JAIPUR MINERAL DEVELOPMENT SYNDICATE, JAIPUR versus THE COMMISSIONER OF INCOME-TAX, NEW DELHI

Citation: [1977] 2 S.C.R. 460 · Decided: 16-12-1976 · Supreme Court of India · Bench: HANS RAJ KHANNA, V.R. KRISHNA IYER · Disposal: Appeal(s) allowed

Judgment (excerpt)

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 dis-
missed 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 appel-
lant, apparently because the notice sent by the High Court had been 
misplaced .. The High Court' in a btief order observed that the assessee 
F 

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