Calcutta High Court
Okayti Tea Co. Ltd. vs Income-Tax Officer And Anr. on 24 January, 1986
Equivalent citations: [1986]160ITR487(CAL)
JUDGMENT Dipak Kumar Sen, J.
1. M/s. Okayti Tea Company Limited, the appellant, filed its return under the Income-tax Act, 1961, for the assessment year 1971-72, the accounting year ending on December 31, 1970, on February 26, 1974. Notices were served thereafter by the Income-tax Officer under Sections 143(2) and 142(1) of the Act and the date of hearing was fixed on March 11, 1974.
2. On March 11, 1974, the assessee did not appear at the hearing and the Income-tax Officer made an assessment under Section 144 of the Act. The Revenue deficit claimed by the assessee was disallowed to the extent of Rs. 1,25,000. The business loss was assessed at Rs. 33,680 of which 40% was allowed. Taking into account income from other sources, tax was charged on income computed at Rs. 65,442.
3. The appellant made an application under Section 146 of the Income-tax Act, 1961, for setting aside of the said ex parte assessment order which was rejected by the Income-tax Officer.
4. The appellant thereafter filed two appeals. One was from the order of assessment and the other was from the order rejecting the application under Section 146. The appeals were disposed of by the Appellate Assistant Commissioner respectively on January 22 and January 18, 1975. The appeals were dismissed.
5. The appellant went up on further appeals before the Income-tax Appellate Tribunal from the orders of the Appellate Assistant Commissioner. The Tribunal fixed the hearing of the two appeals on July 1, 1976, on which date the appellant applied for adjournment on the ground of nonavailability of its authorised representative. The hearing was adjourned to August 26, 1976. On August 24, 1976, the appellant applied for further adjournment on the same ground. On August 26, 1976, an employee of the appellant appeared before the Tribunal and again requested orally for a short adjournment.
6. The Tribunal, however, declined to grant any further adjournment, rejected the second petition for adjournment and decided the two appeals, ex parte, on the basis of the materials on record and after hearing the departmental representative by a consolidated order dated August 31, 1976.
7. The appellant thereafter riled an application for setting aside the ex parte order dated August 31, 1976, praying for another opportunity to be heard on the appeals on merits. The said application was rejected by the Tribunal by an order passed on May 10, 1977.
8. Being aggrieved, the appellant moved this court under Article 226 of the Constitution on August 18, 1977. A rule nisi was issued on the same date calling upon the respondents, viz., the Income-tax Officer, the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal concerned, to show cause why a writ in the nature of mandamus should not be issued directing them to cancel or withdraw or rescind the said assessment order passed by the Income-tax Officer and the appellate orders confirming the same by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal and directing the said respondents further to act according to law.
9. The rule was limited to the following grounds :
"(i) There was claim before the Tribunal for agricultural development allowance under Section 35C of the Act and for tax credit on export sales under Section 280ZC of the Act, but the Tribunal did not attempt to gather materials for the allowances ; it does not appear that the Tribunal did apply its mind to the records ;
(ii) Secondly, Rule 8 of the Income-tax Rules, 1962, provides for allocation of profits but there is no provision for allocation of loss and, therefore, the Income-tax Officer acted without the authority of law in allocating 40% of the loss."
10. The said application under Article 226 of the Constitution was opposed. An affidavit was filed on behalf of the respondents in opposition to the petition which was affirmed by one Rama Prasanna Sen, the Income-tax Officer, "E" Ward, District III on September 23, 1977. It was contended in the said affidavit, inter alia, that claims for relief under Sections 35C and 280ZC of the Act were not made before the Appellate Assistant Commissioner nor in the return. The application of Rule 8 of the Income-tax Rules, 1962, it was contended, was also not challenged in the appeals before the Appellate Assistant Commissioner or the Income-tax Appellate Tribunal. It was further contended that it was open to the appellant to challenge the decisions of the Revenue authorities and the Tribunal by way of a reference which was not done and the appellant failed to avail itself of the alternative remedy provided under the Act.
11. The application was disposed of by a judgment and order dated December 14, 1977, in the first court. The learned judge in the first court held, inter alia, that the Income-tax Officer in disallowing the proportionate loss had proceeded as best as he could in the circumstances and there was no misapplication of Rule 8 of the Income-tax Rules. It was further held that the appellate authorities, viz., the Appellate Assistant Commissioner and the Tribunal in refusing to set aside the assessment proceeded on the basis of some material and thus acted within jurisdiction and it was not for this court to interfere with such finding in proceedings under Article 226 of the Constitution. It was held that the Income-tax Act was a complete code in itself and the appellant should not be allowed to abandon the remedies provided in the Income-tax Act and it was held to be not entitled to relief under the constitutional writ jurisdiction. The application was dismissed and the rule nisi was discharged. The present appeal is from the said judgment and order dated December 14, 1977.
12. Learned advocate for the appellant contended at the hearing that the impugned order of assessment and the appellate orders of the Appellate Assistant Commissioner and the Tribunal contained errors on their face inasmuch as under Rule 8 of the Income-tax Rules, it was open to the Income-
tax Officer concerned to apportion the income but not the loss which has been done in the instant case. This was a clear and apparent illegality on record and in the face of the orders, this court should interfere under Article 226 of the Constitution, It was not open to the Revenue authorities to give a patently erroneous construction to the sections of the statute and import words which were not there in the section. In support of his contentions, learned advocate cited the following decisions :
(a) Smt. Ujjam Bai v. State of Uttar Pradesh, AIR 1962 SC 1621. This decision of the Supreme Court was cited for the following observations from the majority judgment of the Supreme Court (at p. 1659):
" ... in the present case if the Sales Tax Officer, by a wrong construction of the provisions of the Act, made an illegal order imposing a tax on the petitioner's fundamental right, it is liable to be quashed."
" Where the action of an officer of the State is wholly without jurisdiction......... it can have no support from the law he purports to apply...
In such cases,...the want of jurisdiction, if proved, would attract Article 32." (at p. 1668).
" Article 32 does not, as already stated, confer an appellate or revi-sional jurisdiction on this court, and if the law is valid and the decision with jurisdiction, the protection of Article 265 is not destroyed. There is only one exception to this.......That exception also bears upon jurisdiction where by a misconstruction, the State officer or a quasi-judicial tribunal embarks upon an action wholly outside the pale of the law he is enforcing. If, in those circumstances, his action constitutes a breach of fundamental rights, then a petition under Article 32 may He. " (at p. 1668).
(b) Bhopal Sugar Industries Ltd. v. D. P. Dube, Sales Tax Officer, AIR 1967 SC 549 at p. 552; . This decision was cited for the following observations (p. 552):
"The High Court has undoubtedly jurisdiction to decide......whether the taxing authority has arrogated to himself power which he does not possess, or has committed a serious error of procedure which has affected the validity of his conclusion or even where the taxing authority threatens to recover tax on an interpretation of the statute which is erroneous. "
(c) ITO v. Murlidhar Sarda [1975] 99 ITR 485 (Cal). In this case, a Division Bench of this court upheld the judgment and order of a learned judge passed in an application under Article 226 of the Constitution allowing the application and directing the Tribunal to consider the application for restoration of the appeal which had been disposed of by the Tribunal ex parte. The Tribunal had refused to restore the appeal on the ground that as there was no mistake in its order apparent from the record, it had no power to cancel its order or rehear the appeal. It was held that where adequate and reasonable grounds for omission to appear at the hearing were made out to the satisfaction of the Tribunal, it is only a part of the jurisdiction of the Tribunal given by the statute to go into the matter and pass orders as required.
(d) Smt. Tamlata Shyam v. CIT , This decision was cited for the following observations of the Supreme Court (at p. 357):
" There is no scope for importing into the statute words which are not there. Such importation would be, not to construe, but to amend the statute. Even if there be a casus omissus, the defect can be remedied only by legislation and not by judicial interpretation."
13. We have noted earlier that the rule nisi was issued on two limited grounds which have been quoted earlier. Therefore, the appellant would fail or succeed on those grounds only. The provision for allowance under Sections 35C and 280ZC were not mooted before the Appellate Assistant Commissioner and did not arise from the order of the latter. The Tribunal refused to consider the same on that ground. The misapplication of Rule 8 was not even argued before the Tribunal and has been taken for the first time in these proceedings.
14. In that view of the matter, it cannot be said that the Tribunal in whose order the orders of the Income-tax Officer and the Appellate Assistant Commissioner have merged, exceeded or wrongly exercised its jurisdiction. The Tribunal was within its jurisdiction not to entertain the contentions as the same had not been mooted earlier.
15. In our view, this appeal fails on this limited ground. We, however, make it clear that we are not laying down the law as to the application of Rule 8 where there is loss suffered by the assessee. All that we are holding is that it is not open to the appellant in the instant appeal to make a grievance as to the application of the said rule in the impugned assessment. We also agree with the learned judge in the first court that it was open to the appellant to come up by way of reference so that the questions arising out of the order of the Tribunal could be properly adjudicated. The appellant not having chosen to do so acted at its peril and it cannot be held that the appellant will be entitled to urge all the questions which it could have raised in a reference and not in an application under Article 226 of the Constitution where the jurisdiction exercised by the court is necessarily more limited.
16. For the above masons, we dismiss this appeal without any order as to costs.
Mukul Gopal Mukherji, J.
17. I agree.