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PETITIONER: M.B. ABDULLA

       Vs.

RESPONDENT: COMMISSIONER OF INCOME-TAX, KERALA

DATE OF JUDGMENT19/03/1990

BENCH: MUKHARJI, SABYASACHI (CJ) BENCH: MUKHARJI, SABYASACHI (CJ) PUNCHHI, M.M.

CITATION:  1990 AIR 1451            1990 SCR  (2)   5  1990 SCC  Supl.  532     JT 1990 (2)    38  1990 SCALE  (1)607

ACT:     Income  Tax Act, 1961: Section  256(1)--Reference--Ques- tion arising out of the order of the Tribunal--Value of gold worth Rs.20 Lakhs confiscated from the assessee added to the income--Application for treating the amount as business loss rejected--High  Court dismissed the application  for  refer- ence--Whether Rs.20 Lakhs could be treated as income of  the assessee and whether that sum could be deducted as  business loss--Principles.

HEADNOTE:     On  November  11, 1968 the  Petitioner  was  apprehended carrying  contraband gold in a Maruti Car driven by him.  He was taken into custody and the seized gold was  confiscated. For  the assessment year 1960-70 the Petitioner had filed  a return declaring total income of Rs.9,571. In finalising the assessment  the Income Tax Officer added Rs.20  Lakhs  being the price of the confiscated gold as income from undisclosed source.  The Petitioner went in appeal before the  Appellate Assistant Commissioner who reduced the income by that amount holding  that the assessee was not the owner of the  confis- cated  gold.  On second appeal by the revenue  the  Tribunal restored the order of the I.T.O. The Petitioner then moved a Misc. Application under S. 254(1) for amendment for treating Rs.20  Lakhs  as  business loss which was  rejected  by  the Tribunal. The Petitioner then moved a Petition u/s 256(1) of the  Income  Tax  Act seeking reference to  the  High  Court raising  certain  questions, which was turned  down  by  the Tribunal  holding  that none of the questions sought  to  be raised  was  decided by the Tribunal and’  as  such  did-not arise  from  its  order. The High Court  also  declined  the application  to direct the Tribunal to refer  the  questions and to state the case to it.     Hence this special leave petition directed against  both the  order of the Tribunal as well as the High  Court.  Dis- missing the Special Leave Petition, the Court,     HELD:  The real and substantial question posed and  can- vassed before the Tribunal in its appellate order and in the appeal  was whether the sum of Rs.20 Lakhs be considered  as part of the income of the 6

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assessee and as such suffer taxation. The question sought to be raised is whether in view of the decision of the Court in Piara  Singh’s case this amount could be treated as  legiti- mate  business loss of the assessee. It is possible to  take the  view that this is substantially a  different  question, family  whether an amount is a business loss  even  assuming that  it  was he income. It is possible and  conceivable  to consider  two different questions, namely whether a  certain sum  of  money is the income of the assessee  and  secondly, whether  even  assuming that such was the income,  was  that income  liable to be deducted in view of the  provisions  of the Act. Considerations which go into determination  whether an  amount  should be treated as income  and  considerations which are relevant to determine whether even assuming  that, that  was the income the amount was deductible, are  differ- ent. The question in this form was not canvassed before  the Tribunal. The view taken by the Tribunal and the High  Court is  a possible view and they have borne in mind the  princi- ples of law laid down by the Court in Scindia Steam  Naviga- tion’s case. [1 lB-E; 12E]      C.I.T.,  Patiala  v.  Piara Singh, 124  ITR  40  2  and C.I.T., Bombay Scindia Steam Navigation Co. Ltd., [1961]  42 ITR 586, referred to.

JUDGMENT:     CIVIL  APPELLATE  JURISDICTION: Special  Leave  Petition (Civil) Nos. 4973/89 and 12763/89.     From  the  Judgment  and Order dated  31.1.1989  of  the Kerala  High Court in O.P. No. 3218/88 and dated 25.3.82  of the  Income  Tax Appellate Tribunal, Cochin  in  I.T.A.  No. 302/Coch/1977-78. K.K. Venugopal and K.R. Nambiar for the Petitioner.     Soli J. Sorabjee, Attorney General, S. Ganesh and Ms. A. Subhashini for the Respondents. The Judgment of the Court was delivered by     SABYASACHI MUKHARJI, CJ. This is a petition under  arti- cle 136 of the Constitution for leave to appeal against  the orders  of the tribunal and the High Court. The  High  Court vide  its order dated 31st January, 1989 had  dismissed  the application  for  reference. There is also an order  of  the tribunal  refusing to make a reference under section  256(1) of the Income Tax Act, 1961 (hereinafter called ’the  Act’). This  petition also seeks leave to appeal directly from  the said order of the tribunal. 7     However, in order to appreciate the controversy in  this case the facts reiterated by the High court of Kerala in its said  judgment and order are important, it had  observed  as follows: "For  the  assessment year 1969-70 the  petitioner  filed  a return  declaring a total income of Rs.9,571. In  completing the  assessment  the assessing authority  proceeded  on  the basis that the assessee was the owner of the gold seized  on 9.11.68  and  confiscated by the Customs  authorities  worth Rs.20  lakhs and accordingly the Income-tax Officer  treated the  sum  of Rs.20 lakhs as income from  undisclosed  source applying  the provisions of Section 69-A of  the  Income-tax Act,  1961. On appeal, the Appellate Assistant  Commissioner held  that the assessee was not the owner of the  contraband gold  seized by the Central Excise Authority  and  therefore reduced  the  assessee’s total income by  Rs.20  lakhs.  The Revenue filed a second appeal before the Appellate Tribunal, Cochin Bench. After going through the evidence the  Tribunal

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came to the conclusion that the car belonged to the assessee and  the special places of concealment had been provided  by design in the car. Further the assessee himself was  driving the  car in which the gold was found. The assessee also  has not  attributed the ownership to anybody else.  The  assesee also  has not established that the gold was given to him  by any third party. In view of all these, the addition of Rs.20 lakhs  made  by  the Incometax Officer but  deleted  by  the Appellate  Asstt. Commissioner was restored. The  additional ground  raised by the Revenue that the appeal is  not  main- tainable  before the Appellate Asstt. Commissioner  was  re- jected. The assessee thereafter filed a Miscellaneous  Peti- tion  for  rectification of the order of the  Tribunal.  The rectification sought to be made are :- (1)  Business loss to the tune of Rs.20,00,000  incurred  by the assessee due to investment in gold and the  confiscation of  the gold by the Customs authorities be allowed  for  the assessment  year  1969-70, in view of the  decision  of  the Supreme Court in CIT v. Piara Singh, decided on 8-5-1980 and reported in 124 ITR 40, (2)  the income tax and special surcharge amounting  to  Rs. 16, 19,395, Rs.20,00,000 and 8 (3) as the tax has already been collected from the amount of Rs. 20,00,000 no interest was payable."     The High Court noted that the tribunal could not  accede to  the  requests of the petitioner as these  could  not  be considered as mistakes apparent from records. The points had not been raised by way of cross-appeal or  cross-objections. Thereafter, the assessee filed a petition u/s 256 of the Act seeking reference of the following questions of law: "1.  Whether the Tribunal is right in law in its  view  that the right to file an application under Section 254(2) of the Income-tax  Act,  1961 is open to be exercised only  by  the applicant and not by the respondent in the appeal before it? 2.  Whether  the Tribunal is right in law in  rejecting  the application  under  Section 254(2) on the  ground  that  the applicant  was not the appellant before it and that  he  had also  not filed any memo of Cross-objections in  the  appeal against him? 3. Whether on the facts and in the circumstances of the case the assessee was bound to raise before the Tribunal, at  the stage when he was only supporting the order appealed against him, of his case for deduction which he was legally entitled to claim in case of allowance of the appeal against him? 4. Whether on facts and circumstances of the case the Tribu- nal  was right in law in holding that the claim of  loss  on account  of  confiscation of the gold was  not  the  subject matter of the appeal?"     The tribunal dismissed the petition holding that none of the questions sought to be raised was decided by the  tribu- nal and as such did not arise out of the order of the tribu- nal. Aggrieved by these two orders, one being refusal by the tribunal  to refer the question as aforesaid u/s 256(1)  and the other of the High Court directing the tribunal to  refer the  questions  and state the case to the  High  Court,  the petitioner  has come up to this Court. We find that  it  can legitimately be argued in the facts and the circumstances of the  case that the question which essentially  arose,  which had to be borne in mind and which 9 was argued before the tribunal was, whether the sum of Rs.20 lakhs  could be subject to taxation in the context as  found by  the tribunal as the income of the assessee.  The  asses- see’s further contention was that in view of the decision of

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this Court in C.I.T. Patiala v. Piara Singh, 125 ITR 40 even if Rs.20 lakhs could be treated as the income of the  asses- see  inasmuch  as this has been ordered to  be  confiscated, there  was a business loss as held in the said  decision  of this  Court. Therefore, this question should have been  gone into which was sought to be raised by a MiscellaneOus Appli- cation  before the tribunal after disposal of the appeal  by the tribunal.     The  principle  by which this should be  determined  has been  fairly  laid down by this Court in C.I.T.,  Bombay  v. Scindia Steam Navigation Co. Ltd., [1961] 42 ITR 589 wherein this Court at page 612 had observed as follows: "Section  56(1) speaks of a question of law that arises  out of the order of the Tribunal. Now a question of law might be a simple one, having its impact at one point, or it may be a complex one, trenching over an area with approaches  leading to  different points therein. Such a question might  involve more than one aspect, requiring to be tackled from different standpoints.  All  that section 66(1) requires is  that  the question of law which is referred to the court for  decision and which the court is to decide must be the question  which was in issue before the Tribunal. Where the question  itself was  under issue, there is no further limitation imposed  by the  section that the reference should be limited  to  those aspects  of  the question which had been argued  before  the Tribunal.  It will be an over-refinement of the position  to hold  that  each aspect of a question is itself  a  distinct question  for the purpose of section 66(1) of the Act.  That was the view taken by this Court in Commissioner of  Income- tax  v.  Ogale Glass Works Ltd., [1954] 25 ITR  529  and  in Zoraster & Co. v. Commissioner of Income-tax, [1960] 40  ITR 552,  and  we agree with it. As the question  on  which  the parties were at issue, which was referred to the court under section  66(1),  and decided by it under  section  66(5)  is whether  the sum of Rs.9,26,532 is liable to be included  in the  taxable income of the respondents, the ground on  which the  respondents contested their liability before  the  High Court  was one which was within the scope of  the  question, and the High Court rightly entertained it. 10          It is argued for the appellant that this view would have  the  effect of doing away with limitations  which  the Legislature has advisedly imposed on the right of a litigant to  require references under section 66(1), as the  question might  be framed in such general manner as to admit  of  new questions not argued being raised. It is no doubt true’ that sometimes  the  questions are framed in such  general  terms that,  construed  literally, they might  take  in  questions which were never in issue. In such cases, the true scope  of the  reference  will have to be ascertained and  limited  by what  appears on the statement of the case. In this  connec- tion,  it is necessary to emphasise that, in  flaming  ques- tions,  the  Tribunal  should be precise  and  indicate  the grounds  on  which the questions of law are  raised.  Where, however,  the  question  is sufficiently  specific,  we  are unable to see any ground for holding that only those conten- tions  can be argued in support of it which had been  raised before the Tribunal. In our opinion, it is competent to  the court  in  such a case to allow a new contention to  be  ad- vanced, provided it is within the framework of the  question as referred."     Mr.  Venugopal, appearing for the petitioner,  drew  our attention  to  the  observations of  Justice  Shah,  as  the learned  Chief Justice then was, at p. 617 which are to  the following effect:

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"The source of the question must be the order of the  Tribu- nal;  but  of  the question it is not  predicated  that  the Tribunal must have been asked to decide it at the hearing of the  appeal.  It may very well happen and  frequently  cases arise in which the question of law arises for the first time out  of the order of the Tribunal. The Tribunal may  wrongly apply  the law, may call in aid a statutory provision  which has no application, may even misconceive the question to  be decided,  or  ignore a statutory provision  which  expressly applies  to  the facts found. These  are  only  illustrative case:  analogous  cases may easily be multiplied.  It  would indeed  be  perpetrating gross injustice in  such  cases  to restrict  the assessee or the Commissioner to the  questions which have been raised and argued before the Tribunal and to refuse to take cognisance of question which arise out of the order  of the Tribunal, but which were not  argued,  because they could not (in the absence of any indication as to  what the 11 Tribunal was going to decide be argued."     As  mentioned hereinbefore, this is an  application  for leave  to appeal from the decisions of the tribunal and  the High  Court under Article 136 of the Constitution. The  real and  substantial  question posed and  canvassed  before  the tribunal  in  its appellate order and in the appeal,  as  is manifest from the facts stated before, was, whether a sum of Rs.20  lakhs  could in the facts and  the  circumstances  be considered as part of the income of the assessee and as such suffer  taxation. Now the question sought to be  raised  is, whether  in  view  of the decision of this  Court  in  Piara Singh’s  case  (supra) the amount of Rs.20  lakhs  could  be treated as legitimate business loss of the assessee.     It  is possible to take the view that this  is  substan- tially a different question, namely, whether an amount is  a business  loss even assuming that it was the income.  It  is possible  and  conceivable to consider two  different  ques- tions, namely, whether a certain sum of money is the  income of  the assessee, and secondly, whether even  assuming  that such  was the income, was that income liable to be  deducted in view of the provisions of the Act. It is possible to take the  view that these are substantially  different  questions and  not  merely  different aspects of  the  same  question. Considerations  which  go into determination of  whether  an amount  should be treated as income and  the  considerations which are relevant to determine whether even assuming  that, that  was the income the amount was deductible, are  differ- ent. The question in this form was not canvassed before  the tribunal at any point of time in the alternative.     It may be reiterated that the Central Excise Officers at Valayar check-post seized gold weighing 16,000 gms. from Car No. MYX 9432, which was being driven by the petitioner along with the documents and took the petitioner into custody. The Collector of Central Excise, Madras had confiscated the gold in question and found that the petitioner was in  possession of  the gold. The assessment of the petitioner for the  year in  question was originally completed at a total  income  of Rs.  1,571.  Subsequent to the completion  of  the  original assessment, the petitioner filed a return declaring a  total income  of Rs.9,57 1. The Income Tax Officer  issued  notice under section 148 of the Act.     The  Tribunal  ultimately  had  accepted  the  revenue’s contention, restored the addition of Rs.20 lakhs made by the assessing  authority, inter alia, holding that the onus  was on the petitioner to prove that the 12

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gold  was  not owned by him which onus  the  petitioner  had failed to discharge. The Tribunal had gone into and  adjudi- cated  the question substantially raised by  the  petitioner that the confiscated gold could not be treated as the income of the petitioner. The Tribunal rejected the application  of the  petitioner  on  the ground that the claim  of  loss  on account  of  the  confiscation  of  the  gold  was  not  the subject-matter  of  the appeal. The principles of  law  have been discussed by this Court in Scindia Steam Navigation Co. Ltd’s case (supra).     In  the  facts and the circumstances of  the  case,  the Tribunal and the High Courts have taken the view that wheth- er  certain sum of money can be treated as the income of  an assessee and whether that sum of money could be deducted  as loss are different question of law and not different aspects of  the same question. The Tribunal and the High Court  have taken a particular view. They have borne in mind the correct principles that are applicable in the light of the law  laid down  by  this  Court in  Scindia  Steam  Navigation’s  case (supra).     In the background of the facts and the circumstances  of the  case, as mentioned hereinbefore, if the aforesaid  view of  the Tribunal and the High Courts is a possible view,  we are  not inclined to interfere with that view under  Article 136  of the Constitution in the light of the facts  and  the circumstances of this case. We are not prepared to say  that injustice has been done to the petitioner. The view taken by the  Tribunal  and the High Courts is a possible  view.  The Tribunal and the High Courts have borne in mind the  princi- ples of law laid down by this Court.     In  the aforesaid view of the matter,’ in the facts  and the circumstances of the case, this application is  rejected and accordingly dismissed. R.N.J.                                 Petition dismissed. 13