1. This rule arises out of an application, under Section 66, Clause (3) of the Indian Income-Tax Act XI of 1922, by an assessee under that Act.
2. The assessee was assessed by the Income Tax Officer on the 13th October 1923.
3. There was an appeal by him to the Assistant Commissioner of the Range Burdwan and this appeal was dismissed on the 31st January 1924.
4. The assessee then made an application, after the required deposit to the Commissioner under Clause (3) of Section 66 of the Act praying that he might refer to the High Court a question of law which he submitted arose out of the proceedings but the Commissioner refused the application on the 14th March 1924.
5. The petitioner then moved this Court under Clause (3) of Section 66 of the Act praying that this Court might require the Commissioner to state the case and refer it to the High Court and this Court issued the Rule which has now come up for decision before us. The Government have appeared through the Senior Government Pleader to show cause against this Rule.
6. The question of law which the Petitioner urges arose in the case was that after the return required under Section 22 of the Act was filed by the asssssee, the Income Tax Officer might either accept the return and assess him accordingly or if he had reason to believe that the return made under Section 22 was incorrect he was bound to serve upon the person who made the return a notice under Clause (2) of Section 23 requiring him, on a date specified, to produce any evidence on which such person may rely in support of the return. In the present case, although the Income Tax officer refused to accept the return filed on the 11th October 1923 as correct he assessed the tax without serving any notice as provided for by Section 23, Clause (2) and gave no opportunity to the Petitioner to produce evidence in support of his case. The procedure followed by the Income Tax Officer who contrary to law and that the assessment made was illegal. The facts shortly stated are these:
7. That the Petitioner, a resident of Azsimganj in the District of Murshidabad, carries on business in jute and other commodities in various districts and also in Calcutta.
8. That the Petitioner was served with a notice under Section 22 of the Act to file a return which he eventually filed on the 11th October 1923 together with his ac-counts.
9. That the Income Tax Officer was not satisfied with the correctness of the return but assessed Rs. 12,919-1-1 as the tax payable by him on the 15th October, but it appears no notice under Section 23, Clause (2) was served nor any formal evidence was called for or taken.
10. Then the various proceedings to which I have referred took place and eventually this petition under Section 66, Clause (3) of the Act was filed before this Court.
11. It is quite clear from the record and indeed it is also frankly admitted by the Senior Government Pleader that no notice as contemplated by Section 23, Clause (2), was served before the assessment was made on the 15th October 1923. It was submitted by the learned Vakil that this point was not taken in the Court below and that the question now raised was not 'a question of law arising out of such orders' as contemplated by Section 66, Clause (2), inasmuch as this question is not found referred to, in the judgment of the Assistant Commissioner.
12. We think this would be too narrow a view to take of the provision of that section.
13. The question raised is a question which challenges the very foundation of the assessment, and we think it arises upon the proceedings adopted in the case.
14. We are of opinion therefore that ' we are not satisfied of the correctness of the Commissioner's decision refusing to refer the case under Clause (2) of Section 66 of the Act, and therefore we direct that the Commissioner do state the case as prayed for and refer it to this Court.'
15. At this stage of the proceedings we do not wish to say more than is absolutely necessary to state for the matters now be-fore us. All that we intend to say is that the decision of the Commissioner dated the 19th March 1924 is not correct in that ho refused to refer the case to this Court under Section 66, Clause (2) of the Act.
16. The costs of this Rule will abide the result and we assess them at five gold mohurs.
17. I agree.