Rajeswari Export House vs Commissioner of Income Tax

Sujata V. Manohar, C.J.—This is an application u/s 256(2) of the Income Tax Act, 1961. The assessment year concerned is 1974-75 for which the relevant accounting period ended on June 30, 1973. The assessee is an exporter of handloom textiles. The assessing authority completed the assessment making an addition of Rs. 59,430 to the returned income alleging inflation in the purchase cost. The Inspecting Assistant Commissioner of Income Tax, Calicut-I, initiated proceedings u/s 271(1)(c) of the Income Tax Act for levy of penalty. By order dated March 6, 1978, a penalty of Rs. 59,430 was levied. The assessee took up the matter in appeal before the Income Tax Appellate Tribunal, Cochin Bench, Ernakulam. The Appellate Tribunal upheld, inter alia, the contention of the petitioner that the Inspecting Assistant Commissioner had no jurisdiction to levy penalty and accordingly cancelled the penalty. Against the order cancelling the levy of penalty, the Revenue filed an application u/s 256(1) of the Income Tax Act which was allowed. In the reference so allowed, the High Court by its judgment dated March 13, 1985, held that in view of its earlier decision in Income Tax Reference No. 1 of 1979 ( P.M. Kunhimuhammed and Bros. Vs. Commissioner of Income Tax, ), the reference must be answered in favour of the Revenue. The matter was accordingly sent back to the Tribunal for giving effect to the judgment of the High Court u/s 260 of the Income Tax Act. However, by the time the matter came up before the Tribunal for passing an order u/s 260(1) of the Income Tax Act, the High Court in the case of Commissioner of Income Tax Vs. P.I. Issac and Others, overruled its decision in Income Tax Reference No. 1 of 1979 P.M. Kunhimuhammed and Bros. Vs. Commissioner of Income Tax, , and held that after April 1, 1976, the Inspecting Assistant Commissioner had no jurisdiction to levy a penalty.

The Tribunal, however, has implemented the decision of the High Court while passing orders u/s 260(1) of the Income Tax Act. The present reference application u/s 256(2) by the assessee is in respect of this order of the Tribunal u/s 260(1) of the Income Tax Act.

Apart from anything else, the provision for a reference to the High Court u/s 256 of the Income Tax Act is only in respect of an order passed by the Tribunal u/s 254 of the Income Tax Act. The relevant provisions of Section 256(1) are as follows :

"256. (1) The assessee or the Commissioner may, within sixty days of the date upon which he is served with notice of an order u/s 254 .... require the Appellate Tribunal to refer to the High Court any question of law arising out of such order. ..."

Section 256(2) provides as follows :

"256. (2) If, on an application made under Sub-section (1), the Appellate Tribunal refuses to state the case on the ground that no question of law arises, the assessee or the Commissioner, as the case may he, may, within six months from the date on which he is served with notice of such refusal, apply to the High Court. ..."

Thus, both Section 256(1) and Section 256(2) deal with reference applications in respect of an order passed by the Tribunal u/s 254. u/s 254(1) ;

"The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit."

This clearly contemplates full freedom to the Appellate Tribunal to decide the points at issue in the appeal on the merits.

In contrast, Section 260(1) provides as follows :

"260. (1) The High Court or the Supreme Court upon hearing any such case, shall decide the questions of law raised therein .... a copy of the judgment shall be sent under the seal of the court and the signature of the Registrar to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to such judgment." (emphasis* supplied).

The order of the Tribunal u/s 260(1) is, therefore, only for the purpose of passing an order in conformity with the judgment of the High Court or the Supreme Court, as the case may be. Undoubtedly, if any other questions apart from those decided in the reference remain to be decided, the Tribunal would be free to pass orders on those questions u/s 254.

In the present case, however, the order of the Tribunal is entirely u/s 260(1) of the Income Tax Act. In these circumstances, the present reference application is not maintainable as there is no provision u/s 256 for any reference from an order of the Appellate Tribunal u/s 260(1). Moreover, since the order u/s 260(1) merely carries out the judgment of the High Court, no occasion would arise for any reference u/s 256 of the Income Tax Act. In the present case there is no complaint that the order of the Tribunal u/s 260(1) is not in conformity with the judgment of the High Court in the reference. A reference application from such an order is not, therefore, maintainable. The present reference application is, therefore, dismissed. In the circumstances, there will be no order as to costs.