Skip to content


Manilal Ramchand Vs. Commissioner of Income-tax, Gujarat - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference No. 9 of 1962
Judge
Reported in(1964)GLR583; [1964]53ITR377(Guj)
ActsIncome Tax Act, 1922 - Sections 22(2), 22(4), 27, 34 and 64(3)
AppellantManilal Ramchand
RespondentCommissioner of Income-tax, Gujarat
Appellant Advocate D.H. Dwarkadas, Adv.
Respondent Advocate J.M. Thakore, Adv.
Excerpt:
.....not well-founded and must be rejected since in our view on the facts no question as to the place of assessment as contemplated by section 64(3) was raised by the assessee which was required to be referred to the commissioner for his decision before the income-tax officer could proceed with the assessment. the question of place of assessment is a question of some importance to the assessee and an assessee may very well tell the taxing authorities that he is liable to be assessed only by a particular income-tax officer under the provisions of section 64. what is to happen in such a case ? sub-section (3) provides the machinery for determination of such question when it arises. the third proviso to sub-section (3) makes it obligatory on the income-tax officer to refer the matter for..........year, a resident of veraval in the rest while state of saurashtra and carried on business at that place. income-tax legislation was introduced for the first time in the state of saurashtra by the saurashtra income-tax ordinance, 1949, from the assessment year 1949-50. subsequently, there was financial integration of the state of saurashtra and the indian income-tax act, 1922, was made applicable to the territories of the state of saurashtra from the assessment year 1950-51. in 1951 the government of india announced the voluntary disclosure scheme and taking advantage of that scheme, the assessee addressed a letter dated 25th january, 1952, disclosing the following income alleged to have arisen to him in the state of saurashtra from money-lending and speculation during the years.....
Judgment:

Bhagwati, J.

1. This reference arises out of an assessment made on the assessee for the assessment year 1949-50, the previous year being Samvat year 2004, that is, 13th November, 1947, to 1st November, 1948. The assessee was, during the previous year, a resident of Veraval in the rest while State of Saurashtra and carried on business at that place. Income-tax legislation was introduced for the first time in the State of Saurashtra by the Saurashtra Income-tax Ordinance, 1949, from the assessment year 1949-50. Subsequently, there was financial integration of the State of Saurashtra and the Indian Income-tax Act, 1922, was made applicable to the territories of the State of Saurashtra from the assessment year 1950-51. In 1951 the Government of India announced the voluntary disclosure scheme and taking advantage of that scheme, the assessee addressed a letter dated 25th January, 1952, disclosing the following income alleged to have arisen to him in the State of Saurashtra from money-lending and speculation during the years mentioned against the respective figures :

---------------------------------------------------------------------Income. Assessment year. Previous year.---------------------------------------------------------------------Rs.50,000 1949-50 Samvat year 200440,000 1950-51 Samvat year 20057,998 1951-52 Samvat year 2006---------------------------------------------------------------------

2. The assessee also disclosed that he had a share in a firm called Messrs. Rameshchandra Manilal and Company, carrying on business at Kozhikode, from the assessment year 1950-51. On the basis of this disclosure the assessee was assessed to income-tax on an income of Rs. 50,000 for the assessment year 1949-50 under the Saurashtra Income-tax Ordinance, 1949, which was applicable in respect of that assessment year and for the assessment year 1950-51 and 1951-52, the assessee was assessed to income-tax on incomes of Rs. 40,062 and Rs. 14,098 respectively under the Indian Income-tax Act, 1922, which had by then been applied to the territories of the State of Saurashtra.

3. It appears that in 1958, the Income-tax Officer, Ward-A, Junagadh, who has territorial jurisdiction over Veraval being the place where the assessee was residing and carrying on business during the previous year, Samvat year 2004, received information from which he had reason to believe that the assessee had remitted during that previous year certain moneys from Bombay for making an investment in Kozhikode. There being no explanation for the source of these moneys and the assessee not having filed a return of income under the Indian Income-tax Act, 1922, for the assessment year 1949-50, the Income-tax Officer issued a notice under section 34(1)(a) of the Indian Income-tax Act, 1922, for the assessment year 1949-50, after obtaining the necessary approval of the Commissioner of Income-tax, Bombay North, Ahmedabad. The notices under section 34(1)(a) along with the notice under section 22(2) was served on the assessee on 5th March, 1958. On 8th April, 1958, within the period of 35 days prescribed for filing a return after receipt of the notice under section 22(2), a letter was filed before the Income-tax Officer by the advocate appearing on behalf of assessee and the following objections were raised :

'... I had no business or business place in British India and according to section 64 of the Income-tax Act, 1922, there can be no jurisdiction to assess me here. I am a permanent resident of Veraval and have already been assessed under the Saurashtra Income-tax Ordinance and hence I raise the objection to the jurisdiction of assessment and assessment place and hence withhold the return and state that I cannot be treated as defaulter for late submission, etc., unless under the above objections are cleared up by your honour.' The Income-tax Officer thereafter issued a notice dated 13th September, 1959, to the assessee under section 28(4) of the Saurashtra Income-tax Ordinance, 1949, fixing an appointment on 29th September, 1959. The advocate of the assessee appeared on that date and presented a letter of the same date objecting to the notice under section 28(4) of the Saurashtra Income-tax Ordinance, 1949, on the ground that it was not according to law. The Income-tax Officer, realising that the notice was wrongly issued under section 28(4) of the Saurashtra Income-tax Ordinance, 1949, When the proceedings were initiated under section 34(1)(a) of the Indian Income-tax Act, 1922, made a note on the letter of the assessee that the notice under section 28(4) of the Saurashtra Income-tax Ordinance, 1949, was issued through oversight and that the pending assessment proceedings were to be completed under the Indian Income-tax Act, 1922, and obtained the signature of the assessee's advocate below the note. Thereafter, the Income-tax Officer issued a notice on 8th December, 1958, under section 22(4) of the Indian Income-tax Act, 1922, calling for the production of the books of account and bank pass-books of the assessee relevant to the assessment year 1949-50 on 19th December, 1958. The assessee, however, addressed a letter dated 18th December, 1958, to the Income-tax Officer contending that in respect of the assessment year 1949-50 it was the Saurashtra Income-tax Ordinance, 1949, which was applicable and not the Indian Income-tax Act, 1922, and that no proceedings could, therefore, be instituted against the assessee under section 34(1)(a) of the Indian Income-tax Act, 1922, in respect of the assessment year 1949-50 and the notices issued under section 34(1)(a), 22(2) and 22(4) of the Indian Income-tax Act, 1922, were accordingly invalid. Since the assessee failed to make the return required by the notices under section 22(2) and did not comply with the terms of the notice issued under section 22(4), the Income-tax Officer proceeded to make a best judgment assessment under section 23(4) and determined the income accruing or arising in Bombay at Rs. 35,000 and assessed the assessee as a non-resident in respect of such income. The assessment order was made by the Income-tax Officer on 24th December, 1958. The objection raised by the assessee to the jurisdiction of the Income-tax Officer disposed of by the Income-tax Officer in the following words : 'He wanted to point out that Junagadh Income-tax Officer had no jurisdiction but he has never mentioned where he wants to be assessed. Under the circumstances, it is clear that the jurisdiction of the assessment is with this office as per the circular of the Central Board of Revenue. . .'

4. The Circular of the Central Board of Revenue referred to by the Income-tax Officer was the Circular No. 9-I.T. dated 13th February, 1956, adding a certain entry in the notification of the Central Board of Revenue No. 44-I.T. dated 1st July, 1952.

5. Immediately after the assessment order was made by the Income-tax Officer, the assessee made an application to the Income-tax Officer under section 27 for cancelling the assessment on the ground that he was prevented by sufficient cause from making a return required by the notice under section 22(2) and complying with the terms of the notice under section 22(4). The ground urged by the assessee as constituting sufficient cause was that, though the assessee had raised an objections to the place of assessment, the Income-tax Officer had not referred the question as to the place of assessment to the Commissioner of Income-tax as required by section 64(3) and the assessee had, therefore, a reasonable apprehension in his mind that if he submitted a return in pursuance of the notice issued under section 22(2) or complied with the terms of the notice issued under section 22(4) he might be regarded as having accepted the jurisdiction of the Income-tax Officer and that was the reason why he had not filed the return or complied with the notice issued by the Income-tax Officer. The Income-tax Officer rejected the application by an order dated 31st March, 1959. The Income-tax Officer observed :

'... He never claimed that his jurisdiction was with a particular Income-tax officer. Unless he informs this point, the question of jurisdiction is not to be decided . . .'

6. An appeal was preferred to the Appellate Assistant Commissioner but it was rejected by him. The Appellate Assistant Commissioner took the view that the question of reference to the Commissioner under section 64(3) could arise only if the assessee claimed specifically that some Income-tax Officer other than the Income-tax Officer issuing the notice had jurisdiction over the case of the assessee and that since in the present case all that the assessee did was to go on repeating that the Income-tax Officer, Ward-A, Junagadh, had no jurisdiction over his case and did not claim specifically that any other Income-tax Officer had such jurisdiction, he could not be said to have raised an objection to the place of assessment which was required to be referred to the Commissioner for his decision under section 64(3). The Appellate Assistant Commissioner also held that the question of jurisdiction of a particular Income-tax Officer to assessee could not be raised in an appeal under section 30(1). Still, however, the Appellate Assistant Commissioner proceeded to consider whether the Income-tax Officer, Ward-A, Junagadh, had jurisdiction to assess the assessee and held that having regard to the circular of the Board of Revenue to which reference has already been made by us earlier, while referring to the order of the Income-tax Officer, the Income-tax Officer Ward-A, Junagadh, had such jurisdiction.

7. The assessee thereupon carried the matter in appeal to the Tribunal. The Tribunal took the view that the assessee had at no stage of the proceedings stated as to what was the ground on which he was challenging the jurisdiction of the Income-tax Officer, Ward-A, Junagadh, to assess him and that the objection taken by him was vague and that it was, therefore, not required to be referred to the Commissioner under section 64(3). The Tribunal held that it was apparent from the record that the assessee was all along avoiding to file a return on the plea that the Income-tax Officer, Ward-A, Junagadh, had no jurisdiction to assess him and that there was no sufficient cause which prevented him from filing the return as required by the notice issued under section 22(2) or from producing the books of account and bank pass-books as required by the notice issued under section 22(4). The Tribunal, in this view of the matter, dismissed the appeal. The assessee thereupon made an application to the Tribunal under section 66(1), asking the Tribunal to refer to this court four questions of law which according to the assessee arose out of the order of the Tribunal. The Tribunal took the view that the first two questions suggested by the assessee arose out of its order and were, therefore, liable to be referred to this court; but so far as questions Nos. 3 and 4 were concerned, they were redundant. The Tribunal accordingly referred to this court the following two questions of law arising out of its order :

'(1) Whether the Income-tax Officer had jurisdiction to decide or was justified in finalising the proceedings taken pursuant to the notices under section 22 and section 34 before the question of jurisdiction was disposed of under section 64(3) of the Act

(2) Whether on the facts and in the circumstances of the case the assessee was prevented by sufficient cause from making the return required under section 22 read with section 34 of the Indian Income-tax Act within the meaning of section 27 of the Act ?'

8. On the first question Mr. D. H. Dwarkadas, learned advocate appearing on behalf of the assessee, contended that the assessee had by his letter dated 7th April, 1958, raised an objection to the jurisdiction of the Income-tax Officer, Ward-A, Junagadh, to assess him and that the objection being an objection as to the place of assessment, if the Income-tax Officer was not inclined to accept the validity of the objection, the Income-tax Officer was bound to refer the matter to the Commissioner under section 64(3), and it was not opened to the Income-tax Officer to determine the objections himself and to proceed to assessee to tax on the basis that he had jurisdiction to assess the assessee. Since the Income-tax Officer was not entitled, argued Mr. D. H. Dwarkadas, to proceed with the assessment of the assessee without getting the question as to the place of assessment determined by the Commissioner under section 64(3), the assessee had sufficient cause for not filing the return pursuant to the notice under section 22(2) and not complying with the terms of the notice under section 22(4) so long as the question was not determined by the Commissioner and it was not held by the Commissioner that the Income-tax Officer, Ward-A, Junagadh, had jurisdiction to assess the assessee. Mr. D. H. Dwarkadas thus invoked the aid of section 64(3) for making out sufficient cause for setting aside the assessment within the meaning of section 27. The contention based on section 64(3) is, however, not well-founded and must be rejected since in our view on the facts no question as to the place of assessment as contemplated by section 64(3) was raised by the assessee which was required to be referred to the Commissioner for his decision before the Income-tax Officer could proceed with the assessment.

9. The contention of Mr. D. H. Dwarkadas involves a consideration of the provisions of section 64. Section 64 deals with the place of assessment. Sub-section (1) provides that where an assessee carries on 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. Under sub-section (2), in all other cases, an assessee is liable to be assessed by the Income-tax Officer of the area in which he resides. Sub-section (4) declares that notwithstanding anything contained in section 64, every Income-tax Officer shall have all the powers, conferred by or under the Act on an Income-tax Officer in respect of any income, profits or gains accruing, or arising or received within the area for which he is appointed. Sub-section (5) then lays down certain cases in which the provisions of sub-section (1) and (2) shall not apply and shall be deemed never at any time to have applied to an assessee. Sub-section (3) deals with a situation where a question may arise as to the place of assessment. An assessee may raise an objection to the jurisdiction of a particular Income-tax Officer to assess him on the ground that he is not liable to be assessed by such Income-tax Officer but that some other Income-tax Officer has jurisdiction to assess him. The question of place of assessment is a question of some importance to the assessee and an assessee may very well tell the taxing authorities that he is liable to be assessed only by a particular Income-tax Officer under the provisions of section 64. What is to happen in such a case Sub-section (3) provides the machinery for determination of such question when it arises. The second proviso to sub-section (3) provides that the place of assessment cannot be called in question by an assessee if he has made a return in response to the notice under section 22(1) and has stated therein the principal place where he carries on his business, profession or vocation, for in that event the assessee himself having stated the principal place where he carries on his business, profession or vocation, he cannot be permitted to raise an objection to the place of assessment determined on the basis of such statement. An assessee is also precluded by the second proviso to sub-section (3) from calling in question the place of assessment after the expiry of the time allowed by the notice under section 22(2) or section 34 for the making of a return. If he has not made a return in response to the notice under section 22(1) stating therein the principal place where he carries on his business, profession or vocation, by this provision in sub-section (3) the time for making an objection to the place of assessment is limited to the period allowed by the notice under section 22(2) or section 34 for the making of a return and, once such period has expired, the assessee cannot thereafter raise any objection to the place of assessment. Where, however, an assessee raises an objection to the place of assessment and contends that he is liable to be assessed not by the Income-tax Officer who claims to assess him but by some other Income-tax Officer, the question as to the place of assessment which thus arises can be determined only by the Commissioner and where the questions is between places of assessment in more States than one, then by the Commissioners concerned or where they are not in agreement, then by the Central Board of Revenue. The first proviso to sub-section (3) enacts that before any such question is determined in the manner aforesaid, the assessee shall have an opportunity of representing his views. The third proviso to sub-section (3) makes it obligatory on the Income-tax Officer to refer the matter for determination by Commissioner if the Income-tax Officer is not satisfied with the correctness of the claim as to the place of assessment made by the assessee. The machinery thus devised by sub-section (3) for determination of the place of assessment is that if any question as to the place of assessment is raised by an assessee during the period allowed by the second proviso and the Income-tax Officer does not accept the correctness of the claim made by the assessee in regard to the place of assessment, the Income-tax Officer is bound to refer the matter for determination by the Commissioner and before determining the question, the Commissioner is bound to give an opportunity to the assessee to represent his views. Once the Commissioner has determined the question as to the place of assessment after complying with this procedure his decision on the question is final and it cannot be challenged by the assessee. Now it will be clear from this discussion that, before the Income-tax Officer can be required to refer the matter to the Commissioner for his determination under sub-section (3), there must arise before him a question as to the place of assessment which requires to be determined. When such question is referred by the Income-tax Officer to the Commissioner, the Commissioner, after hearing the views of the assessee, determines the question by deciding the place of assessment at which the assessee is liable to be assessed. The scheme of sub-section (3) thus clearly contemplates a controversy between two rival points of view as to the place of assessment which controversy is required to be determined by the Commissioner after hearing the assessee who is party to the controversy. Mr. D. H. Dwarkadas on behalf of the assessee contended that it was enough to bring sub-section (3) into play, that an assessee should raise an objection to the jurisdiction of the Income-tax Officer who claims to assess the assessee and that it was not necessary that the assessee should state as to who according to him was the Income-tax Officer entitled to assess the assessee. His contention was that there may be cases where it may be possible for an assessee to say that the Income-tax Officer who claims to assess him has no jurisdiction under section 64 but it may not be possible for him to state as to who is the Income-tax Officer who has jurisdiction to assess him. In such a case, to take the view that an assessee must in raising objection to the jurisdiction of the Income-tax Officer, who claims to assess the assessee, must also state who according to the assessee is the other Income-tax Officer entitled to assess him, would be to deny the benefit of the machinery provided by sub-section (3) to such assessee. Now, Mr. D. H. Dwarkadas is certainly right when he contends that, in order to attract the applicability of sub-section (3), it is not necessary for an assessee to point out specifically a particular Income-tax Officer, who, according to him, would have jurisdiction to assess him under the provisions of section 64. But it is certainly not enough for an assessee to rest content by merely raising an objection to the jurisdiction of the Income-tax Officer who claims to assess him. The objection to be raised by the assessee must be specific objection stating the ground why he says that the particular Income-tax Officer has no jurisdiction to assess him so that from the ground stated by the assessee it can be determined as to who according to the assessee would be the Income-tax Officer entitled to assess him. The assessee must raise a controversy as to the place of assessment and there must be two points of view between which the Commissioner is called upon to adjudicate. It must be remembered that the Commissioner has to determine the place of assessment and a mere negative objection that a particular Income-tax Officer has no jurisdiction to assessee the assessee cannot attract the applicability of sub-section (3). If a ground is stated by the assessee as to why according to him the Income-tax Officer claiming to assess him has no jurisdiction, such ground, if well-founded, would clearly indicate who would otherwise be the Income-tax Officer entitled to assess him and between these two points of view, the Commissioner would have to determine as to which is the right point of view and on the basis of that, fix the place of assessment. The objection taken by the assessee in the present case was merely a negative objection. The objection taken by the assessee in the present case was merely a negative objection. The assessee did not do anything more than merely assert that the Income-tax Officer, Ward-A, Junagadh, had no jurisdiction to assess him. He did not state as to what were the grounds on which he contended that the Income-tax Officer had no jurisdiction to assess him. He did not raise any controversy between any two or more places of assessment which was required to be determined by the Commissioner. This being the position no question as to the place of assessment was raised by the assessee which was required to be referred by the Income-tax Officer to the Commissioner under the provisions of section 64(3) and the Income-tax Officer did not act illegally in not referring the matter to the Commissioner under that section. In this view of the matter it is clear that the assessee is not entitled to rely on the provisions of section 64(3) for the purpose of contending that he was prevented by sufficient cause from filing the return pursuant to the notice under section 22(2) and from complying with the terms of the notice under section 22(4).

10. We may point out that the first question as framed does not really bring out the point in controversy between the parties. It assumes that there was a question of jurisdiction raised before the Income-tax Officer which was required to be disposed of by the Commissioner under section 64(3) which premise itself is in dispute between the assessee and the Commissioner. We would, therefore, reframe the question as follows so as to bring out the real nature of the controversy between the parties :

'Whether, on the facts and in the circumstances of the case, a question as to the place of assessment was raised by the assessee as contemplated by section 64(3) which was required to be referred to the Commissioner for his decision under the provisions of that section ?'

11. Our answer to this question will be in the negative.

12. That takes us to the second question, namely, whether the assessee was in any event prevented by sufficient cause from making the return required under section 22(2) read with section 34 so as to bring the case within section 27. On this question Mr. D. H. Dwarkadas found himself in considerable difficulties because the facts found by the Tribunal were against him and on the facts so found it was not possible to say that the assessee had sufficient cause which prevented the assessee from filing the return pursuant to the notice under section 22(2) and complying with the terms of the notice under section 22(4). The Tribunal found as a matter of fact that the assessee had no intention of filing a return and was all along avoiding to file a return by taking a frivolous plea that the Income-tax Officer had no jurisdiction to assess him. If this finding of fact could not be challenged on behalf of the assessee, it is obvious that the assessee could not possibly contend that he had sufficient cause within the meaning of section 27. Mr. D. H. Dwarkadas, therefore, tried to challenge this finding of fact by contending that it was unreasonable or perverse. We cannot agree with this contention of Mr. D. H. Dwarkadas. It is not possible to say that this finding of fact reached by the Tribunal is unreasonable or perverse. If this finding of fact stands, then, though the question whether a particular cause is sufficient within the meaning of section 27 would be a question of law, it would have to be held that the assessee had no sufficient cause within the meaning of that section. The only way in which Mr. D. H. Dwarkadas could put his case was that the assessee was under a bona fide belief that the Income-tax Officer had no jurisdiction to assess him and that in any event the Income-tax Officer was not entitled to assess him unless his objection to the jurisdiction of the Income-tax Officer was determined by the Commissioner and that this constituted sufficient cause which prevented him from filing the return and complying with the terms of the notice issued by the Income-tax Officer. But according to the finding of fact reached by the Tribunal, the assessee had no such genuine belief in the plea taken by him and he was all along avoiding to file a return by taking a frivolous plea. We must, therefore, hold on the facts and circumstances of the case that it cannot be said that the assessee was prevented by sufficient cause from filing the return required under section 22(2) read with section 34 as contemplated by section 27. Our answer to second question will, therefore, be in the negative.

13. The assessee will pay the costs of the reference to the Commissioner.

14. Questions answered in the negative.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //