Shiva Gun Factory vs Commissioner of Income Tax

Is the High Court powerless to grant a stay against the realisation of tax in an application made by the assessee u/s 256(2) of the income tax

Act, 1961 ? This question falls for determination in this civil miscellaneous petitions filed by the Revenue for vacation of a stay order granted by this

court on November 24, 1992.

The controversy arises out of the assessee's application filed u/s 256(2) seeking a direction to the Tribunal to refer certain questions, said to be

questions of law, to this court for opinion. The application was admitted for hearing on November 24, 1992, and the Income Tax Officer's

assessment order was stayed. The Revenue seeks vacation of this order and that is how the matter is before us.

Any attempt to answer the question posed would naturally turn to the nature of jurisdiction possessed by the High Court u/s 256 of the Act. If

this jurisdiction can be said to be appellate, revisional or supervisory, the court would certainly have power to grant the stay pending disposal of

the application. In any other case, it would require to be examined whether the court possesses any such power at all.

Before adverting to the jurisdictional aspect, a brief reference to the terms of Section 256 which confers the reference jurisdiction on this court

would be in order. The section provides that an assessee or the Commissioner may, by an application, require the Appellate Tribunal to refer to

the High Court any question of law arising out of the order of the Tribunal and to draw up a statement of the case in this regard. Sub-section (2)

lays down that if the Tribunal rejects the application under Sub-section (1), the assessee or the Commissioner, as the case may be, may, within six

months from the date on which he is served with notice of such refusal, apply to the High Court which, if not satisfied with the correctness of the

decision of the Appellate Tribunal, may direct it to state the case and refer formulated questions of law for its opinion. As would be evident, the

provision confers a special and limited jurisdiction on the High Court which, in essence, is purely advisory in nature and confined to a decision on

such questions of law as may be referred to the court for its opinion. While exercising it, the court can neither raise any question by itself nor

dispose of the whole matter. Its total domain extends to answering those questions which are referred to it and to determine whether a question of

law arises in a particular case.

Therefore, the jurisdiction enjoyed by the High Court in a reference u/s 256 is neither appellate nor revisional or supervisory. While exercising it,

the court does not sit in appeal over the judgment of the Tribunal. Nor can it correct any error of fact or law in the decision of the Tribunal.

Consequently, it has no power to grant any stay which power is normally incidental and ancillary to the types of jurisdiction referred to

hereinabove. This view finds support in the Supreme Court judgment in Commissioner of Income Tax, Bombay Vs. Scindia Steam Navigation Co.

Ltd., , wherein it was held thus :

The jurisdiction of the High Court in a reference u/s 256 is a special one different from its jurisdiction as a civil court. The High Court hearing a

reference under that section did not exercise any appellate or revisional or supervisory jurisdiction over the Tribunal. It acted purely in an advisory

capacity on a reference which properly came before it u/s 256. ...

Even so, it remains to be seen whether the High Court can grant a stay under its inherent power. It is true that the High Court is not deprived of

its inherent jurisdiction or judicial capacity while hearing a reference u/s 256. But that by itself cannot be stretched to mean that it can pass any

order it likes, more so when its basic jurisdiction is special and limited. The inherent power in such a case can at best extend to procedural matters

relating to hearing of references and to passing of such orders as may be ancillary or incidental to the advice which the court proposes to give. But

in no case can it be said that the court enjoys inherent power to pass orders restraining the forums created by the Act from giving effect to their

orders. If the court could not do so while passing final orders, it is naturally incompetent to do so as an interim measure in the purported exercise of

its inherent powers.

There may be cases where the court sometimes assumes that it has the inherent powers to act ex debito justitiae. But even this power relates to

matters of procedure and not to substantive rights. Otherwise, it would result in extending its jurisdiction u/s 256 of the Act.

In Commissioner of Income Tax Vs. Bansi Dhar and Sons, , the Supreme Court observed as under (at page 681) :

In respect of certain matters, jurisdiction exercised by the High Court must be kept separate from the concept of inherent powers or incidental

powers in exercising jurisdiction u/s 66 of the 1922 Act or Section 256 of the 1961 Act. Section 66 of the Indian Income Tax Act of 1922 or

Section 256 of the Income Tax Act of 1961 is a special jurisdiction of a limited nature conferred not by the CPC or by the Charters or by the

Special Acts constituting such High Courts but by the special provisions of the Income Tax Acts of 1922 or 1961 for the limited purpose of

obtaining the High Court's opinion on questions of law. In giving that opinion properly, if any question of incidental or ancillary power arises such as

giving an opportunity or restoring a reference dismissed without hearing or giving sonic additional time to file the paper book, such powers inhere

to the jurisdiction conferred upon it. But such incidental powers cannot be so construed as to confer the power of stay of recovery of taxes

pending a reference which lie in the domain of an appellate authority. Therefore, the concept of granting stay in a reference ex debito justitiae does

not arise. That concept might arise in the case of the appellate authority exercising its power to grant stay where there is no express provision.

In the premises, we have no option, but to hold that the High Court has no power or competence to grant any stay or pass any interim injunction

while dealing with a reference u/s 256. Consequently, the stay order dated November 24, 1992, passed by this court is vacated and the civil

miscellaneous petition disposed of.