Decided on February 05,1970



- (1.) THIS is petition under Section 256 (2) of the Income-tax Act, 1961, whereunder the petitioner is seeking a direction to the Appellate Tribunal to state the case and refer the following questions of law for the opinion of this court: ' (1) Whether on the facts and in the circumstances of the case the inspecting Assistant Commissioner had jurisdiction to levy penalty on the basis of the satisfaction of the Income-tax Officer in the course of the assessment proceedings? (2) Whether on the facts and in the circumstances of the case the provisions of Section 271 (1) (c) can be invoked by the Inspecting Assistant Commissioner in the absence of any proceedings before him? (3) Whether on the facts and in the circumstances of the case the tribunal was justified in confirming the penalty for alleged concealment when the income itself was based on estimates? the short facts necessary for appreciating the contentions of the petitioner are as follows:--The assessee, a bus operator carrying on business in Coimbatore, was admittedly not maintaining any accounts in relation to his business for the accounting year ending March, 1963. For the assessment year 196364, he returned an income of Rs. 16,124/- on October 3, 1963. On february 15, 1964 the Income-tax Department searched the premises of the petitioner and seized certain incriminating sheets which had a bearing on the petitioner's business. In fact, those sheets reflected the collections received by the assessee during a part of that relevant year. On the basis of such sheets and the material thereunder, the Revenue had to estimate the income. But, before final orders were passed for the relevant accounting year, the petitioner filed a revised return. But, it is to be noted that even the revised return was based on no specified or specific material such as account books etc. kept by him, but once again based on his own speculation. The Income-tax Officer estimated the assessable income of the petitioner at Rs. 93,260/- which on appeal to the Appellate Assistant Commissioner was reduced to Rs. 50,000/- and which on a second appeal by the Department was increased to Rs. 62,500/ -. The Inspecting Assistant Commissioner of Income-tax concurrently took up penalty proceedings as provided in the Act and levied a penalty of Rs. 25,000/-, On an appeal against such levy of penalty to the Income-tax Appellate Tribunal the penalty Order and the quantum were confirmed. It is common ground that before the Tribunal no question was mooted relating to the jurisdiction of the Inspecting assistant Commissioner to entertain the proceedings and levy penalty as he did. The Tribunal on the merits found that the penalty order was justified and had to be upheld. An application under Section 256 (1) was made before the Tribunal to refer the above questions of law said to be arising from and out of this order. On a refusal by the Tribunal to do so, the present application has been filed.
(2.) MR. Padmanabhan, the learned counsel for the petitioner, would urge that the matter involved in this case is not purely a question of law, but is a matter concerning jurisdiction and therefore notwithstanding the fact that the matter was not mooted before the Appellate Tribunal, it is open to this Court is exercise of its powers, under Section 256 (2) to require the Tribunal to state a case and to refer the questions as framed by him to the High Court. He would also state that the revenue, in the course of levying the penalty and processing the proceedings for the imposition of penalty, did not find as a fact as to which portion of the escaped income is attributable to any overt or covert act on the part of the petitioner. In the absence of such a finding, the penalty imposed is again vitiated by an error of law.
(3.) UNDER Section 256 (1), the Appellate Tribunal is required in law, at the instance of the assessee or the Department, as the case may be, on an application made to them in the prescribed form, to refer to the High Court any question of law "arising out of such order. " Sub-section (2) of Section 256 enables this Court, on a refusal by the Appellate Tribunal to refer, in the manner contemplated under Section 256 (1) to cause a reference of such questions, again on an application made for the purpose to this Court, if it is not satisfied with the correctness of the decision of the Appellate Tribunal. The question, therefore, is whether in the order of the appellate Tribunal, any question of law arises therefrom. If such a question does arise, then it is statutorily obligatory on the part of the Appellate Tribunal to refer such a question to this Court and if it fails to do so, then their decision would be incorrect. The parenthesis arising out of such order under Section 256 (1) had been the subject-matter of constant interpretation. Where the subject is whether a question of law arises out of the order of the Tribunal, one should find intrinsically in the order itself any misapplication of law or error of jurisdiction or error apparent thereon or at least an unreasonable inference on proved facts. If on the other hand no argument has been addressed on a particular aspect and incidentally therefore no question has been raised and presented before the Tribunal for decision, then they had no opportunity to advert to it or consider it and above all decide on it. It is one thing to say that a question was argued and a question of law arises therefrom; but it is totally a different situation when the record is conspicuously silent about a particular aspect such as the jurisdiction to levy a penalty in the particular circumstances of the case, etc. , and which in the instant case is now sought to be raised before us for the first time, and it would not be proper to say that the Tribunal failed to refer such a question to Court for an answer as if it arose out of its order. Incidentally, we might add that it is not reasonable to expect that while seeking for a reference, every aspect of a comprehensive question, which has a wide coverage, has to be referred. The advisory jurisdiction of this Court has only an impact on matter raised and considered by the Tribunal and in certain exceptional cases to matters which are ancillary and intimately connected with it. No doubt, as has been said, the Court ought not to be super-refined to avoid a decision on a question of law but which is ancillary to the main question referred. This would be so when on an overall review, a point of law does arise by necessary implication though not ex facie on record. But it would be different in a case where there was no argument on a phase of the question and particularly when the Tribunal was not called upon to decide about the jurisdiction of the Revenue to impose a penalty. It would be difficult in such circumstances for this Court under Section 256 (2) to require the Appellate Tribunal to state the case and refer a question sought to be raised for the first time before it. It is common ground that the question of jurisdiction was not raised before the tribunal. But, the argument is that the matters relating to jurisdiction go to the root of the question and it something which is more than a question of law. This might be so. But, as long as the Tribunal was not confronted with such a problem and was not called upon to apply its mind to it, then it would be unreasonable to characterise the order of the Appellate Tribunal as incorrect and call upon them to state a case on a question which cannot, and obviously does not, arise from its order. By approaching this Court under Section 256 in such circumstances, the normal statutory routine cannot be by-passed, and a new question called out from the order of the Tribunal outside its text, scope and content.;

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