D. S. DAVE C.J. - This is a reference by the Income-tax Appellate Tribunal, Bombay Bench 'C', under section 66(2) of the Indian Income-tax Act, 1922, which will hereinafter be referred to as the 'Act'. The question, which has been referred for our answer, runs as follows :
'Whether, in the circumstances of this case, it was obligatory on the succeeding Income-tax Officer to give another opportunity of showing cause before imposing a penalty under section 28 of the Indian Income-tax Act, 1922 ?'
In order to appreciate the question of law involved, it would be proper to mention briefly the facts narrated in the statement of the case.
Messrs. A. C. Metal Works, Jodhpur, which will be referred as the 'assessee' hereafter, was carrying on the business of manufacturing and sale of umbrellas. He purchases some aero-scraps from time to time. They were stocked at a place called Rani and then sold through one Tejraj Jaswantraj to a Bombay party in the assessment year 1957-58 to which the present reference relates. Out of the amounts realised from these sales, Rs. 9,650 was credited by the assessee to the machinery account and Rs. 13,279 to the capital account. When the assessee was asked to explain these entries, it was submitted by him that these were sales of unutilised construction materials. The invoices for these sales, however, showed that they were sales of machinery parts. When Tejraj Jaswantraj was examined, he stated that the items dealt with were aero-scraps. As against the return income of Rs. 6,012, the assessee was therefore assessed on a total income of Rs. 47,489 which included the above amount of Rs. 22,929. Thereafter, the Income-tax Officer took proceedings against the assessee under section 28(1) (c) read with section 28(3) of the Act and issued a notice dated February 24, 1959, to show cause why an order imposing penalty should not be made against him for concealment of particulars of income. The Income-tax Office, who issued this notice, was Shri B. R. Kumbhat. The assessee was requested to appear on March 24, 1959, at 10 a.m. to show cause why an order imposing penalty upon him should not be made under section 28(1) of the Act. The notice was served on the assessee on February 26, 1959. There was no appearance on his behalf on March 24, 1959. He, however, sent a written reply dated March 30, 1959, which has been marked as annexure 'A' in this case. That reply was very brief and may be reproduced here. It was as follows :
'That the assessee has accounted for the sale-proceeds of building material and machinery parts and has submitted before your honour the invoices and full names and addresses of such purchasers. As the transaction is genuine and no particulars of any income have been concealed, it is requested that proceedings started under section 28(3) may kindly be dropped.'
Shri Kumbhat was transferred on July 16, 1959. Thereafter his successor, Shri N. L. Jain, continued the proceedings and passed an order on July 30, 1959, imposing the penalty of Rs. 5,000 on the assessee. Aggrieved by this order, the assessee filed an appeal which was dismissed by the Appellate Assistant Commissioner on March 10, 1960. He filed a second appeal, but that was also dismissed by the Income-tax Appellate Tribunal, Bombay Bench, on July 19, 1961. The assessee then presented an application requesting the Tribunal to make a reference. That application having been rejected, he presented an application to this court. It was requested by him that the Appellate Tribunal should be required to refer three questions of law, but the Bench which heard the application was of opinion that only one question arose out of the order of the Appellate Tribunal and, therefore, the Tribunal was required to state the case and refer to this court the question which has been reproduced above.
It has been strenuously urged by the petitioners learned counsel that the officer who passed the assessment order against his client and who issued notice under section 28(1) (c) read with section 28(3) of the Act was Shri B. R. Kumbhat, that his successor-in-office, Shri N. L. Jain, did not afford to the assessee any opportunity of being heard and that it was incumbent upon him to give him a second opportunity of showing cause before imposing the penalty.
In reply, it is contended by learned counsel for the opposite party that after Shri B. R. Kumbhat issued the notice dated 24th February, 1959, to the assessee to appear before him and show cause against the imposition of penalty on him, the assessee did not care to appear before him on the appointed date. He simply sent a written reply and instead of giving any reasonable explanation as to why the income amounting to Rs. 22,929 should not be treated as concealed income, he remained content by giving a bare denial. Learned counsel proceeds to say that in a case where the assessee files only a written reply and does not ask for a personal hearing, it is not necessary for the successor of that officer to give another opportunity of showing cause before imposing penalty.
We have given due consideration to the arguments advanced by the learned counsel on either side. We agree with learned counsel for the respondent that in a case where one Income-tax Officer issues a notice under section 28(3) of the Act to an assessee calling upon him to show cause why penalty should not be imposed under section 28(1) of the Act and the assessee remains content with submitting his explanation in writing but does not choose to appear before the Income-tax Officer or does not ask for an opportunity to adduce evidence or address arguments, nor demands rehearing under the proviso to section 5, sub-section (7C), of the Act, the succeeding officer has authority to continue the penalty proceedings and impose penalty on the assessee after considering the written representation already filed by him without giving a fresh opportunity of being heard.
Learned counsel for the assessee has referred to Calcutta Tanneries (1944) Ltd. v. Commissioner of Income-tax in support of his argument. In that case, it was observed as follows :
'In a penalty proceeding the assessee has a statutory right of being heard under section 28(3). This hearing consists of the right of adducing evidence as also of advancing arguments, whereas an assessee in an assessment proceeding has the right of only producing evidence under section 23(3) of the Income-tax Act. There is no provision in an assessment proceeding corresponding to section 28(3) which enacts that no order of penalty shall be made unless the assessee...... has been heard or has been given a reasonable opportunity of being heard. Section 5(7C) enacts that the succeeding income-tax authority may continue the proceeding from the stage at which it was left by its predecessor-in-office. The combined effect of the two sections is to authorise the succeeding Income-tax Office to pass an order upon the evidence produced before his predecessor-in-office but the effect is not to authorise the former to pass an order upon arguments advanced before the latter.'
It may be pointed out that the observations made in the case cited above were considered by another Division Bench of the Calcutta High Court in Kanailal Gatani v. Commissioner of Income-tax and Excess Profits Tax and it was remarked by the learned judges that they were made on the peculiar facts and circumstances of that case. It was pointed out in the first place that after the penalty proceedings were started, a written statement was filed by the assessee denying liability and that witnesses and books were examined by the Income-tax Officer and the arguments of the pleader was heard. Such hearing concluded on September 29, 1951, but no order was passed on that date. About fourteen months after that date, the Income-tax Officer was succeeded by another Income-tax Officer who passed an order imposing a penalty of Rs. 9,900 on January 14, 1954. He did not hear the assessee any further. It was in those circumstances that the said observation was made. In Kanailal Gatanis case the assessee was served with a notice and called upon to show cause by March 10, 1947, why a penalty under section 28 of the Act should not be imposed for concealing the particulars of his income deliberately. On 10th March, 1947, the assessee filed a written reply. On further time being allowed, a written statement was filed on May 3, 1947. Thereafter, Mr. A. De was transferred and another officer, Mr. S. N. Roy, came in his place. The succeeding officer imposed penalty and a question arose whether the imposition of penalty by the succeeding officer who did not hear the assessee was legal. It was observed that :
'A hearing of a case may be of many kinds. It usually involves the calling of witnesses, their examination and cross-examination and then arguments are addressed to the Tribunal. Where witnesses have been called and examined, or where arguments have been advanced, it is clear that one man cannot hear the case and another man pass judgment. The reason is that much may depend on the view that the Tribunal takes as to credibility of witnesses and his mind may be swayed one way or the other by the demeanour of witnesses and as a result or arguments. This is such an intangible and personal task, that it cannot be handed over to the successor. Where, however, no witnesses have been called and no arguments have been advanced, but the matter depends on written objections filed, then the successor is in the same position as the officer who originally was in the conduct of the case. Therefore, as long as the successor applies his mind to the materials before him, this is sufficient. As appears from the facts of this case, Mr. A. De had looked into the materials and had drawn the draft order imposing penalty. His successor, Mr. Roy, looked into the materials and the draft order, concurred in the conclusion arrived at by his predecessor and asked for the sanction of the Inspecting Assistant Commissioner and, having obtained it, subscribed his signature to the order, making it his own. In my opinion, the provisions of section 28 have been satisfied and nothing illegal has been done.'
It was also observed by the learned judge as follows :
'I have decided this case upon the law as it stood before section 5(7C) was introduced by the amendment of 1953. There is a conflict of decision as to whether, under that sub-section, a re-hearing or fresh hearing is necessary unless demanded by the assessee. I must not be taken to have expressed any opinion upon that point.'
In Murlidhar Tejpal v. Commissioner of Income-tax the learned judges dissented from the view taken in Calcutta Tanneries (1944) Ltd. v. Commissioner of Income-tax, referred to above, and observed as follows :
'With great respect we differ from the view expressed by the Calcutta High Court in this case. In our opinion, the combined effect of section 28(3) and section 5(7C) of the Indian Income-tax Act is that the succeeding Income-tax Officer has authority to pass an order upon the explanation of the assessee produced before his predecessor-in-office, if the assessee had failed to exercise his right under section 5(7C) demanding that the proceeding should be reopened. It is admitted in the present case that the assessee did not make any demand for reopening the proceeding before Shri V. Jha, the succeeding Income-tax Office, under the first proviso to section 5(7C) of the Income-tax Act. If the assessee had chosen to do so, he might have exercised his statutory right under section 5(7C) of the Income-tax Act, and required the succeeding Income-tax Officer to take a fresh explanation from him before making any order of penalty. But the admitted position is that in the present case the assessee did not exercise his statutory right under section 5(7C). The result, therefore, is that Shri V. Jha had authority to make an order of penalty under section 28(1) (c) of the Income-tax Act, without calling for a fresh explanation from the assessee.'
In Shop Siddegowda and Family v. Commissioner of Income-tax, the learned judges followed the view expressed by the Patna High Court in Murlidhar Tejpal v. Commissioner of Income-tax referred to above. They also followed the earlier view of the Bench of that court in Venkatarayappa and Sons v. Income-tax Officer, Kolar Circle (Writ Petition No. 311 of 1960), in which it was held that 'the wordings of section 5(7C) were also applicable to penalty proceeding.' The same view was reiterated in Hulekar & Sons v. Commissioner of Income-tax.
We respectfully agree with the view expressed in Murlidhar Tejpal v. Commissioner of Income-tax and Shop Siddegowda and Family v. Commissioner of Income-tax referred to above. It has already been pointed out above that after Shri B. R. Kumbhat issued the notice to the assessee asking him to appear before him to show cause against the imposition of penalty, he did not care to appear before him personally or through his counsel on the appointed date or on any other date till he was transferred. He remained content with sending a cryptic written reply. If he had appeared before that officer and advanced some oral arguments in addition to the written reply filed by him, then there could be justification for him to say that his successor had not afforded him an opportunity of rehearing. According to section 5(7C) of the Act, Shri B. R. Kumbhats successor, Shri N. L. Jain, was competent to continue the proceedings from the stage they were left at by Shri Kumbhat. Of course, under the first proviso to that section the assessee could demand an opportunity of rehearing, but, in the present case, he had not asked even for the first opportunity of hearing before Shri B. R. Kumbhat and there is nothing on record to show if he cared to request Shri N. L. Jain for giving him a hearing. Under the circumstances, Shri N. L. Jain was competent to pass the order of penalty after taking into consideration the written explanation which was filed by the assessee.
Our answer to the question, set out above, therefore, is that, in the circumstances of this case, it was not obligatory on the succeeding Income-tax Office to give another opportunity of showing cause before imposing penalty on the assessee under section 28 of the Act.
Before parting with the case, it may be mentioned that learned counsel for the assessee during the course of oral arguments raised a contention before us to the effect that Shri N. L. Jain had signed his order dated July 30, 1959, mechanically without going into the record. We cannot enter into the merits of this allegation because it is beyond the scope of the question which has been referred to us. It is well settled that the jurisdiction of this court while answering the question under section 66 of the Act is purely advisory and limited to answering the point or points referred to us. In Petlad Turkey Red Dye Works Co. Ltd. v. Commissioner of Income-tax it was observed by their Lordships of the Supreme Court after referring to a number of earlier decided cases that 'the jurisdiction of the High Court is advisory under section 66 of the Income-tax Act. Under that section a question of law can be referred soliciting its opinion but the jurisdiction of the High Court is confined to giving an opinion on that question of law arising out of the order of the Appellate Tribunal. It has no jurisdiction to raise another question or to answer a different question.' If the assessee wanted to question the validity of Shri N. L. Jains order on the ground that he had signed it mechanically without applying his mind as a quasi-judicial functionary, the proper course for him was to raise it before the Tribunal. We find that he did not raise this question in the application which he had filed before the Appellate Tribunal for a reference. Again, in the application, which he filed before this court for calling for a reference under section 66(2), of the Act, he did not raise this question. In the order which was passed by the learned judges of this court on November, 15, 1962, there is no discussion about such a contention. They directed the Tribunal to refer only one question which has been set out above. We, therefore, reject his oral prayer to raise a fresh question at this stage.
The parties are left to bear their own costs.