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1998 Supreme(Cal) 128
High Court Of Calcutta
Y. R. Meena, Bijitendra Mohan Mitra
COMMISSIONER OF INCOME-TAX - Appellant
Versus
SUBARNA PLANTATION AND TRADING CO.LTD. - Respondent
Income-Tax Reference 97 Of 1992
Decided On : 03/19/1998
The court's power to direct the Tribunal to state a case for a question is limited to those questions proposed by the assessee or the Department in an application under Section 256(1) or 256(2) of the Income-tax Act, 1961.
Headnote:
INCOME TAX - SECTION 256(1) AND 256(2) - QUESTION OF LAW - COURT'S POWER TO DIRECT TRIBUNAL FOR STATEMENT OF CASE - COURT CAN CONSIDER WHETHER QUESTION ARISES OUT OF TRIBUNAL'S ORDER, IS A QUESTION OF LAW OR IS ACADEMIC, UNNECESSARY OR IRRELEVANT.
Fact of the Case:
The assessee, an investment company, was subjected to a search and seizure operation. Based on the seized papers and a review of the assessment proceedings for the years 1980-81 and 1981-82, the Commissioner of Income-tax initiated proceedings under Section 263 of the Income-tax Act, 1961, finding the assessment orders passed by the Income-tax Officer to be erroneous and prejudicial to the Revenue's interests. The Tribunal, however, held that the Income-tax Officer's orders were neither erroneous nor prejudicial to the Revenue, and that the Commissioner lacked the authority to revise the merged assessment order for the year 1980-81.
Finding of the Court:
The court observed that the question reframed by it, which included the legality and validity of the Commissioner's orders under Section 263, widened the scope of the question initially proposed by the Revenue in its applications under Section 256(1) and 256(2) of the Act. The court noted that the question of merger, which was not raised in the Revenue's applications, was considered by the Tribunal as an additional reason for canceling the Commissioner's order for the year 1980-81.
Issues: 1. Whether the court has the power to direct the Tribunal to state a case for a question not proposed by the Department in an application under Section 256(1) or 256(2) of the Act? 2. Whether the court is bound to answer a question that was not proposed by the assessee or the Department in an application under Section 256(1)? 3. Whether the Tribunal was justified in holding that the Income-tax Officer's orders for the assessment years 1980-81 and 1981-82 were neither erroneous nor prejudicial to the interests of the Revenue?
Ratio Decidendi: 1. The court held that it has no power to direct the Tribunal for the statement of a case on a question that was not proposed by the assessee or the Department in an application under Section 256(1) or 256(2) of the Act. 2. The court is not bound to answer a question that was not proposed by the Revenue or assessee in an application under Section 256(1) and can consider whether to return the question without an answer. 3. The Tribunal's finding that the Income-tax Officer's orders for the assessment year 1980-81 were neither erroneous nor prejudicial to the interests of the Revenue was upheld by the court. However, the court answered the question in the negative for the assessment year 1981-82, holding that the Tribunal was not justified in its finding.
Final Decision: The court declined to answer the question regarding the legality and validity of the Commissioner's orders for the assessment year 1980-81, deeming it an academic exercise due to the merger of the Income-tax Officer's order with the Commissioner of Income-tax (Appeals). For the assessment year 1981-82, the court answered the question in the negative, upholding the Commissioner's revision of the Income-tax Officer's order under Section 263 of the Act.
( 1 ) AS per directions of this court, on an application under Section 25g (2) of the Income-tax Act, 1961, the Tribunal was directed to refer the following question for our opinion :"whether, on the facts and in the circumstances of the case, the orders passed by the Commissioner of Income-tax under Section 265 of the Income-tax Act, 1961, relevant to the assessment years 1980-81 and 1981-82 are legal and valid ?"the assessee-company derives its income from business as an investment company. The assessment years involved are 1980-81 and 1981-82.
( 2 ) THE original assessment for the above assessment years were completed on December 22, 1982 and March 23, 1983, respectively. In a search at the premises of the assessee on September 23, 1983, certain papers were seized and on the basis of those papers and on a perusal of the assessment proceedings for the above referred years, the Commissioner of Income-tax had initiated proceedings under Section 263 of the Act, he found that the assessment orders passed by the Income-tax Officer for these years are erroneous and prejudicial to the interests of the Revenue. That order of the Commissioner of Income-tax under Section 263 has been challenged by the assessee before the Tribunal. The Tribunal has given a categorical finding that neither the order of the Income-tax Officer was erroneous nor prejudicial to the interests of the Revenue. One more reason has been given by the Tribunal that the order of the Income-tax Officer for the assessment year 1980-81 that order of the Income-tax Officer merged with the order of the Commissioner of Income-tax (Appeals ). Therefore, thereafter the Commissioner of Income-tax has no power to revise the assessment order under Section 263 of the Act which has already merged with the order of the Commissioner of Income-tax (Appeals ).
( 3 ) ON a reference application under Section 256 (1) of the Income-tax Act, 1961, the following question was proposed for reference to the Tribunal :"whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the Income-tax Officer, while completing the assessment for the assessment years 1980-81/1981-82 committed no error prejudicial to the interests of the Revenue and in that view cancelling the order of the Commissioner of Income-tax passed under Section 263 of the Income-tax Act, 1961 for the assessment year1980-81/1981-82 ?"the Tribunal by its order dated January 19, 1987, rejected the application on the ground that the Income-tax Officer had applied his mind while making the assessment and had allowed the amount in question correctly and whether the claim was allowed rightly or not, was a question of fact. For the assessment year 1980-81, the application was also rejected on the ground that when the order of the Income-tax Officer was merged with the order of the Commissioner of Income-tax (Appeals), the Commissioner of Income-tax thereafter had no authority to revise that order and that reasoning has not been challenged in the form in the application under Section 250 (1) or (2) question. Therefore, the reference for 1980-81 on the ground whether the Tribunal was justified in holding' that the order of the Income-tax Officer was neither erroneous nor prejudicial to the interests of the Revenue, becomes a question of academic interest.
( 4 ) AN application has been moved under Section 256 (2) of the Income-tax Act before this court and the question which was proposed, in the application under Section 256 (1) was again proposed in the application under Section 256 (2 ). It is also brought to our notice that none appeared for the parties when the application was listed before this court for hearing of rule, On an application under Section 256 (2), this court has refrained the question as follows :"whether, on the facts and in the circumstances of the case, the orders passed by the Commissioner of Income-tax under Section 263 of the Income-tux Act, 19
