Skip to content


Chiranjilal Bahri Vs. Income-tax Officer, d Ward and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberCivil Rule No. 5101(W) of 1969
Judge
Reported in[1977]108ITR646(Cal)
ActsIncome Tax Act, 1922 - Section 34
AppellantChiranjilal Bahri
Respondentincome-tax Officer, "d" Ward and ors.
Appellant AdvocateR.C. Deb, ;T.P. Mukherjee and ;Manisha Seal, Advs.
Respondent AdvocateM.N. Roy, Adv.
Cases ReferredKhardah Co. Ltd. v. Durga Charan
Excerpt:
- .....said notices have been challenged at the time of hearing is that the necessary satisfaction of the central board of revenue for the issue of the said notices were not given in accordance with law. therefore, the condition precedent for assumption of jurisdiction by the respondent no. 1 under section 34 of the act has not been satisfied.2. mr. deb, learned advocate for the petitioner, has submitted that in the instant case, there is no material to establish that the central board of revenue was satisfied that this was a fit case for issue of notices under section 34 of the act. in this connection, mr. deb, learned advocate for the petitioner, referred to the provisions of the central board of revenue act, 1924, and to the central board of revenue regulation and transaction of business.....
Judgment:

Chittatosh Mookerjee, J.

1. The petitioner in this rule has challenged the validity of the notices all dated the 28th March, 1962, issued by the Income-tax Officer, 'D' Ward, Howrah, under Section 34 of the Indian Income-tax Act, 1922, for assessment years 1940-41 to 1952-53 and also the validity of the notices under Section 22 of the Act for the said assessment years. He has, inter alia, prayed that the said notices under Section 22(4) and Section 34 of the Act be quashed and the respondents be commanded to cancel and/or withdraw the same and also to forbear from giving effect to and/or from taking any steps whatsoever in pursuance of the said notices. The only ground on which the said notices have been challenged at the time of hearing is that the necessary satisfaction of the Central Board of Revenue for the issue of the said notices were not given in accordance with law. Therefore, the condition precedent for assumption of jurisdiction by the respondent No. 1 under Section 34 of the Act has not been satisfied.

2. Mr. Deb, learned advocate for the petitioner, has submitted that in the instant case, there is no material to establish that the Central Board of Revenue was satisfied that this was a fit case for issue of notices under Section 34 of the Act. In this connection, Mr. Deb, learned advocate for the petitioner, referred to the provisions of the Central Board of Revenue Act, 1924, and to the Central Board of Revenue Regulation and Transaction of Business Rules, 1936, and contended that the affidavits filed on behalf of the respondents do not show that the Board had made and come to a decision to grant sanction in this case. There was no authenticated copy of the order of the Board before the court. The records of the Board have not been produced. Therefore, there was no evidence, according to Mr. Deb, that the Board was satisfied as contemplated under Section 34(1)(a) of the Act.

3. On the 15th July, 1971, the respondents filed an affidavit-in-opposition affirmed by Haripada Roy, the Income-tax Officer, Special Investigation Branch, West Bengal-II, who was the Income-tax Officer, 'D' Ward, Howrah, at the relevant time. He, inter alia, contended that in making the assessment, the Income-tax Officer concerned had duly complied with the requirement of the law and had followed the necessary procedure. He also stated that he had reasons to believe that the income of the petitioner had escaped assessment on the ground of failure to disclose fully and truly all material facts for the assessment years in question. He further stated that the condition precedent for assumption of jurisdiction had been fully satisfied in the instant case.

4. It may be noted that the writ petition filed by the petitioner did not contain any categorical statement verified as true to the belief of the petitioner that, in his case, the Central Board of Revenue did not grant any sanction. Paragraph 13 of the writ petition while setting forth some of the requirements of Section 34 did not even allude to the non-existence of the Board's sanction in the instant case. No other paragraph in the writ petition dealt with the points regarding the Board's sanction in the instant case. The grounds were set forth in paragraph 18. The ground No. (j) taken by the petitioner was that the proceeding under Section 34 of the Act was illegal and invalid as necessary satisfaction of the Central Board of Revenue for the issue of the notices for the relevant assessment years had not been given in accordance with law. The respondents in paragraph 30 of their affidavit-in-opposition affirmed by Haripada Roy denied the submission contained in paragraph 18(j) and stated that the proceeding under Section 34 of the Act was lawful and necessary satisfaction of the Central Board of Revenue was obtained in accordance with law.

5. The petitioner in paragraph 21 of his affidavit-in-reply filed on the 24th July, 1973, while dealing with paragraphs 20 to 35 of the said affidavit-in-opposition had reiterated the statement contained in paragraph 18 of his petition.

6. I have already mentioned that the petitioner in his writ petition besides taking a ground regarding absence of the valid sanction by the Board did not make specific averments in the body of his writ petition. Therefore, the respondents had not occasion to disclose further materials about sanction by the Board in their aforesaid affidavit-in-opposition. When the rule was first taken up, the petitioner having urged the said point, I felt that in the interest of justice the parties should be given opportunity to file further affidavits.

7. On the 27th February, 1974, the respondent filed a supplementary affidavit affirmed by Haripada Roy who was the Income-tax Officer 'D' Ward, Howrah, at the relevant time. In paragraph 2 of the said affidavit-in-opposition, the deponent stated that when he was the assessing Income-tax Officer in respect of the assessee he was satisfied and as such he had duly obtained necessary sanction from the Central Board of Revenue. The reasons recorded by him were made annexure 'A' to the supplementary affidavit-in-opposition. The then Income-tax Officer, 'D' Ward, by his letter dated the 23rd March, 1962, addressed to the Secretary, Central Board of Revenue, New Delhi, stated the reasons for his belief that the assessee did not disclose fully and truly all material facts for his assessment for the years 1940-41 to 1952-53. He also stated that the amounts of income of such under-assessment could exceed Rs. one lakh. He accordingly proposed to take action under Section 34(1)(a) for all the years. By the said letter, the Income-tax Officer, therefore, requested : 'Hence approval for starting proceedings under Section 34(1)(a) for the assessment years 1940-41 to 1952-53, may kindly be accorded early.' A copy of the said report in connection with the initiation of the proceeding under Section 34 was appended to the said letter.

8. The deponent to the said supplementary affidavit further stated that the Central Board of Revenue telegraphically communicated the Board's approval to take action under Section 34 against the petitioner. The text of the said telegram was set out in paragraph 2 of the supplementary affidavit. A confirmatory copy of the said telegram of the Central Board of Revenue signed on behalf of the Secretary of the Board was sent to the Commissioner of Income-tax, West Bengal, and the same was made annexure 'B' to the supplementary affidavit. The petitioner in his supplementary affidavit-in-reply dated the 28th March, 1974, denied that the Income-tax Officer concerned had duly obtained necessary sanction of the Central Board of Revenue before the initiation of the proceeding for reassessment. He stated that he had no knowledge and he did not admit that the deponent had addressed any letter to the Secretary, Board of Revenue, New Delhi, on March 22, 1962. He also denied that the Central Board of Revenue had sent the telegram quoted in paragraph 2 of the supplementary affidavit. He further stated that he had no knowledge and did not admit that a copy of the purported sanction and the alleged approval of the Board were also forwarded to the Commissioner of Income-tax. He reiterated that the Income-tax Officer had issued notice under Section 34(1)(a) without obtaining sanction of the Board.

9. I had enquired from the learned advocate for the respondents whether the records and proceedings of the Central Board of Revenue were available. Mr. Roy, learned advocate for the respondents, obtained adjournment to ascertain the position. Thereafter, he verbally submitted that the records of the Board relating to the granting of sanction in the instant case had been already destroyed. Thereafter, on May 8, 1974, an affidavit was affirmed by Haripada Roy, inter alia, stating that a telegram had been received from the Central Board of Revenue stating that the concerned file relating to Chiranjilal Bahri had been destroyed in the year 1971. A copy of the communication on the subject was made annexure 'A' to the said supplementary affidavit. The respondent in paragraph 3 of the said supplementary affidavit further stated that the Board had communicated by a telegram to the Commissioner of Income-tax, West Bengal, on March 27, 1962, their sanction followed by a letter. Reference was also made to File No. 6A/470/61-62(PG) in support of the respondents' case that the Board had granted sanction.

10. The deponent also prayed that the respondents be allowed to produce the original records and to adduce secondary evidence regarding granting of the said sanction.

11. The petitioner in his supplementary affidavit-in-reply disputed the assertions contained in the aforesaid supplementary affidavit, dated the 8th May, 1974, and contended that the materials produced by the respondents to establish that the original records of the Board had been destroyed should not be accepted. The petitioner also disputed the right of the respondents to adduce other evidence to prove that the Board had accorded sanction to the initiation of the impugned proceeding.

12. The short point in this rule is whether the Central Board of Revenue had granted sanction to the initiation of the impugned proceedings under Section 34.

13. In my opinion, the petitioner in this rule is not entitled to succeed. On the 14th March, 1963, he had obtained Civil Rule Nos. 31(W) and 30(W) of 1963, challenging the aforesaid notices under Section 34 of the Indian Income-tax Act, 1922, for the years 1947-48 to 1952-53 and 1940-41 to 1946-47, respectively. The petitioner in the said two rules did not make the Central Board of Revenue a party-respondent. The said petitions also did not contain any statement to the effect that the approval of the Board was not obtained in terms of Section 34(1)(a). The ground (i) in paragraph 10 of the two petitions was that the necessary satisfaction of the Central Board of Revenue for issue of the notices were not given in accordance with law but the said writ petitions did not give any particulars or reasons why the Board's sanction was not in accordance with law.

14. The respondents filed affidavit-in-opposition in the two rules denying the material allegations of the two petitioners. The writ petitions in C.R. 30(W) of 1963 in C.R. 31(W) of 1963 were amended, but even then the petitioner did not pray that the Central Board be made a party. Two additional grounds relating to repeal of the Indian Income-tax Act, 1922, by Section 297(1) of Income-tax Act, 1961, were only taken but no particulars were inserted regarding alleged illegality in the Board's sanction.

15. On the 23rd July, 1969, the learned advocate for the petitioner did not wish to proceed with the rules. The rules were accordingly discharged, there was no order as to costs. Operation of the said order discharging the rules was stayed for a fortnight. Liberty was also given to the petitioner in the respective matters to move fresh application on the same cause of action, if they were so advised.

16. Thereafter, on August 7, 1969, P.K. Banerjee J, issued the instant rule. The petitioner did not correctly state in paragraph 20 of the present writ petition that B.C. Mitra J. had granted liberty to the petitioner to withdraw the writ application C.R. 30(W) and C.R. 31(W) of 1963. But in fact B.C. Mitra J., in his order dated the 23rd July, 1967, had merely recorded that Dr. Pal had submitted that the petitioner in both the matters did not want to proceed with the rules and the rules were accordingly discharged. No doubt liberty was given to the petitioner to move fresh application on the same cause of action. But there was nothing on the record to indicate that the petitioner had withdrawn the two previous applications in view of the fact that sufficient materials and grounds were not stated in the said two applications. In my view, even assuming the said reasons prompted the petitioner not to' press the two earlier rules the same did not amount to a 'formal defect' within the meaning of Sub-rule (2)(a) of Rule 1 of Order 23 of the Code. 'Other sufficient grounds' in Sub-rule (2)(b) of Rule 1 of Order 23 must be of the same nature as the grounds specified in Clause (a) [see Khardah Co. Ltd. v. Durga Charan [1910] 11 CLJ 45 (Cal)]. It is well settled that the plaintiff cannot be permitted to withdraw from a suit after he has adduced all his evidence and then finds that the evidence is insufficient to establish his case. I may further point out that B.C. Mitra J. did not expressly grant leave to the petitioner to withdraw the writ applications in previous C.R. 30(W) and 31(W) of 1963, but he had discharged the said rules. Therefore, strictly speaking, the aforesaid case was not covered by Order 23, Rule 1. Again, although the petitioner had taken a ground in two previous writ petitions regarding sanction of the Board (vide paragraph 10(i)), he ultimately did not proceed with the said two rules. The present writ petition does not contain any additional material regarding the alleged illegality in the approval of the Board given under Section 34(1)(a) of the Act. Further, the petitioner having got two previous rules discharged by stating that he did not wish to proceed with the matters, the court may properly decline to entertain the very ground which was also taken in the previous rules, but was ultimately not pursued. It would be a sound exercise of discretion not to allow the petitioner to twice urge the said grounds regarding the approval by the Board, particularly, when he did not produce any additional material in the instant application.

17. In my view, the petitioner's claim that the Board did not grant approval in accordance with law is also a stale and belated one. The impugned approval by the Board was given in the year 1962. Previous rules obtained by the petitioner were not pressed and accordingly discharged. It was not that this court was unable to entertain the previous writ petitions on the ground of defect of jurisdiction or other causes of a like nature. Therefore, in my opinion, the petitioner is not entitled to exclusion of time during which he had been prosecuting the two previous rules in this court. If the petitioner did not press the earlier rules, because he could not obtain sufficient materials, it cannot be said that he had prosecuted the two rules with due diligence. Further, the petitioner obtained the two previous rules and stay of further proceeding. Thereafter, without assigning any reason before the court he got the previous rules discharged and thereafter obtained the instant rule and stay. Thereby he had succeeded in obtaining the stay of proceeding for nearly 11 years. The proceedings relate to the years 1940-41 to 1952-53. Therefore, one may legitimately question the good faith of the petitioner in prosecuting these proceedings.

18. In the above view, I hold that the petitioner's challenge to the approval given by the Central Board of Revenue is belated and not a bona fide one. Further, during the pendency of the previous writ proceedings, the Central Board of Revenue Act, 1924, was repealed by the Central Boards of Revenue Act, 1963. Section 3 of the later Act, inter alia, provided that the 'Central Government shall in place of Central Board of Revenue constitute two separate Boards of Revenue to be called as Central Board of Direct Taxes and Central Board of Excise and Customs'.

19. Section 2 of the Central Boards of Revenue Act, 1963, further provides for repeal of the Central Board of Revenue Act, 1924, and saving. Under Sub-section (2) of Section 8 approval or the order made by the Central Board of Revenue, etc., shall be deemed to have been made, granted and issued by the Central Board of Direct Taxes or as the case may be by the Central Board of Excise and Customs. The said approval, orders, etc., were to continue in force until and unless revised, withdrawn or superseded. The petitioner did not make the Central Board of Revenue a respondent in the previous rules. He also did not make the Central Board of Direct Taxes respondent either in the previous rules or in the present rule. In my view, the Central Board of Direct Taxes who must be deemed to have made the approval order in view of Sub-section (2) of Section 8 of the Central Boards of Revenue Act, 1963, was a necessary party in the present rule. The petitioner did not choose to apply for making the said Central Board of Direct Taxes as a respondent. In case this rule succeeded, the same would have resulted in quashing and/or setting aside the approval order of the Central Board of Revenue which must be deemed to be now issued or taken by the Central Board of Direct Taxes. Therefore, the petition suffers from non-joinder of a necessary party.

20. I have no reason to disbelieve the affidavit affirmed on behalf of the respondents that the original records of the Central Board of Revenue relating to grant of approval were destroyed in the year 1971. It is the petitioner who is to be partly blamed for this unfortunate position because he did not make the Central Board of Direct Taxes a respondent in the rule and presumably as a routine measure the old records of the Board were destroyed.

21. On the material on records, I may however be satisfied that the Board had granted approval in the instant case. Original records kept in File No. 6A/470/61-62 (P.G) indicate that on the 10th April, 1962, the Commissioner of Income-tax, West Bengal by his Memo No.N. A. 1115-CT

6A/470/61-62(P.G.)forwarded to the Income-tax Officer, 'D' Ward, Howrah, the approval of the Board to the proposal under Section 34(1)(a) contained in office Memo No.A/46260/61 C.T.

6A/470/-6162 (P.G.)dated the 28th March, 1962. The name of the assessee was stated to be the present petitioner. The enclosures to the said memo of Commissioner of Income-tax, West Bengal, included the proposal of the Income-tax Officer, 'D' Ward, Howrah, dated the 23rd March, 1961, for starting the proceeding, under Section 34(1)(a) against the petitioner, and the reasons recorded by the said Income-tax Officer for his belief for proceeding under the said provisions. He had prayed that the approval of the Board under Section 34(1)(a) be accorded early. The Central Board of Revenue had also sent a telegram stating that the Board had approved action under Section 34 of the Act in the case of the present petitioner. A report of the Income-tax Officer in Form C is also in the file. The item No. 12 of Form C and the remarks against the same are as follows:

'12. Whether the Central Board of Revenue is satisfied that this is a fit case for the issue of notice under Section 34(1)(a) for the assessment years specified in col. 5.

Yes the Board is satisfied.

Sd. D. Subramanian.

Secretary, Central Board of Revenue.'

22. The Secretary of the Board under rule 6 of the Central Board of Revenue (Regulation of Transaction of Business) Rules, 1956, was authorised to authenticate orders or decisions made or taken by the Board of Revenue. The Form C upon which the Secretary endorsed that the Board had granted approval itself was an evidence that the Board had accorded approval.

23. The petitioner did not specifically assert in the writ petition that in the instant case, the business of the Board was not transacted by the chairman and other members. He merely took a general ground in paragraph 18(j) that the approval of the Board was not given in accordance with law, but the said ground was lacking in particulars. Having regard to the entire official records including the proposals by the Income-tax Officer, forwarding of the same by the Commissioner of Income-tax, the original Form 'C' containing endorsement by the Secretary that the Board had approved, clearly established that the provisions of Section 34(1)(a) were fully complied with. In my view, in the instant case, the court should draw a presumption that all official acts relating to the granting of approval by the Central Board of Revenue were rightly and regularly done (vide Illustration 'e' to Section 114 of the Evidence Act). In the instant case, the respondents have satisfactorily proved the official act in question, namely, the approval by the Board was given. The petitioner has not denied that any approval was given, but tried to contend the same was not given in accordance with law. Therefore, it is not a matter of presumption that the approval was given. The factum of granting of approval by the Board has been established. I have already referred to the endorsement by the Secretary of the Central Board of Revenue stating that the Board had approved action under Section 34(1)(a). Therefore, it is not a case where there is no proof that the approval was ever granted by the Board. As the approval itself has been proved to have been granted it should be presumed that such approval was regularly and properly given. The burden was upon the petitioner to prove that there was any absence of regularity in granting such approval by the Board. The petitioner has not proved anything in this behalf.

24. In the result, this rule must fail.

25. I accordingly discharge this rule with costs. Hearing fee being assessed at four gold mohurs.

26. Let the operation of the order remain stayed for four weeks from date.


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