A question that has not been raised before or decided by the Tribunal cannot be held to arise out of its order and cannot be referred to the High Court under Section 66(2) of the Income Tax Act, 1922.

JUDGMENT :

J.C. Shah, J.

1. Messrs T.D. Kumar & Bros. (Private) Ltd. hereinafter called "the Company" was incorporated in 1923 under the Indian Companies Act, 1913. The paid-up capital of the Company was Rs. 1,02,000 representing 1020 shares of Rs. 100 each. The entire share-capital was held by three persons who may be called "Kumars". Between September 19 to November 14, 1952 the shareholding of Kumars was transferred to five persons who may be called "Ghoshes", and as a part of that scheme for transfer of the shares, investments of the Company of the value of Rs. 1,01,000 odd were transferred to Kumars and the company purchased 400 shares of Messrs East India Housing and Land Development Trust Ltd. hereinafter called "the Trust" held by two out of the five Ghoshes at the rate of Rs. 257-4 per share. The Company sold the shares of the Trust to Messrs Chandoo Lall a registered share-broker at the rate of Rs. 60 per share, and the latter in their turn sold the shares to Bijan Mohan Kundu at the rate of Rs. 61 per share.

2. In proceedings for assessment for Assessment Year 1953-54 the Company claimed that it suffered a total loss of Rs. 76,241 in the transactions of purchase and sale of shares. The Income Tax Officer disallowed the claim and the order was confirmed by the Appellate Assistant Commissioner. In appeal, the Income Tax Appellate Tribunal held that the transaction of purchase and sale of the shares of the Trust was not a part of the Company's business and on that account must be regarded as a loss in the nature of capital and cannot be set off against the Company's profits. The Tribunal at the same time observed that they did not propose to express any opinion on the genuineness or otherwise of the transaction relating to the purchase and sale of the shares of the Trust.

3. During the pendency of proceedings for assessment of income, the Income Tax Officer, Companies District IV, Calcutta, initiated proceedings under Section 28(l)(c) of the Indian Income Tax Act, 1922, and passed an order on September 29, 1955, imposing upon the Company a penalty of Rs. 42,000. In the view of the Income Tax Officer there was "overwhelming proof that the Company had neither purchased nor sold the shares of the Trust". The Appellate Assistant Commissioner in appeal confirmed the order imposing penalty. The Tribunal in second appeal held on a review of the evidence that the Company had failed to substantiate their claim that any sale of the shares of the Trust had at all been effected. There was, in the view of the Tribunal, deliberate fabrication of accounts in recording the sales and that in the circumstances of the case, "imposition of penalty under Section 28(1)(c) was undeniably called for". The Tribunal however reduced the penalty to Rs. 25,000. The Company then applied that a statement of the case be drawn up and the following questions be referred under Section 66(1) of the Income Tax Act, 1022, to the High Court of Calcutta as arising out of the order of the Tribunal:

"(1) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal had evidence or material for the finding that there was deliberate fabrication of the accounts by the assessee Company in order to claim the loss in the return and the imposition of penalty upon the Company under Section 28(1)(c) of the Act is proper and valid?

(2) Whether in view of the finding of the Tribunal, in the appeal against the assessment, that the transaction was not a trading transaction of the Company, the Company could be made liable for penalty under Section 28(1)(c) of the Act?"

The Tribunal rejected the application. They observed that in the proceedings for imposition of penalty they had to consider whether the Company had concealed the particulars of its income or had deliberately furnished inaccurate particulars of such income so as to attract liability to pay penalty provided for in Section 28(1)(c) of the Income Tax Act, and that no question of law arose