1971 PLP 331 (PTD)

VEERASWAMI, J.‑In this petition for certiorari filed by the assessee, the question turns on a construction of the scope of an order of the Commissioner of Income‑tax, Madras, who is the first respondent. The second respondent, who is the IInd Income‑tax Officer, Karaikudi, made an assessment purporting to be pursuant to an order of the Tribunal dated October 19, 1961. The Tribunal made that order in the following circum stances. The assessee originally was a member of a Hindu undivided family. There was a partition on March 11, 1939. Thereafter, the assessee, his wife and three sons, the first of whom was a major and the last two were minors at the relevant time, constituted a partnership, the minors having been admitted to the benefits of the partnership. The assessee was assessed to income‑tax for the assessment year 1951‑52, treating the firm as an unregistered one. In the assessment order, his share income was shown as Rs. 29,124 but, as a loss was returned with regard to the unregistered firm, the assessee was not taxed. Against the order of the Income‑tax Officer, refusing registration of the firm, there was an appeal to the Tribunal, which concurring with the revenue, dismissed it. That was the subject‑matter of a reference to this Court in R. C: No. 49 of 1957. The result of it was the question whether registration should be granted was answered in favour of the assessee. The Tribunal then made the order under section 66(5) disposing of the appeal finally, with a direction that the firm should be registered and all modifications consequential to the grant of such registration might be made in the hands of the partners. The Income‑tax Officer, while carrying out this direction, thought that he could take the opportunity of including in the petitioner's assessment the share income of his wife and two minor sons under section 16(3) of the Act. He made an order on that basis. Apparently, in addition to the Tribunal's order under section 66(5), the Income‑tax Officer relied on section 35(5) too. From his order there was a petition to the first respondent to revise the order on the ground that section 35(5) would be inapplicable to the case, as there was no mistake apparent from the record within the meaning of section 35th, and that, even if section 35(5) was inapplicable, rectification beyond four years from October 30, 1953, would be out of time, and that, even otherwise, this was not a case falling within the ambit of section 35(5). The first respondent in his order noted these grounds, but, in his view, there was no need to decide the ground relating to section 35(5). He considered that the order of the Income‑tax Officer was passed pursuant to the order of the Tribunal under section 66(5) and, that being the case, no question of limitation would also arise. He stated: "This order would, in my opinion, cover all the modifications necessary in the hands of the partners in the manner done by the Income‑tax Officer." Being of that opinion, the first respondent also considered that even for the purposes of section 35(5), the starting point of limitation would be the final order of the Tribunal under section 66(5). We are of the view that in this petition for certiorari to quash the order of the Commissioner, the only question for decision is whether the first respondent was right in the view he took as to the scope of the Tribunal's order under section 66(5). Since the other questions were not decided by him, we have not heard arguments in relation to them from the petitioner. Before the Tribunal, after the reference in respect of registration of the firm was answered by this court, the revenue pressed for a direction that the share income of the petitioner's wife and his two minor sons bad to be included under section 16(3) in the petitioner's assessment, and section 33(5) was relied on for this purpose. The Tribunal declined to make any such direction and this is clear from the following observa tions: "It is not correct to say that the Tribunal can only pass a formal order. But when nothing has been said about the application of section 16(3), either in the order of the Tribunal under reference or in the referred case, it seems to us any reference to it in an order under section 66(5) would not be correct. We therefore pass the following." Then followed the direction to register the firm. The order wound up: "We further direct that all modifications consequential to the grant of such registration may be made in the hands of the partners." It is this particular direction the first respondent relied on as by itself enabling the Income‑tax Officer to revise the original assessment order so as to include within it also the share income of the petitioner's wife and his two minor sons. In our opinion, the last direction made by the Tribunal does not lend itself to the construction placed upon it by the first respondent. The Tribunal itself made explicit in its order by specific reference to the contention of the revenue before it and opined that in an order under section 66(5), it could not make a direction for inclusion of the income under section 16(3). Having said that, the Tribunal could certainly not have intended by the last sentence in its order that by way of consequential modification, the Income‑tax Officer should include the income under section 16(3) in the petitioner's assessment. Mr. Balasubrahmanyan, with his usual ability, attempted to justify the first respondent's order. He referred us to sub sections (4) to (6) of section 33 in contrast with the Tribunal's jurisdiction under section 66(5) and argued that While the powers of the Tribunal under section 66(5) may be narrower and limited only to passing orders as may be necessary to dispose of the case conformably to the judgment of the High Court in the reference, in effect, the pendency of a reference is to keep alive the appeal as un-disposed of, and after the reference has been answered by the High Court, all its powers in appeal under section 33 are still available to it, and that, in this sense, the Tribunal had jurisdiction to give a direction under section 66(5) in disposing of the appeal under section 33, pursuant to an order fn the reference, to direct inclusion in the petitioner's assessment of the income of his wife and minor sons. Reference was made by him to Esthuri Aswathiah v. Commissioner of Income‑tax ((1967) 66 I T R 478), where the relative scope of section 33 and section 66(5) was indicated. The Supreme Court observed: "Section 66(5) of the Indian Income‑tax Act, 1922,' requires the Tribunal on receiving a copy of the judgment of the High Court to pass such orders as are necessary to dispose of the case conformably to such judgment. This clearly imposes an obligation upon the Tribunal to dispose of the appeal in the light of and conformably with the judgment of the High Court. Before the Tribunal passes an order disposing of the appeal, there would normally be a hearing. The scope of the hearing must of course depend upon the nature of the order passed by the High Court. If the High Court has agreed with the view of the Tribunal, the appeal may be disposed of by a formal order ; if the High Court disagrees with the Tribunal on a question of law, the Tribunal must modify its order in the light of the order of the High Court ; if the High Court has held that the judgment of the Tribunal is vitiated, because it is based on no evidence or that it proceeds upon conjectures, speculation or suspicion, or has been delivered after a trial contrary to rules of natural justice, the Tribunal would be under a duty to dispose of the case conformably with the opinion of the High Court and on the merits of the dispute. In all cases, however, opportunity must be afforded to the parties of being heard." Income‑tax Appellate Tribunal, Bombay v. S. C. Cambatta & Co. Ltd. ((1956) 29 I T R 11) was cited in this case with approval, in which the Bombay High Court explained the procedure to be followed in the disposal of an appeal conformably to the judgment of the High Court. Chagla, C. J., who spoke for the Division Bench, stated that the effect of reference made to the High Court under section 66(1) or section 66(2) was that the order made by the Tribunal earlier could not be looked upon as final and that, therefore, the appeal was still pending. It is only when the reference is answered by the High Court and the Tribunal re‑considers the matter and decides it in accordance with the judgment of the High Court, the appeal is finally disposed of. In doing so, what the Tribunal does after the High Court has heard and answered the reference is to exercise its appellate powers under section

33. The Bombay High Court went on to say that the scope of the final disposal of the appeal would of course depend on the view taken by the High Court. Mr. Balasubra manyan says that, having regard to the ambit of the Tribunal's powers in such a situation, notwithstanding the observations of the Tribunal in the earlier parts of its order, its direction at the end should be understood as comprehensive and within its jurisdiction, so that it invested the Income‑tax Officer with the liberty to include the income under section 16(3). We do not think it necessary in the circumstances of this case to decide the precise scope of the Tribunal's jurisdiction in disposing of an appeal after receipt of an order of the High Court in a reference. We are, in this case, as already indicated, concerned with what precisely the Tribunal meant and directed. On that question, we have no doubt that the Tribunal made no direction in respect of section 16(3). It is true the Tribunal directed the Income‑tax Officer to make modifications consequen tial to the grant of registration. It is hardly necessary to point out that inclusion of the income under section 16(3) in the petitioner's assessment is by no means a consequence of registra tion. Registration or no registration, in either case, the income under section 16(3) could be included in the petitioner's assessment, though there might be difference in the tax effect. This petition is allowed. But the effect of it is that the petition before the first respondent will have to be disposed of by him afresh. The disposal of this petition does not also affect the order of the Income‑tax Officer, for no relief has been asked for in this petition against it. No costs.