Tax/28/1986 Of Smt.narmada Devi v. Commissioner Of Income-Tax, Bihar, Patna

IN THE HIGH COURT OF JUDICATURE AT PATNATAX CASES No.28 of 1986 ====================================================== Smt. Narmada Devi, C/o M/s. Pradeep & Co. Arrah ... ... Petitioner/s Versus Commissioner of Income-tax, Bihar, Patna. ... ... Respondent/s ======================================================Appearance :For the Petitioner/s: Mr. D. V. Pathy, AdvocateFor the Respondent/s: Mr. Rishi Raj Sinha, Advocate Ms. Shilpi Keshri, Advocate ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE S. KUMARORAL JUDGMENT (Per: HONOURABLE THE CHIEF JUSTICE) Date : 06-11-2020 The Income Tax Appellate Tribunal, Patna Bench, Patnahas made the instant Reference under Section 256 (1) of theIncome Tax Act,1961 on the following substantial questions oflaw:- “1. Whether on the facts and in the circumstances ofthe case, the Appellate Tribunal was correct in lawin upholding the inclusion of the share income ofthe minor from the firm M/s. Om Prakash & Co.which had closed its accounting year on 10.8.75 inthe assessment of the assessee for the assessmentyear 1976-77?the case, the Appellate Tribunal was correct in lawin upholding the inclusion of the share income ofthe minor from the firm M/s. Om Prakash & Co.which had closed its accounting year on 10.8.75 inthe assessment of the assessee for the assessmentyear 1976-77? 2. Whether the amended provision which had comeinto effect from 1.10.75 will apply to an incomewhich had accrued on 10.8.75 for the assessment to be made for the assessment year 1976-77?” Both the questions can be answered together, forprimarily it is the second question which arises forconsideration. In Keshav Mills Co. Ltd. v. CIT, (1965) 2 SCR 908 (7Judge bench), the Court held as under: “14. Section 66(4) must be read with Section 66(1) andSection 66(2), and so read, it did not empower the HighCourt to raise a new question of law which did not ariseout of the Tribunal's order or direct the Tribunal toinvestigate new and further facts necessary to determinethe new question which had not been referred to it underSection 66(1) or Section 66(2) of the Act and direct theTribunal to submit, supplementary statement of case.” It is for the Tribunal to decide questions of fact, and theHigh Court in a reference under Section 66 of the Act cannot gobehind the Tribunal's findings of fact. The High Court can onlylay down the law applicable to the facts found by the Tribunal.The High Court and the Supreme Court in an appeal against thejudgment of the High Court given in a reference under Section66 of the Act, are not constituted courts of appeal against theorder of the Tribunal. These courts only exercise advisoryjurisdiction in such references. [Rameshwar Prasad Bagla v. CIT, (1973) 3 SCC 575] In Premier Breweries Ltd. v. CIT, (2015) 11 SCC 695 :2015 SCC OnLine SC 196 at page 698, the Court observed: “9. The second issue raised is the jurisdiction of the HighCourt to set aside the order of the Tribunal in the exerciseof its reference jurisdiction. The point is no longer resintegra having been settled in C.P. Sarathy Mudaliar v.CIT [C.P. Sarathy Mudaliar v. CIT, (1966) 62 ITR 576(SC)] wherein this Court has taken the view that settingaside the order of the Tribunal in exercise of the referencejurisdiction of the High Court is inappropriate. This Courthad observed that while hearing a reference under theIncome Tax Act, the High Court exercises advisoryjurisdiction and does not sit in appeal over the judgmentof the Tribunal. It has been further held that the HighCourt has no power to set aside the order of the Tribunaleven if it is of the view that the conclusion recorded bythe Tribunal is not correct.” (Emphasis supplied) The facts recorded in the reference and the contentions ofthe parties leading to the framing to the questions of law and thereference made are reproduced as under:- (Emphasis supplied) The facts recorded in the reference and the contentions ofthe parties leading to the framing to the questions of law and thereference made are reproduced as under:- “3. The assessee is the mother of Dlip Kumar whobeing a minor admitted to the benefits ofpartnership in the firm M/s. Om Prakash & Co.received a share of income. In the first assessmentmade, share income of the minor was not includedin the total income of the assessee. Subsequently,the ITO caused assessment to be re-opened u/s 147being a minor admitted to the benefits ofpartnership in the firm M/s. Om Prakash & Co.received a share of income. In the first assessmentmade, share income of the minor was not includedin the total income of the assessee. Subsequently,the ITO caused assessment to be re-opened u/s 147 and included the share income of master DilipKumar Rs.32,031/- in the assessment of the assess.The ITO acted under the effect of the provisions ofSection 64(1) (iii) as amended by the TaxationLaws Amendment Act, 1975. This provisioncontained in Section 64 which made the inclusionof the share income of the minor in the assessmentof the assessee was made effective from01.10.1975. According to the assessee, theamendment having come into effect only on01.10.1975 could not effect the share of incomeappertaining to the minor when this became due onthe close of the accounting year followed by thefirm on 10.08.75. He, therefore, resisted theinclusion but the ITO over ruled him on the groundthat any provision which was effective on the firstday of the assessment year, that is, of 1st of Aprilwas to apply notwithstanding the date of accrualwithin the accounting year. The disputedamendment was in effect from 1st of April, 1976,corresponding to the assessment year 1976-77share of the minor was includible in the income ofthe assessee. His order forms annexure ‘A’ and apart of the statement of the case. 4. His order had been confirmed by the A.A.C. whichhas been annexed as annexure ‘B’ and constitutes apart of the statement of the case. has been annexed as annexure ‘B’ and constitutes apart of the statement of the case. 5. The Appellate Tribunal also in an appeal brought atthe instance of the assessee upheld the findings ofthe lower authorities and dismissed the appeal ofthe assessee. The finding of the Tribunal iscontained in para 3 of its order where it observed“The Supreme Court has already settled thatalthough the subject of charge is the income of theprevious year, the law to be applied is that inforcein the assessment year and any amendment whichis in force at the beginning of the relevantassessment year must govern irrespective of thefact that the amendment is made after the incomeunder the assessment is earned.” A copy of theorder of the Tribunal is annexed as Annexure ‘C’and forms part of the statement of the case.” the instance of the assessee upheld the findings ofthe lower authorities and dismissed the appeal ofthe assessee. The finding of the Tribunal iscontained in para 3 of its order where it observed“The Supreme Court has already settled thatalthough the subject of charge is the income of theprevious year, the law to be applied is that inforcein the assessment year and any amendment whichis in force at the beginning of the relevantassessment year must govern irrespective of thefact that the amendment is made after the incomeunder the assessment is earned.” A copy of theorder of the Tribunal is annexed as Annexure ‘C’and forms part of the statement of the case.” In view of the doubt having arising with respect to the In view of the doubt having arising with respect to the observations made by a co-ordinate Bench of this Court inBadri Prasad & ors. vs. Commissioner of Income Tax (1990)Volume 185 ITR 307, the matter was referred to a LargerBench (three-Judge Bench). The said Bench, considering thelaw laid down by the Constitution Bench of the Apex Court inKesoram Industries and Cotton Mills Ltd. vs. Wealth TaxCommissioner (Central), Calcutta, AIR 1966 SC 1370, asalso the observations made by yet another Constitution Bench ofthe Hon’ble Apex Court in Karimtharuvi Tea Estate LtdVersus State of Kerala, AIR 1966 SC 1385, has observed inparagraph 19 as under:- “19. The Amending Act introduced a new Section64(1) (iii) in the Income Tax Act with effect from1.4.1976. The tax liability under the said provisioncould therefore be charged on the assessee, in theassessment which was to be made for thataccounting year i.e. 1976-77, which would be donein the assessment year 1977-78. The Amending Actintroducing a new tax liability which came intoforce with effect from 1.4.1976 could not be givena retrospectivity and be made applicable to theprevious accounting year i.e. 1975-76corresponding to the assessment year i.e. 1976-77.” Thus, in view of the observations made by a three-judge K.C.Jha/- AFR/NAFRCAV DATEUploading DateTransmission Date Bench of this Court in its judgment dated 01.08.2019, relevantportion whereof stands extracted hereinabove, the AppellateTribunal was not correct, in law, in upholding the inclusion ofthe share income of the minor from the firm M/s. Om Prakash &Co. for it accrued on 10.08.1975, in the assessment year 1976-77, and the amendment which came into effect only on1.10.1975 was to apply only prospectively and notretrospectively. The Reference is, accordingly, answered in the negative. (Sanjay Karol, CJ) (S. Kumar, J)