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Mannilal Sagarmal Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberCivil Misc. Case No. 45 of 1950
Judge
Reported inAIR1957All649; [1957]32ITR15(All)
ActsIncome Tax Act, 1922 - Sections 23(4), 27, 30 and 30(1)
AppellantMannilal Sagarmal
RespondentCommissioner of Income-tax
Appellant AdvocateR.S. Pathak, Adv.
Respondent AdvocateS.C. Das, Adv.
Excerpt:
direct taxation - quantum assessment -section 30 sub section 1, sections 23 (4) and 27 of income tax act, 1922 - quantum assessment made by income -tax officer under section 23(4) - appeal against assessment - held, appeal can be on any ground other than one on basis of which an application under section 27 for cancellation of the assessment or a fresh assessment lies. - - the income-tax officer therefore proceeded to make a best judgment assessment under section 23 (4) of the act. commissioner of income-tax, [1953]24itr141(all) ,clearly lay down that those grounds of appeal cannot be entertained at the time of deciding an appeal against the quantum assessment under section 23 (4) of the act......which an assessee is entitled to ask for cancellation of the assessment and make a request for a fresh assessment under section 27 of the act. then there can be other grounds such as the jurisdiction of the income-tax officer to make the assessment or the absence of liability of the assessee on the ground of limitation. since the statement of the case, has nowhere mentioned the grounds which had been taken in appeal, we in answering the question have to frame the answer in such a way as to cover all such cases as might arise.4. on the whole, the impression given by the statement of the case is that assessment under section 23 (4) of the act had been challenged in appeal before the assistant commissioner only on one or more of those grounds which could have been taken in an application.....
Judgment:

V. Bhargava, J.

1. The question of law which has been referred to us in this reference is 'whether in the circumstances of the case as stated and in the absence of proceedings under Section 27 of the Income-tax Act, the Tribunal was right in law in refusing to look into the validity of the assessment made under Section 23 (4) of the Income-tax Act in appeal against the quantum assessment.'

2. The facts and circumstances in which this question arose are very brief and simple. For the assessment year 1943-44, the assessee had account books showing a net profit of Rs. 29,375. The Income-tax Officer called on the assessee to produce certain documents under Section 22 (4) of the Act. The accounts and documents required were net produced, and it was held by the Income-tax Officer that the assessee had deliberately suppressed them even though they existed. The Income-tax Officer therefore proceeded to make a best judgment assessment under Section 23 (4) of the Act. The assessee did not file any application under Section 27 of the Act for reopening the assessment and instead filed an appeal against the quantum assessment.

In this appeal the assessee sought to challenge the validity of the action taken by the Income-tax Officer in making the assessment under Section 23 (4) of the Income-tax Act. The Assistant Commissioner relying on a decision in Naba Kumar Singh v. Commissioner of Income-tax, Bengal : [1944]12ITR327(Cal) , rejected this ground of appeal holding that it could not he raised in the quantum appeal. This view of the Appellate Assistant Commissioner was upheld by the Appellate Tribunal. Thereupon the assessee moved an application under Section 66 (1) of the Act and the Tribunal referred to us the question mentioned above for our opinion.

3. In the statement of the case submitted by the Appellate Tribunal ho mention has been made of the grounds on which the validity of the assessment under Section 23 (4) of the Income-tax Act was challenged before the Appellate Assistant Commissioner by the assessee. The Tribunal did not further attach to the statement of the case any documents which could indicate to us the grounds which had been taken in that appeal for challenging the validity of the assessment. This has somewhat handicapped us in deciding this reference, as in our opinion it was necessary to know what the grounds were on which the validity of the assessment was being challenged in appeal.

The validity of the assessment could be challenged on various grounds. One set of grounds could be those on the basis of which an assessee is entitled to ask for cancellation of the assessment and make a request for a fresh assessment under Section 27 of the Act. Then there can be other grounds such as the jurisdiction of the Income-tax Officer to make the assessment or the absence of liability of the assessee on the ground of limitation. Since the statement of the case, has nowhere mentioned the grounds which had been taken in appeal, we in answering the question have to frame the answer in such a way as to cover all such cases as might arise.

4. On the whole, the impression given by the statement of the case is that assessment under Section 23 (4) of the Act had been challenged in appeal before the Assistant Commissioner only on one or more of those grounds which could have been taken in an application under Section 27 for cancellation of the assessment and for asking for a fresh assessment. So far as such grounds of appeal are concerned, the earlier decisions of this Court in Chhote Lal Gobardhandas v. Commissioner of Income-tax : [1953]23ITR272(All) and Padampat Singhania v. Commissioner of Income-tax, : [1953]24ITR141(All) , clearly lay down that those grounds of appeal cannot be entertained at the time of deciding an appeal against the quantum assessment under Section 23 (4) of the Act. In the former case it was held:

'An assessee may, under Section 30 (1) appeal against an order of refusal to make a fresh assessment under Section 27, but where the Income-tax Officer has made an assessment under Section 23 (4) of the Act, or, has made a fresh assessment under Section 27 the assessee can appeal under Section 30 (1) and object to the amount of income assessed or the amount of loss computed or to the amount of tax determined.'

The scope of the two appeals is therefore enitrely separate and, while in the case of one, the question for consideration is whether sufficient cause had or had not been made out for a fresh assessment, in the other, it is accepted that the Income-tax Officer was entitled to make the assessment under Section 23 (4) and the dispute merely relates to the merits of the case, i.e., whether the amount assessed was in excess or whether the right amount of Income-tax had been imposed on the assessee.

This view expressed in this case was not meant to be an exhaustive explanation of the scope of the two appeals. That view was expressed with particular reference to the facts of that case. In the present case, due to the vagueness of the facts included in the statement of the case, it has become necessary for us to define the exact scope of the two separate proceedings one arising from an application under Section 27 of the Act and the other from an appeal against the quantum of assessment under Section 23 (4) of the Act. Section 27 of the Act restricts itself to certain matters only. Under that section the assessee can challenge the assessment made under Sub-section (4) of Section 23 on the following grounds:

(1) That he was prevented by sufficient cause from making the return required by Section 22 or

(2) That he did not receive the notice issued under Sub-section (4) of Section 22 or

(3) That he did not receive the notice issued under Sub-section (2) of Section 23 or

(4) That he had hot had a reasonable opportunity to comply or was prevented by sufficient cause from complying with the terms of the last mentioned notices.

It is only if any one or more of these four circumstances exist that the assessee is competent to make an application under Section 27 and ask for cancellation of the assessment and a fresh assessment. These grounds can only be taken by an application under Section 27, and, if not put forward in that manner, they cannot be taken subsequently when an appeal is filed under Section 30 (1) of the Act against the assessment made under Section 23 (4) of the Act. On the other hand, other grounds on which the assessment made- under Section 23 (4) of the Act is sought to be challenged, can only be taken in the appeal filed against that assessment under Section 30 (1) of the Act, as there is no provision in Section 27 of the Act for challenging assessment on those grounds by an application filed under that section.

5. Consequently, our answer to the question referred to us is that in an appeal under Section 30 (1) of theIncome-tax Act against an assessment made by theIncome-tax Officer under Section 23 (4) of the Income-taxAct, it is open to the assessee to challenge the assessment or its validity on any ground other than thegrounds on the basis of which he could have madean application under Section 27 of the Income-tax Act forcancellation of the assessment and for a fresh assessment. In the circumstances of this case the partiesshall bear their own costs of the reference.


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