Andhra HC (Pre-Telangana)
Commissioner Of Income Tax vs Om Trading Co. on 24 August, 1995
Equivalent citations: (1996)132CTR(AP)514, [1996]220ITR149(AP), [1996]87TAXMAN366(AP)
Author: V. Rajagopala Reddy
Bench: V. Rajagopala Reddy
ORDER S. Parvatha Rao, J.
1. The two questions referred for the opinion of this Court in both the references are :
1. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law to hold that there was no prejudice to Revenue so as to enable the CIT to revise the assessment of the firm for the asst. yr. 1979-80 ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the payment of annuity to the widow is not an application of income of the firm but is diversion at source ?
2. In these references the assessee is the same. The learned counsel for the respondent-assessee points out that the tax involved is less than Rs. 500 and relying on the decisions of the Bombay High Court in CWT vs. Executors of Late D. T. Udeshi and of the Rajasthan High Court in CWT vs. Girdhari Lal Saraf submits that we should decline to answer the references in view of the negligible tax involved. In the Bombay case (supra) the Division Bench referred to Instruction No. 1573 issued by the Central Board of Direct Taxes ('CBDT' for short) in its Circular dt. 12th July, 1984 and Instruction No. 1764 of the CBDT in its Circular dt. 14th July, 1987 and held that the Board had taken a policy decision not to file references in cases where the tax effect was going to be less than Rs. 30,000 per year and in that view of the matter rejected the application for reference, finding that in that matter the tax effect in no year exceeded Rs. 8,500. Girdhari Lal Saraf's case (supra) is also one on reference application and relying on the decision of the Supreme Court in CGT vs. Executors & Trustees of the Estate of Late Sh. Ambalal Sarabhai wherein it was held that "the magnitude of the mechanism for refixation of the value of the gifts and the difference in the quantum of the tax it might result in, do not bear a reasonable or sensible proportion", the Rajasthan High Court held that having regard to the pecuniary involvement in that case, which was small, rejected the reference application. However, we are not concerned in the present case with reference applications. The references have already been made to this Court for the opinion of this Court on the two questions mentioned above.
3. The present references are at the instance of the Department. The learned counsel for the Department, Mr. S. R. Ashok, states that he has received instructions from the Chief CIT, Hyderabad to permit the Department to withdraw the reference cases in view of the fact that the amount of tax involved is undoubtedly very much less than Rs. 1,000.
4. In K. Ch. Venkataratnam vs. CGT , a Division Bench of this Court held as follows :
"A number of decisions have held that if a party fails to appear or to take any interest in the matter, the High Court is not bound to answer the reference and it may refuse to do so. When an applicant says that he wishes to withdraw the reference, it means that he does not take any interest in the matter within the meaning of the decisions. When an assessee makes a request to withdraw from the reference or says he is not interested in pursuing the matter, it is left to this Court, having regard to the circumstances of the case, either to accede to his request and decide not to answer the reference or to proceed to answer the reference in spite of such a request."
The Division Bench relied upon the earlier decision of another Division Bench of this Court in Arisetty Butchanna vs. CIT (1962) 46 ITR 703 (Bom), wherein it was held that "the High Court is not bound to answer a reference under s. 66(2) of the IT Act if the assessee, at whose instance the reference was made, does not appear at the hearing of the reference". The Division Bench also relied on the decision of the Madhya Pradesh High Court in Gajadhar Prasad Nathu Lal vs. CWT wherein that principle was "applied to a case where the party appeared and stated that it was not interested in the reference being answered or made an application for withdrawing the reference". In Maharaja Shri Umaid Mills vs. CIT , a Division Bench of the Rajasthan High Court, after expressing the view that the questions before it had become purely academic and that it would be wholly unnecessary to answer them on account of the supervening circumstances, observed that the assessee company, at whose instance the reference was made, filed an application stating that it was not interested in pursuing the matter further and that it should be allowed to withdraw the references, and in the circumstances of that case accepted that request. There is also the decision of a Division Bench of the Madras High Court in Madras Machine Tools Manufacturers Ltd. vs. CIT , wherein it was observed as follows :
"But having regard to the fact that the assessee at whose instance the reference on that question has been made does not want to prosecute the same, we think it unnecessary to consider that question and express our opinion thereon. It is purely a matter of discretion to answer or not to answer the question in the circumstances when a party who has caused a reference does not want to press the same."
In V. V. Trans-Investments (P) Ltd. vs. CIT a Division Bench of this Court agreeing with the view expressed in K. Ch. Venkataratnam's case (supra), took guidance from the decision of the Supreme Court in CIT vs. Smt. Anusuya Devi as regards the exercise of discretion in such cases observing as follows :
"............. the Supreme Court referred to the circumstances under which the High Court is not bound to answer the reference, according to which, if the question of fact or question of law is purely academic and has no bearing on the dispute between the parties, or if it is unnecessary or irrelevant or is not calculated to dispose of the real issue between the taxpayer and the Department, the High Court is not bound to answer the question. That was a case where the very basis of the question of which the Tribunal was called upon to submit a statement of the case did not exist. Therefore, under those circumstances, the Supreme Court made the above observations. In other words, the High Court need not answer the reference unless it arises from out of the order of the Tribunal or it is academic or irrelevant or unnecessary."
5. We are of the view that also in cases where the amount of tax involved is not much as in the present case, when an application for withdrawing the reference is made by the party at whose instance the reference was made, in view of the circulars issued by the CBDT referred to above, the Court can refuse to answer the reference and permit the party concerned to withdraw the reference.
6. In that view of the matter, we accede to request of the learned standing counsel for the Revenue and decline to answer the references and allow them to be withdrawn.