Commissioner Of Income-Tax vs Sir Shadi Lal Enterprises Ltd.
1994 Latest Caselaw 634 Del

ORDER

Per Gandhi, JM - The present reference has been sought by the revenue out of order of the Appellate Tribunal passed on 24-12-1993. The said order was served on the Commissioner on January 2, 1994. In the aforesaid order, the Tribunal dealt with four different additions. The first addition related to the closing stock. The A. O. found that the assessed had not disclosed any value of bagasses produced in the manufacture of sugar. He worked out the quantity of bagasses which should be with the assessed at the close of the year at 7,265 bales and by applying @ Rs. 700 per metric ton added, Rs. 1,52,565 in the trading account for non-disclosure of bagasses in the closing stock. In appeal, ultimately, the Appellate Tribunal accepted that as per system of accounting followed by the assessed, the closing stock was shown at cost. The bagasses was a by-product produced by the assessed, and on direct cost basis, it did not cost to the assessed anything beyond Rs. 7,557, the figure which was duly disclosed in the closing stock. In above view of the Matter, the Appellate Tribunal deleted the addition of Rs. 1,52,565.

2. The AO also disallowed Rs. 4,762 out of traveling expenses by applying provision of rule 6D of Income-tax Rules. In appeal before the Appellate Tribunal, it was contended that all the tours made by a particular person during the previous year should be taken together to see whether the expenditure incurred was beyond the prescribed limits of rule 6D of IT Rules. The Tribunal accepted above contention and deleted disallowance of Rs. 4,762.

3. The third matter relates to application of section 37(3A). The AO had also disallowed Rs. 62,291 under section 37(3A) out of guest house expenses, depreciation on guest house building and out of repairs and maintenance expenses of car etc. In appeal, the Appellate Tribunal following earlier years orders, held that 30% guest house expenses only be disallowed. The disallowance out of repairs and maintenance was deleted following the decision of Hon'ble Bombay High Court in the case of Chase Bright Steel Ltd. (No. 1) [1989] 177 ITR 124.

4. Another issue decided by the Tribunal related to charging of interest. The AO had levied interest of Rs. 3,64,734 under section 220(2) of the Income-tax Act. A provisional assessment was made under section 141A of the Income-tax Act and refund of Rs. 14,23,356 was allowed to the assessed. On the completion of regular assessment, huge amount of tax was found to be payable by the assessed. The AO thus thought that refund was wrongly allowed and, therefore, assessed was liable to pay interest under section 220(2) on the refund from the date of refund up to the date of regular assessment made on 31-1-1989. This interest was worked out at Rs. 3,64,734.

5. On appeal, the Appellate Tribunal held that interest under section 220(2) could not be charged unless there was a default on the part of the assessed after service of notice under section 156 of the IT Act. No such notice was issued or served on the assessed in this case and therefore, the assessed could not be deemed to be a defaulter under section 220(2) of the I. T. Act. The levy of interest was accordingly cancelled. Some other small issues were also considered and disposed of by the Tribunal.

6. From and out of the aforesaid order, the revenue in the reference application filed on March 21, 1994, claimed the following question of law :-

"Whether, on the facts and in the circumstances of the case, the ITAT was legally correct to hold the order of the lower authorities as erroneous and unjustified ?"

The aforesaid question is of general nature and does not point out precisely the legal controversy which arose and was sought to be raised in the reference application out of the order of the Tribunal. The assessed accordingly objected that the reference application with the aforesaid general question be rejected. The revenue then sought time and filed on 21-7-1994 a fresh set of following four reframed questions :

"1. Whether, the ITAT was legally justified in deleting the addition of Rs. 1,52,565 on account of closing stock of Bagasses ?

2. Whether, the ITAT was legally justified in deleting the addition of Rs. 4,762 made under rule 6D by taking all the trips together ?

3. Whether, the ITAT was legally justified in restricting the disallowance at 30% out of guest house expenses of Rs. 55,629. Similarly, depreciation claim of Rs. 1,660 and expenses of Rs. 5,000 on repairs and maintenance of guest house were not allowable ?

4. Whether, the ITAT was legally justified in directing the Assessing Officer to cancel the interest of Rs. 3,64,734 levied under section 220(2) ?"

The notice of aforesaid reframed questions was sent to the assessed and both the parties were heard. The D. R. prayed that reframed questions be referred to the Hon'ble High Court. The assessed vehemently objected to the amendment of reference application. It was contended that the revenue has filed a fresh reference application under the garb of "reframed questions" and the said reference application was out of time. Even the Tribunal did not have power to condone delay beyond period of 30 days. It was further submitted that earlier application filed with vague and non-specific issues was no reference application in the eye of law. It was accordingly prayed that reference application filed by revenue in original and with reframed questions be dismissed

7. We have heard both the parties in this reference application. It is settled law that in a reference application the applicant has to state specific and precise questions of law which in his opinion arise out of the order of the Tribunal. A vague request to refer a question of general nature not giving any clue to the controversy of law decided by the Tribunal and sought to be raised cannot be entertained under section 256(1) of the Income-tax Act and is liable to be rejected. The question must necessarily bring forth the legal controversy adjudicated upon and arising out of the order of the Tribunal. In most of the cases more than one legal question arise out of the order of the Tribunal. Even in respect of one single addition/disallowance several distinct legal aspects might be considered and decided by the Tribunal. It is, therefore, necessary for the applicant to state clearly the legal aspect of the matter sought to be raised in the form of question in reference application. Only a specified precise question would give proper notice to the opposite party and would enable the Appellate Tribunal to apply mind and form an opinion whether the said question of law arise out of the order of the Tribunal. The Tribunal has then to draw up a statement of the case with reference to the question of law sought by the applicant. A vague request and a general question shall not serve the purpose. Here the first application filed by the revenue on March 21, 1994 is liable to be dismissed on the short ground that it did not mention precisely the legal controversies and questions of law which arose and were sought to be raised.

8. The revenue sought to rectify the aforesaid defect by filing four fresh questions on 21-7-1994 in the covering letter filed along with the aforesaid reframed questions. The applicant did not give any reason as to why questions in the aforesaid form were not sought at the first instance and in the application filed on 21-3-1994. No explanation whatsoever for aforesaid action was given in the covering letter nor any delay was sought to be condoned. Having regard to the question sought in application filed on 21-3-1994 and the four reframed questions, it is clear, that four questions cannot be treated as amended question. The alleged reframed questions are new questions sought to be raised for the first time in the application filed on July 21, 1994. Thus, reference application with alleged reframed question has to be treated as filed on the date mentioned above. It is clearly out of time. To permit the applicant to reframe the question would tantamount to allowing the applicant to file the reference application in disregard to the period prescribed by the statute. It would also deprive the opposite party of rights accrued (sic) on account of lapse of period of limitation. Therefore, the applicant cannot be allowed to raise legal controversies for the first time, through amendment of questions after expiry of period of limitation. We, therefore, treat "reframed questions" as a fresh application filed beyond period of limitation and reject the same. In view of the aforesaid discussion, the original application and application with reframed questions are rejected without making any reference to the Hon'ble High Court.

9. In the result the reference application is dismissed.