# JAIPUR MINERAL DEVELOPMENT SYNDICATE, JAIPUR v. THE COMMISSIONER OF INCOME-TAX, NEW DELHI

- **Citation:** [1977] 2 S.C.R. 460
- **Court:** Supreme Court of India
- **Decided:** 1976-12-16
- **Case number:** Civil Appeal No. 74 of 1972
- **Bench:** H. R. Khanna, V. R. KRISiiNA !YER
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/jaipur-mineral-development-syndicate-jaipur-v-the-commissioner-of-income-tax-7058
- **Pages:** 4

## Headnote

. Indian Income-tax Act, 192Z, S. 660)-Retuni of unanswued rrfumce by
High Court on non-appearance of party, whether functus officio to recall order
for disposal on merits.
At the. instance of the assessee-appellant, his matter WaS referred to the High
Court under s .. 66(1) of the Indian Income-tax Act, 1922. He wa~ issued a
notice by the High Court to file his paper-books within th~ee months,
but
failed to do so, or to appear at the hearing, as the notice got misplaced by his
clerk who received it. The High Court returned the reference
unaswered.
Later, the notice was found and the appellant moved the High Court t6 rehear
the reference on merits pleading a bona fide mistake but the High Court dismissed his application observing that it had become functus officio to entertain
the application because of its earlier order declining to answer the reference.
Allowing the appeal, the Court,
HELD : Where there is no express or implied prohibition of law, the High
Court has inherent power io recall
the
order made in the absence of the
party and to dispose of the reference on merits. It is not functus officio in
entertaining an application for re-hearing the reference and should exercise wch
power provided the party concerned approaches the Court with due diligence
a·nd shows sufficient cause for its non-appearance on the date of hearing.
[4620-F)
E
M. M. Ispahani Ltd., Calcutta v. Commissioner of Exass Profit'.TtJX, West
Bengal 27 ITR 188 and Commissioner of Income-tax, Madras v. S. Chm11i11.ppa
Mudaliar 74 ITR 41, referred to.
Roop Narain Ramchandra (P) Ltd v. Commissionu of lnc1J111e-tu.
U.P ..
84 J.T.R. 181, overruled.

## Text

460
A
JAIPUR MINERAL DEVELOPMENT SYNDICATE, JAIPUR
B
c
D
v.
THE COMMISSIONER OF INCOME-TAX, NEW DELHI
December 16, 1976
(H. R. KHANNA AND V. R. KRISiiNA !YER, JJ.]
. Indian Income-tax Act, 192Z, S. 660)-Retuni of unanswued rrfumce by
High Court on non-appearance of party, whether functus officio to recall order
for disposal on merits.
At the. instance of the assessee-appellant, his matter WaS referred to the High
Court under s .. 66(1) of the Indian Income-tax Act, 1922. He wa~ issued a
notice by the High Court to file his paper-books within th~ee months,
but
failed to do so, or to appear at the hearing, as the notice got misplaced by his
clerk who received it. The High Court returned the reference
unaswered.
Later, the notice was found and the appellant moved the High Court t6 rehear
the reference on merits pleading a bona fide mistake but the High Court dismissed his application observing that it had become functus officio to entertain
the application because of its earlier order declining to answer the reference.
Allowing the appeal, the Court,
HELD : Where there is no express or implied prohibition of law, the High
Court has inherent power io recall
the
order made in the absence of the
party and to dispose of the reference on merits. It is not functus officio in
entertaining an application for re-hearing the reference and should exercise wch
power provided the party concerned approaches the Court with due diligence
a·nd shows sufficient cause for its non-appearance on the date of hearing.
[4620-F)
E
M. M. Ispahani Ltd., Calcutta v. Commissioner of Exass Profit'.TtJX, West
Bengal 27 ITR 188 and Commissioner of Income-tax, Madras v. S. Chm11i11.ppa
Mudaliar 74 ITR 41, referred to.
Roop Narain Ramchandra (P) Ltd v. Commissionu of lnc1J111e-tu.
U.P ..
84 J.T.R. 181, overruled.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 74 of 1972.
F
(Appeal by Special Leave from the Judgment and Order dated the
26th August 1970 of the Rajasthan High Court in Income Tax Refer•
~./
ence No. 14 of 1970).
r
V. S. Desai and S. C. Agrawala, for the appellant.
S. C. Manchanda and R. N. Sachthey, for respondent.
G
The Judgment of the Court was delivered by
H
KHANNA, J.
This appeal by special leave is against the order of
Rajasthah High Court whereby the High Court held that it was functus
officio to entertain an application for re-hearing the reference made
under section 66(1) of the Indian Income-tax Acf, 1922 (her1~inafter
referred to as the Act).
The assessec-appellant is carrying on business in soap stonc~s. At ·
the instance of the appellant, the following two questions were referred
to the High Court by the Tribunal under section 66 ( 1) of th1: Act :
\
J
JAIPUR MINERAL V. COMM, OF I. T. (J:hanmi, J.)
4'61
.
"l. Whether on.the facts and in the circumstances of the
case the Income-tax Appellate tribunal was justified in hold-
. in.g . that . the property in the goods passed in the cust~mers
in erstwhile part 'A' and 'C' States, because the r~1lway
receipts in respect of the sale of goods of the vale (sic) of
Rs. 94,037 /- were made out in the name of 'Self' and were
sent to the purchasers in erstwhile part 'A' and 'C' States
. after endorsing the same in their favour ?
i. Whether on the facts and ill the circumstances of the
case, the entire profits and gains amounting to Rs. 93,019/-
arisen to the assessee firm in part 'A' and part 'C' States
should be taken into account for the purpose of applying the
test laid down under section 4A(C) (h) (sic) or only that
profit of the profits (sic) which can be determined after the
application of section 42(3) of the Act as reasonably . be
attributable to that part of the operations carried on in British
India?"
It appears that a notice was sent by the illgh Court to the appellant
to file paper books within three months of the receipt of the notice.
A
B
c
The notice was received by. a clerk: of the appellant firm on May 9,
D
1970.
According to the affidavit filed on behalf of th(". appellant, the
aforesaid clerk misplaced that notice..
The necessary paper
books
were consequently not filed_ in the High Court.
The reference came
up for hearing on August 26, 1970. On that date, counsel for the
department was present. .No one appeared on behalf of the appellant, apparently because the notice sent by the High Court had been
misplaced .. The High Court' in a btief order observed that the assessee
F
at whose instance the reference had been made had not put in appearance and had also not filed the paper books in spite of the service of
notice.
The Higfi Court accordingly declined to answer the reference.
The affidavit filed on .behab' of the appellant shows that the clerk,
who had misplaced the notice received from the High Court, while
F
proceeding on leave and handing over the charge to another clerk,
discovered on September 21, 1970 that the above mentioned notice
had been received from the .High Court.
Counsel was then engaged on
behalf of the assessee-appellant.
On enquiry it was found that the
matter had been disposed of on August 26, 1970.
On September 24,
1970 an application was filed on behalf of the appellant stating that
the paper books had not been filed because of bona fide mistake. PrayG
et was made for permitting the appellant to file the paper books and
for re-hearing the reference.
The High Court, as per _order dated
Febniary. 22, 1971, dismissed the aforesaid application after observing
that it had become filnctus officio to entertain the application because
of its earlier order declining to answer the reference.
It is this order
which is the subject matter. of the appeal.
. .
·
We have heard Mr. Desai ori ·behalf of the appellant and Mr.
Manchanda on behalf of the revenue.
Mr. Manchanda has brought
to our notice a decision of the· Calcutta High Court in M. M. ispahani
A
.B
c
D
E
F
G
H
462
SUPREME COURT REPORTS
[1977] 2 s.c.R.
Ltd., Calcutta v. Commissioner of Excess Profits Tax, West Bengal(1)
wherein the High Court held that when a party at whose instance the
reference had been made under section 66 ( 1) of the Indian Incometax Act, 1922 does not appear at the hearing of the reference, the High
Court is not bound to answer the question referred to it and should
not do so. It is urged by Mr. Manchanda that the above decision
·has been followed by some of the other High Courts.
As against that
Mr. Desai on behalf of the appellant has urged that the correctness
of those decisions is open to question in view of the decision of this
Court in the case of Commissioner of Income-tax, Madras v. S. Chenniappa Mudaliar('). It was held by this Court in that case that an
appeal filed by the assessee before the Tribunal under section 33 of
the Act should be disposed of on merits and should nor be dismissed
in default because of non-appearance of the appellant.
The Court
in this context referred to section 3 3 ( 4) of the Act and particularly
the word "therein" used in that sub-section.
It is urged by Mr. Desai
that as the Tribunal is bound to dispose of the appeal oti merits even
though a party is not present, likewise the High Court when a question
of law is referred to it, should dispose of the reference on merits and
answer the question referred to if.
In our opinion, it is not essential
to express an opinion about this aspect of the matter, because we art
of the opinion that the High Court was not functus officio in entertaining the application which had been filed on behalf of the appellant
for re-hearing the reference and disposing of the matter Ol) merits.
A party or its counsel may be prevented from appearing at the hearing of a reference for a variety of reasons. In case such a party
shows, subsequent to the order made by the High Court, declining
to answer the reference. that there was sufficient reason for its nonappearance, the High Court, in our opinion, has the inherent power
to recall its earlier order and dispose of the reference on merits. Wt
find it difficult to subscribe to the view that whatever might be the
· ground for non-appearance of a party, the High Court having onct
passed an order declining to answer the question referred to it because of the non-appearance of that party, is functus officio or helpless and cannot pass an order for disposing of the reference on
merits.
The High Court in suitable cases has, as already mentioned,
inherent power to recall the order made in the absence of the party
and to dispose of the reference on merits.
There is nothing in ariy
of the provisions of the Act which, either expressly or by necessary
implication, stands in the way of the High Court from passing .an
order for disposal of the reference on merits.
The courts have
power, in the absence of any express or implied· prohibition, to pas11
an order as may be necessary for the ends of justice or to prevent
the abuse of the process of the court.
To hold otherwise would
result in quite a number of cases in gross miscarriage of justice.
Suppose, for instance, a party proceeds towards the High Court to
be present at the time the reference is to be taken up for hearing and
on the way meets with an accident.
Suppose, further, in such an
(I) 27 I.T.R. 188.
(2) 74. I.T.R 41.
\,
J
..
' '
JAIPUR MINERAL v. COMM. OF I. T. (Khanna. !.)
463
event the High Court passes an order declining to answer the question
referred to it because of the absence of the person who meets with an
accident.
To hold that in such a case the High Court cannot recall
the said order and pass an order for the disposal ()f the reference on
merits, even though full facts are brought to the notice of the High
Court, would res11lt in obvious miscarnage of justice. It is to meet
such situations that courts can exercise in appropriate cases inherent
power.
In exercising inherent power, the courts cannot override the
express provisions of law.
Where however, as in the present case,
there is no express or implied prohibition to recalling an earlier order
made because of the absence of the party and to directing the disposal of the reference on merits, the courts, in our opinion, should
not be loath to exercise such power provided the party concerned
approaches the court with due diligence and shows sufficient cause
for its non-appearance on the date of hearing ..
Our attention has been invited to the decision of the Allahabad
High Court in Roop Narain Ramchandra (-P) ·Ltd. v. Commissioner
of Income-tax, U. P.(') wherein the High Court held that it has no
power to recall an order returning a reference unanswered.
For the
reasons stated above, we are unable to agree with the view taken by
the Allahabad High Court in that decision.
The facts brought out
in the application filed on behalf of the appellant show, in our opinion,
that there was sufficient cause for the non-appearance on behalf of
the appellant on the date of hearing as well as for the non-filing of
the paper books within time.
It also cannot be said that there was
lack of diligence on the part of the appellant in approaching of the
High Court for recalling its earlier order and for disposing of the
reference on merits.
We accordingly accept the appeal,
set aside
the order of the High Court and remand the case to it for answering
the questions referred to it on merits.
Looking to all the circum-
.stances, we make no order as to costs.
M.R.
Appeal allowed.
(1) 84 I.T.R. 181.
A
B
c
D
E