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S. Ram Singh Uppal Vs. Commissioner of Income-tax, Punjab. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case Number Income-tax Reference No. 53 of 1964
Reported in[1969]71ITR609(P& H)
AppellantS. Ram Singh Uppal
RespondentCommissioner of Income-tax, Punjab.
Cases ReferredPannalal Binjraj v. Union of India
Excerpt:
.....on the facts and in the circumstances of the case, the assessment made by the income-tax officer, special circle, amritsar, in pursuance of the notice under section 34(1)(a) issued by him is bad in law ?' for a comprehension of the question formulated aforesaid, it is essential to have a historical perspective of the assessment relating to the financial year 1948-49 right from its very beginning so far as the assessee, ram singh uppal of hindustan embroidery mills private limited, chheharta (amritsar) is concerned. on 9th of march, 1956, the income-tax officer, special circle, issued notice to the assessee under section 34(1)(a) which says, if the income-tax officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income..........on the facts and in the circumstances of the case, the assessment made by the income-tax officer, special circle, amritsar, in pursuance of the notice under section 34(1)(a) issued by him is bad in law ?'for a comprehension of the question formulated aforesaid, it is essential to have a historical perspective of the assessment relating to the financial year 1948-49 right from its very beginning so far as the assessee, ram singh uppal of hindustan embroidery mills private limited, chheharta (amritsar) is concerned. the assessment relating to the year 1948-49 was completed by the income-tax officer, a-ward, amritsar, on 25th of april, 1949. some time thereafter, the commissioner of income-tax transferred the assessment proceedings under sub-section (7a) of section 5 of the act to the.....
Judgment:

The following question has been referred to us under section 66(1) of the Indian Income-tax Act, 1922 (hereinafter called the Act), by the Income-tax Appellate Tribunal, Delhi :

'Whether, on the facts and in the circumstances of the case, the assessment made by the Income-tax Officer, Special Circle, Amritsar, in pursuance of the notice under section 34(1)(a) issued by him is bad in law ?'

For a comprehension of the question formulated aforesaid, it is essential to have a historical perspective of the assessment relating to the financial year 1948-49 right from its very beginning so far as the assessee, Ram Singh Uppal of Hindustan Embroidery Mills Private Limited, Chheharta (Amritsar) is concerned. The assessment relating to the year 1948-49 was completed by the Income-tax Officer, A-Ward, Amritsar, on 25th of April, 1949. Some time thereafter, the Commissioner of Income-tax transferred the assessment proceedings under sub-section (7A) of section 5 of the Act to the Income-tax Officer, Special Investigation Circle, Amritsar. This provision empowers the Commissioner of Income-tax to 'transfer any case from one Income-tax Officer subordinate to him to another', at any stage of the proceedings. On 9th of March, 1956, the Income-tax Officer, Special Circle, issued notice to the assessee under section 34(1)(a) which says, 'if the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed', he may at any time 'within eight years... of the end of that year, which may be included in a notice under sub-section (2) of section 22 and may proceed to assess or reassess such income, profits or gains.......' Under proviso (i) to this sub-section :

'The Income-tax Officer shall not issue a notice under this sub-section, unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons recorded that it is a fit case for the issue of such notice.'

According to the facts stated in the reference order, it is not a matter of dispute that the notice was sent within the requisite period or that the proceedings for reassessment had emanated after the requisite order had been passed by the Commissioner. The Income-tax Officer, Special Circle, completed the assessment in pursuance of the notice under section 34 on 4th of March, 1957, and computed the total concealed income at Rs. 1,12,345 to which the income already assessed at Rs. 30,351 was added, making the aggregate income of Rs. 1,42,696. The assessee had taken part in the proceedings before the Income-tax Officer, Special Circle, whose assessment order of 4th of March, 1957, was taken in appeal before the Appellate Assistant Commissioner of Income-tax. Though the point was not raised before the Income-tax Officer, a plea was taken before the Appellate Assistant Commissioner that the Income-tax Officer, Special Circle, did not have the jurisdiction to make the assessment.

The objection with regard to jurisdiction was founded on the second notice, also under section 34(1)(a), issued on 30th of March, 1956, by another assessing authority, namely, the Income-tax Officer, F-Ward, Amritsar, who had the territorial jurisdiction over the place of residence of the assessee. It was submitted that the second notice also having been issued under section 34(1)(a) the assent of the Commissioner of Income-tax should be presumed and he must be taken to have re-transferred the proceedings from the Income-tax Officer, Special Circle, to the Income-tax Officer, F-Ward, in pursuance of the notice issued by him under section 34(1)(a) on 30th of March, 1956.

It is the case of the department that the second notice by the Income-tax Officer, F-Ward, was sent as a matter of abundant caution in view of the prevailing uncertainty regarding the vires of sub-section (7A) of section 5 of the Act. The cloud which had been cast over the vires of sub-section (7A) of section 5 was not dissipated till December 21, 1956, when the Supreme Court in Pannalal Binjraj v. Union of India held that 'the mere fact that the powers under the sub-section may be abused is not a ground for declaring that the sub-section itself is ultra vires'. The attack on this sub-section was made on the ground that it violated the equal protection guarantee embodied in article 14 of the Constitution of India. The Supreme Court held that sub-section (7A) of section 5 is not discriminatory in itself and is only a provision for administrative convenience, and if there is any abuse of power in exercising the jurisdiction vested in the Commissioner it can be remedied by appropriate action either under article 226 or article 32 of the Constitution.

As observed by the Appellate Assistant Commissioner, 'the Commissioner never withdrew the jurisdiction from the Income-tax Officer, Special Investigation Circle, not he gave any fresh or separate approval to the Income-tax Officer, F-Ward, Amritsar, for issue of notice under section 34'. Reliance is placed by the counsel for the assessee on an observation made in the order of the Appellate Assistant Commissioner dismissing the appeal of the assessee on 30th November, 1962, that :

'......... the Income-tax Officer, F-Ward, Amritsar, who had territorial jurisdiction over the place of residence of the assessee was also asked to issue a notice under section 34 and he issued a notice on March 30, 1956, so that if the provisions of section 5(7A) were challenged, the proceedings under section 34 could not be lost only on the ground that the notice under section 34 was not issued by the proper officer.'

It cannot be taken as a matter of inference from this observation that when the Income-tax Officer, F-Ward, also issued a notice, it was in consequence of a direction or assent given by the Commissioner of Income-tax under proviso (i) to section 34(1)(a). The learned counsel further submits that re-transfer of the proceedings from the Income-tax Officer, Special Circle, to the Income-tax Officer, F-Ward, must be spelled out from the issue of the second notice by the letter of 30th of March, 1956. In our opinion, there is no warrant for such a presumption or inference. As pointed out by Mr. Awasthy, the learned counsel for the department, there is statutory support for the proposition that proceedings once transferred from one Income-tax Officer to another will be disposed of by the transferred authority. Section 64 refers to place of assessment and sub-section (1) says :

'Where an assessee carried on a business, profession or vocation at any place, he shall be assessed by the Income-tax Officer of the area in which that place is situate or, where the business, profession or vocation is carried on in more places than one, by the Income-tax Officer of the area in which the principal place of his business, profession or vocation is situate.'

While sub-section (2) says that :

'In all other cases, an assessee shall be assessed by the Income-tax Officer of the area in which he resides.'

Sub-section (5) of section 64 lays down the important exception that :

'The provisions of sub-section (1) of sub-section (2) shall not apply and shall be deemed never at any time to have applied to any assessee -........

(b) where by any direction given or any distribution or allocation of work made by the Commissioner of Income-tax under sub-section (5) of section 5, or in consequence of any transfer made under sub-section (7A) of section 5, a particular Income-tax Officer has been charged with the function of assessing that assessee, or.....'

It has been rightly submitted by Mr. Awasthy that the provisions of sub-sections (1), (2) and (5) of section 64 make it plain that the authority to whom the proceedings have been transferred by the appropriate authority shall determine the assessement or reassessment, as the case may be, and not the authority which would be normally entrusted with the function in absence of the order of transfer under sub-section (7A) of section 5.

It has been suggested by Mr. Balraj Kohli, the counsel for the assessee, that the second notice of 30th of March, 1956, which emanated from the Income-tax Officer, F-Ward, envisaged an order of transfer and the absence of any specific order to this effect is a mere irregularity. Support is sought for this proposition from the form of notice under section 34 reproduced at page 942 of Sampath Iyengars Indian Income-tax Act (4th edition), volume II. There is a note in this form to this effect :

'This notice is being issued after obtaining the necessary satisfaction of the Commissioner of Income-tax...........'

Now, the reference under section 66(1) is to be determined on the statement of the case which is submitted by the Income-tax Appellate Tribunal and this is not a point mentioned in the statement of the case. Before the Tribunal, the only contention on behalf of the assessee was 'that the notice under section 34(1)(a) was issued by the Income-tax Officer, F-Ward, Amritsar, with the prior permission of the Commissioner of Income-tax Officer, Special Circle, Amritsar, by an order under section 5(7A).' All that was pointed out by the assessee was that :

'By granting permission to the Income-tax Officer, F-Ward, Amritsar, to take action under section 34(1)(a) against the assessee, the Commissioner of Income-tax had, by implication, withdrew his previous order under section 5(7A) transferring the case to the Income-tax Officer, Special Circle, Amritsar.'

In our opinion, there is no warrant to draw any implication or inference as submitted by the assessees counsel.

On the other hand, sub-section (5) of section 64 imposes a statutory duty on the transferred authority to dispose of the assessment or reassessment in accordance with the directions of the Commissioner. The subsisting direction in this regard was issued by the Commissioner only to the Income-tax Officer, Special Circle, and we do not see how the order passed in pursuance of that direction can be said to be invalid.

The answer must, therefore, be given in the negative and against the assessee. The assessee will pay the costs of this reference, which we assess at Rs. 200.

MEHAR SINGH C.J. - I agree.


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