Rajasthan H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of s. 164(1) itself are not applicable and both the beneficiaries and their shares are known and determinate ?

Counsel Appeared

R.N. Surolia, for the Revenue : N.M. Ranka, for the Assessee

BHARGAVA, J.:

This is an application under s. 256(2) of the IT Act, 1961.

2. Against the assessment order of the ITO, Trust Circle, Jaipur, dated February 5, 1980 (annexure-A), relating to the asst. yr. 1977-78, the assessee preferred an appeal before the AAC, A- Range, Jaipur, which was allowed by order dated June 17, 1980 (annexure-B). Feeling aggrieved by the said order, the Revenue preferred an appeal before the Tribunal, Amritsar Bench, Camp at Jaipur, which was dismissed by order dated October 24, 1980 (annexure C). Thereafter, the Revenue preferred an application under s. 256(1) of the IT Act, 1961, for making a reference to this Court. The Tribunal, Jaipur Bench, Jaipur, by its order dated May 27, 1981 (annexure-D), was of the opinion that the following questions of law do arise:

” 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of s. 164(1) itself are not applicable and both the beneficiaries and their shares are known and determinate ?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the decision of the AAC about the charging of the rate of tax by treating the assessee as an association of persons on the rates applicable to the income of such association ? “

The Tribunal, therefore, drew up a draft statement of the case for making a reference to this Court and ordered that the following documents will form part of the statement of the case: ” 1. ITO’s order AAC’s order Tribunal’s order Trust Deed Samjhota Patra.”

4. It was further observed that the Revenue shall furnish copies of the above documents, as required under the law, to the Tribunal before the date of finalisation of the draft statement, failing which the reference applications shall stand rejected notwithstanding the fact that the draft statement has been prepared and reference is proposed to be made to the High Court, as incomplete statement cannot be sent to the High Court “.

The case was fixed for June 26, 1981, for finalising the draft statement of the case. The parties were again heard on June 26, 1981, and the matter was then fixed for June 30, 1981. The matter again came up before the Tribunal on June 30, 1981, and by that time, the Revenue did not furnish copies of the documents to the Tribunal, required to be annexed with the statement of the case, in spite of the specific directions, vide order dated May 27, 1981, and, therefore, the three reference applications were rejected, vide order dated June 30, 1981.

5. It is under these circumstances that the Revenue has moved the present petition under s. 256 (2) of the IT Act, 1961. The petition was admitted and notices were issued to the assessee. The assessee put in appearance through Mr. N. M. Ranka and Mr. J. K. Singhi.

We have heard learned counsel for the parties. We thought it proper to call for the original record of the reference application before the Tribunal. The record of the Tribunal has been received and we have perused the same.

Learned counsel for the assessee has taken a preliminary objection that this application under s. 256(2) of the IT Act is not maintainable in view of the fact that the Tribunal was of the opinion that questions of law do arise in the case, and, therefore, a draft statement of the case for making a reference had also been prepared, and the order of the Tribunal, dated June 30, 1981, does not amount to refusal to state the case on the ground that no question of law arises. Learned counsel for the assessee had placed reliance on some authorities as well, which we shall deal with in the latter part of the judgment.

On the other hand, learned counsel for the Revenue has submitted that since by order dated June 30, 1981, the Tribunal had rejected the application under s. 256(1) of the Act, it amounts to refusal to state the case by the Tribunal, and, therefore, this application is maintainable. He has also drawn our attention to r. 45 of the Tribunal Rules. He further submitted that even if the preliminary objection of the assessee has some force, since the order of the Tribunal is illegal and not proper, the same is liable to be set aside and this application may be treated as a writ petition under Art. 226 of the Constitution of India and the order of the Tribunal dated June 30, 1981, be quashed and the Tribunal may be directed to consider the application under s. 256(1) of the Act and refer the same to this Court.

We have considered the submissions made at the bar. Before we discuss the point involved, we think it will be appropriate to quote ss. 256(1) and 256(2) of the IT Act as also r. 45 of the Tribunal Rules. ” 256. Statement of case to the High Court.—(1) The assessee or the CIT may, within sixty days of the date upon which he is served with notice of an order under s. 254, by application in the prescribed form accompanied where the application is made by the assessee by a fee of two hundred rupees require the Tribunal to refer to the High Court any question of law arising out of such order and, subject to the other provisions contained in this section, the Tribunal shall, within one hundred and twenty days of the receipt of such application, draw up a statement of the case and refer it to the High Court: Provided that the Tribunal may, if it is satisfied that the applicant was prevented by sufficient cause from presenting the application within the period hereinbefore specified, allow it to be presented within a further period not exceeding thirty days. (2) If, on an application made under sub-s. (1), the Tribunal refuses to state the case on the ground that no question of law arises, the assessee or the CIT, as the case may be, may, within six months from the date on which he is served with notice of such refusal, apply to the High Court, and the High Court may, if it is not satisfied with the correctness of the decision of the Tribunal, require the Tribunal to state the case and to refer it, and on receipt of any such requisition, the Tribunal shall state the case and refer it accordingly.” “Rule 45.—The Tribunal shall append to the statement documents which, in its opinion, form part of the case and as supplied to it by the parties. Within such time after the statement of the case is drawn up, as the Tribunal may direct, the applicant or the respondent, as the case may be, shall, in addition to the documents already filed in accordance with r. 36, file as many certified copies of the documents which form annexures to the case as the Tribunal may direct, and in case the party responsible for filing, defaults, the Tribunal may send the statement to the High Court without such annexures.” When we analyse s. 256(2) of the IT Act, 1961, critically, it is obvious that the jurisdiction of the High Court can be invoked only if on an application made under sub-s. (1) of s. 256 of the Act, the Tribunal refuses to state the case on the ground that no question of law arises, meaning thereby that it is envisaged that the jurisdiction of the High Court can be invoked only when the Tribunal does not find on merits any question of law arising out of its order, i.e., the finding of the Tribunal that no question of law arises is a sine qua non before an application under s. 256(2) of the Act can lie to the High Court. Further analysis of s. 256 of the IT Act reveals that s. 256 provides for reference to the High Court at the instance of the assessee or the CIT, a question of law arising out of an order passed by the Tribunal under s. 254. Under s. 256(1), the Tribunal is bound to refer the question to the High Court either at the instance of the assessee or at the instance of the Revenue, if it is satisfied that questions of law do arise out of its order. Before referring the matter to the High Court, the Tribunal prepares a draft statement of the case and calls upon the parties to give their suggestions, if any, as to the question of law drafted. When the draft statement of the case is finalised, the applicant has to file the annexures mentioned in the draft statement within the time allowed by the Tribunal. After the said annexures are filed, the Tribunal will send copies of the reference application along with the annexures to the High Court.

Learned counsel for the assessee has brought to our notice S.P. Jaiswal vs. CIT (1969) 73 ITR 179, a decision of the Punjab and Haryana High Court, wherein their Lordships have held that an application under s. 66(3) of the Indian IT Act, 1922 (which was equivalent to s. 256(2) of the present Act), does not lie to the High Court against the order of the Tribunal refusing to entertain an admittedly time-barred application under s. 66(1).

Our attention has also been drawn to a later decision of the Allahabad High Court in Prem Narain Khurana vs. CIT (1986) 57 CTR (Pat) 247 : (1986) 162 ITR 297, wherein their Lordships have held that the applications under s. 256(2) of the Act were not maintainable on a plain reading of sub-s. (2) of s. 256. This sub-section contemplates an application only in those cases where on an application made under sub-s. (1), the Tribunal has refused to state the case on the ground that no question of law arises.

Our attention was also drawn to a decision of the Bombay High Court in CIT vs. Bombay Master Printers Association (1984) 146 ITR 339, wherein the High Court declined to answer the question referred to it because no paper books had been supplied which must be treated as inability on the part of the Department to prosecute the reference.

Learned counsel for the assessee also placed reliance on another decision of the Bombay High Court in CIT vs. John Fowler (1) Ltd. (1988) 171 ITR 150 wherein their Lordships of the High Court, after noticing the sorry state of affairs and gross negligence on the part of the respective Commissioners, at whose instance the Tribunal made a reference under s. 256(1) of the Act, when the Tribunal had forwarded to the High Court only the statement of the case with a covering letter with the application, i.e., the concerned Commissioner had failed to supply the required annexures, while returning the reference to the Tribunal unanswered as the applicant Commissioner had failed to prosecute the same, gave directions to the Tribunal that while acting under s. 256(1), the Tribunal shall not send a statement of the case simpliciter to the High Court unless the annexures are supplied by the applicant, and if the applicant fails to supply annexures, the Tribunal can revoke the order of reference by reason of such failure.

16. Learned counsel for the Revenue drew our attention to Bansidhar Pradhan vs. CIT (1983) 139 ITR 193, wherein the Orissa High Court while exercising its discretion in a writ petition had observed as under (headnote) :

” The writ jurisdiction of the High Court extends to cases where orders are passed by inferior Courts or Tribunals in excess of their jurisdiction or as a, result of their refusal to exercise the jurisdiction vested in them or when they act illegally or improperly in the exercise of their jurisdiction, causing grave miscarriage of justice.”

17. Our attention was also drawn to CIT vs. Tribunal (1986) 57 CTR (Mad) 265 : (1987) 167 ITR 250, wherein the Madras High Court, while dealing with a writ petition filed by the Revenue, quashed the order of the Tribunal passed under s. 256(1) of the Act refusing to refer certain questions of law on the ground that the application under s. 256(1) had not been signed by the authorised representative. This authority does not apply to the facts of the present case because the Revenue has not filed any writ petition against the order of the Tribunal, dated June 30, 1981, rejecting the application under s. 256(1) on the ground that the directions given by the Tribunal to furnish certain documents in its earlier order dated May 27, 1981, were not complied with, and this application under s. 256(2) of the Act cannot be treated or converted into a writ petition under Art. 226 of the Constitution of India. The scope and jurisdiction of an application under s. 256(2) of the IT Act and a petition under Art. 226 of the Constitution of India are quite different. In our opinion, the proper course for the Revenue was to file a writ petition against the order of the Tribunal dated June 30, 1981, and, in that event, we would have considered whether the impugned order of the Tribunal was illegal, improper or there were grave mistakes or whether the Tribunal was in error in the exercise of their jurisdiction or whether they had acted illegally or improperly in the exercise of their jurisdiction causing grave miscarriage of justice.

18. Rule 45 of the Tribunal Rules, 1963, is also of no avail to the Revenue. It has used the word ” may “, i.e., it is the discretion of the Tribunal whether to forward the statement of the case to the High Court without the annexures required to be sent along with the statement of the case. Moreover, we cannot examine the question whether the discretion was exercised judiciously and justly while exercising jurisdiction under s. 256(2) of the IT Act. We could have examined this aspect only if the Revenue had filed a writ petition under Art. 226 of the Constitution of India.

19. In the result, we are inclined to hold that this petition is not maintainable under s. 256(2) of the IT Act and the same is hereby dismissed but we leave the parties to bear their own costs.

[Citation : 171 ITR 153]