1970 (11) TMI 26 - HC - Income Tax

Revenue challenging the maintainability of this application on the ground that no reference application under section 66 was filed by the petitioner before the Tribunal - revenue s contention that this application by the assessee under section 66(2) of the Act without preferring an application under section 66(1) and obtaining a refusal thereon is not maintainable is acceptable

Summary

Issues Involved:
1. Maintainability of the application under section 66(2) of the Indian Income-tax Act, 1922.
2. Whether the Tribunal was right in law in upholding the addition of Rs. 61,350 based on suspicion, conjecture, and surmise.

Issue-wise Detailed Analysis:

1. Maintainability of the Application under Section 66(2):

The petitioner filed an application under section 66(2) of the Indian Income-tax Act, 1922, to require the Income-tax Appellate Tribunal to state a case for the High Court's opinion. The preliminary objection raised by the income-tax department's counsel was that no reference application under section 66(1) was filed by the petitioner before the Tribunal. The petitioner's counsel contended that the application is maintainable as either the assessee or the Commissioner of Income-tax is entitled to prefer an application under section 66(2) if any application has been filed by either party before the Tribunal under section 66(1).

The court examined the statutory provisions of section 66(1) and section 66(2). Section 66(1) allows the aggrieved party to file a reference application within sixty days of the Tribunal's order. The Tribunal has a statutory duty to state a case for the High Court if the questions of law arise out of its order. Section 66(2) comes into play if the Tribunal refuses to state a case, and the aggrieved party can then apply to the High Court within six months.

The court concluded that the provisions of section 66(2) are attracted only when the Tribunal refuses to state a case on the ground that no question of law arises out of its order. Such refusal must be based on an application made under section 66(1). The court emphasized that only the party who made a demand for a reference under section 66(1) and received a refusal from the Tribunal can invoke the jurisdiction of the High Court under section 66(2). This interpretation is supported by the Supreme Court's observations in Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd.

The court rejected the petitioner's contention that the expression "any application" in section 66(2) allows for an application under section 66(2) without a prior application under section 66(1). The court noted that such an interpretation would be contrary to the statutory provisions and would confer an undue advantage on parties who did not take timely steps under section 66(1).

2. Whether the Tribunal was Right in Law in Upholding the Addition of Rs. 61,350:

The court examined whether the Tribunal's decision to uphold the addition of Rs. 61,350 based on suspicion, conjecture, and surmise was justified. The Income-tax Officer had initially made an addition of Rs. 1,20,000 towards the deficit yield of cut mica and Rs. 60,000 towards unexplained cash credits, along with Rs. 1,350 as interest paid thereon. The Appellate Assistant Commissioner sustained the addition of Rs. 1,20,000 but deleted the further addition of Rs. 61,350. On appeal, the Tribunal sustained the addition of Rs. 60,000 towards the low yield in cut mica and gave relief to the assessee on other additions.

The court noted that the Tribunal had considered the relevant entries, records, and accounts maintained by the assessee and found that an estimate was necessary. The Tribunal estimated the deficit yield of cut mica based on the data and figures explained in detail in its order. The court held that whether the estimate of the low yield of cut mica was justified and whether the quantum of the estimate was reasonable are questions of fact. The Tribunal's finding was based on ample material, and no question of law arose out of its order.

Conclusion:

The court upheld the preliminary objection raised by the revenue's counsel, concluding that the application under section 66(2) without a prior application under section 66(1) was not maintainable. Additionally, the court found no merit in the petitioner's case even on substantive grounds, as the Tribunal's decision was based on ample material and did not raise any question of law. The application was dismissed with costs, and the advocate's fee was fixed at Rs. 150.