Commissioner of Income Tax vs M. Parthasarathy

Puttaswamy, J.—As the parties and the questions that arise for determination in these cases are common, we propose to dispose of them by a common order.

In these references made u/s 256(1) of the income tax Act, 1961 (''the Act''), the Tribunal, Bangalore Bench, at the instance of the revenue, has referred the following question of law for the opinion of this Court:

"Whether in law and on the facts of the case, the Appellate Tribunal was right in holding that the assessee is entitled to relief u/s 80K in respect of dividend income from U-Foam (P.) Ltd., Hyderabad ?"

In order to appreciate the question referred to us, it is necessary in the first instance to notice the facts that are now in dispute.

For the assessment years 1968-69 and 1969-70 relevant to the accounting years ending on 31-3-1968 and 31-3-1969, the assessee claimed certain reliefs under sections 80K and 80J of the Act on the share income derived by him from a company called U-Foam (P.) Ltd., Hyderabad, which was allowed by the ITO, Bangalore in the regular assessment proceedings for those years. But on the basis of an order made against the company, the ITO reopened the proceedings against the assessee and brought the said sums also to tax, the correctness of which was challenged by him in appeals before the AAC, Bangalore who by his common order dated 20-3-1976 allowed them. Aggrieved by the said order of the AAC, the revenue filed second appeals before the Tribunal, which by its order dated 24-6-1977 has dismissed them. Hence these references.

Shri K. Srinivasan, the learned senior standing counsel for the income tax Department, appearing for the revenue, contends that the Tribunal was in error in dismissing the appeals filed by the revenue without at all examining their merits.

The assessee though duly served, has remained absent and is unrepresented.

We find that the Tribunal had not examined the merits of the appeals filed by the revenue and has dismissed them only on the ground that the company had obtained similar relief under the Act. If appeals are filed under the Act in time, the Tribunal is bound to examine them on merits and decide them in one way or the other way. Even if the Tribunal felt that the appeals should be decided only after the disposal of the references relating to the company before the Andhra Pradesh High Court then also it should have postponed the hearing of the appeals and taken them up for hearing after a decision was rendered in that reference. Whether that should be done or not is for the Tribunal to decide. But as the Tribunal has not decided the appeals on merits, we cannot help declining to answer the question referred to us. In the light of our above discussion, we decline to answer the question referred to us. But in the circumstances of the cases, we direct the parties to bear their own costs.