High Court Of Rajasthan : Jaipur Bench
CIT vs. G.B.H. Exporters
Sections 260, 271(1)(c), Expln. 5
S.K. Keshote & K.S. Rathore, JJ.
IT Ref. No. 33 of 1998
1st August, 2003
Counsel Appeared
J.K. Singhi, for the Revenue : N.M. Ranka with J.K. Ranka, for the Assessee
JUDGMENT
S.K. KESHOTE, J. :
Heard the learned counsel for the parties.
2. It is not in dispute that the Revenue in its application under s. 256(1) of the IT Act, 1961 (for short, ‘the Act, 1961’) had proposed the following three questions, which are stated to be of law, for referring the same to this Court for its opinion.
“1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the statement made by Shri Gopaldass on 14th Oct., 1987, was in the course of search in the case of the assessee-firm ?
Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to immunity under Expln. 5 to s. 271(1)(c) and consequently cancelling penalty of Rs. 1,68,000 ?
Whether, in the facts and in the circumstances of the case, the Tribunal was right in holding that the difference in stock was only on account of valuation notwithstanding the fact that there was difference in quantity of stock found as specified in para 3 of the order under s. 271(1)(c) ?”
3. From the statement of the case we find that the Tribunal, Jaipur Bench, Jaipur (for short, ‘the Tribunal’) referred the question Nos. 1 and 2 only to this Court for its opinion, the reference may have to para No. 8 of the statement of case.
4. As regards to the question No. 3 proposed to be referred to this Court for opinion by the Revenue in para No. 2 of the statement of the case the learned Tribunal has recorded reasons to decline to refer the same. The learned Tribunal was of the view that it is a question of fact that the difference in the stocks was mainly on account of difference in valuation and it does not give rise to referable question of law.
5. Briefly stated the facts of the case are that search operations had taken place on 22nd of September, 1987, at the business premises of the firm and the residential premises of the partners. Return declaring an income of Rs. 6,50,000 was filed on 28th of February, 1989, unaccompanied by the annual accounts of the firm. Subsequently, revised return declaring an income of Rs. 7,23,960, accompanied with the annual accounts, was filed on 30th Nov., 1989. In the opinion of the AO the search was completed on 28th Sept., 1987, and according to the statements of Shri Gopaldas, a partner of the assessee-firm, the stocks of precious and semi-precious stones found at the time of search was not in excess of what recorded in the books.
6. There was a separate search in the individual case of Shri Gopaldas, which was concluded on 14th Oct., 1987, when Locker No. 1006 in his name was opened. On 14th Oct., 1987, statement of Shri Gopaldas was recorded and he surrendered Rs. 40,000 as his personal income and Rs. 3,20,000 as the income of the assessee-firm. This amount of Rs. 3,20,000 was accepted as excess stock found.
7. The assessment of the firm was finalized at Rs. 7,36,100 on 15th March, 1990. Penalty proceedings under s. 271(1)(c) of the Act, 1961, were initiated against the firm. The plea has been taken by the assessee-firm that Shri Gopaldas has surrendered in his statement recorded under s. 132(4) of the Act, 1961 in the capacity of partner of the firm during the course of search and the assessee was entitled to the immunity given under Expln. 5 of s. 271(1)(c) of the Act, 1961, and, thus, no penalty is leviable. The AO rejected this plea of the assessee-firm on the ground that search in the case of the firm had been concluded on 28th of Sept., 1987 whereas the surrender of Rs. 3,20,000 by Shri Gopaldas came much later, on 14th Oct., 1987, when his personal locker was opened. Accordingly penalty of Rs. 1,68,000 was levied. This order of the AO has been confirmed in the appeal by the CIT(A). The matter was taken by the assessee to the Tribunal.
8. The learned Tribunal first analyzed the provisions of Expln. 5 to s. 271(1)(c) of the Act, 1961, and particularly cl. (2) thereof which was added with some intent and purpose. Then it analyzed the provisions contained in Part C of Chapter XIII of the Act which gives various powers to different authorities to carry out the purposes of the Act. While dealing with Part C of Chapter XIII, the learned Tribunal discussed at length the provisions of s. 132 of the Act, 1961 and observed that this provision has to be construed harmoniously in order to give effect to the intention of the Parliament. It is observed that the word “in the course of search” appearing in cl. (2) of Expln. 5 cannot be interpreted too technically and too narrowly, particularly when search by itself is an incidental power. According to the Tribunal it would be sufficient if the disclosure is made before the process under s. 132(5) commences, the immediate previous step is search and seizure during which be a person may be examined as provided for in s. 132(4). It is held that it would too technical to say that “during the course of search” means only the physical search of the premises or the person. The Tribunal concluded that search was not complete till 14th of Oct., 1987 and thus the assessee earned the immunities under Expln. 5 of s. 271(1)(c) of the Act, 1961. On merits the learned Tribunal held that the penalty imposed cannot survive. The learned Tribunal recorded a finding of fact that as per the Departmental valuation, the value arrived at of the undisclosed stock of precious and semi-precious stones arrived at was Rs. 15,85,331 whereas as per the books of the assessee it was Rs. 15,86,331. There was no excess stock with the assessee-firm. Whatever was the difference in the stock may be on account of the difference in valuation. The assessee used to maintain account of the stock in his books at cost whereas the valuation got done by the Revenue was on the basis of market rates as on the various dates of search. The Tribunal has further recorded a finding of fact that from the various statements recorded, it is evident that it was on account of constant pestering that the assessee ultimately surrendered a sum of Rs. 3,20,000,otherwise the Department has not been able to muster any material to show that the assessee had any undisclosed income. Question No. 2 which was proposed by the Revenue arising from this part of the judgment of the learned Tribunal, has not been referred to this Court for its opinion.
The penalty imposed under s. 271(1)(c) of the Act, 1961, upon the assessee was set aside by the Tribunal on two grounds. On first ground, no doubt, the Tribunal has been pleased to refer two questions of law for opinion of this Court, but on second point no question has been referred and that part of the judgment of the Tribunal has attained finality. The learned counsel for the assessee admits that the Revenue has not filed any application before this Court under s. 256(2) of the Act, for direction to the Tribunal to send the statement of the case and refer the question No. 3. In these undisputed facts we find sufficient merits, substance and justification in the contention of Shri Ranka, the learned counsel for the assessee, that the questions of law Nos. 1 and 2 referred to this Court for opinion are only of academic nature and this Court may send the same unanswered. It is high time where the Courts are to be very cautious, careful and considered that its valuable and precious time is not wasted or consumed in deciding the matters of academic nature. The decision given on these two questions either way will not have any bearing or effects on the ultimate result to which the Court subordinate or the Tribunal reached, meaning thereby even if the case of the Revenue is accepted, still it will not result in grant of relief in its favour.
Even if these two questions of law are answered in favour of the Revenue we are satisfied that it will not result in revival of the order of the AO which has been confirmed by the CIT(A) i.e., the penalty of Rs. 1,68,000 and the consequential liability of payment thereof upon the assessee.
The Union of India and the State are biggest litigants, in the Courts. Both the Union of India and the State are impersonal machinery. The officers responsible for the affairs of the administration should be very careful, cautious and concerned to see that unwarranted and avoidable litigation is not filed in the Court. They should not unnecessarily burden the Court with the work with which it is already highly burdened. It is also equal responsibility of the Members of the Bar to see that not a single case which has no merit or does not involve a question of law or the questions raised therein are only academic meaning thereby even if the same are decided in favour of the Revenue in this case, will not materially affect the final result, should come to the Court so that the Court’s precious and valuable time is not unnecessarily consumed and wasted. It is people’s time. Looking to the heavy pendency of the cases and the fact that the Courts never work with its full strength, heavy burden lies upon the officers of the Union of India and the State to see that unnecessary litigations do not come to the Court. It is also upon the litigants and the Members of the Bar to see that they are very selective both in filing of the matters as well as arguing the same as and when it is placed on the Board for hearing. A mere looking on today’s Board we find that the cases are coming up for hearing after decades. The litigants are waiting for their turn for final hearing of their cases for last more than two decades. Thus, any single minute of the Court is consumed or wasted in a matter wherein only academic issue is involved or in a frivolous or baseless litigation, it results in loss of people’s time i.e., the ultimate sufferers are the litigants, who are in queue waiting for their cases are placed on the Board for final hearing.
Their Lordships of the Hon’ble Supreme Court in the case of CIT vs. Smt. Anusuya Devi (1968) 68 ITR 750 (SC) observed that the High Court may only answer a question referred to it by the Tribunal. It is however not bound to answer a question merely because it is raised and referred. The High Court may decline to answer a question of fact or a question of law which is purely an academic or has no bearing on the dispute between the parties or, though referred by the Tribunal, does not arise out of its order. It may also decline to answer a question arising out of the order of the Tribunal, if it is unnecessary or irrelevant or is not calculated to dispose of the real issue between the taxpayer and the Department. Their Lordships of the Hon’ble Supreme Court further observed that at the hearing of a reference persuant to an order calling upon the Tribunal to state a case, the High Court is not bound to answer the question without considering whether it arises out of the order of the Tribunal, whether it is a question of law, or whether it is an academic, unnecessary or irrelevant. Power to reframe a question may be exercised by the Court to clarify some obscurity in the question referred, or to pinpoint the real issue between the taxpayer and the Department or for similar other reasons; it cannot be exercised for reopening an enquiry on questions of fact and law which is closed by the order of the Tribunal.
In this case in hand it is to be stated at the cost of repetition that on the second point the Tribunal has set aside the penalty imposed upon the assessee under s. 271(1)(c) of the Act, 1961, which is closed by the order of the Tribunal as the question No. 3 has not been referred nor the Revenue has taken any step to file an application under s. 256(2) of the Act by a direction to the Tribunal to send the case and refer that question. Sub-s. (1) of s. 260 of the Act, 1961, no doubt, provides that the High Court or the Supreme Court upon hearing any such case shall decide the questions of law raised therein and shall deliver its judgment thereon containing to grounds on which such decision is founded, and a copy of the judgment shall be sent under the seal of the Court and the signature of the Registrar to the Tribunal which shall pass such orders as are necessary to dispose of the case conformably to such judgment. From this provision of s. 260 of the Act, 1961, it does not mean that this Court is bound to answer the question of law referred to it by the Tribunal for its opinion or to give its decision where a question raised is only and purely of academic interest and does not resolve the real controversy. In such circumstances where the question is only of academic or is unnecessary or it is not completely resolved the controversy, this Court may ultimately refuse to answer the question or questions. The answer to these questions of law referred to this Court by the Tribunal for its opinion will not dispose of the real confidential issue. Even if these two questions are answered in favour of the Revenue it is to be stated at the cost of the repetition, final decision of the Tribunal is not going to be resulted in favour of the Revenue and the reason is very obvious that on the merits the penalty imposed by the Department against the assessee was held to be not sustainable. Thus, in our opinion, it will be futile and meaningless for this Court to decide these two questions which are only of academic interest now, the answer for which would not have any bearing or effect or adverse result in view of a finding given by the Tribunal in para No. 25 of its judgment dt. 27th March, 1996. We are in agreement with the contention of Shri Ranka appearing for the assessee that it is not mandatory for this Court when once it is made that it may not proceed to answer the question or questions stated in the reference and to decide it though the same may be of purely academic interest and unnecessary to decide the real controversy. In view of the findings recorded by the Tribunal in para No. 25 of its judgment dt. 27th March, 1996, which have not been challenged by the Revenue the answer to question Nos. 1 and 2 will not change the result of the case. Shri J.K. Singhi, the learned counsel for the Revenue, made reference to the decision of the Madras High Court in CIT vs. J.K.K. Angappa Chettiar & Ors. (1982) 27 CTR (Mad) 123 : (1983) 144 ITR 775 (Mad) and submitted that once the questions of law are referred for the opinion of this Court the same are to be considered and the Court has to give its opinion. We have carefully gone through the judgment of the Madras High Court and we are of the opinion that it is not of any help to the Revenue. In that case the Court has observed that in this case the question actually referred for our opinion was as to whether the Tribunal was right in holding that in respect of the transactions relating to import licences the income assessable in the hands of the assessee for the asst. yrs. 1968-69 and 1969-70 was only Rs. 1,51,487 and Rs. 1,25,000 as returned by the assessee. The said question has to be answered in the affirmative if the factual finding given by the Tribunal that there was no sale of import licences, but there was only a sale of imported goods is accepted. The learned counsel, who was appearing for the assessee in that case, vehemently contended before the Court that it is not possible for this Court to go behind the finding of the Tribunal that there was no sale of import licences by the assessee but there was a sale of imported goods, unless there is a specific question raised by he Tribunal whether the finding of the Tribunal is borne out by the material on record, and in this case, there being no such question referred to this Court at the instance of the Revenue, the Revenue was bound by the finding of fact arrived at by the Tribunal as to whether there as a sale of import licences or sale of imported goods by the assessees.
The Madras High Court held. “A perusal of the statement of the case indicates that the Tribunal did not reject the Revenue’s request to refer the two questions on the ground that they did not arise out of the Tribunal’s order. But, it has been refused only on the ground that the question referred was comprehensive.” In view of this position of the facts in the case, the Madras High Court directed the Tribunal to submit a fresh statement of case on two questions set out in the judgment. The Court was of the opinion that the question already referred by the Tribunal under s. 256(1) of the Act, 1961, does not reflect or comprehend the real controversy between the parties. The High Court can reframe the question suitably or call for a fresh statement of a case on the question of law which the Tribunal has not chosen to refer even though asked for by the party and which questions are necessary to bring out the real controversy between the parties. The Madras High Court has further held that the Revenue wanted the Tribunal to refer two questions set out in the order but the Tribunal did not actually refuse to refer those questions on the ground that they did not arise out of the order of the Tribunal but had not referred those questions only on the ground that the question actually referred is comprehensive enough to include within its ambit questions sought to be referred by the Revenue. Thus, on facts this case is clearly distinguishable. That apart in sum and substance this case of the Madras High Court on which reliance has been placed by Shri J.K. Singhi, the learned counsel for the assessee, strengthen the contention raised by Shri J.K. Ranka, the learned counsel for the assessee. As a result of the aforesaid discussion and for the reasons stated above we are of the opinion that it is not necessary to answer the questions referred by the Tribunal for our opinion because answer to these questions will be purely academic and it may be an exercise in futility to answer these questions and remit the case back to the Tribunal. We, therefore, decline to answer the questions referred by the Tribunal. Consequently, the reference is returned unanswered.
[Citation : 271 ITR 545]
