V. Bhargava, J.
1. The assessee during the year of assessment and the corresponding previous year was a resident of Bhilwara outside British India, so that proceedings for his assessment could be taken on the basis that he was a non-resident in British India. He held 8,390 shares in Bijay Cotton Mills, Ltd. situate at Bijaynagar in British India. The Income-Tax Officer of Ajmer Merwara issued a notice under Section 22(2) of the Income-Tax Act, on 6-3-1943 calling upon the assesses to file a return in respect of the assessment year 1942-43. The notice was served on the assessee but no return was filed. Thereafter, a notice under Section 22(4) dated 26-3-1043 was issued for production of books of account by the assessee at Ajmer on 12-4-1943.
On 10-4-1943 the assesses Sent a letter to the Income-Tax Officer. The Income-Tax Officer in his reply to the letter required the appellant to file a return and to show his income in British India as 'Nil' if he had no such income. It is said that an unsigned return showing a total income of Rs. 1,50,000/- was sent by the appellant and was received in the Income-Tax Officer on 28-3-1944. It was On 19-3-1847 that the Income-tax Officer directed issue of another notice under Section 22 (4) fixing 22-3-1947 as the date for production of the accounts. On that date, the Income-Tax Officer directed issue of a notice under Section 23(2) of the Income-tax Act.
On 26-3-1947 the assessee was assessed by the Income-Tax Officer on an income of Rs. 35,000/-. The assessee then appealed to the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal challenging the jurisdiction of the Income-Tax Officer, Ajmer Merwara to issue the notice under Section 22(2) of the Income-tax Act, but was unsuccessful Thereupon, at his request the following question has been referred by the Appellate Tribunal for the opinion of this Court.
'Whether the Income-tax Officer Aimer Marwara had the jurisdiction to issue notice to the assessee under Section 22(2) of the Act?'
2. In the statement of the, case submitted by the Tribunal, the facts mentioned above have been set out whereafter the Tribunal proceed d to say that the contention of the assessee had not been accepted by the Tribunal for the reason recorded by it in its appellate order, a copy of which formed Dart of the statement of the case. The findings given by the Tribunal were not brought out in the statement of the case itself. The statement of the case includes with it as annexure the appellate order of the Tribunal, and in addition, during the hearing of the case by us. We were provided with copies of the assessment order parsed by the Appellate Assistant Commissioner. No other material was made available to us so that it was not possible to find out under what circumstances and on what basis the income-tax Officer had proceeded to issue the notice under Section 22(2) of the Act.
The order of assessment by the Income-tax Officer, however, shows that he made the assessment of the assessee on the ground that on enquiry he had found that the assessee had been trading in British India every now and then. The appellate order of the Tribunal shows that this view of the Income-tax Officer was challenged before the Tribunal by the assessee in his appeal. It is clearly mentioned that the appellant was contending that he was a non-resident, that his entire business was located in Merwar State and that he had no trade or business in British India. There was a further contention by the assessee that, though he held 8,390 shares in Bi'ay Cotton Mills Ltd., Bijay Nagar, there had been no declaration of dividend on these shares in the previous year corresponding to the assessment year in question.
On these pleas, the assessee challenged the Jurisdiction of the Income-Tax Officer Ajmer Merwara to initiate these assessment proceedings against him by issue of the notice under Section 22(2) of the Income-tax Act. The Tribunal, it appears from the appellate order, did not properly appreciate the question that arose in these circumstances. The plea of the assessee that he had no trade or business in British India amounted to saying that he was not carrying on a business, profession or vocation at any place in British India. The further plea that there had been no declaration of dividend in the previous year corresponding to the assessment year in question amounted to a plea that no income profits of gains had accrued, or arisen to or had been received by the assessee in British India.
The two pleas taken together thus challenged the jurisdiction of the Income-tax Officer on the ground that he was not the competent Income-tax Officer to take proceedings either under Sub-section (1) or Sub-section (4) of Section 64 of the Income-tax Act. This aspect of the case was completely lost sight of by the Tribunal. What the Tribunal held was that the pleas of the appellant merely amounted to a contention that the Income-tax Officer had no power under the Act to issue notice under Sections 22 (2) and 22 (4) against the assessee who was a non-resident, and that the notices were, therefore, bad in law. The manner in which the question has been dealt with by the appellate Tribunal has thus completely ignored the real effect of the pleas which had been taken by the assesses.
3. Having gone through the appellate order of the Tribunal and the ether material provided before us, we have found that, in this case, there was no material at all on which any finding could be given or even any opinion could be formed that the assessee was either carrying on a business, profession or vocation at any place in British India or that any income, profits or gains had accrued or arisen to or had been received by the assessee within British India. The Tribunal has clearly held that not a single instance of any business transaction carried out by the appellant in British India could be pointed, out by the Income-tax Officer irrespective of the question whether that transaction had resulted in profit or loss to the assessee.
The Tribunal appears to have approved of the finding of the Income-tax Officer, that the assessee had a very large holding in a mill in British India and that his place of business as only 40 or 50 miles away from British India border. These facts by themselves could not give jurisdiction to the Income-tax Officer either under Section 64(1) or Section 64 (4) of the Act. Carrying on business at a distance of 40 or 50 miles from the border of British India, but outside British India, could not confer jurisdiction on the Income-tax Officer Ajmer Merwara, either under Section 64 (1) or Section 64 (2) of the Income-tax Act. The Tribunal's order also mentions that the account books of the Bijay Cotton Mills Ltd. were subjected to inspection by the department but the department was not able to find out even a single transaction entered into between the assessee and the Bijay Cotton Mills Ltd.
This would show that the assessee was not carrying on any business at all in British India end this fact could provide no material at all for the view that he was carrying on business in British India. The Tribunal has also accepted the finding that no dividends were declared on the shares held by the assessee during the previous year relating to the assessment year in question so that there was no accrual of any income to the assessee within British India. On the facts found by the Tribunal, it is clear that the Income-tax Officer of Ajmer Merwara did not have jurisdiction to take proceedings against the assessee either under Section 64(1) or Section 64(2) of the Income-tax Act. In spite of the fact that there was no such jurisdiction, the tribunal proceeded to hold that these circumstances did not discharge the assessee from his burden of proving by production of his books of account that he had no income arising from any business done in British India either in his own name or in some assumed name.On the face of it, the burden was wrongly placedon the assessee.
The burden was initially on the department to show that the proceedings were being taken in exercise of some competent jurisdiction which vested in the Income-tax Officer Ajmer and the department had totally failed to produce any material on which a finding could be given that the Income-tax Officer of Aimer Merwara had jurisdiction to proceed either under Section 64fl) or Section 64(2) of the Income-tax Act. Clearly, therefore on the material available and on the facts found by the Tribunal, there could be no other conclusion except that the Income-tax Officer of Aimer Merwara had no jurisdiction to take any proceedings under the Income-tax Act against the assessee, so that he was not competent to issue tile notice under Section 22(2) of the Act. The result is that we answer the question referred to us in the negative.
4. The assessee will be entitled to his costs from the department which We fix at Rs. 200/-.