NAIMUDDIN, J. -By this reference under section 66(1) of the Income-tax Act, 1922 (hereinafter called the Act) and in Income Tax Reference No. 471 of 1972 and 472 of 1972, the following question of law has been referred to this Court on substantially identical facts but in respect of different assess6ent years, for answer.
"Whether on the facts and in the circumstances of the case the Tribunal was justified in setting aside the penalty imposed, on 19-2-1971, under section 46(1) of the Income-tax Act.
2. The facts giving rise to the references, as stated in the applications are that, the respondent having failed to pay the arrears of tax demand of Rs. 60,48I for the assessment year 1965-66, the Income-tai Officer passed an order under section 46(1) of the Act on 19-2-1971, imposing a penalty of Ra.1,510.
3. In I. T. R. No. 471 of 1972, a tax demand- of Rx 94,534 for the assessment year 1968-69, was made and on the failure to pay the same a penalty of Rs. 2,363 was imposed by the order, dated 19-2- 1971.
4. In I. T. R. No. 472 of 1972, a tax demand of Rs: 66,662 for the assessment year 1966-67, was made and as failure to pay the same a penalty of Rs. 1,665 was imposed by the order dated 19-2-1971.
5. Aggrieved by these orders, three separate appeals were filed which were ultimately heard by Income-tax Appellate Tribunal, who allowed the same, by order, dated 7-12-1971, setting aside the order impugned in the three appeals. It is out of this order that the present question has been refereed to this Court in alt the three references.
6. The appeals were allowed only on the ground that the orders imposing penalty under section 46(1) of the Act were made during the continuance of valid stay order. We may, for the sake oaf convenience, reproduce hereinbelow the Wire order. It reads: "These three appeal, relating to the assessment years 1965-66, 1966.67 and 1968-69 are directed against order imposing penalty under section 46(1) of the Income-tax Act, on account of alleged failure to pay arrears of tax, for these three assessment years. The assessee had shown loss for the first taro years, but a tax demand of Rs. 60,481 was levied for the first yam and R s. 66,662 for the second year, for this third, assessm ent year the: demand of tax was of Rs. 94,534. Aggrieved by theme: orders of assessm ent, the appellant had approached the Inspecting Assistant, Commissioner and a stay order was made by the: Inspecting Assistant Commissioner, directing stay of recovering of tax till 30-4-1971. The three impugned orders now challenged in this Court were made on 19-2-1971, after the order of stay had been used and while the stay was in force.
These orders were, therefore, prima facie illegal and void ab initio. The simple point in these appeals was that the orders imposing penalty under section 46(1) of the Income-tax of were made, during the continuance of a valid stay order. In the circumstances, these three impugned orders must be set aside we accordingly allow the appeals and sex aside all the three orders imposing penalty for default of payment of the arrears of tax.
(Sd.) A. A. Darshani, Judicial Member-Fifth Bench, 7-12-1971: (Sd.) G. S. Chaudhary.
Accountant, Member, Fifth Bench, 7-12-1971. "
7. It is the case of the Commissioner of Income-tax, the applicant, as stated in the applications under section 66(1) of the Act, that the assessee had approached the Inspecting Assistant Income- tax Commissioner with an application, dated 16-2-1971 for stay of recovery which was forwarded, on 27-2-1973, to the Income-tax Officer for report. The factual report was thereon submitted by the Income-tax Officer to the Inspecting Assistant Commissioner on 5-3-1971. The Inspecting Assistant Commissioner by the order dated 4-3-1971, had stayed the demand till 30.4-1971. It is thus dear that on 19-2-1971, when the orders of imposing penalty -were passed, then were no orders of the Inspecting Assistant Commissioner in operation staying the demand, as the same- was, indeed, passed on 4-3-1971.
8. These facts are not at all in dispute for the respondent has not filed any reply as required by subsection 4(4) of section 66 of the Act and has not rebutted the, facts stated in the application nor has he contested the question of law formulated by the applicant in any manner: We are, therefore, clear that the observations of the Tribunal in the order dated 7-12-1971, the orders imposing penalty under section 46(1) of the Act were made during the continuance of the valid stay orders were based on misreading of the record or non-consideration of the record or are otherwise without any bas or are based upon the view of they facts which could not reasonably entertained.
9. However, the further question for consideration is whether this Court can disturb the finding of facts even on the ground that there is no evidence to support unless it has been first expressly challenged by a question raised in reference under section 66(1). In this record, Mr. A. R. Mirza Advocate referred to a passage from the famous look entitled "Law and Prac--tice of Income-tax" by Kanga and Palkhivala, 7th Edition, which appears at page 1159 thereof. . "the Court cannot disturb or go behind ony finding of fact given by the Tribunal even on the ground that there is no evidence to support it, unless it has been first expressly challenged by a question raised in the reference application under section 256(1) to the Tribunal."
10. In support of the above observations, the learned authors have placed reliance on the, following decisions: Indian Cements Ltd v. C.I.T. (60 I T R 52 (SC)), Hazarat Pir Muhammad Shah Saheb Roza Committee v. C. I. T. (63 I T R 490 (SC)), C. I T. v. Meenakshi .Mills Ltd. (63 I T R 609 (SC)), C. I. T. v. Graves Cotton & Co. Ltd. (68 I T R 200 (SC)), C. I. T. v. Madan Gopal Badhry Lal (73 I T R 652 (SC)), Hooghly Trust Ltd. v. C. I. T. (73 I T R 685 (SC)), C.I.T. v. Imperial Chemical Industries (India) Ltd (74 I T R 17 (SC)).
Alumineum Corpn of India Ltd. v. C. I. T. (86 I T R 11 (SC)) C. I. T. v. Pannalal Narottamdas (67 I T R 667) and C. F. Star Co. Ltd. v. C. I. T. (75 I T R 179 (SC)).
11. However, these very authors at p, 1163- of the same book have opined as follows:- "The Supreme Court has laterly held that the Court cannot disturb or go behind a finding of fact given by the Tribunal on any ground, e.g., that there is no evidence to support it or that it is contradictory of all the evidence on record, unless the finding has been firstly expressly chal-- lenged by a question raised in the reference application (See ante under Specific question necessary to challenge a finding of fact", p. 1159). There are numerous decisions of the Privy Council, the Supreme Court itself see C. I. T. v. Rajasthan Mines Ltd. 78 1. T. K 45, and the House of Lards were the Court answered the referrer question of law correctly by rejecting a finding of fact which had no evidence to support it, although that finding was not expressly chal--lenged by a question specifically directed to that finding. There are no words in the statute to justify the new view and there is no other goof ground for the unsetting of the well-settled judicial practice. In many cases the question of law is bound up with findings of fact. Should the Court give a wrong answer to the question referred because a patently wrong finding of fact, incidental to the question, has not been expressly challenged by a question specifically directed to that finding.--- They have placed reliance on Sarojini Rajah v. C. I. T. 71 I T R 504, Gangamirthammal & Co. v. C.I.T. 74 1 T R 473, Satya Vijay Patel Hindu Dharamshala Trust v. C. I. T. 88 I T R 683, Sivakanmi Co. Ltd. v. C. I. T.
88 I T R 311 and Jaipur Metals & Elec--tricals Ltd. v. C. I. T. 97 I T R 721.
12. We may, however, specifically refer to the case of Mrs. Sarijni Rajah v. Commissioner of Income- tax, Madras 71 I T R 504 a bit in detail. In this case, the assessee, who was a Director of U Ltd., and whose husband was its Manag--ing Director purchased 32,850 shares in V Ltd. On March 31, 1952, and sold them at a loss in January and March, 1953, and paid the sale-proceeds to clear off the amounts cur, by her to U Ltd. These shares wore subse--quently purchased by the assessee's husband. The departmental authorities and the Tribunal refused to allow the loss as one arising from busies as, is their view, the purchases were as an investment. It was ruled by Madras High Court that a factual finding of a Tribunal cannot be disturbed in a reference, but if, upon a reasonable view of the facts, that conclusion could not reasonably be entertained the bar has no application in this case reliance was placed on a Privy Council decision in Griffiths v. J. R. Barri--son (Watford) Ltd. (1965) 59 I T R 328 (P C).
13. We follow the above-quoted opinion and cases and, therefore, answer the question in negative.
14. However, Mr. Abdul Rasheed Mirza, learned counsel for the respon--dent, submitted that subsequent to matting of this reference the main assessment orders have been set aside and, therefore, he submitted the: we might remit the matter to the Tribunal to consider the validity of the penalty orders in the altered circumstances. In this regard, he relied on a decision of a Division Bench of Andhra Paradesh High Court reported in (1972) 2 Andh. Prad. L T 102 ; (1972) Tax v R 11 30 ( 1131).
15. We would accept this request to the extent of saying that it will be open to the Tribunal to reconsider the appeal on merits. Keeping in view the altered circumstances, we leave the parties to bear their own Costs.