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Manordas Kalidas Vs. G.R. Desai and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberMiscellaneous Application No. 303 of 1956
Judge
Reported in[1959]37ITR302(Bom)
ActsIncome Tax Act, 1922 - Sections 5(2), 34 and 64(5)
AppellantManordas Kalidas
RespondentG.R. Desai and ors.
Appellant AdvocateM.M. Jhaveri, Adv.
Respondent AdvocateM.P. Amin, Adv.
Excerpt:
.....a particular case actually pending before an income-tax officer of one place to the income-tax officer of another place. 18. in the result, the petitioner is entitled to a writ of certiorari quashing the order of re-assessment passed by the additional income-tax officer, section v (central), bombay, in respect of the assessment years 1946-47, 1947-48 and 1948-49. 19. the petitioner has failed on a number of points raised by him and the fair order to make in connection with costs would be that each party should bear its own costs of the petition......article 226 of the constitution of india against the additional income-tax officer, section v (central), bombay, the appellate assistant commissioner of income-tax, n. range, and the additional collector of bombay, in connection with the assessment orders, penalty orders, notices of demand and other notices issued by the additional income-tax officer, section v (central), bombay, in respect of assessments for the assessment years 1946-47 to 1946-57 and for setting aside the same. he has also prayed for the issue of a writ in the nature of prohibition or any other appropriate direction, order or writ under article 226 of the constitution prohibiting the first respondent and his successors in office from proceeding to make the regular assessment of the income, profits and gains of the.....
Judgment:

K.T. Desai, J.

1. Manordas Kalidas, an assessee under the Indian Income-tax Act, 1922, has filed the present petition for the issue of a writ in the nature of certiorari or any other appropriate writ, direction or order under article 226 of the Constitution of India against the Additional Income-tax Officer, Section V (Central), Bombay, the Appellate Assistant Commissioner of Income-tax, N. Range, and the Additional Collector of Bombay, in connection with the assessment orders, penalty orders, notices of demand and other notices issued by the Additional Income-tax Officer, Section V (Central), Bombay, in respect of assessments for the assessment years 1946-47 to 1946-57 and for setting aside the same. He has also prayed for the issue of a writ in the nature of prohibition or any other appropriate direction, order or writ under article 226 of the Constitution prohibiting the first respondent and his successors in office from proceeding to make the regular assessment of the income, profits and gains of the petitioner for the assessment years 1952-53 up to 1956-57 or for any other assessment year. He has also prayed for the issue of a writ in the nature of prohibition or any other appropriate direction, order or writ under article 226 of the Constitution prohibiting the Appellate Assistant Commissioner of Income-tax, N Range, or his successors in office from hearing it in any way proceeding with the appeals of the petitioner pending before him for the assessment year 1951-52. He has further prayed for the issue of a writ in the nature of prohibition or any other appropriate writ, direction or order under article 226 of the Constitution prohibiting the Additional Income-tax Officer, Section V (Central), Bombay, and the Additional Collector of Bombay from making any order for payment or from adopting any measure or taking any action against the petitioner as threatened in the show cause notice, dated September 14, 1956, referred to in the petition or from making any other order or orders against the petitioner for recovery from the petitioner of any amount under the said orders. He has also prayed for the issue of a writ in the nature of mandamus or any other appropriate direction, order or writ under article 226 of the Constitution of Indian directing the Additional Income-tax Officer, Section V (Central), Bombay, and the Union of India to refund to the petitioner the sum of Rs. 1,09,754. Mr. Jhaveri, the learned counsel for the petitioner, has not pressed this prayer for refund of the amount of Rs. 1,09,754, reserving his client's right to claim the amount by separate proceedings, if so advised.

2. The facts giving rise to the present petition, briefly stated are as under : The petitioner was assessed to income-tax for the assessment year 1946-47 by the Income-tax Officer, Market Ward, Bombay. That assessment was completed in the year 1951. The petitioner was assessed for the assessment year 1947-48 by the Income-tax Officer, Excess Profit Tax Circle, the assessment being completed on 31st March, 1952. For the assessment year 1948-49 the petitioner was assessed by the Income-tax Officer, Market Ward, Bombay, the assessment being completed on 30th March, 1953. On 16th July, 1953, the Central Board of Revenue, under the provisions contained in sub-section (2) of section 5 of the Indian Income-tax Act, 1922, assigned the case of Petitioner to the Commissioner of Income-tax (Central), Bombay. On 22nd July, 1954, the Commissioner of Income-tax (Central), Bombay, in pursuance of sub-section (5) of section 5 of the Indian Income-tax Act, 1922, assigned the case of the Petitioner to the Additional Income-tax Officer, Section V (Central), Bombay and directed him to perform the functions of an Income-tax Officer in respect of the case of the petitioner. The petitioner received a notice, dated August 20, 1953 from the Additional Income-tax Officer, Section V (Central), Bombay, informing the Petitioner that the petitioner's case had been assigned to him by the Commissioner of Income-tax (Central), Bombay, under the powers vested in the Commissioner under section 5(5) and section 5(7A) of the Income-tax Act. The reference to section 5(7A) of the Income-tax Act in this communication is made through a mistake. It is admitted that no order was passed under the provisions contained in section 5(7A) of the Income-tax Act and the matter has proceeded before me on the footing that no such order was passed. On 7th March, 1955, the Additional Income-tax Officer, Section V (Central), Bombay, issued notices on the petitioner under section 34 of the Indian Income-tax Act in respect of assessment years 1946-47, 1947-48 and 1948-49. These notices have been challenged before me, it being the contention of the petitioner that the Additional Income-tax Officer, Section V (Central), Bombay, who issued those notices, had no jurisdiction to do so. For the assessment year 1949-50 the Income-tax Officer, Market Ward, Bombay, had initiated the proceedings by issuing the requisite notice under section 22(2). On 30th December, 1953, the Additional Income-tax Officer, Section V (Central), Bombay, completed the assessment and passed the assessment order for the said year. On 7th March, 1955, he issued a notice under section 34 and on 7th February, 1956, passed a revised assessment order for the said year. For the assessment year 1950-51 a notice under section 22(2) was issued by the Income-tax Officer, Market Ward, Bombay. The assessment for that year was completed on 14th December, 1954, by the Additional Income-tax Officer, Section V (Central), Bombay. That assessment was re-opened on 7th March, 1955, by the issue of a notice under section 34 and a revised assessment order was passed by the Additional Income-tax Officer, Section V (Central), Bombay, on 17th February, 1956. For the assessment year 1951-52 the requisite notice under section 22(2) was issued by the Income-tax Officer, E.P.T,. Circle, Bombay. The assessment for that year was completed on 28th March, 1956, by the Additional Income-tax Officer, Section V (Central), Bombay. For the assessment years 1952-53 and 1953-54 the requisite notices under section 22(2) were issued by the Income-tax Officer, Market Ward, Bombay. Provisional assessments under section 23B of the Income-tax Act were made by the Additional Income-tax Officer, Section V (Central), Bombay, for those years. In respect of assessment years 1954-55, 1955-56 and 1956-57 notices were issued under section 22(2) by the Additional Income-tax Officer, Section V (Central), Bombay. The petitioner contends that the order passed by the Central Board of Revenue on 16th July, 1953, and the order passed by the Commissioner of Income-tax (Central), Bombay, were not sufficient in law to cover any jurisdiction on the Additional Income-tax Officer, Section V (Central), Bombay, over any case of the petitioner and that all notices issued by him, all assessments made by him and all proceedings taken by him against the petitioner are void of no effect.

3. As regards the cases of the petitioner for the assessment years 1949-50, 1950-51, 1952-53 and 1953-54, which were pending before the Income-tax Officer, Market Ward, Bombay, and the case of the petitioner for the assessment year 1951-52 which was pending before the Income-tax Officer, E.P.T. Circle, Bombay, when the aforesaid order of the Central Board of Revenue was passed, the matter is covered by a judgment delivered by me in Miscellaneous Application No. 267 of 1956, Chimanlal Popatlal v. J.C Kalra and Others, delivered on 3rd December, 1958. By the order dated 16th July, 1953, passed by the Central Board of Revenue, not merely the case of the petitioner herein but the case of Popatlal Premchand, the Hindu undivided family of which the said Chimanlal Popatlal was the karta was assigned to the Commissioner of Income-tax (Central), Bombay. By the order dated 22nd July, 1953, passed by the Commissioner of Income-tax (Central), Bombay, the cases of the petitioner herein and of the said Popatlal Premchand were assigned to the Additional Income-tax Officer, Section V (Central), Bombay. For the reasons given in the judgment, I hold that the order passed by the Central Board of Revenue, dated 16th July, 1953, and by the commissioner of Income-tax (Central), Bombay, dated 22nd July, 1953, were sufficient in law to entitle the Additional Income-tax Officer, Section V (Central), Bombay, to deal with the cases of the petitioner for the assessment years 1949-50 to 1953-54 both inclusive, which were pending as aforesaid on the date when the Central Board of Revenue passed the aforesaid order, and to complete the assessment and to pass the assessment orders for the aforesaid assessment years. As regards the subsequent assessment years, no arguments have been advanced before me showing that the Additional Income-tax Officer, Section V (Central), Bombay, had no jurisdiction to assessee the petitioner. The orders passed by the Central Board of Revenue and the Commissioner of Income-tax (Central), Bombay, are sufficiently wide to cover the case of the petitioner for the assessment year 1954-55 for which no notices had been issued under section 22(2) prior to 16th July, 1953, and for the subsequent assessment years. In my view, the Additional Income-tax Officer, Section V (Central), Bombay, had authority and jurisdiction to issue notices to the petitioner under section 22(2) for the assessment year 1954-55, and the subsequent years and to assess the petitioner.

4. Mr. Jhaveri, the learned counsel for the petitioner, contends that the order dated 16th July, 1953, which has been passed by the Central Board of Revenue, does not operate in respect of completed assessments for the assessment years 1946-47, 1947-48 and 1948-49. He says that assessments in respect of those years had been completed before the order, dated 16th July, 1953, was passed and that they ceased to be cases within the meaning of section 5(2) of the Act. Section 5(2) runs as under :

'The Central Government may appoint as many Commissioner of Income-tax as it thinks fit and they shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of incomes or of such cases or classes of cases as the Central Board of Revenue may direct and where such directions have assigned to two or more Commissioners of Income-tax the same area or the same persons or classes of persons or the same income or classes of incomes or the same cases or classes of cases, they shall have concurrent jurisdiction subject to any orders which the Central Board or Revenue may make for the distribution and allocation of work to be performed.'

5. Mr. Jhaveri contends that the expression 'cases' in sub-section (2) of section 5 cannot cover cases which have been completed. On the other hand, it has been strenuously urged on behalf of the respondents that the expression 'cases' as appearing in sub-section (2) of section 5 is wide enough to cover completed assessments. In support of the argument that the expression 'cases' covers completed assessments, strong reliance was placed on section 64 of the Income-tax Act and in particular sub-section (5) thereof. The provisions of section 64, in so far as they are material for the purpose of the present petition are as under :

'64. (1) Where an assessee carries on a business, profession or vocation at any place, he shall be assessee 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.

(2) In all other cases, an assessee shall be assessed by the Income-tax Officer of the area in which he resides.

(5) 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 purpose 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, or

* * * but the assessment of such persons, whether the proceedings for such assessment began before or after the 1st day of April, 1939, shall be made by the Income-tax Officer for the time being charged with the function of making such assessment by the Central Board of Revenue or by the Commissioner of Income-tax to whom he is subordinate, as the case maybe.'

6. It is urged by Mr. Amin, the learned counsel for the respondents, that section 64(5)(a) covers the case of assessee whose assessment has been completed before the passing of an order appointing a Commissioner of Income-tax without reference to area to exercise the functions of a Commissioner of Income-tax under section 5(2) in respect of such assessee. He urges that the words 'on whom an assessment has been made in the course of any case' covers such a case. He says that the expression 'in the course of any case' means in respect of any case, and that once a case has been assigned to a Commissioner of Income-tax appointed without reference to area under sub-section (2) of section 5, the case of every completed assessment, even if made prior to such appointment, would be covered by those words. The words 'any assessee on whom an assessment has been made in the course of any case' read in the context in which they appear can only mean an assessment which has been made in the course of any case after the appointment of a Commissioner of Income-tax without reference to area under sub-section (2) of section 5 in respect of such case. Sub-section (5) of section 64 says that 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 on whom assessment has been 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. If Mr. Amin's argument were to be accepted, it would mean that in respect of completed assessments the provisions of sub-section (1) and sub-section (2) are to be deemed never at any time to have applied. Such completed assessments would ordinarily be made by the Income-tax Officer referred to in section 64(1) or (2). If those sections are deemed never to have applied, such assessments would have to be regarded as having been made by an Income-tax Officer who had no jurisdiction to do so. Such a conclusion could never have been intended by the Legislature. The only possible meaning to be given to the words 'on whom assessment has been made in the course of any case' is that the assessment must have been made after the appointment of Commissioner of Income-tax without reference to area under sub-section (2) of section 5. In order that such assessment may not be challenged the Legislature has provided that sub-section (1) and sub-section (2) of section 64 shall not apply and shall be deemed never at any time to have applied in connection with such assessment. The argument of Mr. Amin as regards the interpretation of the expression 'cases' in section 5(2) to the extent that it is based on an erroneous interpretation of section 64(5)(a) must fail.

7. It is strongly urged by Mr. Amin that the Commissioner of Income-tax may have to function under clause (iii) of the first proviso to section 34(1)(b) of the income-tax Act in respect of completed assessments and he says that there is no reason why, when a Commissioner of Income-tax is being appointed under sub-section (2) of section 5, he should not be appointed in respect of completed assessments so that he may, in connection with those assessments, exercise the functions of a Commissioner of Income-tax. Sub-section (2) of section 5 provides that Commissioner of Income-tax shall perform his functions in respect (1) of such area (2) of such persons or classes of persons, (3) of such incomes or classes of incomes and (4) of such cases or classes of cases as the Central Board of Revenue may direct. The expression 'such persons or classes of persons' is wide enough to cover persons whose assessments have to be made in the future. The question is whether the expression 'cases' or 'classes of cases' is wide enough to cover completed assessments. Mr. Jhaveri has relied upon the provisions of sub-section (7A) of section 5 in which the word 'cases' appears and the decision of the Supreme Court in the connection. Sub-section (7A) of section 5 without the explanation thereto runs as under :

'The Commissioner of Income-tax may transfer any case from one Income-tax Officer subordinate to him to another, and the Central Board of Revenue may transfer any case from any one Income-tax Officer to another. Such transfer may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Income-tax Officer from whom the case is transferred.'

8. Dealing with this sub-section, the Supreme Court, in the case of Bidi Supply Co. v. Union of India and Others held that the expression 'transfer any case' referred only to pending cases. At page 723 of that judgment, Das, C.J., who delivered the majority judgment of the court observes as follows :

'The sub-section in terms makes, provisions for the transfer of a 'case'. Under the Indian Income-tax Act, 1922, a case is started when the Income-tax Officer issue a notice under section 22(2) of the Act calling upon the assessee to file his return of his total income and total world income during the previous year and then the assessee submits his return in the prescribed form. It is quite clear from the section that the notice and the return are to be confined to a particular assessment year and the sub-section contemplates the transfer of such a 'case', i.e., the assessment case for a particular year. The provision that such a transfer may be made at any stage of the proceedings' obviously postulates proceedings actually pending and 'stage' refers to a point in between the commencement and ending of those proceedings. Further the provision that such transfer shall not render necessary the reissue of notice already issued by the Income-tax Officer from whom the case is transferred quite clearly indicates that the transfer contemplated by the sub-section is the transfer of a particular case actually pending before an Income-tax Officer of one place to the Income-tax Officer of another place.'

9. The Supreme Court in the Bidi Supply Co.'s case was interpreting the expression 'any case' in reference to the transfer thereof. That decision cannot be held to lay down that whenever the expression 'any case' or 'cases' appears under the Income-tax Act, it must of necessity be interpreted to mean 'pending case.'

10. The expression 'cases' within the meaning of sub-section (2) of section 5 came up for consideration before a Division Bench of this court, consisting of Beaumont, C.J., and Kania, J., as he when was, in Dayaldas Kushiram v. Commissioner of Income-tax Section 5(2) as it then stood provided as under :

'The Central Government may appoint a Commissioner of Income-tax for my area specified in the order of appointment, and may appoint Commissioner of Income-tax, not more than three in all, each to discharge, without reference to area, and to the exclusion of any Commissioner appointed for any area, the functions of a Commissioner in respect of any cases or classes of cases assigned to him by the Central Borrd of Revenue.'

11. At page 147 of that report Beaumont, C.J., observes as follows :

'I would say shortly that to my mind the right to transfer cases or classes of cases under section 5, sub-section (2) covers pending assessments, but does not cover a case in which an assessment has been completed. In such a case the assessee has acquired certain rights, e.g., of appealing to a particular Assistant Commissioner and applying for review to a particular Commissioner, and I think that those rights are not taken away by the amending Act cf. Haji Bibi v. H. H. Sultan Mahomed Shah.'

12. It has been strenuously contended by Mr. Amin that it was not really necessary for the purpose of that case to decide that point and that the case could have been disposed of without a decision on that point. There is considerable force in what Mr. Amin says. He further pointed out that the case of Haji Bibi v. H. H. Sir Sultan Mahomed Shah referred to by the learned Judge has really no bearing on the subject. In my view there is considerable force in that contention of Mr. Amin also. The learned Judge himself has prefaced those observations with the words following :

'This point is only of importance if I am wrong in thinking that the last-mentioned Officer cannot assess the applicant at all, but as the learned Advocate-General invited us to express our opinion in the second point and as it has some relevance under prayer (a) of the petition, I would say shortly.........'

13. Mr. Jhaveri relied upon a decision of the Federal Court reported in Venugopala Reddiar v. Krishnaswami Reddiar. In that case the Federal Court held that under the principle of the ruling in Colonial Sugar Refining Co. v. Irving the right to continue a duly instituted suit was in the nature of a vested right which could not be taken away except by a clear indication of intention to that effect.

14. Reference was also made to the decision of the Supreme Court in the case of Pannalal Binjraj v. Union of India, and to the following passage from the judgment of Mr. Justice Bhagwati at page 581 :

'It may be noted, however, that in the passage at page 719 of the majority judgment in Bidi Supply Co. v. Union of India, this court regarded the benefit conferred on the assessee by these provisions of sections 64(1) and (2) of the act as a right and it is too late in the day for us to say that no such right to be assessed by the Income-tax Officer of the particular area where he resides or carries on his business is conferred on the assessee. This right, however, according to the authorities above referred to, is hedged in with the limitation that it has to yield to the exigencies of tax collection.'

15. I am in respectful agreement with the view taken by Beaumont, C.J., that the expression 'case' in section 5(2) as it then stood did not cover an assessment which had been completed. The expression 'cases or classes of cases' which at present appears in sub-section (2) of section 5 has been used in the same sense in which that expression was used in the old sub-section (2) of section 5 which came up for consideration in Dayaldas Kushiram's case. In my view, the expression ' cases or classes of cases' in section 5(2) does not refer to completed assessments. I may, however, observe that after an assessment has been completed a notice may be issued by the Income-tax Officer under section 34 and the case may be revived. After it is so revived it becomes a pending case and can be regarded as a 'case' within section 5(2), but until it is so revived, it cannot be regarded as a 'case' within the meaning of that section. If the Central Board of Revenue desires that a Commissioner of Income-tax should be appointed under the provisions of sub-section (2) of section 5 to exercise his functions in respect of assessments already completed, it is not powerless to do so. The words 'such persons or classes of persons' appearing therein are wide enough to cover the same.

16. The result is that under the order passed on 16th July, 1953, by the Central Board of Revenue and under the order dated 22nd July, 1953, passed by the Commissioner of Income-tax (Central), Bombay, the Additional Income-tax Officer, Section V (Central), Bombay, would not have the jurisdiction, right or authority to issue notices under section 34 in respect of the assessments for the assessment years 1946-47, 1947-48 and 1948-49, which has been completed prior to the dates of the said orders and to re-assess the petitioner in respect of those years as he has purported to do.

17. In the course of the affidavit in reply put in on behalf of the respondents it has been contended that the question as regards the jurisdiction of the Additional Income-tax Officer, Section V (Central), Bombay, to issue notices under section 34 and to assess the petitioner was not taken by the petitioner before that Officer. Ordinarily, if such a point has not been taken before the authority dealing with the matter, the petitioner would be precluded from taking that point on a petition for the issue of a high prerogative writ in connection with the orders passed by that authority. In view of the fact that important questions of law have been raised on the present petition the respondents have not pressed that point before me.

18. In the result, the petitioner is entitled to a writ of certiorari quashing the order of re-assessment passed by the Additional Income-tax Officer, Section V (Central), Bombay, in respect of the assessment years 1946-47, 1947-48 and 1948-49.

19. The petitioner has failed on a number of points raised by him and the fair order to make in connection with costs would be that each party should bear its own costs of the petition.


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