JAIPUR MINERAL DEVELOPMENT SYNDICATE, JAIPUR vs. THE COMMISSIONER OF INCOME-TAX, NEW DELHI

CIVIL APPEAL No. 74/1972Supreme Court[1977] 2 S.C.R. 46016 December 1976Bench: 2 JudgesAuthor: HANS RAJ KHANNA, V.R. KRISHNA IYER A JAIPUR MINERAL DEVELOPMENT SYNDICATE, JAIPUR B4 pages
AI SummaryRemanded

What were the facts?

The assessee, Jaipur Mineral Development Syndicate, had two questions of law referred to the Rajasthan High Court under Section 66(1) of the Indian Income-tax Act, 1922. The High Court issued a notice to the assessee to file paper books within three months. The notice was misplaced by the assessee's clerk, leading to non-filing of paper books and non-appearance of the assessee's counsel at the hearing. Consequently, the High Court returned the reference unanswered. Subsequently, upon discovering the misplaced notice, the assessee filed an application for rehearing the reference on merits, citing a bona fide mistake. The High Court dismissed this application, holding it was functus officio to entertain it due to the prior order declining to answer the reference.

What did the Supreme Court hold?

The Supreme Court held that the High Court was not functus officio in entertaining the assessee's application for rehearing the reference. The Court reasoned that where there is no express or implied prohibition in law, a High Court possesses inherent power to recall an order made in the absence of a party and to dispose of the reference on merits, provided the party approaches the court with due diligence and shows sufficient cause for non-appearance. The Court found that the assessee had demonstrated sufficient cause for non-appearance and lack of diligence in approaching the High Court. The Court overruled the Allahabad High Court's decision in Roop Narain Ramchandra (P) Ltd v. Commissioner of Income-tax, U.P. (84 ITR 181). The appeal was allowed, the High Court's order was set aside, and the case was remanded to the High Court for answering the questions on merits.

What were the issues?

1. Whether the High Court, having returned a reference unanswered due to the non-appearance of the assessee and non-filing of paper books, becomes functus officio and is barred from entertaining an application to recall its order and dispose of the reference on merits, particularly when a bona fide mistake is shown as the cause for non-appearance. Assessee's contention: The assessee argued that the High Court possesses inherent power to recall its earlier order and dispose of the reference on merits if sufficient cause for non-appearance is shown, citing the principle that even the Tribunal must dispose of appeals on merits, as per Commissioner of Income-tax, Madras v. S. Chennippa Mudaliar (74 ITR 41). Revenue's contention: The revenue relied on the decision of the Calcutta High Court in M. M. Ispahani Ltd., Calcutta v. Commissioner of Excess Profits Tax, West Bengal (27 ITR 188), which held that a High Court is not bound to answer a reference if the party at whose instance it was made does not appear.

Which sections of the Income-tax Act were involved?

Section 66(1),Section 33(4),Section 42(3),Section 4A(C)(h)

AI-generated summary — verify with the full judgment below

460 A JAIPUR MINERAL DEVELOPMENT SYNDICATE, JAIPUR B c D v. THE COMMISSIONER OF INCOME-TAX, NEW DELHI December 16, 1976 (H. R. KHANNA AND V. R. KRISiiNA !YER, JJ.] . Indian Income-tax Act, 192Z, S. 660)-Retuni of unanswued rrfumce by High Court on non-appearance of party, whether functus officio to recall order for disposal on merits.

At the. instance of the assessee-appellant, his matter WaS referred to the High Court under s .. 66(1) of the Indian Income-tax Act, 1922. He wa~ issued a notice by the High Court to file his paper-books within th~ee months, but failed to do so, or to appear at the hearing, as the notice got misplaced by his clerk who received it. The High Court returned the reference unaswered.

Later, the notice was found and the appellant moved the High Court t6 rehear the reference on merits pleading a bona fide mistake but the High Court dis- missed his application observing that it had become functus officio to entertain the application because of its earlier order declining to answer the reference.

Allowing the appeal, the Court, HELD : Where there is no express or implied prohibition of law, the High Court has inherent power io recall

The order continues below.

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