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Brij Behari Prasad Vs. Commissioner of Income-tax, U. P. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Miscellneous Case No. 451 of 1959
Reported in[1966]62ITR262(All)
AppellantBrij Behari Prasad
RespondentCommissioner of Income-tax, U. P.
Excerpt:
.....the 1st august, 1949, and the previous year ending on the 30th april, 1948 was for the merged state assessment year 1948-49. in sub-paragraph (3) of paragraph 5, the meaning of merged state assessment year 1948-49 is given as any assessment year which commences on any date between the 1st day of april, 1948, and the 31st december, 1948. the merged state assessment year in the present case commenced on the 1st may, 1948, which is a date which falls between the 1st april, 1948, and 31st december 1948, and, therefore, the merged state assessment law before the 1st day of august, 1949, ther this, perhaps, was not annexed for the very good reason that the assessee realised that, having once acquiesced and submitted to that order by filing a return under section 22 and having been..........had been completed under the rampur income-tax act. no assessment had been made under the rampur state income-tax act for the relevant assessment year 1948-49. rampur state merged with the indian dominion on the 15th may, 1949. on the 1st august, 1949, it became a chief commissioners province and finally on the 1st december, 1949, it became a chief commissioners province and finally on the 1st december, 1949, it merged with the united provinces. as a consequence of the merger, the central taxation laws were made operative in this state by the taxation laws (extension to merged states and amendment) act, 1949, hereinafter referred to as the taxation laws act, 1949.after the merger, for the relevant assessment year 1948-49, the assessee returned an income of rs. 18,900 and was duly.....
Judgment:

MANCHANDA, J. - This is a case stated under section 66(1) of the Income-tax Act (hereinafter referred to as the Act) by the Income-tax Appellate Tribunal. The two questions referred are :

'(1) Whether, on a true interpretation of the provisions of section 3(2) of the Taxation Laws (Extension to Merged States and Amendment) Act, 1949, and para. 5 of the Merged States (Taxation Concessions) Order, 1949, the income, profits and gains arising in the State of Rampur during the accounting year ending on 30th April, 1948, could be assessed under the Indian Income-tax Act for the assessment year 1948-4

(2) Whether, on the facts and circumstances of the case, the accounting year ending 30th April, 1948, could be treated as the previous year for the assessment year 1948-49 within the meaning of section 2(11)(i)(b) ?'

The material facts as culled from the statement of the case are these : The relevant assessment year is 1948-49. The previous year of the assessee was the financial year under the Rampur Income-tax Act which was from the 31st May, 1947, to the 30th April, 1948. The assessee is an individual and was a resident of the Rampur State. The assessee was being assessed to income-tax on the basis of his income for the year ending 30th April, each year. His assessment up to and including the assessment year 1947-48, the previous year ending 30th April, 1947, had been completed under the Rampur Income-tax Act. No assessment had been made under the Rampur State Income-tax Act for the relevant assessment year 1948-49. Rampur State merged with the Indian dominion on the 15th May, 1949. On the 1st August, 1949, it became a Chief Commissioners province and finally on the 1st December, 1949, it became a Chief Commissioners province and finally on the 1st December, 1949, it merged with the United Provinces. As a consequence of the merger, the Central Taxation Laws were made operative in this State by the Taxation Laws (Extension to Merged States and Amendment) Act, 1949, hereinafter referred to as the Taxation Laws Act, 1949.

After the merger, for the relevant assessment year 1948-49, the assessee returned an income of Rs. 18,900 and was duly assessed under section 23(1) of the Indian Income-tax Act on the 24th February, 1951. The Income-tax Officer, subsequently, discovered that the assessee had received dividend amounting to Rs. 1,61,926 on the 16th July, 1947, from the Rampur Tent and Army Equipment . which had gone into voluntary liquidation. Accordingly, proceedings under section 34 of the Indian Income-tax Act were started and the aforesaid amount brought to assessment, after rejecting the various contentions raised by the assessee. The Appellate Assistant Commissioner upheld the assessment but the Tribunal set aside the assessment with a direction to the Income-tax Officer to make a fresh assessment according to law from the stage of the issue of the notice under section 23(2) of the Act. The assessee having asked for a reference under section 66(1) of the Act, the questions aforesaid have been referred.

Two main contentions have been raised by Mr. Jagdish Swarup for the assessee. They are : (1) That no assessment for the assessment year 1948-49 was possible to be made under the Indian Income-tax Act as the Indian Income-tax Act and the Finance Act of 1949 were only made applicable in respect of Merged States as from the 1st April, 1949, and (2) that the Central Board of Revenue or the Commissioner of Income-tax had no authority under section 2(11)(i)(b) of the Income-tax Act to issue any direction in respect of any previous year ending prior to the 1st April, 1949, as the Income-tax Act was not applicable prior to that date.

In order to appreciate these contentions, the relevant provisions may be set out. Section 3(1) of the Taxation Laws (Extension to Merged States and Amendment) Act, 1949, hereinafter referred to as the Taxation Laws Act, 1949, extends certain taxation laws to Merged States. It provides that the Indian Income-tax Act of 1922 and the Indian Finance Act of 1949 and all rules and orders made thereunder shall operate as if they had been extended to and brought into force in all the Merged States on the 1st day of April, 1949. Section 7(1) provides as follows :

'7. Repeal of corresponding laws and savings. - (1) If, immediately before the 26th day of August, 1949, there was in force in any of the Merged States any law relating to income-tax, super-tax or business profits tax, that law shall cease to have effect except for the purposes of the levy, assessment and collection of income-tax and super-tax in respect of any period not included in the previous year for the purposes of assessment under the Indian Income-tax Act, 1922, as extended to that State by section 3 or, as the case may be, the levy, assessment and collection of business profits tax for any chargeable accounting period ending on or before the 31st day of March, 1948, and for any purposes connected with such levy, assessment or collection :

Provided that any reference in any such law to an officer, authority, tribunal or court shall be construed as a reference to the corresponding officer, authority, tribunal or court appointed or constituted by or under the Indian Income-tax Act, 1922, or, as the case may be, the Business Profit Tax Act, 1947, as extended by section 3 to that Merged State.'

By the Taxation Laws Act, the Indian Income-tax Act and the Indian Finance Act of 1949 were extended to all Merged States. Under sub-section (2) of section 3, the date on which the Indian Income-tax Act and the Indian Finance Act were brought into force in the Merged State was the 1st day of April, 1949.

The Merged States (Taxation Concessions) Order, 1949, hereinafter referred to as the Concessions Order, was made in exercise of the powers conferred by section 60A of the Indian Income-tax Act whereby certain exemptions and reductions in the rate of tax and modifications were specified. Section 5(1) reads :

'5. (1) The income, profits and gains of any previous year ending after the 31st day of March, 1948, which is a previous year -

(i) for the Merged State assessment year 1948-49

(ii) for the Merged State assessment year 1949-50,

shall be assessed under the Indian Income-tax Act, 1922, if and only if such income profit such profits and gains have not, before the 1st day of August, 1949, been assessed under the State law. (2) Where the income, profits and gains referred to in sub-paragraph (1) have not been assessed under the State law, they shall be assessed under the Indian Income-tax Act, 1922, and the tax payable thereon shall be determined as hereunder.....

(3) For the purposes of this paragraph -

(a) The Merged State assessment year 1948-49 means the assessment year which commences on any date between the 1st April, 1948, and the 31st December, 1948, both dates inclusive : and

(b) the Merged State assessment year 1949-50 means the assessment year which commences on any date between the 2nd January, 1949, and the 31st July, 1949, both days inclusive.

6. (1) The income, profits and gains of any previous year ending after the 31st day of March, 1948, which does not fall within paragraph 5 of this Order or of any previous year commencing after the previous year referred to in the said paragraph shall be assessed under the Indian Income-tax Act, 1922, but the tax payable on so mush of the income as pertains to the period ending before the 1st day of August, 1949, shall be determined as hereunder.....

In other words, ordinarily no assessment can be made for any assessment year prior to 1949-50 under the Indian Income-tax Act. Section 5(1) of the Concessions Order however would indicate that the income shall be assessed under the Indian Income-tax Act, 1922, in respect of all previous years ending after the 31st day of March, 1948, which is previous year for the Merged State assessed before the 1st day of August, 1949, under the State law. All the conditions of paragraph 5(1) of the Concessions Order would appear to have been satisfied in the present case in as much as the income profits and gains was in respect of a previous year ending after the 31st day of March, 1948, as the previous year of the assessee in the present case was admittedly 30th April, 1948. Further, no assessment, admittedly had been made under the State law before the 1st August, 1949, and the previous year ending on the 30th April, 1948 was for the Merged State assessment year 1948-49.

In sub-paragraph (3) of paragraph 5, the meaning of Merged State assessment year 1948-49 is given as any assessment year which commences on any date between the 1st day of April, 1948, and the 31st December, 1948. The Merged State assessment year in the present case commenced on the 1st May, 1948, which is a date which falls between the 1st April, 1948, and 31st December 1948, and, therefore, the Merged State assessment law before the 1st day of August, 1949, there would appear to be no alternative but to assess it under the Indian Income-tax Act, and the tax payable thereon shall be assessed as provided thereunder. The determination of tax in substance is at the State rate of tax, though the assessment is made under the Indian Income-tax Act. This much is clear from the Concessions Order. The only question is whether section 7, read with section 3(2) of the Taxation Laws Act, prevents any assessment being made for the assessment year 1948-49. Section 7 of the Taxation Laws Act expressly saves the State laws for the purpose of levy, assessment and collection of income-tax for any period not included in the previous year for the purposes of assessment under the Indian Income-tax Act, 1922, and the Finance Act of 1949 shall be brought into though there is a reference to previous year in section 7, there is no direct mention of previous year in section 3, which so to pea, is the charging section. When the latter in express terms provides that the Finance Act of 1949 and Indian Income-tax Act 1922, will be brought into force from 1st April, 1949, no assessment for the assessment year 1948-49 was intended to be effected under the Indian Income-tax Act. It is, however, unnecessary to give a concluded decision on this point as the assessees case and the finding of the Tribunal is that the correct assessment year under the Indian Income-tax Act would be 1949-50, as his year ended on the 30th April, 1948, which was one month after the commencement of the previous year for the assessment year 1947-48 under the Indian Income-tax Act. Therefore, strictly and technically speaking, the assessee would have been assessable under the Indian Income-tax Act for the assessment year 1949-50. But in order to obviate the rigour of any such technicality, the legislature in its wisdom gave the Central Board of Revenue the power, under section 2(11)(i)(b) of the Indian Income-tax Act, to suitably adjust the previous year of an assessee or class of assessees where his or their previous year went a little beyond the Indian Financial Year. In the present case the Commissioner of Income-tax, in exercise of the powers delegated to him by the Central Board of Revenue under section 2(11)(i)(b) of the Indian Income-tax Act, had issued a general order applicable to all assessees carrying on business in the State of Rampur and who were adopting the previous year ending April 30, 1948, that the State Financial year relevant to the State assessment year 1948-49 would be treated as the previous year for the Indian assessment year 1948-49, although such previous year went beyond March 31, 1948, which was the Indian Financial year.

The assessee has not cared to annex a copy of this very material order to the case, nor is he in a position to enlighten us as to the exact words in which it was couched nor the date on which it was issued. This, perhaps, was not annexed for the very good reason that the assessee realised that, having once acquiesced and submitted to that order by filing a return under section 22 and having been assessed under section 23(1) of the Indian Income-tax Act, 1922, for the assessment year 1948-49, it was too late in the day to challenge that order when it came to proceedings under section 34 for that very assessment year, i.e., 1948-49.

This objection is not really open to the assessee for the simple reason that the assessee himself had filed a return for the period ending 30th April, 1948, for the assessment year 1948-49, and the Income-tax Officer had made the assessment under section 23(1) on the 24th of February, 1951. The assessment for the previous year ending 30th of April, 1948, could not ordinarily have been made under the Indian Income-tax Act, for the assessment year 1948-49 as the financial year for that assessment year is the year ending 31st March, 1948, and the assessees previous year went one month beyond and, therefore, under the Indian Income-tax Act fell to be assessed in the assessment year 1949-50. The assessee, manifestly, acquiesced in the order passed by the Commissioner under the authority given to him by the Central Board of Revenue under section 2(11)(i)(b) of the Indian Income-tax Act, whereby the previous year of the assessee in the Merged States, whose year ended within one month of the Indian Financial year, i.e., before the 30th April, 1948, was directed to be treated as the previous year for the assessment year 1948-49. The assessee having accepted the determination of his previous year for purposes of assessment under the Indian Income-tax Act by the Commissioner of Income-tax as the assessment year 1947-48, and having submitted his return on that basis, it is too late for him to object in the subsequent section 34-proceedings taken to bring to assessment escaped income during that very previous year as not assessable in that year. The assessee did not before the Income-tax Tribunal challenge the authority of the Commissioner of Income-tax to issue such a direction under the provisions of section 2(11)(i)(b) of the Act.

Further, the assessee did not at any previous stage of the proceedings challenge, as was attempted before us, the determination of the previous year on the ground that the order of the Commissioner of Income-tax did not relate to a 'class of persons'. It is, therefore, not open to the assessee to contend in these proceedings that the order of the Commissioner under section 2(11)(i)(b) did not relate to a 'class of persons' such as all businessmen carrying on business in merged Rampur State who were adopting the previous year as the year ending 30th April. The validity of that order passed by the Commissioner of Income-tax not having been challenged before the Tribunal, it is not open to the assessee to challenge it for the first time in reference proceedings. Such a question would not arise out of the Tribunals order. As already observed, the order itself has not been annexed to the case and it is not possible to assume that the order did not make special mention of 'class of persons'. This argument, manifestly, was an argument of despair.

The questions referred, in the ultimate analysis, in the particular facts and circumstances of this case, are only of academical interest as the finding of the Tribunal was that ordinarily the assessment in the case of the assessee would fall to be made in the assessment year 1949-50, but by virtue of the determination of the previous year by the Commissioner under section 2(11)(i)(b) the previous year could be treated as the assessment year 1948-49. Mr. Jagdish Swarup could not deny that it really made no difference to the assessee whether the impugned sum which was brought to assessment under section 34 was assessed in the assessment year 1948-49 or 1949-50. The assessee stands to gain nothing as the rates of income-tax under the Finance Acts of 1948 and 1949 were more or less the same. This is all the more so as the Tribunal has set aside the assessment and directed the Income-tax Officer to make a fresh assessment after giving effect to the provisions of clause (2) of paragraph 5 of the Concessions Order which will, in effect, mean that the assessee will pay only the tax which he would have paid if he had been assessed under the Rampur State Tax Act for the assessment year 1948-49.

The question therefore really do not call for an answer but if they have to be answered, we would answer question No. 1 by saying that ordinarily the assessment under the Indian Income-tax Act would not have been made for the assessment year 1948-49, but as the Commissioner of Income-tax had validly issued an order under section 2(11)(i)(b) of the Act, the assessment had rightly been made for the assessment year 1948-49. Question No. 2 is answered in the affirmative. The reference is answered accordingly. In the circumstances of the case, the parties are left to bear their own costs. Counsels fee is assessed at Rs. 200.


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