A) ABSTRACT / HEADNOTE

The Supreme Court of India examined the scope and limits of a High Court’s jurisdiction under Section 66(4) of the Indian Income-tax Act, 1922 in reference proceedings. The appeal arose from a Bombay High Court order directing the Income-tax Appellate Tribunal (ITAT) to submit a supplementary statement of case on an entirely new point — whether cheques received at Bhavnagar were sent by post at the express or implied request of the assessee, making the post office its agent for receipt in British India. This point had not been raised at any stage before the tax authorities or the Tribunal. The central issue was whether Section 66(4) empowered the High Court to raise a new question of law and direct fresh factual investigation. The Supreme Court held that Section 66(4), read with Sections 66(1) and 66(2), only permits the High Court to require additions or alterations to a statement of case to clarify facts already on record, not to introduce new questions or facts outside the Tribunal’s order. The Court ruled the High Court had exceeded its jurisdiction, set aside its order, and remanded the case for decision on the original question: whether receipt of cheques in Bhavnagar amounted to receipt of sale proceeds there. This judgment reinforces that reference jurisdiction is advisory and confined to questions of law arising from facts found by the Tribunal; it cannot be used to re-open evidence or initiate fresh factual enquiries.

Keywords: Section 66(4) jurisdiction, supplementary statement of case, new question of law, Income-tax reference, receipt of income, Bhavnagar cheques.

B) CASE DETAILS

i) Judgement Cause Title:
The New Jehangir Vakil Mills Ltd. v. The Commissioner of Income-Tax, Bombay North, Kutch and Saurashtra

ii) Case Number:
Civil Appeal No. 50 of 1957

iii) Judgement Date:
12 May 1959

iv) Court:
Supreme Court of India

v) Quorum:
S.R. Das, C.J., N.H. Bhagwati, M. Hidayatullah, JJ.

vi) Author:
Justice N.H. Bhagwati

vii) Citation:
1960 (1) SCR 249; [1959] 37 ITR 11 (SC)

viii) Legal Provisions Involved:

• Section 4(1)(a), Indian Income-tax Act, 1922

• Sections 66(1), 66(2), 66(4), Indian Income-tax Act, 1922

ix) Judgments overruled by the Case (if any):
None expressly overruled; clarified earlier High Court interpretations.

x) Case Related to:
Taxation Law; Income-tax procedural law; Jurisdiction of High Court in reference proceedings.

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The litigation arose from assessments for 1943-44 and 1944-45 of The New Jehangir Vakil Mills Ltd., a Bhavnagar-based textile manufacturer, then a non-resident for tax purposes. The dispute centered on whether cheques received in Bhavnagar, drawn on banks in British India, amounted to income received in British India under Section 4(1)(a).

The ITAT held that receipt occurred in Bhavnagar, following Kirloskar Brothers Ltd. v. CIT [1952] 21 ITR 82 (Bom). On reference under Section 66(1), the Bombay High Court directed a supplementary statement to ascertain if cheques were posted in British India at the assessee’s request — a point never earlier argued. The assessee challenged this as beyond the High Court’s powers under Section 66(4).

The Supreme Court thus had to determine the scope of Section 66(4): whether it permits introduction of fresh factual questions not arising from the Tribunal’s order.

D) FACTS OF THE CASE

1. Assessee’s status: Non-resident textile manufacturer in Bhavnagar (an Indian State) during the relevant years.

2. Assessment years: 1943-44 (account year 1942) and 1944-45 (account year 1943).

3. Receipts in question: Cheques from Government of India and other merchants, drawn on British India banks, received at Bhavnagar.

4. Revenue’s stance before authorities:

   • Receipt occurs where cheques are encashed.

   • Cheques encashed in British India; hence income received there.

5. ITAT’s decision: Receipt of cheques at Bhavnagar = receipt of sale proceeds there; followed Kirloskar Brothers Ltd.

6. Reference applications by Revenue: Questions limited to whether mere receipt of cheques at Bhavnagar amounted to receipt of income there.

7. High Court’s action: Found absence of facts on posting of cheques; directed supplementary statement on whether cheques were posted at assessee’s request (express/implied).

8. Special Leave to Appeal: Granted by SC, confined to jurisdictional question under Section 66(4).

E) LEGAL ISSUES RAISED

i) Whether the High Court, under Section 66(4) of the Indian Income-tax Act, 1922, can direct the Tribunal to investigate and report on a new factual question that was never raised before the tax authorities or the Tribunal.

F) PETITIONER/APPELLANT’S ARGUMENTS

i) The counsels for Petitioner submitted that:

• Section 66(4) must be read with Sections 66(1) and 66(2); its scope is confined to clarifying or adding facts already on record.

• High Court’s jurisdiction is advisory; it cannot introduce new questions of law or order fresh fact-finding.

• The point about posting of cheques was never raised earlier; thus no such question “arose out of” the Tribunal’s order.

• The High Court’s direction effectively re-opened the case for new evidence, contrary to precedent such as CIT v. Bhurangya Coal Co. [1958] 34 ITR 802 (SC) and Industrial Development & Investments Co. Ltd. v. C.E.P.T. [1957] 31 ITR 688 (Bom).

G) RESPONDENT’S ARGUMENTS

i) The counsels for Respondent submitted that:

• The High Court’s power under Section 66(4) is broad; it may direct the Tribunal to supply any further facts necessary for proper determination.

• Even if the question about posting of cheques was not raised earlier, it is essential to answering the referred question.

• Reliance placed on CIT v. Visweshwar Singh [1939] 7 ITR 536 (Pat) and Sir Sunder Singh Majithia v. CIT [1942] 10 ITR 457 (PC) to argue that supplementary statements may include further fact-finding.

H) RELATED LEGAL PROVISIONS

i) Section 4(1)(a), Indian Income-tax Act, 1922 – Taxable scope for non-residents.
ii) Section 66(1) – Reference to High Court on question of law arising from Tribunal’s order.
iii) Section 66(2) – High Court’s power to require reference if Tribunal refuses.
iv) Section 66(4) – High Court’s power to call for additions/alterations to statement of case.

I) JUDGEMENT

a. RATIO DECIDENDI

• Section 66(4) does not empower the High Court to raise a new question of law or order investigation into new facts not arising from the Tribunal’s order.

• Additions or alterations permitted are confined to facts already part of the record but omitted from the statement of case.

• High Court’s jurisdiction under Section 66 is consultative; it must answer the question on facts found/admitted by the Tribunal.

b. OBITER DICTA

• Reference jurisdiction is not appellate; it exists to advise on questions of law arising from actual disputes adjudicated by the Tribunal.

• Parties cannot use Section 66 proceedings to fill evidentiary gaps or create new factual foundations.

c. GUIDELINES

1. Section 66(4) must be read harmoniously with Sections 66(1) and 66(2).

2. “Additions or alterations” mean clarifications of facts already on record.

3. No fresh line of inquiry or new evidence is permissible.

4. Questions must “arise out of” the Tribunal’s order, i.e., be based on facts found/admitted therein.

5. High Courts cannot expand the scope of the reference beyond the original controversy before the Tribunal.

J) CONCLUSION & COMMENTS

The judgment underscores judicial discipline in tax reference proceedings, preventing parties from shifting goalposts. By limiting Section 66(4) to supplementation of existing record, the Court preserved procedural fairness and the finality of fact-finding by the Tribunal. It also harmonised Indian jurisprudence with English law principles (e.g., Craddock v. Zevo Finance Co. Ltd. (1946) 27 TC 267). The ruling ensures High Courts act within their consultative role, avoiding de facto appeals on fresh facts.

K) REFERENCES

a. Important Cases Referred

1. Craddock (H.M. Inspector of Taxes) v. Zevo Finance Co. Ltd., (1946) 27 TC 267.

2. CIT, West Bengal v. State Bank of India, [1957] 31 ITR 455 (Cal).

3. Industrial Development & Investments Co. Ltd. v. C.E.P.T., Bombay, [1957] 31 ITR 688 (Bom).

4. Vadilal Ichhachand v. CIT, Bombay North, [1957] 32 ITR 569 (Bom).

5. CIT v. Bhurangya Coal Co., [1958] 34 ITR 802 (SC).

6. CIT, Bihar & Orissa v. Visweshwar Singh, [1939] 7 ITR 536 (Pat).

7. Sir Sunder Singh Majithia v. CIT, C.P. & U.P., [1942] 10 ITR 457 (PC).

8. Kirloskar Brothers Ltd. v. CIT, Bombay, [1952] 21 ITR 82 (Bom).

9. CIT, Bombay South v. Ogale Glass Works Ltd., [1954] 25 ITR 529 (SC).

b. Important Statutes Referred

• Indian Income-tax Act, 1922 – Sections 4(1)(a), 66(1), 66(2), 66(4).