CHANDRA REDDY, C.J. - These four appeals are filed against the order of Umamaheswaram, J., quashing the levy of penalties made by the Income-tax Department.
The facts giving rise to the appeals may be briefly set out. The respondent is a limited company, plying stage carriages for hire in the Cuddapah District. For the assessment year 1948-49, the assessee submitted its return showing an income of Rs. 59,870. The Income-tax Officer could not accept this return, as he felt that it did not represent its true income and he estimated it at Rs. 1,86,276 and levied a tax of Rs. 87,986-2-0. For the succeeding year, the income returned by the assessee was Rs. 93,060. This was also rejected by the Income-tax Officer, who computed the taxable income at Rs. 1,37,368, and levied a tax of Rs. 54,769-2-0. Demand notices for the two years were served on the managing director of the company on September 2,1950, and the company was required to pay the taxes on or before October 10, 1950.
Against these assessments, the assessee filed appeals before the Appellate Assistant Commissioner. Pending them, it moved the Income-tax Officer to stay the collection of tax under section 45 of the Income-tax Act.
The Income-tax Officer refused to comply with this request after considering the attendant circumstances and informed the assessee that if the entire tax due from it was not paid on or before November 24, 1950, he, the Income-tax Officer, would be constrained to levy a heavy penalty under section 46(1) without further intimation.
The assessee next approached the Inspecting Assistant Commissioner for the same relief but unsuccessfully.
Lastly, it moved the Commissioner for permission to pay the tax in easy instalments. The Commissioner permitted the assessee to pay the entire tax in three instalments, the first instalment before January 13, 1951, the second before February 28,1951, and the last before March 31, 1951.
In spite of this, the assessee had not paid any part of the tax. The Income-tax Officer, finding that the assessee had defaulted to pay the tax, proceeded to levy a penalty at five per cent. of the total amount on December 21, 1950. It may be mentioned here that when another application was filed before him for stay of collection of tax alleging that the Commissioner was moved for permission to pay it in instalments, the Income-tax Officer required the assessee to produce a copy of that petition and as that was not done, he could not accede to the request of the assessee. It appears that the assessee was served with a notice of the levy of penalty under section 29 of the Income-tax Act and as it could not be served personally on the managing director, service was effected by affixing it on the front door of the business premises of the registered office of the company on February 5, 1951. Notwithstanding this, neither the tax nor the penalty was paid by the assessee.
Because of the continuing default of the assessee, the Department levied a further penalty of Rs. 1,500 for each year. This was effected on February 1, 1951, as per the direction of the Commissioner in his order dated January 19, 1951, allowing the assessee to pay the tax in instalments.
Meanwhile, the Government of India promulgated a scheme of disclosures in October, 1951, and, taking advantage of this, the assessee disclosed incomes which were practically the same as those mentioned by it in its returns. The Appellate Assistant Commissioner accepted the incomes as disclosed by the assessee and directed imposition of taxes on that basis with the result that the income exigible to tax was considerably reduced. We are told that the assessee paid the tax as reduced in the year 1955, but not the penalties levied in 1951. Instead, it approached the Commissioner of Income-tax for relief under section 33A. Notwithstanding the fact that there was inordinate delay in filing this revision petition, namely more than four years, the Commissioner chose to condone the delay and give the assessee relief taking into account the circumstance that the managing director was bedridden, by reducing the penalty to Rs. 5,675 from Rs. 9,905.
Not satisfied with this, the assessee invoked the jurisdiction of this court under article 226 of the Constitution to remove the order of the Commissioner as also the levies made by the Income-tax Officer under section 46(1) in W.P. Nos. 893 to 896 of 1956.
The main attack against the levies was that there was no order passed by the Income-tax Officer before the notices under section 29 were served on the assessee and further there was no proper and valid service which would enable the Revenue to collect the levies.
Apart from refuting the allegations in this behalf, the writ petitions were opposed by the Department on the contentions that the petitioner (in the writ petitions) was guilty of laches in that there was a delay of more than four years in filing the petitions and that the jurisdiction exercised by the Commissioner was of an administrative character and as such was beyond the ambit of the High Courts power of supervision and control.
Umamaheswaram, J., who heard the petitions, overruled the opposition of the appellants in the view that no period of limitation was prescribed in article 226 of the Constitution, that even otherwise he was inclined to excuse the delay and secondly that the Commissioner acted judicially in dealing with a revision petition under section 33A of the Income-tax Act. He also thought that the notice of demand was unenforceable inasmuch as no order levying and specifying the penalty was passed. In support of this conclusion, he relied on a decision of a Division Bench of the Bombay High Court in N. N. Kotak v. Commissioner of Income-tax .
We are unable to agree with the learned judge that there was no order levying and specifying the penalty. Nor do we think that N. N. Kotak v. Commissioner of Income-tax is in point. There, the order passed by the Income-tax Officer was as follows : 'Tax not paid. Issue penalty notice.' It is plain that this did not specify the amount of penalty nor was any reason indicated as to why penalty was being levied. Unlike that, in the present case, the notice of demand quantified the penalty leviable under section 46(1). It has also pointed out the reason therefore, viz., the failure to pay the tax within the time given by the Department. It may be mentioned here that the notice issued by the Department was in terms of the form prescribed under section 29 of the Act. No further particulars could be furnished by the Department in a notice of demand issued under section 29. That apart, we were shown the order passed by the Income-tax Officer deciding to levy the penalty for the reason that the taxes were not paid within the time given by the Department. That being so, there was no substance in the submission that the absence of an order preceding the issue of a demand notice had vitiated the levy of penalty.
We think that the second point raised by the respondent is equally unsubstantial. It is apparent from the record that it was only when attempts to serve the managing director with notices of demand had failed that service by affixture to the door of the business premises was resorted to. We are unable to see how such service could be regarded as invalid. The learned judge expressed the opinion that it was not proper service for the reason that there was no personal service on the managing director. His opinion is founded on Myitkyina Trading Depot v. Deputy Tahsildar, Paramakudi. We do not think that this case serves to establish any such proposition. In the circumstances of that case, the learned judges felt that affixture of notice on the premises in which the business was carried on once upon a time was to 'reduce the service of notice to a meaningless ritual'. It was there found that the assessee was at that time in Rangoon when postal communications between which place and India were severed by war conditions and that the house, to the door of which the affixture was made, was not inhabited by any one. In such a situation, it was found that it was futile to look for the assessee at the place of residence or to claim that he could not be found at that place and so service by affixture under such circumstances could never be due service within the meaning of Order V, rule 17, and Order V, rule 19, of the Civil Procedure Code, and that the further requirements of Order XXIX, rule 2, were not satisfied in that case, Such a situation does not obtain here.
Admittedly, affixture was made to the door of the business premises. It could not be pretended that neither the staff nor the other directors could be aware of this. We will presently show that someone or other acting on behalf of the managing director was carrying on correspondence with the Department for extension of time for payment of taxes and taking steps to see that the assessee was not treated as a defaulter. Be that as it may, there was nothing illegal, irregular or improper in the service effected, for there was sufficient compliance with the provisions of Order XXIX, rule 2, of the Civil Procedure Code which deals with service of summons on a company. That rule is in these words :
'Subject to any statutory provision regulating service of process, where the suit is against a corporation, the summons may be served -
(a) on the secretary, or on any director, or other principal officer of the corporation, or
(b) by leaving it or sending it by post addressed to the corporation at the registered office, or if there is no registered officer then at the place where the corporation carries on business.'
It is precisely this that was done by the Department when they found that personal service could not be effected either by the Revenue Department to which it was originally entrusted or by the Income-tax Department itself. This is fully borne out by the evidence of the Income-tax Inspector, who was examined by the Department, before they had recourse to service by substituted service. Therefore, we are unable to subscribe to the theory that there was no valid service on the assessee. On these grounds alone, the writ petitions could be rejected.
There is another formidable obstacle in the way of the respondent and that is, the orders passed by the Commissioner are of administrative character and as such are outside the purview of this court under article 226 of the Constitution. The learned judge thought that section 33A of the Income-tax Act did not create any bar to the assessee obtaining relief under article 226, in view of the decision of the Supreme Court in Nagendra Nath v. Commissioner of Hills Division . He was of opinion that this ruling was opposed to the principle enunciated by their Lordships of the Judicial Committee in Commissioner of Income-tax v. Tribune Trust and in Edara Venkaiah v. Commissioner of Income-tax and in Sitalpore Colliery Concern Ltd. v. Union of India. But we do not think there is anything in Nagendranath v. Commissioner of Hills Division . which supports the view taken by him or to disagree with the authoritative pronouncement of the Privy Council in Commissioner of Income-tax v. Tribune Trust .
Their Lordships of the Supreme Court were dealing entirely with a different subject, namely, section 9 of the Eastern Bengal and Assam Excise Act (I of 1944). That section is cast altogether in a different mould and does not furnish any analogy to section 33A of the Income-tax Act. It is in dealing with such a situation that their Lordships decided that the jurisdiction exercised by the concerned tribunal was of judicial character. Sinha, J. (as he then was), who spoke for the court, summarised the position thus :
'Thus, on a review of the provisions of the Act and the rules framed thereunder, it cannot be said that the authorities mentioned in section 9 of the Act passed purely administrative orders which are beyond the ambit of the High Courts power of supervision and control.'
Their Lordships also had in mind the circumstance that there was no indication that any distinction was made by section 9 between the grounds of interference on appeal and in revision. They had further taken into account the other factors which pointed to the conclusion that the tribunals were acting in a judicial capacity when they passed orders under section 9 and under the rules framed under that section. In this connection, we cannot overlook the significant observation of their Lordships, namely :
'Whether or not an administrative body or authority functions as a purely administrative one or in a quasi-judicial capacity, must be determined in each case on an examination of the relevant statute and the rules framed thereunder.'
Bearing the principle enunciated in these observations, if we proceed to examine the scheme of the Income-tax Act, especially Chapter IV headed 'Deduction and Assessment' consisting of sections 18 - 39 inclusive, it becomes clear that the Commissioner was not performing any judicial or quasi-judicial functions while acting under section 33A. That chapter deals elaborately with the subject of 'Deduction and Assessment' and also prescribes the duties of the Income-tax authorities and the rights and obligations of the assessees. Be it noted, that the Income-tax Act confers a right of appeal on the assessee under section 30 and also power on the Commissioner to revise the orders of his subordinate officers either suo motu or on being moved by the aggrieved assessee. It may be incidentally mentioned that prior to 1941 no right was given to an assessee to move the Commissioner and the latter could call for the records of the subordinate officials suo motu and pass such orders as he thinks fit, of course, not prejudicial to the assessee. In 1941 sub-section (2) was inserted vesting a right in the assessee to approach the Commissioner for that purpose. The provision enabling the Commissioner to revise the orders of the subordinate officers is contained in section 33A and it runs as follows :
'(1) The Commissioner may of his own motion call for the record of any proceeding under this Act in which an order has been passed by any authority subordinate to him and may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit :
Provided that the Commissioner shall not revise any order under this sub-section if -
(a) where an appeal against the order lies to the Appellate Assistant Commissioner or to the Appellate Tribunal, the time within which such appeal may be made has not expired, or
(b) the order is pending on an appeal before the Appellate Assistant Commissioner or has been made the subject of an appeal to the Appellate Tribunal, or
(c) the order has been made more than one year previously.
(2) The Commissioner may, on application by an assessee for revision of an order under this Act, passed by any authority subordinate to the Commissioner, made within one year from the date of the order, (or within such further period, as the Commissioner may think fit to allow on being satisfied that the assessee was prevented by sufficient cause from making the application within that period), call for the record of the proceeding in which such order was passed, and on receipt of the record may make such inquiry or cause such inquiry to be made, and, subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit :....'
We are not concerned with the proviso under this sub-section.
It is manifest that this section created only an administrative machinery by which the Commissioner is empowered to rectify any mistake committed by the departmental officials. It is not couched in a language which is calculated to create any right in an assessee or define the limits of such a right.
It is useful to compare this section with section 33B which confer power on the Commissioner to revise the Income-tax Officers orders. Here, the Commissioner could pass an order to the detriment of the assessee. But, before he could do so, he should follow the procedure laid down by that section, viz., he should afford an opportunity to the assessee to show cause why an order should not be made to his prejudice. There can be little doubt that there is difference between the two sections (33A and 33B) in that, under section 33B, before the Commissioner could exercise his powers under that section against the assessee the latter must be given an opportunity to put forward his view point. This gives a clear indication that the functions performed by the Commissioner under the latter section are of a quasi-judicial character. Thus, there is a contrast between this jurisdiction and that created by section 33A in that in the latter the essential elements of section 33B, namely, right of hearing and right of appeal are absent, thus indicating the nature of the machinery set up by that section. That apart, under section 33B a right of appeal is provided to the aggrieved assessee to the Income-tax Appellate Tribunal against the order of the Commissioner.
The same result could also be achieved by comparing section 33A with section 30, which gives a right of appeal to the assessee against orders passed by the Income-tax Officers under the various sections of the Act. The various orders against which appeals lie to the Appellate Assistant Commissioner are indicated in that section 30(1) and the procedure to the followed by the Appellate Assistant commissioner is set out in section 31. It is seen that section 30 provides the right of appeal to an assessee against the assessment made by a Income-tax Officer and also the period within which the appeal should be brought and, as we have already pointed out, section 31 defines the power and duties of the Appellate Assistant commissioner in regard to the hearing of the appeal.
An examination of these and other provisions of Chapter IV would only lead to the view that the Commissioner, while acting under section 33A, is not discharging any duties of a judicial character. It should be borne in mind that the Income-tax Act is a self-contained Act and is a code in itself and the obligations, rights and liabilities of the assessee should be determined with reference to the provisions contained in the Act. In Commissioner of Income-tax v. Tribune Trust their Lordships the Privy Council ruled that an assessee 'could not claim any relief as of right under section 33 ', which corresponds to the present section 33A as, in their Lordships opinion that section is intended to provide the 'administrative machinery by which a higher executive officer may review the acts of his subordinates and take the necessary action upon such review'.
This was followed by Sinha, J., (as he then was), in Sitalpore Colliery Concern Ltd. v. Union of India . The learned judge pointed out that in section 33A, as distinguished from others, such as sections 30 and 33B, there was no express provision for hearing the assessees, because the Commissioner was performing administrative functions.
To a like effect is the judgment of our learned brother, Jaganmohan Reddy, J., in Edara Venkaiah v. Commissioner of Income-tax which has also called in aid for its support the ruling of the Privy Council in Commissioner of Income-tax v. Tribune Trust.
We feel that the pronouncement of their Lordships of the Privy Council could leave no room for doubt as to the nature and character of the duties performed by the Commissioner. That being the position, the order of the Commissioner is not subject to removal on certiorari.
The learned judge thought that even if it were so, the order of the Income-tax Officer could be quashed. But, we cannot ignore the fact that has become merged in the order of the Commissioner. It must be noted that the Department is now trying to collect only the amount due by the assessee as revised by the Commissioner. But, if the attempt is to have the order of the Commissioner removed, we do not think that there will be justification to exercise the extraordinary jurisdiction of this court under article 226 bearing in mind the fact that the orders questioned were passed by the Income-tax Officer as far back as 1951. We feel it difficult to accept the explanation offered by the assessee that it was because the managing director was in Madanapalle hospital that he could not approach this court for the relief asked for in the writ petitions earlier. Surely, the presence of the managing director was not necessary for filing the writ petitions. He could have instructed other directors to move in the matter. Moreover, it is clear from the correspondence that passed between the assessee and the Department that there were other people who were acting for and on behalf of the assessee in taking steps for getting extension of time for payment of the taxes and in seeing that the assessee was not treated as a defaulter. Nothing prevented the other directors to file the petitions under article 226. It is also pertinent to remember that in the beginning of 1955 itself the revision petition was filed under section 33A. So, this is another hurdle in the way of the respondent.
It was lastly urged by Sri Bhujanga Rao, learned counsel for the respondent, though this contention does not seem to have been advanced before the learned judge, that when an appeal was pending before the Appellate Assistant Commissioner, the Income-tax Officer ought not to have treated the assessee as a defaulter but should have given him time for payment of the amount. We do not think that we can give any weight to this contention. Section 45 of the Income-tax Act does not give an absolute right to an assessee who has preferred an appeal, to get an order treating him as not in default, de hors the discretion that is vested in the Income-tax Officer under that section. It is true that the officer concerned could not exercise the discretion vested in him by that section arbitrarily or capriciously. But, at the same time, it could not be said that he had no discretion at all to refuse to stay collection of the tax. If the assessee pays the admitted amount and offers security for the disputed amount and yet the concerned officer refuses to give further time for the payment of the amount in dispute and treats him as a defaulter, it may then be said that it is a capricious exercise of the discretion. But that is not the position here. Nothing was paid by the assessee in spite of the warning given by the officer concerned in November, 1950, that in the event of its not paying the amount it would be treated as a defaulter within the meaning of section 45 and the Commissioner gave it permission to pay the amount in instalments. It was only in 1955 that the assessee chose to comply with the demand of the Department. In these circumstances, we do not think that there is any scope for the contention that the Income-tax Officer was not justified in treating the assessee as a defaulter or to invoke the doctrine of justice, equity and good conscience.
For these reasons, we cannot uphold the judgment under appeal. In the result, these appeals are allowed, but, in the circumstances of the case, we make no order as to costs.