Alfred Henry Lionel Leach, C.J.
1. The question which has been referred is whether the case of N.A.S.V. Venkatachalam Chettiar v. Commissioner of Income-tax, Madras (1934) 68 M.L.J. 227 : I.L.R. 58 Mad. 367 : 8 I.T.C. 74 (F.B.) was rightly decided. The answer depends on the meaning to be given to the word 'prejudicial' in Section 66(2) of the Indian Income-tax Act. Section 66(2) states that within sixty days of the date on which he is served with notice of an order under Section 33 enhancing an assessment or otherwise prejudicial to him the assessee may require the Commissioner of Income-tax to refer to the High Court any question of law arising out of the order. Section 33 authorises the Commissioner of Income-tax of his own motion to call for the record of a proceeding under the Act which has been taken by an authority subordinate to him or by himself when exercising the power of an Assistant Commissioner under Sub-section (4) of Section 5, and having called for the record he is empowered, subject to the provisions of the Act, to pass such order as he thinks fit, but he may not pass an order prejudicial to an assessee without hearing him or giving him a reasonable opportunity of being heard. The section makes no mention of the right of an assessee to move the Commissioner to take action but as the Commissioner may take action of his own motion the assessee must have the right of calling his attention to a prejudicial order and of asking that action be taken. This in fact frequently happens.
2. In Venkatachalam Chettiar's case (1934) 68 M.L.J. 227 : I.L.R. 58 Mad. 367 : 8 I.T.C. 74 (F.B.) the petitioner applied to the Income-tax Officer for a refund of income-tax under Section 48 of the Act, but his application was refused. The petitioner then filed an application asking the Commissioner to revise the order of the Income-tax Officer under Section 33. Having heard the application the Commissioner refused to interfere. The petitioner then required the Commissioner to refer the matter to the High Court under Section 66(2) of the Act as involving a question of law. The Commissioner dismissed the application on the ground that it was incompetent. His reason was that his order under Section 33 was not one enhancing the assessment or otherwise prejudicial to the applicant. In accepting this interpretation, Beasley, C.J., observed:
What Section 33 clearly contemplates is an order made by the Commissioner which alters the position of an assessee or an applicant to that person's prejudice. In this particular case, his position had been prejudiced already by the refusal of the Income-tax Officer (o grant him the refund which he required. The Commissioner's order did no more than leave him in that position and, it is quite clear to us, was not an order which was prejudicial to the petitioner in the sense intended, namely, that his position at that time, that is, the dale of the Commissioner's order, was altered by that order to one of prejudice to him.
3. With these observations the other Judges (Ramesam and King, JJ.) agreed.
4. With great respect I am unable to accept this interpretation. It means that the Commissioner's order must be more prejudicial than the order complained of before it can come within the purview of Section 66(2). The section does not say so. All that it contemplates is a prejudicial order. It seems to me that if an order of the Income-tax Officer is prejudicial an order which confirms it or rejects an application asking that it be revised is also prejudicial. It could not be said that a decree of an appellate Court dismissing an appeal from a Court of first instance is not prejudicial to the appellant. It is just as prejudicial as the original decree. There is no difference in this respect between the dismissal of an appeal and the dismissal of an application for revision when the law permits such an application to be made.
5. In expressing this opinion I have not lost sight of the first proviso to Section 66(2), which reads as follows:
Provided that a reference shall lie from an order under Section 33 only on a question of law arising out of that order itself, and not on a question of law arising out of a previous order under Section 31 or Section 32 revised by the order under Section 33.
6. Section 66(2) also applies to orders made under Sections 31 and 32. Mr. Patanjali Sastri has suggested that the proviso only relates to orders under Sections 31 and 32 revised under Section 33. In other words he asks the Court to read the second part of the proviso as governing the first part. I do not read it in that way. I consider the effect of the proviso to be this. A reference shall lie only when a question of law arises out of the order passed under Section 33 but if the matter is one which relates to an order under Section 31 or Section 32 a question of law which arose out of the previous order alone cannot be referred.
7. Reading the first part of the proviso as standing alone it does not mean that the Commissioner can render the provisions of Sub-section (2) nugatory by dismissing the assessee's petition without stating his reasons. When the Commissioner receives a petition filed under Section 33 it is his duty to consider it and pass an order on it. If the petition relates to an order of the Income-tax Officer the consideration of the petition involves the consideration of the Income-tax Officer's order and if the Commissioner dismisses the petition without mentioning the question of law, supposing one arises on the order complained of, the Commissioner's order must be read with the order of the Income-tax Officer. Whether a question of law arises on an order of the Commissioner passed on an application under Section 33 will depend on the circumstances of the particular case, but because a question of law is not set out in an order does not necessarily follow that a question of law does not arise. The Commissioner cannot, of course, be required to receive a frivolous or belated petition.
7. Our attention has been drawn to the case of The Central India Spinning, Weaving and . v. The Commissioner of Income-tax, Central and United Provinces (1936) 10 I.T.C. 131 in which the Nagpur High Court followed the decision in Venkatachalam Chettiar's case (1934) 68 M.L.J. 227 : I.L.R. 58 Mad. 367 : 8 I.T.C. 74 (F.B.) and considered the first proviso to Section 66(2). The Court accepted Venkatachalam Chettiar's case (1934) 68 M.L.J. 227 : I.L.R. 58 Mad. 367 : 8 I.T.C. 74 (F.B.) without discussing it and therefore its judgment does not carry the matter further. With regard to the proviso the Court considered that its true intent is that a question of law that is common to both the Assistant Commissioner's and the Commissioner's order is not a proper subject-matter of a reference unless the question of law is raised on a reference from the decision of the Assistant Commissioner. This question does not arise in the present case and we are not called upon to discuss it.
8. The answer that I would give to the question referred is that N.A.S.V. Venkatachalam Chettiar v. Commissioner of Income-tax, Madras (1934) 68 M.L.J. 227 : I.L.R. 1934 58 Mad. 367 : 8 I.T.C. 74 (F.B.) was wrongly decided and that an order which dismisses an application asking for the revision of a prejudicial order must be deemed to be prejudicial within the meaning of Section 66(2).
9. The costs of this reference will be made costs in the case out of which it arises and we fix the amount at Rs. 150.
Madhavan Nair, J.
10. I agree.
11. I agree.
Venkataramana Rao, J.
12. I agree.
Abdur Rahman, J.
13. I concur and wish to add nothing more.