Commissioner of Income Tax Vs. Saatal Kattha and Chemicals (P) Ltd. - Court Judgment

Excerpt:
- constitution of india 1055. article 141; [a.k. patnaik, c.j., dipak misra, abhay gohil, s. samvatsar, & s.k. gangele, jj] dismissal of slp arising from decision of high court whether binding precedent decision of division bench in rama and company v. state of madhya pradesh, [2007(ii) mpjr 229] overruled by full bench of same high court prior to delivery of decision of full bench order passed in division bench decision assailed in slp before supreme court dismissal of slp by short reasoned order, though declaration of law, but high court is bound to follow earlier decisions in field regard being had to concept of precedents as per law laid down by apex court and larger bench decision in jabalpur bus operators association, reported in [2003(1) mpjr 158]. court clarifies that dr. jaidev siddha v. jaiprakash siddha, 2007(2) mpjr (fb) 361; air 2007 mp 269 (fb) is not impliedly overruled in view of dismissal of slp articles 226 & 227; [a.k. patnaik, c.j., dipak misra, abhay gohil, s. samvatsar, & s.k. gangele, jj] power to issue writ under article 226 - [per majority] the high courts exercise original jurisdiction under article 226 of the constitution and supervisory jurisdiction and the power of superintendence under article 227 of the constitution. but, an eloquent and fertile one, a writ of certiorari is issued in exercise of original jurisdiction. whenever word supervisory has been used in the context of article 226 it is in contrast with the appellate or revisional jurisdiction. when a writ is issued under article 226 of the constitution in respect of courts or tribunals it is done in exercise of original jurisdiction and the parameters are different than article 227 of the constitution of india. it is worth noting that the power under article 227 was there in a different manner under the government of india act. power of superintendence is distinct from the exercise of power of revisional or supervisory jurisdiction which is a facet of the power of superintendence. the confusion occurs when one applies the principle of equivalence or equates the exercise of supervisory power and power of superintendence with original or supervisory jurisdiction. there is an acceptable nuance between the concept of jurisdiction and exercise of power by certain parameters. both do come within the fundamental concept of judicial review but the jurisdiction exercised is different when under article 226 a writ is issued it is issued in exercise of original jurisdiction whether against a tribunal or inferior courts or administrative authorities. the word superintendence has not been used in article 226 of the constitution. it is also evident that the term writs is not referred to in article 227. on a scrutiny of article 227 it would be crystal clear that power of superintendence conferred on the high courts is a power that is restricted to the courts and tribunal in relation to which it exercises jurisdiction. on the contrary the power conferred on the high court under article 226 is not constricted and confined to the courts and tribunals but it extends to any person or authority. be it noted, article 226 as has been engrafted in the constitution covers entirely a new area, a broader one in a larger spectrum. when the legislature has used the terms in exercise of original jurisdiction and supervisory jurisdiction it has to be understood that they are used in contradistinction in the constitutional context as has been interpreted by the apex court. the words of the section have to be understood to mean exercise of powers under article 226 of the constitution of india which is always original. -- m.p. samaj ke kamjor vargon ke krishi bhumi hadapne sambandhi kuchakron se paritran tatha mukti adhiniyam [3/1977]. section 2: writ appeal maintainability from order of single judge-when permissible held, maintainability of a writ appeal from an order of the learned single judge would depend upon many an aspect and cannot be put into a strait jacket formula. it cannot be stated with mathematical exactitude. it would depend upon the pleadings in the writ petition, nature of the order passed by the single judge, character and the contour of the order, directions issued, nomenclature given and the jurisdictional prospective in the constitutional context are to be perceived. it cannot be said in a hyper-technical manner that an order passed in a writ petition, if there is assail to the order emerging from the inferior tribunal or subordinate courts has to be treated all the time for all purposes to be under article 227 of the constitution of india. it would depend upon the real nature of the order passed by the learned single judge. the pleadings also assume immense significance. it would not be an over emphasis to state that an order in a writ petition can fit into the subtle contour of articles 226 and 227 of the constitution in a composite manner and they can co-inside, co-exist, overlap or imbricate. in this context it is apt to note that there may be cases where the single judge may feel disposed or inclined to issue a writ to do full and complete justice because it is to be borne in mind that article 226 of the constitution is fundamentally a repository and reservoir of justice based on equity and good conscience. it will depend upon factual matrix of each case. dr. jaidev siddha v. jaiprakash siddha, 2007(2) mpjr (fb) 361: air 2007 mp 269 (fb) is not impliedly overruled in view of dismissal of slp preferred against order reported in rama and company v. state of madhya pradesh [2007 (2) mpjr 229 (db) (mp)]. - for this purpose the assessee-company purchased kher wood pieces from the forest department of the government of mp as well as from other parties.orders.k. kulshrestha, j.1. the above two appeals under section 260a of the it act, 1961, arise from the order dt. 18th aug., 2000 passed by tribunal in ita case no. 880/ind/1992 and ita case no. 818/ind/1992, both, for the asst. yr. 1989-90.the revenue's appeal has been admitted on the following substantial questions of law:1. whether, on the facts and in the circumstances of case, the tribunal was justified in law in confirming the order of the cit(a) thereby sustaining addition of only rs. 2,71,104 on the basis of application of gp rate even when the ao had (made) specific addition of rs. 66,57,128 and rs. 8,12,467, respectively, on account of sale of kattha and cutch outside regular books of account of the assessee ?2. whether, on the facts and in the circumstances of the case, the tribunal was justified in law in confirming the order of the cit(a) thereby sustaining addition of only rs. 2,71,104 as against addition of rs. 66,57,128 and rs. 8,12,467 made by the ao on account of sales account of the assessee ?3. whether, on the facts and in the circumstances of the case, the tribunal was justified in law in confirming the order of the cit(a) thereby upholding the application of gp rate of 25 per cent in the case of the assessee who is a manufacturer instead of the addition made by the ao on the basis of yield shown by the assessee ?the appeal of the assessee has been admitted on the following question of law:whether on the facts and in the circumstances of the case and in view of the positive finding regarding absence of any defects or discrepancies, the tribunal's decision upholding the rejection of books and application of flat gp rate is vitiated in lawsince both the appeals dwell on common facts and arguments, the appeals are being disposed of by this common order.2. the assessee is a private limited company incorporated and registered under the indian companies act, 1956 and is engaged in the business of manufacture and sale of kattha and cutch which are derived from processing kher wood. for this purpose the assessee-company purchased kher wood pieces from the forest department of the government of mp as well as from other parties. the kher wood contains raw material which is called hart wood which is obtained after stripping the trees.3. the assessee-company filed its return of income for the asst. yr. 1989-90 disclosing a loss of rs. 3,49,893. the assessment was completed by the assessing authority under section 143(3) of the act. during the course of assessment proceedings books of account, documents and registers properly maintained by the assessee in the course of regular business, were produced. however, the ao rejected the books maintained by the assessee under the provisions of section 145(2) of the it act on the ground that the assessee has not maintained quantitative records in respect of the kher wood trees on the basis of their weight, though the assessee has maintained complete quantitative details on the basis of the number of trees purchased. the ao also worked out the recovery of hart wood and determined the yield at 14.13 per cent. on the basis of the yield so determined, the ao determined the sale of kattha at rs. 6,57,128 and treated the same as undisclosed sale. he also determined the sale of cutch at rs. 8,12,467.4. aggrieved by the order of ao, an appeal was filed before cit(a), who disagreed with the findings of the assessing authority in relation to the books of account of the assessee, on the basis of the gp rate of 25 per cent sustained the addition only to the extent of rs. 2,71,104 vide his order annex. a/3. the assessee and the revenue, both challenged the order of git (a) before the tribunal. the tribunal confirmed the order of cit(a) vide annexs. a/4 and a/5. it is against this order that both the parties have filed the above appeals undersection 260a of the it act.5. in it appeal no. 7 of 2001, learned senior counsel for the revenue has submitted that since in the past year yield of kattha was much more than the yield indicated in the assessment year in question, the ao was justified in rejecting the accounts and making an addition and the cit(a) and the tribunal should not have set aside the said addition. in it appeal no. 9 of 2001, learned counsel for the assessee submits that since the log of woods purchased from the government and various other firms are not of uniform size and the yield of kattha from various logs varies for a large variety of reasons, the yield derived in the past cannot be made basis for calculating the yield of kattha of future years and therefore, on the basis of the accounts maintained by the assessee, the revenue should have accepted the yield shown. learned counsel for the assessee has also demonstrated the pieces of kher wood to substantiate his argument.6. it is not disputed that the timber (kher wood) is available in the market in various sizes and therefore the yield derive from the timber depends on length, girth and also weight of the timbers. the quality of kattha is also different. under these circumstances, merely on the basis of the number of logs purchased by the assessee, the ao could not have, on the basis of past records or any other extraneous material, calculated the yield of kattha. we are, therefore, of the opinion that the method adopted by the ao in deriving the yield of kattha from the kher wood was not a sound method. under these circumstances, the addition made capriciously was not justified. however, the addition made by the cit(a) and the tribunal in the sum of rs. 2,71,104 by applying 25 per cent rate of gp appears to be reasonable.7. in view of the above discussion, both the appeals are dismissed but with no order as to costs. a signed copy of this order be also kept in the record of it appeal no. 9 of 2001.

Judgment:
ORDER

S.K. Kulshrestha, J.

1. The above two appeals under Section 260A of the IT Act, 1961, arise from the order dt. 18th Aug., 2000 passed by Tribunal in ITA Case No. 880/Ind/1992 and ITA Case No. 818/Ind/1992, both, for the asst. yr. 1989-90.

The Revenue's appeal has been admitted on the following substantial questions of law:

1. Whether, on the facts and in the circumstances of case, the Tribunal was justified in law in confirming the order of the CIT(A) thereby sustaining addition of only Rs. 2,71,104 on the basis of application of GP rate even when the AO had (made) specific addition of Rs. 66,57,128 and Rs. 8,12,467, respectively, on account of sale of Kattha and Cutch outside regular books of account of the assessee ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming the order of the CIT(A) thereby sustaining addition of only Rs. 2,71,104 as against addition of Rs. 66,57,128 and Rs. 8,12,467 made by the AO on account of sales account of the assessee ?

3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming the order of the CIT(A) thereby upholding the application of GP rate of 25 per cent in the case of the assessee who is a manufacturer instead of the addition made by the AO on the basis of yield shown by the assessee ?

The appeal of the assessee has been admitted on the following question of law:

Whether on the facts and in the circumstances of the case and in view of the positive finding regarding absence of any defects or discrepancies, the Tribunal's decision upholding the rejection of books and application of flat GP rate is vitiated in law

Since both the appeals dwell on common facts and arguments, the appeals are being disposed of by this common order.

2. The assessee is a private limited company incorporated and registered under the Indian Companies Act, 1956 and is engaged in the business of manufacture and sale of Kattha and Cutch which are derived from processing Kher wood. For this purpose the assessee-company purchased Kher wood pieces from the Forest Department of the Government of MP as well as from other parties. The Kher wood contains raw material which is called hart wood which is obtained after stripping the trees.

3. The assessee-company filed its return of income for the asst. yr. 1989-90 disclosing a loss of Rs. 3,49,893. The assessment was completed by the assessing authority under section 143(3) of the Act. During the course of assessment proceedings books of account, documents and registers properly maintained by the assessee in the course of regular business, were produced. However, the AO rejected the books maintained by the assessee under the provisions of Section 145(2) of the IT Act on the ground that the assessee has not maintained quantitative records in respect of the Kher wood trees on the basis of their weight, though the assessee has maintained complete quantitative details on the basis of the number of trees purchased. The AO also worked out the recovery of hart wood and determined the yield at 14.13 per cent. On the basis of the yield so determined, the AO determined the sale of Kattha at Rs. 6,57,128 and treated the same as undisclosed sale. He also determined the sale of Cutch at Rs. 8,12,467.

4. Aggrieved by the order of AO, an appeal was filed before CIT(A), who disagreed with the findings of the assessing authority in relation to the books of account of the assessee, on the basis of the GP rate of 25 per cent sustained the addition only to the extent of Rs. 2,71,104 vide his order Annex. A/3. The assessee and the Revenue, both challenged the order of GIT (A) before the Tribunal. The Tribunal confirmed the order of CIT(A) vide Annexs. A/4 and A/5. It is against this order that both the parties have filed the above appeals undersection 260A of the IT Act.

5. In IT Appeal No. 7 of 2001, learned senior counsel for the Revenue has submitted that since in the past year yield of Kattha was much more than the yield indicated in the assessment year in question, the AO was justified in rejecting the accounts and making an addition and the CIT(A) and the Tribunal should not have set aside the said addition. In IT Appeal No. 9 of 2001, learned Counsel for the assessee submits that since the log of woods purchased from the Government and various other firms are not of uniform size and the yield of Kattha from various logs varies for a large variety of reasons, the yield derived in the past cannot be made basis for calculating the yield of Kattha of future years and therefore, on the basis of the accounts maintained by the assessee, the Revenue should have accepted the yield shown. Learned Counsel for the assessee has also demonstrated the pieces of Kher wood to substantiate his argument.

6. It is not disputed that the timber (Kher wood) is available in the market in various sizes and therefore the yield derive from the timber depends on length, girth and also weight of the timbers. The quality of Kattha is also different. Under these circumstances, merely on the basis of the number of logs purchased by the assessee, the AO could not have, on the basis of past records or any other extraneous material, calculated the yield of Kattha. We are, therefore, of the opinion that the method adopted by the AO in deriving the yield of Kattha from the Kher wood was not a sound method. Under these circumstances, the addition made capriciously was not justified. However, the addition made by the CIT(A) and the Tribunal in the sum of Rs. 2,71,104 by applying 25 per cent rate of GP appears to be reasonable.

7. In view of the above discussion, both the appeals are dismissed but with no order as to costs. A signed copy of this order be also kept in the record of IT Appeal No. 9 of 2001.