COMMISSIONER OF Income Tax vs J.N. SARMA

Gyani, J. - It was in compliance of the direction of this Court u/s 256(2) of the Income Tax Act, 1961 (''the Act'') as made in Civil Rule No. 25(M) of 1993 that the following question based on a statement of facts was drawn by the department:

"Whether in view of wording of rule 8(2) of the Income Tax Rules, 1962, the Tribunal was right in coming to the finding that the claim of the assessee was rightly allowed by the Commissioner of Income Tax (Appeal on the facts of the case ?''

The learned counsel appearing for the assessee at the very outset submitted that notwithstanding the fact that this statement of case has been sought by the High Court and the above question referred for its opinion, the Court is not bound to answer the question. Before we deal with this contention, it would be pertinent to note the basic facts. The assessee has three tea garden. In the assessment year 1985-86, the Assessing Officer held that the expenditure incurred on en-block re-plantation was capital expenditure in nature. On appeal being preferred by the assessee, the Commissioner (Appeals) held that replantation expenditure was revenue expenditure and as such allowed the expenditure incurred on replantation. On further appeal by the revenue, the Tribunal held that the assessee''s claim was correctly allowed by the Commissioner (Appeals) on the facts of the case. It was pointed out that the Assessing Officer had not recorded a finding to the effect that the re. planting was done on a virgin area of the tea garden and in the absence of necessary findings of fact the contention advanced by the revenue was not accepted. It was in pursuance of this Court''s direction that the statement of the case has been submitted.

We have heard the learned standing counsel for the revenue Mr. Bhuyan and the learned counsel Mr. Agarwalla for the assessee.

It is a cardinal rule that the High Court in reference proceedings does not and cannot go behind the fact found. It cannot look at the evidence that was not before the Tribunal when it reached the impugned finding, the jurisdiction of this Court in a reference under the Taxation Statute h purely advisory. The question of law is whether it really arises out of the finding given by the Tribunal ?

Adverting to the order passed by the Tribunal, the following findings are demonstrably clear:

''It is seen that the Assessing Officer himself has noted, amongst other things, that the re-planting expense is regarded as capital expenditure because the re-plantation is expenses of en-blocked area as good as new cultivation.''

There is no finding by the ITO that the replanting was in a virgin area of the tea garden. In the absence of necessary finding the contention of the revenue cannot be accepted.

This finding can by no means be said to be unreasonable, much less perverse and the ITO in his assessment order has concluded that -

"The replanting expense is regarded as capital expenditure, because, the replantation is expenses of en-blocked area as good as new cultivation. This is added back as capital expenses.''

There is no reason assigned for this conclusion.

The Supreme Court in Patnaik and Co. Ltd. Vs. Commissioner of Income Tax, Orissa, has held that the High Court was wrong in re-appreciating the evidence, the question referred to was itself framed on an assumption that it had to be decided on factual matrix as directed by the Tribunal.

The Supreme Court held-

"It is now well settled that the Appellate Tribunal is the final fact-finding authority under the Income Tax Act and that the Court has no jurisdiction to go behind the statement of facts made by the Tribunal in its appellate order. The Court may do so only if there is no evidence to support the findings or the Appellate Tribunal has misdirected itself in law in arriving at the findings of fact. But even there, the Court cannot disturb the findings of fact given by the Appellate Tribunal unless a challenge is directed specifically by a question framed in a reference against the validity of the impugned findings of fact on the ground that there is no evidence to support them or they are the result of a misdirection in law. (p. 366)

What is a perverse finding? Strictly speaking we do not have to go into the question of perverse finding since no such direct challenge has been posed in the question as formulated.

Perverse.-A perverse verdict may probably be defined as one that is not only against the weight of evidence but is altogether against the evidence.

Perverse finding - A finding cannot be said to be perverse, if it is against the weight of evidence. It is perverse if it is altogether against evidence.

It was strenuously urged by the learned counsel for the revenue that the question as referred is not in its proper form, it is open to this Court to re-frame the question. As a proposition of law, there can be no quarrel with the submission made by the learned standing counsel but this power to reframe a question can be exercised to clarify some obscurity in the question referred or to pinpoint the real issue between the taxpayer and the department or for similar other reasons: it cannot be exercised for reopening an enquiry on questions of fact or law which is closed by the order of the Tribunal. (See Commissioner of Income Tax, West Bengal, Calcutta Vs. Smt. Anusuya Devi, .

The same judgment also holds that the High Court is not bound to advise the Tribunal on a question which did not arise out of the order of the

Tribunal merely because the High Court called upon the Tribunal to state a case on that question.

In the same vein, a judgment of this Court in Commissioner of Income Tax Vs. Basanta Kumar Agarwalla and Another, has held that:

.. . . the question must be disputed or disputable question of law. The object of a reference is to get a decision from the High Court on a problematic or debtable question and not on an obvious and simple point of law, although somehow the determination is somewhere linked up with a provision of law. The meaning of the term ''question'' in the context means a subject or point of investigation, examination or debate, a problem, as a delicate or doubtful question. The Tribunal need not refer every ''point of law.'' The Tribunal is obliged to refer only a question of law which calls for investigation, examination, debate or when it is a dubious problem. However, if a point of law decided by the Tribunal is positive, certain, definite and sure, there is no obligation on the part of the Tribunal to refer the matter, as the point cannot be termed as a question of law. When a decision is apparently correct and there is no scope for any debate or dispute or difference, it does not fall within the expression ''a question of law.---(p. 419)

If the expenditure was incurred for replacement of tea bushes that have died or become permanently useless in an arca of the tea garden and if the area has not previously been abandoned, the Kerala High Court in CIT v. Mahavir Plantations Lid. [1995] 213 ITR 485 has held that the expenditure is allowable under rules(2)of the Income Tax Rules, 1962 and the Tribunal was right in allowing the deduction of the expenditure on replacement of tea bushes. No question of law arose from the order.

What is the scope and jurisdiction of the High Court to examine the findings of facts contrary to one given by the Tribunal and how far the High Court can interfere u/s 256(1) if the findings or conclusion of the Tribunal are perverse. This is what the Supreme Court said in Smt. Kilasho Devi Burman and anothers Vs. Commr. of Income Tax, West Bengal, Calcutta,

"The High Court in a reference under the taxation statutes exercises advisory jurisdiction in regard to a question of law. It is only when it has before it a question that asked whether the Tribunal has, upon the evidence on record before it, come to a conclusion which is perverse that if may go into facts for this is a question of law. A conclusion is perverse only if it is such that no person, duly instructed, could, upon the record before him, have reasonably come to ?

For the foregoing reasons on the statement of the case and the findings of fact as recorded by the Tribunal which can by no stretch of imagination, said to be unreasonable, much less perverse, the question as referred does not arise and therefore, there exists no question for our opinion thereon.

Reference answered accordingly.