Income Tax Appellate Tribunal - Nagpur
Byramji & Co. vs Commissioner Of Income-Tax, C.P. & U.P. on 29 January, 1943
Equivalent citations: [1943]11ITR286(NAG)
JUDGMENT
JUDGMENT OF THE APPELLATE TRIBUNAL The only question that arises in this appeal is whether the rates prescribed by the Finance Act, 1938, should be applied in calculating super-tax upon the appellants income. super-tax upon the appellants income.
2. The point arises in this way. The appellants total income for the charge year 1939-40 was computed at Rs. 54,024 from different sources. Rs. 6,900 out of this income represented directors fees received by the appellant in the account year from the C.P. Syndicate, and Rs. 29,298 received as dividends from the same company. Thus the income derived from these two sources aggregated to Rs. 36,198, that is to say, more than half the total income. The Income-tax Officer who made the assessment in the first instance treated the directors fees as salary, which, in our opinion, was not correct. But that point is not material.
3. Section 6, sub-section4, of the Finance Act, 1939, provided that where more than half the total income of any person consisted of income from salaries, interest on securities or dividends, income-tax for the change year 1939-40 should be imposed at the rates prescribed by the Finance Act of 1938. In regard to the imposition of super-tax rates prescribed by the Finance Act of 1938 could be applied. That condition was that super-tax had either been deducted or would have been deductible had the Indian Income-tax Amendment Act, 1939, come into force on April 1, 1938.
4. The Income-tax Officer who first made the appellants assessment thought that the appellant had satisfied both these conditions in respect of his income, and charged both the income-tax and super-tax at the rates prescribed in 1938. Later, the Income-tax Officer who made the present assessment thought that the appellant had been under-assessed to super-tax by the application of the old rates inasmuch as, in his opinion, the appellant had not satisfied the condition laid down in Section 6(4)(b) of the Finance Act, 1939. He accordingly made the present re-assessment under Section 34 of the Act by applying the super-tax rates prescribed by the Finance Act, 1939.
5. Admittedly, the appellant is a resident. Section 18 of the Income-tax Act of 1939 does not provide any machinery for the deduction at source of super-tax on the dividend income of a resident. It follows, therefore, that super-tax would not have been deductible from the dividend income of the account year in question had the Income-tax Act of 1939 come into force on April 1, 1938. Then as to the directors fees received by the appellant, no super-tax could be deducted from it because the amount did not exceed the minimum not chargeable to super-tax. That also is admitted. But the point made by the appellant is that this dividend income must also be regarded as salary, inasmuch as it is paid by the same company from whom he received the directors fees. Such a proposition is obviously untenable and it was not further pressed.
6. Thus on the only qeustion raised in the appellants memo the appeal must fail. The appellant, however, made one more point that the re-assessment in the present case was illegal inasmuch as it amounted to revision of his first assessment by the application of higher rates which the Income-tax Officer who first made the assessment could as well have adopted. But this point was not taken in the memo of appeal, nor was it added by means of any proper amendment. Doubtless, a point of law can be taken in appeal, but it must be by means of a suitable amendment so that the other side might have a reasonable opportunity to meet it. That was not done. In consequence we could not permit the point being taken.
7. In the circumstances the appeal fails and is dismissed.
At the request of the assessees a reference was made to the High Court.
This is a reference under section 66(1) of the Indian Income-tax Act, 1922, by the Income-tax Tribunal. The question referred for our decision is as under :-
"Whether, in the circumstances of the case, the Bench did not properly use its discretion in not permitting the applicants to take the additional ground not raised in the memo of appeal and not added to it by means of a proper amendment ?"
2. The facts of the case which have given rise to this reference may briefly be stated as follows :-
An assessment was first made on the applicants for the charge year 1939-40 on a total income of Rs. 54,024. By virtue of section 3 of the Income-tax Act the amount to Income-tax and super-tax to be charged was according to the rates prescribed by the Finance Act of 1939; but provision in the latter ACt made a concession in respect of incomes derived from certain specified sources and assessed for the year in question by directing that income-tax and super-tax shall be charged at the rates prescribed by the Finance Act of 1937. The Income-tax Officer who made the first assessment thought that the applicants income was governed by that provision and determined that tax according to the old rates. Later, however, he appeared to have realised his error in this respect, and in consequence reopened the assessment under section 34 of the Act and made a fresh assessment computing the tax at the rates prescribed by the Finance Act of 1939. On appeal the Appellate Assistant Commissioner of Income-tax confirmed the order of the Income-tax Officer. The applicants went up in appeal before the Income-tax Appellate Tribunal, which dismissed the appeal. In the memorandum of appeal filed before the Income-tax Tribunal the only point raised was whether the rates of tax to be adopted were those prescribed by the Finance Act, 1937, or those prescribed by the corresponding Act of 1939. The appeal was fixed for hearing on October 11, 1941, before the Tribunal. On October 4, 1941, the assessee sent by post a letter to the Income-tax Tribunal enclosing an additional ground and bagged leave to urge it as an additions ground. This was received by the Income-tax Tribunal office on October 7, 1941. On the October 11, the case was not headed but the assessees representative had forwarded a written statement stating that whatever had already been urged by them by way of appeal or by way of additional ground was all that they had to urge. The appeal, however, was taken up for hearing on the March 25, 1942. On this date the assessees advocate argued all the grounds already mentioned into memorandum of appeal and also wanted to urge the additional ground of which he had given notice by his letter of October 4. The Tribunal stated to the advocate that the additional ground had not been added to the memorandum of appeal by means of a suitable amendmeno and that consequently the other side had no reasonable opportunity to meet it. On this ground the Tribunal did not allow the assessees advocate to argue that point.
3. The Tribunal concedes that what the applicants sought to urge by way of an additional ground was a pure question of law and that such a point of law could be taken in appeal. It is also admitted by the Tribunal that the contention raised in the additional ground went into the root of the matter and if accepted would resulted in the re-assessment being set aside altogether, but that they did not permit that point to be taken because it had not been raised in the memorandum of appeal and had not been added to the memorandum of appeal by means of a proper amendment. In paragraph 5 of its reference the Tribunal has stated that the letter of October 4 is neither stamped nor verified. The Tribunal in all probability wishes our attention to be directed to this fact, though this is not a fact stated in his order in appeal. Paragraph 6 of its judgment is as follows :-
"Thus on the only question raised in the appellants memo, the appeal must fail. The appellant, however, made one more point that the re-assessment in the present case was illegal inasmuch as it amounted to a revision of his first assessment by the application of higher rates which the Income-tax Officer who first made the assessment could as well have adopted. But this point was not taken in the memorandum of appeal, nor was it added by means of any proper amendment. Doubtless a point of law can be taken in appeal, but it must be by means of a suitable amendment so that the other side might have a reasonable opportunity to meet it. That was not done. In consequence we could not permit the point being taken.
It would thus see from this paragraph that the question regarding stamp or verification was not present in the mind of the Tribunal when it disallowed the prayer for urging the additional point of law. Counsel who appeared for the Commissioner of Income-tax has not been able to show us anything either in the Act or the Rules hereunder an application for urging an additional ground of appeal is required to be stamped or verified.
4. An attempt was made to argue that inasmuch as a memorandum of appeal requires to be verified an application whereby an additional ground of appeal is intended to be urged should also be verified. But an application for urging an additional ground is not a memorandum of appeal. The memorandum of appeal was admittedly duly verified, and if the application for urging the additional ground would have formed part of that memorandum of appeal which had already been verified. At any rate, in the absence of rules or provisions in the Act for verification and court-fee stamp for such an application we are not prepared to hold that it required verification and court-fee.
5. The next question therefore for decision is whether in the circumstances of the case the Bench did not exercise its discretion properly in not permitting the applicants to take the additional ground. In this connection our attention was invited to the rules framed by the Tribunal, and in particular to Rules 17 to 21. Rule 17 prescribes the form for the memorandum of appeal and the manner in which the memorandum of appeal has to be signed and verified. Rule 18 also deals with the memorandum of appeal. Rule 19 speaks of the copy that has to accompany the memorandum. Rule 20 deals with a fact which is not borne out by or is contrary to the record and directs how that should be stated and supported. Rule 21 is as follows :-
"The appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground of objection not set forth in the grounds of appeal ; but the Tribunal, in deciding the appeal shall not be confined to the grounds of objection set forth in the grounds of appeal or taken by leave of the Tribunal under this rule."
This rule is practically in the same words as Order 41, rule 2 of the Civil Procedure Code. It only requires premises of the Tribunal to urge an additional ground. There is nothing in the rule which says that the additional ground has to be added to the memorandum of appeal by means of a proper amendment. Whether to grant leave or not is left to the discretion of the Tribunal. Counsel for the Income-tax Commissioner drew our attention to rule 22 of the rules made by the Tribunal, though the Income-tax Tribunal did not invite our attention to rule 22 but invited our attention only to Section 33 and rules 17 to 21. Counsel urged that the memorandum of appeal has to be amended as required by rule 22. Rule 22 deal with a memorandum of appeal which has not been up in the prescribed manner and enacts the touch a memorandum may be rejected or may, on such terms as the Tribunal may think fit, be returned to the appellant for the purpose of being amended within a time to be fixed by the Tribunal or then and there. This rule has nothing to do with an application for leave to urge an additional ground an did in no way apposite to the circumstances of the case. The Income-tax Tribunal did not therefore refer us to this rule. Section 33 of the Act also refers to the form in which the appeal should be presented and the manner in which it should be verified. That section also has nothing to do with an application for leave to urge an additional ground. All that the assessee appellant is required to do is to place the new ground of appeal before the Appellate Tribunal and ask for leave to urge the same. The Appellate Tribunal was therefore not justified in refusing to grant leave simply because this new ground was not added to the memorandum of appeal by means of a proper amendment.
6. It is conceded by the Tribunal that the questing raised in the additional ground is a question of law not involving any further investigation into facts. It is also stated that the contention raised is such as would go to the root of the matter and if accepted would result in the re-assessment being set aside altogether. The contention raised is thus a very important one, and it being a pure question of law the desecrate should have been exercised in favour of the assessee, who should have been permitted to urge it. In the Appellate decision it is stated that a point of law, though it can be taken in appeal, can be taken only by means of a suitable amendment so that the other side might have a reasonable opportunity to meet it. It was urged before us that the application was filed on October 4, 1941, that it reached the office on October 7, 1941, that the case was to be heard on October 11, and that on that date the Income-tax Department had fu ll notice of the fact that permission to urge such an additional gound was being asked for. There is nothing in the order of the Tribunal to indicate that the Income-tax Officer objected to the grant of leave for urging the new ground. As the Income-tax Department raised no objection to the additional ground and did not suggest that it had no reasonable opportunity of meeting it the Tribunal was not justified in rejecting the very reasonable prayer of the assessees. We are aware of the exact that under the rules it is for the Tribunal to exercise desecrate in granting leave to urge an additional ground; but this discretion has to be exercised judicial and not arbitrarily and if it is found the that it has been exercised arbitrarily such exercise of discretion can be interfered with : Commissioner of Income-tax, U. P. & C. P. v. Behari Lall Ramchandra The circumstances of this case do not disclose any reason why leave to urge this additional ground should have been refused. The only grounds mentioned in the judgment of the Tribunal have been shown by us to be improper. We have shown that the reason stated in the reference, viz., that the application was neither stamped nor verified, is also not justified by the provisions of, or the rules made under, the Income-tax Act. We have also shown that the Income-tax Department does not appear to have raised any objection to the grant of leave to urge the additional ground; nor do we find any complaint by them that they had no reasonable opportunity of meeting it if it had been urged at that hearing. The assessee had placed on record on October 11, 1941, a written argument including gal argument on this additional ground. The other side had every opportunity of looking at it and knowing what was meant to be urged on that new ground. Under these circumstances our answer to the question referred to us for decision is that the Bench did not properly use it discretion in not permitting the applicants to take the additional grounds not raised in the memo of appeal and not added to it by means of a proper amendment. The Income-tax Commissioner shall pay the costs of the assessees, which we fix at Rs. 75 and refund Rs. 100 deposited by the assessees.
Reference answered.