TMI Blog2001 (8) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... he reference be noted briefly as under: The respondent-assessee is a company registered under the provisions of the Companies Act and it carries on manufacture of cylinders which are required for keeping gas for petromax lights and deals in liquid petroleum gas and the petroleum gas is distributed to consumers through dealers. The assessment year involved is 1980-81 for which the relevant accounting year ended on Match 31, 1980. The assessee returned a loss of Rs. 3,20,064. The Income-tax Officer determined the net loss at Rs.2,67,680. The Commissioner of Income-tax (hereinafter referred to as "the CIT", for short), after examination of the records found that the assessee has shown "security deposits collected against empty cylinders of gas" in the balance-sheet as "deposits against cylinders' in a sum of Rs. 16,73,285 as liability. According to the Commissioner of Income-tax, the security deposit was not received by the assessee as trustee or custodian of deposits from the dealers and there is no obligation for the customers to return the empty cylinders nor is there any time-limit for retuming the cylinders. In that view of the matter, the Commissioner of Income-tax was of the op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was writing off the amount as if the cylinders were sold. It was also found that the security deposit collected by the assessee was more than the actual cost of the cylinders. Against the above order of the Tribunal, the assessee filed miscellaneous petition numbered as M.P. No. 37/Hyd. of 1986. In this petition, the assessee contended that' ground No. 11 taken by it in the main grounds of appeal relating to the jurisdiction of the Commissioner of Income-tax under section 263 of the Act had not been dealt with. The Tribunal considered it but fallowing the unreported decision of this court in CIT v. Vegi Veeri Naidu and Sons (unreported judgment in R. C. No. 2 of 1982, dated February 4, 1984) held that as the question of taxability of amount of Rs. 16,73,285 was neither raised before-the Commissioner of Income-tax (Appeals) in ground No. 2 nor was it considered by him, the theory of merger could not be invoked in this case and as such the Commissioner of Income-tax had jurisdiction under section 263 of the Act. The assessee again filed a second miscellaneous petition numbered as MP No. 50/Hyd. of 1986 praying to recall the original order of the Tribunal in ITA No. 551/Hyd. of 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that security deposit formed part of the trading transactions and not considering the decision of the Supreme Court in the case of K. M. S. Lakshmanier and Sons v. CIT [1953] 23 ITR 202. 3. The Appellate Tribunal overlooked the decision of the Andhra Pradesh High Court in the case of CIT v. Andhra General Finance Corporation [1985] 156 ITR 386 wherein under similar circumstances, receipt of money on trust was not held to be income. 4. The Special Bench of the Tribunal dealing with the identical issue in the case of Detective Devices Pvt. Ltd., had held that these are not taxable receipts. The Tribunal further admitted the fallowing submissions made through a written statement dated September 25, 1987, for its consideration in the miscellaneous petition before. 5. The Tribunal had not considered the agreement between the assessee and the assessee's customers as a whole and should have looked into the agreement in its entirety. 6. The Tribunal overlooked the fact that the cylinders against which security was taken constituted plant of the assessee, Instead they concluded that the writing off lent support to the proposition that the cylinders were sold. 7. The Tribunal c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee under section 254(2) of the Act earlier, seriously erred in law in allowing the third application for the same relief and recalling its original order made in the appeal and posting the appeal for fresh hearing, and that the impugned order of the Tribunal was tantamount to reviewing its own order made in the appeal. Learned standing counsel would point out that the Act does not confer any such reviewing power on the Tribunal. On the other hand, Sri Y. Ratnakar, learned counsel for the assessee, placing reliance on two judgments of this court in CIT v. ITAT [1994] 206 ITR 126 and Asst. CIT v. Dr. Ved Prakash [1994] 209 ITR 448 and also a judgment of the Allahabad High Court in CIT v. Keshav Fruit Mart [19931 199 ITR 771, would contend that the order of the Tribunal merely recalling its earlier order and posting the appeal for fresh hearing cannot be a subject-matter of a reference under section 256 of the Act. Learned counsel would also maintain that the judgment of the Supreme Court in CIT v. Durga Engineering and Foundry Works [20001 245 ITR 272 and the judgment of the Madhya Pradesh High Court in CIT v. Tirupati Construction Co. [2000] 241 ITR 833 in a way support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cient 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-section (1), the Appellate Tribunal refuses to state the case on the ground that no question of law arises, the assessee or the Commissioner, 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 Appellate Tribunal, require the Appellate Tribunal to state the case and to refer it, and on receipt of any such requisition, the Appellate Tribunal shall state the case and refer it accordingly. (3) Where in the exercise of its powers under sub-section (2), the Appellate Tribunal refuses to state a case which it has been required by the assessee to state, the assessee may, within thirty days from the date on which he receives notice of such refusal, withdraw his application, and, if he does so, the fee paid shall be refunded." Section 256 empowers the assessee as well as the Revenue "to require the Appellate Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icates in the context "one or another" or "one or more", "all or every" "in the given category" ; it has no reference to any particular or definite individual, but to a positive but undetermined number in that category without restriction or limitation of choice. Having regard to the context in which the word "any" occurs in sub-section (1) of section 256, it only means "each and every" and, therefore, each and every question of law arising out of an order made by the Appellate Tribunal under section 254 of the Act can be a subject-matter of reference to the High Court as contemplated under sub-section (1) of section 256 of the Act. Therefore, the contention of Sri Y. Ratnakar, learned counsel for the assessee, that the order of the Tribunal made under sub-section (2) of section 254 of the Act merely recalling the order made by it under sub-section (1) of section 254 and posting the appeal for hearing in due course cannot be the subject matter of a reference under section 256(l) of the Act, cannot be accepted. It is pertinent to note that the Income-tax Department is the beneficiary of the order made under sub-section (1) of section 254 of the Act. The Tribunal by recalling that or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minary issue raised by the assessee. We accordingly amend our order and direct that the additions made by the Assessing Officer amounting to Rs. 5,00,851 and Rs. 85,700 be deleted from their income for the assessment years 1987-88 and 1988-89. As observed, the Department may investigate the matter in the hands of the partners." The Revenue filed an application before the Tribunal seeking reference of two questions that arose out of the order on the rectification application. The questions read thus: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the provisions of section 68 of the Income-tax Act, 1961, are not applicable to the facts of the present case ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in deleting the additions of Rs. 5,00,851 and Rs..85,700 made by the Assessing Officer under section 68 of the Income tax Act, 1961, representing the unexplained cash credits in the accounts of the partners?" The Tribunal declined to make the reference on the basis that these were questions of fact. The Revenue then made an application to the Madhya Pradesh High Court u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of section 256, a reference may be made to the High Court of a question of law that arises upon any order of the Tribunal. The view taken by the High Court in the earlier judgment in Popular Engineering Co.'s case [1983] 140 ITR 398 (MP), and followed by it in the order under challenge is erroneous. There is no doubt in our mind, particularly having regard to the fact that the deletions of the additions that had been made by the Assessing Officer were made in rectification, proceedings, that the questions that were sought to be referred were questions of law and that the High Court ought to have called upon the Tribunal to refer the same to it for its consideration". This court in an unreported judgment in ITC N.. 73 of 1994, dated September 18, 2000, of which one of us (S. R. Nayak J.) is a member, while reviewing the correctness of the view taken by the Tribunal placing reliance on the judgment of this court in CIT v. N. J. Dadabai [1978] 115 ITR 317 that no reference would lie against an order of the Tribunal in a miscellaneous petition passed subsequent to the disposal of the main case, and that reference can only be in respect of the main order in the appeal decided by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal recalled its earlier order and posted the matter for hearing afresh. That order of the Tribunal was assailed in a writ petition before this court under article 226 of the Constitution of India. Before this court a preliminary objection was raised about the maintainability of the writ petition contending that against the order of the Tribunal, a reference lies under section 256 of the Act. Dealing with that preliminary objection, this court held : "On a closer reading of sections 254 and 256 of the Income-tax Act, we are of the opinion that a reference lies from orders under section 254(1) or final orders made under section 254(2) of the Act. In the latter case, the order which may be subject to a reference under section 256(1) will only be an order passed by the Tribunal amending its earlier order rectifying the mistake brought to its notice by the assessee or the Assessing Officer. Finality is attached only to orders disposing of the appeal under section 254(1) or orders amending such appellate orders in exercise of the power of rectification under section 254(2) of the Act, We are of the opinion that an order on a miscellaneous application in the nature of the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under sub-section (1) of section 254 of the Act and posting the case for hearing cannot be the subject-matter of a reference to this court under section 256 of the Act. But the question for our consideration is whether that opinion of this court is still good law in the light of the judgment of the Supreme Court in Durga Engineering and Foundry Works case [2000] 245 ITR 272. As already seen above, in that case the Supreme Court has opined that under the provisions of section 256, a reference may be made to the High Court on a question of law that arises out of any order of the Tribunal, i.e., to say even an order made under sub-section (2) of section 254 of the Act and the Supreme Court was pleased to observe that if an order passed in a rectification application under section 254(2) of the Act has serious financial implications for the assessee, it is unthinkable that the assessee should be left without a remedy, by way of a reference to the High Court. As already pointed out the order made by the Tribunal recalling its earlier order made under subsection (1) of section 254 of the Act is prejudicial to the Revenue and, therefore, the ratio of the judgment of the Madhya Pradesh Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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