Skip to content


Commissioner of Income-tax Vs. Chunilal Hemraj - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 51 of 1965
Judge
Reported in[1970]78ITR193(Cal)
ActsIncome Tax Act, 1922 - Sections 22(2), 22(3), 23(4) and 27
AppellantCommissioner of Income-tax
RespondentChunilal Hemraj
Appellant AdvocateB.L. Pal and ;D. Sen, Advs.
Respondent AdvocateNone
Cases ReferredNeath Rural District Council v. William
Excerpt:
- .....not make an assessment for thefailure of the assessee to file a return under section 22(2) of the indianincome-tax act, 1922. the tribunal was also of the opinion that theassessee was prevented by sufficient cause from complying with the noticeunder section 22(4) of the indian income-tax act, 1922. the tribunal heldthat though there may have been a default under section 22(2) that alonewould not be sufficient to make an assessment under section 23(4). according to the tribunal, there must be further default under section 22(3) of theindian income-tax act, 1922, in order to attract the provisions of section 23(4) of the indian income-tax act, 1922. the tribunal, therefore, dismissedthe appeal. 4. on an application being made, the tribunal has referred to this courtunder section 66(1) of.....
Judgment:

Sabyasachi Mukharji, J.

1. The assessee, Messrs. Chunilal Hemraj, has been assessed in the status of an unregistered firm in respect of the assessment year 1958-59, corresponding accounting year being 1364 B.S. The said assessment was made ex parte on March 14, 1962, under Section 23(4) of the Indian Income-tax Act, 1922. The said assessment was made under Section 23(4) because of the failure of the assessee to comply with the notices under Sections 22(2) and 22(4) of the Indian Income-tax Act, 1922. On May 9, 1962, an application was made under Section 27 of the said Act before the Income-tax Officer requiring the Income-tax Officer to reopen the assessment made under sectiom 23(4) and to make a fresh assessment on the ground that the assessee was prevented by sufficient cause from complying with the notices under Section 22(2) and 22(4) of the Indian Income-lax Act, 1922* It was admitted in the said petition under Section 27 of the Indian Income-tax Act, 1922, that the notice under Section 22(2) was served long ago, but it was stated that owing to the alleged illness of the accountant and various other domestic troubles the assessee could not comply with the said' notice. It was, thereafter, stated in the said petition that the said notice under Sections 22(2) of the Indian Income-tax Act, 1922, was not valid in law. It was further asserted that, though the notice under Section 22(4) of the Indian Income-tax Act, 1922, required the assessee to comply on December 26, 1961, the hearing was adjourned on the application of the assessee. By a further notice under Section 22(4), dated March 12, 1962, the assessee was informed that the hearing of theassessee's case was fixed on March 15, 1962, and oh the date of hearing, that is to say, March 15, 1962, the assessee had prayed for another adjournment till March 28, 1962. Thereupon, the assessee states that the assessee was served with a demand notice on March 25, 1962, and the assessment order under Section 23(4) of the Indian Income-tax Act, 1922, dated March 14, 1962. The assessee, therefore, contended that the assessee had no reasonable opportunity to comply with the notice under Section 22(4) of the Indian Income-tax Act. The Income-tax Officer rejected the application under Section 27 of the Indian Income-tax Act, 1922.

2. The assessee, thereupon, preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that as the typed date being March 14, 1962, in notice under Section 22(4) had been scored out in ink and the date, March 15, 1962, had been inserted, it was not possible to ascertain the correct position from the records and as the assessment of the partners was fixed for hearing on March, 15, 1962, it was quite possible that the notice on the firm was also, for, .March 15, 1962, by making the alterations in the assessee's copy of the notice, but through inadvertence no entry to that effect was made in the records of this case. In those circumstances, the Appellate Assistant Commissioner was of the opinion that the assessee did not have reasonable opportunity of complying with the notice under Section 22(4) of the Indian Income-tax Act, 1922. The Appellate Assistant Commissioner, however, did not refer to or deal with the question whether there has been failure or non-compliance by the assessee with the notice under Section 22(2) of the Indian Income-tax Act, 1922. The Appellate Assistant Commissioner allowed the appeal and directed a fresh assessment.

3. Revenue preferred appeal before the Income-tax Appellate Tribunal.The Income-tax Appellate Tribunal was of the opinion that in the presentcase the assessee was prevented from filing the return under Section 22(3)and, as such, the Income-tax Officer could not make an assessment for thefailure of the assessee to file a return under Section 22(2) of the IndianIncome-tax Act, 1922. The Tribunal was also of the opinion that theassessee was prevented by sufficient cause from complying with the noticeunder Section 22(4) of the Indian Income-tax Act, 1922. The Tribunal heldthat though there may have been a default under Section 22(2) that alonewould not be sufficient to make an assessment under Section 23(4). According to the Tribunal, there must be further default under Section 22(3) of theIndian Income-tax Act, 1922, in order to attract the provisions of Section 23(4) of the Indian Income-tax Act, 1922. The Tribunal, therefore, dismissedthe appeal.

4. On an application being made, the Tribunal has referred to this courtunder Section 66(1) of the Indian Income-tax Act, 1922, the followingquestion:

'Whether, on the facts and in the circumstances of the case, theTribunal was right in holding that an assessment under Section 23(4) of theIndian Income-tax Act, 1922, could not be made unless there has been adefault on the part of the assessee not only under Section 22(2) of the saidAct but also under Section 22(3) thereof?'

5. Section 22(2) of the Indian Income-tax Act, 1922, provides:

'In the case of any person whose total income is, in the Income-taxOfficer's opinion, of such an amount as to render such person liable to income-tax, the Income-tax Officer may serve a notice upon him requiring him tofurnish, within such period, not being less than 30 days, as may be specifiedin the notice, a return in the prescribed form and verified in the prescribedmanner setting forth (along with such other particulars as may be providedfor in the notice) his total income and total world income during the previous year : Provided that the Income-tax Officer may in his discretion extend thedate for the delivery of the return.'

6. Sub-section (3) of Section 22 is in the following terms:

'If any person has not furnished a return within the time allowed byor under Sub-section (1) or Sub-section (2), or having furnished a returnunder either of those sub-sections, discovers any omission or wrong statement therein, he may furnish a return or a revised return, as the case maybe, at any time before the assessment is made.'

7. Sub-section (4) of Section 23 is in the following terms :

'If any person fails to make the return required by any notice givenunder Sub-section (2) of Section 22 and has not made a return or a revisedreturn under Sub-section (3) of the same section or fails to comply with allthe terms of a notice issued under Sub-section (4) of the same section or,having made a return, fails to comply with all the terms of a notice issuedunder Sub-section (2) of this section, the Income-tax Officer shall make theassessment to the best of his judgment and determine the sum payable bythe assessee on the basis of such assessment and, in the case of a firm,may refuse to register it or may cancel its registration if it is alreadyregistered: ....'

8. The scheme of Sub-section (4) of Section 23 indicates that on the happening of any one of the contingencies contemplated, that is to say, failure to make a return as required by notice given under Sub-section (2) of Section 22 or failure to comply with the terms of the notice under Sub-section (4) of Section 22, or failure to comply with the terms of the notice under Subsection (2) of Section 23, the Income-tax Officer is authorised to proceed to make an assessment under Section 23(4) of the Indian Income-tax Act, 1922. In the Bench decision of the Allahabad High Court in the case of Behari Lal Chatterji v. Commissioner of Income-tax, [1934] 2 I.T.R. 377 (All.), it was held that an assessment to the best of judgment can be made under Section 23(4) of the Income-tax Act, if there is a failure to make a return under Section 22(1) and 22(2). It is not necessary for applying Section 23(4) that there should be a non-compliance with a notice under Sections 22(4) of the Indian Income-tax Act, 1922. In the case of Commissioner of Income-tax v. Ranchhoddas Karsondas, : [1959]36ITR569(SC) , the Supreme Court, explaining the scheme of the section, observed as follows:

'It will be seen from this, that, as the Bombay High Court correctly pointed out, there is a time-limit provided in Sub-sections (1) and (2) and the failure or omission occurs when that period passes, but Sub-section (3), allows locus poenilentiae before the assessment is actually made.'

9. It is clear, therefore, that failure or omission on the part of the assessee occurs if there is non-compliance within the time mentioned in Sub-sections (1) and (2) of Section 22. Sub-section (3) of Section 23 allows locus poenitetitiae, i.e., an opportunity is allowed to the assessee for filing the return until a decisive step has been taken. The position is, therefore, it seems to us, that an assessee is bound to comply with the notice under Section 22(2) within the time mentioned in the notice or within the extended time. If, however, the Income-tax Officer has not made the assessment the assessee has the right or privilege to file a return of a revised return and the Income-tax Officer is not entitled to ignore that return if that has been filed before the assessment even though after the period mentioned in the notice. The question is whether in order to attract the provisions of Section 23(4) of the Income-tax Act there has to be not only a default in compliance with Section 22(2) of the Indian Income-tax Act, 1922, but also what has been described as a default under Section 22(3) of the Indian income-tax Act, 1922.

10. In our opinion, there is no scope for considering whether there is default under Section 22(3) of the Indian Income-tax Act, 1922. The expression 'default' as mentioned in Stroud's Judicial Dictionary, page 757; volume I, is a French word. The word 'defelia' is legally taken for non-appearance in court. It is a relative term and its connotation naturally depends upon the context. In the context of the scheme in which the expression has been used in this case, we are of the opinion that it has been used in the sense as a failure to perform an obligation, statutory or contractual. Mere inaction in not taking the benefit of a privilege is not a default in the context of the scheme of the section. Section 22(3) of the Indian Income-tax Act, 1922, does not impose any obligation upon the assessee. It affords an additional opportunity and restrains the Income-tax Officer from ignoring the return, even though it is filed after the time mentioned in the notice under Section 22(1) and (2) of the Indian Income-tax Act, 1922. It may be noticed that in the case of Neath Rural District Council v. William, [1950] 2 All E.R. 625, 632 (K.B.) Chief Justice Lord Goddard observed as follows:

'I cannot construe the word 'default' here in the way in which we have been asked to construe it by the Rural, District Council. I do not think that in this case default could mean merely doing nothing, unless an obligation to do something were imposed by the Act.'

11. We find from the scope of both the Sections 22 and 23 of the Indian Income-tax Act, 1922, that there is no obligation imposed to comply with Section 22(3) of the Indian Income-tax Act, 1922. In that view of the matter it is not possible to accept the proposition that in order to attract the provision of Section 23(4) of the Indian Income-tax Act, 1922, there must not only be a default of Section 22(2) of the Indian Income-tax Act, 1922, but also a default of Section 22(3) of that Act. In our opinion, Section 23(4) would be attracted if there has been a default and non-compliance with notice under Section 22(2) of the Indian Income-tax Act, 1922, but if before an assessment is completed the assessee files a return, the Income-tax Officer cannot proceed to make assessment under Section 23(4) of the Indian Income-tax Act, 1922.

12. It is an admitted position in this case that there has been non-compliance with notice under Section 22(2) of the Indian Income-tax Act, 1922, that is to say, there has been default under Section 22(2) of the Act. If that is the position, then the Income-tax Officer was justified in proceeding to make the assessment under Section 23(4) of the Indian Income-tax Act, 1922. Inasmuch as there was no obligation imposed upon the assessee by Section 22(3) of the Indian Income-tax Act, 1922, there is no question of any default of compliance witfr Section 22(3) of the Indian Income-tax Act, 1922. Therefore, there is no question of the assessee being prevented by sufficient cause in not complying with the requirement of Section 22(3) of the Indian Income-tax Act, 1922.

13. In that view of the matter, we are of the opinion that the Tribunal was not right in arriving at its conclusion and the question referred to this court must be answered in the negative and in favour of the revenue. Each party will pay and bear its own costs.

S.C. Deb, J.

14. I agree.


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