The judgment of the court was delivered by
SABYASACHI MUKHARJI C. J. I. -This is a petition under
article 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 January 31,
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.
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 October 9, 1968, 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 sources applying the
provisions of section 69A 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 came to the conclusion that the car belonged to the assessee and
the special places of concealment had been provided by a 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 assessee
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 Income-tax Officer
but deleted by the Appellate Assistant Commissioner was restored. The additional
ground raised by the Revenue that the appeal is not maintainable before the
Appellate Assistant Commissioner was rejected. The assessee, thereafter, filed a
miscellaneous petition for rectification of the order of the Tribunal. The
rectifications sought to be made are :
(1) business loss to the tune of Rs. 20,00,000 incurred by
the asses see 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 May 8, 1980, and
reported in [1980] 124 ITR 40;
(2) the income-tax and special surcharge amounting to Rs.
16,19,395 and Rs. 20,00,000 ; and
(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 the record. These points had not been raised by way of
cross-appeal or cross-objections. Thereafter, the assessee filed a petition
under section 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 the facts and circumstances of the case,
the Tribunal 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 Tribunal and that as such
they did not arise out of the order of the Tribunal. Aggrieved by these two
orders, one being refusal by the Tribunal to refer the question as aforesaid
under section 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 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 assessee's further
contention was that, in view of the decision of this court in CIT v. Piara Singh
[1980] 124 ITR 40, even if Rs. 20 lakhs could be treated as the income of the
assessee 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 application 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 CIT v. Scindia Steam Navigation Co. Ltd. [1961]
42 ITR 589, wherein this court, at page 612, had observed as follows:
"Section 66(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
CIT v. Ogale Glass Works Ltd. [1954] 25 ITR 529 and in Zoraster and Co. v. CIT
[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.
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 connection, it is necessary to emphasise that, in
framing questions, 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 contentions 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 advanced, 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:
"The source of the question must be the order of the
Tribunal 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 cases :
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 questions 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 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 [1980] 124
ITR 40, 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 substantially
a different question, namely, whether an amount is a business loss even assuming
that it was income. It is possible and conceivable to consider two different
questions, namely, whether a certain sum of money is the income of the asses
see, 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
the determination of whether an amount should be treated as income and the
considerations which are relevant to determine whether, even assuming that that
was income, the amount was deductible, are different. The question in this form
was not canvassed before the Tribunal at any point of time, even as an
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
total income of Rs. 9,571. 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 gold was not owned by him which onus the petitioner had failed to discharge.
The Tribunal had gone into and adjudicated on 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 [1961] 42 ITR 589.
In the facts and circumstances of he case, the Tribunal
and the High Court have taken the view that whether a 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 questions 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 [1961] 42
ITR 589.
In the background of the facts and circumstances of the
case, as mentioned hereinbefore, if the aforesaid view of the Tribunal and the
High Court 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
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 Court is a
possible view. The Tribunal and the High Court have borne in mind the principles
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.
