two appeals, there had to be two reference applications. These reference applications, however, were purported to have been filed by the Birla company. The Tribunal observed that ordinarily it would have made two separate references but that a common reference would be convenient inasmuch as the facts relating to the two applications were not only common but were also inter-connected. In this way, a consolidated reference has been made by the Tribunal in the two reference applications before it. The applicant has been described as the Birla company and the questions of law which have been referred for our decision are as follows:

“1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the action of the Income-tax Officer in initiating proceedings under section 23A of the Indian Income-tax Act, 1922, by his notices dated 15th December, 1964, and 15th January, 1965, in the names of Merchandise and Stores Ltd. and Rajputana General Dealers Ltd. and making order under the said section in their names was valid?

2. Whether the charitable trusts are persons within the meaning of Explanation 1(b)(iii) of section 23A of the Indian Income-tax Act, 1922?

3. Whether, on the facts and in the circumstances of the case the Tribunal was right in holding that the Birla Cotton Spinning and Weaving Mills Ltd. are liable to pay super-tax levied under section 23A as the legal representatives of Merchandise and Stores Ltd. and Rajputana General Dealers Ltd.?”

6. Not satisfied with the questions which had been referred by the Tribunal, this court was also moved by the Birla company under s. 66(2) of the Act. This was by C.M 910/71 which was accompanied by C.M 909/71 for condonation of delay. In the first instance, these petitions were dismissed for default. But subsequently they were revived by the order passed in CM. 1009/71. The Bench which heard the CM. directed that if at the time of the hearing of the petition it became necessary to reframe the questions, necessary orders would be made but that till then it was not necessary to issue any direction to the respondent in the matter. In other words, the court appears to have thought that it may be sufficient to reframe the questions already framed and that a direction to the Tribunal to refer further questions might not be necessary but left the matter to be decided at the time of hearing of I.T.R 8/71. Thus, we have three matters before us the two references made by the Tribunal but consolidated as one and the application of the Birla company under s. 66(2) seeking a direction to the Tribunal to refer questions for consideration of this court.

7. Shri S.T Desai, learned counsel for the applicant, contended that as a result of the orders of the High Courts sanctioning the amalgamation of the two transferor-companies, they had been dissolved. Dissolution puts an end to the very existence of the companies and any notice of assessment or other proceedings in respect of such non-existent companies would be a nullity inasmuch as the legislature had not expressly provided for such a contingency. He pointed out that in the case of individuals, firms and associations of persons and joint Hindu families, the Act contained specific provisions enabling assessment on the legal representatives of the deceased individual, the erstwhile partners or members of a dissolved partnership or association of persons and on the erstwhile members of a joint Hindu family which had been partitioned, but that no such provision had been enacted to deal with the case of a dissolved company. He contended that cl. (6) of the scheme of amalgamation referred to by the Tribunal only protected action which had already been initiated before the date of dissolution against the transferor-companies but that since no notices under s. 23A had been issued against the transferor-companies before the date of amalgamation, this clause did not save the proceedings in the present case.

8. Shri M.L Verma, learned counsel for the department, raised a preliminary objection that the present reference to this court is incompetent and that we should, therefore, decline to answer the question referred to us and return the reference unanswered to the Tribunal for such action as may be considered appropriate. His plea that the reference is incompetent proceeds on the following lines. He argues that if, as contended by Shri S.T Desai, the companies had been dissolved and ceased to exist and, therefore, the orders passed against the said companies were nullities, then, by the same logic the appeals preferred against the orders under s. 23A passed by the ITO were nullities and not existent in law. The appeals were filed by the non-existing Companies and so could not be taken cognizance of by the AAC. Likewise there were no valid or proper appeals before the Tribunal. Thus the appeals before the AAC and the Tribunal being invalid and incompetent, no question of any reference to this court can at all arise. May be the Birla company had a grievance in that it was called upon to pay the tax demand raised under the impugned orders but the appropriate remedy of the Birla company in such a case was to take steps to have the orders quashed in appropriate proceedings. But so long as the applicant chooses to contend that these orders had been passed not against itself but against the transferor-companies and so invalid, the appeals preferred were totally incompetent and consequently no valid reference can lie to any High Court from the orders passed by the Tribunal on such an incompetent appeal. On the other hand, Shri Verma contends, if according to the applicant the assessments though made in the names of non-existent companies had really been made against the Birla company, then the reference would be maintainable and he would seek to sustain the assessment orders on the basis suggested by the Tribunal, viz., that the Birla company as a legal representative of the tranferor-companies had been properly assessed under s. 23A(1). A second line of reasoning on the basis of which also the competence of the reference is challenged by Shri Verma is to be found in a decision of this court (to which one of us was a party) in Seth Banarsi Dass Gupta v. CIT, [1978] 113 ITR 817. He points out that the assessees are the two transferor-companies. These companies had their registered office and carried on their business in Jaipur. They were within the jurisdiction of the ITO, Jaipur, who passed the orders under s. 23A. The appeals against the orders had been preferred to, and disposed of by the AAC, Jaipur. Since the assessees and the ITO were within the jurisdiction of the Rajasthan High Court, any reference in the matter should be made to the Rajasthan High Court and not to the Delhi High Court. The mere circumstance that at the relevant time even appeals falling within the jurisdiction of the Rajasthan High Court were disposed of by the Delhi Bench of the Tribunal would not, he contended, confer jurisdiction on the Delhi High Court to deal with this reference.

9. It is necessary to deal with the preliminary objections raised by Shri Verma because they go to the very root of the matter and challenge the validity of the reference which has already been made and the reference which the applicant is seeking under s. 66(2) of the Act.

10. After careful consideration we have come to the conclusion that both the objections raised by Shri Verma should prevail and that we should decline to answer this reference on the ground that this court has no juris diction to entertain the same.

11. One of the objections of Shri Verma, as already mentioned, is based on the decision of this court (to which one of us was a party) reported as Seth Banarsi Dass Gupta v. CIT, [1978] 113 ITR 817. In that case, the assessee was a HUF, which resided and carried on business in Meerut in U.P Assessment orders were passed by the ITO at Meerut and appeals there from were heard by the AAC at Meerut. Further appeals preferred by the assessee were disposed of by the Delhi Bench of the Appellate Tribunal and at the request of the assessee a reference was made by the Tribunal to this court. When the reference came on for hearing an objection was raised on behalf of the Commissioner that this court had no jurisdiction to enter tain the reference. After examining the position under the I.T Act and the Income-tax Appellate Tribunal Rules and also considering the decision of the Madras High Court in CIT v. Sivaramakrishna Iyer, [1968] 70 ITR 860, this court returned the reference unanswered on the ground that it had no jurisdiction to entertain the same. The court observed (headnote of 113 ITR):

“The place of location of the Bench of the Tribunal which hears and determines the appeal did not provide a basis for the determination of the jurisdiction of the High Court to which the case had to be stated. The basis adopted (in the Tribunal's standing orders) for determining the juris diction of the Bench of the Tribunal was more appropriate than the basis adopted by section 64 of the Indian Income-tax Act, 1922, for determining the jurisdiction of an Income-tax Officer. Under the Explanation to the standing orders the basis of the location of the assessing officer, viz., the officer making the assessment, had been adopted. In this case, the appeal before the Tribunal had arisen out of assessment orders of the Income-tax Officer at Meerut which was in the State of Uttar Pradesh and, therefore, it was the Allahabad High Court to which the reference should have been made.

When a Bench of the Appellate Tribunal hears and determines an appeal as an appeal from a particular State, it would be quite appropriate for the Bench to state the case to the High Court of the State from which the appeal came.”

12. We agree with Shri Verma that this decision fully covers the present cases. In this case, the assessment orders were passed by the ITO at Jaipur and the appeals were also disposed of by the AAC at Jaipur. The mere accident that when the matters came before the Tribunal the appeals had to be heard by the Delhi Bench of the Income-tax Appellate Tribunal because at that time there was no Bench of the Tribunal at Jaipur, cannot vest this court with jurisdiction to hear references in the matters coming from the State of Rajasthan. Section 66(8) of the Indian I.T Act, 1922, as well as s. 269 of the I.T Act, 1961, define the jurisdiction of the High Court in relation to the State to which the matters pertain and as interpreted by this court in the earlier decision above referred to the Rajasthan High Court is the appropriate High Court to which the reference in this case should have been made. We are, therefore, of opinion that the reference to this court has to be returned unanswered to the Tribunal.

13. Shri S.T Desai, learned counsel for the Birla company, however, contends that in the present case this court has the jurisdiction to dispose of the reference because the applications for reference had been made by the Birla company which is located in Delhi and it is on these applications that the case has been referred to this court. We are unable to accept this contention. The present reference arose out of orders under s. 23A of the Indian I. T, Act, 1922, passed against the two Jaipur companies. Under section 30 of the Act, it was for these companies which were the assessees if they objected to the order under s. 23A to prefer appeals to the AAC. From the documents filed by Shri S.T Desai along with an affidavit to clarify the position, we see that, in fact, the memo of appeals describe the appeals as filed by the Jaipur companies, though the memoranda of appeal were signed by a representative of the Birla company. Again the m???mos of appeal from the orders passed by the AAC describe the Jaipur companies as the appellants, though, again, the memoranda of appeal had to be signed, since the companies were non-existent, by somebody on behalf of the Birla company. These appeals were registered and the appellants were described as the Jaipur companies. Suddenly at the stage of the proceedings under section 256(1) of the I.T Act, the application appears to have been made by the Birla company. The Tribunal, without adverting to the difference in the names of the applicant and the appellants seems to have thought that the Birla company was the assessee and that it had preferred two reference applications. These were accordingly consolidated and a reference made to this court. But what we have to determine for the purposes of the reference is not the question as to who filed the reference application but the question as to who the assessees in this case were. A perusal of the orders of the ITO leaves no doubt that the orders under, section 23A had been passed against the two Jaipur companies. In fact that is also the case of the Birla company and that is the ground put forward by it to challenge the validity of the orders under s. 23A. There is, therefore, no manner of doubt that the proceedings initiated by the ITO were against the Jaipur companies. Moreover, even assuming for purposes of argument (though that would be inconsistent with the claim of the Birla company throughout) that the assessments had been made on the Birla company as some sort of representative for the Jaipur companies, still according to the principle laid down in the case of Seth Banarsi Dass Gupta, [1978] 113 ITR 817. (Delhi), the court to which reference should be made would be the court having jurisdiction over the territory in which the office of the ITO was situate. We are, therefore, unable to find any point of distinction between the present case and the case already decided by this court in Seth Banarsi Dass Gupta's case, [1978] 113 ITR 817 (Delhi). We are, therefore, constrained to accept this preliminary objection raised by Shri Verma.

14. In our opinion, the second line of objection put forward by Shri Verma is also equally tenable. As we have already pointed out, the reference arises out of orders passed in this case against the two Jaipur companies. The case of the Birla company is (and, in our opinion, that is correct) that these Jaipur companies which had got dissolved as a result of the orders of the two High Courts had no longer any existence in the eye of law. There fore, the position would be that the orders passsed under section 23A(1) by the ITO purportedly against these companies were invalid orders of assess ment. However, the validity of the orders would have no effect on these companies since they did not exist at the time of the orders. In a case, where an assessee exists and the order of assessment is null and void for some reason, the assessee would be aggrieved and would and should file an appeal to get rid of the invalid order. But where the assessee is non-exis tent and consequently can have no grievance against the assessment order there is no question of its preferring any appeals against the said order. The appeals preferred before the AAC in the first instance and thereafter before the Appellate Tribunal purportedly on behalf of these companies were manifestly incompetent appeals. It does not need much argument to say that an appeal preferred by a non-existing person must be treated as non est. In other words, there were no appeals at all, in the eye of law, before the AAC or before the Appellate Tribunal. Consequently, there could be no competent reference to this court out of the orders passed by the Tribunal on such appeals.

15. In our opinion, this position is clear from a long line of judicial decisions. In CIT v. Mtt. Ar. S. Ar. Arunachalam Chettiar, [1953] 23 ITR 180 (SC) a reference was made to the High Court by the Income-tax Appellate Tribunal from an order passed by it. It was discovered at the stage of the final hearing of the reference that the order of the Tribunal had been passed not on an appeal under s. 33 but on a miscellaneous application. The High Court as well as the Supreme Court held that the reference was not maintainable. The Supreme Court held (head note):

“The jurisdiction given to the High Court under sub-section (2) of section 66 is conditional on an application under sub-section (1) being refused by the Appellate Tribunal. This clearly presupposes that the application under sub-section (1) was otherwise a valid application. If, therefore, an application under sub-section. (1) was not well-founded in that there was no order which could properly be said to be an order under sub-section (4) of section 33 then the refusal of the Appellate Tribunal to state a case on such misconceived application on the ground that no question of law arises will not authorise the High Court, on an application under sub-section (2) of section 66, to direct the Tribunal to state a case. The jurisdiction of the Tribunal and of the High Court is conditional on there being an order by the Appellate Tribunal which may be said to be one under section 33(4) and the question of law arising out of such an order.”

16. This principle has been applied to cases where a reference is sought for against an order passed under s. 35 of the Indian I.T Act, 1922. It had been held in CIT v. O. Rm. M. Sm. SV. Sevugan, [1948] 16 ITR 59 (Mad) that from an order passed under s. 35 by the Tribunal there could be no valid reference. This was approved by the Supreme Court in Arunachalam Chettiar's case, [1953] 23 ITR 180. Similarly, in Pt. Deo Sharma v. CIT, [1953] 23 ITR 226 (All) a reference against an order of the Appellate Tribunal was held incompetent because the order of the Tribunal had been passed on appeals which had been preferred against an order passed by the ITO under s. 18A(6) of the Indian I.T Act, 1922, against which no appeal could be preferred. The court held that both the AAC as well as the Appellate Tribunal had passed orders which were wholly without jurisdiction and that the order of the Appellate Tribunal could not be deemed to be an order under s. 33. In CIT v. Vellingiri Gounder and Brothers, [1953] 24 ITR 166 (Mad) the ITO had passed an order under s. 35 enhancing the assessable income. The AAC had held that an appeal was incompetent. But on further appeal the Tribunal held that the appeal to the AAC was competent and remanded the case. However, the High Court came to the conclusion on a reference made to it that no appeal lay to the AAC against the order of the ITO under s. 35 and, therefore, no appeal lay to the Appellate Tribunal against the order of the AAC. Therefore, the order of the Tribunal was not an order under section 33(4) and, therefore, the reference under section 66(1) was incompetent. A similar objection to the competence of a reference was upheld in M.M.P.L.S Ramaswami Chettiar v. CIT, [1956] 30 ITR 281 (Mad) where the Tribunal had disposed of an appeal which had been preferred against an order passed by the ITO under section 25(4) of the Indian I.T Act, 1922. Here again the High Court traced the genesis of the original order and pointed out that since the order passed by the ITO was one under s. 25(4) against which an appeal was not competent there was no valid appeal before the AAC and there was no valid appeal before the Appellate Tribunal and consequently the reference to the High Court was also incompetent.

17. The above principles have also been applied recently by this court and the Madras High Court. In Vr. C. Rm. Adaikkappa Chettiar v. CIT, [1970] 78 ITR 285 (Mad) the ITO purported to rectify an assessment under section 154 of the I.T Act, 1961. But the High Court came to the conclusion that the jurisdiction of the officer to rectify the assessment had to be traced to section 35 of the Indian I.T Act though he, had purported to act under section 154 of the I.T Act, 1961. It was, therefore, held that since no appeal lay under the 1922 Act against an order under s. 35 the appeals to the AAC and the Tribunal as well as the consequential reference to the High Court were incompetent and hence the reference had to be returned unanswered. This decision was followed by the Delhi High Court in CIT v. National Small Industries Corporation Ltd., [1973] 91 ITR 579 in similar circumstances.

18. No doubt, the above cases were concerned with the question whether an order passed by the ITO or AAC was an appealable order or not. But if an order of the Tribunal on an appeal which did not lie to it cannot give-rise to a reference, equally an appeal preferred by a non-existent or unauthorised person can confer no better rights. The ratio of these decisions will, therefore, we think, apply to this case also squarely.

19. A survey of the above decisions clearly shows that while dealing with a reference under the I.T Act the High Court has to be satisfied that there is a competent reference before it. In the first place the High Court has to satisfy itself that under the Act the reference lies to that particular court and not to some other High Court. Again it has to satisfy itself that the reference arises out of an order passed on a valid and competent appeal before the AAC and the Tribunal. If the appeals before these authorities were not valid or proper appeals then there would be no jurisdiction in the Tribunal to refer the matter to the High Court nor can the High Court entertain any such reference.

20. In their Commentary on the Income Tax Act, Vol. I, 7th Edn., at page 1147, Kanga and Palkhivala suggest that the above line of decision may need reconsideration in view of certain observations in the later pronouncement of the Supreme Court in Mela Ram & Sons v. Commissioner Of Income Tax, Punjab, [1956] 29 ITR 607 to the effect that an appeal is no less an appeal because it is irregular or competent. In Mela Ram's case the Supreme Court was concerned with the question whether an order passed by an AAC refusing to entertain an appeal on the ground that it was out of time would be an order on the appeal under s. 31 of the i.t act and hence appealable or not. The Supreme Court came to the conclusion that such an order should be treated as an order passed on the appeal. We find that the Supreme Court has, in Mela Ram's case, [1956] 29 ITR 607 (SC) considered the earlier decision in Arunachalam Chettiar's case, [1953] 23 ITR 180 (SC) but has not disapproved or qualified it in any manner. Further, as pointed out above, Arunachalam Chettiar's case has been consistently applied to hold that there can be no valid reference where there is no valid or proper order of the Tribunal under s. 33. In this the appeals in the present case were invalid and incompetent, the present reference is also equally incompetent.

21. Shri Desai, learned counsel for the petitioner, again sought to save the reference by contending that the appeals should be considered as having been preferred by the Birla company. In our opinion, this does not improve the position. The Birla company has no doubt taken inside its fold the two Jaipur companies which have since been dissolved. But the case of the Birla company is that it has no liability towards the tax obligations of the Jaipur companies in respect of income-tax. We agree that the orders under s. 23A(1) could not be passed against the Birla company. It cannot be described as the legal representative of the two defunct companies for that concept is appropriate only in the case of an individual and not in the case of a company or an artificial entity. The only ground perhaps on which the Birla company could be made liable would be on the basis of s. 26(2) of the Indian I.T Act, 1922. But here again, Shri Desai rightly points out, the application of this section has been ruled out by the Appellate Tribunal and is no longer in issue. The third possibility is that there is some liability in the Birla company on account of the orders by which the two companies were amalgamated. But, again, according to the Birla company, cl. (6) of the scheme protected only pending proceedings and as rightly pointed out by Shri Desai there were no such proceedings under s. 23A pending against the Jaipur companies on the date when they got snuffed out of existence. If that is so (and this is what the company itself argues in the reference) then, qua the appeals which were filed before the AAC and the Appellate Tribunal, the Birla company was a total stranger. Shri Desai says that the department has collected the tax from the Birla company and the Birla company has paid the same under protest pending the appeals. But, as rightly pointed out by Shri Verma, this cannot confer on the Birla company any locus standi to maintain the appeals against the orders passed by the ITO. If the ITO had demanded the tax on the basis of the orders passed from the Birla company without any jurisdiction, the Birla company could have got the demands quashed by filing a writ petition and seeking a writ of certiorari or prohibition. But when the Birla company was not the assessee and so long as there is no provision under which it could be held responsible for the liabilities of the erstwhile companies, it had no standing to prefer any appeals against the orders passed against the defunct companies. Thus, in either view of the matter, the appeals which were presented in this case before the AAC as well as the Appellate Tribunal were invalid appeals. In one view they were presented by non-existent entities and were, therefore, non est. In the other view, they were preferred by a third party which on its own showing, had no connection with the said orders and, therefore, had no locus standi to maintain those appeals.

22. It was then argued by Shri Desai that though the appeals might have been incompetent, the jurisdiction of this court cannot be challenged at this belated stage on the basis of territoriality. He contends that it is permissible for the concerned parties to waive the lack of territorial jurisdiction. In the present case, he points out, the department did not object to the reference made under s. 66(1) to this court. Moreover, so far as petition under s. 66(2) is concerned, the delay in filing thereof had been condoned after hearing the departmental representative and even at the stage of the petition under s. 66(2), this objection had not been taken. We do not, however, think that this contention can be accepted. The High Courts under the I.T Act exercise advisory jurisdiction and the question as to which High Court can tender the advice to the Tribunal is specified in the Act itself. If the test mentioned by the Act is not fulfilled and the reference goes to a wrong court, that court cannot get seized of jurisdiction by the consent of the parties. In fact, even in the case of Seth Banarsi Dass Gupta, [1978] 113 ITR 817 (Delhi) the objection to the jurisdiction was taken only at the time of final hearing. That apart, there is no question of waiver in this case because it can hardly be said that the department consciously admitted the jurisdiction of this court to hear the reference. All that can be said is that either the assessee or the department could have pointed out at the time when the statement of case was being finalised that the reference should be made not to the Delhi High Court but to the Rajasthan High Court. From the mere failure of the department to do this it cannot be inferred that it had waived its rights to object to the jurisdiction of the High Court when the reference came up for hearing. So far as the application under s. 66(2) is concerned, it is coming up for hearing after notice and the department is entitled to put forward the objection regarding jurisdiction.

23. Shri Desai then submitted that several years had (passed since this reference was made and that at this belated stage we should not return the reference unanswered or as incompetent. Even in the case of Seth Banarsi Dass Gupta, [1978] 113 ITR 817 (Delhi), there was a lapse of about eight years before the reference was heard. Where it is a question of inherent lack of jurisdiction due to a statutory provision, the question of delay becomes immaterial and that alone cannot be a ground for this court assuming to itself a jurisdiction which it does not possess. That apart, in the present case, the reference will not be returned by us to the Tribunal unanswered for presentation to the proper court but will be rejected as incompetent for the other reason which we have discussed earlier, namely, on the ground that, there having been no valid and competent appeals before the AAC and the Appellate Tribunal under ss. 30 and 33 of the Act, there can be no valid reference to this court.

24. We would like to add, before we conclude, that Shri Desai's plea that in equity at least the reference should not be rejected on a technical ground after the lapse of so many years, is singularly inapposite in this case. The points raised by the applicant are also, in a sense, technical points. Though an assessee like the Birla company could not have been unaware of the defects in the notices issued by the ITO to the defunct companies, the applicant did not raise any objections before the ITO to the validity of the proceedings. It is interesting to notice that the proceedings under s. 23A in this case were in respect of assessment year 1960-61 and had been initiated early in 1965. At that time, the decision of the Gujarat High Court in Navanagar Transport's case, [1964] 54 ITR 271 (which was subsequently reversed by the Supreme Court in [1967] 63 ITR 663—M.M Parikh, ITO v. Navanagar Transport and Industries Ltd.) held the field. It was to the effect that an order under s. 23A was an order of assessment to which the four-year period of limitation would apply. It was, therefore, greatly to the advantage of the assessee to keep silent regarding the defects in procedure and to permit the defective proceedings to be completed and a defective order passed. To have raised an objection at that stage would have put the ITO on guard and have given him a chance to set matters right. It seems to us that this perhaps explained why the assessee remained silent until the four-year period was over and why the objections to the validity of the proceedings were raised only at the stage of appeal before the AAC. In these circumstances, the rejection of the reference even on a “technical ground” warranted by law seems to us to be justified on equitable considerations as well.

25. For the above reasons, we accept the preliminary objections raised on behalf of the department and return the reference unanswered as incompetent. We make no order as to costs.

D.R Khanna, J.:— I concur in the overall conclusion arrived at by my learned brother that the reference should be returned unanswered as incompetent. As brought out by my learned brother and as borne out from the order of the Tribunal, there can hardly be any dispute that the provisions of s. 23A of the Indian I.T Act, 1922, were squarely applicable to the present cases. Both the Merchandise and Stores Ltd. and the Rajputana General Dealers Ltd. were companies in which the public was not interested and the shares of the two companies carrying more???than 50% voting power were held by four persons. Their shares were not freely transferable nor were ever the subject-matter of dealings at any recognised stock exchange in India. They were primarily investment companies. The AAC has also held that these companies were throughout in existence during the previous year relevant to assessment year 1960-61. The companies, however, did not distribute their profits, which were quite substantial, as dividends in terms of s. 23A. They were, therefore, liable to pay additional super-tax at the rate of 50%.

26. When the ITO had recourse to the provisions contained in s. 23A of the Act notices were issued in the names of the two companies. They had been in the meanwhile, under the scheme of amalgamation sanctioned by the Rajasthan High Court, merged with the Birla Cotton, Spinning and Weaving Mills Ltd. (hereinafter referred to as “the transferee-company”). The transferee-company thereby undertook to pay, satisfy, discharge, perform and fulfil all liabilities and obligations of whatever kind of the said two companies. Those two companies without being wound up were to stand dissolved from the date as was to be determined by the court in the order approving the scheme.

27. The transferee-company accepted those notices issued in the names of those two companies under s. 23A of the Act and pursued those proceedings. It was at no stage then contended that the notices were improper or that they should have been directed in its name instead of the said two companies.

28. Later when the ITO had made orders under s. 23A, directing the levy of additional super-tax at the rate of 50% of the distributable profits, appeals before the AAC were filed in the names of those two companies, though their addresses were given as of the Birla Cotton, Spinning and Weaving Mills Ltd. It was then for the first time sought to be raised that the orders of the ITO were not tenable in law because they had been made in the names of the two companies which had since been amalgamated with the Birla Cotton, Spinning and Weaving Mills Ltd. This, however, did not prevail as the AAC found that no such objection was taken before the ITO and that in any case the Birla Cotton, Spinning and Weaving Mills Ltd., had responded to those notices on behalf of the two companies and conducted proceedings on merits. Reliance in this respect was placed upon a decision of the Allahabad High Court in the case of Ramchand & Sons Sugar Mills P. Ltd. v. CIT, [1970] 75 ITR 428.

29. In appeals which were later filed before the Tribunal, again the appellants described were the said two companies, though it was mentioned “through Birla Cotton, Spinning and Weaving Mills Ltd.” In other words, the Birla Cotton, Spinning and Weaving Mills Ltd., was still treating and adopting the said two companies as the appellants. The Tribunal too did not approve of the said new plea and held that there was a substantial compliance of the requirement of issue of notices before the making of the orders under s. 23A and no prejudice, in any manner, had been caused. It was next found that the effect of the amalgamation order was that the two transferee-companies did not wind up but merely merged with the transferee-company and the latter started representing and embodying in itself the former two companies as well, and was bound to discharge and fulfil all the liabilities and the obligations of the transferor-companies. It was further held that the mere mention of the transferor-companies without mentioning the name of the Birla Cotton, Spinning and Weaving Mills Ltd., as legal representative, was merely an irregularity and did not vitiate the proceedings nor it brought about any illegality therein inasmuch as both the parties to the proceedings were fully aware of the nature and the scope of the proceedings, the obligations of the parties under s. 23A and had their full say in the matter.

30. With this state of affairs and the course of conduct displayed by the transferee-company before the ITO, it prima facie perhaps could be said that the company could not have been allowed to raise the new plea before the AAC and the Tribunal that the orders under s. 23A were vitiated. Rather had they been raised before the ITO he could have made amends. The Supreme Court has thus in the decision reported in [1978] 111 ITR 1 (Addl. CIT v. Gurjargravures P. Ltd.) disapproved of the appellate authorities permitting for the first time an assessee to raise a plea of exemption which had not been at all agitated before the ITO.

31. At the time when the appeals against the orders of the ITO and the AAC were filed before the Appellate Tribunal, the State of Rajasthan had no bench of the Appellate Tribunal working. It were the Delhi Benches of the Tribunal before which the appeals used to lie. The Jaipur Bench of the Tribunal started working from July, 1971. References thereafter with respect to assessments orders made by the ITO within the area constituting Rajasthan, were then started to be made to the Rajasthan High Court. My learned brother has in the circumstances, held, and I am in full agreement that the reference could lie before the Rajasthan High Court, and this court has no jurisdiction or competency to entertain the reference. However, having once come to this conclusion, I am firmly of the view that there should be no justification to express any opinion on the merits or otherwise, of the orders made by the ITO under s. 23A of the Act. Propriety would demand that on a matter over which this court has ho jurisdiction, it should not venture to incidentally adjudicate or express any opinion even as a passing reference. That would be entirely within the domain of the court or the authority before which the matter may ultimately go for adjudication. To express any opinion as to the validity of the orders, would tan tantamount to in a roundabout and a veiled manner allowing the reference by accepting the pleas raised on merits.

32. In my considered view, therefore, it is wholly beyond the competency of this court, and the propriety too demands that no incidental adjudication about the merits of the orders under s. 23A be given. Rather, if one may venture, there seemed prima facie justifications for making of orders under s. 23A. The most significant fact was that the transferor-companies were in existence during the year when the dividends which ought to have been declared, were not declared. It remained to be seen if by the process or trick of amalgamation, liabilities which had already been rendered upon, could be obliterated, especially when the larger company which embodied within itself all the three companies had undertaken to meet all the liabilities and obligation of the transferor-companies. Perhaps orders under s. 23A could as well be treated as rectifications of original assessments. The plea of the company that with the passage of time, the reference should not be returned unanswered, does not much call for indulgence when the company had itself been indulging belatedly in hypertechnicalities. No approval to the dubious silence adopted by virtue of certain decisions of the High Court may deserve to be extended. The courts of law do expect straightforward and above-board conducts. They need not look with favour on any strategical devices enacted under which ITOs are tempted to fall in trap by making wrong orders.

33. With these observations I concur with the ultimate decision arrived at by my learned brother that the references be returned unanswered as incompetent. No order as to costs.