THE NEW JEHANGIR VAKIL MILLS LTD. vs. THE COMMISSIONER OF INCOME-TAX, BOMBAY NORTH, KUTCH AND SAURASHTRA.

CIVIL APPEAL No. 50/1957Supreme Court[1960] 1 S.C.R. 24912 May 1959Bench: 3 JudgesAuthor: SUDHI RANJAN DAS, NATWARLAL HARILAL BHAGWATI, M. HIDAYATULLAH SUPREME COURT REPORTS22 pages
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What were the facts?

The assessee, The New Jehangir Vakil Mills Ltd., is a company manufacturing textile goods at Bhavnagar, an Indian State during assessment years 1943-44 and 1944-45. For these years, the assessee was held to be a non-resident. The Income-tax Officer computed the British Indian Income on a proportionate basis. A dispute arose regarding sale proceeds received by cheques drawn on British India banks. The Income-tax Officer and Appellate Assistant Commissioner held that receipt of cheques at Bhavnagar did not constitute receipt of money in British India until cashed. The Tribunal, however, held that the cheques were received at Bhavnagar and the money related back to the receipt of the cheque, thus also received in Bhavnagar. The High Court, under Section 66(4) of the Income-tax Act, directed the Tribunal to submit a supplementary statement of case on points not raised before the authorities or the Tribunal, specifically concerning whether cheques were sent by post without request and whether this amounted to receipt in British India.

What did the Supreme Court hold?

The Supreme Court held that the High Court had misconceived its powers under Section 66(4) of the Indian Income-tax Act, 1922. The Court reasoned that Section 66(4), when read with Sections 66(1) and 66(2), does not empower the High Court to raise a new question of law that does not arise from the Tribunal's order. It also cannot direct the Tribunal to investigate new facts necessary to determine such a new question, which had not been referred to it. The power under Section 66(4) is limited to directing the Tribunal to include facts that were already part of the record but were omitted from the statement of the case. The Court found that the question of whether cheques were sent by post without request and whether this amounted to receipt of sale proceeds in British India was never raised before the income-tax authorities or the Tribunal. Therefore, the High Court erred in directing the Tribunal to submit a supplementary statement of case on these new points. The appeal was allowed, and the matter was remanded to the High Court to decide the reference based on the facts already submitted.

What were the issues?

1. Whether the High Court had the power under Section 66(4) of the Indian Income-tax Act, 1922, to direct the Income-tax Appellate Tribunal to submit a supplementary statement of case on new questions not raised before the income-tax authorities or the Tribunal. Assessee's Contention: The High Court had misconceived its powers under Section 66(4). The Tribunal had already held that cheques received at Bhavnagar constituted receipt of sale proceeds at Bhavnagar. The High Court's direction to investigate new facts regarding the posting of cheques and consequent receipt of sale proceeds in British India was beyond its jurisdiction as these points were never raised or decided by the lower authorities. Revenue's Contention: The Revenue referred to the Privy Council decision in Sir Sunder Singh Majithia v. Commissioner of Income-tax, C.P. and U.P. to argue that the High Court could direct the Tribunal to state further facts to satisfactorily answer the question raised in the reference. The High Court has a right, independent of the parties' conduct, to direct the Tribunal to state further facts under Section 66(4) to exercise its advisory jurisdiction.

Which sections of the Income-tax Act were involved?

Section 66(4),Section 66(1),Section 66(2),Section 4(1)(a)

AI-generated summary — verify with the full judgment below

S.C.R. SUPREME COURT REPORTS 249 THE NEW JEHANGIR VAKIL MILLS LTD. v. THE COMMISSIONER OF INCOME-TAX, BOMBAY NORTH, KUTCH AND SAURASHTRA. (S. R. DAs, C.J., N.H. BHAGWATI and M. HIDAYATULLAH, ,JJ.)

Income-tax-Reference-Power of Hi~:h C01~rt·-If can direct investigation on a new qttestion and call for supplementary statetJtt!1~t of case-Indian Income-tax Act, I9ZZ (XI of 1922), s. 66(4).

This appeal hy special leave was directecl against the order of the High Court asking the Income-tax Appellate Tribunal under s. 66(4) of the Income-tax Act to submit a supplementary statement of case on points, which were never raisecl by the parties nor decided by the Income-tax Authorities or the Tribunal.

The only question canvassed bi!fore them was whether Ct'rtain cheques,· which were rec~ived by the assessee at Bhavnagar having been cashed in British lndia. the monies in respect of them could be said to have been received in British India. The Tribunal held that the monies related back to the receipt of the cheques and were as such received at Bhavnagar. The question was whether the r<'ceipt of the cheques at Bhavnagar amounted to receipt of the sale proceeds at Bhavnag

The order continues below.

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