Kerala H.C : These are in all 18 income-tax references. Out of them, six references of 1992 are by the Revenue and those of 1993 are of the assessee.

High Court Of Kerala

CIT vs. Asian Techs Ltd.

Sections 256, 260, 254(1), ITAT Rule 29

Asst. Year 1979-80, 1980-81, 1981-82, 1982-83

V.V. Kamat & K. Narayana Kurup, JJ.

IT Ref. Nos. 126 to 131 of 1992, 64 to 67 of 1993 and 71 to 78 of 1996

16th October, 1996

Counsel Appeared

P.K.R. Menon & N.R.K. Nair, for the Revenue : Joseph Markose & Jospeh Kodianathara, for the Assessee in IT Ref. Nos. 126 to 131 of 1992 & IT Ref. Nos. 64 to 67 of 1993 and P.G.K. Warrier, Joseph Markose & Joseph Kodianthara, for the Assessee in IT Ref. Nos. 71 to 74 & 75 to 78 of 1996

JUDGMENT

V.V. KAMAT, J. :

These are in all 18 income-tax references. Out of them, six references of 1992 are by the Revenue and those of 1993 are of the assessee. Except IT Ref. No. 64 of 1993 relating to the asst. yr. 197980, the other income-tax references, both by the assessee as well as by the Revenue, relate to the asst. yrs. 1980-81, 1981-82 & 1982-83. IT Ref. Nos. 71 to 78 are as a result of the orders passed by this Court in the concerned original petitions directing the Tribunal to refer the questions raised by the Revenue which were not referred and could be made the subject- matter of IT Ref. Nos. 126 to 131 of 1992. The Revenue has approached this Court in these references of 1996 for the same asst. yrs. 1979-80, 1980-81, 1981-82 & 1982-83 (four assessment years)—with regard to the questions that are initially declined to be referred by the Tribunal. These references were considered together, ultimately creating jurisdictional difficulties for us to answer the questions involved therein, although it must be stated that jurisdictional difficulties making us impossible to deal with and answer questions, floated on the surface of the record. It must also be stated that the aspect is not specifically urged with reference to any of the questions raised either by the assessee or even by the Revenue.

It is true and we are very much conscious that under s. 260 of the IT Act, 1961, the Court gets concerned with the question referred to it in its advisory function. In the process, the Court also comes to a decision to refuse to answer such questions on the basis that such questions need not and should not be answered and at times may re- formulate the questions. In the process of reasoning, the Court also has to be conscious that in the process of re- formulation if required, the expected questions in such a process must emerge from the material on record considered by the Tribunal, out of which the proceedings under s. 260 of the IT Act, 1961, are before this Court. It is also to be borne in mind that in the process of dealing with the proceedings under s. 260 of the IT Act, 1961, new and altogether different questions are not expected to be raised and answered consequently and the power in this connection is capable of enabling the Court only to re-settle and re-frame the questions with reference to the questions referred to it.

The above position is undoubtedly on a restrictive character determining the function of the Court acting under the powers of s. 260 of the IT Act, 1961. In the process, it is to be borne in mind that the Court cannot disturb or go

behind a finding of fact given by the Tribunal with reference to any factual situation. Such a finding cannot be disturbed or bypassed, may be on the basis that there is no evidence to support it or that it is contradictory to all the evidence on record and that too in the absence of an express challenge in regard thereto. Illustratively, the decision of the apex Court in CIT vs. Greaves Cotton & Co. Ltd. (1968) 68 ITR 200 (SC) : TC 54R.839 is pressed into service for the proposition that in the hearing of a reference, the Court is not entitled to go behind the finding of fact recorded by the Tribunal. Firstly, unless the question relating thereto is before the Court in the nature of a referred question, it is submitted on the strength drawn from the above decision that it is for the party to apply for a reference in regard to the findings of fact in question sought to be contended. Yet in another decision of the apex Court in CIT vs. Smt. Anusuya Devi (1968) 68 ITR 750 (SC) : TC 55R.809 in the same volume, a situation enabling the High Court to decline to answer a question of fact or question of law which is purely academic or having no bearing on the dispute between the parties or not arising out of its order is considered. This is with reference to a situation in which the High Court declined to answer the question arising out of the Tribunal.

In spite of these restricted situations, specific situations do occur. Illustratively, in Kanga and Palkhivala’s The Law and Practice of IT, 7th Edn., Vol. I—s. 258 of the IT Act, 1961—such occasions relating to the finding not having been expressly challenged by a question are also considered. It is found in the process of discussion that the Court answered the question of law even after rejecting a finding of fact, which had no evidence in support of it, to that finding. Illustratively, a question is also posed—should the Court give a wrong answer to the question referred because a patently wrong finding of fact, incidental to the question, has not been expressly challenged by a question specifically directed to that finding ? In the context of the real need, situations occur relating to the departure in the context. The Court normally should not permit a party who could and should have given relevant evidence at a stage, which is normally not the stage of receiving evidence. In such a situation, the Court gets directly concerned with reference to the manner in which such evidence has crept in on the record. Even though this Court and the apex Court exercised advisory jurisdiction, it has to be understood on the basis that they have only two options in the process of dealing with the situation, either to answer the question of law or to call for a supplementary statement of the case. Even in such a situation, when the Court is placed in difficult situations, it is not a must that the question should be answered or as the other alternative, a supplementary statement should be called for. There is yet a third course and it is adopted by the apex Court itself on three occasions in CIT vs. George Henderson and Co. Ltd. (1967) 66 ITR 622 (SC) : TC 55R.1065, CIT vs. Greaves Cotton & Co. Ltd. (supra) and B. Muniappa Gounder vs. CIT (1976) 102 ITR 787 (Mad) : TC 56R.268 and resorted to a direction to the Tribunal to consider the question afresh and consequently to dispose of the appeal in the light of the observations, after taking into consideration and account all the materials legally and properly received on record. What appears to be the characteristic feature of the system of procedure relating to the quasi-judicial tax authority is much different from that under the ordinary civil law. The system of procedural functioning justifiably expects that all the necessary materials in support of the contentions taken up by the assessee must be made available in the proceedings before the ITO. There has to be a contention and with regard thereto, there has to be a material. Unlike the civil proceedings, the procedural stages thereafter are not in a relaxed condition. This is amply illustrated relating to the procedural aspects before the first appellate authority—CIT(A)—before whom, under r. 45 of the IT Rules, 1962, an appeal is to be presented and dealt with thereafter by the first appellate authority. In this context, r. 46A of the IT Rules, 1962, is vital and important. It is in the negative form enacting that the appellant shall not be entitled to produce before the appellate authority any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the AO. This negative form assures the legal position that normally the AO is the be all and end all with regard to the reception of the material with regard to the contentions that are to be taken up and considered by the assessing authority.

The following four conditions appearing in r. 46A of the IT Rules, 1962, made the situation still worse. The four conditions are as follows : “(a) where the AO has refused to admit evidence which ought to have been admitted; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the AO; or (c) where the appellant was prevented by sufficient cause from producing before the AO any evidence which is relevant to any ground of appeal; or (d) where the AO has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.”

A reading of these four conditions would fortify the basic situation that everything has to be placed on record before the AO and cannot be placed thereafter, without the above four hurdles. Even in such a situation, the further provisions of r. 46A(2), (3), (4) would make the situation abundantly clear in the context. The saidprovisions are as follows : “46A. (2) No evidence shall be admitted under sub-r. (1) unless the Dy. CIT(A) or, as the case may be, the CIT(A) records in writing the reasons for its admission. (3) The Dy. CIT(A) or, as the case may be, the CIT(A) shall not take into account any evidence produced under sub-r. (1) unless the AO has been allowed a reasonable opportunity— (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the Dy. CIT(A) or, as the case may be, the CIT(A) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the AO) under cl. (a) of sub-s. (1) of s. 251 or the imposition of penalty under s. 271.”

In particular, even in spite of this situation, the above r. 46A(4) of the Rules would give powers to the first appellate authority to direct the production of a document or examination of any witness to enable him to dispose of the appeal or for any other substantial cause.

It would be thus apparent that the first appellate authority has powers to admit evidence sought to be tendered by the party, only after satisfaction of the rigorous test in regard thereto and that too after compliance with the statutory provisions of recording reasons in writing in regard thereto. This power, along with its rigorous restrictions appearing in the forefront in r. 46A of the IT Rules, 1962, in our judgment, would certainly influence the exercise of his powers under r. 46A(4) of the rules, apart from the statutory provision, that such a power given to the first appellate authority gets restricted to the conditions of the said statutory provision and that too in regard to a direction relating to the production of any document or examination of any witness. Even the Tribunal, under the Tribunal Rules, 1963 (under r. 29 thereof), gets the power with the conditional negative form relating to the parties to the proceedings. The said r. 29 of the Tribunal Rules, 1963 would be beneficial and it is as follows :

“29. The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or, if the IT authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced.” It would be seen that what was available to the party before the first appellate authority and that too with rigorous conditions is not available under any circumstances, in view of the introductory negative portion and it is to the following effect : “The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal.” Thus, what was a rigorously conditional right before the first appellate authority appears in r. 29 of the Tribunal Rules, 1963, in the extinct form. It is thereafter, as could be seen from the above provision reproduced, that the Tribunal gets the power, if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed. This power is with reference to certain situations enacted in regard thereto. Firstly, it is to enable the Tribunal to pass orders, secondly, it is for any other substantial cause and, thirdly, in the event of a situation that the IT authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them. It is only in a situation of demand attributable to these requirements, the Tribunal gets the statutory discretion to allow such document to be produced or witness to be examined or affidavit to be filed or allowance of such evidence to be adduced. This is not the be all and end all of the situation with regard to the Tribunal exercising powers under r. 29 of the Tribunal Rules, 1963. The Tribunal, with regard to all these situations, is under a statutory obligation to record reasons as per the provisions of r. 29 of the Tribunal Rules, 1963.

In other words, not only the statutory provisions of r. 46A of the IT Rules, 1962, established the situation that everything is expected to be done in the course of the proceedings before the AO and could be done with regard to the material other than the one expected to be produced before the AO, which can be received only after passing the litmus test as provided thereunder. Even at that stage, the power given to the first appellate authority is specifically pinpointed. Even in regard to the proceedings before the Tribunal, the statutory provision of r. 29 of the Tribunal Rules, 1963, puts the situation in the forefront, though the parties are not allowed to produce additional evidence in any situation. In our judgment, the statutory provisions considered hereinbefore would have to be understood as controlling the powers of the first appellate authority and the Tribunal with reference to the situation of restrictions on the parties and further with regard to the situation, so far as the Tribunal is concerned,limited to the aspects specified therein and the legal the matter in regard thereto to record reasons referring to the specified occasions leading to the requirement of the Tribunal with reference to production of a document, examination of any witness or allowing filing of any affidavit under its own above statutory power. In our judgment, in the first instance, the situation would have to be considered as to whether there is any kind of compliance in regard to the above statutory provisions. In the light of the view which we are taking hereafter, the traditional and established method of opening this judgment with the reproduction of the questions brought before us both by the assessee as well as by the Revenue is abandoned. It is because with regard to this feature, we find it difficult to answer any of the above questions. This is because the entire material, on the basis of which the Tribunal has proceeded, is the one which has come on record before the Tribunal keeping aside the above jurisdictional requirement in this connection.

With the help of counsel for the parties, we have been taken through the material on record and we will refer thereto so far as it is necessary in the context under discussion.

The assessee is a company engaged in the business in engineering contracts. With regard to all the years under consideration, separate assessment orders are passed naturally by the ITO, Ernakulam. They are at Annexure-A collectively.

The first appellate authority was the CIT and heard all the four appeals as a group. He considered common questions to all the four assessment years, firstly with regard to investment allowance in respect of new machinery purchased and installed during the previous year relevant to each of the four asst. yrs. under consideration. He considered the contention in regard thereto, to the effect that the ITO was in error to reject the claim for investment allowance solely on the ground that the assessee is not an industrial undertaking for the purpose of the business of construction, manufacture or production of any article or thing, let alone an article or thing not included in the list in the XIth Schedule to the Act. The first appellate authority considered the contention in the context that as a contractor using extensive raw materials and fabrication of such raw materials including pile driving, the assessee was clearly manufacturing an article or thing as envisaged under s. 32A of the Act. The assessee had undertaken the elaborate work in Bhutan and for that purpose, a huge factory had to be set up at the work site for the execution of the work and there is ample evidence to show that manufacturing activities are being carried out in the process of contract work.

In the process of reasoning, the first appellate authority concluded that the assessee is entitled to investment allowance as being a concern or an industrial undertaking engaged in the construction work. However, the contention of the assessee that it is a manufacturing concern as envisaged under s. 32A, as seen from the order, did not find favourable consideration with the said authority. In the process of reasoning, the first appellate authority did not have any hesitation in the context to accept that the activity of the assessee is an industrial undertaking even for the purpose of claiming benefit under s. 32A.

The first appellate authority considered the next aspect relating to the deduction under s. 80J for all the relevant years under consideration. The authority considered the aspect and in the process of reasoning, referred to its earlier observation that the assessee is an industrial undertaking, but is not manufacturing or producing any article. In this connection, the authority has observed that although investment allowance is admissible to the assessee as it is constructing an article or thing, though not manufacturing or producing an article, deduction under s. 80J cannot be allowed, in the absence of the assessee being found to be engaged in the manufacturing or production of any article. However, the authority observed that it is true that in the course of executing the contract work, the assessee would be manufacturing or producing certain articles. This aspect was rejected by the first appellate authority describing it to be too insignificant to bestow the character of an industrial undertaking engaged in the manufacture or production of article as envisaged in s. 80J. Then the first appellate authority considered the question of deduction under s. 35B relating to the asst. yrs. 1980-81, 1981-82 and 1982-83, obviously, relating to the weighted deduction on the expenditure on travelling in Bhutan and also on the maintenance of two branch offices in Bhutan. Thereafter, in para 9 of the order, the first appellate authority considered the question of depreciation admitting it to be an additional ground and raising the rate of depreciation from 10 per cent to 15 per cent In the ultimate analysis, the first appellate authority considered the question relating to deduction under s. 80HH with regard to the asst. yr. 1980-81. With regard to the factual position relating to the assessee manufacturing or producing articles in any backward area, the appellate authority took the view that the assessee- contractor is only executing contract work in the form of buildings, tunnel, etc., and there is no manufacturing of any article involved in this, as envisaged in s. 80HH.

It is in these circumstances, the proceedings travelled before the Tribunal, both at the instance of the assessee as well as of the Revenue with regard to all these assessment years.

Before the Tribunal, the judicial member and the accountant member did not agree and, therefore, under s. 255(4) of the Act, the point of difference came to be referred to the third member. The said point of difference is as follows : “Whether, on the facts and in the circumstances of the case, the assessee has manufactured articles or things independent of the main contract to claim the benefit under ss. 80J and 80HH ?” Accordingly, the proceedings were taken up and heard by a third member—the then president of the Tribunal, Cochin Bench. Therefore, on the basis of the three judgments, under the above circumstances, by the order dt. 9th March, 1992 (Annexure-C4, p. 116-119), the matter ended with the observation that the majority view is that the assessee is not entitled to the benefit under s. 80J and 80HH in the relevant assessment years and since, it is observed, on all other issues there was agreement between the members, who heard the appeals originally, the proceedings were disposed of with reference to the following summary of findings in regard thereto : “(i) The assessee is an industrial undertaking entitled to lower rate of taxes. (ii) The assessee is entitled to investment allowance. (iii) The assessee is entitled to weighted deduction under the provisions of s. 35B(1)(b)(iv) and (vii) of the IT Act as claimed by it for the asst. yrs. 1980-81 to 1982-83. (iv) The disallowance on travelling and vehicle running expenses stands deleted. (v) A sum of Rs. 14,687 is allowed as a deduction in respect of the expenditure incurred at Rammam Hydel Project (erroneously given the name as Lonavala site in the assessment order). (vi) The disallowance of Rs. 12,460 under the head ‘staff welfare expenses’ is deleted. (vii) The assessee is entitled to 15 per cent depreciation on the steel shuttering equipments instead of 10 per cent (viii) The assessee is not entitled to relief under s. 80J and 80HH as it is not engaged in the manufacture of articles or things.”

As stated at the outset, we find difficulties two fold, complete violation of the statutory provisions of r. 29 of the ITAT Rules, 1963, and with regard to the anomalous situation created on reading of the three judgments. In the judgment of the judicial member (Annexure-C, pp. 63-92), the factual matrix stated in para 5 with reference to seven aspects (a to g thereof) appears flowing from the additional material that has come for the first time before the Tribunal. The judicial member then has taken up for consideration the aspect of ss. 80J and 80HH and in para 8 thereafter in particular has referred to the contention of learned counsel that besides the article manufactured in the construction activities of the assessee, the assessee also manufactured articles which are independently sold and the assessee has received substantial amounts from Bhutan, Kudremukh, Salem, Cochin Refinery and Lonavala Karja works. It is thereafter the judicial member has observed in the following manner : “On our directions, he filed before us a copy of the details showing the description of the articles manufactured and also the amounts received by the assessee . . .”

It would thus appear that a copy of the details showing description of the articles manufactured and also the amounts received by the assessee came to be filed on behalf of the assessee, as stated on the directions of the Tribunal. A reading of the judgment, after referring to the submissions of the rival parties, shows that the judicial member has based the entire reasoning relating to the factual position on the basis of the material tendered in the above situation for the first time before the Tribunal. Although, throughout the judgment, the judicial member has used the dual pronoun “we”, in the process of reasoning and record of findings, the accountant member was unable to agree with the conclusions.

It is in this situation that we are made aware of the statutory provisions of the IT Rules, 1962, and the Tribunal Rules, 1963, with reference to the situation whereunder the Tribunal received the above material in the above situation quoted hereinbefore. Apart from the situation analysed by us hereinbefore leading to the legal position that when the parties do not have any right or in other words are specifically prohibited with regard to the tendering of additional material, the basis before the Tribunal was the copy of the details produced on behalf of the assessee and it is stated in regard thereto that it was pursuant to the directions of the Tribunal.

In our judgment, this course adopted by the Tribunal proceeding to rely upon the material referred to above, without admitting them as additional evidence and that too without giving any reasons in regard thereto, would have to be termed as grossly unfair and illegal. Based on these documents, the Tribunal has entered a finding which would be suffering from jurisdictional infirmity and it would not be in accordance with the law. The above statutory provision would amplify that ordinarily the Tribunal should dispose of the appeal only on the basis of the materials on record and available before it. It is also important that in regard to the material, the parties to the appeal, the assessee and the Revenue, should have notice and knowledge. All these aspects are already considered earlier by this Court in CIT vs. Travancore Titanium Products Ltd. (1993) 111 CTR (Ker) 112 : (1993) 203 ITR 685 (Ker) : TC 8R.1106, though in a different context emphasising that “ad hocism” in that regard cannot be countenanced in law. With anxiety and our concern with reference to the consideration of responsibility in the context, the record and proceedings of the Tribunal were specifically called for our satisfaction. In the context of the situation, it was seen and examined not only by learned counsel for the assessee, but also by senior tax counsel appearing before us. We have also gone through the record in the context. We find no reference in the order sheet as to when this copy of details came to be tendered on record. The copy appears to be on record with a covering letter showing that it was filed on 25th Feb., 1987, giving details of Annexures with reference to the copy tendered on record. Travelling through the entire record for the said purpose, we do not find any kind of compliance with the statutory provisions. After having seen the record, we are left with a feeling of a desire in future that the order sheet is required to be properly maintained keeping a record of events and this is more so because of the statutory restrictions under the above provisions referred to and discussed by us.

The accountant member, in his judgment Annexure-C1, pp. 93-96 in para 33, has ad verbum borrowed from para 5 of the judicial member’s order and the colour pamphlet filed by the assessee and referred to the argument notes filed by the assessee with reference to the details and in regard to which he has observed in the following manner: “. . . as per the original tender the requirement of steel supports were not visualised, we were asked to manufacture the entire quantity of steel supports required for supporting the roofs of power house and butterfly valve chamber. These steel supports are independent articles or things which are not required in the ordinary tunnelling work . ..”

It is, thereafter, that the accountant member has recorded that the assessee has not filed the copy of the original tender or copy of the original agreement entered into by the assessee with Chukha Hydel Project to substantiate his abovesaid claims and, therefore, concluded that the statement of the assessee cannot be taken for granted as true. Thereafter, the accountant member considered yet another aspect and that too on the basis of the papers filed by the assessee, viz., the running account bills. The accountant member has observed that the running account bill is made with reference to the agreement and the payments are claimed with reference to the various items as forming an integral part of the underground power house only. It is specifically observed that these steel supports, rock bolts, etc., cannot be taken as independent articles. It is, thereafter, that the accountant member has made the following observations : “. . . Had they been so the tender and the agreements for erection of such steel supports, etc., would have been supported by separate tenders and agreements. The assessee has not filed before us copies of separate tenders and agreements in respect of those steel supports, rock bolts, steel reinforcements, etc. On the other hand, these are included as specific items in the running account bills in respect of the work of the underground power house . . .” Therefore, the accountant member would have to be understood and followed completely with reference to the factual position pointedly regarding his conclusion that the material is insufficient and even on a probe in regard thereto, there is disagreement even on facts of a vital and important character apart from the situation that the entire observations are based solely on the production of additional material in the above circumstances, even then we find the above single point of difference quoted hereinbefore. When we go through the third judgment of the then president of the Tribunal, we have to appreciate learned counsel for the assessee pointing out to us as regards the awareness of the very limited and restricted jurisdiction of the third member to confine himself only to express his opinion on the point of difference of opinion referred to him. However, the president proceeded to consider the position on the basis that the assessee was manufacturing intermediate products, that too on the basis of the situation as admitted by both the members. The president referred to the decision of the apex Court in CIT vs. Cellulose Products of India Ltd. (1991) 98 CTR (SC) 225 : (1991) 192 ITR 155 (SC) : TC 25R.739. In the course of discussion in regard to this decision of the apex Court, the president emphasised the fact that the apex Court reversed the decision of the Gujarat High Court in Cellulose Products of India Ltd. vs. CIT (1977) 110 ITR 151 (Guj) : TC 25R.743, holding that the apex Court observed that even if intermediate products are manufactured, only if they are marketable by themselves, and if their production was covered by the objects specified in the memorandum of association, such products would also be covered by the expression “articles”. On the basis of the above axiom, the president proceeded to find out the difference of opinion whether could be resolved, relating to the situation as to whether the assessee is entitled to relief claimed under ss. 80J & 80HH.

With the help of learned counsel for the assessee, we have been taken through the said decision of the apex Court. We do not find such a position as has been understood by the president as the declaration of law by the apex Court in the said judgment. The apex Court reversed the decision of the Gujarat High Court observing that the finding of the Tribunal that the production of cellulose pulp during the month of March, 1961, was not a trial production and that the cellulose pulp manufactured by the respondent was a finished product which was a marketable commodity, was essentially a finding of fact based on appraisal of evidence. It is further observed that the circumstance that the industrial licence granted to the respondent was for the manufacture of CMC and not of cellulose pulp was, keeping in view the nature of the two articles, not of much significance. The reasoning proceeds further to observe that in view of the wide objects specified in its memorandum of association manufacture of cellulose pulp was one of the objects of the respondent. It is on the basis of this reasoning, the apex Court felt that the High Court erred in rejecting the finding of fact arrived at by the Tribunal against this background and holding that the manufacture of cellulose pulp during March, 1961, was of no consequence and that the first year of production would be the asst. yr. 1962-63 when the CMC was actually manufactured. The apex Court also observed that the alternative contention of the respondent was not set up before the Tribunal nor was any question sought to be referred on that basis. On facts, it is observed that if the Tribunal, after considering the evidence produced before it on a question of fact, records its finding, the finding cannot be interfered with by the High Court unless such a finding was not supported by any evidence, was perverse or was patently unreasonable. The apex Court was considering the position more or less similar under s. 84 of the IT Act, 1961. It is not possible to accept the assumption of the president that marketability so held by the apex Court in the other judgment was an essential condition.

It is thereafter the president proceeds to record his difficulty that the assessee has manufactured articles or things independent of the main contract to claim the benefit under ss. 80J & 80HH. Factually, the president borrowed from the situation as having been agreed to by both the members that the assessee is an industrial undertaking. The president recorded the opinion that the assessee has not manufactured any article or thing independent of the main contract to claim the benefit under ss. 80J and 80HH of the Act and further recorded that the view expressed by the accountant member is agreeable. In the process of reasoning, reported decisions have been taken into consideration, mainly drawing strength from the decision of the apex Court in Cellulose Products of India Ltd.’s case (supra), on the assumption that marketability is an essential factor to be established as declared by the apex Court in the said decision. We have considered the position that the observation does not flow as a result of the reading of the above judgment.

Learned counsel for the assessee reminded us of the self-imposed restriction available in the judgment of the president at the outset and we have pinpointed the aspect. The question was as to whether the assessee has manufactured articles or things independent of the main contract to claim the benefit under ss. 80J & 80HH. From the discussion referred to above in the judgment of the president, reaching the conclusion as regards marketability in the submission of learned counsel is a travel beyond the scope of the question referred. Be that as it may, the picture that gets presented before us is of the judicial member initially even with regard to the statement of facts has borrowed bodily from the additional material. The said member has considered the factual matrix solely on the basis of the material that is received under the above circumstances.

The accountant member, in his turn, has bodily taken the situation from para 5 of the judicial member’s order and the colour pamphlet filed by the assessee for the first time before the Tribunal. He has disagreed even on facts and we would say the disagreement is wholly tangential in the context of the sufficiency of the material as well as in the context of the specific items readable with reference to the running account of the assessee.

We find that even thereafter when the proceedings came up for final order dt. 9th March, 1992, (Annexure-C4), the reasoning gets confined to the majority view that the assessee is not entitled to the benefit under ss. 80J &

80HH in the relevant assessment years. In our judgment, our examination of the contents of the two judgments shows, what we have already observed hereinbefore. In para 4 of the order, the final order proceeds on the basthat there was agreement between the members who heard the appeals originally and in pursuance thereof, the following eight points appear in the nature of findings of fact.

The material on record leads us to a situation of an insurmountable difficulty firstly with regard to the jurisdictional aspect of the additional material coming on record as observed above. Additionally, going through the three judgments, when divergence as regards the factual aspects is of a diametrically opposite character from each other, the final order proceeding on the basis that there was agreement between the members who heard the appeal originally would be hazardous in the context of peculiarities pointed out hereinabove. It is not possible to accept the eight points as flowing from the situation of agreement.

In fact, the learned senior tax counsel submitted strenuously that except the issues this Court can consider the other issues which are the subject-matter of the references preferred by the Revenue. However, in the teeth of the conclusions that are arrived at by us, whereby we are compelled to reject the entire proceeding before the Tribunal, so much so that the final order, in our judgment cannot be understood to flow as a direct consequence of the three orders referred to by us hereinbefore. In such a situation, the submission of learned senior tax counsel is more than difficult for consideration, not to speak of its acceptance.

The factual peculiarities compelled us to adopt a rather unknown course of quashing and setting aside the proceedings before the Tribunal covered by the three orders culminating in the final order specified hereinbefore. Therefore, at the outset itself, we have shown awareness of our limits. At the same time, we have borrowed strength from the three decisions of the apex Court deviating, for the requirements of justice, from the normal restrictions of our powers under s. 260 of the IT Act, 1961. The apex Court in George Henderson’s case (supra), Greaves Cotton’s case (supra) and Muniappa Gounder’s case (supra), was left with this situation to deal with the factual matrix to direct the Tribunal to rehear the appeals before it. We adopt the same course. It is for this reason, also as stated earlier, we have abandoned the traditional way of enumerating the questions that are posed for our consideration.

For the above reasons, the questions are not required to be answered. The proceedings [Annexures C, C1, C3 and lastly the final order dt. 9th March, 1992, C4] before the Tribunal, Cochin Bench, are quashed and set aside and the Tribunal is directed to hear and decide all the appeals, viz., ITA Nos. 835 to 838 of 1985 of the assessee as well as ITA Nos. 81 to 84 of 1986 of the Revenue afresh, in the light of the above observations. The references stand disposed of accordingly.

[Citation : 233 ITR 715]

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