Skip to content


Commissioner of Income-tax, Madhya Pradesh, Nagpur and Bhandara Vs. Paluram Dhanania - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 4 of 1959
Judge
Reported in[1960]39ITR432(Bom)
ActsIndian Income Tax Act, 1922 - Sections 34; Income-tax and Business Profits Tax (Amendment) Act, 1948 - Sections 34
AppellantCommissioner of Income-tax, Madhya Pradesh, Nagpur and Bhandara
RespondentPaluram Dhanania
Appellant AdvocateG.N. Joshi, Adv.
Respondent AdvocateN.A. Palkhivala, Adv.
Excerpt:
- .....pradesh. by a notification, dated july 31, 1944, issued by the ruler of the raigarh state, the indian income-tax act, 1922, with all the amendments made till that date, as in operation in british india, was made applicable to the territory of the raigarh state. it was also provided by the notification that all future amendments made in the indian income-tax act, 1922, will be applicable 'automatically' to the raigarh state. the assessee was assessed to income-tax for the assessment years 1946-47 and 1947-48. as accepted on a concession made by the department by the income-tax appellate tribunal, the raigarh state merged with the central provinces and berar on april 1, 1949. in march, 1954, the income-tax officer, special circle 1, nagpur, initiated proceedings under section 34 of the.....
Judgment:

Shah, J.

1. The assessee was a resident of the former State of Raigarh in the province of Madhya Pradesh. By a notification, dated July 31, 1944, issued by the Ruler of the Raigarh State, the Indian Income-tax Act, 1922, with all the amendments made till that date, as in operation in British India, was made applicable to the territory of the Raigarh State. It was also provided by the notification that all future amendments made in the Indian Income-tax Act, 1922, will be applicable 'automatically' to the Raigarh State. The assessee was assessed to income-tax for the assessment years 1946-47 and 1947-48. As accepted on a concession made by the Department by the Income-tax Appellate Tribunal, the Raigarh State merged with the Central Provinces and Berar on April 1, 1949. In March, 1954, the Income-tax Officer, Special Circle 1, Nagpur, initiated proceedings under section 34 of the Indian Income-tax Act for reassessment of the assessee's income on the view that certain income of the assessee for the relevant assessment years had escaped assessment. Before the Income-tax Officer it was counted by the assessee that as required section 34(1) of the Indian Income-tax Act, 1922, as amended by the Income-tax and Business Profits Tax (Amendment) Act, 1948, the sanction of the Commissioner of Income-tax should in the first instance be obtained before commencing action under section 34 and no such sanction having been obtained, the proceedings were without jurisdiction. The income-tax Officer negatived that contention and reassessed the income of the assessee. That order was upheld by the Appellate Assistant Commissioner. The Tribunal, however, accepted the plea of the assessee that sanction, as required, of the Commissioner of Income-tax was not obtained before the commencement of proceedings and, therefore, the proceedings under section 34 were without jurisdiction. At the instance of the Commissioner, the following question has now been referred :

'Whether on a true construction of the Raigarh Darbar Notification No. 89/44/D/Raigarh, dated July 31, 1944, section 34 of the Indian Income-tax Act, 1922, as amended by the Income-tax and Business Profits Tax (Amendment) Act, 1948, was applicable to the proceedings taken in the present case ?'

2. On the question as framed, there can be little doubt that section 34 of the Indian Income-tax Act, 1922, as amended by the Income-tax and Business Profits Tax (Amendment) Act, 1948, was applicable to the Raigarh State by virtue of the notification dated July 31, 1944. It is expressly enacted by the notification that all future amendments in the Indian Income-tax Act will be applicable automatically to the Raigarh State. By the Income-tax and Business Profits Tax (Amendment) Act, 1948, section 34 of the Income-tax Act was amended and the Commissioner's sanction before proceedings were commenced under that section was required and that provision must be deemed to have been made applicable to the Raigarh State as from the date on which it was applied in the Dominion of India.

3. Mr. Joshi on behalf of the Department has strenuously contended that as from December 31, 1947, the Raigarh State ceased to exist and the territory of that State became a part of the Central Provinces and Berar and all the authority of the Ruler of the Raigarh State was extinguished and the law in operation in the State became crystallized as on December 31, 1947, and it was that law which was applicable to the proceedings for reassessment commenced against the assessee under section 34 of the Income-tax Act. In other words, Mr. Joshi's contention is that the amendment to section 34 of the Income-tax Act, 1922, made by the Income-tax and Business Profits Tax (Amendment) Act, 1948, did not have the effect of amending the income-tax Act which was in force in the Raigarh state. We are unable to entertain the submission made by Mr. Joshi. The Tribunal has submitted only one question to us, and that is whether section 34 of the Indian Income-tax Act, 1922, as amended in the year 1948, was applicable to the assessment proceedings commenced against the assessee in the light of the notification issued by the Raigarth Darbar on July 31, 1944. The question assumes that the Raigarh Darbar notification was issued on July 31, 1944, and that it was in operation on the date on which the Indian Income-tax Act, 1922, was amended by the Act 1948; and the only question which is to be answered is whether in the light of section 34 as amended the proceedings commenced against the assessee were properly commenced. It appears that before the Tribunal an attempt was made on behalf of the Department, by relying upon the White Paper, to show that in fact the State of Raigarh merged with the Central Provinces and Berar on January 1, 1948, and after that date the authority of the Ruler of the State ceased. The Tribunal declined to entertain that argument. Evidently in order to rely upon notifications issued from time to time and substantially to ask the Tribunal to decide a question of fact which had not been previously decided, viz., whether the Ruler of the Raigarh State had ceased to have jurisdiction over his territories as from January 1, 1948. Mr. Joshi says that we must ascertain a question of fact before we can proceed to hold that the Raigarh Darbar notification, dated July 31, 1944, had ceased to be in operation. If before the Tribunal the only question posed for answer was a question based on the continued operation of the notification, dated July 31, 1944, it is not open to us at this stage to investigate into the question whether in facts the notification continued to remain in operation on the date on which the Income-tax Act, 1922, was amended in the year 1948. It is true that under Taxation Laws (Extension to merged States and Amendment) Act, 1949, if before August 26, 1949, there was in force in any of merged States any law relating to income-tax, super-tax or business profits tax, such law shall be deemed to remain in operation for purposes connected with the levy, assessment and collection of such tax. If before the Tribunal the Department chose to argue the question on the footing that the income-tax law immediately before August 26, 1949, in force in the territory of the Raigarh State was as amended by the Income-tax and Business Profits Tax (Amendment) Act, 1948, it is not open now to the Department to contend that the assumption implicit in the question and in the arguments advanced before the Tribunal was unwarranted.

4. On that view of the case, the answer to the question must be in the affirmative. The Commissioner of Income-tax to pay the costs of the assessee.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //