The petition feels aggrieved by an order of revision of assessment of her income, made under section 33B of the Income-tax Act, 1922, by the respondent, the Commissioner of Income-tax, for the assessment years 1953-54 to 1961-62.
The circumstances under which the revision of assessment was made are briefly as hereinafter stated. The assessee filed voluntary returns of income for the assessment years 1953-54 to 1959-60 and also for the year 1960-61, all in the year 1961. One Mr. H. Upadhaya, who was at the material time the Income-tax Officer, 'B' Ward, 24 Parganas, assessed the petitioner for the assessment year 1953-54 to a total income of Rs. 5,000 in the manner hereinafter quoted :
'Seen return. In response to notice under section 23(2), authorised representative Shri C. M. Chopra appears and the case is discussed. Evidences produced are also examined. Assessee was married about 30 years ago and received certain gifts and presents in cash, which is customary. With that she did pawn-broking business. Accounts are not maintained properly. She has no bank account. Assessed under section 23(3) as below :
Income from business estimated..
Out of initial capital, in the absence of conclusive proof taken as income from other sources.
For the subsequent years, namely, assessment years 1954-55, and 1959-60, the same officer passed stereotyped assessment orders more or less on the lines indicated above and assessed the total income of the petitioner as hereinbelow indicated :
All these assessment orders bear the date March 23, 1961. For the assessment year 1961-62, the return was filed on August 12, 1961. The case was heard by Mr. A. K. Banerjee, Income-tax Officer, B-Ward, 24 Parganas, on January 17, 1962, and the assessee was assessed on an income of Rs. 2,736, by an order bearing the same date.
On February 28, 1963, the respondent-Commissioner of Income-tax sent a notice under section 33B of the Income-tax Act, 1922, to the petitioner, which read as follows :
'On calling for and examining the records of your case for the assessment years 1953-54, 1954-55, 1955-56, 1956-57, 1957-58, 1958-59, 1959-60, 1960-61 and 1961-62 and another connected records, I consider that the orders of assessment passed by the Income-tax Officer, 'B' Ward, 24 Parganas on March 23, 1961, and January 17, 1962, are erroneous in so far as they are prejudicial to the interests of revenue for the following reasons amongst others.
2. Enquiries made have revealed that you neither resided at 19, Purna Mitra Place, Calcutta, nor carried on any business from the said address. Also the Income-tax Officer was not justified in accepting the initial capital, the income from business, etc., without any enquiry or evidence whatsoever.
3. 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 Income-tax Act, 1922. The cases will be heard at 11 a.m. on March 8, 1963, at my above office when you are required to produce the necessary evidence in support of your contentions. Objections in writing accompanied for personal hearing will also be duly considered.
4. Please note that no adjournment of the hearing will be granted.'
On receipt of the notice, the assessee-petitioner wrote back to the respondent-Commissioner, on March 7, 1963, to the following effect :
'You have been pleased to mention that certain enquiries made had revealed that the assessee never resided at 19, Purna Mitra Place, Calcutta. In this connection it is submitted that the assessee did reside at the said premises No. 19, Purna Mitra Place, Calcutta. Such residence at the aforesaid place was during the months, January, 1961, to June 1961, both inclusive. The rent receipts in sons name are available and the same are forwarded herewith.
With regard to the observation that the Income-tax Officer was not justified in accepting initial capital, etc., without any enquiry or evidence whatsoever, it is submitted that in this connection the Income-tax Officer did make enquiries and as required by him detailed explanation was also furnished by the assessee in writing. The initial capital which has been accepted by the Income-tax Officer was Rs. 9,400 most of which were received from father and other relations and had amounted to the aforesaid sum including interest earned during several years and further small gifts received in connection with various ceremonies as usual in the community. Such amounts are not unreasonable to be in the possession of ladies. Certain evidences were also produced before him which were also looked into and the assessment was completed thereafter.
With regard to the assessment for 1961-62, it is submitted that the said assessment was made by the subsequent Income-tax Officer at a later date mainly from income from dividend.
With regard to the contention that the assessee used to earn interest from time to time in respect of amounts advanced to various persons on security of ornaments or otherwise, certificates from the several persons have been obtained, within the short time allowed, in support of the above facts and the same are forwarded herewith in original. From the above it would be clearly proved that the assessee was earning interest on loans and/or pawning.'
On the date fixed for hearing, namely, March 8, 1963, nobody appeared before the Commissioner for the petitioner. Thereupon, the respondent-Commissioner passed an order on the same date, cancelling the previous assessment and directing the Income-tax Officer to make fresh assessment according to law for the assessment years 1953-54 to 1961-62.
Aggrieved by the order, the petitioner moved this court, under article 226 of the Constitution, praying for the quashing or of order, dated March 8, 1963, and for a writ of mandamus directing the respondent-Commissioner to recall the order and obtained this rule.
One of the grounds taken in the rule was :
'The respondent, Commissioner of Income-tax, initiated the proceedings on 28th February, 1963, under section 33B of the repealed Indian Income-tax Act, 1922, whereas the said section 33B was repealed on and from 1st day of April, 1962, and hence, the respondent, Commissioner of Income-tax, in initiating the said proceeding and also in passing the said order dated 8th March, 1963, has acted without jurisdiction and without the authority of law.'
Since this point is covered by my judgment in Kalawati Debi Haralalka v. Commissioner of Income-tax, against the petitioner, Mr. A. C. Mitra, learned advocate for the petitioner, submitted that he would not argue that point before me but would not give up the point so that it may remain open to the petitioner to argue the point higher up. I note the stand taken by Mr. Mitra and leave the aforesaid ground as covered by my judgment in Kalawati Debi Haralalkas case, without more.
The only ground urged by Mr. Mitra in support of this rule was ground (b), which I set out below :
'The respondent, Commissioner of Income-tax, in passing the said order dated 8th March, 1963, has relied upon materials collected behind the back of your petitioner without giving your petitioner an opportunity of being heard in rebuttal of those materials and has thus violated the principles of natural justice and also violated the express provisions of section 33B of the repealed Indian Income-tax Act, 1922, even assuming the said section applies.'
In elaboration of this ground, Mr. Mitra argued that the revision order, particularly paragraphs 3, 4 and 5 thereof contained an innuendo that the petitioner had go hold of an Income-tax Officer who was too much favourably disposed to the assessee-petitioner and who allowed her to file voluntary returns for several years at a time and, thereafter, grabbed jurisdiction over the returns and passed favorable assessment orders on her. Mr. Mitra argued that the aforesaid ground was not included in the notice and the petitioner had no opportunity of explaining how she came to file the voluntary returns before that particular Income-tax Officer, namely, Mr. H. Upadhaya, and how that officer made the assessment for all the years on one and the same date. Mr. Mitra further contended that the regions of assessment for all the years was made also on the ground that the Income-tax Officer, 'B' Ward, 24-Parganas, had no jurisdiction and, hence, all the assessment orders were null and void. Mr. Mitra contended that the aforesaid ground was not included in the notice under section 33B and that the petitioner had no opportunity of showing cause against that ground. Mr. Mitra also contended that, in paragraphs 7 and 8 of the order of revision, the respondent-Commissioner referred to certain 'ascertainments' made by him, namely :
(i) that the assessee had not taken any licence for doing pawn-broking business;
(ii) that the assessees husband, Shri Misrimal, a well-known businessman, was the managing director of Messrs. Coventry Spring & Engineering Co. (P.) Ltd. and a partner in Kankroli Khandsari Mill in Rajasthan and that the assessee-petitioner made large investments in the above two concerns, in 1960-61, namely, Rs. 30,400, in Coventry Spring & Engineering Co. (P.) Ltd. and Rs. 12,500 in Kankroli Khandsari Mill.
From the above 'ascertainments', which Mr. Mitra condemned as privately made behind the back of the petitioner, the respondent-Commissioner came to the conclusion that the assessee-petitioner had filed voluntary returns of income giving a fictitious address and a false story of business with a view to explain away the investments made by her in the business, in which her husband was interested. Mr. Mitra submitted that the notice did not indicate that the respondent-Commissioner was going to revise the assessment orders on the basis of what he had privately ascertained and that the petitioner had no opportunity of showing that what the respondent-Commissioner had so ascertained were all wrong. Mr. Mitra, lastly, contended that the respondent-Commissioner found that the petitioner was conducting loan business as the benamidar of her husband without notifying to the petitioner that he was going to revise the assessments on that basis. Mr. Mitra rounded up this argument with the observation that the denial of all opportunities to the petitioner to show cause against the aforesaid grounds, on which the respondent-Commissioner proceeded, amounted to violation of the principles of natural justice and the order of revision must be quashed for that reason. In making this argument Mr. Mitra drew an inspiration from an unreported judgment of Sinha J. in Matter No. 158 of 1963, Rampiari Khemka v. Commissioner of Income-tax. To that judgment I shall have to refer later on.
The argument advanced by Mr. Mitra requires careful consideration. No riddle is more difficult of solution, none has more persistently engaged the attention of thoughtful minds than the problems of natural justice. If one cares to examine the case law on the point, from the earliest times, he is sure to find flood tide of respect for natural justice, an ebb tide and a return of the flow tide. But in spite of all that, the term 'nature' has never been wholly without its eternal fascination, possibly because it only can suggest absoluteness which man is after, but which the modern mind cannot find. Wherever the English system of jurisprudence has taken root, certain fundamental principles of justice are well recognised, loosely called rules of natural justice, because they fit in with all absolute principles of justice. They are :
(i) notice of the charge or charges on which a man is sought to be proceeded against;
(ii) hearing before an impartial tribunal so that no man can be a judge of his own cause and that the decision can be made in good faith and without bias;
(iii) an orderly course of procedure before the tribunal so that a man may have opportunity to rebut the evidence sought to be used against him.
In Matter No. 158 of 1963, Rampiari Khemka v. Commissioner of Income-tax, on which Mr. Mitra very much relied, the notice under section 33B indicated the grounds for the proposed revision couched in the following language :
'Enquiries made have revealed that no business was carried on by you as alleged in the returns. Also the Income-tax Officer was not justified in accepting the initial capital, the income from business, the acquisition and sale of jewellery, etc., without any enquiry or evidence whatsoever.'
Although the notice disclosed the above-quoted limited grounds, the respondent-Commissioner relied upon other grounds also in making the revision order. This was criticised by Sinha J. in the following language :
'(a) A notice was sent to the petitioner on the 28th January, 1963, in which it was stated that it was proposed to set aside the assessment made on the 18th February, 1961, as enquiries had been made and certain facts had been revealed. So far as these facts are concerned, there is no difficulty. But when it came to make the order under section 33B dated 7th February, 1963, the Commissioner proceeded on grounds not at all disclosed to the petitioner and on the result of enquiries and information some of which had never been made and the result of the information was, in any event, never disclosed to the petitioner. The most serious ground on which the order proceeded was the fact that the service of notice and the making of the assessment order were all fraudulent. Although the word 'fraud' had not been specifically used, the facts disclosed show that the charge is one of collusion and fraud. It was held that notices under the said Act were not properly issued or served. The orders were not properly made, but interpolations were made in the record to show that it was properly done. No such thing could have been done without a concert between the Income-tax Officer and the assessee. Of these very serious charges, however, no linking was at all given to the petitioner in the notice that was served upon her. Let us assume that she received the notice and did not appear at the hearing. At best, the order could have been made after conforming to the rules of natural justice. Just because the petitioner did not appear at the hearing, it did not mean that allegations of fraudulent conduct or the interpolation of record, etc., could be gone into and decided without any notice whatsoever to her that she was being charged with the same or that the order of assessment was being set aside on such grounds.....
(b) Apart from the enquiries mentioned in the notice, the Commissioner has relied on other enquiries not mentioned therein. In fact, the record does not show that some of the enquiries had at all been made. The Commissioner went upon the record and I do not see how it can be argued that there were enquiries not appearing in the record. In coming to the conclusion that the assessment made was erroneous and prejudicial to the revenue, the Commissioner had considered a number of grounds. Some of the grounds he was entitled to go into ex parte, as the petitioner, in spite of notice of such grounds, failed to appear and contest the same. He, however, did not confine himself to those grounds, but his order, which is a speaking order, discloses that he considered the case from various points of view not disclosed to the petitioner, took into consideration materials quite unknown to her, and relied on enquiries and information prejudicial to the assessee, the gist of which had not been disclosed to her. As regards enquiries, I think that the position is quite clear. The Commissioner could make any enquiry that he finds necessary, because section 33B itself gives him that right. But if he proposes to use against the assessee the result of any such enquiry, he must communicate to her the substance of such information, so as to put the assessee in possession of full particulars of the case she was expected to meet. He should have given her an opportunity to meet the same......
(c) In the present case, the notice that was given merely stated that enquiries had revealed that no business had been carried on by the assessee as alleged in her return and also that the Income-tax Officer was not justified in accepting the initial capital, the income from business, the acquisition and sale of jewellery, etc., without any enquiry or evidence whatsoever. But the basis of the order is not merely the charges contained in the notice. It had been held that there was conspiracy and collusion between the assessee and the Income-tax Officer. Every single step in the assessment has been found to smell of fraud. The returns were filed in a peculiar manner. The notices were pre-dated. There were interpolations in the order-sheets and it had been doubted as to whether notices were at all issued. The demand notices were also tampered with and there were various other defects. It is obvious that the whole basis of the order has changed, or at least has taken into account new and much more serious factors than were disclosed in the notice.'
Towards the concluding portion of the judgment, his Lordship further observed :
'In the present case, at the hearing the assessee did not appear. Assuming that she is to be deemed to have been served with notice and took the risk of an ex parte order, it must be an order based upon the notice that was issued. Since the Commissioner at the hearing found that there were serious allegations of fraud, collusion and conspiracy, interpolation of records, etc., he should not have proceeded further without bringing these matters to the notice of the assessee and giving her an opportunity of answering the serious charges. The hearing should have been adjourned for that purpose. It is of no use now to say that she was not prejudiced by the order or that had she appeared at the hearing the further charges could have been communicated to her.'
I have deliberately quoted long extracts from the judgment of Sinha J. because I have to see how far the facts of the instant case attract the criticisms of the type made by Sinha J. which criticisms were adopted by Mr. Mitra as part of his argument.
The first ground against the petitioner disclosed in the notice under section 33B was that she neither resided at No. 19, Purna Mitra Place, nor carried on any business from that address, although the returns or some of them were shown as submitted from that address. On that ground, the respondent-Commissioner recorded the following findings :
'A short stereotyped assessment order has been made for each of the succeeding assessment years 1954-55 to 1961-62 the income assessed for these years being Rs. 3,500, Rs. 4,000, Rs. 4,300, Rs. 4,400 Rs. 4,500, Rs. 4,500 Rs. 4,500 and Rs. 2,736 for the assessment years 1954-55, 1955-56, 1956-57, 1957-58, 1958-59, 1959-60, 1960-61 and 1961-62 respectively.
It is seen from the assessment records and from what is stated above that all the assessment were made by the Income-tax Officer in post-haste without making any enquiry or investigation into the antecedents of the assessee, whether the assessee was actually carrying on any business, whether the jurisdiction was correct and other factors relevant for making correct and proper assessment. On enquiry, it has been ascertained that the Income-tax Officer, 'B' ward, 24-Parganas, had no jurisdiction over the assessee and, hence, all the assessments made by the Income-tax Officer are an initio null and void.'
The petitioner was also told by the notice that her place of residence as well as her place of business, as in the returns, were being doubted by the respondent-Commissioner. In her reply to the notice, which I have already set out, the petitioner alleged that during January to June, 1961, she resided at No. 19, Purna Mitra Place, a house rented by her son. The assessment related to assessment years 1953-54 to 1961-62. Therefore, on her own showing, the petitioner did not reside at No. 19, Purna Mitra Place, earlier than January, 1961. The respondent-Commissioner no doubt came to the conclusion that the petitioner was not residing at No. 19, Purna Mitra Place, on other materials, namely :
(a) his own ascertainment, from undisclosed sources, that up to 1959, the petitioner used to reside in East Pakistan;
(b) his own ascertainment, based on returns submitted by the petitioner for 1960-61, that the petitioner was residing at No. 772, 5th Road, Sodarpur, Jodhpur, during the period material for the return;
(c) his own ascertainment, based on the return for assessment year 1961-62, that the petitioner was residing at No. P. 536(57), Raja Basanta Roy Road during the period material for the return.
Since all the three addresses were outside the territorial jurisdiction of the Income-tax Officer who made the assessment, the respondent-Commissioner found that the assessments were void ab initio. The question for my consideration is how far the respondent-Commissioner was right in arriving at his conclusion about the residence and place of business of the assessee-petitioner in the manner done by him. In this context I need remind myself of two decisions of the Supreme Court, namely, Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax and C. Vasant Lal & Co. v. Commissioner of Income-tax. In the case of Dhakeswari Cotton Mills Mahajan C.J. observed :
'As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the Income-tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law, but there the agreement ends; because it is equally clear that, in making the assessment under sub-section (3) of section 23 of the Act, the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 23(3)...
In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, he did not given any opportunity to the company to rebut the material furnished to it by him, and, lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result is that the assessee had not had a fair hearing.'
The same view was reiterated in the case of C. Vasantlal & Co., in which Shah J. observed :
'The Income-tax Officer is not bound by any technical rules of the law of evidence. It is open to him collect materials to facilitate assessment even by private enquiry. But if he desires to use the materials so collected, the assessee must be informed of the material and must be given an adequate opportunity of explaining it.'
Section 33B of the Income-tax Act, 1922, invests in the Commissioner the power of 'making or causing to be made such enquiry as he deems necessary.' But this power notwithstanding, the Commissioner cannot use the materials collected by him on enquiry against an assessee unless he makes known the materials to the assessee and gives him an opportunity to rebut the materials so collected. This position is inescapable, regard being had to the two judgments of the Supreme Court herein before referred to. Therefore, in so far as the Commissioner of Income-tax held that the petitioner was living in East Pakistan up to 1957, on materials unknown or undisclosed to the assessee-petitioner, the conclusion cannot be supported, but even then there were other materials to come to the same conclusion, namely, admission by the petitioner contained in the reply to the show-cause notice and the address given by the petitioner herself, in the returns submitted. These materials do not fall to be excluded under any of the two decision of the Supreme Court above referred to. Therefore, there being other acceptable materials on which he respondent-Commissioner could come to the same conclusion, it is difficult for me to interfere with the finding, sitting in constitutional writ jurisdiction. The view that I take finds support from a recent judgment of the Supreme Court in the case of State of Orissa v. Murlidhar Jena. In the that case an officer of the excise department was charged with several heads of misconduct, one of them being that he had purchased an Austin motor car, at concessional rate, through a dealer known as Messrs. Barjorji of Balasore, who were interested in the shop of an excise vendor, to whom the officer was obliged. This charge was taken to be established by the disciplinary tribunal, amongst other materials, by a letter written by Messrs. Barjorji. Barjorji was not examined on the letter and the Orissa High Court, which heard a writ petition against the order of dismissal passed on the officer, adversely commented on the use of the letter. Setting aside the judgment of the High Court, Gajendragadkar J. (as the C.J. he then was) observed :
'The High Court had also commented on the fact that the Tribunal should have examined Barjorji before relying upon the statements made by him in his letter addressed to Mr. Patnaik. There is some force in this argument; but the finding of the Tribunal in regard to the purchase of the Austin car is based on several other considerations all of which have been duly proved. In fact, about the main feature of this transaction, there was no serious controversy between the parties. The parties were at issue on the question as to the effect of these broad features but that, clearly, is a question of fact which fell within the jurisdiction of the Tribunal. We have carefully considered the reasons given by the High Court in its judgment under appeal but we are unable to accept the contention pressed before us by Mr. Sinha, for the respondent, that the conclusion of the High Court is right when it says that the Tribunals findings against the respondent were based on no evidence. Whether or not the High Court or this court agrees with the conclusions of the Tribunal is another matter. The question to be considered is whether the said conclusions could be set aside on the narrow ground that they are not supported by any evidence. In our opinion, it is difficult to accept the view that there is no evidence in support of the conclusion recorded by the Tribunal against the respondent.'
Thus, there being other acceptable material, on which the first charge could be established, the fact that the respondent-Commissioner also used some materials, not disclosed to the assessee-petitioner, for coming to the finding need not prove fatal to the finding itself.
I now turn to the second ground disclosed in the notice, namely, that the Income-tax Officer accepted the initial capital and the income from business, as included in the returns by the petitioner without any enquiry or evidence. The respondent-Commissioner found in favour of this ground on the following line of reasoning. He found, in the first place, that the records showed that the assessee-petitioner filed returns of income for the assessment years 1953-54 to 1959-60, all dated March 20, 1961, and for the assessment year 1960-61 dated March 6, 1961. The date of receipt of the returns for the assessment years 1953-54 to 1959-69 were no where noted.
Only in respect of the return for the assessment year 1960-61 the date of receipt was noted as March 17, 1961. Notices under section 23(2) in respect of the assessment years 1953-54 to 1959-60 were issued on March 20, 1961, fixing the date of hearing on March 23, 1961. Notice under section 23(2) for the assessment year 1960-61 was issued on March 18, 1961, fixing the date of hearing on March 20, 1961. On March 20, 1961, the assessment case for 1960-61 was discussed with the assessees authorised representative, Mr. C. M. Chopra, and the matter was postponed to March 23, 1961. On March 23, 1961, the revision order for all the years 1953-54 to 1960-61 was made. The demand notices were issued on March 25, 1961, and were received by Mr. C. M. Chopra on behalf of the assessee. He found, in the next place, that the assessment orders were all cryptic and stereotyped and quoted one such order, namely, that for the assessment year 1953-54, to show that the Income-tax Officer arrived at his conclusion off-hand, in post haste and without enquiry. He, lastly, found that the assessee did not maintain proper books of account, could not produce any evidence of pawn-broking business, had not even taken licence for the pawn-broking business and merely fabricated a story to explain away large investments made by her in certain business of which her husband was either the managing director or a partner. The line of reasoning adopted by the respondent-Commissioner, in this case, is different from the line of reasoning which prevailed with the Commissioner of Income-tax in Matter No. 158 of 1963 decided by Sinha J. Here, the Commissioner of Income-tax did not find that the notices were not properly issued or served or that the records were interpolated in order to make a show of service. The ground relied on by the Commissioner of Income-tax was that the Income-tax Officer had passed the orders of assessments without enquiry and without supporting evidence. That ground was disclosed to the petitioner. In order to establish that ground, the respondent-Commissioner, firstly, relied on the fact that between the filing of the returns and the making of the order not even a week elapsed, within which period the notice under Section 23(2) were issued, the dated of hearing was fixed, the representative of the party was heard and the order was made. These facts were all within the knowledge of the petitioner and, appearing as they did from the records, did not require to be ascertained by the Commissioner of Income-tax, by private enquiries. The respondent-Commissioner did not inter from these facts that the Income-tax Officer was manipulating the records to help the assessee but utilised those facts to establish the ground that the Income-tax Officer proceeded in haste and without enquiry. Secondly, he quoted from the record, by way of example, one assessment order so as to emphasise upon the scrappy nature of the order made in all the assessment years. The ground disclosed was that the Income-tax Officer had made assessment without enquiry and evidence. To establish that ground the haste with which assessment were completed and the scrappy nature of the orders were of relevant consideration. These facts were matters of record all within the knowledge of the assessee-petitioner and did not require to be included in the notice by way of exemplification. The last set of facts relied on by the respondent-Commissioner, in support of this ground, namely, (i) that the assessee was either not carrying on any pawn-broking business or that even if she was carrying on some loan business, was doing so as a benamidar of her husband, and (ii) that she filed voluntary returns, therein alleging false address and further alleging carriage of pawn-broking business with capital of her own, in order to explain away large investments made by her in the business of her husband, were no doubt facts ascertained by the respondent-Commissioner by private enquiries or inference made from such enquiries and he should have disclosed those facts to the petitioner if he wanted to utilise them against him. By not doing so he fell within the prohibition imposed by the two Supreme Court judgments hereinbefore referred to.
But the question remains for consideration whether the revision order is to be set aside because of the defect noted above. In Matter No. 158 of 1963 Sinha J. relied on the decision of the Supreme Court in Dhirajlal Girdharilal v. Commissioner of Income-tax and observed : 'If part of an order is good and another part bad, the whole order becomes defective, because where a finding is based on a material which is only partly irrelevant or inadmissible it was vitiated as a whole.' His Lordship distinguished the judgment of the Supreme Court in S. N. Namasivayam Chettiar v. Commissioner of Income-tax on the ground that in that case the Supreme Court excused the use of materials undisclosed to the assessee on the theory that those materials did not from the basis of the order, the principle laid down by the Supreme Court in S. N. Namasivayam Chettiars case would not apply. I have, therefore, to see whether the basis of the order of revision were the facts ascertained by the respondent-Commissioner himself, namely, the absence of pawn-broking business, the benami loan business. In my opinion, the aforesaid facts were referred to by the respondent-Commissioner as supporting materials for his conclusion that the Income-tax Officer had made the orders of assessment without any enquiry and without probing into the evidence. What the Commissioner of Income-tax meant to say was that if the Income-tax Officer had not proceeded so hastily, the aforesaid facts might not have escaped his notice and revenue would not have suffered. I, therefore, find that the present case is not distinguishable from S. N. Namasivayam Chettiars case. Moreover, in the case of State of Orissa v. Bidyabhushan Mohapatra, the Supreme Court observed that where a disciplinary proceeding was started on more charges than one and wheel the High Court found that the findings on some of the charges only violated the principles of natural justice, the HIGH Court had no power to interfere with the penalty and ask the authorities to reconsider the penalty. I set out the relevant passage from the judgment herein below :
'The High Court had held that there was evidence to support the findings on heads (c) and (d) of charge (1) and of Charge (2). In respect of charge 1(b), the respondent was acquitted by the Tribunal and it did not fall to be considered by the Governor. In respect of charge 1(a) and 1(e) in the view of the High Court the rules of natural justice had not been observed. The recommendation of the Tribunal was undoubtedly founded on its findings on charges 1(a), 1(e), 1(c), 1(d) and charge (2). The High Court was of the opinion that the findings on two of the heads under charge (1) could not be sustained because in arriving at the findings the Tribunal had violated the rules of natural justice. The High Court, therefore, directed that the Government of the State of Orissa should decide whether on the basis of those charges the punishment of dismissal should be maintained or else whether a lesser punishment would suffice. It is not necessary for us to consider whether the High Court was right in holding that the finding of the Tribunal on charges 1(a) and 1(e) were vitiated for reasons we will presently set out by it, because in our judgment the order of the High Court directing the Government to reconsider the question of punishment cannot, for reasons we will presently set out, be sustained. If the order of dismissal was based on the findings on charges 1(a) and 1(e) alone the court would have jurisdiction to declare the order of dismissal illegal but when the findings of the Tribunal relating to the two out of five heads of the first charge and the second charge was found not liable to be interfered with by the High Court and those findings established that the respondent was, prima facie, guilty of grave delinquency, in our view the High Court had no power to direct the Governor of Orissa to reconsider the order of dismissal.'
In this rule I have not to deal with a disciplinary proceeding but with a proceeding for revision of assessment under section 33B of the Indian Income-tax Act, 1922, but the rules of natural justice do not differ with the nature of the proceedings. They are everywhere the same, unless controlled or modified by statutes or statutory rules. Therefore, if a ground is sought to be made out from different aspects and if such an attempt becomes bad for violation of the rules of natural justice in respect of only some aspects, it may be difficult to interfere with the ultimate order, under article 226 of the Constitution, if the ground be otherwise made out from other aspects. In his judgment in Matter No. 158 of 1963, Sinha J. did not take into consideration the pronouncements of the Supreme Court in State of Orissa v. Murlidhar Jena, and in State of Orissa v. Bidyabhushan Mohapatra, possibly because it was not necessary for his Lordship so to do in the facts of the case before him. In the facts of this case, however, the above two decisions of the Supreme Court are of relevant consideration. The Income-tax Officer hurriedly assessed the petitioner, a new assessee, without making enquiries as to the truth or otherwise of her case as in the returns, passed the assessment orders based on off-hand estimates and conjectures. This was enough to call for an action under section 33B. The fact that the respondent-Commissioner also imported materials collected by him, but not disclosed to the assessee-petitioner, and used them, so as to make the order, was no doubter highly irregular. But this had not the effect of making the order itself band because, as I have already said, those materials were merely supporting materials and did not constitute basic grounds on which the order was made.
In the view that I take, I hold that Mr. Mitra was not right in reading in the revision order an innuendo that the Income-tax Officer was very much favourably disposed to the assessee-petitioner. All that was found against the Income-tax Officer was that he proceeded in hot haste and without enquiry or evidence. This haste and the nature of the performance of the Income-tax Officer may be explicable on the theory of favoritism or nepotism or dishonesty but may also be otherwise explicable. The respondent-Commissioner did not go so far as to hold that the Income-tax Officer was guilty of favoritism or dishonesty and it would not be proper for me to read in the order an innuendo which cannot be spelt out from it. I further hold that the respondent-Commissioner of Income-tax found want of jurisdiction in the Income-tax Officer, who had assessed the petitioner, because he found, in any event, on the petitioners own admission, that she did not reside at 19, Purna Mitra Place, at any material time. That ground way disclosed to the petitioner and I cannot make much of the criticism made by Mr. Mitra in this respect. The other materials undisclosed to the petitioner were used as supporting materials for his findings on the grounds disclosed and were not basic materials, a distinction which I have already pointed out. I do not, therefore, uphold the argument made by Mr. Mitra also on that aspect of the matter.
The extent and limitations of the rules of natural justice applicable to a proceeding under section 33B may be tabulated as follows :
(a) The Commissioner of Income-tax must disclose, in his notice to the assessee, the grounds on which he desires to revise. This is essential; otherwise the assessee may not be able to show any cause and the 'opportunity of being heard', which section 33B requires, may prove illusory to the assessee. If the assessee does not know on what point he is to be heard, he may not visualise what he has to say at the hearing at all.
(b) The notice to show cause must be served upon the assessee reasonably ahead of the date fixed for hearing. A notice calling upon an assessee to show cause, why assessment orders for several years should not be revised, within an unreasonable short time should be condemned. What should be the reasonable time must always depend on the facts of each case.
(c) The Commissioner of Income-tax is entitled to make his own enquiries for the purpose of revising an order. Ordinarily he must disclose to the assessee materials collected by him on enquiry, if he wants to use the materials against the assessee. The Commissioner of Income-tax however, need not disclose the source wherefrom he collected the materials.
(d) Even if some of the several grounds disclosed in the notice fail (say for example, for violation of the rules of natural justice or for want of evidence), even then the revision of assessment may be made on grounds which are substantiated.
(e) If the Commissioner relies on several materials for substantiating a ground disclosed to the assessee, and use of some of the materials be objected to on the plea that the materials had not been disclosed to the assessee, care must be taken to see whether those materials were the basic materials on which the ground was taken to be established. If the disclosed ground was otherwise established and the undisclosed materials were utilised merely as supporting materials for the finding, the finding need not be interfered with.
(f) Even if an assessee be absent at the hearing, the Commissioner of Income-tax must not proceed against him on undisclosed grounds or on undisclosed basic materials collected against him. He must give further notice to the absent assessee, if it becomes necessary for him to proceed on the basis of new grounds and new undisclosed basic materials.
(g) If the Commissioner of Income-tax discloses one or moire grounds in the notice, but revises the order on an entirely different ground, not disclosed to the assessee, that order cannot be sustained.
For reasons already stated, the order of revision in the present case cannot be condemned for violation of the principles of natural justice, I, therefore, discharge this rule with costs.
I make it clear that I do not dissent from the judgment of Sinha J. in Matter No. 158 of 1963. That case may have been correctly decided on its own facts.