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Mathuraprasad Motilal and Co. Vs. Commissioner of Income-tax, - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Nagpur
Decided On
Reported in195630ITR695(Nag.)
AppellantMathuraprasad Motilal and Co.
RespondentCommissioner of Income-tax,
Excerpt:
.....the learned counsel for the department has no force. a valid notice calling upon the assessee to file a return under sub-section (2) of section 22 of the act is condition precedent to sustain an assessment made under sub-section (4) of section 23 of the act on account of failure to file a return. the case relied upon on this point is distinguishable on facts. in that case the return was, in fact, filed.16. sub-section (4) of section 23 of the act provides that if the assessee fails to make a return required by notice given under sub-section (2) of section 22 and has not made a return or a revised return under sub-section (3) of that section or fails to comply with all the terms of notice issued under sub-section (2) of this section, the income-tax officer shall make the assessment to.....
Judgment:
This is an application under sub-section (2) of section 66 of the Indian Income-tax Act (hereinafter called the Act).

2. The assessee, Smt. Jugnabai, is the widow of Beni Bahadur Singh and daughter of late Rai Saheb Mathuraprasad of Chhindwara. She is the sole proprietor of "Mathuraprasad Motilal and Company" which owns collieries situated in Chhindwara district. The case relates to the assessment for the year 1950-51 (accounting period ending with 31st March, 1950).

3. On 8th June, 1950, the Income-tax Officer, Chhindwara, issued a notice under sub-section (2) of section 22 of the Act requiring the assessee to submit a return of her total income within thirty-five days of the receipt of the notice. On 2nd August, 1950, she filed an application for extension of the time limit by two months for filing the return on the ground that a number of adjustments in respect of dealings with merchants and suppliers were still to be made. Time to file the return was extended up to 28th August, 1950.

4. In the meantime, under the orders of the Commissioner of Income-tax, Madhya Pradesh and Bhopal, of date 17th August, 1950, the case was transferred from the file of the Income-tax Officer, Chhindwara, to that of the Income-tax Officer, Special Circle, Nagpur.

5. On 29th August, 1950, the assessee filed another application seeking extension of time till the middle of October, 1950, However till the middle of October, 1950, on return was filed.

6. On 27th October, 1950, notice under sub-section (4) 22 of the Act was issued calling upon the assessee to produce or cause to be produced on 28th November, 1950, books of account documents, etc. this notice is signed as follows : On 28th November, 1950, the assessee filed an application for extension of time up to the middle of January, 1951, for filing the return and production of books of account, etc., on the ground that due to the serious illness of her youngest son from February, 1950, her eldest son could not look after the business and was therefore unable to make the adjustments.

7. The Income-tax Officer found that the request for extension of time was not bona fide as the reason given in the previous applications was different from that given in the application dated 28th November, 1950.

He proceeded to make the assessment to the best of his judgment under sub-section (4) of section 23 of the Act, and on the basis of the previous history of the business of the assessee and the inquiries made by him computed the income at Rs. 55,260. The Income-tax Officer further issued a notice under sub-section (3) of section 28 of the Act.

8. We are not concerned with the case started on the notice under sub-section (3) of section 28. We are informed that matter is still pending. We are concerned here only with the assessment made under sub-section (4) of section 23 of the Act.

9. The assessee appealed before the Appellate Assistant Commissioner against the order of assessment. The Appellate Assistant Commissioner, in order to satisfy himself, again in July, 1951, gave an opportunity to the assessee to produce the books of account within four days. She, however, failed to do so. The reason given by her counsel for her failure to do so was that the assessees son had gone to Bombay. The Appellate Assistant Commissioner was not satisfied with this explanation. He found that the assessment made by the Income-tax Officer was fair and reasonable, and consequently dismissed the appeal.

10. The assessee preferred an appeal to the Income-tax Appellate Tribunal (hereinafter called the Tribunal) which was dismissed on 25th April, 1952. The assessee thereafter filed an application under sub-section (1) of section 66 of the Act requiring the Tribunal to refer the case to this court. That application was rejected. Hence this application.

11. Though in the application a number of questions of law are stated to arise out of the order of the Tribunal, the learned counsel for the applicant pressed before us only the following four questions : "(i) whether notice under section 22 (2) of the Income-tax Act issued by the Income-tax Officer, Chhindwara, and received by Seth Chhogalal on 8th June, 1950, could be held as properly served on the assessee (ii) Whether there was proper publication of transfer of jurisdiction of the assessees case from the file of the Income-tax Officer, Chhindwara, to the file of the Income-tax Officer, Special Cycle, Nagpur, and, if not, what is its effect on issue of notice under section 22(4) by Shri R. S. Gahlot on 27th October, 1950, and could it be said to be a valid notice issued according to law (iii) Whether Shri R. S. Gahlot was competent officer invested with jurisdiction to deal with cases transferred to the file of the Income-tax Officer, Special Circle, Nagpur, on 27th October, 1950, and could he issue the said notice so as to bind the assesse (iv) Was it not necessary to have another notice under section 22(2) coupled with the prescribed form of return issued by the Income-tax Officer, Special Circle, Nagpur, on the case being transferred to his file and if it was not necessary, is the notice under section 22(4) dated 27th October, 1950, a valid notic ?" (a) The notice issued under sub-section (2) of section 22 of the Act by the Income-tax Officer, Chhindwara, could not be availed of by Shri Uggarsain Jain, Income-tax Officer, Special Circle, Nagpur, inasmuch as the order of the Commissioner of Income-tax, Madhya Pradesh and Bhopal, transferring the case from the file of the Income-tax Officer, Chhindwara, to the file of the Income-tax Officer, Special Circle, Nagpur, was not notified and published in the official Gazette as required by sub-sections (1) and (2) of section 64 read together with sub-section (6) of section 5 of the Act.

(b) The notice under sub-section (4) of section 22 of the Act is signed by Shri R. S. Gahlot but as a matter of fact he was not the Income-tax Officer, Special Circle, Income-tax cum Excess Profits Tax, Nagpur, and was therefore not competent to issue the notice. This notice could not, therefore, be availed of by Shri Uggarsain Jain who passed the assessment order.

13. Thus, it is contended that there has been no failure to comply with the notice under sub-section (2) of section 22 or under sub-section (4) of that section. The assessment made under sub-section (4) of section 23 of the Act is, therefore, void in law, Reliance is placed on Ramkrishna Ramnath Firm of Tirora v. Commissioner of Income-tax, Central Provinces and Berar and Jamna Dhar Potdar and Co., Lyallpur v.Commissioner of Income-tax, Punjab.

14. On behalf of the Department it is urged that both the notices under sub-section (2) as well as under sub-section (4) of section 22 of the Act are valid. It was not necessary under law to publish in the Official Gazette the order of transfer of the instant case from one Income-tax Officer to another. Shri R. S. Gahlot, who signed the notice under sub-section (4) of section 22 of the Act, had authority to sign it. In the alternative, it is urged that even if the notices are invalid, the assessment under sub-section (4) of section 23 is not vitiated. Reliance is placed on a decision of the Federal Court in Chatturam and Others v. Commissioner of Income-tax Bihar.

15. In our opinion, the alternate contention of the learned counsel for the Department has no force. A valid notice calling upon the assessee to file a return under sub-section (2) of section 22 of the Act is condition precedent to sustain an assessment made under sub-section (4) of section 23 of the Act on account of failure to file a return. The case relied upon on this point is distinguishable on facts. In that case the return was, in fact, filed.

16. Sub-section (4) of section 23 of the Act provides that if the assessee fails to make a return required by notice given under sub-section (2) of section 22 and has not made a return or a revised return under sub-section (3) of that section or fails to comply with all the terms of notice issued under sub-section (2) of this section, the Income-tax Officer shall make the assessment to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment. It will thus be seen that the failure to comply with a notice either under sub-section (2) or sub-section (4) of section 22 of the Act entitles the Income-tax Officer to make the assessment to the best of his judgment under sub-section (4) of section 23 of the Act when other conditions mentioned therein are fulfilled.

17. It is, therefore, necessary first, to consider the contention of the applicant in respect of the notice issued under sub-section (2). It is not challenged that the Income-tax Officer, Chhindwara, was competent to issue the notice. All that is contended is that there was no valid transfer of the case and, therefore, this notice could not be availed of by Shri Uggarsain Jain, Income-tax Officer, Special Circle, Nagpur, in proceeding to assess the applicant under sub-section (4) of section 23 of the Act. It is urged that under section 64 of the Act the Income-tax Officer, Chhindwara, was the person who was competent to make the assessment. For a valid transfer of the case from his file to that of the Income-tax Officer, Special Circle, Nagpur, publication of the order in the Official Gazette under sub-section (6) of section 5 of the Act is necessary. In our opinion, this contention has no force.

True the assessee carries on business in Chhindwara district and normally the Income-tax Officer Chhindwara, would be the competent authority to make the assessment under sub-section (1) of section 64 of the Act, but the provisions of sub-section (1) and (2) of that section are subject to those of sub-section (5) of that section. Clause (b) of sub-section (5) of section 64 provides that when in consequence of any transfer of a case made under sub-section (7A) and a particular Income-tax Officer has been charged with the function of assessing the assessee, then it is that Officer who has jurisdiction to make the assessment.

18. In the instant case the case was transferred from the file of the Income-tax Officer Chhindwara, to the file of the Income-tax Officer, Special Circle, Nagpur, under sub-section (7A) of section 5 of the Act by the Commissioner of Income-tax, M. P. and Bhopal. He was competent to do so under the said provisions. There is no warrant for the contention that an order under sub-section (7A) of section 5 has to be published in the Official Gazette. Sub-section (6) of section 5 of the Act, which requires a notification, has no application to the facts of this case. Further the provisions of sub-section (7A) provide that when a case is transferred under that sub-section it is not necessary for the succeeding Income-tax Officer to re-issue any notice which has already been issued by the Income-tax Officer from whom the case is transferred.

19. For reasons stated above, in our opinion, the case was validly transferred from the file of the Income-tax Officer, Chhindwara, to that of the Income-tax Officer, Special Circle, Nagpur, who was competent to avail of the notice issued by the Income-tax Officer, Chhindwara, under sub-section (2) of section 22 of the Act. It was, therefore, not necessary for the Income-tax Officer, Special Circle, Nagpur, to issue another notice under sub-section (2) of section 22 of the Act.

20. It is an admitted position that the assessee failed to make the return required by the notice under sub-section (2) of section 22 and has not made a return or a revised return under sub-section (3) of that section. This in itself is sufficient to sustain the assessment made by the Income-tax Officer under sub-section (4) of section 23 of the Act.

It is therefore, not necessary to consider the contention raised as to the validity of the notice issued under sub-section (4) of section 22.

21. It is urged on behalf of the assessee that the question of validity of the notice is a question of law and therefore the Tribunal should be called upon to state the case. Even assuming that any question of law does arise, it is not incumbent upon this Court to require the Tribunal to state the case when the answer is evident and there has been error on the part of the Tribunal in rejecting the application. We have taken a similar view Sagarmal Spinning and Weaving Mills v. Commissioner of Income-tax M. P. and Bhopal.

22. In the result, this application is dismissed with costs counsels fee Rs. 75.


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