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Manabendra Nath Roy Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 96 of 1967
Judge
Reported in[1977]107ITR959(Cal)
ActsIncome Tax Act, 1922 - Sections 5(7C), 28(1), 33B, 28(3) and 66(1)
AppellantManabendra Nath Roy
RespondentCommissioner of Income-tax
Cases Referred(Smt. Aparna Roy v. Commissioner of Income
Excerpt:
- p.b. mukharji, c.j.1. this is an income-tax reference under section 66(1) of the indian income-tax act, 1922. it raises the following two questions: '(1) whether, in view of the repeal of the indian income-tax act, 1922, the commissioner of income-tax can validly exercise jurisdiction under section 33b of the indian income-tax act, 1922, after april 1, 1962 (2) whether, on the facts and in the circumstances of the case, the order for each of these years 1956-57 to 1961-62 passed by the commissioner of income-tax under section 33b was valid and proper ?' 2. in the judgment just delivered by us in income-tax reference no. 100 of 1967 (smt. aparna roy v. commissioner of income-tax (cal)), we have answered both these questions in the affirmative and given our reasons for it. we do not wish.....
Judgment:

P.B. Mukharji, C.J.

1. This is an income-tax reference under Section 66(1) of the Indian Income-tax Act, 1922. It raises the following two questions:

'(1) Whether, in view of the repeal of the Indian Income-tax Act, 1922, the Commissioner of Income-tax can validly exercise jurisdiction under Section 33B of the Indian Income-tax Act, 1922, after April 1, 1962

(2) Whether, on the facts and in the circumstances of the case, the order for each of these years 1956-57 to 1961-62 passed by the Commissioner of Income-tax under Section 33B was valid and proper ?'

2. In the judgment just delivered by us in Income-tax Reference No. 100 of 1967 (Smt. Aparna Roy v. Commissioner of Income-tax (Cal)), we have answered both these questions in the affirmative and given our reasons for it. We do not wish to repeat what we have said in that judgment in these proceedings. We only make a reference to that judgment to indicate that our reasons for the answers to these questions are to be found there and that judgment should be used for answering these two questions.

3. There is, however, only one particular point on which Dr. Pal appearing for the assessee has tried to make a distinction from the facts in the judgment delivered in the other case mentioned above. That point briefly is that the order made by the Commissioner under Section 33B in this case is illegal and bad under Section 5(7C) of the Indian Income-tax Act, 1922, on the ground that one Commissioner gave the notice to show cause under Section 33B and thereafter when he ceased to have the jurisdiction some other Commissioner made the order under section 33B of the Income-tax Act, 1922.

4. The facts on this point are as follows : The show-cause notice by the Commissioner of Income-tax, West Bengal, was given on the 8th August, 1963, by Mr. Vallibhoy, the then Commissioner. The assessee made a reply to the show-cause notice in writing on the 29th August, 1963. Thereafter, Mr. Vallibhoy ceased to have his jurisdiction and one Mr. Palekar, Commissioner of Income-tax, West Bengal-Ill, assumed charge on the2nd September, 1963. The order under Section 33B of the Indian Income-tax Act, 1922, in this case was passed by this Mr. Palekar on the 3rd September, 1963. Therefore, on these facts Dr. Pal for the assessee challenges this order as being in violation of Section 5(7C) of the Indian Income-tax Act, 1922. His contention is that these proceedings should have been reopened by Mr. Palekar or the assessee should have been reheard before he made the order under Section 33B. We shall now examine this argument in some detail.

5. The notice to show cause under Section 33B of the Indian Income-tax Act, 1922, dated the 8th August, 1963, by Mr. Vallibhoy, the Commissioner of Income-tax, West Bengal, stated as follows:

'I, therefore, propose to pass such orders thereon as the circumstances of the cases justify after giving you an opportunity of being heard under the powers vested in me under Section 33B of the Indian Income-tax Act, 1922. The cases will be heard at 11.30 a.m. on September 3, 1963, at my above office when you are requested to produce necessary evidence in support of your contentions. Objections in writing accompanied by the necessary evidence, if any, received on or before the appointment for personal hearing will also be duly considered.'

6. The reply of the assessee dated the 29th August, 1963, was long and elaborate but significantly enough it was not accompanied by any evidence in support thereof as required by the notice to show cause. In the reply the assessee stated:

'A short adjournment for only three days is prayed for for furnishing evidence which would conclusively prove that the suspicions on which the learned Commissioner is purporting to act are controvertible. Moreover, your petitioner is a young man just started in life and submits this petition with a fervent prayer that the learned Commissioner will be graciously pleased to drop this harassing proceeding.'

7. The request, therefore, was to drop what was called the harassing proceeding combined with a request for an adjournment for three days. The hearing date was already fixed on the 3rd September, 1963. The assessee took the law into his own hands and without getting an order of adjournment or any communication on that point he chose not to appear on the date of hearing fixed on the 3rd September, 1963. The record shows that nobody appeared for the assessee. It is to be noticed at this stage that there was no request for rehearing made on the 3rd September, 1963, when the order was being passed or when the case was intended to be heard and where the assessee was ordered to attend. No reason is given on the record by the assessee to show why he was absent from the hearing on the 3rd September, 1963. The record does not show that he was absent from the hearing on the 3rd September, 1963, for any unavoidable cause oron any misunderstanding. The assessee just chose not to appear on that crucial date which was notified to him by the Commissioner as the date when he would be given an opportunity to be heard.

8. There are many difficulties in the way of the assessee in entertaining this point under Section 5(7C) of the Indian Income-tax Act, 1922. The first difficulty of course is that it is debatable whether he at all made this point or argued it before the Tribunal. The order of the Tribunal in this case does not make any reference to this particular point that the notice to show cause was issued by one Commissioner and was heard by another Commissioner when the previous Commissioner had ceased to exercise jurisdiction. A similar point was raised in the case of ITR No. 100 of 1967 (Smt. Aparna Roy v. Commissioner of Income-tax (Cal)) mentioned above but there this fact was not present that one Commissioner gave notice and another Commissioner issued the order under Section 33B. The plain fact remains that the Tribunal did not advert to this fact which is now put forward by Dr. Pal for the assessee as a ground for challenging this order under Section 33B. Even in the reference application under Section 66(1) of the Indian Income-tax Act, 1922, which the assessee made before the Tribunal for stating the case, where in paragraph 4 he sets out as many as ten grounds from (A) to (J) he specifically took the point in (I) and (J) raising the question of Section 5(7C) and the fact that Mr. Palekar succeeded Mr. Vallibhoy as Commissioner. But these points were not referred by the Tribunal to this court. On the other hand, only grounds (A) and (D) were referred to this court. But even then there was no application thereafter by the assessee in this court for an order upon the Tribunal to refer also this question tinder Section 5(7C) of the Indian Income-tax Act, 1922. In spite of this we allowed Dr. Pal for the assessee to make his submissions on the point on the ground that in the grounds of appeal before the Tribunal he had at least suggested this particular point under Section 5(7C) of the Indian Income-tax Act, 1922.

9. We are satisfied that this contention of Dr. Pal for the assessee must fail on the merits and the interpretation of Section 5(7C) of the Indian Income-tax Act, 1922. That section, inter alia, reads as follows :

'5. (7C) Whenever in respect of any proceeding under this Act an income-tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises his jurisdiction, the income-tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor :

Provided that the assessee concerned may demand that before the proceeding is so continued, the previous proceeding or any part thereof be reopened or that before any order for assessment is passed against him he be re-heard.'

10. This is the material portion of Section 5(7C) of the Act with which we are concerned. A plain reading of this provision makes the following points clear : the first mandate of the statute is that the successor authority has the jurisdiction to continue the proceeding from the point where it was left by his predecessor authority. That is the very first provision quoted above. Now, that mandate can only be displaced if the assessee concerned demands that before the proceeding is so continued the previous proceeding or any part thereof be reopened or that before any order for assessment is passed against him he be re-heard. That is the clear and express language of the proviso. The assessee in the facts and circumstances of this case cannot at all come within this proviso. There is no demand by him 'before the proceeding is so continued' either to reopen the previous proceeding or to re-hear him. Indeed, it is significant that the assessee's own statement of the case before the Tribunal accompanying the applications for reference never even suggested expressly or impliedly that he wanted or demanded the previous proceeding to be reopened or that he, the assessee, should be reheard. Here, again, the assessee's own absence from the date notified for hearing, i.e., September 3, 1963, is also a fact against this contention for if he had appeared he would have known that the hearing was given by Mr. Palekar and not Mr. Vallibhoy and he could have then made a representation at that stage that he wanted a re-hearing or wanted the proceedings to be reopened. But even missing that chance, he gets another chance in the statement of the case which he files and even there he does not make the point that he made any demand for reopening the previous proceedings or be re-heard. On the language of the proviso quoted, the assessee clearly cannot come within its protection and hence the primary mandate of the statute permitting the succeeding authority to carry on the proceeding from the point left by his predecessor authority must prevail. Therefore, the order under Section 33B by Mr. Palekar must be held to be valid, legal and proper.

11. The interpretation of Section 5(7C) of the Indian Income-tax Act, 1922, is, to our mind, plain and clear. We would not have thought it necessary to cite any authorities. Out of deference to the arguments made from the Bar, we shall briefly notice a few.

12. The first case is a decision of the Division Bench of this court in Calcutta Tanneries (1944) Ltd. v Commissioner of Income-tax [1960] 40 ITR 178 (Cal). There one Income-tax Officer initiated a penalty proceeding under Section 28(1)(c) of the Indian Income-tax Act, and the hearing of the proceedings had concluded on September 29, 1951, and a long time thereafter a successor officer passed an order on January 14, 1954, imposing a penalty, without giving an opportunity to the assessee to be heard. The fact in that case is to be distinguished by saying that there the officerconcerned had not only initiated the proceedings, but also heard the proceedings and after having concluded the proceedings, some other officer passed the order of penalty. There is no such comparable fact in the instant reference before us. But even then the actual ratio of that decision on Section 5(7C) is completely against the assessee's contention in the present reference. The relevant observations of Lahiri C.J. will appear at pages 181-182 of that report and the specific observation appearing at page 182, where it was said :

'As a result of the assessee's failure to exercise its right under the first part of the proviso (Section 5(7C)) the assessee has undoubtedly lost its right of having the proceeding reopened......'

13. The decision, however, made a distinction between the right under Section 5(7C) of the Indian Income-tax Act, 1922, and a further right under Section 28(3) of the Indian Income-tax Act, 1922. The court in that case held that although the right under Section 5(7C) has been lost the right of being heard under Section 28(3) of the Indian Income-tax Act, 1922, has not been lost. But there is no question of any right of being heard under Section 28(3) in the instant reference before us.

14. Reference was also made to a Calcutta decision in Kanailal Gatani v. Commissioner of Income-tax [1963] 48 ITR 262 . But, as will be clear from the observations made at pages 269-270, the court expressed there no opinion on the interpretation of Section 5(7C) of the Indian Income-tax Act, 1922.

15. This disposes of the two Calcutta decisions referred to in the arguments made from the Bar.

16. The Punjab and Haryana High Court in Satprakash Ram Naranjan v. Commissioner of Income-tax followed the Calcutta decision in Calcutta Tanneries' case : [1960]40ITR178(Cal) (see the observations at page 649 of that report).

17. The Mysore High Court in Shop Siddegowda & Family v. Commissioner of Income-tax : [1964]53ITR57(KAR) discussed this point under Section 5(7C) of the Indian Income-tax Act, 1922, at pages 59, 60. Hegde J. delivering the judgment of the Mysore High Court, observed as follows at those pages:

'A Bench of this court in Writ Petition No. 311 of 1960 (Venkatarayappa & Sons v. Income-tax Officer, Kolar Circle) held that the wordings of Section 5(7C) are also applicable to penalty proceedings. In the instant case, the assessee had not demanded any reopening of the case as contemplated under the first proviso to Section 5(7C). The only grievance of the assessee is that the succeeding Income-tax Officer did not give him a fresh opportunity of being heard. Is he entitled to such an opportunity A combined reading of Sections 28(3) and 5(7C) makes it clear that a penalty proceeding can be continued by the succeeding Income-tax Officer from the stage where it was left by the previous Income-tax Officer... As seen earlier the assessee had not been given an opportunity of being heard in the penalty proceedings. He did not think it necessary to have a personal hearing nor did he think it necessary that he should adduce any evidence before the Income-tax Officer to satisfy the Income-tax Officer that the view taken by him that the assessee had concealed any income is not correct...No provision in the Act nor any decided case was brought to. our notice laying down that in a case like the one before us, a further opportunity should be given to the assessee of being heard even though the assessee did not seek to reopen the proceeding as contemplated by the first proviso to Section 5(7C). We do not think such a position is even available under the principles of natural justice.'

18. The same view was taken by another decision of the Mysore High Court in Hulekar & Sons v. Commissioner of Income-fax : [1967]63ITR130(KAR) . The Rajasthan High Court at Jodhpur in A. C. Metal Works v. Commissioner of Income-tax , again took the same view by pointing out that if the assessee remains content with submitting his explanation in writing but does not choose to appear before the taxing authority or ask for an opportunity to adduce evidence or address argument, nor demands re-hearing under the proviso to Section 5(7C) of the Act, the succeeding officer has the authority to continue the proceedings. These principles are also illustrated by the other decision of the Punjab and Haryana High Court in Ram Saran Das Kapoor v. Commissioner of Income-tax , where the assessee not only submitted written objections but also asked for a personal hearing and the officer gave a personal hearing but before he could give a decision, the case was transferred to another Income-tax Officer who passed the order imposing the penalty without giving a personal hearing to the assessee and it was in that case held that the order was bad in law, even though, the assessee did not ask under Section 5(7C) for reopening of the case or for personal hearing by the officer, who passed the order. Now, that case again on the facts is entirely different from the instant reference before us, for there the assessee asked for a personal hearing which the assessee has not done in the instant reference. Secondly, the hearing was concluded before one officer but the order that was passed was by a different officer. That again is a fact which is very different from the fact in the instant reference before us. Therefore, that case is clearly distinguishable.

19. For the reasons stated above and on the authorities discussed and also for the reasons stated in our judgment in Income-tax Reference No. 100 of 1967 (Smt. Aparna Roy v. Commissioner of Income-tax (Cal)) we answer both the questions in the affirmative and in favour of the revenue;

20. The costs should follow the event and be paid by the assessee.

T.K. Basu, J.

21. I agree.


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