High Court Of Kerala
CIT vs. Dr. T.K. Jairaj
Sections 69, 254, 256(1)
Asst. Year 1984-85
P.K. Balasubramanyan & C.N. Ramachandran Nair, JJ.
IT Ref. Nos. 61 of 1997 & 275 of 1999 and OP No. 20583 of 1996
31st October, 2001
Counsel Appeared
P.K.R. Menon & George K. George, for the Applicant : C. Kochunny Nair & M.C. Madhavan, for the Respondent
JUDGMENT
C.N. RAMACHANDRAN NAIR, J. :
All the three cases arise from the orders of the Tribunal relating to the income-tax assessment of Dr. T.K. Jayaraj, a medical practitioner in Calicut, hereinafter referred to as the “assessee”, for the asst. yr. 1984-85. The assessment was completed by the ITO, Central Circle, Kozhikode, and, therefore, the CIT competent to file reference application before the Tribunal was the CIT, Central Circle, having jurisdiction over the AO who passed the order. The appeal by the assessee was allowed by the Tribunal, Cochin Bench, and copy of the order was sent to the CIT, Central Circle, Bangalore, who was the person on record of the Tribunal, having jurisdiction in the matter. However, on receipt of the order from the Tribunal, the CIT Central Circle, Bangalore, sent the appellate order to the CIT, Central Circle, Madras, to whom the jurisdiction was transferred. It appears that there was some delay in the office of the CIT at Madras, where the appellate order was stated to be misplaced. However, the CIT at Madras also had ceased to have jurisdiction and therefore, he forwarded the order to the CIT, Cochin who had jurisdiction in the matter. The CIT, Cochin, thereafter filed the reference application before the Tribunal, Cochin Bench, accompanied by a delay condonation petition for condoning the delay of 136 days. It may be noticed that the limitation for filing the reference application was calculated reckoning the date of receipt of the appellate order of the Tribunal by the CIT, Madras on 17th Jan., 1994, who had ceased to have jurisdiction in the matter. Under the proviso to s. 256(1) of the IT Act, the Tribunal does not have the power to condone delay of more than 30 days in filing the reference application. Therefore, the reference application filed by the CIT, Cochin, was rejected by the Tribunal by order dt. 22nd May, 1995. Thereafter the Department changed it’s stand and the CIT, Cochin, filed Misc. Petn. M.P. No. 7 of 1996 praying for restoration of the reference application dismissed by the Tribunal on the ground that date of receipt of the appellate order of the Tribunal should be taken as 13th June, 1994, that is the date on which the CIT, Cochin who had jurisdiction in the matter received the appellate order. The reference application was in fact filed by him on 1st Aug., 1994, and if the date of receipt of the appellate order is to be reckoned as 13th June, 1994, the date on which the CIT, Cochin, received the order, then the reference application was well within the statutory period. The Tribunal vide order dt. 28th June, 1996, restored the reference application and thereafter disposed of the same by referring the questions of law in IT Ref. No. 61 of 1997. The assessee challenged the restoration order by filing O.P. No. 20583 of 1996. Thereafter the assessee also filed reference application to refer questions of law arising from the restoration order passed in the miscellaneous petition. The Tribunal disposed of the reference application by referring the questions of law raised by the assessee relating to the jurisdiction of the Tribunal to restore the reference application initially dismissed by order dt. 22nd May, 1995. The reference case is numbers as IT Ref. No. 275 of 1999. The assessee’s two cases are against the maintainability of the reference case, IT Ref. No. 61 of 1997, referred by the Tribunal at the instance of the CIT, Cochin. As common issues are involved we have taken up all the cases together and have heard Sr. C.K. Nair, counsel for the assessee, and Sri. P.K.R. Menon, senior standing counsel for the IT Department.
2. The assessee’s counsel contended that the Department having accepted the date of receipt of the appellate order at an earlier date, and having filed the reference application with delay condonation petition, cannot, after the same was dismissed by the Tribunal, maintain a different stand on the ground that the appellate order should be taken to have been received only on the date on which it was received by the CIT, Cochin. In any case, counsel contended that once the Tribunal had dismissed the reference application as time-barred, it had no jurisdiction to restore the same by rectification of the dismissal order dt. 22nd May, 1995, either under s. 254(2) of the Act, or under it’s inherent power. On the other hand, the Department’s counsel contended that it was a mistake for the CIT, Cochin, to have conceded that the date of receipt of the appellate order as the date on which the order was received by the CIT at Madras who had no jurisdiction in the matter. According to him, the date on which the order is received by the CIT having jurisdiction in the matter, is the date of actual service and with reference to that date, the reference application filed was within time. It is his contention that the party should not be made to suffer on account of a mistake committed by the Tribunal in so far as it has treated the reference application filed within time as one filed beyond time, even though the CIT, Cochin, has by mistake admitted the delay and filed a delay condonation petition. We are of the view that the service of the order by the Tribunal either on the CIT at Bangalore or at Madras was no service at all, because the order has to be served on the person having jurisdiction in the matter. Therefore, the date of service of the order is the actual date on which the same was served on the CIT having jurisdiction in the matter, and who is the real party in the proceedings before the Tribunal. Admittedly, the CIT, Cochin, is the person having jurisdiction in the matter at the time of filing the reference application and the date of receipt of the appellate order of the Tribunal by him was on 13th June, 1994, and he filed the reference application on 1st Aug., 1994, which is within the statutory period. Therefore, factually the reference application was filed in time, and the rejection of the same by the Tribunal as time-barred by order dt. 22nd May, 1995, was only a mistake and the same was pointed out by the CIT, Cochin, who wrongly conceded delay. The proviso to s. 256() of the Act does not empower the Tribunal to condone the delay beyond 30 days. Therefore, once the delay is beyond 30 days, reference application is not maintainable in the Tribunal at all. However, the rejection of the same by the Tribunal vide order dt. 22nd May, 1995, produced as Ext. P2 in the O.P. filed by the assessee could be taken only as a refusal to entertain the reference application. In fact, once the reference application is entertained by the Tribunal as one validly filed, there is no provision for dismissing the same, except on merits, that is either by referring the questions of law or by refusing to refer the questions of law. Accordingly we are of the view that the order of the Tribunal rejecting the reference application is one of refusal to entertain the reference application. Later, when the Tribunal was informed of the actual date of receipt of the order by the CIT, Cochin, the Tribunal rightly restored the reference application vide order dt. 28th June, 1996, which is marked as Ext. P4, and challenged by the assessee in the original petition filed by him. Even though s. 254(2) authorises the Tribunal to rectify the mistakes apparent on the face of the appellant order, the same power cannot be invoked in a case like this where the Tribunal dismissed the reference application as time-barred by mistake. Therefore, the power has to be found elsewhere to correct such a mistake committed by the Tribunal. In the view taken by us, that the dismissal of the reference application is only to be taken as a refusal to entertain the reference application, as one treated as filed beyond time-limit, it should be taken that the reference application so treated as defective still remains to be disposed of when the defect is cured or when the Tribunal is satisfied there is actually no such defect. Therefore, we are of the view that when the Tribunal noticed that the reference application was not really time barred, it is still free to dispose of the reference application on merits, as the same is held to be still pending. In any case in view of the developments in this case, we proceed to consider whether the Tribunal has jurisdiction to restore the reference application once dismissed by it as time barred by mistake. We are inclined to agree with the position canvassed by counsel for the Department that the Tribunal has inherent power to correct it’s own mistakes, because the party cannot be made to suffer on account of a mistake committed by a Court or Tribunal. Our attention was invited to the decision of the Allahabad High Court in Srimathi Lachmana Alias Mulraia vs. Dy. Director of Consolidation, 1966 RD 419, wherein the Allahabad High Court held that the Tribunal has inherent jurisdiction apart from statutory jurisdiction to correct an error committed by it. Similarly, the Punjab High Court in Mangat Ram Kuthialia vs. CIT (1960) 38 ITR 1 (Punj) : TC 8R.675 held as follows : “that it was a settled rule that a judicial Tribunal could recall and quash its own order in exceptional cases when it was shown that it was obtained by fraud or by palpable mistake or was made in utter ignorance of a statutory provision and the like, and for the application of that rule the class of the Tribunal was not a material matter but what was the substance and material nature of the proceedings before it; if the proceedings were in the nature of judicial proceedings, then irrespective of the class of the Tribunal the rule applied.” Similar is the view of the Bombay High Court in the case decided in Khushalchand B. Daga vs. T.K. Surendran (1972) 85 ITR 48 (Bom) : TC 8R.656, wherein the Bombay High Court held as follows : “The Tribunal in my view ought to have set aside the said impugned order in exercise of its inherent powers and should have reheard to appeal on merits, without going into the question as to whether the application for rectification of the mistake was within the time or not, for after all, no Court or Tribunal can allow a party to suffer for its own mistake. That the Court or the Tribunal has such inherent power to correct its own mistake is well settled.” Therefore, we are of the view that the Tribunal has inherent power to correct its mistake and having dismissed the reference application by mistake as one filed beyond time, it has the power to restore the same on an application by the aggrieved party. We hold that the Tribunal rightly restored the reference application vide it’s order dt. 28th June, 1996, and decided the same on merits. Therefore, we dismiss the original petition filed by the assessee challenging the order of the Tribunal restoring the reference application. In view of our decision in the original petition, we answer the questions on the same issue referred in IT Ref. No. 275 of 1999 at the instance of the assessee, in favour of the Department and against the assessee.
5. IT Ref. No. 61 of 1997 is the reference at the instance of the Department, and the two questions referred are the following :
Whether, on the facts and in the circumstances of the case, and also the issue before the assessing authority being whether the unexplained investments declared by the minor children under the Amnesty Scheme could be added in the in the assessment of their father, the Tribunal is right in directing the AO to determine whether the amount invested by the minor children in immovable properties during the previous year relevant to the asst. yr. 1984-85 were out of the past accumulation or not ?
Whether, on the facts and in the circumstances of the case and also considering the facts and figures reproduced in the enclosure to this reference, the Tribunal is right in law and fact in holding that “from any angle” the addition of Rs. 27,410 cannot be sustained ?
The two questions referred relate to the additions made in the assessment of the assessee for the asst. yr. 1984-85. The addition of Rs. 97,950 represents the unexplained investment in the name of assessee’s minor children in immovable properties. The names of the minor children and the respective investments in their names are given hereunder : Besides the addition of this amount under unexplained investments, the AO also made addition of Rs. 27,410 which represents the addition to the wealth in the name of assessee’s minor son T.J. Jaikish, who did not have the source for the same.
6. The assessee is a doctor employed in a reputed hospital and was also engaged in private practice. For the asst. yr. 1984-85, the assessee returned a total income of Rs. 60,540. However, another return was filed later admitting a total income of Rs. 1,40,540. Though the revised return was said to be filed under the Amnesty Scheme, the AO did not accept the same as full disclosure of the income. There was a search in the assessee’s premises on 7th Jan., 1986, and assessee’s sworn statement was recorded, wherein the assessee deposed that the assessee had acquired immovable properties in the name of his minor children in the relevant previous year. However, later vide letter dt. 5th Oct., 1987, the assessee informed the AO that the investments in the name of his minor children have been offered by his children for assessment under the Amnesty Scheme. The AO conducted enquiries and found that the assessee’s minor children had only limited source of income from rent and dividends and did not have sufficient source to explain the investments in the immovable properties amounting to Rs. 97,540, and the acquisition of wealth to the extent of Rs. 27,410. Accordingly, the assessment was completed by making addition of these two amounts as unexplained expenditure of the assessee. Though an appeal was filed by the assessee before the CIT(A) the same was dismissed in so far as addition of these two amounts are concerned. In the further appeal before the Tribunal, the assessee furnished certain data in respect of the income assessed in the name of his minor children from 1974-75 onwards. The assessee contended before the Tribunal that the minor children had accumulations during the preceding years, and therefore, they had the source for the investments made during the accounting year, relevant to the asst. yr. 1984-85. Though it was contended that the children had accumulations, it was conceded before the Tribunal that strict profit could not be produced. Relying on the data furnished by the assessee before the Tribunal, the Tribunal set aside the assessment and remanded the matter back to the AO with a direction to consider the earnings of assessee’s children in the preceeding years and to examine whether they have accumulations justifying investments which were treated as unexplained expenditure and income of the assessee. The Department has questioned this order of the Tribunal by getting the above two questions referred to this Court. We have extensively heard counsel for the Department and counsel for the assessee and have also perused the revised assessment order produced by the assessee before us. We are of the view that the Tribunal’s order is not sustainable for various reasons. In the first place, the assessee, who is a doctor, has admitted in his sworn statement in the course of search on 7th Jan., 1986 that he has made investments in the name of his minor children in the form of immovable properties. It is this amount that the Department has added towards unexplained expenditure in the name of the assessee. We do not know whether there is any scope for further investigation in the matter against the assessee’s own admission in the form of sworn statement. It is worthwhile to notice that there was no case of accumulation of income during the course of several years by assessee’s minor children before the AO or before the first appellate authority. It is for the first time that the assessee has furnished details of income assessed in the name of his minor children from 1974-75 onwards. We do not know on what basis the Tribunal had accepted the new theory put forward before it for the first time. The Tribunal seems to have brushed aside the sworn statement of the assessee, wherein he has admitted the investments made in the name of his minor children during the previous year.
Therefore, we are of the view that there is no scope for any further investigation in the matter, once the assessee has admitted before the Department that he has made the investments in the name of his minor children. Further, the Tribunal does not appear to have taken note of the details given in the assessment order, where the AO has gone into the source of income of the minor children of the assessee. In fact it is on record that the assessee’s minor children during the previous year had only fixed income in the form of rent and dividends which were insufficient to explain the investment made. The assessee had no further material in the course of assessment proceedings to offer source of investment of his minor children. Therefore, the Tribunal was not justified in remanding the case for a fresh investigation on the source of investment of the minor children on which the Department had probed and established it’s non-existence. Even before the Tribunal the assessee did not produce any bank pass book or other document to establish that assessee’s children had accumulated savings to make the investment. The copies of assessments for earlier years produced before the Tribunal do not establish any carried forward accumulations. Therefore, we feel that the materials produced before the Tribunal also do not justify a remand. We do not also think that the revised assessment issued by the AO and produced before us has any significance as we do not find any justification in the investigation ordered by the Tribunal. This finding of ours covers the addition of Rs. 97,950, representing unexplained expenditure in the form of investments in the name of assessee’s minor children. The next amount is also on account of the unexplained increase in the wealth of the minor son of the assessee. The Tribunal has ordered investigation of this addition also on the very same basis relevant to the addition of Rs. 97,950 for the asst. yr. 1984-85. Here again the assessee never even ventured to establish a case of source for his minor son to acquire wealth covered by this amount either in assessment or in first appeal. The only case before the lower authorities was that the children have made a declaration under the Amnesty Scheme covering the same amount. We are of the view that even if such a declaration is made under the Amnesty Scheme in the name of the minor children, the addition under the unexplained expenditure can be made in the name of the assessee. Therefore, we answer both the questions referred to us in favour of the Department and against the assessee.
[Citation : 256 ITR 252]
