Bombay High Court
Ritz Ltd. vs D.D. Vyas And Others on 13 March, 1990
Equivalent citations: [1990]185ITR311(BOM)
JUDGMENT T.D. Sugla, J.
1. By this petition under articles 19(1)(g) and 226 of the Constitution of India, the petitioner-company (hereinafter referred to as "the assessee") has challenged the legality and validity of the order of the Income-tax Appellate Tribunal dated December 7, 1983, passed on the assessee's application dated May 6, 1983, in the undermentioned circumstances.
2. The reassessments of the assessee for the assessment years 1965-66 to 1967-68 and 1969-70 and 1970-71 were completed under section 148/143(3)/144B of the Income-tax Act, 1961 (for short "the Act"). The reassessments were challenged, inter alia, on the ground that they were made beyond the time limit prescribed for their completion. The Commissioner (Appeals) rejected the challenge and held that the reassessments were not barred by limitation. Observing that certain procedural irregularities were committed while making the reassessment, however, the Commissioner (Appeals) set aside the assessments directing the Income-tax Officer to make fresh assessments after following the procedure according to law. The order of the Commissioner (Appeals) was confirmed by the Tribunal by its order dated October 18, 1982. The effect of the Tribunal's order was that the validity of the reopening of the assessments under section 148/147(a) was upheld. The reassessments were held to have been completed within time. However, the order of the Commissioner (Appeals) to the extent that there were certain procedural lapses in completing the assessments and, therefore, the assessments required to be made afresh according to law was upheld.
3. The assessee filed reference application under section 256(1) suggesting as many as three questions of law. But the Tribunal referred to this court one question of law only, viz., :
"Whether, on the facts and in the circumstances of the case, the reassessments made by the Income-tax Officer were barred by limitations prescribed under section 153 of the Income-tax Act, 1961 ?"
4. It is common ground that the reference is pending in this court.
5. After the Tribunal referred the question of law to this court, the assessee filed an application dated May 6, 1983, before the Tribunal. It was stated that the Tribunal having referred the question of law to this court which related to the very validity of the reassessments orders from the point of view of limitation, it was only proper that the income-tax authorities were prevented from proceedings with the reassessments till the reference was disposed of by this court. By its judgment and order dated December 7, 1983, the application was, after hearing the parties, rejected by the Tribunal. The Tribunal's impugned order is short and is reproduced hereunder :
"We have heard Shri V. Rajgopal, the learned representative for the assessee, who urged before us that a suitable order may be passed by us as prayed for in the miscellaneous application. He relied on the decision in the case of Puran Mal Kauntia [1975] 98 ITR 39 (Patna) in support of his contention. Shri R. N. Vaze, learned representative for the Department, on the other hand, stated that there is no error apparent from the record in the order of the Tribunal which can be rectified under section 254 of the Act, especially when a reference has already been made to the High Court.
We have considered the contentions of both the parties as well as the facts on record. We do not find any force in the miscellaneous petition under consideration. No direction on the lines prayed for by the assessee can be given to the Revenue authorities on the ground that there is any error apparent from the records in the orders of the Tribunal because there is no such error. The case of Puran Mal Kauntia [1975] 98 ITR 39 (Patna), is distinguishable on facts because there was an appeal still pending before the Tribunal in that case, whereas no appeal is now pending before us."
6. It is submitted by Shri Rajgopal, learned counsel for the assessee, that the Tribunal has the power to grant stay of the reassessment proceedings until the reference before this court was disposed of. For this purpose, Shri Rajgopal strongly relied on the Supreme Court decision in the case of CIT v. Bansi Dhar and Sons . Though the said decision was in the context of the power to stay the demand, it was pointed out that the ratio of the decision was wide. The Tribunal was held to have inherent and all incidental powers for making the appeal effective even during the pendency of reference before the High Court. He referred to another decision of the Supreme Court in the case of ITO v. M. K. Mohammad Kunhi [1969] 71 ITR 815 to show that the powers conferred by section 254 on the Appellate Tribunal were of the widest possible amplitude and by necessary implication they must carry with them all powers and duties incidental and necessary to make the exercise of those powers fully effective. According to Shri Rajgopal, in CIT v. Bansi Dhar and Sons [1986] 157 ITR 665, the Supreme Court merely enlarged the principle enunciated by it in ITO v. M. K. Mohammad Kunhi [1969] 71 ITR 815 (SC) to the extent that it held that whatever powers the Tribunal had during the pendency of appeal before it, it continued to have even after the disposal of appeal in case reference therefrom was pending before the High Court.
7. This power the Tribunal did not exercise taking the view that, after the appeal was disposed of, it did not have any such power. Assuming that the Tribunal had exercised this power, Shri Rajgopal submitted that the power was wrongly exercised as the balance of convenience lay in favour of the petitioner's claim. If the Income-tax Officer was not prevented from proceeding with the assessments, he may make fresh assessments. Demands may be raised. Penalty proceedings under different sections may be started. As it is likely to take time before the reference applications are disposed of by this court, the petitioner may have to file appeals. There may, thus, be multiplicity of proceedings and a lot of harassment to the assessee which will be found unnecessary in case the reference was answered by this court in favour of the petitioner.
8. Shri Jetley, learned counsel for the Department, pointed out that, in the Supreme Court decision in Bansi Dhar and Sons' case , the only question involved was whether the High Court had jurisdiction to grant stay of demand pending references before it under section 66 of the old Act and section 256 of the new Act. It was held that the High Court had not, and the Tribunal had, jurisdiction because the jurisdiction of the High Court in tax matters was advisory and not appellate. When a reference was pending before the High Court, the appeal, it was further held, continued to be pending before the Tribunal and, therefore, it was for the Tribunal to grant stay of demand in appropriate cases even when the appeal before it was disposed of and the reference was pending before the High Court. According to Shri Jetley, the Supreme Court decision in M. K. Mohammad Kunhi's case [1969] 71 ITR 815 was also not an authority for the proposition that the Tribunal had such power.
9. Alternatively, Shri Jetley argued that the power, if any, was at best a discretionary power. As held by the Supreme Court in Kunhi's case [1969] 71 ITR 815 itself, such a power was not to be exercised as a matter of routine or as a matter of course in view of the special nature of taxation and revenue laws. Only when the Tribunal satisfied is that the entire purpose of the appeal will be frustrated or rendered nugatory by allowing the recovery proceedings to continue during the pendency of the appeal before it, should the Tribunal exercise such a power. The caution necessary in matter of stay, according to Shri Jetley, was all the more required when the question involved was that of staying the assessment proceedings before the Income-tax Officer. As regards the balance of convenience, he pointed out that the assessments involved herein are assessment years 1965-66 to 1967-68 and 1969-70 and 1970-71. The assessments have been set aside by the Commissioner (Appeals) and the setting aside was confirmed by the Tribunal on the ground that the Income-tax Officer did not supply the confessional statements of the creditors to the petitioner and he had naturally not recorded the statement in rebuttal of the petitioner thereon. In the circumstances, the balance of convenience also was stated to lie on the side of not granting the stay rather than granting stay of the proceedings.
10. No doubt the question before the Supreme Court in Bansi Dhar and Sons was whether the High Court had power to grant stay in a case where reference proceedings were pending before it and it was held that the Tribunal had but the High Court did not have such a power. However, it cannot be overlooked that the Supreme Court's observations in this regard went beyond that in that it held that it cannot be said that the High Court has inherent power or incidental power in the matter of a reference pending before it to grant stay of realisation or to grant injunction. That must remain within the jurisdiction of the appellate authority and pendency of a reference does not detract from that jurisdiction of the appellate authority. The Supreme Court has evidently used two expressions, viz., to grant stay of realisation or to grant injunction and this is naturally capable of contemplating within its compass not merely power of stay of demand but other powers also which are ancillary or incidental to the power of appeal. In my judgment, the principle laid down by the Supreme Court in Kunhi's case [1969] 71 ITR 815 was extended to Bansi Dhar's case [1986] 157 ITR 665. It can now be taken as settled law that the Tribunal continues to have all powers necessary to make the right of appeal effective during the pendency of the appeal as also after the appeal is disposed of and reference is pending before the High Court.
11. The next question is whether the Tribunal exercised or failed to exercise this power and in case the power was exercised, whether it was validly exercised and further, whether it was a fit case for this court to interfere in writ jurisdiction. Firstly, the Tribunal has rejected the application on merits for reasons given in its order. Secondly, it requires to be noted that the assessment years involved are 1965-66 to 1967-68, 1969-70 and 1970-71. The assessments were reopened under section 147(a) on the basis of some material. The reopening of the assessments has been upheld by the Tribunal and is not the subject of reference before this court. The assessments are, of course, set aside to be made afresh on the ground that they suffered from certain procedural defects such as that the confessional statements of the creditors were not made available to the petitioner and the petitioner did not have opportunity to have its say on the subject. If the assessments are not allowed to be completed even now, i.e., after more than 20 years, and have to be completed after ten or even more years, it is anybody's guess whether the persons who made confessions will be available for examination, if necessary. It will, thus, be very difficult, if not impossible, for the Department to complete the assessments in accordance with the principles of natural justice assuming the references are answered in its favour.
12. On the other hand, if the assessments are allowed to be completed, it is likely that they will result in multiplicity of proceedings. But taking into account all these circumstances, this court is of the view that the balance of convenience lies in favour of the Revenue. The Tribunal was, therefore, justified in not granting stay of the reassessment proceedings. Moreover, in writ jurisdiction, this court does not sit in appeal. It interferes only if the order challenged is without jurisdiction or patently wrong.
13. In the result, the impugned order of the Tribunal calls for no interference. The petition is dismissed. Rule stands discharged. No order as to costs.
14. The oral application of the assessee's counsel for the stay of this order for some time is rejected.