High Court Of Orissa
CIT vs. Biju Patnaik (Decd.) By LR Prempatnaik
Sections CPC 151, 256
Asst. Years 1962-63, 1963-64, 1964-65
A.K. Ganguly & I. Mahanty, JJ.
Misc. Case Nos. 1 to 6 of 2004
25th October, 2006
Counsel Appeared
A.K. Mohapatra, for the Petitioner : S.N. Rotho & M.K. Badu, for the Respondent
JUDGMENT
A.K. Ganguly, J. :
These six miscellaneous cases being Miscellaneous Case Nos. 1 to 6 of 2004 under s. 151 of the CPC (hereinafter called, “the Code”), were filed by the Revenue in SJC Nos. 211 to 216 of 1971 which were disposed of by a Division Bench of this High Court on 1st Aug., 1990 [CIT vs. Biju Patnaik (1990) 90 CTR (Ori) 192 : (1991) 190 ITR 396 (Ori)]. In all the miscellaneous cases identical prayer was made and the said prayer is set out below : It is therefore prayed that this Hon’ble Court may be pleased to allow this application and be further pleased tdirect the Tribunal to conclude the assessment in terms of the order of the apex Court and the order of this Hon’ble Court dt. 1st Aug., 1990. Alternatively this Hon’ble Court may be pleased to issue suitable directions for giving effect to the order of the apex Court. Any other order/orders that may deem fit and proper be passed in the facts and circumstances of this case.”
2. The facts of the case span over more than four decades and some of the facts may be recounted briefly to appreciate the nature of controversy. In the course of assessment of the late Biju Patnaik for the asst. yrs. 1962-63, 1963-64 and 196465, the AO came to a finding that the funds invested in Kalinga Foundation Trust (hereinafter referred to as “the trust”) actually belonged to the assessee and the trust’s income was added to the income of the assessee. On appeal, the AAC reversed the finding of the AO, inter alia, on the ground that the AO reached its findings on the basis of evidence collected behind the back of the assessee. As such direction was given to undertake the exercise of assessment once again after giving the assessee an opportunity to cross-examine the persons on whose statement the previous assessment was made. This was done by the AAC by his order dt. 1st April, 1968. However challenging the said order of the AAC, the appeals were filed before the Income-tax Appellate Tribunal (hereinafter referred to as “the Tribunal”). In the appeal filed by the assessee it was contended that since the assessment order was found by the AAC to be vitiated by illegality, the same should have been quashed for good and the contention of the Department was that, the assessment order was valid and should have been confirmed by the AAC. While deciding the said appeals, the Tribunal reiterated the findings of the AAC and held that the assessment orders suffered from legal infirmity, inter alia, on the ground that the assessee was not given an opportunity to rebut the statements recorded under s. 131 of the IT Act and also because of the fact that the AO failed to consider the entire evidence on record and did not call upon the assessee to furnish explanation on certain points. The Tribunal thus dismissed the appeals of the Department by its order dt. 27th Nov., 1970.Then on 17th May, 1971, the Department filed an application under s. 256(1) to the Tribunal to refer the matter to the High Court but the Department’s application was rejected, inter alia, on the ground that no question of law arose out of the order of the Tribunal. Thereafter, the High Court also rejected on 5th April, 1974, the Department’s application under s. 256(2) of the Act, holding, inter alia, that the finding of the Tribunal was correct and no question of law arose.
3. Then the Department went up in appeal to the Supreme Court from the order of the High Court and the Hon’ble Supreme Court allowed the Department’s appeal and directed the Tribunal to refer under s. 256(2) of the Act certain questions of law to be heard by the High Court. The questions framed by the Hon’ble Supreme Court are as follows :
“1. Whether the findings of the Tribunal are vitiated in law by reason of it having ignored relevant and admissible evidence and having relied on incorrect facts and misstatement of facts ?
Whether, on the facts and in the circumstances of the case, the conclusion of the Tribunal that the Kalinga Foundation Trust came into existence in 1947 and that it was distinct from the trust created by the assessee in 1949 logically followed from the materials on record or it was perverse in the sense that no reasonable man could come to it on the said materials ?
Whether, on the facts and in the circumstances of the case, in arriving at the finding that the Kalinga Foundation Trust had acquired property from donations from the public, the Tribunal erred in law in not giving due consideration to the several matters relevant for determination of the points which had been considered by the ITO in the assessment order ?
Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the income from dividend shown in the name of the Kalinga Foundation Trust, the interest on the loans advanced in the name of the Kalinga Foundation Trust and all investments, remittance, receipts and actual payments in the name of Kalinga Foundation Trust did not belong to the assessee and should therefore be deleted from the assessment of the assessee ?
Whether, on the facts and in the circumstances of the case, there was any evidence in support of the Tribunal’s finding that the assessee had collected donations from the public for the Kalinga Foundation Trust ?
If the answer to question No. 5 (rearranged by this Court) be in the negative, then whether the Tribunal was right in holding that the amounts donated by the assessee to the said trust were satisfactorily explained and accordingly they were not to be included in the assessment of the assessee ? Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Revenue authorities were bound to accept the decision of the Supreme Court in S.P. Jain vs. Kalinga Tubes Ltd., as to the ownership of 39,000 shares of Kalinga Tubes Ltd. in spite of the materials collected by the ITO subsequent to the delivery of the judgment in the said case ? If the answer to question No. 7 (rearranged by this Court) be in the negative, then whether the finding of the Tribunal that the persons in whose names the said shares stood were not the benamidars of the assessee was perverse and was arrived at without due consideration of the material considered by the ITO in detail of the point ?” After framing the said questions, the Hon’ble Supreme Court directed the Tribunal to send a statement of case for the three assessment years involved in this case within six months from the date of receipt of the order. Pursuant to that, the Tribunal sent the reference to the High Court and the High Court heard the parties in full in the said reference application. The High Court’s judgment is reported in (1990) 90 CTR (Ori) 192 : (1991) 190 ITR 396 (Ori) (supra). The High Court in its judgment found that the Tribunal did not consider the evidence in its proper perspective, and accordingly the finding of the Tribunal is vitiated by law. Therefore, the Tribunal was to consider the matter once again, and since admittedly the assessee was not given a reasonable opportunity by the ITO to give a rebuttal evidence, the same should now be given. It was made clear that this can be effectively done only by the AO. Recording this finding the reference application was disposed of leaving it open to the Tribunal to pass a consequential order on the basis of the judgment of the High Court. After the judgment of the High Court was delivered on 1st Aug., 1990, the Tribunal passed the following consequential orders : “Accordingly, we restore the matter to the file of the AO with a direction to pass fresh order after allowing reasonable opportunity of being heard to the assessee on the lines of the direction of the Hon’ble High Court.”
The AO at Bhubaneswar on receipt of the case on transfer sent a notice to the assessee in respect of the aforesaid three assessment years and on receiving the said notice, the assessee filed in 1997 the writ petition before the Hon’ble High Court challenging the provision of s. 153(2A) of the IT Act which was introduced from 1st April, 1971. However, on that writ petition, being OJC No. 420 of 1997, on 17th March, 1997, a stay was granted by the Hon’ble Court on fresh assessment proceeding in respect of the concerned assessment years. Thereafter the writ petition was withdrawn from the High Court and its withdrawal was allowed by the High Court by its order dt. 26th Sept., 2003. In this matter a remand report was filed by the Asstt. CIT, Circle-I(I), Bhubaneswar. In the said remand report, it was clearly mentioned that addition to the income of the assessee for the asst. yrs. 1962-63, 1963-64 and 1964-65 was made and such assessments were completed on 27th March, 1967, inter alia, on the strength of the statement recorded under s. 131 of the IT Act of 14 witnesses. Their names have been mentioned in the remand report as follows : “1. Sri Naba Krishna Choudhury Dr. Harekrishna Mahatab Sri S.K. Kapur Sri K.C. Dalai Sri G.C. Pattnaik Sri Bansidhar Mohanty Sri M.L. Pandit Sri M.N. Ghosh Sri Verilal Dwarakadas Mehta Sri B.E. Prasad Rao Verma, manager Sri Sadhu Charan Mohanty Sri Sadasiv Tripathy Smt. Swaran Obhrai Sri N.P. Sahu.”
8. It appears from the remand report that for the purpose of allowing cross-examination by the assessee of those witnesses, copies of the available statements of the twelve witnesses, namely, Sl. Nos. 1 to 12 of the above list were handed over to the Authorised Representative of the assessee, the late Biju Patnaik. During the hearing on 19th June, 2003, the Authorised Representative submitted that the witnesses at Sl. Nos. 1 to 10 were deceased as on that date. In the further hearing which was held on 9th July, 2003, the Authorised Representative further submitted that the witnesses as Sl. Nos. 11 and 12 are also dead. So far as witness No. 13 is concerned, it was found that the whereabouts of the said witness could not be traced out and as such the cross-examination of witness No. 13 was not possible and so far as witness No. 14 was concerned, the Authorised Representative submitted the address of the said witness and summonses were accordingly issued under s. 131(1)(d) of the Act to the ITO, Puri, to cause enquiry about the whereabouts of the witness and the possibility of his cross-examination. From the report of the ITO, it appears that the said witness was aged about 88 years and was physically indisposed as well as hard of hearing. As such, cross-examination was not possible in respect of any of the witnesses.
9. In the light of the above facts, the following conclusions were given in the remand report : “In the light of the foregoing facts of death/physical incapacity/non-traceability of the concerned 14 witnesses, the possibility of their cross-examination by the assessee stands completely ruled out. The above is brought to the kind notice of the Hon’ble Tribunal.” It was therefore clear that the Authorised Representative of the assessee could not be given any chance to cross-examine the witnesses. As such the matter was dropped by the Tribunal. Thereafter miscellaneous petitions were filed by the Revenue seeking modification of the orders of the Tribunal dt. 22nd Feb., 1994, and 16th Oct., 2003. Those applications were also dismissed by the Tribunal, Cuttack Bench, Cuttack, by an order dt. 19th Dec., 2003, on the ground of limitation and also on the merits. It was also mentioned in the said order that the Revenue did not mention any section under which those miscellaneous applications were filed. After those applications were dismissed by the Tribunal, the instant miscellaneous cases have been filed before this Court under s. 151 of the CPC with the prayer mentioned above. Now the question that falls for consideration before this Court is whether, in the facts and circumstances of the case discussed above, the present miscellaneous cases, namely, Miscellaneous Case Nos. 1 to 6 of 2004 are maintainable in law and on the facts. The learned counsel for the Revenue submits that the above miscellaneous cases are maintainable as the Tribunal refused to pass an order permitting completion of assessment taking into consideration the situation which prevailed in view of the remand report. It was urged that by filing the miscellaneous cases, the Revenue was seeking a direction to complete the assessment by giving effect to the order of the Hon’ble Supreme Court. It was also submitted that in the facts and circumstances of the case, the Revenue is duty-bound to give effect to the order of the Hon’ble Supreme Court.
In the written note submitted by learned counsel for the Revenue, it has been clearly stated that there is no provision in the IT Act, 1961, which permits an aggrieved party to move the Hon’ble High Court “to answer question of the Hon’ble apex Court”. So the miscellaneous cases have been filed for carrying out the direction of the Hon’ble Supreme Court and since no legal provision is made in the IT Act, the inherent power of the Court under s. 151 of the Code has been invoked. In support of such contention, reliance was placed on certain decisions. Reliance was first placed on the judgment of the Allahabad High Court in the case of Roop Narain Ramchandra (P) Ltd. vs. CIT (1972) 84 ITR 181 (All). In that judgment, the Division Bench of the Allahabad High Court held that the IT Act does not confer any power on the High Court to recall an order when it has returned a reference unanswered. The learned Judges held that s. 151, CPC, does not apply in connection with the reference jurisdiction under the IT Act which is advisory in nature. The learned Judges also held that the order returning the reference unanswered is not an administrative order but it is virtually an order dismissing the reference for non-prosecution and it is a judicial order. As such s. 21 of the General Clauses Act would not apply.This Court is unable to appreciate the applicability of the aforesaid ratio to the facts of the present case. The next decision cited by learned counsel for the petitioner was rendered in the case of Jaipur Mineral Development Syndicate vs. CIT 1977 CTR (SC) 92 : AIR 1977 SC 1348. In that case, the learned Judge did not approve the ratio in the case of Roop Narain Ramchandra (P) Ltd. (supra). The learned Judges held that a party or its counsel may be prevented from appearing at the hearing of a reference for a variety of reasons. But subsequently if a party shows that there was sufficient reason for its non-appearance, in such cases the High Court has inherent power to recall its earlier order and dispose of the reference on the merits. The learned Judges held that in an appropriate situation, the High Court has the power to recall the order made in the absence of a party and there is nothing in any of the provisions of the IT Act which either expressly or by necessary implication stand in the way of the High Court from passing an order of disposal of a reference on the merits. It may be noted that while discussing such powers of the High Court, the Hon’ble Supreme Court made no reference to s. 151 of the Code. So this decision does not support the contention of the Revenu
Reliance was also placed by learned counsel for the petitioner on the judgment of the Supreme Court in the case of Jet Ply Wood (P) Ltd. vs. Madhukar Nowlakha AIR 2006 SC 1260. In that case the questions which were decided by the Supreme Court were that an application was filed for withdrawal of a suit and an order was passed permitting the withdrawal of the suit. The application was, however, not filed with any leave to file a fresh suit. The Court found that there is no provision in the Code providing for filing an application for recalling an order permitting withdrawal of a suit. In such a situation the Court held that s. 151 of the Code can be resorted to in the interest of justice. From the aforesaid discussion, it is clear that those findings were arrived at by the Court in connection with a purely civil litigation. Such litigation is totally governed by the provisions of the Code. In that context, the learned Judges of the Supreme Court held that the provisions of s. 151 of the Code can be applicable inasmuch as the provisions of the Code are not exhaustive of the powers of a Civil Court. In that view of the matter, the Court found that in an appropriate situation the Court is not powerless to set aside an order permitting the withdrawal of a suit. But in the instant case the entire proceeding was under the IT Act which is a self- contained code. Reference in this connection is made to the decision of the Supreme Court in the case of Rao Bahadur Ravulu Subba Rao vs. CIT AIR 1956 SC 604. The learned Judges of the Supreme Court while construing the different provisions of the IT Act, relied on the rule of construction formulated by Lord Herschell in the case of Bank of England vs. Vagliano (1891) AC 107 (HL). Referring to the formulation of Lord Herschell, the learned Judges conclusively held that the provisions of the Indian IT Act form a self-contained code exhaustive of the matters dealt with therein. It has also been held subsequently in the case of Karamchari Union, Agra vs. Union of India (2000) 159 CTR (SC) 148 : (2000) 243 ITR 143 (SC) that the IT Act is a self contained code.
19. The nature of jurisdiction of the High Court under s. 256 of the IT Act has been examined by the apex Court in the case of CIT vs. Bansi Dar & Sons (1986) 50 CTR (SC) 250 : (1986) 157 ITR 665 (SC) : AIR 1986 SC 421. With regard to the limits of the nature of jurisdiction, the learned Judges found that the jurisdiction of the High Court was confined to merely giving an opinion and it was purely an advisory jurisdiction. The apex Court after discussing the relevant case law on the subject ruled clearly that apart from the Court’s incidental or ancillary power in dealing with a reference, the High Court does not have any inherent power under s. 151 of the Code while dealing with a reference. The pertinent observations of the apex Court on this point at pp. 681-682 of the report are set out : “Sec. 66 of the IT Act of 1922 or s. 256 of the IT Act, 1961, is a special jurisdiction of a limited nature conferred not by the CPC or by the charters or by the special Acts constituting such High Courts but by the special provisions of the IT Acts of 1922 or 1961 for the limited purpose of obtaining the High Court’s opinion on questions of law. In giving that opinion properly, if any question of incidental or ancillary power arises such as giving an opportunity or restoring a reference dismissed without hearing or giving some additional time to file the paper book, such powers inhere to the jurisdiction conferred upon it.” This point has been further clarified at p. 682 of the report as follows : “In our opinion, there the High Court was in error in exercising its jurisdiction by passing an order for stay of realisation under s. 151 of the CPC in a pending reference. The High Court could have exercised its power if the appellate authority had not properly exercised its jurisdiction, not in reference jurisdiction but by virtue of its jurisdiction under Art. 226 or Art. 227 in appropriate cases. But that was not the case here.” The same principles have recently been reiterated by the Division Bench of the Calcutta High Court in the case of CIT vs. Ruby Traders & Exporters Ltd. (2004) 192 CTR (Cal) 618 : (2004) 270 ITR 526 (Cal). Here it is not a case of exercise of incidental or ancillary power which is prayed for by the Revenue in the miscellaneous cases. The prayer is for reopening of a judgment delivered on 1st Aug., 1990, which has attained finality long ago.That is why the Revenue sought to invoke the Court’s inherent power. Sitting in reference jurisdiction of the High Court, we cannot exercise the Court’s inherent power under s. 151 of the Code in view of the clear legal position settled by the apex Court in the case of Bansi Dhar & Sons (supra). Apart from the question of non-application of s. 151 of the CPC to the reference jurisdiction, otherwise also the miscellaneous cases are not maintainable. In the instant case, the findings given by the High Court in exercise of its reference jurisdiction on 1st Aug., 1990, reported in CIT vs. Biju Patnaik (supra) have not been challenged by filing an appeal before the Hon’ble Supreme Court. The said findings have become final. The findings given by the High Court in exercise of its reference jurisdiction under s. 256 of the IT Act are as follows : (a) the assessee had not been given a reasonable opportunity to rebut the statements recorded ex parte under s. 131 of the Act. The ITO failed to consider all the evidence on record; (b) the assessee was not called upon to furnish explanation on certain points; (c) the High Court recorded that learned counsel for both the parties fairly stated before it that those findings of the Tribunals at (a) and (b) were not disturbed by the Hon’ble Supreme Court; (d) the answer on the questions framed by the Supreme Court would be “inconclusive” in view of the subsisting finding of the Tribunal that the ITO has not given a reasonable opportunity to the assessee to rebut the statement recorded against him under s. 131 of the Act; (e) the High Court further held that if the High Court answers the questions in the absence of reasonable opportunity being afforded to the assessee, such answers would be of “academic interest”; (f) a clear and conclusive finding binding on the parties can be given only after reasonable opportunity is given to the assessee as was the finding of the Tribunal which finding has not been disturbed; (g) the High Court was also of the opinion that in its advisory jurisdiction, it was not desirable for the High Court to record findings of facts and, therefore, the High Court held that no answer should be given in exercise of its advisory jurisdiction which would finally decide the issue since a final finding can be arrived at only after giving reasonable opportunity to the assessee as the explanation given by the assessee would have a material bearing on the finding; and (h) therefore, the High Court thought that the AO should give an opportunity to the assessee.
23. On the basis of those findings of the High Court, the Tribunal passed a consequential order by restoring the matter to the AO with a direction to pass a fresh order after allowing reasonable opportunity of being heard to the assessee in the light of the judgment of the High Court. Thereafter the remand report was filed showing that cross- examination of those 14 witnesses by the assessee’s representative is not possible.
24. Now there is no challenge to the judgment of the High Court. Nor is there any challenge to the order of the Tribunal passed on 22nd Feb., 1994, or to the remand report. On the basis of the remand report, the proceedings were dropped. Therefore all these orders have become final. Therefore, the proceeding in which questions were framed by the Hon’ble Supreme Court for an answer has come to an end with the order of the High Court followed by the consequential order passed by the Tribunal. Since neither the order of the High Court nor the order of the Tribunal has been questioned and those orders have become final, those questions cannot be reopened on the basis of a miscellaneous case filed under s. 151 of the CPC which does not at all apply to the exercise of reference jurisdiction by the High Court.
25. That apart, from the remand report it is clear that none of the witnesses are available for cross-examination. As such no purpose will be served by seeking to reopen the proceedings on the basis of these misconceived miscellaneous cases and the whole thing has become academic. In fact the High Court in its judgment referred to above reported in CIT vs. Biju Patnaik (supra) has come to a conclusion that the entire thing will be academic if the witnesses cannot be examined. These conclusions were reached by the High Court in the year 1990. After 16 years, the position obviously has not improved.
26. For the reasons aforesaid, the miscellaneous cases are dismissed as totally misconceived and not maintainable.
[Citation : 289 ITR 406]
