1. Dispute over whether sale proceeds were received in British India — Reference to High Court under Section 66, Income-tax Act, 1922 — Remand for supplementary statement. (Para 2 , 3 , 6 , 8 , 11 , 12 )
Back
Next 
1965 Supreme(SC) 28
SUPREME COURT OF INDIA
8th February 1965
P.B. GAJENDRAGADKAR, C.J.I., K. SUBBA RAO, K.N. WANCHOO, M. HIDAYATULLAH, J.C. SHAH, S.M. SIKRI AND R.S. BACHAWAT, JJ.
The Keshav Mills Co. Ltd., Petlad, Appellant
Versus
The Commissioner of Income-tax, Bombay North, Ahmedabad, Respondent.
Civil Appeal No. 1017 of 1963.
Advocates appeared
Mr. N. A. Palkhivala, Senior Advocate (Mr. I. N. Shroff, Advocate, with him), for Appellant; Mr. C. K. Daphtary, Attorney- General for India, (Messrs R. Ganapathy Iyer, R. H. Dhebar and R. N. Sachthey, Advocates, with him), for Respondent.
Advocates:
C.K.DAFTARY, I.M.SHROFF, N.A.PALKHIWALA, R.Ganapathy Iyer, R.H.Dhebar, R.N.SACH
C.K.DAFTARY, I.M.SHROFF, N.A.PALKHIWALA, R.Ganapathy Iyer, R.H.Dhebar, R.N.SACH
Section 66(4) of the Indian Income-tax Act, 1922, empowers the High Court to direct additions or alterations to a statement of case only based on evidence already on record; it does not permit the collection of additional evidence not previously produced.
Headnote:(A) Indian Income-tax Act, 1922 - Sections 66(1), 66(2), 66(4), and 66(5) - Power of High Court to direct supplementary statement of case - Scope of Section 66(4) - High Court cannot direct the Tribunal to collect additional material or evidence not already on record. The power to make additions or alterations to the statement of case is limited to facts already forming part of the record. (Paras 14, 15, 30)
(B) Review of Judicial Precedents - Supreme Court's inherent jurisdiction to reconsider and revise its earlier decisions - Reluctance to revise unless there are compelling and substantial reasons to maintain certainty and continuity in the interpretation of law. (Paras 23, 25)
Facts of the case:
A dispute arose regarding whether certain sale proceeds were received in taxable territories. During reference proceedings, the High Court directed the Tribunal to collect additional evidence to determine if payments were sent by post. The appellant challenged this direction, contending that the High Court exceeded its jurisdiction under Section 66(4) by requiring the collection of material not previously on record.
Findings of Court:
The High Court's power under Section 66(4) is limited to requiring the Tribunal to include material and evidence already on the record but omitted from the initial statement of case. It does not extend to directing the collection of fresh evidence.
Issues: Whether the High Court, under Section 66(4) of the Indian Income-tax Act, 1922, has the authority to direct the Appellate Tribunal to collect additional evidence not already on record to determine a question of law.
Ratio Decidendi: The statutory scheme provides specific stages for adducing evidence before the tax officer, the appellate assistant commissioner, or the tribunal. Once a question of law is referred to the High Court, it must be decided based on the existing record. Allowing additional evidence at the reference stage would prolong tax proceedings interminably and contradict the legislative intent. (Paras 29, 30, 31)
Result: Appeal allowed.
Legal Category Hierarchy
Table of Contents
2. Whether Section 66(4), Income-tax Act, 1922 empowers High Court to direct Tribunal to collect additional evidence not on record or only to supplement existing record. (Para 13 , 14 , 15 , 20 , 21 , 22 )
3. Analysis of the statutory scheme of evidence collection — Evaluation of the inherent power to review previous decisions — Consideration of the impact on tax proceedings. (Para 16 , 17 , 18 , 19 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 31 , 32 , 33 )
4. Section 66(4), Income-tax Act, 1922 does not empower High Court to direct Tribunal to collect additional evidence not already on the record. (Para 30 , 34 )
5. Appeal allowed — High Court order set aside — Matter remitted to High Court for disposal in accordance with established precedents. (Para 34 )
6. Does Section 66(4) of the Income-tax Act, 1922 allow the High Court to direct the Tribunal to collect additional evidence?
No. The High Court's power under Section 66(4) is limited to requiring the Tribunal to add to or alter the statement of case based on material and evidence already on the record; it cannot direct the collection of new evidence. (Para 14 , 15 , 30 , 34 )
7. Under what circumstances will the Supreme Court reconsider and revise its own earlier decisions?
The Court will reconsider earlier decisions only when there are compelling and substantial reasons, such as the decision being clearly erroneous or necessary for the public good, to maintain certainty and continuity in the interpretation of law. (Para 23 , 25 )
8. What constitutes a question of law arising out of a Tribunal's order under Section 66?
A question arises out of the order if it was raised and dealt with by the Tribunal, raised but not dealt with, or not raised but dealt with by the Tribunal. (Para 18 , 19 )
Judgment
GAJENDRAGADKAR, C.J.I.: When this appeal was argued before a Division Bench of this Court on October 23, 1964, it was urged on behalf of the appellant, the Keshav Mills Co. Ltd., that in view of the present decisions of this Court in The New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax , (1960) 1 SCR 249: and The Petlad Turkey Red Dye Works Co. Ltd. v. Commr. of Income-tax , (1963) Supp 1 SCR 871: the appeal must be allowed and the case sent back to the Bombay High Court for disposal in accordance with the principles laid down in the latter decision. At that stage, the learned Attorney-General for the respondent, the Commissioner of Income-tax, Bombay North, Ahmedabad, urged that he wanted this Court to reconsider the said two decisions. He fairly conceded that if the said two decisions were to be followed, the appeal would have to be allowed and sent back as suggested by the appellant. The learned Judges constituting the Division Bench took the view that an opportunity should be given to the learned Attorney-General to press his contention, and so, they directed that the appeal be placed before a Bench of five Judges. Thereafter, this appeal came on for hearing before the Constitution Bench on November 5, 1964. On this occasion again, the same contentions were raised on behalf of the appellant and the respondent, respectively. Mr. Palkhivala for the appellant urged that it would be inappropriate to reconsider the recent decisions on which he relied, and he argued that on the merits, the view taken by this Court in the said two decisions was sound and correct. On the other hand, the learned Attorney-General contended that he wanted this Court to reconsider the said two decisions, and he pointed out that the matter was of importance, and so, the appeal should be referred to a larger Bench in view of the fact that the decision in the case of the Petlad Co. (1963) Supp 1 SCR 871(supra) was unanimous decision of a Bench consisting of five Judges of this Court. It was under these circumstances that the Court directed that the appeal should be placed before a Special Bench of seven Judges. That is how it has come on for a final decision before a Bench of seven Judges; and the only point which has been raised for the decision of the Special Bench is whether the two decisions in question should be reviewed and revised.
2. Let us begin by stating the relevant facts leading up to the main point of controversy between the parties. The appellant is a company registered in the Baroda State as it then was. The assessment year with which the proceedings giving rise to this appeal are concerned is 1942-43 (the accounting year being calendar year 1941). During the said year, the appellant was a non-resident. It carried on business manufacturing and selling textile goods in the Baroda State. The operations in relation to all sales of goods manufactured by the appellant s Mill were completed at the appellant s premises at Petlad on the footing of ex-Mill delivery in every case.
3. It appears that on March 22, 1947, the Income-tax Officer, E.P.T. Circle, Ward B. Ahmedabad, passed an order under Ss.23 (3) and 34 of the Indian Income-tax Act, 1922 (No. 11 of 1922) (hereinafter called the Act ) and held that sale proceeds in respect of the sales aggregating each of the following three items were received by the appellant in British India. These items were:
(i) Sale-proceeds actually received in the accounting Year through M/s. Jagmohandas Ramanlal and Co. Rs. 12,68,460
(ii) Sale-proceeds through British Indian Banks through Drafts Rs. 4,40,878
(iii) Sale proceeds collected by collecting cheques on British Indian Banks and Hundis on British Indian Shroffs and Merchants Rs. 6,71,735
It is with this last item that the present appeal is concerned.
4. Aggrieved by the order thus passed by the Income-tax Officer, the appellant preferred an appeal before the Appellate Assistant Commissioner of Income-tax, Ahmedabad Range. The Appellate Au
