HIDAYATULLAH, - (1.) THE following Judgment of the court was delivered by :
(2.) THIS is an appeal againstthe order of the Income-tax Appellate tribunal,Delhi bench, dated May 1/14, 1957, by which thetribunal, reversing the order of the AppellateAssistant Commissioner, held that a loss arisingfrom the sale of certain shares by the respondentCompany was a capital loss. Subsequent to theorder of the tribunal impugned here, theCommissioner of Income-tax, New Delhi, who is theappellant before us, had moved the tribunal for areference to the High court on certain questionsof law said to arise out of the order of theAppellate tribunal. That application was found tobe barred by one day, and since, under the law,the tribunal had no jurisdiction to extend thetime, the application was dismissed. Against thedecision of the tribunal, an application was filedin the High court under s. 66(3) of the Income-taxAct; but the High court dismissed the application,agreeing with the tribunal that the application tothe tribunal for a reference was barred by time.The Commissioner of Income-tax then applied forspecial leave against the order passed by theTribunal in the appeal before it, and the presentappeal, with special leave, has been filed. Before we examine the merits of the case, weshall deal with a preliminary objection raised onbehalf of the respondent that the appeal isincomepetent, in view of the decision of thisCourt in Chandi Prasad Chokhani v. State of Bihar(1) where it was held that this court would notentertain an appeal directly from an order of theTribunal by passing the decision of the HighCourt, except in very exceptional circumstances.The appellant relies upon the decision of thisCourt in Baldev Singh v. Commissioner of Incometax (2), and contendsthat the exceptional circumstances existing in thelatter case and adverted to in the former, governthe present case. The facts relating to the filing of theapplication for reference together with therelevant dates are these: The tribunal's order waspassed by two learned Members, who signed theirrespective orders on different dates. TheAccountant Member signed his order on 1/05/1957,and the Judicial Member, on 14/05/1957. Thenotice of the order was sent to the Commissionerof Income-tax, New Delhi, and reached his officeby registered post on 15/07/1957. It wasreceived by one Motilal Pathak, a clerk in theoffice of the Commissioner. Motilal's affidavitshows that, he suddenly fell ill, and had to takecasual leave for the day. He returned to theoffice the next day, and dealt with the noticereceived from the tribunal. By a mischance, whichis easy to appreciate, the date stamp of thereceipt of the papers was affixed on the 16th, andbore that date instead of the real date, viz., the15th, on which the papers had actually beenreceived. Relying upon the date stamp, everybodytook it for granted that limitation would expireon the 60th day, counting time from 16/07/1957.The application was filed on the last day oflimitation on that supposition. Actually, theapplication was barred by a day. The Income-taxTribunal, therefore, dismissed the application on 4/12/1957. The decision of the tribunal wasunsuccessfully challenged before the High court.It is evident that the decision of the tribunalwas quite correct, and the tribunal had no optionbut to dismiss the application, since the lawgives no jurisdiction to the tribunal to extendlimitation, as is done under s. 5 of the IndianLimitation Act. This court then granted special leave againstthe order of the tribunal passed in the appealbefore it, and the question is whether the appealshould be heard or the leave revoked, in view ofthe decision in Chokhani's case (1). In Chokhani'scase (1), the attempt was to bypass the decisionof the High court on a question referred to theHigh court for decision and also another decisionof the High court that no other point of law arosefrom the order of the tribunal. It was held thatthis court would not allow the High court to beby-passed, and that an appeal from the decision ofthe tribunal in the circumstances was incompetent.A similar view was again expressed in two othercases, viz., Indian Aluminium Co. Ltd. v.Commissioner of Income-tax (2) and KanhaiyalalLohia v. The Commissioner of Income-tax (3). Inall the three cases, reliance was placed by theappellants therein upon the decisions of thisCourt in Dhakeswari Cotton Mills, Ltd. v.Commissioner of Income-tax (4) and Baldev Singh v.Commissioner of Income-tax (5) It was pointed outin the judgments of this court that the two casesrelied upon were decided on the specialcircumstances existing there. In the first, therewas a question of breach of the principles ofnatural justice, which could not be raisedotherwise than by an appeal with the special leaveof this court. In the second case, it was pointedout that limitation was lost by the party throughno fault of his, inasmuch as a letter was undulydelayed in post. In our opinion, in the presentcase also, special circumstances which justifiedthe grant of special leave in Baldev Singh's case(5), exist. There was a combination ofcircumstances which led to the filing of theapplication a day late, but in circumstancesshowing that the default was not due to anynegligence on the part of the Commissioner ofIncome-tax. The receipt of the notice on July 15is admitted; but the affixing of the date stamp onthe 16th was due to the failure of theclerk to deal with the notice on the 15th becausehe fell ill and had to leave the office. It iscommon knowledge that date stamps are alteredevery day in the office, and this is done mostlyby a very junior employee. The affixing of thedate stamp on the 16th and the notice consequentlybearing that date went unnoticed, and relying uponthe date stamp, the appeal was filed, though onthe last day of limitation but within time. Inthese circumstances, it is difficult to say thatthe Commissioner of Income-tax was negligent andthe negligence, if any, on the part of the clerkin affixing a wrong date stamp is excusable, ifone considers his illness and his absence from theoffice on the 15th. In our opinion, this casecomes within the rule of Baldev Singh's case (1)and an appeal direct to this court from theTribunal's order is justified by the specialcircumstances. By this appeal, no decision of theHigh court can be said to be bypassed, because thedecision of the High court related to thecorrectness of the decision of the tribunal on thequestion of limitation, which is not a questionwhich is sought to be raised in an indirect way bythe present appeal. We, therefore, overrule thepreliminary objection. The assessee Company is the National FinanceLtd., New Delhi. It is a public limited Companywhich was incorporated in 1943. It deals in sharesand securities and also as financiers. The presentcase arises from a deal in 3,000.00 shares of theMadhusudan Mills Ltd., Bombay, by the assesseeCompany. In the year of account, 1/05/1949, to 30/04/1950, corresponding to the assessmentyear, 1951-52, the assessee Company sold theseshares suffering a loss of Rs. 5,48,712-8-0, whichit claimed as one on the sale of its stock-in-trade. The Income-tax Officer and the AppellateAssistant Commissioner held it to be a capitalloss. TheAppellate tribunal, Delhi bench, reversed thedecision, and held in favour of the assesseeCompany. The only question in this appeal iswhether the decision of the tribunal is right.
(3.) THE assessee Company belongs to a group ofCompanies controlled by one Lala Yodh Raj Bhallaand certain persons associated with him. It isconvenient to describe these persons as the 'YodhRaj Bhalla group'. THEse Companies are (1) JaswantSugar Mills Ltd., (2) Jaswant Straw Boards Ltd.,(3) National Finance Ltd., (4) NationalConstruction and Development Corporation Ltd., (5)Ganesh Finance Corporation Ltd., and (6) RaghunathInvestment Trust Ltd. THE interrelation of these.Companies is very intimate, and they arepractically owned by the 'Yodh Raj Bhalla group'.To understand this, the following analysis of theshareholdings of these Companies must besufficient: JUDGEMENT_835_AIR(SC)_1963Html1.htm THE resulting position may be stated thus: GaneshFiance Corporation Ltd. practically owns theassessee Company and National Construction andDevelopment Corporation Ltd., Raghunath InvestmentTrust Ltd. practically owns the Ganesh FinanceCorporation Ltd., and 'Yodh Raj Bhalla group'practically owns Raghunath Investment Trust Ltd.Jaswant Sugar Mills Ltd. is practically owned byJaswant Straw Board Ltd., National Finance Ltd.,and National Construction and DevelopmentCorporation Ltd., and Jaswant Straw Board Ltd., ispractically owned by National Finance Ltd., andNational Construction and Development CorporationLtd. Thus, the entire group is owned by aconsortium, and there is no doubt about it. The shares of Madhusudan Mills Ltd. wereacquired in the following circumstances: In July1948, Mr. Yodh Raj Bhalla, who was in a positionby reason of his holdings in these six Companiesto influence decisions of the Board of Directors,arranged to purchase 26,547 shares of the Millsfrom Messrs. Bhadani Brothers, Ltd., who were themanaging agents of the Mills. This block of sharesrepresented about 80 per cent of the total issuedcapital of the Mills, The purchase was made at Rs.400.00 per share, when the price in the market, wasabout Rs. 250.00 per share. Out of the remainingshares which were on the market 200 shares werepurchased at Rs. 252-8-0 per share, which was thenthe quoted price. Now, these shares were purchasedby Jaswant Sugar Mills Ltd., but the money for thepurchase of the shares was obtained by borrowingit from some of the other concerns. TheseCompanies, as has been shown above, werecompletely under the control of 'Yodh Raj Bhallagroup'. The arrangement for the money was asfollows: JUDGEMENT_835_AIR(SC)_1963Html2.htm The shares were registered as follows:10,500 shares registered in the name of the assessee Company. 5,400 shares in the name of the National Construction and Development Corportion Ltd., and the balance in the names of the nominees of Jaswant Sugar Mills Ltd., which meant, largely, persons belonging to the 'Yodh Raj Bhalla group'. On Oct 9/10/1949, the assessee Companypurchased 15,547 shares at Rs. 400.00 per share fromJaswant Sugar Mills Ltd., and the amount paid bythe assessee Company was adjusted towards thepurchase price and the balance was paid. On thesame day, the remaining 11,000.00 shares were sold byJaswant Sugar Mills Ltd. to National Constructionand Development Corporation Ltd., at Rs. 400.00 pershare. Thus, on that date Jaswant Sugar Mills Ltd.ceased to have any connection with the presentmatter. It may be pointed out that on the date onwhich the two transactions took place, thepriceruling in the market was about Rs. 217-8-0.Before Jaswant Sugar Mills Ltd. parted with theshares, they. had appointed a new Board ofDirectors of the Madhusudan Mills Ltd., and thesenew Directors also belonged to the same group. Themanaging agency of Messrs. Bhadani Brothers Ltd.was terminated, and on the same day on which theshares were purchased from these managing agents,the assessee Company was appointed as thepurchasing and selling agent of the Mills. Theassessee Company made enormous profit from theacquisition of these shares by way of dividend andcommission as the purchasing and selling agent. InOctober and November, 1948 they, however, sold6,525 shares to Dalmia Cement and MarketingCompany Ltd. at Rs. 400.00 per share. These sharessubsequently came back to the same group; butthat is not a matter with which we are immediatelyconcerned. ;