Broad aspect: while referring and applying any order of Superior Court, subsequent developments must also be considered by counsels, Courts and Tribunals. Tribunal wrongly applied Supreme Court Order directing Tribunal to refer question of law to High Court. Tribunal did not consider consequent and subsequent development in case of BIJU PATNAIK

[DEV KUMAR KOTHARI]

Broad aspect:   while referring and  applying any order of Superior Court, subsequent developments must also be considered by counsels, Courts and Tribunals.

Tribunal wrongly applied Supreme Court Order  directing Tribunal to refer question of law to High Court. Tribunal did not consider consequent and subsequent development in case of BIJU PATNAIK .

Recent order of ITAT 2022 (7) TMI 77 - ITAT AHMEDABAD

M/S. SEKANI INDUSTRIES PVT. LTD. (FORMERLY KNOWN AS MANGAL COTTON MILLS PVT. LTD.) VERSUS THE DCIT, CIRCLE-2 (1) (2) , AHMEDABAD. ITA No.290/AHD/2018 Dated: - 29-6-2022 ( in short SEKANI case)

Cases in matter of Biju Patnaik:

Referred by Tribunal and wrongly applied, though no ruling was delivered in that case that source of source can be examined:

1986 (5) TMI 2 - SUPREME COURT

COMMISSIONER OF INCOME-TAX, CALCUTTA VERSUS BIJU PATNAIK

Dated: - 9-5-1986

Subsequent orders in the matter not referred:

1990 (8) TMI 45 - ORISSA HIGH COURT

COMMISSIONER OF INCOME-TAX VERSUS BIJU PATNAIK

Dated: - 1-8-1990

2006 (10) TMI 108 - ORISSA HIGH COURT

COMMISSIONER OF INCOME-TAX VERSUS BIJU PATNAIK (DECD.).

Dated: - 25-10-2006

The Ahmedbad Bench of ITAT in Shekani case supra:

considering issue of applicability of S.68 held that source of source can be examined retrospectively -though ITAT  referred a judgment  of the  Supreme Court,  but mistakenly applied it becaseu Supreme Court has in judgment relied by Tribunal, merely directed Tribunal to refer quession of  law u.s.256. The Tribunal drew wrong conclusions and applied as if  law was   laid down by SC, where there is no such law declared by SC or evenue by HC or Tribunal in consequent orders.

In fact, in case of Biju Patnaik relief allowed by first appealalte authority which was confirmed by ITAT, became final and the order of SC , directing reference have no bearing aat all in ultimate.

Therefore, order of Tribunal deserve to be challenged and  reconsidered in suitable proceeding.

Scope of This article is restricted on general rule that while applying any ordere or judgment of any superior court, subsequent developments and latest position should be considered. Particularrly when ruling relied on is such that as a consequence   therefore further orders are to be passed by lower courts/ authority.

In the case under study on aspecrt of wrong application of SC order in case of Biju Patnaik.

1. In judgement of 1986 SC concluded as follows:

The judgment and order of the High Court are, therefore, set aside. We direct the Tribunal to send a statement of the case for the three years involved within six months of the date of receipt of this order on the questions mentioned hereinbefore to the High Court at Cuttack. Let the records be sent to the Tribunal immediately through the High Court. As the matter is very old, the reference, when made, should be disposed of as quickly as possible.

The costs of these appeals will abide by the ultimate order made in the reference.

2. Judgment of HC on reference:

Then The High Court  on such referecne  in order dt 01.08.1990  also found that question of law ould not be answered unless it is examined  whether reasonable opportunity was allowed or not for cross examination of witnesses and other factual aspects. In conclustions it was held as follwos:

“ Since the Tribunal has recorded a finding that a reasonable opportunity has not been given to the assessee, it cannot now give findings without giving opportunity to the assessee to give rebuttal evidence and explanation. This can effectively be done by the Assessing Officer.

On the aforesaid answer, the reference applications are disposed of as above leaving it to the Tribunal to pass consequential orders on the basis of the aforesaid answer.”

Judgment of 1990:

On reading of the  the judgment of the High Court  1990 (8) TMI 45 supra  which was delivered on August 1, 1990, we find that   the Income-tax Appellate Tribunal passed the consequential order directing AO to pass fresh orders after allowing opportunity of being heard to the assessee.

To Quote from judgment dt. 01.08.1990 supra:

 the Income-tax Appellate Tribunal passed the following consequential orders:

"Accordingly, we restore the matter to the file of the Assessing Officer 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 honourable High Court."

The subsequent orders of Tribunal are not found on websites. However, from further development in further proceedings we find from judgment dated 25.10.2006 on six miscellaneous applications of revenue.

Therefore, it appears that Revenue filed six Miscelleneou appealicaiton in High Court  which were considered and decided in 2006 (10) TMI 108 - ORISSA HIGH COURT -COMMISSIONER OF INCOME-TAX VERSUS BIJU PATNAIK (DECD.).Dated: - 25-10-2006

To quote  (within {   },from judgment dated 25.10.2006 on six miscellenous application:

About prayers of revenue:

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 to direct the Tribunal to conclude the assessment in terms of the order of the apex court and the order of this hon'ble court dated August 1, 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."}

About fresh assessment notices and thereafter in appeals etc:

{ “The Assessing Officer 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 provisions of section 153(2A) of the Income-tax Act which was introduced from April 1, 1971. However, on that writ petition, being OJC No. 420 of 1997, on March 17, 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 dated September 26, 2003.

In this matter a remand report was filed by the Assistant Commissioner of Income-tax, Circle-I(I), Bhubaneswar. In the said remand report, it was clearly mentioned that addition to the income of the assessee for the assessment years 1962-63, 1963-64 and 1964-65 was made and such assessments were completed on March 27, 1967, inter alia, on the strength of the statement recorded under section 131 of the Income-tax Act of 14 witnesses. Their names have been mentioned in the remand report as follows:

"1. Sri Naba Krishna Choudhury

2. Dr. Harekrishna Mahatab

3. Sri S. K. Kapur

4. Sri K. C. Dalai

5. Sri G. C. Pattnaik

6. Sri Bansidhar Mohanty

7. Sri M. L. Pandit

8. Sri M. N. Ghosh

9. Sri Verilal Dwarakadas Mehta

10. Sri B. E. Prasad Rao Verma, manager,

11. Sri Sadhu Charan Mohanty

12. Sri Sadasiv Tripathy

13. Smt. Swaran Obhrai

14. Sri N. P. Sahu."

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, S1. Nos. 1 to 12 of the above list were handed over to the authorised representative of the assessee, the late Biju Pattaniak. During the hearing on June 19, 2003, the authorised representative submitted that the witnesses at S1. Nos. 1 to 10 were deceased as on that date. In the further hearing which was held on July 9, 2003, the authorised representative further submitted that the witnesses as S1. 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 tracted 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 section 131(1)(d) of the Act to the Income-tax Officer, Puri, to cause enquiry about the whereabouts of the witness and the possibility of his cross-examination. From the report of the Income-tax Officer, 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.

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 Income-tax Appellate 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 Income-tax Appellate Tribunal.}

About order on miscellaneous applications before High Court:

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 assessment years 1962-63, 1963-64 and 1964-65, the Assessing Officer 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 Appellate Assistant Commissioner of Income-tax (the AAC) reversed the finding of the Assessing Officer, inter alia, on the ground that the Assessing Officer 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 Appellate Assistant Commissioner by his order dated April 1, 1968.

However challenging the said order of the Appellate Assistant Commissioner, the appeals were filed before the Income-tax Appellate Tribunal (hereinafter referred to as "the ITAT"). In the appeal filed by the assessee it was contended that since the assessment order was found by the Appellate Assistant Commissioner 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 Appellate Assistant Commissioner.

While deciding the said appeals, the Income-tax Appellate Tribunal reiterated the findings of the Appellate Assistant Commissioner 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 section 131 of the Income-tax Act and also because of the fact that the Assessing Officer failed to consider the entire evidence on record and did not call upon the assessee to furnish explanation on certain points. The Income-tax Appellate Tribunal thus dismissed the appeals of the Department by its order dated November 27, 1970. Then on May 17, 1971, the Department filed an application under section 256(1) of the Income-tax Appellate 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 Income-tax Appellate Tribunal.

Thereafter, the High Court also rejected on April 5, 1974, the Department's application under section 256(2) of the Act, holding, inter alia, that the finding of the Income-tax Appellate Tribunal was correct and no question of law arose.

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 Income-tax Appellate Tribunal to refer under section 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:

xxxx

Thereafter miscellaneous petitions were filed by the Revenue seeking modification of the orders of the Income-tax Appellate Tribunal dated February 22, 1994, and October 16, 2003. Those applications were also dismissed by the Income-tax Appellate Tribunal, Cuttack Bench, Cuttack, by an order dated December 19, 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 Income-tax Appellate Tribunal, the instant miscellaneous cases have been filed before this court under section 151 of the Code of Civil Procedure 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 Cases Nos. 1 to 6 of 2004 are maintainable in law and on the facts.

Learned counsel for the Revenue submits that the above miscellaneous cases are maintainable as the Income-tax Appellate 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 Income-tax 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 Income-tax Act, the inherent power of the court under section 151 of the Code has been invoked. In support of such contention, reliance was placed on certain decisions.

Xxxxx

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 v. Biju Patnaik [1991] 190 ITR 396 (Orissa) 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.

For the reasons aforesaid, the miscellaneous cases are dismissed as totally misconceived and not maintainable.

Conclusion:

There was no judgment or order of SC, HC and Tribunal that source of source can be examined while considering S.68. The Tribunal , Ahemdabad has wrongly drawn its inference or conclusion to hold that SC has held that in such cases  S. 68 can be extended to examine source of source of creditor. Therefore, amended S.68 can be applied retrospectively

Other aspect of judgment of Tribunal have not been discussed  in this article.