In this application under article 226 the petitioner has obtained a rule for a writ of certiorari to quash the orders of the Appellate Assistant Commissioner and the Commissioner of Income-tax (respondents Nos. 2 and 3) dated June 5, 1957, and February 3, 1960, respectively.
The case of the petitioner is that he is the karta of a Hindu undivided family, constituted by the heirs of one Manmatha Nath Sen and as such is liable to pay income-tax in respect of the income of the deceased Manmatha Nath to the extent of the estate inherited by the family from him. Manmatha Nath happened to be a partner of an unregistered firm called Messrs. Sen Bros. and Co. carrying on business at 15, College Square. The Income-tax Officer (respondent No. 1) in assessing the income of Manmatha Nath for the assessment years 1950-56 added to his personal income from house property, his 1/3 share of the income from the business of the said firm and charged tax accordingly. Since the business of the firm was in the hands of receivers, it was the receivers who were chargeable with the tax. The 1/3 share of the income of the firm could not be added to the personal income of Manmatha Nath, for the purposes of assessment, unless the business was assessed as an unregistered firm. The impugned order being, according to the petitioner, illegal and ultra vires the petitioner appealed to the Appellate Assistant Commissioner who dismissed the appeal on June 5, 1957, and from his order the petitioner moved the Commissioner in revision, under section 33A(2) of the Income-tax Act, 1922, but the Commissioner rejected the application of the petitioner by order dated February 5, 1960, without giving the petitioner an opportunity of representing his case.
The grounds taken in the affidavit filed on behalf of the respondents is that the application is vitiated by inordinate delay; that Messrs. Sen Bros. were in fact assessed as an association of persons and that the alleged addition of the 1/3 share of the business income was made in pursuance of a request made by Manmatha Nath himself, in his letter of June 1, 1954, to the Income-tax Officer as follows :
'Please realise my share of income-tax from my business, Messrs. Sen Bros. and Co., which is at present under the management of joint receivers, Sri Kanai Lal Sen and Sri Sisir Kumar Basu.'
As regards the contention of the petitioner that he was not given a hearing before rejecting his application for revision it is urged that no such hearing is required by section 33A(2) of the Act. It has also been urged that the petitioner is not entitled to any remedy under article 226.
The points for decision are :
(a) is the application liable to be refused on the ground of delay ?
(b) is the application under article 226 maintainable ?
(c) are the impugned orders without jurisdiction ?
(d) have the principles of natural justice been violated by the impugned orders ?
Point (a) : Annexure 'B' is the assessment order of the Income-tax Officer dated March 26, 1953. Annexure 'D' is the order of the Appellate Assistant Commissioner dated June 5, 1957, and annexure 'E' is the order of the Commissioner dated February 5, 1960. This application under article 226, impugning the orders of June 5, 1957, and February 5, 1960, was presented on September 14, 1960. The order of the Commissioner being the final order, there has been a delay of over seven months from that order.
Nevertheless, I do not think that this application for certiorari can be rejected on this ground alone if the petitioner is able to establish on the merits that the impugned orders are in violation of the principles of natural justice.
Point (b) : The original order of assessment in annexure 'B' is not and cannot be challenged in this application since the original order has merged in the appellate order in annexure 'D' as held by the Supreme Court in Commissioner of Income-tax v. Amritlal.
Similar is the position in regard to the appellate order in annexure 'D' in view of the recent pronouncement of the Supreme Court in Collector of Customs v. East India Commercial Co., reversing the decision of this court, that even where the order of a subordinate authority is confirmed by an appellate or revising authority the order of the subordinate authority is merged in the final order of the appellate or revisional authority and that becomes the only operative order.
The petitioner appealed under section 30 from the assessment order. The Appellate Assistant Commissioner rejected the appeal and confirmed the assessment order. Instead of appealing further from that appellate order under section 33, the petitioner preferred to move the revisional authority under section 33A(2). The application for revision against the order of the Appellate Assistant Commissioner having been rejected by the Commissioner (annexure 'E') it is the order of the Commissioner which is outstanding and operative.
The question for determination is whether an application under article 226 lies against the order of the Commissioner in annexure 'E'.
The position has been complicated owing to legislative changes. Prior to 1941, the corresponding revisional power of the Commissioner, called 'review', was contained in section 33. Under that section, it was open to the Commissioner to make an order prejudicial to the assessee but the proviso to that section required that if the Commissioner proceeded to make a 'prejudicial order', he must give the assessee a reasonable opportunity of being heard. When there was such statutory requirement of hearing, it might very well have been contended that an application under article 226 would lie if the hearing was denied.
The position has become different under section 33A, introduced in 1941. Sub-section (2) of this section clearly prohibits the Commissioner to make any prejudicial order under this section. For the making of prejudicial orders, there is now a separate provision, namely, section 33B. The question now remains, whether the very refusal by the Commissioner to interfere with the order of the subordinate authority amounts to a 'prejudicial order'. It was indeed so held in some pre-1941 decisions, e.g., Sriramulu v. Commissioner of Income-tax. That view was, however, over-ruled by the Privy Council in Commissioner of Income-tax v. Tribune Trust, holding that an order could be said to be 'prejudicial' for the present purpose, only where the revisional order placed the assessee in a substantially worse position. This view has been made clear by the second proviso deliberately added by the legislature to prevent any contention like this to be raised. It lays down clearly that 'an order by the Commissioner declining to interfere shall not be deemed to be an order prejudicial to the assessee'.
As will be presently seen, the requirement of a reasonable opportunity of being heard has also been taken away by the legislature by the same amendment, leaving it to the Commissioner to 'make such inquiry to be made... as he thinks fit'. If that be so, certiorari would not be available on the ground that a hearing has been denied and the rules of natural justice have been violated because such expressions imply a determination on subjective satisfaction (cf. Virindar v. State of Punjab).
I would respectfully agree with the decision of Sinha J. in the case already referred to and reiterated in Suganchand v. Commissioner of Income-tax, that a writ of certiorari does not lie against an order of the Commissioner under section 33A(2) of the Act.
Point (d) : As stated above, the meaning of the expression 'such inquiry... as he thinks fit' has to be construed keeping in view the deliberate omission by the legislature of the pre-existing requirement of a 'reasonable opportunity of hearing' being offered. The reason of this is that the legislature would not allow an order under section 33A(2) to be deemed to be an order 'prejudicial' to the assessee in any event. Of course, while under the old section the Commissioner could have proceeded only suo motu under section 33A(2), an application by the assessee to move the Commissioner lies. But, as held by Sinha J. in Sitalpore Colliery v. Union of India, the fact that the assessee has been given the right to move the Commissioner does not change the nature of the functions of the Commissioner, namely, that it is administrative and not quasi-judicial. This view has also been followed in other High Courts (vide Additional Income-tax Officer v. Cudappah Star Transport Co. Ltd). The assessee, aggrieved by the order of the subordinate appellate authority, has been given a statutory right to appeal to the Appellate Tribunal, and against the decision of the Tribunal, the assessee can come to the High Court on a statement of a case under section 66. If, instead of availing of that statutory right, he moves the revising authority who has been given only a discretion to interfere or not to interfere, on making such inquiry as he deems fit, not being obliged by the statute to give a hearing to the assessee, the assessee must thank himself for any unfortunate result.
Considering all aspects of the question, it must be held that the order contemplated by section 33A(2) is an administrative order of a discretionary nature and that the doctrine of natural justice cannot be imported because there is no obligation to hear, either expressly or impliedly (vide Radheshyam v. State of M. P., and Virindar v. State of Punjab). Hence, even though admittedly, the Commissioner did not hear the petitioner, the petitioner cannot have any relief in this application on that ground.
Point (c) : The case of the petitioner on this point is that the addition of his income from the share in the business of the firm, Sen Bros., which has been made for the purpose of section 16(1)(a) is without jurisdiction because the assessment on the firm was not made in compliance with the requirements of section 14(2)(a) so that the very basis for the application of section 16(1)(a) was gone.
Under section 16(1)(a) any income which has been exempted from personal taxation, inter alia, under section 14(2), can be added to the personal income to constitute the 'total income' for the purpose of determining the rate of taxation. The relevant item of exemption is under section 14(2)(a), which says :
'The tax shall not be payable by an assessee-... if a partner of an unregistered firm, in respect of any portion of his share in the profits and gains of the firm computed in the manner laid down in clause (b) of sub-section (1) of section 16 on which the tax has already been paid by the firm.'
Of the several ingredients for the application of the above provision, it is not disputed that the petitioner was a partner of the unregistered firm, Messrs. Sen Brothers & Co., and that his 1/3 share of the income of the business of that firm has been added for the purposes of section 16(1)(a). It is, however, contended that the tax which has been so added has never been assessed on the firm as such.
Section 3, the charging section, lays down that income-tax may be charged only upon an individual, Hindu undivided family, company and local authority, firm, other association of persons or the partners of the firm or the members of the association, individually. The question which is relevant for the application of section 14(2)(a) is whether the added tax has been paid by the firm. From the averments in paragraph 4 of the application, read with the assessment orders (annexures 'B' & 'C') it is evident that the business of the firm was under the management of a receiver or receivers who were assessed in respect of the income of the firm and not on account of any personal income of such receivers and that they paid the tax so assessed. This is sufficient to attract the operation of section 16(1)(a) for the purpose of determining the rate of taxation, because the petitioner has been exempted from the liability to pay the tax on account of his share in the firm under section 14(2).
The petitioners grievance is that the receiver or receivers were not properly described in the assessment proceedings as representing the firm, but sometimes as an individual and sometimes as an association of persons.
But, as stated already, the question for the application of section 14(2)(a) is whether the tax has been paid by the receivers in respect of the income of the firm and whether the petitioner has already been given exemption in respect of that income. The answer to that question is clearly in the affirmative (vide annexure 'E' to the application).
Above all, the petitioner has not pursued his statutory remedies against the assessment order and, as held above, the final order of the Commissioner under section 33A(2) cannot be challenged in this application under article 226 for a writ of certiorari.
Besides, an application under article 226 should not be entertained as regards defects in the assessment proceedings where the petitioner could have but has not pursued his statutory remedy of appeal to the Appellate Tribunal. In Abraham v. Income-tax Officer, the Supreme Court observed in no uncertain terms :
'The Income-tax Act provides a complete machinery for assessment of tax and imposition of penalty and for obtaining relief in respect of any improper orders passed by the income-tax authorities, and the appellant could not be permitted to abandon resort to that machinery and to invoke the jurisdiction of the High Court under article 226 of the Constitution when he had adequate remedy open to him by a appeal to the Tribunal.'
In the result the application must fail and the rule discharged. There will be no order as to costs.