C.M. Lodha, C.J. - (1.) THIS is a reference under Section 66(1) of the Indian Income-tax Act, 1922 (hereinafter to be referred to as "the Act of 1922") by the Income-tax Appellate Tribunal, Delhi Bench ' B ', at the instance of the CIT, Rajasthan, Jaipur. The question referred to us for answer is as follows: "Whether, on the facts and in the circumstances of the case, the provisions of Section 34(1)(a) of the Indian Income-tax Act, 1922, were rightly held to be not attracted to the case ?"
(2.) THERE is no dispute regarding the main facts of the case which we propose to state as under: The assessee is a public limited company running a textile mill at Pali. The matter pertains to the assessment year 1955-56. The assessee, it appears, has considerable income from dividends. The dividend income for the relevant year was shown by the assessee as Rs. 2,74,281. The ITO found that out of Rs. 2,74,281 a sum of Rs 18,742 related to the assessment year 1954-55. The assessee returned a dividend income of Rs. 25,952 for the next assessment year 1956-57. The assessment for the year in question i.e., 1955-56, was completed on March 28, 1960, whereas the assessment for the assessment year 1956-57 was taken up later and completed on March 27, 1961. The amount of Rs. 25,952 shown as dividend income for assessment year 1956-57, was not included in the assessee's income and of course it could not be included for the year 1955-56, as neither the assessee had shown it in the return for 1955-56, nor the ITO had included this amount for that year. However, on July 19, 1961, notice under Section 34(1)(a) was issued to the assessee and the same was served on July 28, 1961. In compliance with the said notice, the assessee, no doubt, filed a revised return, but contended that no dividend income for that year had escaped assessment on account of the omission or failure on the part of the assessee to disclose truly and fully the material facts necessary for assessment in that year and that consequently, the case did not fall under Section 34(1)(a) of the Act of 1922. The assessee, therefore, prayed that the proceedings initiated by the ITO under Section 34 of the Act of 1922, be dropped. The ITO, however, overruled the assessee's contention and held that the dividend income amounting to Rs. 25,952 should have been included in the assessment year 1955-56, but admittedly, it was not shown in the return and this amounted to an omission on the part of the assessee to disclose fully and truly the material facts necessary for assessment. He further held that the fact that the assessee had shown this income in the return filed for the assessment year 1956-57, did not exonerate it of the liability under Section 34(1)(a) of the Act of 1922, in respect of the assessment year 1955-56. In this view of the matter, he included the net dividend income of Rs. 25,952 for the assessment year 1955-56. Aggrieved by the order of the ITO, the assessee filed an appeal before the AAC, who, by his order dated October 28, 1964, allowed the appeal and deleted the amount of Rs. 25,952 from the assessee's income, but gave a direction to the ITO to tax the said income in the assessment year 1956-57, on the basis of the assessee's declaration in that year. Dissatisfied with the order of the AAC, the department preferred an appeal to the Tribunal. The Tribunal also upheld the assessee's contention and rejected the department's appeal by its order dated June 17, 1966. Thereupon, the department made an application under Section 66(1) of the Act of 1922, requiring the Tribunal to refer to this court a question of law arising out of the order of the Tribunal. The Tribunal allowed the department's application and has referred the question of law arising out of its order already extracted in the earlier part of this judgment. Learned counsel for the department has strenuously urged that according to the finding arrived at by the Tribunal, there has been escapement of income and that the assessee had not disclosed the dividend income of Rs. 25,952 during the relevant year. It has been urged that the mere fact that the assessee had shown that income for the succeeding assessment year, i.e., 1956-57, is no ground for holding that there was no omission or failure on the part of the assessee in not disclosing this income for the relevant year. In this connection, it has been argued that the Tribunal's view that the ITO should have looked into the assessment records for the year 1956-57, is not correct. The argument appears to be attractive but, as we shall presently show, it is devoid of substance. On the other hand, Shri Choudhary, learned counsel for the assessee, has contended that, in the first place, the dividend income of-Rs. 25,952, which had been received by the assessee during the year 1956-57, had rightly been returned in the year 1956-57. The assessee was not bound to return this income in the year 1955-56, during which year only this income had been declared, as, according to the learned counsel, a mere declaration of dividend is not to be regarded as payment within Section 16(2) of the Act of 1922. He has submitted that the finding of the Tribunal, in this respect, is incorrect, and the assessee is entitled to challenge the same in this reference. In the alternative, the learned counsel has also argued that there has been no escapement of income by reason of any failure or omission on the part of the assessee to disclose the true and material facts necessary for assessment.
(3.) THE Tribunal has observed in para. 10 of its order dated June 17, 1966, as follows : "THE dividend in question had admittedly been declared in the previous year relevant to the assessment year 1955-56, at the general meeting of the shareholders and it is nobody's case that such declaration was in any way contingent. On the contrary, the case proceeded even before the departmental authorities on the footing that it was a final and unconditional declaration of the dividend. Under those circumstances, it can only be held that the said dividend was an income of the year in which it was declared. It was as good as having been paid, credited or distributed to the assessee-shareholders. Under those circumstances that income rightly fell to be assessed in the assessment year 1955-56. " In support of the aforesaid finding, the Tribunal has also referred to a decision by the Supreme Court in J. Dalmia v. CIT [1964] 53 ITR 83. However, it has not dilated on this aspect of the case, as, in its view, the main question to be decided in the case was not as to the year in which the particular income fell to be assessed but whether the assessee had failed to disclose fully and truly all material facts necessary for its assessment. Learned counsel for the assessee has challenged the finding by the Tribunal extracted above and has contended that in the facts and circumstances of the present case, the assessee was justified in including the dividend income in question in the return for the assessment, year 1956-57, during which the dividend could be said to have been paid within the meaning of Section 16(2) of the Act of 1922. In support of this contention, he has placed strong reliance on CIT v. Bikaner Trading Co. Ltd. [1970] 78 ITR 12 (SC). We may, however, observe that we do not feel inclined to go into this controversy. The assessee did not make any request, to the Tribunal to get this question referred to us, namely, whether the dividend income in question was rightly returned by the assessee in the assessment year 1956-57 and did not fall to be assessed in the assessment year 1955-56, It is sufficient to point out that the High Court exercises only advisory jurisdiction under Section 66(1) of the Act of 1922 and is not supposed to discharge the functions of an appellate court, Since no question has been referred to us on the point whether the dividend income in question rightly fell to be assessed in the assessment year 1955-56, we refrain from dealing with it. ;