JAGANMOHAN REDDY J. - This writ petition has been referred to us by our learned brother, Seshachalapati J., having regard to the importance of the case.
The petitioner seeks the issuance of a writ of certiorari of quashing the order of the Commissioner of Income-tax, Con. No. 41 of 1960, dated February 1, 1962, and to pass such further or other appropriate order or orders as this honble court may deem it necessary.
The facts relevant for the purposes of determining the questions raised before us may now be briefly state : The petitioner, who is a refugee from Lahore, is the proprietor of the firm, Devi Dayal Co., carrying on business at Delhi as successor to Himatlal Fateh Mohammad & Co., which latter firm was being assessed at Dhanbad in Bihar State. After the petitioner had succeeded to this firm, he made an application to the Central Board of Revenue (hereinafter called the Board) for a transfer of the case of that firm under section 5(7A) of the Income-tax Act, 1922 (hereinafter called the Act) and after correspondence between the representative of the petitioner with the Board, the Board by its order C. No. 29A(97)-IT/50 dated May 12, 1951, instructed the Commissioner of Income-tax, Bihar and Orissa, Patna, to cancel the assessment already made in the case of Himatlal Fateh Mohammad & Co. (successor M/s. Devi Dayal & Co.) and to 'transfer the records of the case to the Commissioner of Income-tax, Delhi, Rajasthan, Ajmer and Madhya Bharat, Delhi, for the purposes of making a fresh assessment, provided a formal security bond is executed for payment of the tax which may be found due'. Subsequent to this communication, the assessments were evidently being made by the Income-tax Officer at Delhi till 1955. Thereafter, it appears that the Income-tax Officer at Delhi had tried to serve certain notices and a representative of the petitioner, one Narinder Nath Chopra, by his letter dated December 3, 1957, intimated the officer as follow :
'That the assessee, Shri Devi Dayals address has already been furnished to the predecessor of the learned Income-tax Officer which is as follow :
Shri Devi Dayal, F-2-886, Somajiguda, Hyderabad-Deccan.
He having permanently shifted to Hyderabad-Deccan, he could not possibly receive any notice sent to him on his old address.'
Pursuant to this information received by the Income-tax Officer, the said officer by his letter dated July 27, 1959, addressed to the petitioner to his Hyderabad address, asked whether he had any objection for the transfer of the assessment records to the Income-tax Officer, Hyderabad, who had jurisdiction over him. It is stated in the counter-affidavit of the second respondent that no reply was received from the assessee raising any objection for the transfer of his file to the Income-tax Officer, Hyderabad, in spite of specific opportunity being afforded in the above letter. At this stage, it may also be stated that, prior to this letter, two letters appear to have been sent to the petitioner because it is found from the letter of the Income-tax Officer of 21st January, 1958, asking the petitioner to let him know whether he had any objection if his pending assessment records are transferred to the Income-tax Officer, Hyderabad, for necessary action, that such a letter was sent on 11th January, 1958, to which no reply was received and, consequently, by the letter of the 21st January, 1958, the officer asked again the petitioner to give his reply in writing by February 4, 1958. On February 3, 1958, the petitioners counsel, Dewan Narendranath Chopra, represented to the Income-tax Officer, New Delhi, as follow :
'In response to the letter alluded to above, it is to be stated that Hyderabad stay of the assessee is now almost coming to an end, that he would be resuming his stay and activities in Delhi soon hereafter. The transfer of the case to Hyderabad is not warranted.'
Subsequent to this letter, again the officer wrote the letter to which we have adverted, viz., the one dated July 27, 1959, asking the petitioner to state his objections to the transfer of the assessment records to the Income-tax Officer, Hyderabad, who had jurisdiction over him. A reply was asked to be sent within a week. It now appears that a reply was in fact sent on August 29, 1959, by the petitioner in which, apart from representation relating to the assessments already made, he, inter alia, asserted that his principle office of business is situate at 65/16, Rohtak Road, Delhi, that he went to Hyderabad temporarily on account of certain business exigencies, that the Hyderabad Income-tax Officer had no jurisdiction over him since the principal place of business is situate at Delhi and that the assessment records should not be transferred. From the record, it appears that after the receipt of this letter, the Income-tax Officer addressed the Commissioner of Income-tax at New Delhi for steps being taken for determining the place of assessment to be at Hyderabad. In the counter, the second respondent submits that while these proceedings were being taken at Delhi, it came to the notice of the Income-tax Officer, Special Survey Circle, Hyderabad, in April, 1960, that the petitioner was carrying on substantial business and had entered into a number of transactions of purchase and sale of evacuee properties at Hyderabad to the tune of about 141 lakhs of rupees, that he took on lease from the Government (State) Deccan Porcelain and Potteries Ltd., Tandur, in 1955 and that he also floated a concern in the name and style of Andhra Mines and Industries (P.) Ltd., Hyderabad, of which he was one of the directors and that he was residing at Hyderabad. In view of this, notices under section 22(2) of the Act for the assessment year 1960-61 were issued to the petitioner and the Andhra Mines and Industries (P.) Ltd., and served on the assessee by the income-tax inspector who was informed by the petitioner at the time of service that he was being assessed at Delhi. Thereupon, the Income-tax Officer, Hyderabad, informed the Income-tax Officer, New Delhi, that the business activities of the assessee are being centered at Hyderabad and proper investigation can be carried on if the assessments are done at Hyderabad and suggested that the case should be transferred to him. The Income-tax Officer at New Delhi agreed with the report of the Income-tax Officer at Hyderabad, and the Commissioner of Income-tax at Delhi was accordingly informed regarding the proposal to transfer the assessment records to Hyderabad. Thereafter, the Commissioner of Income-tax, New Delhi, by his letter dated January 19, 1961, requested the Commissioner of Income-tax, Hyderabad, to inform him whether he has any objection for the proposed transfer of the records to his charge. Since the Commissioner of Income-tax by his letter dated February 2, 1961, has agreed for the transfer of the case papers of the assessee to Hyderabad, the file was thereafter sent to the Income-tax Officer, Hyderabad. After the receipt of the records, the Commissioner made over the case to the Income-tax Officer, Income-tax-cum-Wealth-tax Circle No. 1, Hyderabad. Subsequently, notices appear to have been issued under section 14(2) of the Wealth-tax Act, under section 13(2) of the Expenditure-tax Act and under section 34 of the Income-tax Act to Messrs. Devi Dayal & Co. Pursuant to these notices, the assessee filed applications dated April 27, 1961, under section 64 of the Act before the Income-tax Officer objecting to the place of assessment at Hyderabad and requested to transfer the assessments to Delhi on the ground that his principal place of business was at Delhi, that his counsel resides at Delhi and that his account books are at Delhi. He also challenged the jurisdiction of the officer to make assessments for these years. After this, notices for 1961-62 were also issued to the firm Devi Dayal & Co., as well as Devi Dayal, individual. Since the place of assessment was objected to, the Income-tax Officer referred the case to the Commissioner of Income-tax, who by his letter dated January 23, 1962, informed the petitioner to appear before him on January 31, 1962, at 11 a.m. with all evidence, if any, in support of his objections for the determination of the place of assessment and for transfer of the case to New Delhi on the ground that the principal place of business was at New Delhi. He was also informed that if he had failed to appear on the above date, it would be construed that he has no objections. His letter was served on the petitioner on January 26, 1962, and on the next day, he wrote to the Commissioner, Income-tax, stating that as he had a fracture in the ankle, he could not appear and asked for three weeks adjournment. This letter was received on January 29, 1962. But, on the due date, viz., January 31, 1962, no one appeared on behalf of the petitioner and since the application for adjournment was not accompanied by any medical certificate, the Commissioner took up the matter and communicated to the petitioner by his letter Con. 41/60, dated February 1, 1962, intimating him that on a careful consideration of the facts it was clear that the petitioners business activities as also his place of residence has since 1955 been shifted from Delhi to Hyderabad, that the Commissioners of Income-tax at Delhi, and at Hyderabad, are of the view that the petitioners case falls to be assessed at Hyderabad in view of the provisions of section 64 of the Act, that as required, he was given an opportunity under the proviso to section 64(3) of the Act to represent his views; but if he was not able to attend personally, he might have furnished the desired explanation or objection through a representative or in writing; but since he had already furnished his contentions against the assessment proceedings being conducted at Hyderabad in his applications dated April 27, 1961, and August 25, 1961, addressed to the Income-tax Officer, Hyderabad, and the reasons regarding the correct place of assessment communicated in those applications were duly considered; but having regard to the facts gathered by him, the petitioner was residing and carrying on business activities at Hyderabad, since 1955, and he continued to do so even now and as such, he finally stated that the proper place of assessment under section 64(3) of the Act was accordingly determined as Hyderabad and falling within the jurisdiction of the Income-tax Officer, Income-tax-cum-Wealth-tax Circle No. 1, Hyderabad. Attached to this letter was a statement showing the position of the assessment proceedings from the beginning till that date in respect of Messrs. Devi Dayal & Co. (Unregistered firm) and Shri Devi Dayal (Individual) at Delhi and at Hyderabad. For the purposes of disposal of this petition, it is not necessary to go into the details of the assessment and the several steps taken from time to time relating thereto either under section 27 or under section 34 of the Act.
In this petition, the learned advocate for the petitioner contends inter ali :
(1) that the order of the Board of Revenue dated May 12, 1951, transfering the case of the petitioner to the Commissioner of Income-tax, New Delhi, was made under section 5(7A) of the Act; as such that when once the order is made under section 5(7A) of the Act, neither the Commissioner of Income-tax at Hyderabad nor the Commissioner at New Delhi has jurisdiction to determine the place of business under section 64(3) by virtue of the inhibition contained in section 64(5) of the Act;
(2) that even if the above contention is negatived, the provisions of section 64(3) have not been compiled with inasmuch as the petitioner was not given an opportunity, and, if given, it was not given by both the Commissioners, namely the Commissioner at Hyderabad as well as at Delhi; and, in any case, he was not given a reasonable opportunity;
(3) that if it be held that the order of the Board transfering the records to the Commissioner of Income-tax at Delhi was not an order under section 5(7A) of the Act, it should be held that it is an order under section 5(2) and that as long as that order is there, the determination of the principal place of business cannot be made under section 64(3).
The learned advocate for the department contends that the order of the Board dated May 12, 1951, is not an order of transfer within the meaning of section 5(7A) of the Income-tax Act nor is it an order under section 5(2) because the Board can only make over the case where there are more than one Commissioner for the same area or a new Commissioner is appointed for any unspecified area. He also contends that, in any case, the impugned order under section 64(3) in purely an administrative order over which this court has no jurisdiction. With respect to the contention that the petitioner was denied an opportunity under the proviso to section 64(3), the learned advocate contends that the provision nowhere specifies either that both the Commissioners should meet together and given an opportunity or as the learned advocate for the petitioner contended during the course of his arguments that a personal hearing should be given or that the petitioner should be given an opportunity by both the Commissioners in exercise of what the petitioners advocate termed his right to create a disagreement between the Commissioners, so that the case may be referred to the Board under the provisions of section 64(3) of the Act.
In considering these several contentions it is necessary to bear in mind the relevant provisions of section 5 and 64, which are as follow :
'5. (2) The Central Government may appoint as many Commissioners 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 such cases or classes of cases Central Board of Revenue may direct, and where such directions have assigned to two or more Commissioner 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 of Revenue may make for the distribution and allocation of work to be performed.'
Section 5(7A :
'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.'
Explanation. - In this sub-section case in relation to any person whose name is specified in the order of transfer means all proceedings under this Act in respect of any year which may be pending on the date of the transfer, and includes all proceedings under this Act which may be commenced after the date of the transfer in respect of any year....
(8) All officers and persons employed in the execution of this Act shall observe and follow the orders, instructions and directions of the Central Board of Revenu :
Provided that no such orders, instructions or directions shall be given so as to interfere with the discretion of the Appellate Assistant Commissioner in the exercise of his appellate function.'
'64. Place of assessment. - (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.
(2) In all other cases, an assessee shall be assessed by the Income-tax Officer of the area in which he resides.
(3) Where any question arises under this section as to the place of assessment, such question shall be determined by the Commissioner, or, where the question is between places in more States than one, by the Commissioners concerned, or, if they are not in agreement, by the Central Board of Revenu :
Provided that, before any such question is determined, the assessee shall have had an opportunity of representing his view :
Provided further the place of assessment shall not be called in question by an assessee if he has made a return in response to the notice under sub-section (1) of section 22 and has stated therein the principle place wherein he carries on his business, profession or vocation, or if he has not made such a return shall not be called in question after the expiry of the time allowed by the notice under sub-section (2) of section 22 or under section 34 for the making of a retur :
Provided further that if the place of assessment is called in question by an assessee the Income-tax Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under this sub-section before assessment is made.
(4) Notwithstanding anything contained in this section, every Income-tax Officer shall have all the powers conferred by or under this Act on an Income-tax Officer in respect of any income, profits or gains accruing, or arising or received within the area for which he is appointed.
(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 reassessment 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, or
(b) where by any direction given or any distribution or allocation of work made by the Commissioner of Income-tax under sub-section (5) of section 5 or in consequence of any transfer made under sub-section (7A) of section 5, a particular Income-tax Officer has been charged with the function of assessing that assessee, or
(c) who or whose income is included in class of persons or a class of incomes specified in any notification issued under sub-section (6) of section 5,
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 may be.'
It may be stated that these two sections were amended from time to time, and though section 5 deals with the income-tax authorities, the powers conferred on the Central Board of Revenue have also been specified therein. Before the Amendment Act of 1939, sub-section (2) of section 5 had not empowered the appointment of Commissioners of Income-tax without reference to area and it was for the first time by that Act that the Central Government was empowered to appoint not more than three Commissioners of Income-tax without reference to area and to the exclusion of any Commissioner appointed for an area, to discharge the functions of a Commissioner in respect of any case or classes of cases assigned to him by the Central Board of Revenue. The present sub-section (2) has been inserted by the Amendment Act XXV of 1953, with effect from 1st April, 1952. Again sub-section (7A) of section 5 was added by Act IV of 1940, and in 1956, by Amendment Act XXVI of 1956, as a result of the decision of the Supreme Court in the Bidi case to which we shall refer in detail, an Explanation was added to sub-section (7A) which Explanation is deemed always to have been inserted to enable the Board to transfer all proceedings in respect of any case which may be pending on the date of the transfer including all proceedings under the Act which may be commenced after the date of the transfer in respect of any order.
In so far as section 64(5) is concerned, sub-section (5) was added by Income-tax Law Amendment Act (Act XII of 1940), and subsequently clause (b) of sub-section (5) of section 64 was again amended by the Amendment Act XL of 1940, by not only inserting the words 'any direction given' in the first sentence, but also by insertion of provision relation to sub-section (7A) of section 5.
Bearing these amendments in mind, it is necessary to first dispose of the contention of the learned advocate for the department that the order under section 64 of the Act is merely an administrative order, which the courts are not called upon to adjudicate. In support of this contention, a passage of the Federal Court in Wallace Brothers & Co. Ltd. v. Commissioner of Income-tax was cited. That was a case where the place of assessment of the appellant, which was limited company incorporated in England, was being construed. Some portion of the profits of the company accrued in India, while the major portion of the profits accrued in England, and it was contended that under section 4(1)(b)(ii) of the Income-tax Act as amended in 1939 and the second part of section 4A(c) of the Act, the place of assessment in respect of income accrued in England could not be the place of assessment in India, having regard to the principle of extra territoriality. In those proceedings the jurisdiction of the Income-tax Officer to assess under section 64 was also challenged. On the first question it was held that there was no element of extra territoriality in the provisions of the Indian Income-tax Act, in the sense understood in relation to criminal law, and even if the provisions were in any measure extra territorial in their effect, it was not a ground for holding the relevant provisions of the Income-tax Act as ultra vires the Indian legislature. On the other question, viz., the jurisdiction of the officer assessing the appellant under section 64 and the applicability of that section, Spens C.J. delivering the judgment of the court observed at page 7 :
'It however seems to us open to serious doubt whether the appellant is entitled to raise this question at all and whether it is really a matter for decision by the court. Clause (3) of section 64 provides that any question as to the place of assessment shall be determined by the Commissioner or by the Central Board of Revenue. The third proviso to the clause enacts that if the place of assessment is called in question by the assessee, the Income-tax Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under this sub-section before assessment is made. These provisions clearly indicate that the matter is more one of administrative convenience than of jurisdiction and that in any event it is not one for adjudication by the court. The second proviso to clause (3) further enacts that the place of assessment shall not be called in question by an assessee if he has made a return in response to the notice under sub-section (1) of section 22, or if he has not made such a return, it shall not be called in question after the expiry of the time allowed by the notice for the making of a return. This confirms in the view that the scheme of the Act does not contemplate an objection as to the place of assessment being raised on an appeal against the assessment after the assessment has been made.'
This passage does not, however, support the contention of the learned counsel for the department that the order is an administrative order, which is not cognizable by the courts; as such it does not raise any question of jurisdiction. What was in fact observed was that the provision is one for administrative convenience and that no appeal was provided for, against any determination under section 64(3). and that where an assessment has in fact been made, no objection can be raised thereafter. In fact, in that case, the determination was challenged in appeal only before the Tribunal and since no appeal was provided for under the Act, their Lordships came to the conclusion that courts had no jurisdiction to determine that matter on reference under section 66(1) or (2) of the Income-tax Act. Though sub-sections (1) and (2) of section 64 deals with the place of assessment, in fact, a reading of these provisions really determine the Income-tax Officer who has jurisdiction to assess the assessee in relation to the place specified therein. That this is a right conferred on the assessee as also a provision for facilitating the income-tax authorities for the better assessment and collection of revenue, is evident from a plain reading of the section itself. This is further reinforced by the provisions of sub-section (3), because it prescribes the procedure for determining a question relating to the principal place of business or of residence, where such a question arises, and it further enjoins that before such determination could be made by the authorities specified therein, the assessee should be given an opportunity of representing his view. That the power conferred under section 64(1) and (2) of the Act is a right, has been dealt with as early as 1940 in the case of Dayaldas Kushiram v. Commissioner of Income-tax. It appears that, in that case, the assessee who carried on business in Bombay had received a notice under section 22 of the Act directing him to make a return to the Income-tax Officer appointed by the Commissioner of Income-tax in the Bombay Presidency and in respect of the year 1937-38, assessment was made. For the year 1938-39 the assessee received a notice to make a return, but no assessment had actually been made, nor was assessment made for the year 1939-40 to which the amended Income-tax Act applied. For the year 1937-38 the assessee was served with a notice under section 34 alleging that certain income had escaped assessment. As already noted, sub-section (2) of section 5 had by then been amended in 1939 and the Central Board of Revenue, therefore, had appointed a Commissioner of Income-tax (Central) with head-quarters at Bombay under the provisions of that sub-section, and the cases of the assessee were assigned to him. It is in respect of that assessment that the assessee had filed an application under section 45 of the Specific Relief Act of 1877, asking the cour : (a) to direct the Commissioner of Income-tax, Central, to forbear from exercising jurisdiction and passing orders in the assessment of the petitioner for the years 1937-38 and 1938-39; and (b) to direct the Income-tax Officer, Section II Central, to forbear from exercising jurisdiction, passing orders and continuing assessment proceedings for the assessment of the petitioner for the years 1937-38, 1938-39 and 1939-40. It may be remembered that at that time when the assessee had filed the suit, the provisions of sub-section (5) of section 64 had not been added. In the circumstances, it was held that in spite of the fact that sub-section (2) of section 5 had authorized the appointment of a Commissioner of Income-tax without reference to area, the assessment of the assessee by an Income-tax Officer, who had no jurisdiction, was invalid. In the course of judgment Beaumont C.J. observed at page 237 thu :
'In my opinion section 64 was intended to ensure that as far as practicable an assessee should be assessed locally, and the area to which an Income-tax Officer is appointed must, so far as the exigencies of tax collection allow, bear some reasonable relation to the place where the assessee carries on business or resides. There is no evidenca ethat there was any difficulty in restricting the area to which the Income-tax Officer, Section II (Central), was appointed to something much narrower than the Bombay Presidency, Sind and Baluchistan. Therefore, in my opinion, the Income-tax Officer, Section II (Central), is not the Income-tax Officer of the area in which the applicants place of the business is situate, and as there is such an officer in existence, namely, the Officer of Ward C., Section II, in my opinion, it is only the latter officer who can assess the assessee.'
Similarly, Kania J. on the same page observe :
'A plain reading of the section shows that the same is imperative in terms. It also gives to the assessee a valuable right. He is entitled to tell the taxing authorities that he shall not called upon to attend at different places and thus upset his business. Section 5, in terms defines income-tax authorities, deals with the appointment of various principal and subordinate officers and the distribution of work among them. That section has nothing to do with the assessee directly and does not prescribe the powers of the officers as regards the assessee. There is thus no apparent conflict between the two sections. The question is whether section 64 is controlled by section 5 so as to read with a proviso that section 64 is applicable, except to cases which are transferred to the Commissioner, Central, or the officers appointed by the Commissioner, Central, under him. In my opinion section 64 is not so controlled. The two sections can stand together without encroaching on each other and that natural construction should be adopted.
The words of section 64, Income-tax Act, clearly provide that the assessee shall be assessed by the Income-tax Officer of the area in which his place of business or residence is situate.'
These passages clearly indicate what we have already observed, namely, that the provisions of section 64(1) and (2) vest a right in the assessee to have his assessment made at the principle place of business, and in the case of any objection relating thereto, to have the same determined. It is probable as a consequence of this decision that sub-section (5) of section 64 was added, clauses (a) and (b) of which deal with the assignment of cases to Commissioners of Income-tax appointed without reference to an area or where a transfer is made by the Board under section 5(7A).
Their Lordships of the Supreme Court in Bidi Supply Co. v. Union of India, while citing the observations of Beaumont C.J. and Kania J. in Dayaldas Kushiram v. Commissioner of Income-tax, observed at page 722 thu :
'It will be noticed from the above passages that the learned judges treated the provisions of section 64 more as a question of right than as a matter of convenience only. It was for the above decision that Indian Income-tax Act, 1922, was amended by the Indian Income-tax (Amendment) Act, 1940 (XL of 1940), by adding to clause (b) of sub-section (5) of section 64 the words in consequence of any transfer made under sub-section (7A) of section 5...'
After setting out the provisions of sub-sections (5)(a) and (5)(b), Das C.J. proceeded to observe thu :
'It is thus clear from this amendment that the benefit conferred by the provisions of sub-section (1) and sub-section (2) is taken away and is to be deemed not to have existed at any time as regards the assessee with regard to whom a transfer order is made under sub-section (7A) of section 5.'
Of course, the question in that case was whether the omnibus order transferring cases under section 5(7A) was valid, and their Lordships held that it was not. This matter again came in for consideration by the Supreme Court in Pannalal Binjraj v. Union of India. Bhagwati J., after referring to the case of Dayaldas Kushiram v. Commissioner of Income-tax and the passage of Beaumont C.J. and Kania J. cited supra, posed this question at page 57 :
'It is, therefore, necessary to consider whether any such right is conferred upon the assessee by section 64(1) and (2) of the Act.'
After pointing out the provisions of section 64(3), the learned judge went on to say at page 58 :
'This provision also goes to show that the convenience of the assessee is the main consideration in determining the place of assessment. Even so the exigencies of tax collection have got to be considered and the primary object of the Act, viz., the assessment of income-tax, has got to be achieved.'
After considering the case of Dayaldas Kushiram v. Commissioner of Income-tax, Wallace Brothers & Co. Ltd. v. Commissioner of Income-tax and the case of the Supreme Court in Bidi Supply Co. v. Union of India, the learned judge observed at page 581 thu :
'.... 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.'
What considerations may prevail with the determining authority is a different matter. But, that it is a right conferred on the assessee can now admit of no doubt.
Though no doubt the Supreme Court in the case of Seth Teomal v. Commissioner of Income-tax observed that there is nothing in the Bidi Supply case which in any way detracts from the efficacy of the decision of the Federal Court in Wallace Brothers case, the emphasis in both the cases was the maintainability of an objection as to the place of assessment in an appeal against the assessment after the assessment has been made. In Dina Nath Hem Raj v. Commissioner of Income-tax the assessee who was carrying on business * at Calcutta was sought to be assesseed at Kanpur and an objection * was taken to the Income-tax Officer, Kanpur, making the assessment. The Income-tax Officer did not proceed in accordance with section 64(3) and it was, therefore, held that the assessment made by him was without jurisdiction.
In the case of Seth Teomal v. Commissioner of Income-tax the case of the assessee was assigned to the Income-tax Commissioner, Central, who is an officer appointed under section 5(2) without reference to any area; as such coming directly within clause (a) of sub-section (5) of section 64. The Commissioner allocated the case to one of the Income-tax Officers within his jurisdiction, who made the assessment in question. It was contended by the assessee that there was an illegal assumption of jurisdiction as the officer who made the assessment had no jurisdiction at all to make the assessment. It was also contended that if the Central Board of Revenue wanted to transfer the assessment proceedings from the Income-tax Officer, Rangpur, to the Income-tax Officer at Calcutta, it could only exercise that jurisdiction by making an order under section 5(7A) and not under section 5(2) of the Act, inasmuch as sub-section (7A) is a special provision and it necessarily excludes the operation of sub-section (2). Their Lordships did not accept this contention and held that the two sub-sections, viz., sub-section (2) and sub-section (7A), are complementary and operate in two separate spheres. Sub-section (2) is for the purpose of specifying as to which of the Commissioners would perform functions in respect of different areas, persons, incomes or cases or classes thereof, while sub-section (7A) confers a power on the Board to transfer any case from one Income-tax Officer to the other which can be done at any stage of the proceedings. In this view, it was held that after an order by the Central Board of Revenue under section 5(2) of the Act, the provisions of sub-sections (1) and (2) of section 64 have no application because of sub-section (5)(a) of section 64.
In the view we have taken, the simple question that falls for determination is, what is the nature of the order of the Board dated May 12, 1951. Is it an order under section 5(2) or an order under section 5(7A) of the Act. If it is an order falling under either of these two provisions, certainly in view of section 64(5)(a) and (b) it may be contended that the Income-tax Commissioner or Commissioners have no right to determine the matter under sub-section (3) of section 64. At this stage it may also be observed that Sri Kondaiah for the department argued that even if it is an order under section 5(7A) or section 5(2) the provisions of sub-section (3) of section 64 should be given full force and effect irrespective of the inhibition in sub-section (5). His reasoning is as follow :
Sub-sections (1) and (2) of section 64 deal with the place of business, where no dispute arises, and it is only in such cases where orders are made by the Board under section 5(2) or section 5(7A) that the Income-tax Officer is inhibited from entertaining jurisdiction contrary to the orders of the Board. But where a dispute arises that since the Board has been empowered even under sub-section (3) to determine the question in the event of there being disagreement between both the Commissioners, that power is not one which is in contemplation of sub-section (5)(b) of section 64. It is contended that section 64(3) is independent and does not embody a consequential power to be exercised in cases where any question arises under sub-sections (1) and (2) of section 64. This is said to be so as sub-sections (5) does not mention sub-section (3) as it does sub-sections (1) and (2). It is therefore argued that sub-sections (1) and (2) should be held to confine only to case where the assessee does not raise an objection but where an objection is raised the matter can be dealt with under sub-section (3) in spite of the fact that there is a transfer order under section 5(7A) by the Board. This proposition is demurred to by the learned advocate for the assessee as being destructive of the purpose for which sub-section (5)(b) has been enacted. Apart from the question that sub-section (3) is itself subject to the provisions of the section, the contention of the learned advocate for the department, if accepted, would amount to saying that if there is an order of the Board either under sub-section (2) or sub-section (7A) of section 5, the effect of sub-section (5) of section 64 could be nullified by the Commissioner or the Income-tax Officer raising the question and deciding the matter in the case of an inter-State determination by agreement of the Commissioners concerned. Prima facie, it would appear to us that the legislature could not in its wisdom have even unconsciously sown the seeds of indiscipline, for, that would in effect be the result, if we were to hold that an order of transfer under section 5(7A) or allotment of work under section 5(2) could be made inoperative under section 64(3) by the Commissioners merely agreeing to the determination of the place of assessment by either themselves or their subordinates raising the question.
We, however, find it necessary to express a final opinion on the question in the view we are taking of the order of May 12, 1951, viz., that it is neither an order under section 5(2) as contemplated under section 64(5)(a) nor under section 5(7A).
While so, Mr. Suryanarayana does not go to the length of saying that it is an order under section 5(2) for the purposes of the first part of section 64(5)(b) for the obvious reason that what is contemplated therein is the assignment of work to a Commissioner appointed without reference to area. Certainly he cannot contend that the Commissioner of Income-tax, Delhi, Ajmer and Rajasthan, is one such. But what he does contend is that it is nevertheless an order under section 5(2) and, consequently, the Income-tax Officers cannot deal with a matter which has been assigned by the Board to someone else. He is, however, unable to support this contention either by authority or by reference to any provisions of the Income-tax Act. The only provisions, as we have stated, are those contained in section 64, and none of those provisions have any reference to any other power under section 5(7A), it is obvious that the primary requisite for an order under that provision is that the Commissioner or the Board is empowered to only transfer from one Income-tax Officer to another, whether within the State by the Commissioner or within or without the State by the Board. The order in question is one which does not purport to transfer the cases of the petitioner to any Income-tax Officer. On the other hand, it purports to assign them to a Commissioner to be dealt with by him under the provisions of the Act.
Mr. Kondaiah contends that it is an order made under sub-section (8) of section 5, which empowers the Board to issue administrative directions to its subordinates and in exercise of the those powers the cases of the petitioners were transferred to the Commissioner. We are however clear in our minds that sub-section (8) does not empower the Board to transfer or assign cases from one Income-tax Officer to the other or from one Commissioner to the other. When the legislature has definitely made provision for such transfer or allocation either under sub-section (7A) or sub-section (2) of section 5, the general powers of direction and superintendence vested with the Board under sub-section (8) cannot be used for the same purpose as provided under sub-section (2) or sub-section (7A) of section 5. Whatever be the nature of the order, we do not think that the Board could act in issuing any instructions or directions which are not consistent with the provisions of the Act. In K.A. Meera Sahib Tharaganar, In re a Bench of the Madras High Court had occasion to consider the scope and ambit of section 5(8) of the Act. Suffice it to notice the observations of Rajamannar C.J. at pages 452 and 45 :
'In the first place, in our opinion. this provision, namely, section 5(8) does not contemplate orders, instructions and directions from the Central Board of Revenue to the assessing officer in any particular case. What is contemplated, we think, is the issue of the general orders. instructions and directions to guide the subordinate officers in the execution of the duties laid on them by the several provisions of the Act. In the absence of any allegation that in the case before us, any officer had followed any order, instruction or direction of the Central Board of Revenue in making any order adverse to the appellants, we do not think it necessary to embark on a general discussion of the validity of this provision.'
Earlier in the case of Justice Iqbal Ahmed, In re a Bench of the Allahabad High Court observed at page 17 :
'A Commissioner of Income-tax has no option but to obey departmental orders of the Central Board of Revenue; but it cannot possibly be said that his direction can be legally controlled inasmuch as the discretion is vested in him by statute and there is no statutory control of such discretion. A court or an official functioning as a court must exercise its discretion judicially; but that is the only form of control which is known to the law.'
Whatever administrative instructions may have been given, they cannot be contrary to the statute. The provisions of law vesting powers and conferring discretion on the income-tax authorities must be exercised judicially by the authorities in consonance with the statutes and the law declared by the High Court of the territory and the Supreme Court. The system of Government prevailing in this country fortunately rejects arbitrariness and subjects those in authority to the governance by the rule of law.
It appears to us in the view we have taken of the order of May 12, 1951, namely, that it is not one under section 5(7A) or though it is contended that it is one under section 5(2), it is certainly not one under that sub-section as contemplated under section 64(5)(b), to further consider under what provisions the transfer was made from the Commissioner of Bihar to the Commissioner of Delhi. That order was not, as we have stated already, an order of transfer from one Income-tax Officer to the other. It was an order directing the Commissioner of Bihar to cancel, on security being furnished, the ex parte assessment and to make over the case thereafter to the Commissioner of Delhi. The assessee himself admits that subsequently he has been filing his returns under section 22 till 1955 at Delhi. Therefore, the proviso to section 64(3) precludes him from challenging the assessments made by the Income-tax Officer, Delhi. Mr. Suryanarayana on behalf of the petitioner does not seek to challenge that order nor, as we have stated, are we concerned with that aspect of the matter. Once we have come to the conclusion that there is no order either under section 5(2) or section 5(7A), within the meaning of section 64(5)(a) or (b) there is no impediment in the provisions of section 64(1) or (3) being compiled with.
The next question is that inasmuch as the assessee has objection to the transfer, the question did arise for determination under sub-section (3) of section 64. Three point arise for conclusion, viz., whether an opportunity was in fact given, because it is contended by the learned advocate for the assessee that the disposal of the matter without giving an adjournment amounts to the assessee not being given an opportunity; secondly, that if the notice dated 23rd January, 1962, is deemed to be an opportunity given to him, it is not a reasonable opportunity inasmuch as an adjournment should have been granted; and, thirdly, that notice by one Commissioner alone is not sufficient, but notice should have been given by both the Commissioner; at any rate consultation with the Commissioner should have been made only after the assessee was given an opportunity by the Commissioner at Hyderabad, when alone he should make up his mind. It is only after this that the Commissioner, Delhi, should be consulted and he accepts the proposal thereafter that would form the determination of the question. On the first point, it cannot be said that the Commissioner acted without jurisdiction in proceeding to consider the matter on the date fixed for his making representations. It is argued that the proviso to sub-section (3) of section 64 confers a right on the assessee to be heard and that he should have been heard in person. We do not think that there is any substance in this contention. The words of the proviso merely give the assessee an opportunity for making representations. The language of the Income-tax Act in reference to other sections where hearing is to be given such as sections 31 and 33 would show that where the word 'hearing' is specifically used with reference to the appeals to the Appellate Assistant Commissioner and the Income-tax Tribunal, a representation can, in our view, be made either orally, if permitted, or by writing, or through a representative or even by an affidavit. As long as the assessee is given an opportunity to state his objections to the proposed determination of the place of assessment, that would satisfy the requirements of the proviso. When the Income-tax Commissioner at Hyderabad served a notice on him asking him to make his representations and even inviting him to be present at his office to do so, it does not mean that he could be deemed to have had an opportunity if he was heard in person. If he was unable to attend on the due date, he could have sent a written representation, affidavit or even authorized some one to represent him on his behalf. In this case, his representations against the transfer were before the Income-tax Commissioner. That apart, we cannot say that the Commissioner was not justified in treating his absence as non-compliance with the notice served on him to make representations, or that the petitioner (assessee) was not given an opportunity or that the Commissioner had not considered his representations. No medical certificate was in fact produced and, in the circumstances of the case, the Commissioner was perfectly justified in considering the matter, and, consequently, we are of the view that opportunity was given for making representations of the petitioner, with in the meaning of the proviso.
In Seth Kanhaiya Lal Goenka, In re a Bench of the Allahabad High Court had considered the question of what amounts to determination by the Commissioners, what is the procedure to be adopted between them and how the representations could be made. In that case, the question about the place of assessment was considered under section 64(3). The Income-tax Officer, before whom this question was raised, referred the matter to the Commissioner of Central and United Provinces for determination. The Commissioner by an order dated the 21st of October, 1935, asked the Income-tax Officer to obtain an affidavit from the assessee and an affidavit containing all the statements upon which the assessee objected to being assessed in the United Provinces was given. The contention of the assessee was that his principle place of business and his residence was in Calcutta and he should, therefore, be assessed there. As a result of that contention the Commissioner of Income-tax, Central and United Provinces, entered into correspondence with the Commissioner of Bengal and it was ultimately decide that so far as assessment of 1934-35 and 1935-36 were concerned they should be completed in the United Provinces at Meerut and assessments thereafter beginning from 1936-37 should be made in Calcutta. There was some misunderstanding by the Income-tax Officer of Meerut and he seemed to have transmitted the records for the years 1934-35 and 1935-36 to Calcutta. But the Income-tax Officer, Calcutta, drew the attention of the Meerut officer to the agreed order passed by the Commissioners of the two provinces and requested him to proceed with the assessments for the years 1934- 35 and 1935-36. The Income-tax Officer of Meerut then became apprised of the correct situation and proceeded with the assessment of 1934-35. The assessee continued to object to the jurisdiction of the Meerut Income-tax Officer, but the assessment for 1934-35 was completed on the 23rd June, 1937. Subsequently, an appeal to the Appellate Assistant Commissioner was taken challenging the jurisdiction of the Income-tax Officer, Meerut, and the matter came ultimately to the High Court under section 66(2).
It was first held that where an Income-tax Officer accepting the final order of the Commissioner or Commissioner or the Central Board of Revenue proceeds to make an assessment, the plea of jurisdiction cannot be raised before the Assistant Commissioner on appeal, and the High Court cannot deal with that question under section 66 of the Act. It was held that no right of appeal would lie against an order under section 64(3). On the facts and circumstances, it was also held that the assessee must be deemed to have been afforded an opportunity within the meaning of the proviso to sub-section (3) of section 64 of the Act, if he had given any affidavit called for by the Commissioner. It may be observed that in that case the Commissioner of United Provinces called for his representations and subsequently after correspondence, both the Commissioners had agreed on the question of place of assessment. It was not the case that both the Commissioners should give an opportunity for making representations or for personally being heard by either or both of them. At page 30 it was observed thu :
'The words occurring in the proviso are that the assessee should have had an opportunity of representing his views and not that the assessee should have been formally heard on his objection.... It was not necessary that the Commissioner, U.P., after he had consulted the Commissioner, Bengal, should have apprised the assessee of their joint decision and given him an opportunity of showing cause why that decision should not be given effect to.'
In our view, having regard to the provisions of section 64(3), the assessee cannot claim to have a right to be either heard personally or to make representations to both the Commissioners simultaneously with a view to getting a divergence of opinion. If one of them gives an opportunity and the assessee has, in fact, had an opportunity to make representations against the transfer, which is considered by the Commissioner, it is sufficient for the purpose of the proviso. In fact, in this case, not only did the Income-tax Officer at Delhi call upon the assessee to state his objections, not once but on several occasions and on one occasion the assessee did in fact state his objections, which were forwarded to the Commissioner, Delhi, but also the Income-tax Officer, Hyderabad, gave him that opportunity. Viewing this even in the light of the contentions addressed by the learned counsel for the petitioner, we are satisfied that the proviso to section 64(3) has been amply compiled with, that the consultations between the Commissioners did take place and that they agreed to the transfer.
Lastly, Mr. Suryanarayana contends that the order should be confined only to the cases arising from the date when he shifted to Hyderabad and that the cases before that date which were dealt with by the Income-tax Officer, Delhi, should be decided by him, because it would be matter of hardship and inconvenience to the assessee to bring in all evidence and witnesses from the place or places of business conducted by him at Delhi, which mainly consists of purchasing and selling of motor vehicles.
We may observe that this writ petition is not concerned with that aspect of the matter, and secondly that the order of the Commissioners determining the place of assessment, which has been challenged, clearly sets out in paragraph (3) that what has been determined is the assessees place of business since 1955. The operative portion of the order shows that the Commissioner has been finally satisfied that the assessees principle place of business since 1955 is Hyderabad, and that he accordingly determined the place of business as Hyderabad and falling within the jurisdiction of the Income-tax Officer, Wealth-tax Circle, Hyderabad. The notice of assessment specified therein dealt with the assessment of Devidayal & Co., unregistered firm for the years 1960-61 and 1961-62 and on the individual for the said years 1960-61 and 1961-62 under the Income-tax Act, the Wealth-tax Act and the Expenditure-tax Act. Apart from this, there is a notice under section 34 for the year 1952-53. In any case, as we have stated, we are not called upon to consider that question in this writ petition, because it is the jurisdiction of the Commissioner to determine the place of business that is challenged, and we are of the view that that order is valid and cannot be quashed.
In this view, the petition is dismissed with costs. Advocates fee Rs. 250.