http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

PETITIONER: COMMISSIONER OF INCOME-TAX, DELHI AND RAJASTHAN

       Vs.

RESPONDENT: THE MEWAR TEXTILE MILLS LTD.

DATE OF JUDGMENT: 10/12/1965

BENCH: SIKRI, S.M. BENCH: SIKRI, S.M. SUBBARAO, K. SHAH, J.C.

CITATION:  1966 AIR 1559            1966 SCR  (3)  34

ACT: Income  Tax  Act,  ( 11 of  1922),  s.  66(1)-Procedure  for reference  of questions of law by Tribunal to High  Court-At the instance of assessee Tribunal annexing fresh  documents, not discussed, to statement of case Property of.

HEADNOTE: At  the  time  of making an application  to  the  Income-tax Appellate  Tribunal  under s. 66(1) of the  Income-tax  Act, 1922,  to refer certain questions of law to the High  Court, the  assessee  filed certain documents as annexures  to  his application and the Tribunal attached these documents to the Statement  of  Case.   There was no mention of  any  of  the documents either in the Appellate order of the Tribunal or in  the  body  of the Statement of  Case.   The  High  Court decided  the  questions  referred to it  in  favour  of  the assessee. On an appeal to this Court, HELD  : (i) The case must be remanded to the High  Court  as the  relevant facts were not clear, nor agreed upon  by  the parties. (ii)It is not consistent with the advisory jurisdiction  of a  High  Court  under the Act that  the  Appellate  Tribunal should attach to the Statement of Case documents. other than the proceedings of the Income-tax authorities, which are not mentioned or discussed either in its own appellate order  or in the Statement of Case.  If the High Court were to  decide any  dispute  concerning  the  interpretation  of  any  such document, it would be deciding questions not decided by  the Tribunal  and which the High Court is incompetent to  decide under the Act. [38 G, H]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 969 of 1964. Appeal from the judgment and order, dated March 21, 1963 of   the Rajasthan High Court in D. B. Civil Income-tax Ref.  No.  41 of   1960. A.   V.  Viswanatha Sastri, S. K. Aiyar, B. R. G. K.  Achar, and R.    N. Sachthey, for the appellant.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

S. T. Desai, Z. S. Meeratwal and Naunit Lal, for respondent. The Judgment of the Court was delivered by Sikri J. This appeal, by certificate granted under S. 66A(2) of the Indian Income Tax Act, 1922, hereinafter referred to as  the Act, read with S. 261 of the Indian Income Tax  Act, 1961, is directed against the judgment of the Rajasthan High Court in a 35 consolidated  reference  made  to  it  by  the  Income   Tax Appellate Tribunal, Delhi Branch, under s. 66(1) of the Act. This  appeal relates to the assessment year 1943-44 and  the relevant question with which we are concerned is as  follows :-               "Whether the profit on the amounts received by               the  assessees  bankers in  British  India  as               price of goods sold by the assessee on railway               receipts in the names of the consignees or  as               price  of goods delivered  ex-godown  Bhilwara               was liable to tax under the Indian  Income-Tax               Act ?" This question was referred at the instance of the  appellant and the item in dispute now before us is the item  amounting to  Rs. 2,73,488, which was held not liable to  taxation  by the  Appellate Tribunal.  The question which arises in  this appeal  is  whether  the  Tribunal  was  right.   The  first submission,  however,  of Mr. A. V. Viswanatha  Sastri,  the learned  counsel for the appellant, is that the  High  Court has  not dealt with this question insofar as it  relates  to this  sum.  Mr. Desai, on the other hand, contends that  the appellant has not appealed as far as this item is concerned; and, therefore, before we attempt to answer the question  we must  first see whether the appellant’s appeal  covers  this item. Mr.  Desai refers us to the petition for leave to appeal  to the  Supreme Court, filed in the High Court, and  says  that there is no express mention of the item of Rs. 2,73,488.  He is  right  as far as this is concerned,  but  the  appellant apparently  felt it was not necessary to  mention  expressly this  item.   Mr. Sastri points to paras 12 and  13  of  the petition which read as follows :               "12.    That  on  account  of   applying   the               principle   of  accrual  basis  and   allowing               apportionment    of   profit    between    the               manufacturing  and  selling processes  in  the               ratio  of 75% : 25% the revenue that would  be               lost to the Department would be  approximately               Rs. 36,000.               13.That  the point of law decided  by  this               Hon’ble  Court while returning the  answer  to               question No. 12. namely, whether the liability               to pay tax can be fastened on the assessee  on               receipt   basis   or  accrual   basis   is   a               substantial  question of law and is  of  great               public  and private importance and would  form               important  precedent  governing  the  numerous               other  cases.   The  tax  effect  is  also  of               considerable value." 36 Further, Mr.sastri points out that the first seven parts  of the  petition which deal with the facts and the  proceedings before the Income Tax Authorities are general and cover  the said item of Rs. 2,73,488; also the grounds of appeal,  Nos. 1 and 2 are very general and cover the item in dispute.   It is true, as pointed out by Mr. Desai, that the High Court in granting  leave  to  appeal to the  Supreme  Court  did  not

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

expressly  deal  with this item at all, but  then  the  High Court  was dealing with the question of law as such and  was not  adverting to the facts in detail.  Be that as  it  may, the  appellant  has  filed  an  appeal  in  respect  of  the assessment year 1943-44 and the only possible question  that can  arise in this appeal is regarding the disputed item  of Rs. 2,73,488, and we do not feel justified in accepting this technical objection and debarring the appellant from  urging that this item is taxable. Now,  coming to the merits of the submission of Mr.  Sastri, we  find  that  the  Rajasthan High  Court  has  omitted  to consider the question of the taxability of this item.   This item  was  exempted  by the  Appellate  Tribunal.   In  this connection the Appellate Tribunal observed as follows :               ".  . but the assessee would not be liable  to               tax  in respect of goods sold by the  assesses               to  the purchasers on railway receipts in  the               names  of  consignees.  In  respect  of  these               goods,  the  delivery  of  the  goods  was  in               Bhilwara,  the goods were  appropriated  there               and not in British India and the title in  the               goods  had passed in the Indian State and  not               in   British  India.   The  assessee   cannot,               therefore, be assessed on the amounts received               by  the  assessee from consignees  on  railway               receipts  in the names of the consignees.   It               is true that the consignees did pay the  price               of  the  goods to the  assessee’s  bankers  in               British  India  but  thereby  the  bankers  in               British  India  had become the agents  of  the               consignees and not the agents of the assessee.               In  this view of the matter the  inclusion  of               the receipts on railway receipts addressed  to               the  consignees cannot be justified.   In  the               assessment  years 1944-45 and 1945-46 none  of               the  railway receipts was in the name  of  the               consignees.    The  sales  were   on   railway               receipts in the name of self or were in  cash.               It  was  only in the assessment  year  1943-44               that the railway receipts were in the name  of               the  consignees and they were to the  tune  of               Rs. 2,73,488.  The amount will, therefore,  be               excluded  from  the  total  receipts  of   Rs.               12,62,911."                                     37               The  High  Court  noticed  exclusion  of   Rs.               2,73,488 in these words :               ,,The Tribunal also found that it was only  in               the assessment years 1944-45 and 1945-46  that               sales  were  effected by assessee  on  railway               receipts  in the names of the  consignees  and               that such sales amounted to Rs. 2,73,488.  The               Tribunal   accordingly   deleted   from    the               aggregate  amount sales of Rs.  12,72,911  and               Rs.  2,73,488 obviously treating  the  amounts               deleted as not liable to tax." Apparently the mention of 1944-45 and 1945-46 is a  clerical mistake  and we should read it as 1943-44.  Apart  from  the above  words, we do not find any reference to the figure  of Rs. 2,73,488 in the rest of the judgment.  Further, the main reasoning  of  the  High Court concerns  the  items  of  Rs. 1,14,687  in  the year 1945-46 and Rs. 3,55,289  during  the year  1946-47.   These  amounts had  been  received  by  the assessee  by  discounting  hundies  with  the  Bharat  Bank, Bhilwara,  and  the  Rajasthan  High  Court  held  that  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

assessee was liable to tax in respect of these items not  on receipt basis but on accrual basis.  The item of Rs.2,73,388 was  not realised in Bhilwara by discounting of hundies  but in other circumstances. Two courses are open to us in this appeal; either we  should on  the  material  here on the  record  decide  whether  Rs. 2,73,488  is taxable or not or remand the case to  the  High Court  for  decision.  We have decided to  take  the  latter course because the relevant facts in respect of this item of Rs. 2,73,488 are not clear and the counsel for the  assessee and  for  the revenue have not been able to agree  upon  the facts  on which we should decide this question.   We  regret having  to  adopt  the latter  course  because  this  appeal concerns the assessment year 1943-44 and it is now 1965; but under the circumstances we have no choice except to send the case back to the High Court. We  may mention, however, that Mr. Desai contends before  us that  the  facts are clear and he relies  on  six  documents which are printed in the paper book, namely :-               (1) The Contract form--Annexure Ex."T";               (2)   Copy  of  the postcard  from  Shiv  Nath               Radha  Krishna  Somani, Beawar, to M./s  Mewar               Textile               38               Mills,  Bhilwara, dated March 7,  1942-Annxure               Ex. ’U’;               (3)   Copy of the advice from Umedmal Abheymal               Ajmer  to Mewar Textile Mills, dated March  7,               1942-Annexure Ex.  ’V’;               (4)   Copy  of the despatch instructions  from               Shiv  Nath Radha Krishna Beawar to  M/s  Mewar               Textile Mills Ltd.  Bhilwara, dated March  11,               1942; Annexure Ex. ’W’;               (5)   Copy  of  letter to M/s  Shivnath  Radha               Krishna Beawar, dated March 12, 1942, Annexure               Ex.  ’X’; and               (6)   Copy  of the Journal Entry in the  Books               of the Mills of Rs. 9,000 Annexure Ex.  ’Y’. He  invites us to treat these documents as a sample  of  the manner  in which the goods were sent from Bhilwara,  to  the consignee  in British India and the amount of  Rs.  2,73,488 was received.  But we notice that these very documents  were filed  as annexures to the assessee’s application under  s. 66(1) of the Act in respect of questions other than question No. 2, which was referred by the Tribunal at the instance of the appellant and, therefore, we feel a doubt whether  these documents could safely be treated as relating to the item of Rs. 2,73,488. Before  we conclude we must mention a matter  of  procedure. The  Appellate  Tribunal  at the instance  of  the  assessee attached a number of documents to the statement of the case, including the six documents mentioned above, but we find  no mention of these documents either in the Appellate Order  of the  Appellate Tribunal or in the body of the  statement  of the  case.   We  feel that it is  not  consistent  with  the advisory jurisdiction of a High Court under the Act that the Appellate  Tribunal  should attach to the statement  of  the case documents, other than the proceedings of the Income Tax authorities, which are not mentioned and discussed either in its  own appellate order or in the statements of  the  case. Suppose  a  dispute  arises as to the  interpretation  of  a document which is annexed in the manner above mentioned.  If the  High  Court decides the dispute it  would  be  deciding questions  not decided by the Tribunal, and which  the  High Court  would  be incompetent to decide,  Linder  the  Indian

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

Income Tax Act. 39 In  the result we accept the appeal, set aside the order  of the  High Court of Rajasthan as far as the  assessment  year 1943-44 is concerned and remand the case to the High  Court. The  High Court will dispose of the reference in  accordance with  law.  In view of the circumstances of the case,  there will be no order as to costs. Appeal allowed. 40