Pehlad Rai And Company v. Commissioner Of Income-Tax, For The State Of Punjab

1. This is an application for leave to appeal to the Supreme Court against an order of this Court passed upon a reference made under Section 66(2) of the Income-tax Act. Leave to appeal is sought under the provisions of Article 133 of the Constitution. Under this Article an appeal lies to the Supreme Court “from any judgment, decree or final order in a civil proceeding of a High Court.” Mr. Sikri, who appears on behalf of the Commissioner of Income-tax, contends that the order under appeal is neither a judgment, a decree nor a final order and that therefore leave cannot be granted under the provisions of Article 133. He has placed before us a recent decision of the Supreme Court in Premchand Satramdas v. The State of Bihar [1951] 19 I.T.R 108. In that case the point under consideration was whether an appeal lay to the Supreme Court from an order of the High Court of Patna declining to call upon the Board of Revenue to state a case under Section 21(3) of the Bihar Sales Tax Act. Now Section 21(3) is analogous in terms to Section 66 of the Income-tax Act. The judgment contains a reference to a decision of the Patna High Court in Harihar Gir v. Commissioner of Income-tax, Bihar and Orissa [1941] 9 I.T.R 246. Their Lordships said:—

“It was held by a Special Bench of the Patna High Court that no appeal lay to His Majesty in Council, under Clause 31 of the Letters Patent of the Patna High Court, from an order of the High Court dismissing an application under Section 66(3), Income-tax Act, (a provision similar to Section 21 of the Act before us) to direct the Commissioner of Income-tax to state a case. In that case, the whole law on the subject has been clearly and exhaustively dealt with, and it has been pointed out that the view taken by the Full Bench of the Lahore High Court in the case cited by the appellant (Feroze Shah v. Commissioner of Income-tax 1931 A.I.R 1931 Lah 138.) was not supported by several other High Courts and that the Privy Council also, when the matter came before it, refrained from expressing any opinion as to its correctness. In our opinion, the view expressed in the Patna case is correct.”

2. These remarks of their Lordships of the Supreme Court clearly indicate that no appeal against an order passed upon a reference or an order refusing a reference is competent. It is to be observed that in Clause 31 of the Letters Patent of the Patna High Court the words used are “final judgment, decree or order” which are the words used in Article 133 of the Constitution.

3. It is, therefore, clear that the order from which an appeal is contemplated is not a judgment, decree or final order within the meaning of Article 133 and that therefore no appeal from this order is competent. We accordingly refuse leave to appeal and dismiss the petition with costs. This order covers the connected case Civil Miscellaneous No. 369-C of 1951 also. Cost of both the cases are assessed at Rs. 50.

4. Petition dismissed.

APPENDIX

5. The judgment of Mr. Justice G.D Khosla and Mr. Justice Harnam Singh in Civil Miscellaneous No. 43 of 1950 is as follows:—

Khosla, J.— This is an application under Section 66, sub-section (2), of the Indian Income-tax Act in which the applicant prays that the Appellate Income-tax Tribunal be asked to state a number of questions for the decision of this Court. There are in all nine questions proposed, but the point which is sought to be agitated is a simple one. The facts briefly are that Messrs. Pehlad Rai and Company, a private firm owned by two partners Pehlad Rai and his uncle Hardwari Mal, started the business of purchase and sale of yarn on the 30 th of September, 1941. They also did a certain amount of business, though to a very small extent, in the purchase and sale of bhalawa oil. In the accounting period 30th September, 1941, to 14th July, 1942, 430 bales of yarn were purchased by this company and all of them were sold to the Universal Manufacturing Company the partners of which are Shugan Chand Jain and Pehlad Rai. This Pehlad Rai is the same individual who is the partner of the assessee firm Pehlad Rai and Company. For this period the assessee showed a profit of only Rs. 2,087-4-6. The Income-tax Officer on going into the accounts came to the conclusion that the profit was very small on the large turnover shown in the books and that this was a case in which profits appeared to have been concealed. He found that a credit item of Rs. 54,638 must be treated as profits from undisclosed sales and purchases and held subject to income-tax. The total income was therefore assessed at Rs. 57,874. An appeal against the order of the Income-tax Officer was dismissed by the Appellate Assistant Commissioner and on appeal the Appellate Income-tax Tribunal modified the order of the Income-tax Officer to a very small extent only (an item of Rs. 991 was allowed by way of expenses). The assessee then moved the Income-tax Tribunal to state a number of questions. The main object of these questions was to reopen the finding of the Income-tax Officer that the credit entry of Rs. 54,638 did not constitute income of the firm.

6. It is clear that no question of law here arises. The assessee firm bought yarn worth Rs. 1,33,095-2-0. This yarn is alleged to have been sold for Rs. 1,39,743-12-0 leading to a gross profit of Rs. 6,648-10-0 and a net profit of Rs. 2,087-4-6. This shows a very small percentage of less than 2 per cent. on the initial outlay. Some of the credit items were shown in the khata of Rameshwar Das who is the brother of Hardwari Mal and the father of Pehlad Rai. This khata shows that large sums of money amounting in all to Rs. 49,430-9-6 were received from Rameshwar Das at different times and paid out on various occasions. These cash credits were not explained and the assessee stated that the items did not appear in the books of Rameshwar Das. Similarly there were a number of items alleged to have been received from one Brij Lal and when put to proof Pehlad Rai admitted that these amounts would not be traceable in Brij Lal's books as they had nothing to do with him. The Income-tax Officer thus came to the conclusion that these sales to the Universal Manufacturing Company were collusive sales and the income of the assessee firm was, in fact, much larger and included the credit entries which were alleged to have been received from Rameshwar Das and Brij Lal. The decision of the Income-tax Officer is nothing more than a finding of fact and no question of law is involved. In the circumstances the prayer for directing the Appellate Income-tax Tribunal to state the nine questions set out in the application must be rejected. I would accordingly dismiss this petition with costs. We assess the costs in the two connected applications at Rs. 200.

Harnam Singh, J.— I agree.