M/S. Soorajmull Nagarmull vs Commissioner Of Income-Tax

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 238 and 239 of 1961

Decision Date: 19 February 1962

Coram: J.C. Shah, S.K. Das, M. Hidayatullah

In the matter of M/S Soorajmull Nagarmull versus the Commissioner of Income‑Tax, the Supreme Court rendered its judgment on 19 February 1962. The opinion was authored by Justice J.C. Shah, who was joined by Justices S.K. Das and M. Hidayatullah. The petitioner in the case was M/S Soorajmull Nagarmull and the respondent was the Commissioner of Income‑Tax, Calcutta, with a connected appeal also being considered. The judgment appears in the official reports as 1963 AIR 491 and 1962 SCR Supplement (3) 306. The dispute concerned the operation of the Income‑Tax Act of 1922, specifically sections 33(4) and 66(2), and the constitutional power granted under Article 136. The Income‑Tax Appellate Tribunal had issued an order under section 33(4) disposing of an appeal. Both the assessee and the Commissioner of Income‑Tax subsequently applied to the High Court of Calcutta for orders compelling the Tribunal to state a case under section 66(2). Those applications were dismissed by the High Court. Each party then sought special leave to appeal the Tribunal’s order before this Court, raising the principal question of whether, even if an appeal against the High Court’s refusal to order a statement of the case fails on its merits, the Supreme Court retains jurisdiction to entertain the appeal against the Tribunal’s order.

The Court held that when an aggrieved party approaches a High Court under a taxing statute for an order directing a statement of the case and that High Court refuses the application, this Court, exercising its powers under Article 136 of the Constitution, will not, absent special or exceptional circumstances, permit the High Court’s order to be bypassed by entertaining a direct appeal against the Tribunal’s order under the taxing Act. This principle applies even if an appeal has already been lodged against the High Court’s order. The Court relied on the earlier decisions in Chandi Prasad Chhokhani v. State of Bihar (1962) 2 S.C.R. 276, Dhakeswari Cotton Mill Ltd. v. Commissioner of Income‑Tax, West Bengal [1955] 1 S.C.R. 941, and Sardar Baldev Singh v. Commissioner of Income‑Tax, Delhi and Ajmer [1961] 1 S.C.R. 482. The civil appellate jurisdiction for Civil Appeals Nos. 238 and 239 of 1961 was invoked, both being appeals by special leave from the Income‑Tax Appellate Tribunal (Calcutta Bench) judgment dated 28 March 1957 in I.T.A. Nos. 722 and 7341 of 1954‑55. Counsel for the appellant and respondent were instructed, and the judgment of the Court was delivered by Justice Shah, stating that the assessors and the Commissioner had preferred appeals against the Tribunal’s order passed under section 33(4) of the Income‑Tax Act.

After the assessees filed applications before the Calcutta High Court seeking an order under section 66(2) that would compel the Tribunal to state a case, those applications were dismissed. The counsel representing the assessees argued that even if their appeal against the High Court’s order under section 66(2) were to be dismissed on its merits, the Supreme Court still possessed the authority to entertain their appeal against the Tribunal’s order issued under section 33(4) of the Indian Income‑Tax Act. The counsel relied on the decision in Chandi Prasad Chhokhani v. State of Bihar [1962] 2 S.C.R. 276, where the Court addressed situations in which a party challenged a Tribunal order without first appealing the High Court’s refusal to call for a statement of the case. In that precedent, the Court articulated the following practice: (a) when an aggrieved party approaches the High Court under a taxing statute for an order directing a statement of the case and the High Court refuses, the Supreme Court, exercising its powers under article 136, will normally not permit the High Court’s order to be bypassed by hearing an appeal directly against the Tribunal. Such a bypass would be unwise, particularly where it might create conflicting decisions from two courts of competent jurisdiction. The legislative scheme of the taxing statutes is designed to avoid such conflict by making factual determinations of the taxing authorities final, subject only to the statutory mechanisms of appeal, revision or review, while decisions of the High Court on questions of law are final and subject to appeal to this Court. (b) This rule, however, does not prohibit the Supreme Court from granting special leave in exceptional circumstances, for example in Dhakeswari Cotton Mills Ltd. v. Commissioner of Income‑Tax [1955] 1 S.C.R., where the Tribunal breached fundamental rules of justice, or in Sardar Baldev Singh v. Commissioner of Income‑Tax [1961] 1 S.C.R. 482, where special circumstances beyond the party’s control prevented the High Court from considering an application for a statement of the case, thereby depriving the party of the right to approach the High Court.

The counsel for the assessees further contended that the Chhokhani case involved no appeal against the High Court’s order and therefore its principle was not applicable where the aggrieved party has appealed both the High Court’s order and the Tribunal’s order. It is correct that in the present matter appeals have been filed against both the Tribunal’s order under section 33(4) of the Income‑Tax Act and the High Court’s order under section 66(2) refusing to require the Tribunal to state a case. Nonetheless, the Court did not perceive any principled distinction between a situation where an appeal is lodged solely against the Tribunal’s order and a situation where an appeal is lodged against the Tribunal’s order as well as the High Court’s order, the latter being dismissed for lack of merit. The counsel did not point to any special or exceptional circumstances that would justify deviating from the established rule.

In a situation where an appeal is made solely against the order of the Tribunal and no appeal is filed against the order of the High Court, the circumstances differ from those in a case where an appeal is filed against both the Tribunal’s order and the High Court’s order, and where the latter appeal is dismissed on the ground that it lacks merit. The counsel for the parties did not point out any special or exceptional facts that would set the present case apart from the general rule. The Court listened to detailed arguments presented by representatives of the assessee and by the Commissioner, each advancing their respective positions. After considering those submissions and relying on reasons already articulated, the Court concluded that there is no justification for directing the Tribunal to provide a statement of the case. If the Court were to entertain the appeal against the Tribunal’s order after having affirmed the High Court’s decision that no question of law arose from the Tribunal’s order, such a step would conflict with the well‑established principle that, except in rare circumstances, the Court does not exercise its jurisdiction under Article 136 to revisit the factual findings on which a Court or Tribunal’s decision is based. The legislature has expressly vested the authority to evaluate evidence in the hands of the taxing authorities, and the determinations of those authorities are ordinarily considered final. This does not mean that the Court is absolutely barred from reviewing evidence when justice so requires, but the power under Article 136 is exercised only in truly exceptional cases. The present matter does not reveal any such exceptional situation. Consequently, the appeals numbered 238 and 239 of 1961, filed respectively by the assessee and the Commissioner against the Tribunal’s order, must fail. Those appeals are therefore dismissed, with costs imposed, and a single hearing fee is levied. The appeals are dismissed.