1965 (2) TMI 8 - SC - Income Tax

Appellant succeeds in appeal, High Court directed to review based on existing record only.

The court upheld the appellant's contention, setting aside the High Court's order and directing the High Court to consider the matter in line with the ... Scope of section 66(4) of the Income tax Act - power to call for additions or alterations to statement of case - Limitation of High Court's power to call for additional evidence not on the record - Statement of case under section 66(1) must be confined to material on record - Prohibition on remitting reference for collection of fresh evidence under section 66(4) - Principle of stare decisis and reconsideration of Supreme Court precedentsScope of section 66(4) of the Income tax Act - power to call for additions or alterations to statement of case - Statement of case under section 66(1) must be confined to material on record - Limitation of High Court's power to call for additional evidence not on the record - Whether the High Court, under section 66(4) of the Income tax Act, may direct the Appellate Tribunal to collect additional material or evidence not already on the record before making a supplementary statement of case. - HELD THAT: - The Court held that the statement of case under section 66(1) must arise out of the Tribunal's order and be confined to facts already on the record. Section 66(4) empowers the High Court to require additions or alterations to the statement of case only in respect of material already on the record; it does not, consistently with the statutory scheme (including section 31(2) and rule 29 governing admission of additional evidence at earlier stages), authorise the High Court to direct the Tribunal to travel outside the record and collect fresh evidence. Although the language of section 66(4) is wide enough to admit a liberal construction, considerations of the statutory scheme, the appellate procedure, and the policy of avoiding interminable tax proceedings support the restricted construction adopted by this Court in New Jehangir Mills and Petlad Turkey Red Dye Works Co. Ltd., which the Court declined to overrule. The Court therefore set aside the High Court's order insofar as it resulted in collection and inclusion of additional material not previously on the record.High Court has no power under section 66(4) to direct collection of additional evidence not on the record; additions/alterations under section 66(4) are limited to material already on record.Prohibition on remitting reference for collection of fresh evidence under section 66(4) - Principle of stare decisis and reconsideration of Supreme Court precedents - What is the consequence of the High Court having directed collection and inclusion of additional material contrary to the scope of section 66(4)? - HELD THAT: - Applying the settled precedents (New Jehangir Mills and Petlad Co. Ltd.) and having declined to revisit those decisions, the Court found that the High Court exceeded its jurisdiction by remanding the matter in a manner that resulted in fresh material being collected and included in the supplementary statements. Consequently, the Court set aside the High Court's order on that point and directed that the reference be dealt with afresh by the High Court in the light of the controlling precedents. The Court emphasised that it would not lightly depart from its prior uniform rulings on the construction of section 66(4) absent compelling reasons, and no such reasons were shown.High Court's order to collect and include additional evidence is set aside; the matter is remitted to the High Court to be dealt with in accordance with New Jehangir Mills and Petlad Co. Ltd.Final Conclusion: The Supreme Court upheld its prior decisions restricting the scope of section 66(4): the High Court may order additions or alterations to the statement of case only in respect of material already on the record and may not direct the Tribunal to collect fresh evidence; the High Court's order in the present reference insofar as it resulted in new evidence being taken is set aside and the reference is remitted to the High Court for disposal in conformity with the established precedents. Issues Involved:1. Whether the two decisions in New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax and Petlad Turkey Red Dye Works Co. Ltd. v. Commissioner of Income-tax should be reviewed and revised.2. Whether the High Court had jurisdiction to direct the Tribunal to collect additional material and include it in the supplementary statement under section 66(4) of the Indian Income-tax Act, 1922.Issue-wise Detailed Analysis:1. Review and Revision of the Two Decisions:The primary issue before the Special Bench of seven judges was whether the two decisions in New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax and Petlad Turkey Red Dye Works Co. Ltd. v. Commissioner of Income-tax should be reviewed and revised. The appellant argued that the recent decisions were sound and correct, while the respondent contended that these decisions should be reconsidered due to their significance.The court emphasized the importance of maintaining certainty and continuity in the interpretation of law, as frequent revisions could lead to confusion. It was noted that the court should only reconsider its earlier decisions if there are compelling reasons, such as a clear error or oversight of significant aspects or statutory provisions.The court reviewed the earlier decisions and other relevant judgments, concluding that the decisions in the New Jehangir Mills case and the Petlad Co. Ltd. case were reasonably possible views and had been followed consistently. Therefore, the court found no compelling reason to revise these decisions.2. Jurisdiction of the High Court under Section 66(4):The second issue was whether the High Court had the jurisdiction to direct the Tribunal to collect additional material and include it in the supplementary statement under section 66(4) of the Indian Income-tax Act, 1922. The appellant contended that the High Court exceeded its jurisdiction by directing the collection of additional material, which was not on the record when the question was framed by the Tribunal.The court examined the scheme of the Act, which indicates that evidence should primarily be led before the Income-tax Officer, with additional evidence allowed before the Appellate Assistant Commissioner or the Tribunal under specific provisions. Section 66(4) allows the High Court to call for a supplementary statement of the case if the original statement is insufficient to determine the question raised. However, this power is limited to material already on the record.The court held that section 66(4) does not authorize the High Court to direct the Tribunal to collect new evidence not already on the record. This interpretation aligns with the decisions in the New Jehangir Mills case and the Petlad Co. Ltd. case, which restrict the High Court's power to requiring the Tribunal to include material already on the record in the supplementary statement.Conclusion:The court upheld the appellant's contention, set aside the High Court's order, and directed the High Court to deal with the matter in light of the decisions in the New Jehangir Mills and Petlad Co. Ltd. cases. The court emphasized that the High Court's power under section 66(4) is limited to requiring the Tribunal to include material already on the record in the supplementary statement and does not extend to collecting new evidence. No order as to costs was made.