MANI & CO. VS COMMISSIONER OF INCOME-TAX
1997 P T D 500
[213 I T R 563]
[Kerala High Court (India)]
Before T.L. Viswanatha lyer and Mrs. K. K. Usha, JJ
MANI & CO
Versus
COMMISSIONER OF INCOME-TAX
Original Petition No. 974 of 1992 alongwith Original Petition No.. 975 of 1992, decided on 23/11/1994.
(a) Income-tax---
----Reference---Application for reference---Multiple appeals arising out of one order of assessment made on one assessee for one year under one enactment---Single application is sufficient---Appeals relating to same assessee for different years or for same years but under different enactments ---Separate application required for each case---Indian Income Tax Act, 1961, S.256---[Union of India v. ITAT (1987) 164 ITR 600 (MP) and Kusum Ansal v. CIT (1991) 190 ITR 24 (Delhi) dissented from].
When multiple appeals are disposed of by the Tribunal by a consolidated order arising out of an order of assessment made on the assessee for one year, a single reference application is sufficient, followed by a single application under section 256(2) covering the questions raised both in the assessee's and departmental appeals.
Narhari v. Shanker AIR 1953 SC 419 and (K.G.) Khosla & Co. (P.)
Ltd. v. Deputy Commissioner of Commercial Taxes (1966) 17 STC 473 (SC) rel.
[Observations to the contrary in Jacob Mathew v. State of Kerala (1994) 93 STC 90 (Ker.) and V.K. Hameed & Co. v. State of Kerala (1994) 93 STC 107 (Ker.) held to be per incuriam.]
Appeals relating to the same assessee for different years of assessment, or even for the same year under different enactments, will require separate reference applications in relation to each assessment though the appeals might have been consolidated and disposed of together.
J.K. Agents (P.) Ltd. v. CIT (1972) 86 ITR 793 (MP); Nawal Bihari Lal Goel v. CIT (1983) 140 ITR 979 (Delhi) and Kwality Restaurant and Ice Cream Co. v. CIT (1986) 158 ITR 188 (Delhi) fol.
Union of India v. ITAT (1987) 164 ITR 600 (MP) and Kusum Ansal v. CIT (1991) 190 ITR 24 (Delhi) dissented from.
(b) Income-tax---
----Reference---Income---Accounting---Estimateof profits whether justified---Question of law---Indian Income Tax Act, 1961, S.256
Held, that the question whether the Tribunal was justified in upholding the estimate of the profits despite the assessee maintaining accounts for his business was a question of law.
CIT v. ITAT (1975) 99 ITR 552 (Delhi) and Elite Jewellery v. Assistant Commissioner (Assessment) (1993) 91 STC 354 (Ker.) ref.
M.C. Sen for Petitioner.
P.K.R. Menon and N.R.K. Nair for Respondent
JUDGMENT
T.L. VISWANATHA IYER, J.---These are applications under section 256(2) of the Income Tax Act, 1961, to compel reference of certain questions of law arising out of the common order of the Appellate Tribunal in five appeals before it, namely, Income Tax Appeals Nos. 839 and 840 of 1984 and 14, 15 and 16 of 1985. The assessment years concerned are 1979-80 and 1980-81.
The assessee is an engineering contractor who undertakes works for the Military Engineering Service. For the assessment years 1979-80 and 1980-81, he filed returns disclosing loss, the reason for the loss being attributed to the unusual delay in the completion of the contracts entered into by him during the year and the unbearable increase in the cost of materials and labour. The assessee had been maintaining books of account during these years, unlike in the past and he prayed for acceptance of the accounts. The Income Tax Officer made an assessment estimating the profit at ten per cent., which was based on the estimate of profit made in the prior years when the assessee was not maintaining any accounts. The Commissioner of Income-tax adopted a via media. He observed that the books of account maintained by the assessee may not have been ideally written. But the fact remained that he was maintaining books of account. His case of loss cannot in the circumstances be totally brushed aside. The fact that the accounts were not ideally written may not mean that he has made profit when the accounts disclosed loss. The Commissioner, therefore, held that the business results for the two years under appeal will be taken as nil.
Both the assessee and the Revenue felt aggrieved by this order and filed separate appeals before the Tribunal, the assessee pressing for acceptance of his accounts and the Revenue for restoration of the estimate made by the Income Tax Officer.
There was an independent proceeding in the year 1980-81 to bring to tax the profits of another contract, which had been omitted to be considered in the original assessment. That led to an appeal Income Tax Appeal No. 16 of 1985 before the Tribunal.
The Tribunal dealt with all the five appeals together. The Tribunal dismissed the assessee's appeals and allowed the Revenue's appeals arising out of the original order of assessment. On Income Tax Appeal No. 16 of 1985, the Tribunal directed that the book results will be followed and assessment completed accordingly. That appeal of the Revenue was thus partly allowed.
The assessee filed separate applications for reference of a question of law arising out of the common order in all the five appeals and the Tribunal rejected the same by the proceedings Annexure 'F. The assessee's complaint was that the Tribunal had not dealt with the question of acceptance of the books of account and that gave rise to a question of law. The Tribunal rejected the applications and that has led to these two applications under section 256(2).
We would not have recounted the facts leading to these applications in detail, but for a preliminary objection raised by counsel for the Revenue regarding the maintainability of these applications. In Original Petition No. 974 of 1992, the petitioner had referred in the cause title to the reference application in Income Tax Appeal No. 840 of 1984 and in the other he referred to the reference application in Income Tax Appeal No.839 of 1984. The reference applications in the other three appeals were not specifically mentioned in the cause title to these applications. Counsel for the Revenue raised the preliminary objection based on this fact that these applications under section 256(2) did not relate to the Departmental appeals, Income Tax Appeals Nos. 14, 15 and 16 of 1985 which had been allowed wholly or in part and in the absence of any challenge thereto, the decision therein had become final and, therefore, no purpose will be served by directing reference of the question sought in two applications related to Income Tax Appeals Nos. 839 and 840 of 1984. On this preliminary objection being raised counsel for the petitioner assessee filed petitions to amend the cause title to include all the reference applications therein. We felt that there was sufficient cause for allowing these applications and have accordingly allowed them. This is sufficient to surmount the technical objection raised by counsel for the Revenue. But we would clarify the position in relation to such matters as to whether the consolidated applications could or could not be filed for reference before the Tribunal or under section 256(2) in this Court when the appeals are disposed of by a consolidated order by the Tribunal.
The Tribunal has occasion very often to decide appeals or cross objections arising out of the same order of assessment for a particular year or out of different orders of assessment made for different years in relation to the same assessee or for different assessees.
The question arises as to what is the procedure to be followed in applying for reference in such cases, whether there should be multiple applications for reference or whether a consolidated application for reference is sufficient. We are of the opinion that when multiple appeals are disposed of by the Tribunal by a consolidated order arising out of an order of assessment made on the assessee for one year, a single reference application is sufficient, followed by a single application under section 256(2) covering the questions raised both in the assessee's and the Departmental appeals. We say so, relying on two decisions of the Supreme Court in Narhari v. Shanker, AIR 1953 SC 419 and K.G. Khosla & Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes (1966) 17 STC 473. In the first of these cases, the decree in a suit led to two separate appeals before the first Appellate Court by two sets of defendants. Those first appeals were allowed and the plaintiff's suit was dismissed by a consolidated judgment. The Appellate Court also drafted two separate decrees in the appeals. The plaintiff preferred two-second appeals one of which was time-barred and was accordingly dismissed. The High Court held that the other appeal was barred by res judicata and dismissed it. On appeal, the Supreme Court held that it was not necessary for the plaintiff to file two separate second appeals in the case, as there was only one suit, and both the appellate decrees were in the same case and based on the same judgment. The question of res judicata will not, therefore, arise.
The same principle was enunciated in relation to a sales tax matter in K.G. Khosla's case (1966) 17 STC 473 (SC). In that case, there were two separate assessments made under the Madras General Sales Tax Act and the Central Sales Tax Act, 1956, which led to four tax revision cases in the High Court, two by the assessee, and two by the Revenue. These cases were disposed of by a common judgment. The assessee filed two appeals in the Supreme Court challenging this common order, one each relating to the assessment under the two enactments. A preliminary objection was raised that the assessee should have filed four different appeals because there were four revision petitions before the High Court. The Supreme Court overruled the objection observing that "the subject-matter of the four revisions were only two assessments, one under the Madras General Sales Tax Act and the other under the Central Sales Tax Act", and, therefore, the assessee was quite right in filing only two appeals.
The principle of these decisions is that where the multiple appeals or vision before. a Superior Court or Tribunal have their origin in one assessment, then any further proceeding on the decision of these appeals or revisions need only be one and not multiple. It follows that where appeals filed before the Appellate Tribunal by both sides, arising out of one assessment made on the assessee, are disposed of together by a consolidated order, one reference application alone need be filed by the aggrieved party, covering the points arising in both the appeals (whose numbers should no doubt be indicated therein). The law on the point has been very succinctly stated by Chaturvedi and Pithisaria in their Income Tax Law, Fourth Edition, at page 5411, as follows:
"Where there is only one assessment order out of which two appeals arose and as a result of the disposal of both the appeals one order was passed amending the assessment order or refusing to amend the order, there is only one order against which it is necessary to file only one reference application under section 256. Whether the order against which reference is sought is as a result of two cross-appeals or is as a result of only one appeal is immaterial. Singular always includes plural and if the order, with which the assessee is aggrieved has been passed upon hearing two appeals, he can certainly mention the numbers of both the appeals in his reference application m order to indicate that the order from which he is aggrieved is the combined order passed in the two appeals."
This view of the learned authors is based on the decision of tithe Madhya Pradesh High Court in J.K. Agents (P.) Ltd. v. CIT (1972) 86 ITR 793, where separate appeals had been filed before the Tribunal by the assessee and the Income Tax Officer against the order of the Appellate Assistant Commissioner. The Tribunal consolidated the appeals and disposed of them by a single order restoring the order of the Income Tax Officer. The assessee sent one application for reference accompanied by one institution fee which was out of time. The Tribunal insisted on two separate applications being filed as there were two appeals, whereupon the assessee sent another application for reference under protest together with another set of institution fee. This was beyond the time prescribed for filing an application for reference. The Tribunal rejected the second application as barred by time, and dismissed the first application also on the same ground as the institution fee was received out of time. In that context, the Madhya Pradesh High Court, while holding that the first application was in time, observed that the Tribunal was in error in insisting on two reference applications being filed. The Court observed (at page 798):
"We are of the opinion that in such a case where there is only one assessment order out of which two appeals arise and as a result of the disposal of both the appeals, one order is passed amending the assessment order or refusing to amend the order, there is only one order against which it is necessary to file only one application under section 66 of the Act. "
A similar case arose before the Delhi High Court in CIT v. ITAT (1975) 99 ITR 552. The facts in that case are telling. A Hindu undivided family was assessed for the year 1951-52. An appeal filed by the family against the order of the Appellate Assistant Commissioner remanding the case for fresh assessment was pending before the Tribunal, when the family got disrupted by partition. The fresh assessment after remand was therefore appealed against by four of the members of the erstwhile family before the Appellate Assistant Commissioner and having lost there, they appealed to the Tribunal. These appeals and the earlier appeal filed by the family were consolidated by the Tribunal and disposed of by a common order. The Commissioner who was aggrieved preferred one application within time under section 66(1) of the Indian Income-tax Act, 1922, for reference of the questions of law arising out of the five appeals and followed it up with four more applications which were out of time. They were dismissed as such. The application filed in time was also dismissed on the ground that five different applications were required, and that one consolidated reference application was not competent in respect of all the appeals. The Delhi High Court on a writ petition filed by the Commissioner held that since the five appeals pertained to the same case of assessment of the Hindu undivided family for the assessment year 1951-52 and they were consolidated end disposed of by a common judgment, a single application for reference was competent.
We are in agreement with the view expressed in these decisions. We must, however, make it clear that this view of ours pertains to the case of one assessee and an assessment made on him for one, year under one enactment. Appeals relating to the same assessee for different years of assessment, or even for the same year under different enactments, will require separate reference applications in relation to each assessment though the appeals might have been consolidated and disposed of together. On this point, we are in agreement with the view expressed by the Madhya Pradesh High Court in J.K. Agents (Pvt) Ltd.'s case (1972) 86 ITR 793 (already referred to), that (at page 799):--
"Cases in which two or more assessees are concerned, so that the original assessment orders are different in their cases, cannot be covered by what has been said above by us, because in that case, several appeals may be disposed of by one appellate order and the operative orders would be different in respect of different cases, and it cannot be said that there was only one order within the meaning of section 66 of the Act. So also there may be different cases for different periods in relation to the same assessee. In that case also, the assessment orders being different, the operative orders in appeal would also be different for the different periods and it would not be possible to say that the ultimate operative order is only one order although it has been pronounced after hearing two or more appeals."
(See also Nawal Bihari Lal Goel v. CIT (1983) 140 ITR 979 (Delhi) and Kwality Restaurant and Ice Cream Co. v. CIT (1986) 158 ITR 188 (Delhi), where the same view was taken by the Delhi High Court).
We prefer this view of the Madhya Pradesh High Court to its later decision in Union of India v. ITAT (1987) 164 ITR 600, where it was held that one consolidated reference application could be filed for various years in relation to the same assessee; and to the decision of the Full Bench of the Delhi High Court in Kusum Ansal v. CIT (1991) 190 ITR 24, where the principle was extended to the case of different assessees also. We feel that this view of ours accords with the decision of the Supreme Court in K.G. Khosla's case (1966) 17 STC 473, where two different appeals were held to have been properly filed when they had their origin in two different enactments.
What we have stated above about reference applications applies with equal force to applications filed in this Court under section 256(2) of the Income-tax Act, or the corresponding provisions in other statutes.
We must, however, refer to three decisions of this Court, which are stated to strike a discordant note. They are: Elite Jewellery v. Assistant Commissioner (Assessment) (1993) 91 STC 354; Jacob Mathew v. State of Kerala (1994) 93 STC 90 and V.K. Hameed & Co. v. State of Kerala (1994) 93 STC 107.
In Elite Jewellery's case (1993) 91 STC 354 (Ker.) the rejection of the assessee's accounts by the Sales Tax Officer was confirmed by the Appellate Assistant Commissioner, but the turnover estimated was reduced by him. Both the assessee and the Department appealed to the Tribunal, which dismissed the Departmental appeal, but allowed the assessee's appeal in part by confirming the rejection of the accounts, but at the same time reducing the estimate of turnover. The assessee challenged the order in his appeal in revision in this Court without specially challenging the order in the Departmental appeal. This Court observed that since the order in the Departmental appeal was not under challenge that because final and the assessee's revision had to fail in consequence. In Jacob Mathew's case (1994) 93 STC 90 (Ker.), the position was similar, except that the Tribunal dismissed both the assessee's and the departmental appeals. The assessee challenged only the order in the departmental appeal; but not the order in his appeal. This Court observed incidentally that technically there should have been two tax revision cases in this Court, and at any rate, one against the dismissal of the assessee's appeal: In any event, the assessee should have rectified the mistake in the tax revision case filed by him by including the number of his appeal also in it. Since no such step was taken, the revision was dismissed. In the third case of V.K. Hameed & Co. (1994) 93 STC 107 (Ker.) the Tribunal allowed the Departmental appeal and dismissed the assessee's, on which one tax revision case was filed in this Court. The Court observed that two revisions should have been filed; at any rate, two court fees should have been remitted for the tax revisions.
In the first two of these cases, namely, Elite Jewellery's case (1993) 91 STC 354 (Ker.) and Jacob Mathew (1994) 93 STC 90 (Ker.), the revision petitions purported to challenge the order only in one of the two appeals and not the other, which the assessee could have done by including that number also in the revision petition. In his absence the Court said, the challenge to the order in the other appeal was not maintainable. The challenge should have been to the order in both the appeals and not merely to one. These decisions are, therefore, distinguishable and cannot be held to lay down any rule that two separate revisions are necessary where the proceedings originate in one assessment and the order of the Appellate Tribunal on the two appeals is a consolidated one pertaining to the same assessment. The third decision in V.K. Hameed & Co.'s case (1994) 93 STC 107 (Ker.) (as well as Jacob Mathew's case (1994) 93 STC 90 (Ker.)), no doubt contain observations that two separate revision petitions have to be filed in such cases or at least two sets of court-fee paid. But we are of the view that these observations are per incuriam without taking note of the decisions of the Supreme Court in Narhari's case, AIR 1953 SC 419, and K.G. Khoslas' case (1966) 17 STC 473, particularly, the latter where the Supreme Court has held categorically that one appeal is sufficient in such cases. When the appeals before the Tribunal originate in a single assessment, and are disposed of by a common order, it is not possible to dissociate the one from the other and treat them as separate proceedings for purposes of revision in this Court.
These decisions do not, therefore, militate against the view we have taken, which, is supported by the decisions of the Supreme Court.
We may also note that there are no specific rules regarding the number of reference applications to be filed before the Tribunal in the Income-tax (Appellate Tribunal) Regulations. The matter has, therefore, been decided only on general principles.
We accordingly allow the applications and direct the Income Tax' Appellate Tribunal to state a case and refer to this Court for its opinion the following question of law under section 256(2) of the Income Tax Act, 1961:
"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in upholding the estimate of-the profits despite the assessee maintaining accounts for his business?"
Communicate a copy of this judgment under the seal of this Court: and the signature of the Registrar to the Income Tax Appellate Tribunal, Cochin Bench, for information.
M. B. A./1185/FC Applications allowed.