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Mir Suba Hari Bhakta Vs. Income-tax Officer, A-ward, Dehra Dun. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberCivil Miscellaneous Writ (Income-tax) No. 505 of 1959
Reported in[1960]39ITR617(All)
AppellantMir Suba Hari Bhakta
Respondentincome-tax Officer, A-ward, Dehra Dun.
Excerpt:
.....the expiry of eight years from the end of that assessment year. on the basis of that return, the income-tax officer was quite competent to take proceedings under section 22(4) of the income-tax act as well as under section 23(2) of that act, and those proceedings were not invalidated by any provision of law, as no period of limitation is prescribed for taking those proceedings. this is on the principle that a court which has jurisdiction over a subject-matter has jurisdiction to decide wrong as well as right, and when the legislature does not choose to confer a right of appeal against that decision, it would be defeating its purpose and policy, if a superior court were to re-hear the case on the evidence, and substitute its own findings in certiorari. these propositions are well..........(1) of section 28 did or did not apply to this case. he did record that finding and this finding record by him, whether it be right or wrong, was a finding which he was required to give and which he could give in exercist of the jurisdiction which he was already exercising in dealing with the proceedings for assessment. the finding which affected this question of limitation was, therefore, a finding which he had to record in exercise of the jurisdiction which he was already exercising validly and was not a finding of a collateral fact which might have affected the jurisdiction to take proceedings altogether. the point he had to decide was, therefore, one which was intrinsic to the exercise of jurisdiction already vested in him and was not an extrinsic or collateral point which.....
Judgment:

BHARGAVA, J. - By this petition under article 226 of the Constitution, after incorporation of the amendment which was sought by the petitioner, the main relief sought is the issue of a writ, order or direction in the nature of a writ of certiorari quashing the assessment order dated February 23, 1959, passed by the opposite party, the Income-tax Officer, 'A' Ward, Dehra Dun. This order of assessment relates to the assessment year 1950-51. For that assessment year no notice under section 22(2) of the Income-tax Act was issued to the petitioner. A general notice under section 22(1) had been issued as usual. Some time at the end of the year 1954, the Income-tax Officer sought the permission of the Commissioner of Income-tax to take action under section 34 of the Income-tax Act against the petitioner. Before, however, any proceedings under that provision of law could be initiated, the petitioner, on January 1, 1955, filed a return of his income in respect of the assessment year 1950-51. This return was obviously filed under section 22(3) of the Income-tax Act, as up to that date no order of assessment had been made in the case of the petitioner in respect of the assessment year 1950-51. The Income-tax Officer, however, ignored the return and, having obtained the sanction of the Commissioner, he proceeded to issue notice under section 34(1) of the Income-tax Act to the assessee. He then took proceedings in pursuance of that notice and made an order of assessment. That order was taken up in appeal to the Appellate Assistant Commissioner and then to the Income-tax Appellate Tribunal. The Tribunal accepted the appeal and set aside the proceedings under section 34 on the ground that those proceedings were void, having been taken after the return had been filed under section 22(3) of the Income-tax Act. The Commissioner of Income-tax then moved the Tribunal to refer the question of law to the High Court as to whether the proceedings under section 34 of the Income-tax Act were valid or void in view of the return having been filed under section 22(3) of the Income-tax Act. It was at this stage that the opposite party started proceedings for assessment of the petitioner under section 23 of the Income-tax Act on the basis of the return that had been filed by the petitioner under section 22(3) of the Act on January 1, 1955. He issued two notices to the petitioner - one under section 22(4) and the other under section 23(2) of the Income-tax Act to appear and produce or to arrange for production of certain account books in connection with the assessment proceedings. Both these notices were issued on February 13, 1959, fixing February 20, 1959, for the production of the documents. The petitioner has stated that he was out of station, and consequently he sought adjournment, which was granted to the extent that the datu for production was shifted to February 23, 1959. On that date the petitioner did not appear. Thereupon, the Income-tax Officer proceeded under section 23(4) to make assessment. Against that assessment the petitioner filed an appeal before the Appellate Assistant Commissioner which is still pending. He also moved an application under section 27 of the Income-tax Act before the Income-tax Officer to set aside the assessment made and to make a fresh assessment under section 23(3) of the Act. It is in these circumstances that the petitioner has comn up to this court by this petition seeking an order or writ quashing the order of assessment which was made by the opposite party on February 23, 1959, under section 23(4) of the Income-tax Act.

The principal ground on which the writ is sought from this court is that the order of assessment was made beyond the period of limitation prescribed in section 34(3) of the Act and was, therefore, void in law. This is a ground which is to be examined in detail.

It has alreade been mentioned earlier that the order of assessment relates to the assessment year 1950-51, and this order was passed on February 23, 1959. The order of assessment was, therefore, clearly made after the expiry of four years from the end of the assessment year 1950-51, but before the expiry of eight years from the end of that assessment year. Under section 34(3) of the Income-tax Act, no order of assessment or reassessment can be made after the expiry of four years from the end of the assessment year other than an order of assessment under section 23 to which clause (c) of sub-section (1) of section 28 of the Income-tax Act applies, or an order of assessment or reassessment in cases falling within clause (a) of sub-section (1) of section 34 of the Income-tax Act. In this case, the order of assessment is sought to be brought within the period of limitation on behalf of the opposite party on the ground that it was passed within eight years from the end of the assessment year and is an order of assessment under section 23 to which clause (c) of sub-section (1) of section 28 applies.

On behalf of the petitioner, it has been urged that thej is not a case to which clause (c) of sub-section (1) of section 28 applied; and, in holding that that provision did apply, and thus coming to the finding that an order of assessment could be made within eight years from the end of the yar of assessment, the Income-tax Officer, opposite party, exercised jurisdiction not vested in him. It appears, however, that the argument advanced on behalf of the petitioner ignores the circumstance that the limitation prescribed under section 34(3) of the Income-tax Act applies only at the stage of passing the order of assessment and does not in any way affect the validity of the proceedings taken for assessment prior to the making of the order of assessment. The proceedings which were taken by the opposite party by issuing the two notices dated February 13, 1959, under sections 22(4) and 23(3) of the Income-tax Act were valid proceedings. The return in respect of which these notices were issued had been admittedly filed on January 4, 1955, under section 22(3) of the Income-tax Act and was a valid return. On the basis of that return, the Income-tax Officer was quite competent to take proceedings under section 22(4) of the Income-tax Act as well as under section 23(2) of that Act, and those proceedings were not invalidated by any provision of law, as no period of limitation is prescribed for taking those proceedings. After the proceedings had been taken under section 22(4) and section 23(2) of the Income-tax Act and the Income-tax Officer had made all necessary enquiries, the stage arrived when the Income-tax Officer had to make an order under section 23(3) of the Income-tax Act, and at that stage he had to keep in view the provisions of section 34(3) of the Act so that he could not make a valid order of assessment unless that order was within the period of limitation prescribed under section 34(3) of the Act. At this stage, therefore, he had to record a finding as to the period which had expired from the end of the year of assessment, and had also to determine the facts which could show whether the order of assessment could be made within four years only or whether it could be made within eight years in view of the principles laid down in section 34(3) of the Act mentioned above. It was at this stage, therefore, that the Income-tax Officer had to determine whether the order of assessment which he was going to make was an order under section 23 to which clause (c) of sub-section (1) of section 28 was applicable.

In the present case, the Income-tax Officer, opposite party, held in the order of assessment itself that the order which he was making was one to which clause (c) of sub-section (1) of section 28 did apply. This was held by him for the reason that the petitioner had concealed the particulars of income in respect of one item of Rs. 1,00,000 and also in respect of another item of Rs. 12. It was urged by learned counsel for the petitioner before us that this finding of the Income-tax Officer that the petitioner had concealed the particulars of his income in respect of these two items was incorrect and, in exercise of our writ jurisdiction under article 226 of the Constitution, we are competent to re-examine the question and decide whether the decision given by the Income-tax Officer is correct or incorrectu It was urged that, on the determination of this question depended the decision of the question as to whether the Income-tax Officer acted in exercise of jurisdiction vested in him or in excess of that jurisdiction. This contention raised before us ignores the circumstance that the limitation prescribed by section 34(3) of the Income-tax act does not govern the jurisdiction of the Income-tax Officer to take quasi-judicial proceedings for assessment, but merely governs his power to pass an order of assessment. As has beef held earlier, the proceedings for assessment which were being taken under sections 22 and 23 of the Income-tax Act on the return which had been filed by the petitioner under section 22(3) of the Income-tax Act were not barred by time or otherwise illegal. While taking those proceedings the Income-tax Officer was already functioning as a quasi-judicial tribunal so that he was competently seized of quasi-judicial proceedings. The proviso relating to limitation contained in section 34(3) of the Income-tax Act was only a limitation on his power to make an order of assessment and did not affect his jurisdiction to continue the proceedings under section 22 and 23 of the Income-tax Act. This was, therefore, a case where the Income-tax Officer was rightly and competently dealing with the quasi-judicial proceedings and the law merely laid down limitation on his power to pass a particular order in those proceedings. The limitation was that he could not make an order of assessment ordinarily beyond four years from the end of the year of assessment or, in case where clause (c) of sub-section (1) of section 28 applied, beyond a period of eight years from the end of the year of assessment. In order to see whether this limitation did or did not affect his power, he had to record a finding whether clause (c) of sub-section (1) of section 28 did or did not apply to this case. He did record that finding and this finding record by him, whether it be right or wrong, was a finding which he was required to give and which he could give in exercist of the jurisdiction which he was already exercising in dealing with the proceedings for assessment. The finding which affected this question of limitation was, therefore, a finding which he had to record in exercise of the jurisdiction which he was already exercising validly and was not a finding of a collateral fact which might have affected the jurisdiction to take proceedings altogether. The point he had to decide was, therefore, one which was intrinsic to the exercise of jurisdiction already vested in him and was not an extrinsic or collateral point which required decision so as to permit the exercise of jurisdiction or take away his jurisdiction. The law laid upon the Income-tax Officer himself the duty of recording a finding, and the finding having been recorded in exercise of jurisdiction vested in him, it cannot be said that the recording of the incorrect finding had the result of enabling him to exercise jurisdiction not vested in him, so that in this case no question arises in the petitiop before us of setting aside the order of the Income-tax Officer on the ground of want of jurisdiction or on the ground that he had exercised jurisdiction in excess of that vested in him. The point that is being challenged by the petitioner is one which the Income-tax Officer was required to decide in exercise of jurisdiction vested in him and the jurisdiction of the Income-tax Officer on such a point could be challenged under article 226 of the Constitution only on the ground that it suffered from a manifest error apparent on the face of the record. In this connection, reliance is placed on two recent decisions of the Supreme Court in Nagendra Nath Bora v. Commissioner of Hills Division and Appeals, Assam, and Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale. It does not appear to be necessary to refer to earlier decisions of the Supreme Court or of other courts, as in these two latest cases the Supreme Court has fully clarified all the earlier decisions. In the case of Nagendra Nath Bora v. Commissioner of Hills Division and Appeals, Assam, it was held that :

'So far as we know, it has never been contended before this court that an error of fact, even though apparent on the fact of the record, could be a ground for interference by the court exercising its writ jurisdiction. No ruling was brought to our notice in support of the proposition that the court exercising its powers under article 226 of the Constitution coulm quash an order of an inferior tribunal on the ground of a mistake of fact apparent on the face of the record.'

In the subsequent case, Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale, their Lordships of the Supreme Court referred to an earlier decision of theirs in Hari Vishnu Kamath v. Ahmad Ishaque in which the character and scope of writs of certiorari had been dealt with by the Supreme Court in some detail. The principles which had been enunciated in the earlier case were quoted with approval in this case also, and they are to the following effect :

'On these authorities, the following propositions may be taken as established : (1) Certiorari will be issued for correcting errors of jurisdiction, as and when an inferior court or tribunal acts without jurisdiction or in excess of it, or fails to exercise it. (2) Certiorari will also be issued when the court or tribunal acts illegally in the exercise of its undoubted jurisdiction, as when it decides without giving an opportunity to the parties to be heard, or violates the principles of natural justice. (3) The court issuing a writ of certiorari acts in exercise of a supervisory and not appellate jurisdiction. One consequence of this is that the court will nop review findings of fact reached by the inferior court or tribunal, even if they be erroneous. This is on the principle that a court which has jurisdiction over a subject-matter has jurisdiction to decide wrong as well as right, and when the Legislature does not choose to confer a right of appeal against that decision, it would be defeating its purpose and policy, if a superior court were to re-hear the case on the evidence, and substitute its own findings in certiorari. These propositions are well settled and are not in dispute.'

After this quotation from the earlier judgment, their Lordships took notice of the fact that besides the above three propositions a fourth proposition as to which there appeared to have been some controversy, had also been discussed, viz., whether certiorari can be issued when the decision of the inferior court or tribunal is erroneous in law. They then proceeded to quote a further passage from their earlier decision in the case of Kamath (3) where it was held that :

'It may therefore be taken as settled that a writ of certiorari could be issued to correct an error of law. But it is essential that it should be something more than a mere error; it must be one which must be manifest on the fact of the record.'

These are the principles which have to be applied in the present case. In this case the application of these principles would show that the only ground on which the petitioner could seek relief from this court in the present petition was the contention raised by the petitioner that the decision of the Income-tax Officer about the applicability of clause (c) of sub-section (1) of section 28 of the Income-tax Act suffers from a manifest error of law apparent on the face of the record. Learned counsel for the petitioner, in these circumstances, urged before us that on the material available in this writ petition, we should record a finding that the decision of the income-tax Officer on this point suffers from a manifest error apparent on the face of the record.

As has been mentioned by us earlier, the Income-tax Officer held that clause (c) of sub-section (1) of section 28 was applicable on two grounds, viz., concealment of particulars of income of Rs. 1,00,000 and concealment of another income of Rs. 12. With regard to both these items, there is an admission by the petitioner that these items did not find mention in the return which was filed by him on January 4, 1955. With regard to the first item, however, it was urged on behalf of the petitioner that the failure to make mention of it in the return would not amount to concealment because, even prior to the filing of the return, he had put before the Income-tax Officer all the relevant facts relating to the receipt of this sum by the petitioner. It appears that, in connection with the proceedings for assessment of 1952-53, the petitioner was called upon by the Income-tax Officer to furnish certain information with regard to some investments, particularly in respect of an immovable property standing in his name in Connaught Place, Dehra Dun. When called upon to furnish this information, the petitioner sent a letter on April 15, 1953, in which he wrote that he might add for the information of the Income-tax Officer that Her Highness Maharani Gambhir Kumari of Nepal had been graciously pleased to make gift of Rs. 1,00,000 to him in recognition of his past meritorious services. He then proceeded to give the details of the manner in which the sum of Rs. 1,00,000 was paid to him. Thereafter, he proceeded to state that the original letter was dated 14th Sawan, 2006 Sambat Bikrami, and was in the Nepali Language. He, however, enclosed its English translation for the perusal of the Income-tax Officer. This letter dated April 15, 1953, sent by the petitioner to the Income-tax Officer, together with the English translation of the letter of Her Highness the Maharani of Nepal is the file of the proceedings for assessment of the petitioner for the year 1952-53, and came to our notice when learned counsel for the Department produced that file before us for our perusal. It was urged before us on the basis of this letter that the petitioner had disclosed full and complete acts relating to this receipt of one lakh of rupees to the Income-tax Officer as early as April 15, 1953, and, in making the disclosure in that letter, he had mentioned that the amount had been received by him as gift, implying that it was never received as an income which would be liable to income-tax. That letter was received by the Income-tax Officer who took no steps on its receipt to communicate to the petitioner that the receipt was income liable to tax or that there was even any doubt that this receipt could be taxable income. Having given that information to the Income-tax Officer long before he filed the return, the petitioner, when filing the return, omitted to mention this receipt in the return. It is urged that this omission was clearly bona fide as the petitioner had already given all the facts to the Income-tax Officer concealing no fact at all and that he did not consider it necessary to include this item in the return as this receipt was not of the nature of income liable to tax.

With regard to the second item of Rs. 12, it is admitted that this amount was received by the petitioner by a credit entry in his current account with the United Commercial Bank Limited, Calcutta, on December 23, 1949. There is an explanation in the affidavit filed in support of the writ petition before us to the effect that this amount was left out by inadvertence and is too trivial.

These are the grounds on which the petitioner challenges the finding recorded by the Income-tax Officer in his income in respect that the petitioner had concealed particulars of his income in respect of these two items. It is clear that the petitioner in raising this contention in the present writ petition is really challenging the correctness of the finding of fact recorded by the Income-tax Officer with regard to the concealment of the particulars of these two items of income. The finding relating to the concealment of Rs. 1,00,000 is challenged on the ground that there was manifest error apparent on the face of the record inasmuch as the Income-tax Officer had totally ignored the information which had already been given to him by the petitioner in his letter of April 15, 1953, before he filed the return on January 4, 1955, in which, it is said, he concealed the particulars of his income. With regard to the second amount of Rs. 12, the finding is challenged on the ground that it was a trivial amount and had been omitted from the return by inadvertence; so that there was actually no concealment in respect of the particulars of these amounts of income. In view of the principles laid down by the Supreme Court as mentioned above, we do not think that in exercise of our jurisdiction under article 226 of the Constitution we can go into the question of correctness of this finding recorded by the Income-tax Officer and particularly those principles that apply to the item of Rs. 12. Even in the case of the sum of Rs. 1,00,000 the finding can be given by us that the Income-tax Officers decision suffers from a manifest error apparent on the face of the record, only after examining the record of the assessment proceedings for the year 1952-53, and it does not appear that those assessment proceedings were brought to the notice of the Income-tax Officer when he passed the assessment order which is now being challenged by this writ petition. The finding that can be interfered with by this court must be a finding suffering from a manifest error apparent on the face of the record of the proceedings which were before the quasi-judicial authority which passed the impugned order. There is at present nothing to show that this letter of April 15, 1953, was before the income-tax Officer when he was exercising his jurisdiction in dealing with the proceedings in respect of the assessment of 1950-51. So far as the second item is concerned, the question that has to be decided is whether on the facts, which were before the Income-tax Officer, there was enough material to record the finding that the petitioner had concealed particulars of this income or whether there was no material to record such a finding, these are all questions of fact which require a detailed examination and discussion of the relevant facts and circumstances and we do not, therefore, think that we can go into these questions when exercising our jurisdiction under article 226 of the Constitution in view of the decisions of the Supreme Court cited above.

It is also to be noticed that the petitioner is already seeking his alternative remedies by an application under section 27 of the Income-tax Act and by an appeal before the Assistant Commissioner, both of which proceedings are directed against this very assessment order which has been challenged by this writ petition and it is in those proceedings only that the correctness of the finding recorded by the Income-tax Officer can be appropriately examined. It is further to the kept in view that the powers of the appellate court are much wider than the powers of a court exercising writ jurisdiction under article 226 of the Constitution, and the appellate court is in a much better position to rectify an order of this nature. If a finding is recorded by the Income-tax Officer without material, it can be set aside by the appellate court. On the other hand, it can be upheld if the appellate court on examination of all the materials finds that there is material which could support the finding recorded by the Income-tax Officer even though it was not relied upon by the Income-tax Officer in the assessment order. Further, the appellate court even has the power of obtaining further material and while exercising its appellate jurisdiction, may, in appropriate cases, obtain further material which the appellate court may consider advisable in the interest of justice.

In these circumstances, It appears to us that it cannot be at all appropriate for this court to exercise its jurisdiction under article 226 of the Constitution by examining the correctness of the finding recorded by the Income-tax Officer and quash the order of assessment made by him thus making ineffective other proceedings which are going on by way of an application under section 27 to the Income-tax Officer, or by way of the appeal before the Appellate Assistant Commissioner. It is in those proceedings only that the error committed by the Income-tax Officer, if at all, would either be rectified or given proper effect to by setting aside the order of assessment. It would not be appropriate for us to quash the order of assessment and thus render infructuous those other proceedings where proper orders in respect of the error committed, if any, can be passed, and where errors can be properly rectified. This is another reason why it would not be appropriate to interfere at this stage. It is proper to leave the petitioner to seek his remedy through the machinery which has been provided in the Income-tax Act itself.

One more ground, which has been urged before us by learned counsel for the petitioner in respect of this petition, may be taken notice of. That ground put forward by learned counsel is that, when proceedings on the basis of the return filed under section 22(3) of the Income-tax Act were started by the Income-tax Officer on February 13, 1959, by issuing two notices under sections 22(4) and 23(2) of the Income-tax Act, no reasonable opportunity was afforded to the petitioner to be heard, and to produce documents in the case. We have examined this point and we are unable to hold that, on the material provided, it is manifest that proper opportunity was denied to the petitioner. The two notices issued on February 13, 1959, called upon the petitioner to appear personally and to produce or to arrange for production of certain books of account or documents on February 20, 1959. There was a weeks time, but instead of producing the documents the petitioner, according to his affidavit, asked for adjournment of the case. The ground for asking for adjournment mentioned in the affidavit filed by the petitioner was that the petitioner was out of station. Even if he was out of station, it was for the petitioner to arrange for the production of the documents needed, which he could surely have done when he was able at least to make an application for adjournment of the case. No satisfactory explanation is forthcoming in the petition why this period of seven days was not sufficient. Then the affidavit does not mention what was the length of the adjournment sought. An adjournment for three days was actually granted. No circumstances are shown in the affidavit to indicate that this adjournment was too short. On the question whether there was sufficient reason for the petitioner for failing to comply with the notice on the adjourned date, viz., February 23, 1959, a decision has yet to be recorded in the application under section 27 of the Income-tax Acd which the petitioner has already moved. The facts as they are given in the affidavit filed along with the petition before us are not complete and sufficient, and on their basis it is not possible for us to make an appropriate examination of the circumstances and to arrive at a proper finding whether the petitioner did or did not have sufficient reason for failing to comply with the requirements of the notices on the February 23, 1959. This is also a point which has to be left for decision by the appropriate authorities in the course of the proceedings which the petitioner has already initiated by moving an application under section 27 of the Income-tax Act. In no case can this be a ground for our exercising the power of issuing writ of certiorari to quash the order of assessment made by the Income-tax Officer.

As a consequence, the petition fails and is dismissed with costs which we fix at Rs. 250 as fee of counsel for the Department.

Petition dismissed.


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