Case: Commissioner Of Income-Tax (Central),New Delhi Vs. M/S. S. Zoraster &amp; Company

nt is a firm consisting of three partners, namely, Sohanmal, Mehtabchand and Allahdin. Sohanmal and Mehtabchand are also the two coparceners of a Hindu Undivided Family. The said family had got its own business firm known also by the name of the assessee, M/s. s. Zoraster and Company The assessee firm, as well as the joint family firm were both situated in Jaipur, which was outside the taxable territories at the relevant period, the assessee had business dealings with the Government of India. In respect of the goods supplied by the said firm, the Government of India paid the price by cheques. The cheques in question were received by the assessee at Jaipur. However, the said cheques were drawn on the Reserve Bank of India, at Bombay. The assessee, through the agency of the family firm, sent those cheques to Bombay for collection and realised the amounts due under the cheques at Bombay. The question arose whether the amounts represented by the cheques which were cashed at Bombay, were taxable in the hands of the assessee under the Act. Thex Officer, the Appellate Assistant Commissioner, as well as the Appellate Tribunal held that as the amounts had been realised in Bombay, which is a taxable territory, the amounts covered by the cheques were liable to tax under the Act5. On an application made by the assessee, the Appellate Tribunal made a Reference on December 10, 1952 to the High Court of judicature for the State of Punjab at Simla. The question of law, that was referred to the High Court was one, which we have set out in the earlier part of the judgment. The Reference was numbered as Civil Reference Case no. 3 of 1953 in the Punjab High Court. As in the opinion of the High Court, the appellate Tribunal had not given a finding as to whether the cheques in question were sent to the assessee by post and whether the assessee had given any direction in that regard to the Government of India, by its order dated March 24, 1955, a supplementary statement was called for. The assessee challenged this order of the High Court calling for a supplementary statement in an appeal before this Court. By its order dated August 17, 1960 this Court dismissed the said appeal. The decision of the Court is reported in Zorastar and Co. v. Commr. of, (1960) 40 ITR 552  = (AIR 1961 SC 107 ). After the decision of this Court, the Appellate Tribunal, on March 18, 1961 submitted to the High Court a supplementary statement. The case was renumbered in the High Court isx Reference No. 7 of 1961. At this stage it may be mentioned that in the supplementary statement, the Appellate Tribunal had recorded a finding that there is no material on record to show as to how the cheques in question were sent, i.e. whether by post or by hand. The Appellate Tribunal further found that the assessee had given a direction to pay by cheques and that apart from this there was no other material on record to show any direction given by the assessee regarding the mode of dispatch of cheques6. The High court, in its order under attack, noted the findings recorded by the Tribunal, namely, that the cheques were received by the assessee at Jaipur but collected at Bombay and that it is not established how the cheques were sent to the assessee by the Government of India. The Revenue contended before the High Court that the amounts covered by the cheques in question must be considered to have been received by the assessee in the taxable territory, either at Bombay, on the basis that the amounts covered by the cheques were realised at that place, or at Delhi, on the ground that the cheques must be considered to have been received by the assessee at that place where the cheques were posted, as the Post Office is to be considered, the agent of the assessee. The High Court first considered the question as to what is the effect of payments made by the Government to the assessee by means of cheques. After a reference to certain decisions of this Court, the High Court held that the mere fact that the cheques were realised at Bombay is of no consequence. In the particular circumstances of the case, the High Court is of the view that as the cheques were received by the assessee at Jaipur, it must be held that the amounts covered by the cheques were received by the assessee at that place, which was outside the taxable territory7. In dealing with the contention of the Revenue that the cheques must be considered to have been received by the assessee at Delhi, where they were posted, the High Court again, after a reference to the relevant decisions of this Court, adverted to the finding recorded by the Appellate Tribunal that there is no evidence to show that the cheques were sent by post. In fact, it is pertinent to note the how the High Court actually dealt with this question. It observed as follows:"If there was a finding by the Tribunal that the Government of India was invariably sending the cheques referred to earlier from Delhi to Jaipur through post and that the assessee was receiving those cheques without demur, then we would have found no difficulty in upholding the contention of Shri Kapur that the cheques in question sent to the assessee through post with its implied consent and, that being, so the post office should be considered as the agent of the assessee. But as mentioned earlier, in the instant case, there is no evidence to show that those cheques were sent by post. Hence the question of assessees consent, implied or otherwise, does not arise for consideration."Later on, the High Court has also observed that the stark fact is that there is no finding by the Appellate Tribunal that the Government of India sent the cheques by post and that the Revenue has failed to place any material to prove that the cheques in question were being sent by the Government through post. On the basis of the above finding, the High Court answered the question, referred to it, in favour of the assessee4. Thet is a firm consisting of three partners, namely, Sohanmal, Mehtabchand and Allahdin. Sohanmal and Mehtabchand are also the two coparceners of a Hindu Undivided Family. The said family had got its own business firm known also by the name of the assessee, M/s. s. Zoraster and Company The assessee firm, as well as the joint family firm were both situated in Jaipur, which was outside the taxable territories at the relevant period, the assessee had business dealings with the Government of India. In respect of the goods supplied by the said firm, the Government of India paid the price by cheques. The cheques in question were received by the assessee at Jaipur. However, the said cheques were drawn on the Reserve Bank of India, at Bombay. The assessee, through the agency of the family firm, sent those cheques to Bombay for collection and realised the amounts due under the cheques at Bombay. The question arose whether the amounts represented by the cheques which were cashed at Bombay, were taxable in the hands of the assessee under the Act. Thex Officer, the Appellate Assistant Commissioner, as well as the Appellate Tribunal held that as the amounts had been realised in Bombay, which is a taxable territory, the amounts covered by the cheques were liable to tax under the Act5. On an application made by the assessee, the Appellate Tribunal made a Reference on December 10, 1952 to the High Court of judicature for the State of Punjab at Simla. The question of law, that was referred to the High Court was one, which we have set out in the earlier part of the judgment. The Reference was numbered as Civil Reference Case no. 3 of 1953 in the Punjab High Court. As in the opinion of the High Court, the appellate Tribunal had not given a finding as to whether the cheques in question were sent to the assessee by post and whether the assessee had given any direction in that regard to the Government of India, by its order dated March 24, 1955, a supplementary statement was called for. The assessee challenged this order of the High Court calling for a supplementary statement in an appeal before this Court. By its order dated August 17, 1960 this Court dismissed the said appeal. The decision of the Court is reported in Zorastar and Co. v. Commr. of, (1960) 40 ITR 552  = (AIR 1961 SC 107 ). After the decision of this Court, the Appellate Tribunal, on March 18, 1961 submitted to the High Court a supplementary statement. The case was renumbered in the High Court isx Reference No. 7 of 1961. At this stage it may be mentioned that in the supplementary statement, the Appellate Tribunal had recorded a finding that there is no material on record to show as to how the cheques in question were sent, i.e. whether by post or by hand. The Appellate Tribunal further found that the assessee had given a direction to pay by cheques and that apart from this there was no other material on record to show any direction given by the assessee regarding the mode of dispatch of cheques6. The High court, in its order under attack, noted the findings recorded by the Tribunal, namely, that the cheques were received by the assessee at Jaipur but collected at Bombay and that it is not established how the cheques were sent to the assessee by the Government of India. The Revenue contended before the High Court that the amounts covered by the cheques in question must be considered to have been received by the assessee in the taxable territory, either at Bombay, on the basis that the amounts covered by the cheques were realised at that place, or at Delhi, on the ground that the cheques must be considered to have been received by the assessee at that place where the cheques were posted, as the Post Office is to be considered, the agent of the assessee. The High Court first considered the question as to what is the effect of payments made by the Government to the assessee by means of cheques. After a reference to certain decisions of this Court, the High Court held that the mere fact that the cheques were realised at Bombay is of no consequence. In the particular circumstances of the case, the High Court is of the view that as the cheques were received by the assessee at Jaipur, it must be held that the amounts covered by the cheques were received by the assessee at that place, which was outside the taxable territory7. In dealing with the contention of the Revenue that the cheques must be considered to have been received by the assessee at Delhi, where they were posted, the High Court again, after a reference to the relevant decisions of this Court, adverted to the finding recorded by the Appellate Tribunal that there is no evidence to show that the cheques were sent by post. In fact, it is pertinent to note the how the High Court actually dealt with this question. It observed as follows:"If there was a finding by the Tribunal that the Government of India was invariably sending the cheques referred to earlier from Delhi to Jaipur through post and that the assessee was receiving those cheques without demur, then we would have found no difficulty in upholding the contention of Shri Kapur that the cheques in question sent to the assessee through post with its implied consent and, that being, so the post office should be considered as the agent of the assessee. But as mentioned earlier, in the instant case, there is no evidence to show that those cheques were sent by post. Hence the question of assessees consent, implied or otherwise, does not arise for consideration."Later on, the High Court has also observed that the stark fact is that there is no finding by the Appellate Tribunal that the Government of India sent the cheques by post and that the Revenue has failed to place any material to prove that the cheques in question were being sent by the Government through post. On the basis of the above finding, the High Court answered the question, referred to it, in favour of the assessee8. The Revenue filed two applications Supreme Court Applications Nos. 95 and 96 of 1967 before the High Court for grant of certificates declaring the cases to be fit ones for appeal to this Court. Supreme Court Application No. 95 of 1967 related to the assessment year3 and No. 96 of 1967 related to the assessment year. In the grounds of appeal, in particular, it was stated that the High court has not properly interpreted the decisions of this Court and that the High Court further erred in holding that there was no proof as to how the cheques were received by the assessee in Jaipur. Another ground was taken that the evidence on record establishes that the cheques were issued and sent to the assessee at his request by post9. The learned Judges, who dealt with the applications for grant of certificates were difference from those who dealt with the main reference. by order dated July 15, 1968, the High Court granted the certificates that the cases are fir for appeal to this Court.

Court's reasoning:
14. While we agree with Mr. Dhebar that reasons for granting the certificate must be given by the learned Judges in the order, those reasons, however, in our opinion, must be confined to the material on record, which must have been before the Court which dealt with an appeal or Reference and in respect of which decision, the aggrieved party desires to come in appeal to this Court on certificate on the ground that a substantial question of law arises for consideration15. We are not inclined to accept the contention of Mr. Dheber that the High Court has properly exercised its jurisdiction in certifying that the two cases are fit for appeal to this Court. We must frankly admit that when we went through the order of the High Court granting the certificates, we felt that the learned Judges were either sitting in appeal over the judgment of the Division Bench, which answered the Reference, or were themselves dealing with the Reference under S. 66 (1) of the Act, in the first instance. Unless the learned Judges were exercising one or the other of the above jurisdiction, the criticism about the approach made by the Division Bench when answering the Reference, could not be justified." It is clear that when dealing with application for grant of certificate of fitness, the court was exercising no such jurisdiction. It must be emphasised that in the circumstances like this, the Jurisdiction of the Court, at the stage of dealing with application for grant of certificate is limited only to considering whether any substantial question of law arises having due regard to the material on record and the discussion on facts and law contained in the judgment of the High Court which dealt with the appeal or Reference or any other proceeding, as the case may be16. Regarding the question that the assessee may be considered to have received the payments at Bombay, the learned Judges have quite rightly declined to grant a certificate on the ground that the point is covered by the decisions of this Court and that no substantial question of law arises17. As we have already pointed out the certificate has been granted by the learned Judges on the basis that the general question whether a presumption under S. 114 illustration (f) of the Evidence Act can be raised is of great importance and that it is likely to arise in many future cases not restricted to. It should be remembered that this Court should not be invited to decide any question of law much less the substantial question of law purely in the abstract. Such question of law must reasonably arise on the basis of the material on record. Further, the substantial question of law, in order to be certified as fit to be decided by this Court must arise on the facts of a particular case. With great respect to the learned Judges who dealt with the application for grant of certificate, we are constrained to remark that they have ignored the finding of fact recorded by the Appellate Tribunal in its supplementary statement dated March, 18, 1961 that the Revenue has placed no materials to prove that the cheques were posted at Delhi. It should be remembered that when the reference was made in the first instance, the Punjab High Court felt that the Appellate Tribunal had not given any finding as to whether the cheques in question were sent to the assessee by post and whether the assessee had given any direction in that regard to the Government of india. In view of the absence of such a finding, the High Court by its order dated March 24, 1955 called for a supplementary statement from the Appellate Tribunal under S. 66 (4) of the Act. This order was challenged before this Court by the assessee unsuccessfully. The purpose of seeking a supplementary statement was to focus the attention of the Appellate Tribunal to this aspect, namely, the posting of cheques claimed to have been done at Delhi by the Government of India. That the Revenue miserably failed to establish the fact of posting of cheques at Delhi, is clear from the finding recorded by the Appellate Tribunal in its supplementary statement, which finding has been accepted by the High Court in its judgment dated February 21, 1967 when aswering the Reference. The High Court has also then recorded a finding that the Revenue has failed to place any material before the Appellate Tribunal to prove that the cheques in question were being sent by the Government of India through post. Unfortunately, all these aspects have been missed by the learned Judges when dealing with the applications filed by the Revenue for the grant of certificates18. On the above findings recorded by the Appellate Tribunal and confirmed by the High Court, no question of applying any presumption under S. 114 of the Evidence Act arises for consideration. The learned Judges, dealing with the applications for grant of certificates, had no jurisdiction to go behind the finding recorded in the original judgment disposing of the Reference. In our opinion, the entire discussion on this aspect of posting of the cheques at Delhi by the learned Judges is beside the point, as that question no longer was available to the Revenue, in view of the finding recorded against it, to which we have made a reference earlier19. When once the question of a presumption under S. 114, illustration (f) of the Evidence Act does not fall to be considered in these proceedings, in view of the specific finding recorded by the Appellate Tribunal against the Revenue, and accepted by the High court, in our opinion, the High Court was not justified in certifying, on this ground, that the cases are fit for appeal to this Court.