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Civil Miscellaneous Application No. 251 of 1962, decided on 11th November 1963.
Income-tax-
High Court-Writ petitions-Power to review orders to prevent miscarriage of justice-Constitution of India, Art. 226.
An order made by the High Court in exercise of its powers under Article 226 of the Constitution can be reviewed even in cases which are not of a civil nature.
[In this case the High Court reviewed an order made under Article 226 of the Constitution and recalled it to prevent miscarriage of justice.]
[Cases referred to].
R. L. Gulati for Applicant.
P. N. Pachauri for Respondent.
This is a review application against the order dated the 13th August, 1962, passed by me in Civil Miscellaneous Writ No. 1558 of 1962 (1963) 50 I T R 156.
The main ground for asking for a review is that two material facts were not disclosed by the assessee and as such he had disentitled himself to the exercise of the extraordinary writ jurisdiction of this Court in his favour. The original writ petition was directed against the notice of demand dated the 17th of March 1956 and 25th of August 1958.
The assessee was a partner in the partnership firm carrying on business in the name and style Munna Lal & Sons; Kanpur. The petitioner had a four annas share. The relevant year of assessment is 1950-51. In the assessment of that year the share of profit of the petitioner in the aforesaid firm, including interest, was computed at Rs. 88,809: vide assessment order, dated the 17th of March 1955, and on the basis of that order the Income-tax Officer computed the tax payable at Rs. 39,364-9-0. The notice of demand issued was dated the 17th March 1955, requiring payment on or before the 28th March 1955. On the 17th March 1955, an individual return of income was filed by the assessee before the Income-tax Officer on the basis of which the Income-tax Officer issued a notice under section 23(2) of the Act of 1922 (hereinafter referred to as the Act) and fixed the hearing on the same date and also passed an assessment order on that date determining the assessee's total income at Rs. 88,809. According to the petitioner he had no knowledge of the notice of demand having been served on any one on his behalf till the 20th September 1961, when the file was inspected and. it was discovered that the notice of demand was served on one Mr. P. Dayal on the 30th March 1955. The inspection of the records, according to the assessee, had further shown that a sum of Rs. 1,000 was paid towards the aforesaid demand on the 1st August 1955. It further appeared that on the 8th March 1956, the Income-tax Officer had imposed a penalty of Rs. 1,900 under section 46 (1) of the Act, for the alleged default in payment of tax. The order imposing penalty of Rs. 1,900, however, was not filed along with the writ petition. Against that penalty order an appeal was filed. The petitioner did not, however, file any appeal under section 30 of the Act, against the assessment order passed on him for the assessment year 1950-51.
In the affidavit accompanying the original petition it was stated that the first recovery certificate to the Collector of Kanpur under section 46 (2) of the Act for the recovery of a sum of Rs. 40,264-9-0 which included the aforesaid penalty, of Rs. 1,900, was issued on 24th December 1956. According to the petitioner as the demand notice was only served on the 30th March 1955, recovery proceedings ought to have been taken on or before the 30th March 1956, and therefore they were barred under the provisions of section 46, subclause (7) of the Act. The petitioner, no doubt, had taken this stand before the Income-tax Officer, Kanpur, and the Income-tax Officer, Dhera Dun, to whom the proceedings were subsequently transferred and also before the Commissioner of Income-tax, Lucknow, and the Collector, Debra Dun. The assessee, however, did not place all his cards on the table nor was the Department vigilant enough to place the correct facts before this Court at the time when the writ petition came to be argued. On the materials on record the recovery proceedings were prima facie barred by time, they having been taken for the first time on the 24th December 1956, and it having been noticed that the counter-affidavit filed by the Department had made no effort to meet the point of limitation, this Court considered that there was no alternative but to issue a writ of certiorari quashing the recovery proceedings taken on the 24th December 1956, and a fortiori the subsequent recovery proceedings dated the 25th August 1958. This Court, further, without having given a finding as to whether the notice of demand was validly served, had quashed the notice of demand dated the 17th March 1955. That was not at all necessary when the recovery proceedings themselves were quashed. It is the quashing of the recovery proceedings and the demand notice which is required to be reviewed by the present application.
Preliminary objections have been taken to the maintainability of the review application on the ground that no review lies against an order passed under Article 226 of the Constitution in respect of a matter which does not fall within the civil jurisdiction of this Court. Reliance for this proposition by Mr. Pachauri, the learned counsel for the assessee, had been placed on three decisions of this Court. The first of these decisions is the case of Dan Singh Bist v. Additional Collector, Bijnor ((1959) A L J 798-A I R 1960 All. 192). James, J. had held that there was no provision in the Constitution debarring the High Court from exercising a power of review; that if such power is found derived from some other statute a High Court will be entitled to review its decision and orders. In that particular case as the proceedings had been started to enforce or vindicate a civil right it was held that the proceedings were civil proceedings from which it followed that in adjudicating upon them under Article 226 of the Constitution, the learned Judge was exercising civil jurisdiction and therefore the Civil Procedure Code applied. By virtue of the Civil Procedure Code the provisions of section 151 gave this Court ample power to undo the injustice by recalling the incorrect and invalid order which had come to be passed as a result of the ignorance of a certain notification. This case, therefore, did not rule out the exercise of the powers of review under the inherent powers which flow from the exercise of the plenary jurisdiction under Article 226 of the Constitution.
Reliance was next placed on the case of Brij Lal v. State of U. P. (A I R 1958 All. 621), where the question of review was not under consideration and the only question decided was that proceedings under Article 226 of the Constitution were not other proceedings within the meaning of Article 132 of the Constitution.
The third case relied upon was Income-tax Officer v. Joti Prasad Agarwal ((1962) 44 I T R 574), where again it was laid down that proceedings relating to liability to income-tax partake of the nature of a proceeding which had been usually described as a revenue proceeding and that the liability to income-tax is not a civil right enforceable as such in a Court of law.
The last case cited was a decision of a Full Bench in Mst. Abhilakhi v. Sada Nand (A I R 1931 All. 224). This case merely laid down that no review lies from a judgment of a Bench hearing an appeal under clause 10 of the Letters Patent.
As against these decisions there are two direct decisions, one of this Court and the other of the Calcutta High Court relating to tax matters. Adharsh Bhandar v. Sales Tax Officer, Aligarh ((1959) 10 S T C 364) was a converse case to the present one, inasmuch as section 4 of the U. P. Sales Tax (Validation) Act of 1958 made it obligatory on the High Court to review its pronouncement in certain cases. The Full Bench of this Court resisted that attempt of the Government to force the High Court to review every order passed by it including orders passed under Article 226 of the Constitution. Mootham, C. J., who delivered the judgment of the Full Bench in this connection, observed:
"The power of the High Court to review an Order passed by it under Article 226 of the Constitution is either included in the power conferred by the Article itself or can be exercised under the Code of Civil Procedure in case the proceeding is treated as a civil proceeding."
It is, therefore, clear that the Full Bench considered that the power of review is inherent in the power given to this Court under Article 226 of the Constitution apart from proceedings which are in the nature of civil proceedings which would also be covered by the provisions of the Code.
The Calcutta case in Dalip Nath Sen v. Certificate Officer (A I R 1962 Cal. 346), after noticing the conflict between the Madhya Pradesh High Court on the one hand and the Bombay and Madras High Courts on the other, followed the latter view and held that in a proper case an application for review would lie from an order passed in proceedings under Article 226 of the Constitution.
This conflict has been noticed in Basu's Constitution of India, IV edition, Volume III, and the following observations appear at page 398:
"The controversy has however been set at rest by the Supreme Court by holding that the High Court under Article 226 has an inherent power of review apart from statutory conditions."
This is followed up by a quotation from the Supreme Court decision in Sheo Deo Singh v. State of Punjab [C. A. No. 265 of 1958 decided on 8-3-1961]
" . . . . . There is nothing in Article 226 of the Constitution to preclude the High Court from exercising the power of review which inheres in every Court of plenary jurisdiction to prevent miscarriage of justice or to correct grave and palpable errors committed by it."
In view of the Supreme Court decision, the view taken by a Full Bench of this Court and the Calcutta High Court, I would hold that a review would lie from an order under Article 226 of the Constitution even in matters which do not relate to the civil jurisdiction of this Court.
The next objection raised was that the application for review was barred by time as it was presented beyond 60 days of the order of this Court. To begin with the period of limitation is 90 days under Article 173 of the First Schedule of the Limitation Act and not 60 days as contended for by learned counsel for the assessee. Section 12 (2) of the Limitation Act specifically provides for the exclusion of the time taken for obtaining a certified copy. This Court in Gauri Shankar v. Kashi Nath ((1933) I L R 56 All. 591) laid down that the time taken for obtaining copies is to be excluded under section 12 (2) even when the rules of the Court do not require the filing of any such certified copy. In the present case a certified copy was in fact applied for the purpose of filing the special appeal. The special appeal which was filed was admittedly in time after excluding the time taken for the obtaining of copies. An application for review having been filed within 30 days of the date on which the special appeal was filed would undoubtedly be within time as the period of limitation, as already observed, for the filing of a review application is 90 days whereas for a special appeal it is only 60 days. The review application, therefore, must be held to have been made within time.
It was next contended that in a case where an appeal is provided for against an order, an application for review does not lie. The contention is that as the Department had filed a special appeal before a Bench of this Court it was debarred from filing a review application, as the Department was thereby gambling and wanted to take chances both by way of a special appeal as well as through the channel of a review application. There is no force in this contention also as there was no element of gambling in the action taken by the Department. It was first considered that a special appeal should be filed but latter it seems to have been realised, probably on the pointing out of the Special Bench before whom the appeal came up for hearing, that the main ground being the suppression of two orders extending the time for the payment of the demand notice and as those orders not being on the record when this Court had passed the order on the writ petition, the proper remedy was by way of a review application. Without those two documents having been considered by the single Judge or having been brought on the record the Bench hearing the special appeal could not have gone into those questions. The order of the Bench dismissing the appeal bears out the contention of the Department. This reads:
"Mr. R. L. Gulati, learned counsel for the appellants, states that the appellants have now moved an application for review of the judgment of the learned single Judge and consequently they do not press this appeal. The appeal is consequently dismissed without going into merits, so that it may not affect, in any way, the decision of the review application."
That is a clear indication as to how that special appeal came to be withdrawn and dismissed by the Department. The failure to disclose the fact in the review application that a special appeal had been filed is one which can reasonably be attributed to inadvertence in view of what happened before the Bench hearing the special appeal. The fact is that the appellant had brought to the notice of the Bench hearing the appeal that a review application had been filed and, therefore, there could have been no sinister motive for the Department in not having disclosed the fact of the filing of the special appeal. In the application for review, it is no doubt true that this fact was disclosed after the counter-affidavit was filed by the opposite-party and the Department would have been well advised to have disclosed this fact in the application for review.
Coming now to the merits of the review application it is based on the suppression of two material orders. They are the order dated the 8th March 1956 (Annexure "A"), and the order dated the 14th March 1956 (Annexure " B ") whereby according to the Department the period of payment of the tax due and the penalty levied was extended. According to the Department, the suppression was deliberate, the facts in the writ petition having been given in a garbled manner. I have examined the original record and there is no doubt in my mind that, if Annexures "A" and "B" aforesaid had been brought to my notice by either party, the recovery proceedings would not have been quashed by the issue of a writ of certiorari, as these annexures show that the period for payment was extended. The order dated the 8th of March 1956, reads:
"A demand of Rs. 38,364-9-0 is outstanding against the assessee since long. They approached the higher authority for stay of the recovery of the same. But they declined to interfere in the matter. The assessee was given one more opportunity for payment of the demand but neither he paid the same nor he applied for extension of time. Under section 46(1) of the Act, A penalty of Rs. 1,900 is therefore, imposed and the total amount of Rs. 40,264-9-0 should be paid on or before March 20, 1956. The demand notice and challan will be issued to the defaulter."
The period for payment under this order not only of the' tax due but also in respect of the penalty of Rs. 1,900 levied was undoubtedly extended to the 20th March 1956. The reference in this order to the approach made to the higher authorities is fully borne out by the records which were examined by me. This showed that not only the assessee but the firm of which he was a partner was from time to time asking for an extension of time for payment of the tax demand. On the 11th August 1955, three months' time was asked for and allowed for the payment of taxes on account of Sri S. B. Mehrotra, the present assessee. This letter which was written for Munna Lal & Sons re. payment of taxes account of Sri S. B. Mehrotra reads:
"We beg to enclose herewith a cheque for Rs. 1,000 on the National Bank of India Ltd., Kanpur, as a token payment towards the demand of Sri S. B. Mehrotra. Due to heavy difficulties of finances we are not in a position to pay the entire demand at the moment but we are negotiating for the sale of our certain properties and hope that within 3 months time we would be able to pay off the liability due towards Sri S. B. Mehrotra. We would, therefore, request you to kindly allow us the time to pay the same within three months' time."
The order on that application by Income-tax Officer was "Allowed". This is duly noted by the said Ramji Dass. Again on the 30th September 1955, apparently before the aforesaid three months' time expired on the 30th September 1955, the said Ramji Das made an application to the Inspecting Assistant Commissioner asking for an extension of time. The order thereon is Annexure "C" dated 30th September 1955, which reads:
"Shri Ramji Das attends and states that he is approaching the Inspecting Assistant Commissioner for time. Party asked to send a copy of their application to the Inspecting Assistant Commissioner."
The Inspecting Assistant Commissioner on the same date passed the following order:
"Shri Ramji Mehrotra has appeared. He says that negotiations for sale of shares of Jhansi Electric Supply Co. worth Rs. 3 lakhs are going on with some party of Gorakhpur and Sir Padampat. The Gorakhpur party has called him in the 1st week of December 1955. If it materialises, the entire amount will be paid forthwith. Shri Ramji Mehrotra has been asked to see me on December 10, 1955. Put up papers on December 10, 1955."
Further approaches appear to have been made to the Commissioner of Income-tax also for extension of time. Eventually the request was turned down and the matter came back to the Income-tax Officer. The Income-tax Officer informed the assessee by his letter dated the 2nd March 1956, that this request was turned down in these words:
"Please refer to your application dated December 17, 1955, addressed to the Commissioner of Income-tax, Lucknow, for extension of time for payment of arrears demand of Rs. 38,364-90 for the assessment year 1950-51. The same has been rejected by him. As such you are requested to make payment of the above arrear demand on or before 6th March 1956. Please also note that in case of failure, I shall be reluctantly constrained to invoke recovery proceedings in addition to any penalty to which you may be liable under the Incometax Act."
Even by this letter the Income-tax Officer had extended the time of payment up to the 6th March 1956 and on that basis also the recovery proceedings taken on the 24th December 1956, would also have been within time. The Income-tax Officer after having waited up to the 6th March 1956, passed order on the 8th of March 1956, levying a penalty of Rs. 1,900 and once again extended the time for payment up to the 20th March.1956.
Against the said penalty order the assessee filed an appeal and though the fact of the filing of the appeal was mentioned in the writ petition filed in this Court, the order dated the 8th of March 1956, was not filed nor was the operative part of the order reproduced whereby the period for payment of the demand was extended up to the 20th March 1956. The memorandum of appeal must have been signed by the assessee even though Ramji Mehrotra at the time of hearing had appeared for him and not the assessee personally. The appeal was dismissed by an order of the Appellate Assistant Commissioner dated the 16th May 1956. This fact, therefore, that the time had been extended ought to have been disclosed by the assessee in the writ petition. He has asserted that he had left Kanpur in 1955 and therefore he was not fully aware of all that transpired between the Income-tax Department and the partners acting on his behalf. He has, however, in this connection made contradictory assertions in the letters written by him to the Income-tax Department. In the letter (Annexure "M") to the writ petition he had stated-"since I had left Kanpur in the year 1955 when the assessment was made. I did not know about the proceedings except that a return was signed by me and handed over to be delivered for the assessment". As against this in the foot-note above the signatures of the assessee dated the 8th of November 1958, it was mentioned:
"The remaining partners of the firm are also not in a position to pay anything towards the arrears of tax due from the applicant. Shri Kundan Lall Mehrotra (partner) is also submitting an application for writing off the arrears of demand. Regarding the remaining two partners, viz., Shri Jang Bahadur Mehrotra and Shri Ramji Das Mehrotra, it may be mentioned that after the assessment year in question, i.e., the year for which the arrear of demand is outstanding against the applicant, viz., 1930-51, both these partners also suffered losses year after year. Not a piece of tax could be imposed on account of heavy losses on both these partners in the subsequent years, viz., 1951-52, 1952-53, 1953-54, 1954-55, 1955-56 and 1956-57. Sri Jang Bahadur Mehrotra got in attack of paralysis in 1953 and a second attack in 1955. He is completely crippled both physically and financially and Sri Ramji Das Mehrotra has to meet a heavy liability which exceeds the assets by over Rs. 2,00,000."
There is also another letter dated the 7th of January 1959, addressed to the Commissioner of Income-tax, Luckhow, wherein a note is added as follows:
"(N. B.) The recovery of this very demand is also pressed by the D. M., Dehra Dun. Since I reside in Kanpur permanently I would request you to please send for the same here to be consolidated at one place for disposal."
Therefore, it is clear that the assessee was making statements from time to time to suit his purpose without much regard for the actual state of affairs. The fact, however, remains that it was Ramji Das who was acting for him before the Income-tax Officer and the appellate authorities and therefore may not have been fully conversant with the details but it is difficult to hold that he was as innocent of the facts as he would have this Court believe. He had as already noticed by me in the order disposing of the writ petition drawn the attention of the Income-tax Officer and the other authorities to the fact that the demand notice was barred by time. It is indeed surprising that none of the authorities or any one on behalf of the Department at the time when the writ petition was filed brought these pertinent and important facts to the notice of the Court. This has resulted not only in miscarriage of justice but in a waste of public time and money which is to be deprecated.
The miscarriage of justice however cannot be allowed to be perpetuated and it becomes the duty of this Court to recall the order passed in Writ Petition No. 1558 of 1962, whereby the demand notice and the recovery proceedings were quashed on the ground that the recovery proceedings were barred by limitation under section 46 (7) of the Act. The demand notice was only quashed by the writ petition because recovery proceedings were found to be out of time.
The review application is accordingly allowed but in the circumstances of the case there will be no order as to costs. Counsel's fee is assessed at Rs. 100.
Application allowed.
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