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Commissioner of Income-tax Vs. New Punjab Calcutta Transport Co. (P.) Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 447 of 1965
Judge
Reported in[1972]83ITR844(All)
ActsIncome Tax Act, 1922 - Sections 22(1) and 22(2)
AppellantCommissioner of Income-tax
RespondentNew Punjab Calcutta Transport Co. (P.) Ltd.
Appellant AdvocateB.L. Gupta and ;R.R. Misra, Advs.
Respondent AdvocateP.N. Pachauri, Adv.
Excerpt:
.....made under section 23(4) but the appellate assistant commissioner upheld the action taken by the income-tax officer in completing the assessment under section 23(4) although he reduced the estimated income. the appeals were allowed by the tribunal, which set aside the assessment made under section 23(4) and, therefore, the order under section 27 as well as the order under section 271(1)(i). and now this reference has been made at the instance of the commissioner of income-tax. there being no valid notice under section 22(2), the tribunal reasoned, the best judgment assessment under section 23(4) could not be sustained inasmuch as recourse to section 23(4) had been made on the ground that the notice under section 22(2) had not been complied with. in our opinion, the legislature has for..........22(1) of the indian income-tax act, 1922, was published in the press requiring every person whose total income during the previous year exceeded the maximum amount which was not chargeable to income-tax to furnish within sixty-five days a return of his income. accordingly, a return for the assessment year 1961-62 under section 22(1) was due to be filed by june 28, 1961. on april 18, 1961, before the expiry of that period, the income-tax officer issued a notice under section 22(2) which was served on the assessee on may 6, 1961. it required the assessee to file his return of income within thirty-five days of the service of the notice. in other words, the assessee was required to file his return by june 10, 1961. therefore, while consequent to the notice under section 22(1) the assessee.....
Judgment:

Pathak, J.

1. The Income-tax Appellate Tribunal has referred the following question under Section 66(1) of the Indian Income-tax Act, 1922 :

' Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessment made under Section 23(4) of the Income-tax Act, 1922, was illegal and accordingly accepting the assessee's appeal against the order under Section 27 of the Income-tax Act, 1922, and further cancelling the penalty imposed under Section 271(I)(i) of the Income-tax Act ?'

2. The assessee is a private limited company engaged in transport business. It was incorporated in May, 1959, and closed its account for the first time on December 31, 1960. We are concerned in this reference with the assessment year 1961-62, the relevant year of account being the calendar year 1960.

3. On April 24, 1961, a notice under Section 22(1) of the Indian Income-tax Act, 1922, was published in the press requiring every person whose total income during the previous year exceeded the maximum amount which was not chargeable to income-tax to furnish within sixty-five days a return of his income. Accordingly, a return for the assessment year 1961-62 under Section 22(1) was due to be filed by June 28, 1961. On April 18, 1961, before the expiry of that period, the Income-tax Officer issued a notice under Section 22(2) which was served on the assessee on May 6, 1961. It required the assessee to file his return of income within thirty-five days of the service of the notice. In other words, the assessee was required to file his return by June 10, 1961. Therefore, while consequent to the notice under Section 22(1) the assessee had time up to June 28, 1961, to file his return, the notice under Section 22(2) required him to do so even earlier. On June 20, 1961, the assessee applied for a further two months for filing his return. The time expired without a return being filed. On October 17, 1961, the Income-tax Officer served a notice under Section 22(4) requiring the assessee to produce its account books and documents on October 28, 1961. The assessee did not comply with the notice. Another notice was served on the assessee, this time under Section 142(1) of the Income-tax Act, 1961, requiring it to produce its account books and documents on August 7, 1962. On that date, the assessee attended before the Income-tax Officer and produced its account books. It also applied for extension of time by another two months for filing its return. The application was rejected by the Income-tax Officer, who on the same date completed the assessment ex parte under Section 23(4) of the Act of 1922 on an estimated total income of Rs. 30,000. A few days later, on August 21, 1962, the assessee applied under Section 27 of the Act of 1922 for cancellation of the assessment on the ground that the account books were not complete and, therefore, the return could not be filed. The application was rejected by the Income-tax Officer on September 28, 1962. Then, on March 25, 1963, the Income-tax Officer made an order under Section 271(1)(i) of the Act of 1961 imposing a penalty of Rs. 3,780 for failure of the assessee to file its return in response to the notice under Section 22(2) of the Act of 1922. The assessee appealed against the assessment order made under Section 23(4) but the Appellate Assistant Commissioner upheld the action taken by the Income-tax Officer in completing the assessment under Section 23(4) although he reduced the estimated income. He also dismissed an appeal against the order under Section 27. An appeal against the penalty order resulted merely in the amount of penalty being reduced. The assessee now appealed to the Income-tax Appellate Tribunal against the orders of the Appellate Assistant Commissioner disposing of the three appeals. The appeals were allowed by the Tribunal, which set aside the assessment made under Section 23(4) and, therefore, the order under Section 27 as well as the order under Section 271(1)(i). And now this reference has been made at the instance of the Commissioner of Income-tax.

4. The Tribunal has taken the view that the assessee was obliged to comply with the notice under Section 22(1) and he had time up to June 28, 1961, to do so. By the subsequent notice under Section 22(2) that time was curtailed and the assessee was required to file the return by June 10, 1961. In its opinion, that was not open to the Income-tax Officer, and accordingly it held that the notice under Section 22(2) was invalid. There being no valid notice under Section 22(2), the Tribunal reasoned, the best judgment assessment under Section 23(4) could not be sustained inasmuch as recourse to Section 23(4) had been made on the ground that the notice under Section 22(2) had not been complied with. In the circumstances, the orders under Section 27 and Section 271(1)(i) were also set aside.

5. The question then is whether the Income-tax Officer had the power to serve the notice under Section 22(2) requiring an assessee to file his return of income even before the expiry of the period mentioned under Section 22(1). Section 22(1) provides :

'22. (1) Return of Income.--The Income-tax Officer shall, on or before the 1st day of May in each year, give notice by publication in the press and by publication in the prescribed manner, requiring every person whose total income during the previous year exceeded the maximum amount which is not chargeable to income-tax to furnish, within such period not being less than sixty days as may be specified in the notice, a return, in the prescribed form and verified in the prescribed manner, setting forth (along with such other particulars as may be required by the notice) his total income and total world income during that year.'

And Section 22(2) provides :

' (2) In the case of any person whose total income is, in the Income-tax Officer's opinion, of such an amount as to render such person liable to income-tax, the Income-tax Officer may serve a notice upon him requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth (along with such other particulars as may be provided for in the notice) his total income and total world income during the previous year.'

6. Section 22(1), it is clear, commands the Income-tax Officer to give notice by publication requiring every person whose total income exceeds the maximum amount not chargeable to income-tax to furnish a return of his income. It requires that the Income-tax Officer must do so on or before the 1st day of May in each year. In other words, the Income-tax Officer must have the notice published between April 1 and May 1 of the year. The publication of the notice is envisaged as an automatic act of the Income-tax Officer, and it is directed to every person whose total income exceeds the non-taxable limit. It is not contemplated that before publishing the notice the Income-tax Officer should have applied his mind to any or all of the cases falling within his jurisdiction. That pre-requisite is a feature of the notice under Section 22(2), Section 22(2) empowers the Income-tax Officer to serve a notice calling for a return where he is of opinion that the total income of the person to whom the notice is directed is such as to render him liable to income-tax.

7. The crucial question in this case is whether the Income-tax Officer can serve the notice under Section 22(2) at any time or can he do so only after the expiry of the time specified in the notice under Section 22(1) for filing a return. It seems to its that it is open to the Income-tax Officer to serve the notice under Section 22(2) at any time during the assessment year. There is nothing in the terms of that provision precluding him from doing so. Indeed, while Section 22(1) defines the period within which the notice must be published, any such restriction is conspicuous by its absence in Section 22(2). The Income-tax Officer may issue the notice under Section 22(2) towards the beginning, middle or end of the assessment year. All that is necessary is that before doing so he should have come to the opinion that the person to whom he issues such notice has a total income rendering him liable to income-tax. In our opinion, the legislature has for good reason conferred the widest discretion upon the Income-tax Officer as to the point of time when he should serve the notice under Section 22(2), There can conceivably be a case where urgent circumstances call for an expeditious assessment and, therefore, require that the assessment proceedings be initiated by a notice under Section 22(2) at the earliest possible opportunity. To accept the contention that notice under Section 22(2) must await the expiry of the period specified in the notice under Section 22(1) for filing a return would he to deny to the Income-tax Officer the power to take such expeditious assessment proceedings. If the assessee's contention is carried to its logical conclusion, then having regard to the period of sixty days mentioned in Section 22(1) and the period of thirty days mentioned in Section 22(2), the Income-tax Officer cannot by issuing a notice under Section 22(2) require a person to file his return before the end of June of the assessment year. It is a conclusion for which we find no support in the provisions of the Act. We are of opinion that a notice under Section 22(2) can be served by the Income-tax Officer even before the expiry of the period mentioned in the notice under Section 22(1) for filing a return. In holding to the contrary, the Tribunal has erred. The notice under Section 22(2) was a valid notice arid, therefore, the assessment made under Section 23(4) was also valid. Inasmuch as the order under Section 27 and the order cancelling the penalty imposed under Section 271(1)(i) proceed on the assumption that the notice under Section 22(2) was invalid, those orders are also erroneous.

8. Upon the aforesaid considerations, we answer the question referred in the negative.

9. The Commissioner of Income-tax is entitled to his costs which we assess at Rs. 200 Counsel's fee is assessed at the same figure.

Question answered in the negative.


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