Thanthi Trust vs Assistant Commissioner of Income Tax

K.P. Sivasubramaniam, J.—This writ petition is filed for the issue of a writ of prohibition prohibiting the respondent-Assistant Commissioner

of Income Tax, Central Circle-II, Madras-34, from proceeding with the assessment of the petitioner or from making any assessment order under

the Income Tax Act for the assessment year 1974-75.

In the affidavit filed in support of the writ petition several anterior facts relating to the nature of the assessee being a trust entitled to exemption

under the Income Tax Act, 1961, have been stated in detail. Having regard to the issue under consideration in this writ petition, it is sufficient to

mention the following facts alone.

It appears that there was a raid in the premises belonging to the petitioner at Madurai, Coimbatore and Tirunelveli and the premises were

searched by the officers of the Income Tax Department on September 3, 1976. In the course of the search, certain books of account were seized

u/s 132(1) of the Income Tax Act relating to the assessment years 1972-73 to 1977-78, After the seizure of the books of account, the petitioner

was called upon to file the return for the assessment year 1974-75. Though the petitioner was able to file the return for the other assessment years,

he was not able to file the return for the relevant period since the entire books of account and records have been seized by the Department. The

petitioner would further contend that in the circumstances there being no other alternative he was forced to file a return without the books of

account having been audited and on February 8, 1978, the respondent had sent a draft assessment order u/s 143(3) read with Section 144B

denying exemption on various grounds including that the books were not audited as required u/s 12A and the petitioner was called upon to file his

objections u/s 144B. The objections were filed and consequently the order of the Income Tax Officer was passed on April 29, 1978.

An appeal was filed before the Commissioner of Income Tax (Appeals). Before the Commissioner of Income Tax it was contended by the

petitioner that the trust had no reason to get the accounts audited inasmuch as there was no positive income and there was only loss and in any

case, the audit has to be completed only before the return was filed and as stated earlier audit could not be completed since the books of account

had been seized. The petitioner submitted before the Commissioner of Income Tax that in the petitioner''s own case the Madras High Court has

held that they were entitled to the benefit of Section 11 and the appeal filed before the Supreme Court was also rejected and that thus as a result of

the judgment of the Supreme Court, it has to be held that the petitioner was entitled to the benefit of Section 11. The Commissioner of Income Tax

after considering the submissions made by the assessee, held that in view of the decision of the Supreme Court the assessee was covered by the

provisions of Section 11 and directed the Income Tax Officer to verify the admissibility by permitting the petitioner to produce all the necessary

details for verifying the petitioner''s claim. The Income Tax Officer was also directed to recompute the income after providing reasonable

opportunity to the assessee for furnishing all the materials for verification of the claim of exemption u/s 11 and to recompute the income according

to law.

The respondent herein aggrieved by the said decision filed an appeal before the Income Tax Appellate Tribunal, Madras Bench, in I. T. A. No.

1872/Ms of 1984. The assessee/petitioner herein filed cross-objections before the Tribunal contending that the Commissioner of Income Tax

(Appeals) ought to have considered that inasmuch as the assessee did not file objections to the draft assessment order within the statutory period

provided under the Act, the Income Tax Officer was bound to complete the assessment within the time prescribed thereon and that since the

Income tax Officer did not complete the assessment within the prescribed time, the assessment for the assessment year 1974-75 was barred by

time and that, therefore, the assessment was beyond the period of limitation.

The Tribunal by their order dated June 10, 1987, disposed of both the appeal and the cross-objections by a common order. The appeal was

dismissed after upholding the order of the Commissioner of Income Tax and the Tribunal held that inasmuch as the issue of verifying the claim u/s

11 had already been remitted back by the Commissioner of Income Tax to the file of the Income Tax Officer for reconsideration, the Income Tax

Officer was directed to consider the exemption claimed by the assessee in accordance with the relevant provisions of law as applicable to the

assessment year 1974-75. The Tribunal did not consider the cross-objections on merits but held that it was also open to the assessee to put

forward his claim of limitation and jurisdiction in making the assessment and the Income Tax Officer was also directed to give an opportunity to the

assessee to file the audit certificate which was not filed earlier. The Tribunal also observed that the Income Tax Officer was at liberty to complete

the assessment in accordance with law after giving due opportunity of hearing to the assessee. But while passing the order, the Tribunal observed

that both the appeal and the cross-objection filed by the assessee were dismissed. Aggrieved by the expression that the cross-objection had been

dismissed, the assessee filed a miscellaneous petition in M. P. No. 14 of 1987 which resulted in the Tribunal issuing a corrigendum. Paragraph 7 of

the original order was substituted to the effect that the Tribunal confirmed the order passed by the Commissioner of Income Tax (Appeals) and

dismissed the appeal filed by the Department and that the cross-objection filed by the assessee will be treated as allowed for statistical purposes.

Subsequently, a reference application was filed by the assessee before the Tribunal to refer the dispute to the High Court by stating certain

questions of law as arising out of the order of the Tribunal dated June 10, 1987. By order dated December 9, 1987, the reference application was

dismissed by the Tribunal, Thereafter the Income Tax Officer appears to have taken steps to call upon the assessee to furnish particulars regarding

the assessment years 1974-75 and 1975-76. Consequently, the present writ petition has been filed for the issue of a writ of prohibition on the

ground that inasmuch as the assessment was barred by limitation the Income Tax Officer had no jurisdiction to proceed further in making the

assessment for the year 1975-76 (1974-75 ?).

Mr. V. Shanmugham, learned counsel appearing for the petitioner, contends that inasmuch as the cross-objection pertaining to the issue of

limitation was allowed, the Tribunal was wrong in having sustained the order of the Commissioner of Income Tax (Appeals). In having remitted the

matter to the Income Tax Officer for proceeding with the assessment. The Income Tax Officer had no jurisdiction to proceed further in view of the

fact that the assessment was beyond the period of limitation.

Mrs. Kala Ramesh, learned counsel appearing for the respondent, contends that the scope of the order of the Tribunal was clear, namely, that it

was the mere order of remand leaving the issue of limitation open for consideration by the Income Tax Officer and that it cannot be disputed that

the Income Tax Officer had jurisdiction to consider the issue of limitation. The order allowing cross-objection on the miscellaneous petition filed by

the assessee was only to rectify a technical defect in the original order of the Tribunal stating that the cross-objection was dismissed. At any rate,

even if the assessee was aggrieved by the order of the Tribunal rejecting his petition for reference u/s 256(1) of the Act, it was open to him to have

pursued his statutory remedies u/s 256(2) of the Income Tax Act before this court.

We may at once deal with the effect of the order of the Tribunal and consider whether there is any basis for the apprehension of the writ,

petitioner. The petitioner was, in fact, not aggrieved by that portion of the order of the Commissioner of Income Tax dated March 24, 1984,

remitting the case to the Income Tax Officer for recomputing the income and for verification of the claim for exemption u/s 11 of the Act. As

against the said order no appeal was filed by the assessee. Though in the cross-objection filed by him in the appeal by the Department a passing

contention is raised by the assessee by observing that the order of the Commissioner was erroneous, the fact remains that the cross-objection was

directed only as against the non-consideration of the issue of limitation by the Commissioner as could be evident from the petitioner''s own

statement in paragraph No. 23 of his affidavit filed in support of this writ petition. The Tribunal while dismissing the appeal and confirming the order

of the Commissioner of Income Tax (Appeals) in paragraph No. 6 of its order, permitted the assessee to put forward his claim of limitation and

jurisdiction in making the assessment before the Income Tax Officer. The Tribunal did not deal with the issue of limitation on merits, but left the

issue to be agitated before the Income Tax Officer. However, in the concluding paragraph of its order (paragraph No. 7) an unintended technical

mistake had crept in by the observation that the appeal as well as the cross-objection stood dismissed. This mistake was rectified by issuing a

corrigendum to paragraph No. 7 alone to the effect that the cross-objection will be treated as allowed for statistical purposes. It is pertinent to note

that the Tribunal even while issuing a corrigendum did not go into the merits of the issue of limitation nor set aside its directions contained in

paragraph No. 6 of its order permitting the assessee to put forward his claim of limitation and jurisdiction in making the assessment. It is also

relevant to note that even subsequently while dismissing the reference application the Tribunal has repeated that inasmuch as it was open to the

assessee to put forward his claim of limitation in making the assessment, the assessee cannot be aggrieved by the order of the Tribunal.

In the said circumstances the contention of the petitioner that the expression of the Tribunal to the effect that the cross-objection was allowed

should be construed as having upheld his plea of limitation, is to say the least, unrealistic. The judgments and orders of courts and Tribunals cannot

be construed or interpreted like Acts of Parliament or as mathematical theorems. The ultimate word in the judgment expressed as ""allowed"",

dismissed"", ""ordered accordingly"", etc., cannot be blindly applied de hors the actual findings and directions contained in the judgment. Therefore, I

am inclined to hold that the effect of the Tribunal''s order was only to allow the parties to agitate the issue of limitation before the Income Tax

Officer, without the Tribunal rendering any finding on the said issue.

It cannot be disputed that the powers of the Tribunal for ordering a remand are wide inclusive of issuing a direction to the lower authority to

consider and dispose of the claims in accordance with law, on the basis of the facts to be made available during the enquiry before the lower

authority. In interpreting the powers of the Tribunal and the expression ""pass such further orders thereon as it deems fit"" as contained in Section

33(4) of the Indian Income Tax Act, 1922, and the corresponding Section 254(1) of the Income Tax Act, 1961, the Supreme Court has held so in

the following cases : (1) Hukumchand Mills Ltd. Vs. Commissioner of Income Tax, Central Bombay and Others, ; (2) Commissioner of Income

Tax, Central, Calcutta Vs. National Taj Traders, ; and (3) Commissioner of Income Tax, Shillong Vs. Assam Travels Shipping Service, Dibrugarh,

.

It is neither contended before me nor can it be contended that the Income Tax Officer does not have jurisdiction to decide a legal or jurisdic-

tional issue.

Learned counsel for the petitioner seeks to place reliance on the following judgments in support of his contention that the order of the

Commissioner of Income Tax and the Tribunal are unsustainable.

In Commissioner of Income Tax, Coimbatore Vs. Estate of Late Sri N. Veeraswami Chettiar, , a Division Bench of this court was dealing with

a case (at page 20) where the appellate authority while accepting the contention that the assessment was made in violation of the bar of limitation,

yet purported to give a direction to proceed with the assessment, it was held that such an order would be invalid. In that case a contention was

also raised on behalf of the Department as though where the Income Tax Officer was giving effect to a direction of the appellate authority u/s 31 of

the Indian Income Tax Act, 1922, there was no bar of limitation. This contention was held to be unacceptable. Further, in that case, the fact that

the impugned notice had no validity was not denied by the Department. None of these reasons is applicable to the present case. Neither the

Commissioner of Income Tax nor the Tribunal went into the issue of limitation.

In N. Naganatha Iyer Vs. Commissioner of Income Tax, Madras, , a Division Bench of this court was concerned with a case where a

direction was given by the Appellate Assistant Commissioner conferring jurisdiction on the Income Tax Officer where he was not lawfully seized of

jurisdiction. In that case notices were issued by the Income Tax Officer u/s 34(1)(a) of the Indian Income Tax Act, 1922. The Appellate Assistant

Commissioner after setting aside the assessment directed the Income Tax Officer to proceed u/s 34(1)(b) of the Act. This was held to be illegal

and, therefore, the ratio of the said ruling cannot be relied upon.

In Commissioner of Income Tax, Gujarat II Vs. Nanalal Tribhovandas and Another, , a Division Bench of the Gujarat High Court was dealing

with a pleading on behalf of the Department similar to the case reported in Commissioner of Income Tax, Coimbatore Vs. Estate of Late Sri N.

Veeraswami Chettiar, , namely that a direction by the appellate authority to the Income Tax Officer to proceed with or to reopen the assessment

would clothe the Income Tax Officer with power to proceed further ignoring the issue of jurisdiction or limitation. Hence, the said ruling also cannot

govern the facts of this case.

In the present case, all that the Tribunal has done was to leave the issue of limitation open to be agitated before the Income Tax Officer and the

Income Tax Officer is by no stretch of imagination vested with jurisdiction or in any manner directed to ignore the question of limitation. On the

other hand, there is a specific direction which requires the Income Tax Officer to consider the question of limitation as raised by the assessee.

It is also pertinent to note that as noted earlier as against the rejection of the reference application by the Tribunal u/s 256(1) of the Act, the

petitioner has not chosen to move this court u/s 256(2) of the Income Tax Act. It is true that there is no bar for invoking the jurisdiction of this

court under article 226 of the Constitution of India even though he has not pursued his further remedies u/s 256 of the Income Tax Act. None the

less there is a valid direction by the Tribunal to the Income Tax Officer to consider the issue of limitation as raised by the petitioner and thus there is

no question of any lack of jurisdiction on the part of the Income Tax Officer to consider the issue of limitation, so as to warrant a writ of

prohibition.

Having regard to the aforesaid reasons I am unable to accept the contentions raised by the petitioner and the writ petition is dismissed. No

costs. Consequently, connected W. M. P. is also dismissed.