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Commissioner Of Income Tax, West Bengal v. Premji Bhimji
Factual and Procedural Background
The Income-tax Appellate Tribunal, Calcutta Bench, referred a question to the Calcutta High Court under section 66(2) of the Indian Income-tax Act, 1922. The question was whether a gain of Rs. 49,400 from the sale of 200 shares of Radha Films Ltd. was a capital gain or taxable business income. On 15 December 1959 the High Court found the original statement of case inadequate and, while calling for a supplementary statement, expressly permitted the Tribunal to take additional evidence on six specified matters.
The Tribunal submitted a supplementary statement on 25 October 1960, and on 21 June 1963 the High Court held that the gain was of a capital nature, not taxable as business income. After the High Court refused a certificate under section 66A, the Commissioner of Income-tax obtained special leave and appealed to the Supreme Court, challenging the High Court’s authority to allow the Tribunal to record additional evidence.
Legal Issues Presented
- Whether, under section 66(4) of the Indian Income-tax Act, 1922, the High Court could direct the Appellate Tribunal to collect and rely on additional evidence while preparing a supplementary statement of the case.
Arguments of the Parties
Appellant — Commissioner of Income-tax
- The High Court’s judgment was vitiated because it exceeded its jurisdiction in authorising the Tribunal to record and use additional evidence when preparing the supplementary statement of case.
The opinion does not contain a detailed account of the respondent’s legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Keshav Mills Co. Ltd. v. Commissioner of Income-tax | Under section 66(4) the High Court may call for a supplementary statement only on material already on record; it cannot direct the Tribunal to collect additional evidence. | The Supreme Court relied on this decision to hold that the Calcutta High Court acted without jurisdiction in permitting new evidence, rendering its answer invalid. |
Court's Reasoning and Analysis
The Supreme Court observed that its own precedent in Keshav Mills squarely prohibited a High Court, when acting under section 66(4), from directing the Tribunal to gather fresh evidence. Although the High Court was entitled to seek a supplementary statement on the six identified issues, it could do so only on the basis of evidence already on record. Because the High Court’s order explicitly allowed additional evidence, the resulting supplementary statement blended original and newly-collected material, making it impossible to separate the two. Consequently, the High Court’s reliance on that tainted record necessitated setting aside its decision.
The Supreme Court therefore discharged the High Court’s answer and instructed that the matter be remitted. The High Court must now request a fresh supplementary statement from the Tribunal confined strictly to existing evidence and thereafter decide the reference afresh.
Holding and Implications
Appeal Allowed; High Court’s answer set aside and matter remanded.
Immediate Effect: The Calcutta High Court’s determination that the gain was of a capital nature is vacated. The High Court must obtain a new supplementary statement from the Tribunal based solely on the original record and then reconsider the reference.
Broader Implication: The decision reinforces the limitation that, under section 66(4), High Courts cannot expand the evidentiary record when calling for supplementary statements, thereby preserving the appellate structure envisaged by the Income-tax Act.
1. The Income-tax Appellate Tribunal, Calcutta Bench, Calcutta, drew up a statement of case under section 66(2) of the Indian Income- tax Act and submitted the following question to the High Court of Judicature at Calcutta :
"Whether, under the facts and circumstances, and on the materials available, the Appellate Tribunal was justified in holding that the gain of Rs. 49,400 made by the sale of 200 shares of Radha Films Limited was a venture in the nature of trade and whether the said amount of gain was of a 'capital nature' or an 'income from business' taxable under the Indian Income-tax Act ?"
2. The learned judges of the High Court on the 15th December, 1959, after hearing counsel, were of the view that the statement of case was not sufficient to enable them to determine the question raised by the Tribunal. The court, accordingly referred the case to the Tribunal to arrive at the findings on the points indicated in their order. The High Court directed that in arriving at its findings the Tribunal will have liberty to take additional evidence that may be adduced by the parties. The court then set out six matters on which evidence may be recorded by the Tribunal.
3. The Tribunal submitted a supplementary statement of case on the 25th October, 1960. The reference was again placed for hearing before a Division Bench of the High Court. The learned judges by their judgment dated June 21, 1963, answered the question that the gain was of a capital nature and was not income from business taxable under the Indian Income-tax Act. The High Court having declined to grant a certificate under section 66A of the Indian Income-tax Act, 1922, with special leave the Commissioner of Income-tax has appealed to this court.
4. Counsel for the commissioner contends that the judgment under appeal was vitiated because the High Court authorised the Tribunal to record additional evidence on the matters set out in their order. That contention, on our judgment, must be accepted. The order of the High Court is on the face of it inconsistent with the decisions of this court. We may refer to the decision in Keshav Mills Co. Ltd. v. Commissioner of Income-tax. In that case the material part of the headnote is as follows :
"In calling for a supplementary statement of the case under section 66(4) of the Indian Income-tax Act, 1922, the High Court can require the Tribunal to include in such supplementary statement only such material and evidence as may already be on the record but which has not been included in the statement of the case made initially under section 66(1) or section 66(2). It has no jurisdiction to direct the Appellate Tribunal to collect additional material and make it a part of the supplementary statement."
5. It was certainly open to the High Court to call for a supplementary statement of case under section 66(4) on the matters enumerated in their order dated December 15, 1959. But the supplementary statement of case must on the view expressed by this court, be founded only on the evidence already on the record, and the Tribunal cannot be directed to collect any additional evidenced. It is impossible on the supplementary statement of the case submitted by the Tribunal to ascertain what part of the supplementary statement was based on additional evidence. Since the High Court had considered the facts disclosed in the supplementary statement of case in recording their opinion on the question referred, we must discharge the answer recorded by the High Court and remand the case to it with the direction that the High Court do refer the case to the Tribunal for recording its supplementary statement on the matters set out in the order of December 15, 1959, on the materials on record uninfluenced by any additional evidence collected since its original order and the High Court do, after the supplementary statement is received, proceed to hear and dispose of the reference. The supplementary statement of case dated the 25th October, 1960, will be excluded from consideration by the High Court.
6. The appeal is allowed. No order as to costs.
7. Appeal allowed.
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