KRISHNA MOHAN ENTERPRISES VS COMMISSIONER OF INCOME-TAX, 2000 PTD-ANDHRA-PRADESH-HIGH-COURT-INDIA 3480 (1998)

(a) Income-tax--

----Reference---High Court---Power to reframe question---No power to frame question afresh on basis of statement of case---Only power is to answer questions referred by Tribunal---Indian Income Tax Act, 1961, S.256.

It is not open to the High Court to frame questions afresh on the basis of the statement of the case. The only power of the High Court is to answer the questions referred by the Tribunal.

(b) Income-tax---

----Reference---High Court---Tribunal refusing to refer a question---Remedy of aggrieved party is to approach High Court under S.256(2)---Indian Income Tax Act, 1961, S.256(2).

When the Tribunal refuses to refer a question, the remedy for the aggrieved party is to approach the High Court by way of a petition under section 256(2) of the Income Tax Act, 1961.

CIT v. Anusuya Devi (Smt.) (1968) 68 ITR 750 (SC); CIT v. G.M. Chennabasappa (1959) 35 ITR 261 (AP); Ganga Ram Balmokand v. CIT (1937) 5 ITR 464 (Punj.); Raja Rameshwara Rao Bahadur v. CIT (1957) 32 ITR 552 (AP) and Shiva Prasad Gupta v. CIT AIR 1929 All. 819 ref.

Y. Ratnakar for the Assessee.

S.R. Ashok for the Commissioner.

JUDGMENT

MS. S.V. MARUTHI, J---The Tribunal at the instance of the assessee referred the following question:

"Whether, on the facts and in the circumstances of the case, the. Appellate Tribunal is right in holding that the cost of roofing and foundations were not included in the Valuation Officer's Report?"

The facts in brief are as follows:

"The assessee is a registered firm of 19 partners. One K.V. Reddy was the managing partner. They have purchased 75 cents or 3830 square yards of land in Sy. No.409/4 for Rs.15,000. They have also taken on long-lease from the Government an adjoining area measuring 445.56 sq.mts. The assessee-firm began constructing a cinema theater on the said site, which is subsequently named as Sri Laxmi Theater. According to the assessee the book value of the cost of the construction of the cinema house was Rs.6,45,392. The assessee filed the return accordingly, alongwith the approved valuer's report. The income-tax Officer found that the cost of construction adopted by the registered valuer was very low and no proper basis has been given to such estimation for arriving at its cost of construction. Therefore, he referred the matter of valuation to the Departmental valuer. Tine Departmental valuer estimated the cost of construction at Rs.9,98,000. On receipt of the objections filed by the assessee and on consideration of the same the Income-tax Officer arrived at an addition of Rs.4,48,835 as unexplained investment.. Accordingly, the Income-tax Officer finalised the assessment. On appeal the Commissioner of Income-tax (Appeals) gave relief of Rs.69,233 or Rs.70,000 and fixed the cost of construction of the theater building at Rs.7,70,000 and directed the addition to be modified accordingly. He dismissed the claim of the assessee for deduction on account of economies observed by the assessee in purchasing the material and for the personal care, supervision, minimum wages, etc., for which the assessee claimed at per cent of the book value. Against the said order, the assessee filed an appeal before the Tribunal. The Tribunal held that even conceding the assessee is entitled to five per cent more towards self-supervision charges and 10 per cent for economy observed towards purchase of material, the value of the two major items highlighted, namely, foundations and roof adequately take care of the total relief now prayed for in this appeal. Therefore, the assessee is not entitled for any relief. In other words, according to the Tribunal, the valuation report of the approved valuer did not include the value of two items, namely, foundation and roof, and, therefore, the claim of the assessee for a deduction of five per cent for self-supervision and ten: per cent for economy observed towards the purchase of material is compensated by not including the value of those two items. The assessee filed before the Tribunal a petition seeking a reference of four questions. However, the Tribunal refused to refer three questions and referred only the question as set out in the earlier paragraph.

The main argument of learned counsel for the assessee is that it was not the case of either the Department or the assessee that the cost of roofing and foundation were not included in the Valuation Officer's Report. Therefore, the question referred by the tribunal does not arise out of the facts before the Tribunal. On the other hand, the question that actually arose for consideration is question No.2, namely, whether, on the facts and in the circumstances of the case, the Appellate Tribunal is competent to touch upon the issues which were neither contested by 'the assesssee nor by the Department in any of the proceedings? Therefore, the real issue before this Court is "whether the Tribunal is competent to touch upon the issues which were neither contested by the assessee nor by the Department in. any of the proceedings?" and not the question that was actually referred for the opinion of this Court.

We agree with the contention of learned counsel for the assessee that apart from the fact that the question that was referred is a question of fact, it did not arise out of the facts before the Tribunal.

However, counsel for the assessee contended that even though the question that was referred is not the real question, it is open to this Court to frame the real question that arises from out of the facts mentioned in the statement of case. Therefore; this Court should reframe the question stating that whether, on the facts and in the circumstances of the case, the Appellate Tribunal is competent to touch upon the issues, which were neither contested by the assessee nor by the Department in any of the proceedings? In support of his contention that it is open to this Court to reframe the question, learned counsel relied on the judgment of this Court in CIT v. G-.M. Chennabasappa (1959) 35 ITR 261, wherein it was held that (page 270):

"In our opinion, the power to recast or reframe questions is implied in this subsection, although it does not specifically invest the Court with such a power. The only condition is that question of law should be raised by the reference. The High Court has not only the power but it is its duty to reframe the questions in such a way as to bring out the real dispute between the parties. The Court is not confined to the questions, which the Tribunal was directed to submit. "

There is abundant authority for this proposition. In Ganga Ram Balmokand v. CIT (1937) 5 ITR 464, the Lahore High Court has ruled that the High Court is not confined to the decision of the question of law as formulated by the Commissioner or the Court issuing the mandamus. On the other hand, that section (section 66) confers upon the High Court full powers to decide the question of law in the form it actually arises from the statement of the case made by the Commissioner. This decision follows the judgment of the Allahabad High Court in Shiva Prasad Gupta v. CIT, AIR 1929 All 819, which has laid down that the High Court is entitled to resettle issues as it were and to decide them. A Bench of this Court in Raja Rameshwara Rao Bahadur v. CIT (1957) 32 ITR 552, has observed that if the question was in an ambiguous form, the Court was certainly entitled to reframe it or amend it in such a way as to bring out the real dispute between the parties, and that the power to reframe or amend the question was implied in subsection (5) of section 66 of the Act.

Counsel for the assessee also submitted that the question as framed by the Tribunal involves the question that actually arises from out of the facts and therefore, even without refraining the question this Court is competent to, answer the question that actually arose for consideration.

At the outset we reject the argument of learned counsel that the question referred impliedly includes the question that actually arose for consideration. The question referred by the Tribunal is a pure question of fact, namely, whether the cost of roofing and foundation were not in6luded in the Valuation Officer's Report? It is difficult to hold that this includes the question whether the Appellate Tribunal is competent to touch upon issues, which were neither contested by the assessee nor by the Department in any of the proceedings?

Regarding the question that it is open to this Court to reframe the questions taking into account the facts stated in the statement of the case, the Supreme Court in CIT v. Smt. Anusuya Devi (1968) 68 ITR 750, considered thepower of the High Court to frame questions and held as follows (page 759):

"The High Court may answer only those questions which are referred to it. New questions, which have not been referred cannot be raised and answered by the High Court. If the Tribunal refuses to refer a case under section 66(1) which arises out of its order, the proper course is for the aggrieved party to move the High Court to require the Tribunal under section 66(2) to refer the same. The question whether Rs.5,84,000 represented income of the year account, 1944-45, was not submitted by the Tribunal to the High Court. Even if it be assumed that the High Court was moved to direct the Tribunal to state a case on the sixth question, which was set out in the application filed before the Tribunal under section 66(1), the application must be deemed to have been rejected, and the order of rejection has become final. We have no power, without an appeal by the assessee to set aside that order of the High Court and to direct the Tribunal to state a case on that question. "

From the above it follows that it is not open to this Court to frame questions afresh on the basis of-the statement of case. The only power of this Court is to answer the questions referred by the Tribunal.

The contention of learned counsel for the assessee is that since the Tribunal has not stated anything expressly rejecting his claim for a reference of question No.2 it is deemed to have been impliedly referred. It is difficult to accept the contention of learned counsel. The very fact, that when he requested the Tribunal to frame four questions and the Tribunal referred question No. 1, indicates that question No: l is different from question No.2. Further, when question No. l was referred by the Tribunal and question No.2 was not referred, it amounts to impliedly refusing to refer question No.2.

Under those circumstances it is difficult to accept the argument of learned counsel for the assesssee. As pointed out by the Supreme Court in CIT v. Smt. Anusuya Devi (1968) 68 ITR 750, the assessee when the Tribunal refused to refer question No.2 ought to have approached this Court by way of a petition under section-256(2) of the Income-tax Act.

It follows from the above, since the question referred by the Tribunal is, a pure question of fact we decline to answer the same.

The R.C. is, accordingly, disposed of. No. costs.

M.B.A./107/FCOrder accordingly.