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Segu Buchiah Setty Vs. Commissioner of Income-tax, Mysore - Court Judgment

LegalCrystal Citation
Overruled ByCommissioner of Income Tax, Mysore Vs. Segu Buchiah Setty
SubjectDirect Taxation
CourtKarnataka High Court
Decided On
Case NumberIncome-tax Referred Case No. 19 of 1964
Judge
Reported in[1966]62ITR767(KAR); [1966]62ITR767(Karn)
ActsIncome Tax Act, 1922 - Sections 22, 22(2), 22(4), 23(2), 23(4) and 27
AppellantSegu Buchiah Setty
RespondentCommissioner of Income-tax, Mysore
Advocates:K. Srinivasan, Adv.
Excerpt:
.....made by her to join the matrimonial home has failed which shows that she has not deserted, on the contrary it is the appellant who has deserted her. - on failure to produce them, the income-tax officer made an assessment under section 23(4). 2. the assessee then asked for cancellation of the assessment under section 27 on the ground that there was sufficient reason for non-compliance with the notices issued under section 22(2) and under section 22(4). the income-tax officer, who held that there was no sufficient cause for non-compliance with the notice served under section 22(2), was however of the opinion that there was sufficient cause for non-compliance with the notice served under section 22(4). but, being of the opinion that the cancellation of the assessment was not..........officer having recorded a finding that there was sufficient case for non-compliance with the notice issued under section 22(4) was not to proceed to make a fresh assessment even though there was no sufficient cause for non-compliance with the notice under section 22(2) ?' 4. section 27 under which the assessee sought the cancellation of the assessment reads : '27. where an assessee within one month from the service of a notice of demand issued as hereinafter provided, satisfies the income-tax officer that he was prevented by sufficient cause from making the return required by section 22, or that he did not receive the notice issued under sub-section (4) of section 22, or sub-section (2) of section 23, or that he had not a reasonable opportunity to comply, or was prevented by.....
Judgment:
1. This reference under section 66(2) of the Income-tax Act, 1922, involves the interpretation of section 27 of the Act. In respect of the assessment years 1953-54 and 1954-55, the assessee produced no return, although called upon to do so under section 22(2). He was thereupon served with a notice under section 22(4) and called upon to produce his accounts. On failure to produce them, the Income-tax Officer made an assessment under section 23(4).

2. The assessee then asked for cancellation of the assessment under section 27 on the ground that there was sufficient reason for non-compliance with the notices issued under section 22(2) and under section 22(4). The Income-tax Officer, who held that there was no sufficient cause for non-compliance with the notice served under section 22(2), was however of the opinion that there was sufficient cause for non-compliance with the notice served under section 22(4). But, being of the opinion that the cancellation of the assessment was not possible, unless there was sufficient cause for non-compliance with both the notices, he refused to cancel the assessment.

3. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal concurred in this view, and the question which were called upon to decide in this reference reads :

'Whether the Income-tax Officer having recorded a finding that there was sufficient case for non-compliance with the notice issued under section 22(4) was not to proceed to make a fresh assessment even though there was no sufficient cause for non-compliance with the notice under section 22(2) ?'

4. Section 27 under which the assessee sought the cancellation of the assessment reads :

'27. Where an assessee within one month from the service of a notice of demand issued as hereinafter provided, satisfies the Income-tax Officer that he was prevented by sufficient cause from making the return required by section 22, or that he did not receive the notice issued under sub-section (4) of section 22, or sub-section (2) of section 23, or that he had not a reasonable opportunity to comply, or was prevented by sufficient cause from complying, with the terms of the last mentioned notices, the Income-tax Officer shall cancel the assessment and proceed to make a fresh assessment in accordance with the provisions of section 23.'

5. Mr. Srinivasan for the assessee contends that the cancellation of the assessment under this section was imperative, if, notwithstanding there being no sufficient cause to comply with the notice issued under section 22(2) there was sufficient cause for non-compliance with the notice issued under section 22(4), and that it does not make it necessary for the assessee to prove that there was sufficient cause for non compliance with both the notices.

6. It is clear from the provisions of section 27 that the cancellation of the assessment under its provisions is imperative if the case falls within any one of its parts. What it provides is that it shall be so cancelled in a case where a assessee was prevented by sufficient cause from making the return under section 22 and also in a case where a notice issued under section 22(4) is not received and likewise in a case where a notice issued under section 23(2) is not received. It is equally clear from the second part of this section that the assessment should also be cancelled in a case where there was no reasonable opportunity to comply with or the assessee was prevented by sufficient cause from complying with, a notice issued under section 22(4), or with a notice issued under section 23(2).

7. The provisions of this section are not cumulative but disjunctive and so the assessee can claim the cancellation of the assessment on one of the many grounds on which such cancellation could be sought under the section. So, what should follow is that, even if there was no sufficient reason for non-compliance with a notice issued under section 22(2), so long as there was sufficient reason for non-compliance with the notice issued under section 22(4), the assessee could ask for the cancellation of the assessment.

8. The argument pressed upon us by Mr. Rajasekhar Murthy that no cancellation of the assessment is possible unless, in addition to there being sufficient cause for non-compliance with the notice under section 22(4) there was also sufficient cause for non-compliance with the notice under section 22(2), overlooks the importance of the word 'or' occurring after the words 'that he was prevented by sufficient cause from making the return required by section 22' in the section.

9. We are, therefore, of the opinion, that our answer to the question referred to us should be in favour of the assessee. Our answer is that the Income-tax Officer, having recorded a finding that there was sufficient cause for non-compliance with the notice issued under section 22(4), was bound to cancel the assessment made under section 23(4) and to proceed to make a fresh assessment even though there was no sufficient cause for non-compliance with the notice under section 22(2).

10. The assessee will get his costs in the reference. Advocate's fee, rupees Two hundred and fifty (Rs. 250).

11. Question answered in favour of the assessee.


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