K.T.M.S. Mahamood Vs. Commissioner of Income Tax - Court Judgment

Thanikkachalam, J.

1. TCMP No. 693 of 1996 is filed by the assessee under s. 151 of the CPC for condoning the delay of 77 days in filing the restoration petition, TCMP No. 692 of 1996.

2. TCMP No. 692 of 1996 is also filed under s. 151 of the CPC to set aside the order of dismissal in TC No. 1117 of 1984, dt. 8th August, 1996, and restore the same for re-hearing.

3. TC No. 1117 of 1984 [CIT vs. K. T. M. S. Mahmood was disposed of on 8th August, 1996. Inasmuch as the counsel for the assessee/respondent was not present on the date of hearing, the reference was heard and answered, with the assistance of the learned Senior Standing Counsel appearing for the Department and also after perusing the records carefully. In the result, the question referred was answered in the negative and in favour of the Department only to the extent of the addition of Rs. 4,28,713. It is thereafter the abovesaid two TCMPs. were filed before this Court under s. 151 CPC to condone the delay of 77 days in filing the restoration petition as well as for setting aside the order of dismissal in TC No. 1117 of 1984, dt. 8th August, 1996 and to restore the reference for rehearing. These two TCMPs. were filed by a counsel, who has not entered appearance on behalf of the assessee in TC No. 1117 of 1984.

4. The petitioner in the abovesaid two TCMPs, submitted that originally M/s. N. C. Ananthachari and N. C. Rangesh, Advocates were appearing on behalf of the assessee in the tax case. Mr. N. C. Ananthachari left the practice and Mr. N. C. Rangesh went abroad and settled there. The petitioner/assessee came to know about the result in the tax case through a letter written by an Advocate Mr. K. C. Rajappa, who was engaged in a writ petition filed by the petitioner herein, which advocate was said to be engaged by M/s. N. C. Ananthachari and N. C. Rangesh, Advocates. It is thereafter the petitioner moved the Supreme Court with a Special leave petition, S.L.P. (Civil) No. 20503 of 1996 wherein the Supreme Court, upon hearing counsel, passed the following Order :

'Learned counsel for the petitioner states that he will move the High Court for appropriate orders to rehear the reference. He applies for liberty to withdraw the SLP. The SLP is dismissed as withdrawn'.

5. Thereafter the petitioner herein approached this Court by way of the abovesaid two TCMPs, stating that the Supreme Court permitted the petitioner herein to move the High Court for appropriate orders to rehear the reference. Therefore, the counsel for the petitioner submitted that in view of the permission given by the Supreme Court this Court can condone the delay in filing the petition to set aside the earlier order passed by this Court in TC No. 1117 of 1984 and restore the same so as to enable the counsel for the petitioner to make his submissions on merits.

6. On the other hand, the learned senior standing counsel appearing for the Department respondent herein submitted as under :

This Court is sitting in the matter of reference under s. 256 of the IT Act, 1961. Therefore, the petition under s. 151 CPC to set aside the order passed by this Court in TC No. 1117 of 1984 is not competent. Further it was stated that there is no provision in the IT Act to condone the delay in filing the petition to set aside the order passed by this Court in TC No. 1117 of 1984. It was further submitted that Limitation Act also will not be applicable to tax case reference. According to the learned senior standing counsel any application before this Court should be filed under s. 256 of the IT Act. According to the learned senior standing counsel no reasonable cause was shown for the absence of the counsel appearing for the petitioner herein on 8th August, 1996 when the tax case was taken up for hearing. According to the learned senior standing counsel the tax case appeared in the monthly list relating to the month of July, 1996 and thereafter the case was appearing in the monthly list relating to the month of August, 1996. The tax case was posted for hearing in the list for more than one occasion and since on 7th August, 1996 when the counsel for the respondent therein/assessee were not present, the matter was posted in the list on 8th August, 1996 under the caption 'for orders'. The learned senior standing counsel further submitted that the assessee was diligent enough to engage a fresh counsel in a writ petition filed by him when the earlier counsel, who were engaged by him, were not in a position to appear in his case. The assessee could have shown the same diligence in the tax case also by engaging another counsel when he comes to know that his earlier counsel were not in a position to appear for him. The learned senior standing counsel also submitted that in a tax case there is no question of dismissing the tax case. The result would be either answering the question or returning the question unanswered. Therefore filing of petition under s. 151 of the CPC to set aside the order passed by this Court in a tax case is not competent. Therefore according to the learned senior standing counsel when this Court was exercising its advisory jurisdiction in giving opinion over the question referred to it in a tax case under s. 256 of the IT Act, it is not possible to review its earlier order passed in a tax case, answering the question referred to it. It was, therefore, submitted that the petitions filed by the assessee herein are liable to be dismissed.

7. We have heard both the learned counsel appearing for the assessee as well as the learned senior standing counsel appearing for the Department.

8. The fact remains that TC No. 1117 of 1984 was disposed of on 8th August, 1996, answering the question referred to this Court in the negative and in favour of the Department. The tax case was listed in the Board relating to the month of July, 1996. Again the tax case was appeared in the monthly, list of August, 1996. On 7th August, 1996 when the matter reached, the counsel for the assessee were not present. Hence the matter was posted for hearing on the next date, viz., on 8th August, 1996. Even on 8th August, 1996 the counsel for the assessee were not present. The tax case was heard with the assistance of the learned senior standing counsel appearing for the Department and after perusing the records carefully, the question was answered by this Court.

9. According to the assessee the earlier counsel engaged by him in the tax case were unable to be present in Court since the senior counsel left the practice and the junior counsel went abroad and settled down there. It remains to be seen that the same assessee in a writ petition filed by him through a counsel, who were appearing in this tax case engaged a fresh counsel for conducting the writ petition. The same diligence should have been shown by the assessee in engaging a fresh counsel for the purpose of conducting the tax case before this Court. That was not done in this case. According to the assessee he came to know about the result of the tax case only through a letter written by a counsel, who was engaged by the earlier counsel in the writ petition. The same counsel could have done the same arrangement for the tax case also. That was also not done in this case.

10. The Limitation Act will not be applicable to a tax case filed before this Court under s. 256 of the IT Act. The limitation for filing a tax case petition or a tax case is already stated in the IT Act, 1961. Further, in the notice prescribed under r. 6(a) in Form A under the Appellate Side Rules, 1965, it is clearly stated in default of the appearance of the assessee, the said reference will be heard and determined in his absence. It is also significant to note that the Limitation Act, 1963, will not be applicable in filing the tax cases. If the Limitation Act is applicable, then we have got to see whether there is any reasonable cause for condoning the delay. Inasmuch as the Limitation Act is not applicable to tax case reference, further probe into this matter does not arise. Under s. 256 of the IT Act, 1961, this Court is functioning with advisory jurisdiction in giving opinion on the question referred to it. Therefore, dismissal of a tax case does not arise in this case. This Court under s. 256 of the IT Act, 1961, can either answer the question referred to it or return the question unanswered. Under such circumstances, setting aside the order of dismissal in a tax case under s. 151 CPC is also not in accordance with the provisions contained in the IT Act 1961.

11. According to the assessee, the Supreme Court permitted him to move this Court for appropriate orders to rehear the reference. A perusal of the order passed by the Supreme Court, dt. 28th October, 1996 in SLP (Civil) No. 20503/96 would go to show that the learned counsel appearing for the petitioner therein stated before the Supreme Court that he will move the High Court for appropriate orders to rehear the reference. He also sought for liberty to withdraw the SLP. Accordingly, the SLP, was dismissed as withdrawn.

12. In order to support his contention, the learned counsel appearing for the assessee relies upon the decision of the Supreme Court in Jaipur Mineral Development Syndicate vs . CIT : [1977]106ITR653(SC) , wherein the Supreme Court held as under :

'A party or its counsel may be prevented from appearing at the hearing of a reference for a variety of reasons. In case such a party shows, subsequent to the order made by the High Court declining to answer the reference, that there was sufficient reason for its non-appearance, the High Court has the inherent power to recall its earlier order and dispose of the reference on merits. There is nothing in any of the provisions of the Indian IT Act, 1922, either expressly or by necessary implication, which stands in the way of the High Court from passing an order for disposal of the reference on merits. The High Court should not be loath to exercise the inherent power of recalling an earlier order provided that the party concerned approaches the Court with due diligence and shows sufficient cause for its non-appearance on the date of hearing.

Held also, on the facts, that there was sufficient cause for non-appearance on the date of the hearing as well as non-filing of the paper books within time, and that there was no lack of diligence on the part of the appellant in approaching the High Court for recalling its earlier order'.

13. According to the facts arising in the abovesaid decision, the High Court passed an order, declining to answer the reference because the appellant had not put any appearance and had also not filed the paper book. In a matter while the High Court unanswered the question and returned the reference it is possible to recall such an order and rehear the reference, but in a case where the High Court on merits answered the question referred to it in the absence of the counsel for the assessee, it is not possible to recall the said order, since that would amount to reviewing its earlier decision which is not possible under the provisions of the IT Act, 1961. Even in the abovesaid decision, the Supreme Court pointed out that there is nothing in any of the provisions of the Indian IT Act, 1922, which either expressly or by necessary implication stands in the way of the High Court from passing an order for disposal of the reference on merits. Further, in the present case, the tax case was filed by the Department and the Department was ready on the date of hearing to argue its case. In such circumstances, this Court cannot prevent the Department from arguing its case while the counsel for the assessee did not appear even though the tax case appeared in the monthly list and finally posted for orders on 8th August, 1996. Therefore, the decision rendered in : [1977]106ITR653(SC) (supra) would render no assistance to the assessee for seeking the relief of recalling of the order passed on 8th August, 1996.

14. Learned counsel appearing for the assessee also relied upon the decision of the Supreme Court in CIT vs . Bansi Dhar & Sons : [1986]157ITR665(SC) , wherein the Supreme Court held as under :

'It has to be borne in mind that in answering questions or disposing of reference either under s. 66 of the 1922 Act or s. 256 of the 1961 Act, the High Courts do not exercise any jurisdiction conferred upon them by the CPC or the Charters or by the Acts establishing the respective High Courts. In respect of certain matters, jurisdiction exercised by the High Court must be kept separate from the concept of inherent powers or incidental power in exercising jurisdiction under s. 66 of the 1922 Act or s. 256 of the 1961 Act. Sec. 66 of the IT Act, of 1922 or s. 256 of the IT Act, of 1961 is a special jurisdiction of a limited nature conferred not by the CPC or by the Charters or by the special Acts constituting such High Courts but by the Special provisions of the IT Acts of 1922 or 1961 for the limited purpose of obtaining the High Court's opinion on questions of law. In giving that opinion properly, if any question of incidental or ancillary power arises such as giving an opportunity or restoring a reference dismissed without hearing or giving some additional time to file the paper book, such powers inhere to the jurisdiction conferred upon it. But such incidental powers cannot be so construed as to confer the power of stay of recovery of taxes pending a reference which lie in the domain of an appellate authority. Therefore, the concept of granting stay in a reference ex debito justitiae does not arise. The concept might arise in the case of the appellate authority exercising its power to grant stay where there is no express provision. Ex debtio justitiae is to do justice between the parties'.

According to the learned counsel appearing for the assessee this decision would support the assessee's case in recalling the order passed in the tax case and rehearing the assessee under incidental or ancillary power conferred upon this Court under s. 256 of the IT Act, 1961. It is significant to note that even in the abovesaid decision the Supreme Court pointed out that such incidental or ancillary power can be exercised only to restore a reference dismissed without hearing. According to the facts arising in the present case, the tax case was not dismissed, but the question referred to the High Court was answered in the negative and in favour of the Department. Therefore, the question of recalling the order passed by this Court in the tax case on merits does not arise, since such a power can be said to be neither incidental nor ancillary. Therefore, this decision also would not be applicable to the facts arising in the present case.

15. Reliance was also placed upon the Full Bench decision of the Kerala High Court in K. Ahamad vs . CIT : [1974]96ITR29(Ker) (FB), wherein the Kerala High Court held as under :

'... that in the answer to the reference it was held that, in the circumstances of the case, for the year of assessment 1963-64, the Explanation was applicable. That was all that was meant and said. But, unfortunately a sentence had crept in due to an accidental slip or omission or carelessness which had given rise to much trouble subsequently. It was not decided that the assessee was liable to be penalised. The Court never dealt with the question as to whether, as required by the Explanation to the section, extenuating circumstances existed or whether they were sufficient. In those circumstances, the interpretation placed on the sentence was thoroughly unjustified, and the position had to be clarified. The sentence must disappear from the judgment in the interest of justice for which alone Courts have been constituted. There was no law which precluded the Court from doing so. If there are accidental errors or omissions, the High Court as a Court of review has the jurisdiction to correct those errors and rectify those omissions. The principle is that no act of a Court shall even injure a party'.

According to the abovesaid decision, if there are incidental errors or omissions, the High Court as a Court of review, has the jurisdiction to correct those errors and rectify those omissions. But, in the present case, no such error or accidental omission is pointed out so as to enable this Court to correct the same by reviewing the earlier order passed by this Court. Accordingly, this decision also will not support the contention put forward by the assessee in this case.

16. Our attention was also drawn to the decision of the Allahabad High Court in Lakshmi Industries & Cold Storage Co. (P) Ltd. In re : [1980]124ITR828(All) . According to the facts arising in that decision, the name of the counsel appearing for the assessee does not find a place in the cause list. Therefore, the Allahabad High Court came to the conclusion that the decision rendered by the High Court without hearing the counsel for the assessee would amount to a nullity for want of notice to the assessee. But that is not the case here. So this decision also will not help the assessee to contend that the order passed by this Court in the tax case is liable to be set aside. Thus, considering the facts arising in this case, in the light of the judicial pronouncements cited supra, we hold that the abovesaid two tax civil miscellaneous petitions filed by the assessee under s. 151 of the CPC are not maintainable and therefore they are dismissed.