TMI Blog1992 (4) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Appellate Tribunal for the assessment year 1976-77. For the same year, as directed by this court, on motion by the Revenue, in 0. P. No. 1151 of 1987, the Income-tax Appellate Tribunal has referred two additional questions for the decision of this court and they form the subject-matter of Income-tax Reference No. 116 of 1989. (Relevant papers are in the paper book relating to Income-tax Reference No. 100 of 1986). In Income-tax Reference No. 97 of 1989, only one question has been referred by the Income-tax Appellate Tribunal for the decision of this court, at the instance of the Revenue. The questions referred to in Income-tax Reference No. 100 of 1986 and Income-tax Reference No. 116 of 1989, on the one hand (for the assessment year 1976-77), and the sole question referred to in Income-tax Reference No. 97 of 1989 (for the assessment year 1978-79) are as follows "Income-tax Reference No. 100 of 1986: Whether, on the facts and in the circumstances of the case, the expenditure of Rs. 23,076 by way of E. C. G. C. premium is entitled to weighted deduction under section 35B of the Income-tax Act ? Income-tax Reference No. 116 of 1989: 1. Whether, on the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Special Bench of the Tribunal in J. Hemchand and Co.'s case and the assessee will be entitled to the benefit of the said circular as an administrative relief. In these circumstances, while declining to answer the question referred to this court in that case, which is similar to the one referred to this court in Income-tax Reference No. 100 of 1986, this court directed the Income-tax Appellate Tribunal to restore the appeal to file for the limited purpose of considering as to whether and to what extent the assessee will be entitled to weighted deduction under section 35B of the Act in the light of the circular issued by the Central Board of Direct Taxes dated December 28, 1981. The said circular is referred to in two decisions in CIT v. Novelty Trading Corporation [1984] 150 ITR 453 (All) at page 454, and CIT v. Jay Engineering Works [1984] 149 ITR 297 (Delhi), at page 298. The said circular has been extracted in detail in Bench decision of this court in CIT v. Kerala Nut Food Co. [1991] 192 ITR 585. Following the earlier Bench decision of this court in Income-tax Reference No. 139 of 1985, dated June 14, 1989, we direct the Income-tax Appellate Tribunal to apply its mind to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 74,953 and by adding to the same the purchases from December 19, 1975, to December 31, 1975, and after deducting exports during the period and the difference in opening stock as on January 1, 1975, of Rs. 20,10,658. In this process, he arrived at the figure of Rs. 15,87,720 and fixed the said figure as the closing stock of the assessee as on December 31, 1975. The assessee's closing stock shown to the Department was only Rs. 3,22,062. So, the Income-tax Officer added the difference between Rs. 15,87,720 and Rs. 3,22,062, i.e., Rs. 12,65,658 as the closing stock of the assessee, for the assessment year 1976-77. In appeal, the Commissioner of Income-tax (Appeals) held that there were two types of inflations in stock. One was inflation in the quantity of stock declared to the bank and the other was the inflation in the value as per unit of the stock declared. He held that no addition could be made for the second, i.e., inflation in the value as per unit of the stock declared. Regarding the first type of inflation, the Commissioner of Income-tax (Appeals), after examining the employee of the assessee-firm who was personally present, and the other relevant papers, held that the stock de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... habit of inflating the stock and so no sanctity can be given to the stock statement as on December 31, 1975, and in view of the non demur to the said plea by the Revenue for the year immediately preceding the relevant assessment year and also for subsequent years, the Revenue should have adopted the same procedure for all the assessment years and should not single out certain assessment years only. Briefly stated, the Appellate Tribunal has opined that, in the case of the same assessee, when identical questions come up for consideration for different assessment years, the Revenue should not be permitted or allowed to adopt inconsistent stands. It is on this reasoning that the Tribunal upheld the conclusion of the Commissioner of Income-tax (Appeals) without adjudicating as to whether the plea of the assessee that it furnished an inflated statement to obtain higher credit from the bank was true and tenable in law. Both sides covered a wide spectrum in order to substantiate their respective view-points. Counsel for the Revenue attacked the reasoning and conclusion of the Appellate Tribunal as perfunctory, laconic and illegal. It was argued that the Appellate Tribunal failed to adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) The assessee itself furnished the statement to the bank regarding the "stock". It is bound by such solemn statement. It cannot be departed from. The assessee cannot adopt inconsistent stands in such matters, by giving different statements to the bank and to the Income-tax Department. The Inspecting Assistant Commissioner as also the assessing authority have worked out the closing stock as on December 31, 1975, as is evident from paragraph 9 of the proceedings of the Inspecting Assistant Commissioner and also page 28 of the paper book. If the assessee was aggrieved by any different principle adopted for a different year, he should have taken up the matter in appeal. But, such act or conduct adopted for different year cannot in any way deter or preclude the Department from taking a different stand for another year. On the other hand, counsel for the assessee, Mr. P. C. Chacko, laid stress on the following aspects: (i) The Commissioner of Income-tax (Appeals) accepted the plea of the assessee that the "stock" furnished to the bank is unreal and inflated. That was so done after adverting to materials available in the case. Cogent reason has been given for accepting the plea of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sitions, by reference to the following decisions : Deoniti Prasad Singh v. CIT [1947] 15 ITR 165 (Patna) ; C. T. Narayanan Chettiar v. CIT [1966] 60 ITR 690 (Mad) and Baijnath Brijmohan and Sons P. Ltd. v. CIT [1986] 161 ITR 234 (Bom). We considered the rival pleas aforesaid with care and evaluated them in the light of the appellate order passed by the Appellate Tribunal. On a reading of the order of the Appellate Tribunal, we are left with the impression that the above rival pleas were never highlighted before the Appellate Tribunal. Even the basic premises have not been stressed or highlighted before the Appellate Tribunal, though an attempt has been made by both parties to explain the order of the Appellate Tribunal from the various angles now pressed before us for the first time. The various aspects pressed before us require scanning of the various materials in a very different perspective and questions of fact, the conduct of the parties and the circumstances in which the various pleas were taken up, or the assessments made, should be evaluated with care. In other words, the facts will have to be ascertained and evaluated. In the absence of relevant facts or findings, it wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax (Appeals) is catalogued. In paragraph 4.3, the plea of the Revenue is highlighted. In paragraph 4.4, the stock statements as on December 31, 1974, and December 31, 1975, declared to the bank, letter dated June 28, 1980, from the assessee to the Indian bank, bank's letter dated November 7, 1970, to the assessee, a copy of the report dated April 28, 1980, by the statutory auditors of the Indian Bank, and other details are adverted to and also the plea of the assessee that the Department has not followed a "consistent practice", in that, notwithstanding the discrepancy in the stock statement given to the bank, the Department has not made any addition in the earlier and later assessment years. It is after adverting to these aspects that the Appellate Tribunal came to its own decision in paragraph 4.5 (extracted hereinabove-paragraph 10 (see page 919)). We are stressing these aspects only to show that though there was an elaborate review of the rival pleas put forward by the assessee and the Revenue before the Tribunal as also reference to various documents on which the parties placed reliance, the Appellate Tribunal preferred to base its decision highlighting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee in any appeal that it may file from the assessment order for the assessment year 1977-78. Referring to the main reason given by the Tribunal for declining to interfere with the deletion of the addition ordered by the Commissioner of Income-tax (Appeals), we are unable to discern the exact legal basis on which the Tribunal held that the Department should adopt the same procedure for all the assessment years. Had the Tribunal in mind the principle of estoppel in stating so ? It is not clear. Will the principle of estoppel apply, if an inconsistent stand is taken for different years and not for the same year ? That requires an in depth study. Or, had the Tribunal in mind only the morality of the stand taken by the Revenue in adopting different procedure for different years ? Is such an approach permissible or valid in law, is a matter which requires elucidation. When and in what circumstances the Department is precluded from taking an inconsistent stand, in a different year, is a matter which requires analysis on the legal basis. Or is it a case where the Tribunal had in mind the principle of "election" that a party cannot "approbate and reprobate" or "blow hot and cold" or "p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. State of Tamil Nadu, AIR 1974 SC 555 ; Ajay Hasia v. Khalid Mujib Sehrawardi, AIR 1981 SC 487 and other similar cases. The matter has got far-reaching consequences, since the duty to act "fairly" is an inbuilt safeguard enshrined in article 14 of the Constitution of India. This is not a plea akin to estoppel, but stems from a constitutional guarantee under article 14 of the Constitution of India. That is why we stated that the matter has got various dimensions. The same aspect can be viewed from a different focus also. Was the Tribunal of the view that failure to adopt the same procedure for all the assessment years and singling out certain assessment years only is unreasonable or irrational ? In other words, consistency is a hallmark of being reasonable. This aspect is different from fairness and is based on the Wednesbury principle (Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation [1948] 1 KB 223 (CA))-see G. B. Mahajan v. Jalgaon Municipal Council, AIR 1991 SC 1153. In an article, "Beyond Wednesbury : Substantive Principles of Administrative Law" (1987 Public Law, 368 at page 377) the authors Jeffrey Jowell and Anthony Lester deal with the principle of con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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