KUSUM ANSAL VS COMMISSIONER OF INCOME-TAX
1993 P T D 520
[190 ITR 24]
[Delhi High Court (India)]
Before B.N. Kirpal, Mrs. Sunanda Bhandare and Mrs. Santosh Dual, JJ
KUSUM ANSAL
versus
COMMISSIONER OF INCOME-TAX
I.T.C. No.169 of 1989, decided on 22/03/1991.
Income-tax---
----Reference---Scope of---High Court exercises only advisory jurisdiction-- Single appellate order passed by Appellate Tribunal---Common question of law in respect of different assessment years or different parties---One reference application maintainable---Indian Income Tax Act, 1961, S.256(1),(2).
When common questions of law arise out of a single order passed by the Appellate Tribunal whether in respect of different years or different parties, one application for reference under section 256(1) or 256(2) of the Indian Income Tax Act, 1961, would be maintainable.
From a reading of sections 253(2), 254, 256(1), 256(2), 259 and 260(1) of the Income Tax Act, 1961, it is cleat that by the reference which is made to the High Court, the Appellate Tribunal seeks its opinion on questions of law which arise from its order passed under section 254. The jurisdiction which is exercised by the High Court is neither appellate nor revisional. The High Court exercises, advisory jurisdiction and that is why section 259(1). provides that the case which has been referred shall be decided according to "the opinion" of the Judges of the High Court. The decision of the High Court on a reference does not bring the proceedings to an end. The proceedings culminate when, on receipt of the judgment, the Tribunal, under section 260(1), passes such orders as may be necessary in conformity with the judgment of the High Court. Neither section 256(1) nor section 256(2) refers to any particular assessment year. Reference in section 256(1) and (2) is to the order which is passed by the Tribunal under section 254. Both in subsection (1) as well as in subsection (2) of section 256, the reference is to the order which is passed by the Tribunal and not to the assessment years in respect of which the order may have been passed. The language of section 256, therefore, indicates, that when there is one order which is passed by the Tribunal, even though it may be dealing with different assessment years and, possibly, different assessees, nevertheless one application for reference is maintainable. Only when common questions of law or fact arise does the Tribunal pass a single or common order. It must necessarily follow that the questions of law which arise from such an order, and which are referred under section 256(1) or 256(2), must also be common to the various assessment years because they arise from a common order. The advisory jurisdiction of the High Court is in respect of questions of law from the order passed by the Tribunal irrespective of the fact whether the order under section 254 dealt with one or more parties or assessment years.
CIT v. Income-tax Appellate Tribunal (1975) 99 ITR 552 (Delhi) and observations in Kwality Restaurant and Ice Cream Co. v. CIT (1986) 158 ITR 188 (Delhi) approved.
Khosla (K.G.) and Co. P. Ltd. v. Deputy Commissioner of Commercial Taxes (1966) 17 STC 473 (SC); Lachhmi (Mst.) v. Mst. Bhulli AIR 1927 Lah. 289 (FB); Narhari v. Shankar AIR 1953 SC 419; Nawal Bihari Lal Goel v. CIT (1983) 140 ITR 979 (Delhi); Sushil Ansal v. CIT (1986) 160 ITR 308 (Delhi); Union of India v. Itat (1987) 164 ITR 600 (MP) ref.
M.S. Syali, Satyen Sethi and Ms. S. Mathur for the Petitioner.
B. Gupta and R.C. Pandey for the Respondent.
JUDGMENT
B.N. KIRPAL, J.---The question, which has been referred to this Bench for consideration is whether a single application under section 256(1) and/or 256(2) of the Income Tax Act, 1961, is maintainable when the Income-tax Appellate Tribunal disposes of by a common order, appeals pertaining to more than one year and/or of different assessees.
In respect of the assessment years 1982-83, 1983-84 and 1984-85, the petitioner had filed its returns of income. One of the items of income was the rent which was received by the petitioner from commercial flats which had been let out. The petitioner claimed that this rent was taxable under the head "Income from house property".
The Income-tax Officer passed three separate assessment orders and he treated the rental income as taxable under the head "Income from other sources" on the ground that the flats had not yet been transferred to the petitioner under a registered document. The petitioner was, therefore, denied deductions under section 24 of the said Act.
Three different appeals were filed by the petitioner challenging the assessment of the said income under the head "Income from other sources".
In respect of the aforesaid three assessment years, three separate appeals were filed before the Commissioner of Income-tax (Appeals), New Delhi. For the assessment year 1982-83, an order dated December 2, 1985, was passed by the Commissioner allowing the appeal. In respect of the assessment years 1983-84 and 1984-85, a single common order was passed by the Commissioner of Income-tax (Appeals) also dated December 2, 1985, allowing the appeals.
The Income-tax Officer then filed three different appeals before the Tribunal. On September 23, 1988, the Income-tax Appellate Tribunal, following the decision of this Court in the case of Sushil Ansal (1986) 160 ITR 308, came to the conclusion that the income from rent was assessable under the head "Other sources". The three appeals of the Income-tax Officer in respect of the assessment years 1982-83 to 1984-85 were disposed of by a single order.
The petitioner then filed three applications under section 256(1) before the Income-tax Appellate Tribunal requiring the Tribunal to state the case and refer two questions to this Court. Vide a single common order dated May 5, 1989, all the three reference applications were dismissed.
The petitioner, thereafter, filed a single application under section 256(2) of the Income-tax Act. This application is in respect of the assessment years 1982-83 to 1984-85.
When the application came up for hearing before a Division Bench, counsel for the respondent raised a preliminary objection. It was submitted that, in respect of three different assessment years, a single application under section 256(2) was not maintainable. As there appeared to be a slight conflict of decisions, vide order, dated January 16, 1991, the Division Bench referred the aforesaid question to the Full Bench for its decision.
On behalf of the respondent it has once again been contended that the petitioner should have filed three separate applications under section 256(2) and a single application is not maintainable. Reliance is placed by learned counsel on two decisions of this Court in the cases of Nawal Bihari Lal Goel v. CIT (1983) 140 ITR 979 and Kwality Restaurant and Ice Cream Co. v. CIT (1986) 158 ITR 188.
Learned counsel for the petitioner, however, relied upon the decision of a Single Judge of this Court in the case of CIT v. TTAT (1975) 99 ITR 552 as well as the decision of the Supreme Court in the case of K.G. Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes (1966) 17 STC 473 and contended that when a single order is passed by the Tribunal under section 254, dealing with a number of assessment years, then a single application under section 256(1) and also under section 256(2) of the said Act is maintainable.
Before referring to the' aforesaid decisions, it will be more appropriate to examine the relevant provisions of the Income-tax Act.
Appeals are filed to the Appellate Tribunal under section 253(2) of the Act. By virtue of the powers conferred on it by section 254, the said appeals are heard and decided by the Tribunal. Subsection (4) of section 254 provides that, save as provided in section 256, the orders passed by the Appellate Tribunal on appeal shall be final.
Under section 256(1), the assessee or the Commissioner may, within, the prescribed period of limitation, file an application requiring "the Appellate Tribunal to refer to the High Court any question of law arising out of such order". If the Tribunal refuses to state the case, then, under subsection (2) of section 256, the assessee or the Commissioner may, within the prescribed period, apply to the High Court requiring it to direct the Appellate Tribunal to state the case and refer the question of law arising out of the Tribunal's order passed under section 254 of the Act.
After the reference is made, either pursuant to an order under section 256(1) or under section 256(2), the same is decided by the High Court under section 25.9, in accordance with the opinion of the judges. Section 260(1), inter alia, provides that the judgment of the High Court shall contain .the grounds for the decision and the Appellate Tribunal shall, on receipt of the judgment from the High Court, "pass such orders as are necessary to dispose of the case conformably to such judgment". From a reading of the aforesaid provisions of law, it is clear that, by the reference which is made to the High Court, the Tribunal seeks the opinion on questions of law which arise from its order passed under section 254 of the Act. The jurisdiction which is exercised by the High Court is neither appellate nor revisional. The High Court exercises advisory jurisdiction and that is why section 259(1) provides that the case which has been referred shall be decided according to "the opinion" of the judges of the High Court. The decision of the High Court on a reference does not bring the proceedings to an end. The proceedings culminate when, on the receipt of the judgment, the Tribunal, under section 260(1), passes such orders as may be necessary in conformity with the said judgment. Neither section 256(1) nor section 256(2) refers to any particular assessment year. Reference in section 256(1) and 256(2) is to the order which is passed by the Tribunal under section 254. It is not in dispute that the Tribunal can, where any questions of law or facts arise, dispose of by a common judgment, a number of appeals. This is precisely what has been done in the present case. In respect of the assessment years 1982-83, 1983-84 and 1984-85, a common judgment has been delivered by the Tribunal under section 254 of the Act whereby three different appeals which had been filed before it were decided. Section 256 requires an application being filed for stating the case arising out of the order of the. Tribunal. Both in subsection (1) as well as in subsection (2) of section 256, the reference is to the order which is passed by the Tribunal and not to the assessment tears in respect of which the order may have been passed. The language of section, 256 would, therefore, seem to indicate that when there is one order which is passed by the Tribunal, even though it may be dealing with different assessment years and, possibly, different assessees, nevertheless one. application for reference is maintainable. If common questions of fact or law arise, it is only then that a single or common order is passed by the Tribunal. It must necessarily follow that the questions of law which arise from such an order and which are referred under section 256(1) or 256(2) must also be common to the various assessment years because they arise from a common order. The advisory jurisdiction of the High Court is in respect of questions of law arising from the order passed under section 254 by the Tribunal irrespective of the fact whether the order under section 254 dealt with one or more parties or one or more assessment years.
The aforesaid view finds support from the decision of the Single Bench of this Court in the case of CIT v. ITAT (1975) 99 ITR 552. In that case, there were five different appeals, though in respect of the same assessment year, which were disposed of by the Tribunal by a common order. The five appeals had been filed by the coparceners of a Hindu undivided family in respect of which an assessment had been framed. By the time the appeals were filed, the Hindu undivided family had been disrupted and that is why the erstwhile coparceners and the Karta filed separate appeals. The Commissioner of Income-tax, however, filed a single application under section 256(1) before the Tribunal. The Tribunal held that a single application was not maintainable. The Commissioner of Income-tax then filed a petition under Article 226 of the Constitution, inter alia, contending that, when, by a common order, a number of appeals are disposed of, then one application under section 256(1) was maintainable. Prithvi Raj J. examined this question at length and, after referring to a Full Bench decision of the Lahore High Court in the case of Mst. Lachhmi v. Mst. Bhulli, AIR 1927 Lahore 289, which had been approved by the Supreme Court in the case of Narhari v. Shankar, AIR 1953 SC 419, came to the conclusion that the contention of the Commissioner of Income-tax was correct and that a single reference application was maintainable. Prithvi Raj, J. relied upon the following observations of the Supreme Court in Narhari's case, AIR 1953 SC 419 (at p. 561 of 99 ITR):
"It is now well-settled that where there has been one trial, one finding, and one 'decision, there need not be two appeals even though two decrees may have been drawn up. As has been observed by Tek Chand, J. in his learned judgment in Mst. Lachhmi v. Mst. Bhulli, AIR 1927 Lah. 289 (1713), mentioned above, the determining factor is not the decree but the matter in controversy. As he puts it later in his judgment, the estoppel is not created by the decree but it can only be created by the judgment. The question of res judicata arises only when there are two suits. Even when there are two suits, it has been held that a decision given simultaneously cannot be a decision in the former suit. When there is only one suit, the question of res judicata does not arise at all and, in the present case, both the decrees are in the same case and based on the same judgment, and the matter decided concerns the entire suit. As such, there is no question of the application of the principle of res judicata. The same judgment cannot remain effective just because it was appealed against with a different number or a copy. of it was attached to a different appeal, The two decrees in substance are one."
The learned Judge then concluded that (at p. 559) "It is well-settled that in the cases where two or more appeals are consolidated and heard together, combining the controversy in the appeals into a single controversy and making the proceedings a single proceeding disposing of them by a single judgment, there is no warrant for holding that an appeal filed against the common judgment in one of the appeals is barred merely because no appeals were filed in the connected cases because in such a case there is in substance as well as in form but one verdict and that there would be no justification to stifle the hearing of the appeal against such a judgment on the ground that the findings had become final operating as res judicata".
In K.G. Khosla's case (1966) 17 STC 473 (SC), in respect of the assessment year 1958-59, two orders were passed by the. Sales Tax Officer, one under the Madras Sales Tax Act and the other under the Central Sales Tax Act. Two appeals were filed by the assessee to the Tribunal. The Tribunal partly allowed the said appeals. Against the said decision; both the Department as well as the assessee filed revisions to the High Court. Two revision applications were filed by the assessee and two were filed by the Department, All the four revision petitions were disposed of by the High Court by a common order. The assessee, thereafter, filed only two appeals before the Supreme Court. An objection was raised stating that, as the High Court had decided four revision petitions, though by a common order, the assessee should have filed four appeals and not two. The Supreme Court repelled this contention and held that the assessee was "quite right in filing two appeals before this Court".
From the aforesaid observations, it would follow that, even though four separate revisions were decided by the High Court by a common order, two appeals before the Supreme Court were considered sufficient, one appeal being with reference to the Madras Sales Tax Act and the other under the Central Sales Tax Act, even though the assessment year was one and the same.
The Single Bench decision of this Court in the case of CIT v. ITAT (1975) 99 ITR 552 was followed with approval by the Madhya Pradesh High Court in the case of Union of India v. 1TAT (1987) 164 ITR 600. In that case also, in respect of the assessment years 1969-70 to 1977-78, the Tribunal dismissed the appeals before it by a common order. One consolidated reference application was filed by the Department under section 27(1) of the Wealth-tax Act for referring a common question of law. The application was rejected by the Tribunal on the ground that separate reference applications should have been filed. The High Court noted with approval the aforesaid decision of Prithvi Raj, J. of this Court and also referred to the following passage from Kanga and Palkhivala's Income-tax, Volume I (7th Edition), at page 1149:
"Only one reference application need be made when the Tribunal passes a consolidated order disposing of the appeals of the assessee and the Department against the Appellate Assistant Commissioner's, order for the same assessment year or a consolidated order disposing of a common point arising in different appeals. But separate reference applications should be made and separate statements of case should be prepared in respect of appeals decided under different tax statutes even if the question of law is similar."
The Madhya Pradesh High Court held that, in the absence of any specific rules under the Wealth-tax Rules and there being no bar against it under section 27 of the Act, one consolidated reference application could be filed in such a case, moreso when the respondent was unable to point out that any prejudice would be caused or was likely to be caused in such a case.
In Nawal Bihari Lai Goel's case (1983) 140 ITR 979 (Delhi), by a common order, the Tribunal had disposed of four appeals but only one application under section 256(2) was filed. After the period of limitation had expired, three new applications under section 256(2) were filed with an application for condonation of delay. The delay was not condoned and it was observed by a Division Bench of this Court as under (at p. 981):
"We are not inclined at present to hold that only one application under section 256(2) can be filed if there is only one appellate order by the Tribunal regarding the several years. This has become a part of the settled practice of the Court. It is clearly understood that each assessment year is separate from every other assessment year. Therefore, there, is a requirement to file a separate application for each year."
The attention of the Court was not drawn to the decision of Prithvi Raj, J. and the Bench proceeded on the assumption that it was the settled practice of the Court that a separate application under section 256(2) has to be filed in respect of every assessment year.
In Kwality Restaurant and Ice Cream Co.'s case (1986) 158 ITR 188, another Division Bench of this Court, D.K. Kapur, J. being common, had to deal with a similar situation. In that case, after referring to section 256(1), it was observed as follows (at p. 191):
"The relevant portion of this section is that the assessee may within sixty days of the date upon which he is served with a notice of the order apply in the prescribed form requesting a reference to the High Court. The most important part of the section is to refer to the High Court any question of law arising out of such order. The interpretation of the section shows that if there are questions of law arising out of the order, then an application has to be moved. As there was only one order covering all the years, it may legitimately be said that one application can suffice to cover all questions of law even if they arise for several years. Thus, one application serves the purpose. It may also be said that even if there is a blunder by filing one application instead of three applications, it cannot be said that that one application is beyond time because it was filed within the period of limitation.
For the purpose of seeing whether such a contention is bona fide or not, we have to examine, whether on a reading of the section, it can legitimately be inferred that only one application is necessary. No doubt, the wording of the section shows that one application may be filed and if there is an objection, then more applications can be filed. To offset this, it may be noticed that, in actual fact, the applicant did file three applications under section 256(1). So, the assessee had no doubt that separate applications had to be filed for the three years. Having filed three separate applications under section 256(1), the assessee could have little difficulty in filing three separate applications under section 256(2).".
The Court however, condoned the delay. Nevertheless, the aforesaid observations also show that the Court was prima facie of the opinion, and in our opinion rightly, that, on a correct interpretation of section 256, a single reference application could be filed if a common order is passed by the Tribunal.
In our opinion, the ratio of the decision of Prithvi Raj, J. in CIT v. ITAT (1975) 99 ITR 552 (Delhi) lays down the correct law. When common questions of law arise out of a single order passed by the Tribunal whether in respect of different assessment years or different parties, then one application for reference under section 256(1) or 256(2) would be maintainable. This is for the reason that there is nothing in section 256 to indicate that a single application is not maintainable. On the contrary, as we have already observed, the nature of jurisdiction of the High Court being advisory, when the Tribunal has consolidated one or more appeals and heard them together, then the matter in controversy becomes single. There is no reason as to why more than one application for a reference should be required to be filed. Whenever the questions of law referred are answered, the Tribunal will, thereupon, pass appropriate orders relating to different assessees and/or different assessment years. It is at that stage that the proceedings under the Act would come to an end.
For the aforesaid reasons, we would answer the reference by observing that a single application under section 256(1) and/or 256(2) is maintainable when the Income-tax Appellate Tribunal disposes of, by a common order, appeals pertaining to more than one year and/or of different assessee.
M.BA /2048/T Question answered.