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Sampat Ram Budhmal v. Commissioner Of Income Tax.
Factual and Procedural Background
The assessee filed an application under s. 256(2) of the Income Tax Act seeking a direction to the Tribunal, Jaipur Bench, Jaipur, to refer certain questions of law to the High Court. The dispute arose from reassessment proceedings initiated by the Income Tax Officer (ITO) for the assessment year 1974-75, alleging that income had escaped assessment. The original assessment was completed on 16th January 1975. The reassessment was initiated and completed on 18th February 1984 under sections 142(2) and 147(a) of the Act. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who allowed the appeal and held the reassessment proceedings unsustainable, reasoning that all relevant facts were already known to the ITO at the time of original assessment and that section 147(a) could not be invoked to remedy an alleged failure by the ITO. The Revenue appealed to the Tribunal, which allowed the appeal, relying on Supreme Court precedents, and restored the reassessment order. The assessee then sought a reference of questions of law to the High Court under section 256(1), but the Tribunal declined, stating the questions were purely academic as the facts were covered by Supreme Court decisions. The assessee challenged the Tribunal's refusal to refer the questions.
Legal Issues Presented
- Whether the ITO was justified in initiating and completing reassessment proceedings under sections 147(a)/148 of the Income Tax Act for the assessment year 1974-75, and whether the Tribunal was correct in upholding the reassessment.
- Whether the Tribunal was justified in holding that due to the assessee's failure to fully and truly disclose all material facts, income had escaped assessment, thereby validating the proceedings under section 147(a).
- Whether the Tribunal was justified in holding that, in view of Supreme Court decisions, the provisions of section 147(a) automatically applied to the present facts despite distinctions from the Supreme Court cases, and consequently, whether the questions of law arising from the Tribunal's order were purely academic and need not be referred to the High Court.
Arguments of the Parties
Assessee's Arguments
- The questions of law arise from the Tribunal's judgment and refusal to refer them to the High Court was unjustified.
- Since the questions of law emerge from the Tribunal’s order, the Tribunal ought to have referred them for the High Court’s opinion.
Revenue's Arguments
The opinion does not contain a detailed account of the Revenue's legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Indo-Aden Salt Mfg. & Trading Co. (P) Ltd. vs. CIT (1986) 159 ITR 624 (SC) | Principle regarding validity of reassessment proceedings under section 147(a) when income has escaped assessment due to failure to disclose material facts. | The Court relied on this precedent to uphold the Tribunal's finding that reassessment was valid as the assessee failed to fully disclose material facts. |
| A. L. A. Firm vs. CIT (1991) 189 ITR 285 (SC) | Reinforcement of principles related to reassessment validity and income escaping assessment. | Supported the Tribunal's decision to uphold reassessment proceedings in the present case. |
| Central Provinces Manganese Ore Co. Ltd. vs. ITO (1991) 191 ITR 662 (SC) | Clarification on application of section 147(a) where income has escaped assessment. | Used by the Tribunal and the Court to confirm that reassessment was maintainable under the facts of the case. |
Court's Reasoning and Analysis
The Court noted that the controversy was squarely covered by existing Supreme Court precedents which had already established that reassessment under section 147(a) is maintainable when the assessee fails to fully and truly disclose material facts, leading to income escaping assessment. The Tribunal's reliance on these precedents was appropriate. The Court found that since the legal questions raised were already conclusively settled by the Supreme Court, referring them again to the High Court would be a futile exercise. Accordingly, the Court upheld the Tribunal's refusal to refer the questions of law, considering them purely academic in light of binding Supreme Court decisions.
Holding and Implications
DISMISSED
The Court dismissed the application under section 256(2) of the Income Tax Act. The direct effect is that the reassessment proceedings for the assessment year 1974-75, upheld by the Tribunal relying on Supreme Court precedents, remain valid and binding on the parties. No new precedent was established by this decision.
:
The assessee, by this application under s. 256(2) of the IT Act has prayed that the Tribunal, Jaipur Bench, Jaipur, may be directed to refer the following questions of law for the opinion of the High Court :
"(1) Whether the ITO was justified in initiating and completing the reassessment proceedings under s. 147(a)/148 of the Act for asst. yr. 1974-75 in the case of the assessee and whether the Tribunal was right in law in upholding the same ?
(2) Whether the Tribunal was justified in holding that due to failure on the part of the assessee to disclose fully and truly all material facts, income had escaped assessment and the proceedings initiated under s. 147(a) were valid ?
(3) Whether the Tribunal was justified in holding that, in view of the Supreme Court decision, the provisions of s. 147(a) get automatically attracted to the facts of the present case, when the facts of the present case and those before the Honble Supreme Court were entirely distinguishable and that having been pointed out before the Tribunal, whether the Tribunal was justified in holding that the questions of law arising out of the order of the Tribunal were purely academic and need not be referred ?"
2. The assessee, for the asst. yr. 1974-75, was assessed by the ITO on 16th Jan., 1975. The case of the assessee was thereafter reopened as according to the ITO, certain income escaped assessment. After serving a notice on the assessee, the ITO, A Ward, Churu, completed the assessment under s. 142(2)/147(a) of the Act vide its order dt. 18th Feb., 1984. Dissatisfied with the order dt. 18th Feb., 1984, the assessee preferred an appeal before the CIT(A), Jodhpur, who, vide his order dt. 27th Sept., 1985 allowed the appeal filed by the assessee and held that the reassessment proceedings for the asst. yr. 1974-75 are not sustainable as all the relevant facts were within the knowledge of the ITO when the original assessment were made and simply because these were not shown by the appellant-assessee in his income but known to the ITO, the reassessment proceedings cannot be held to be valid. According to the CIT(A), s. 147(a) cannot be invoked for remedying the patent failure by the ITO while completing the original assessment. He, therefore, cancelled the reassessment proceeding for the asst. yr. 1974-75. The Revenue, aggrieved with the order passed by the CIT(A) preferred an appeal before the Tribunal, Jaipur Bench, Jaipur, and the Tribunal, by its judgment dt. 16th Dec., 1986, relying upon the judgments of the Supreme Court reported in Indo-Aden Salt Mfg. & Trading Co. (P) Ltd. vs. CIT (1986) 159 ITR 624 (SC) A. L. A. Firm vs. CIT (1991) 189 ITR 285 (SC) and Central Provinces Manganese Ore Co. Ltd. vs. ITO (1991) 191 ITR 662 (SC) allowed the appeal filed by the Revenue and restored the order of the ITO. The assessee thereafter moved an application under s. 256(1) of the Act for referring two questions of law mentioned in the application for the opinion of the High Court. The learned member of the Tribunal, after considering the arguments, refused to refer the questions on the ground that they are purely of academic interest and observed as under :
"Since the finding of fact is that the assessee had failed in his primary duty and this being further decided by Their Lordships of the Supreme Court (supra) both the questions become purely of academic interest and, therefore, the reference does not survive, hence, rejected."
3. It is contended by the learned counsel for the assessee that the questions of law do arise out of the judgment passed by the Tribunal and it was not justified for the Tribunal to decide the matter at that time while refusing to refer the questions and as the questions of law do arise from the order passed by the Tribunal, the Tribunal should have made reference for the opinion of the High Court.
4. We have considered the submissions made by the learned counsel for the parties.
5. The controversy involved in the present case stands squarely covered by the judgment of the Supreme Court reported in (1986) 159 ITR 624 (SC) (supra). The Tribunal, while relying upon the judgments of the Supreme Court, also held that due to failure on the part of the assessee to disclose fully and truly the income that the income escaped assessment and, therefore, the proceedings under s. 147(a) of the Act are maintainable.
6. Since the controversy raised in this case stands squarely covered by the judgment of the Supreme Court, it will be a futile exercise to direct the Tribunal to refer the questions for the adjudication to this Court.
7. In this view of the matter, we do not find any merit in this application under s. 256(2) of the Act and the same is hereby dismissed.
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