TaxTMI 
TaxTMI 
1979 (12) TMI 50
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....lhi within the then jurisdiction of the Punjab High Court, the above scheme had also to be approved by the Punjab High Court and the sanction of the Punjab High Court to the scheme was granted on May 20, 1960. In this order, it was mentioned, inter alia, that the transferee-company, i.e., the Birla company should within a month from the date of the order cause a certified copy thereof to be delivered to the Registrar of Companies, Rajasthan, for registration and that subject to the orders of the Rajasthan High Court in this behalf on such certified copy being delivered the transferor companies should stand dissolved. Thus, the result of these two orders of the two High Courts was that with effect from some date in June, 1960, the two amalgamating companies stood dissolved without a winding up. For the assessment year 1960-61, M/s. Merchandise and Stores Ltd. had been assessed to income-tax on a total income of Rs. 1,45,143 and the Rajputana General Dealers Ltd. had been assessed to income-tax on a total income of Rs. 1,14,417. These assessments appear to have been made some time in 1961, i.e., after the companies had been dissolved by the orders of the courts. However, we are no....
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....nt companies under s. 23A were invalid. It appears from the order of the Tribunal that the notices under s. 23A which had been issued by the ITO in the names of the transferor-companies had been served on M/s. Birla Cotton Spinning and Weaving Mills Ltd. and that the chartered accountant who appeared before the ITO and the AAC was the authorised representative of the Birla company. The Appellate Tribunal took the view that the effect of the amalgamation order passed by the High Courts was that the transferor-companies merely merged with the transferee-company and were not wound up as a result of the amalgamation. The transferee-company was in law held to represent the estate of the transferor-companies and to have undertaken to discharge all the liabilities and obligations of the transferor-companies. It was, therefore, held that the mere mention of the names of the transferor-companies without mentioning the name of the Birla company as their legal representative was a mere irregularity. The Tribunal held that in fact the proceedings had been initiated and continued against the Birla company and, therefore, the proceedings were valid in view of cl. 6 of the scheme of amalgamation.....
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....ny under s. 66(2) of the Act. This was by C.M. 910/71 which was accompanied by C.M. 909/71 for condonation of delay. In the first instance, these petitions were dismissed for default. But subsequently they were revived by the order passed in C.M. 1009/71. The Bench which heard the C.M. directed that if at the time of the hearing of the petition it became necessary to reframe the questions, necessary orders would be made but that till then it was not necessary to issue any direction to the respondent in the matter. In other words, the court appears to have thought that it may be sufficient to reframe the questions already framed and that a direction to the Tribunal to refer further questions might not be necessary but left the matter to be decided at the time of hearing of I.T.R. 8/71. Thus, we have three matters before us the two references made by the Tribunal but consolidated as one and the application of the Birla company under s. 66(2) seeking a direction to the Tribunal to refer questions for consideration of this court. Shri S. T. Desai, learned counsel for the applicant, contended that as a result of the orders of the High Courts sanctioning the amalgamation of the two tr....
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....s to have the orders quashed in appropriate proceedings. But so long as the applicant chooses to contend that these orders had been passed not against itself but against the transferor-companies and so, invalid, the appeals preferred were totally incompetent and consequently no valid reference can lie to any High Court from the orders passed by the Tribunal on such an incompetent appeal. On the other hand, Shri Verma contends, if according to the applicant the assessments though made in the names of non-existent companies had really been made against the Birla company, then the reference would be maintainable and he would seek to sustain the assessment orders on the basis suggested by the Tribunal, viz., that the Birla company as a legal representative of the tranferor-companies had been properly assessed under s. 23A(1). A second line of reasoning on the basis of which also the competence of the reference is challenged by Shri Verma is to be found in a decision of this court (to which one of us was a party) in Seth Banarsi Dass Gupta .CIT [1978] 113 ITR 817. He points out that the assessees are the two transferor-companies. These companies had their registered office and carried o....
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....determination of the jurisdiction of the High Court to which the case had to be stated. The basis adopted (in the Tribunal's standing orders) for determining the jurisdiction of the Bench of the Tribunal was more appropriate than the basis adopted by section 64 of the Indian Income-tax Act, 1922, for determining the jurisdiction of an Income-tax Officer. Under the Explanation to the standing orders the basis of the location of the assessing officer, viz., the officer making the assessment, had been adopted. In this case, the appeal before the Tribunal had arisen out of assessment orders of the Income-tax Officer it Meerut which was in the State of Uttar Pradesh and, therefore, it was the Allahabad High Court to which the reference should have been made. When a Bench of the Appellate Tribunal hears and determines an appeal as an appeal from a particular State, it would be quite appropriate for the Bench to state the case to the High Court of the State from which the appeal came. " We agree with Shri Verma that this decision fully covers the present case. In this case, the assessment orders were passed by the ITO at Jaipur and the appeals were also disposed of by the AAC at Jai....
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....at it had preferred two reference applications. These were accordingly consolidated and a reference made to this court. But what we have to determine for the purposes of the reference is not the question as to who filed the reference application but the question as to who the assessees in this case were. A perusal of the orders of the ITO leaves no doubt that the orders Under section 23A had been passed against the two Jaipur companies. In fact that is also the case of the Birla company and that is the ground put forward by it to challenge the validity of the orders under s. 23A. There is, therefore, no manner of doubt that the proceeding, initiated by the ITO were against the Jaipur companies. Moreover, even assuming for purposes of argument (though that would be inconsistent with the claim of the Birla company throughout) that the assessments had been made on the Birla company as some sort of representative for the Jaipur companies, still according to the principle laid down in the case of Seth Banarsi Dass Gupta [1978] 113 ITR 817 (Delhi), the court to which reference should be made would be the court having jurisdiction over the territory in which the office of the ITO was situ....
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....eme Court held that the reference was not maintainable. The Supreme Court held : " The jurisdiction given to the High Court under sub-section (2) of section 66 is conditional on an application under sub-section (1) being refused by the Appellate Tribunal. This clearly presupposes that the application under sub-section (1) was otherwise a valid application. If, therefore, an application under sub-section (1) was not well-founded in that there was no order which could properly be said to be an order under sub-section (4) of section 33 then the refusal of the Appellate Tribunal to state a case on such misconceived application on the ground that no question of law arises will not authorise the High Court, on an application under sub-section (2) of section 66, to direct the Tribunal to state a case. The jurisdiction of the Tribunal and of the High Court is conditional on there being an order by the Appellate Tribunal which may be said to be one under section 33(4) and the question of law arising out of such an order." This principle has been applied to cases where a reference is sought for against an order passed under s. 35 of the Indian I.T. Act, 1922. It had been held in CIT v.....
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....jurisdiction of the officer to rectify the assessment had to be traced to section 35 of the Indian I.T. Act though he had purported to act under section 154 of the I.T. Act, 1961. It was, therefore, held that since no appeal lay under the 1922 Act against an order under s. 35 the appeals to the AAC and the Tribunal as well as the consequential reference to the High Court were incompetent and hence the reference had to be returned unanswered. This decision was followed by the Delhi High Court in CIT v. National Small Industries Corporation Ltd. [1973] 91 ITR 579 in similar circumstances. No doubt, the above cases were concerned with the question whether an order passed by the ITO or AAC, was an appealable order or not. But if an order of the Tribunal on an appeal which did not lie to it cannot give rise to a reference, equally an appeal preferred by a non-existent or unauthorised person can confer no better rights. The ratio of these decisions will, therefore, we think, apply to this case also squarely. A survey of the above decisions clearly shows that while dealing with a reference under the I.T. Act the High Court has to be satisfied that there is a competent reference befo....
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....t be described as the legal representative of the two defunct companies for that concept is appropriate only in the case of an individual and not in the case of a company or an artificial entity. The only ground perhaps on which the Birla company could be made liable would be on the basis of s. 26(2) of the Indian I.T. Act, 1922. But here again, Shri Desai rightly points out, the application of this section has been ruled out by the Appellate Tribunal and is no longer in issue. The third possibility is that there is some liability in the Birla company on account of the orders by which the two companies were amalgamated. But, again, according to the Birla company, cl. (6) of the scheme protected only pending proceedings and as rightly pointed out by Shri Desai there were no such proceedings under s. 23A pending against the Jaipur companies on the date when they got snuffed out of existence. If that is so (and this is what the company itself argues in the reference) then, qua the appeals which were filed before the AAC and the Appellate Tribunal, the Birla company was a total stranger. Shri Desai says that the department has collected the tax from the Birla company and the Birla comp....
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....is no question of waiver in this case because it can hardly be said that the department consciously admitted the jurisdiction of this court to hear the reference. All that can be said is that either the assessee or the department could have pointed out at the time when the statement of case was being finalised that the reference should be made not to the Delhi High Court but to the Rajasthan High Court. From the mere failure of the department to do this it cannot be inferred that it had waived its rights to object to the jurisdiction of the High Court when the reference came up for hearing. So far as the application under s. 66(2) is concerned, it is coming up for hearing after notice and the department is entitled to put forward the objection regarding jurisdiction. Shri Desai then submitted that several years had passed since this reference was made and that at this belated stage we should not return the reference unanswered or as incompetent. Eyen in the case of Seth Banarsi Dass Gupta [1978] 113 ITR 817 (Delhi), there was a lapse of about eight years before the reference was heard. Where it is a question of inherent lack of jurisdiction due to a statutory provision, the ques....
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....he preliminary objections raised on behalf of the department and return the reference unanswered as incompetent. We make no order as to costs. D. R. KHANNA J.--I concur in the overall conclusion arrived at by my learned brother that the reference should be returned unanswered as incompetent. As brought out by my learned brother and as borne out from the order of the Tribunal, there can hardly be any dispute that the provisions of s. 23A of the Indian I.T. Act, 1922, were squarely applicable to the present cases. Both the Merchandise and Stores Ltd. and the Rajputana General Dealers Ltd. were companies in which the public was not interested and the shares of the two companies carrying more than 50% voting power were held by four persons. Their shares were not freely transferable nor were ever the subject-matter of dealings at any recognised stock exchange in India. They were primarily investment companies. The AAC has also held that these companies were throughout in existence during the previous year relevant to assessment year 1960-61. The companies, however, did not distribute their profits, which were quite substantial, as dividends in terms of s. 23A. They were, therefore, l....
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....and held that there was a substantial compliance of the requirement of issue of notices before the making of the orders under s. 23A and no prejudice, in any manner, had been caused. It was next found that the effect of the amalgamation order was that the two transferee-companies did not wind up but merely merged with the transferee-company and the latter started representing and embodying in itself the former two companies as well, and was bound to discharge and fulfil all the liabilities and the obligations of the transferor-companies. It was further held that the mere mention of the transferor-companies without mentioning the name of the Birla Cotton, Spinning and Weaving Mills Ltd., as legal representative, was merely an irregularity and did not vitiate the proceedings nor it brought about any illegality therein inasmuch as both the parties to the proceedings were fully aware of the nature and the scope of the proceedings, the obligations of the parties under s. 23A and had their full say in the matter. With this state of affairs and the course of conduct displayed by the transferee-companv before the ITO, it prima facie perhaps could be said that the company could not have ....