Case: Messrs Jaipur Mineral Development Syndicate, Jaipur Vs. Commissioner of Income Tax, New Delhi

This appeal by special leave is against the order of Rajasthan High Court whereby the High Court held that it was functus officio to entertain an application for rehearing the reference made under Section 66(1) of the Indianx Act, 1922 (hereinafter referred to as the Act).      2. Thet is carrying on business in soapstones. At the instance of the appellant, the following two questions were referred to the High Court by the tribunal under Section 66(1) of the Act :      1. Whether on the facts and in the circumstances of the case thex Appellate Tribunal was justified in holding that the property in the goods passed in the customers in erstwhile Part A and C States, because the railway receipts in respect of the sale of goods of the vale (sic) of Rs. 94, 037 were made out in the name of Self and were sent to the purchasers in erstwhile Part A and C States after endorsing the same in their favour ?      2. Whether on the facts and in the circumstances of the case, the entire profits and gains amounting to Rs. 93, 019 arisen to the assessee firm in Part A and Part C States should be taken into account for the purpose of applying the test laid down under Section 4A(C)(h)(sic) or only that profit of the profits (sic) which can be determined after the application of Section 42(3) of the Act as reasonably be attributable to that part of the operations carried on in British India ?      It appears that a notice was sent by the High Court to the appellant to file paper books within three months of the receipt of the notice. The notice was received by a clerk of the appellant firm on May 9, 1970. According to the affidavit filed on behalf of the appellant, the aforesaid clerk misplaced that notice. The necessary paper books were consequently not filed in the High Court. The reference came up for hearing on August 26, 1970. On that date, counsel for the department was present. No one appeared on behalf of the appellant, apparently because the notice sent by the High Court had been misplaced. The High Court in a brief order observed that the assessee at whose instance the reference had been made had not put in appearance and had also not filed the paper books in spite of the service of notice. The High Court accordingly declined to answer the reference.      3. The affidavit filed on behalf of the appellant shows that the clerk, who had misplaced the notice received from the High Court, while proceeding on leave and handing over the charge to another clerk, discovered on September 21, 1970 that the abovementioned notice had been received from the High Court. was then engaged on behalf of the. On enquiry it was found that the matter had been disposed of on August 26, 1970. On September 24, 1970 an application was filed on behalf of the appellant stating that the paper books had not been filed because of bona fide mistake. Prayer was made for permitting the appellant to file the paper books and for rehearing the reference. The High Court, as per order dated February 22, 1971, dismissed the aforesaid application after observing that it had become functus officio to entertain the application because of its earlier order declining to answer the reference. It is this order which is ther of the appeal.

Reasoning: Suppose, further, in such an event the High Court passes an order declining to answer the question referred to it because of the absence of the person who meets with an accident. To hold that in such a case the High Court cannot recall the said order and pass an order for the disposal of the reference on merits, even though full facts are brought to the notice of the High Court, would result in obvious miscarriage of justice. It is to meet such situations that courts can exercise in appropriate cases inherent power. In exercising inherent power, the courts cannot override the express provisions of law. Where however, as in the present case, there is no express or implied prohibition to recalling an earlier order made because of the absence of the party and to directing the disposal of the reference on merits, the courts, in our opinion, should not be loath to exercise such power provided the party concerned approaches the court with due diligence and shows sufficient cause for itse in the date of hearingWe find it difficult to subscribe to the view that whatever might be the ground fore of a party, the High Court having once passed an order declining to answer the question referred to it because of thee of that party, is functus officio or helpless and cannot pass an order for disposing of the reference on merits. The High Court in suitable cases has, as already mentioned, inherent power to recall the order made in the absence of the party and to dispose of the reference on merits. There is nothing in any of the provisions of the Act which, either expressly or by necessary implication, stands in the way of the High Court from passing an order for disposal of the reference on merits. The courts have power, in the absence of any express or implied prohibition, to pass an order as may be necessary for the ends of justice or to prevent the abuse of the process of the court. To hold otherwise would result in quite a number of cases in gross miscarriage of justice. Suppose, for instance, a party proceeds towards the High Court to be present at the time the reference is to be taken up for hearing and on the way meets with an accident.Suppose, further, in such an event the High Court passes an order declining to answer the question referred to it because of the absence of the person who meets with an accident. To hold that in such a case the High Court cannot recall the said order and pass an order for the disposal of the reference on merits, even though full facts are brought to the notice of the High Court, would result in obvious miscarriage of justice. It is to meet such situations that courts can exercise in appropriate cases inherent power. In exercising inherent power, the courts cannot override the express provisions of law. Where however, as in the present case, there is no express or implied prohibition to recalling an earlier order made because of the absence of the party and to directing the disposal of the reference on merits, the courts, in our opinion, should not be loath to exercise such power provided the party concerned approaches the court with due diligence and shows sufficient cause for itse in the date of hearingFor the reasons stated above, we are unable to agree with the view taken by the Allahabad High Court in that decision. The facts brought out in the application filed on behalf of the appellant show, in our opinion, that there was sufficient cause for thee on behalf of the appellant on the date of hearing as well as for theg of the paper books within time. It also cannot be said that there was lack of diligence on the part of the appellant in approaching the High Court for recalling its earlier order and for disposing of the reference on merits.