1. The assessee was assessed to income-tax for the assessment year 1950-51 & earlier years by the Additional Income-tax Officer, Section VI (Central), Bombay. The jurisdiction of this officer to assess the assessee is not in question. The head office of the assessee was at Indore and the Income-tax Act did not apply to Indore which was prior to 1950 an Indian State.
Section 3 of the Finance Act of 1950 made the Income-tax Act applicable to the whole of India excepting Kashmir which included Madhya Bharat and Indore. The assessee was assessed by the same officer for the assessment year 1951-52, and the contention put forward by the assessee was that by reason of the application of the Indian Income-tax Act to Indore the jurisdiction which was rightly vested in the Income-tax Officer became divested. This contention of the assessee has been accepted by the Tribunal and we have now to examine whether the Tribunal was correct in the view that it took.
2. Now, on 18-4-1939, under Sub-section (2) of Section 5 the Central Board of Revenue appointed the Commissioner of Income-tax to try certain specific cases and one of the cases assigned to this Commissioner was the case of the assessee. Under Section 5(2) the Central Government may appoint a Commissioner of Income-tax for a specified area or it may appoint a Commissioner to discharge, without reference to area the functions of a Commissioner in respect of any class or classes of cases assigned to him by the Central Board of Revenue, and in this case the Central Board of Revenue has directed the Commissioner of Income-tax (Central) to discharge the functions in respect of certain specific cases without reference to area.
On 27-4-1939, the Commissioner of Income-tax (Central) by reason of the powers vested in him under Section 5(5) of the Act allotted the case of the assessee to Section I (Central), and on May 4, 1945, by reason of the powers vested in him under Sub-section (7A) of Section 5 he transferred the case of the assessee from the Income-tax Officer, Section I (Central), to the Income-tax Officer, Section VI (Central), and it is this officer who has assessed the assessee.
3. Now, what is urged by Mr. Kolah is that as soon as the Income-tax Act became applicable to Indore, the assessee was entitled to the right conferred upon him by Section 64(1) and that section provides:
'(1) Where an assessee carries on a business, profession or vocation at any place, he shall be assessed by the Income-tax Officer of the area in which that place is situate or, where the business, profession or vocation is carried on in more places than one, by the Income-tax Officer of the area in which the principal place of his business, profession or vocation is situate.' Sub-section (2) provides:
'(2) In all other cases, an assessee shall be assessed by the Income-tax Officer of the area in which he resides.'
The contention is that inasmuch as the assessee has his principal business in Indore, by reason of Sub-section (1) of Section 64 he is entitled to be assesed by the Income-tax Officer of that area. It is said that before the Income-tax Act was made applicable to Iadore the assessee could not claim his right under Section 64(1), but as soon as this section applied, whatever the jurisdiction of the Income-tax Officer, Bombay, was, that jurisdiction ceased and the only officer who had jurisdiction was the Income-tax Officer of the area in question, viz., Indore.
In putting forward this argument Mr. Kolah completely ignores and overlooks the provisions of Sub-section (5) of Section 64, and the provisions of that sub-section are:
'The provisions of Sub-section (1) and Sub-section (2) shall not apply and shall be deemed never at any time to have applied to any assessee- (a) on whom an assessment or re-assessment for the purposes of this Act has been, is being or is to be made in the course of any case in respect of which a Commissioner of Income-tax appointed without reference to area under Sub-section (2) of section 5 is exercising the functions of a Commissioner of Income-tax.'
The scheme of this sub-section is clear that the right, if one may so put it, to territorial assessment is taken away where a specific case is assigned to an Income-tax Officer. The right to territorial assessment only exists where there is no assignment of the particular case of the assessee to a specific Income-tax Officer.
In this case, as we have already pointed out, the specific case of the assessee was assigned first to the Commissioner of Income-tax (Central) under Section 5(2), by the Commissioner of Income-tax (Central) to the Income-tax Officer. Section I (Central), under Section 5(5) and ultimately it was transferred by the Commissioner to the Income-tax Officer, Section VI (Central), Bombay. Therefore it is clear that Section 64(5) overrides Section 64(1) and the assessee cannot claim the right of territorial assessment conferred upon him by Section 64(1).
4. The next contention of Mr. Kolah is that even assuming Section 64(5) applies, the force of the notification issued under the various sections exhausted itself as soon as Madhya Bharat was merged in India and the Income-tax Act applied to Indore. Mr. Kolah says that the Income-tax Act has only a territorial application and it applied to British India and the notifications issued under that Act could only apply to British India, but as soon as Indore became part of India and the Income-tax Act applied to that part, it was necessary to issue a fresh notification so that it should apply to Indore and to the residents of Indore. This contention would have had considerable force if the notification was a notification with a territorial operation. But it is clear that the notification applies to the specific case of the assessee irrespective of his residence, irrespective of the country of which he is a citizen, and irrespective of where he may be carrying on his business. The notification is, as it were, 'in personam' and not territorial. Therefore it is difficult to understand what possible effect the merger of Madhya Bharat with India can have on the notification validly issued under the Income-tax Act, If the case of the assessee could be dealt with under these notifications by the specific Income-tax Officer appointed, that Income-tax Officer still had the jurisdiction to deal with that case by reason of the same provisions of the law which provisions were in no way affected by the merger of Madhya Bharat with India or the application of the Incorne-lax Act to Madhya Bharat.
5. The last argument of Mr. Kolah is that the notification deals not with the case of the assessee but with a particular area because the address of the assessee is mentioned in the notification, and it is suggested that inasmuch as the assessee is not carrying on his business at the address mentioned in this notification, the jurisdiction of the Income-tax Officer to deal with this case has ceased. It is indeed a rather surprising argument that if an assessee whose case has been specifically referred to an Income-tax Officer changes his address, he thereby divests the Income-tax Officer of his jurisdiction. If that were the true position, most assessees would be doing nothing else except trying to alter their addresses so as to deprive the Income-tax Officer of the jurisdiction under the Act. Unfortunately, in the order of the Tribunal there is no reference whatever to Section 64(5). In our opinion that is the only section which is relevant and material in order to consider the jurisdiction of the Income-tax Officer concerned. We have had therefore no assistance from the order of the Tribunal as to why they have taken the view that the jurisdiction which was vested in the Income-tax Officer, Section VI (Central), was divested by reason of the Indian Income-tax Act being extended to the whole of India.
6. We must, therefore, answer the question raised: (1) In the negative. (2) Does not arise. The assessee to pay the costs.
7. Reference answered.