The judgment of MITTER and MASUD JJ., against which the application for leave to appeal was filed, was as follows :
MASUD J. - In this reference under section 66(1) of the Income-tax Act, 1922, the short point to be decided is to determine whether the date of the assessment order is the date on which it is passed or the date on which it is served on the assessee. The facts of the case are briefly state as follows :
The assessee is a partner in three registered firms, namely, M/s, Bajoria & Co., M/s. Nand Kishore & Co. (A/c. No. 2) and M/s National shipping Co. He also derives income from dividends and also directors fees and commission from Star Paper Mills Ltd. and Hall & Anderson Ltd. The assessment year in question is 1954-55 and the corresponding previous year is the financial year 1953-54. The Income-tax Officer completed the assessment for the year 1954-55 on 26th March, 1959, on an income of Rs. 42,318. Thereafter, a notice of demand under section 29 of the Income-tax Act demanding the tax due on the amount assessed was served on the assessee on 1st April, 1959. The assessee appealed to the Appellate Assistant Commissioner and also to the Appellate Tribunal but the said appeals were dismissed. On these facts the following questions of law has been referred to us :
'Whether, on the facts and in the circumstances of the case, the order of assessment for the year 1954-55 was made after the expiry of 4 years from the end of the relevant assessment year ?'
The learned counsel for the assessee has challenged before us the validity of the assessment under section 23(3) on the ground that the order of assessment, not having been communicated to the assessee within 4 years after the and of the assessment year as provided under section 34(3), is barred by limitation and as such, invalid in law. Relying on N. N. Majumdar v. N. M. Bardhan, Makhan Lal Sen v. Director of Panchayats, Government of West Bengal, and Bachhittar Singh v. State of Punjab, he has contended that an order of assessment is not completed or made until it is communicated to the person to be affected by the order. All the aforesaid cases do not relate to any section under the Income-tax Act. The case, N. N. Majumdar v. N. M. Bardhan, was based upon sections 77 and 87 of the Calcutta Municipal Act, 1951, and the impugned order was an order of dismissal by the Administrative Officer of the Corporation of Calcutta. Similarly, the cases of Makhan Lal Sen v. Director of Panchayats, Government of West Bengal and Bachittar Singh v. State of Punjab also are concerned with the constitutional rights of a dismissed Government servant. But one decision based on section 33A(2) of the Income-tax Act, 1922, has been referred to us which, however, has some relevance. In Petlad Bulakhidas Mills Co. v. Raj Singh, it was held that, where an Appellate Assistant commissioner made an order on 6th January, 1956, and the order was served on the assessee on January 27, 1956, the application for revision of that order under section 33A(2) filed on January 25, 1957, was made within 'one year from the date of the order' within the meaning of section 33A and was not barred by limitation. This case has only decided that a period of limitation will run only from the date when the order is served on the person who is affected by the order. This must be so. An assessees statutory obligation to move a higher court or Tribunal against an order cannot be set in motion until the order is communicated to him. It cannot be denied that an order, before it is made effective, must be served on the person against whom the order is made. Thus, from the point of view of the person who is affected by the order, the order is made when it is communicated to him. But this does mean that, until an order is communicated, the order is not made at all. Notice under section 29 of the Income-tax Act presupposes an order of assessment under section 23(1) or 23(3). Notice under section 29 can only be served after an order of assessment is made. Thus, the making or passing of an assessment order, the issue of notice under section 29, the service of notice or communication of the assessment order are different stages or steps before an assessee pays the assessed tax. In other words, the date of making the order, the date of issue of notice and the date when the order is communicated need not necessarily be the same date. Admittedly, in the instant case, the order of assessment was made on 26th March, 1959, which is a date within 4 years after the end of assessment year. It is true that the order of assessment has been communicated to the assessee on 1st April, 1959, which date falls 4 years after the end of the assessment year. But the date of communication of the order cannot be the date of making the order because communication presupposes the determination of the thing to be communicated. From the point of view of taxability or liability to pay tax on the part of the assessee, the date of communication may be the most effective date. An order to be communicated must presuppose the existence of an order and the existence of the order is only possible when the Income-tax Officer has made that order. From the point of view of the Income-tax Officer, he has discharged the statutory liability to assess if he makes an order of assessment within 4 years after the end of the assessment year. The statute does not say that the Income-tax Officer must communicate the order of assessment within 4 years after the end of the assessment year. We, therefore, cannot accept the contention of the assessee that the date of communication of the order of assessment is the date of making the order.
For the reasons stated above, the answer to the question should be made in the negative and against the assessee who will pay the costs of this reference.
MITTER J. - I agree.
[The application for leave to appeal was heard be SEN and GUPTA JJ. on March 28, 1966.]
SEN J. - This is an application section article 133 of the Constitution read with section 66A(2) of the Income-tax Act for leave to appeal to the Supreme Court.
In this reference the following question was referred to this court for its opinion.
'Whether, on the fact and circumstances of the case, the order of assessment for the year 1954-55 was made after the expiry of four years from the end of the relevant assessment year ?'
This court answered the question in the negative.
Dr. Pal appearing for the assessee in this case has mainly argued that the question as to the period of limitation as prescribed under section 34(3) of the Income-tax Act, 1922, within which the assessment order should be made requires interpretation by the Supreme Court, inasmuch as the assessment must be deemed to have been made when the order is communicated to the assessee. The section, as it stands, runs as follows :
'No order of assessment or reassessment other than an order of assessment under section 23 to which clause (c) of sub-section (1) of section 28 applies or an order of assessment or reassessment in cases falling within clause (a) of sub-section (1) or sub-section (1) (A) of this section shall be made after the expiry of 4 years from the end of the year in which the income, profits, or gains were first assessable.'
In this case it appears the assessment was made on March 26, 1959, that is, within 4 years from the end of the year in which the income was first assessable - the assessment year being 1954-55. In this application we are concerned to see whether the section requires an interpretation to mean whether the expression 'assessment or reassessment shall be made' should be deemed to be made within 4 years within the meaning of this sub-section as soon as the notice of deemed is served upon the assessee.
Dr. Pal in this connection referred to us a decision in Petlad Bulakhidas Mills Co. v. Raj Singh. In this case it was decided as to whether the limitation for filing an application for revision should run with effect from the date of the order of assessment or the date when the order was communicated. Their Lordships decided as follows :
'..... The expression order in this section means an order of which a party affected has actual or constructive notice. The right of appeal is given to an assessee against the order, and that right of appeal can only be effectively exercised if the party affected has knowledge of that order..... But if the assessee has neither actual nor constructive knowledge, it cannot possibly be suggested that there is an order within the meaning of section 33A(2) against which the assessee could possibly have appealed.'
Section 33A(2) gives a right to an assessee to make an application for revision of an under this Act passed by any authority subordinate to the Commissioner and such an order should be filed within one year from the date of the order. This section clearly envisages the period of limitation for the purpose for filing a revisional application and, in view of the decision stated above, such an application can only be filed after the assessee has actual or constructive knowledge of the order passed by the taxing authority. As such, an application regarding limitation as envisaged in this sub-section (2) of section 33A is clearly distinguishable from the provision of section 34(3) of the Act. This sub-section (3) puts a fetter upon the Income-tax Officer as to the period within which the assessment has to be completed. This section nowhere states as to when the notice of demand should be served upon the assessee and there is no indication in the sub-section to show that the assessment order should be treated as an invalid one, unless an intimation of that order is made to the assessee. An assessment in terms of the Income-tax Act, 1922, must be completed within the time limit laid down in section 34(3), but the Act nowhere imposes any limit of time within which the service of the notice of demand under this section has to be effected. In this view of the matter, we are of opinion that the language of the section is free from any difficulty as to its construction and no alternative view can be taken as the legislature in clear terms has specified the time-limit within which the assessment should be completed. This has nothing to do with a notice of demand. Accordingly, we are of opinion that this case is not a fit one for granting of leave to the assessee for appeal to the Supreme Court.
Dr. Pal has also referred to us a Supreme Court decision in Bachittar Singh v. State of Punjab. The decision points to the interpretation of article 166 of the Constitution as also of article 311(2). In paragraph 9 of the decision their Lordships decided as follows :
'The question therefore, is whether he did in fact make such an order. Merely writing something to the file does not amount to an order. Before something amounts to an order of the State Government, two things are necessary. The order has to be expressed in the name of the Governor as required be clause (1) of article 166 and then it has to be communicated. As already indicated, no formal order modifying the decision of the revenue secretary was ever made. Until such an order is drawn up, the State Government cannot, in our opinion, be regarded as bound by what was stated in the file. As long as the matter rested with him, the Revenue Minister could well source out his remarks or minutes on the file and write fresh ones.'
In our opinion the decision made by their Lordships cannot be attracted to the points of law raised by Dr. Pal, inasmuch as we have already said that they are not sustainable in view of the clear provisions as to the period of limitation, when the assessment by the taxing authority has to be completed. The other decision to which reference has been made is reported in 68 C. W. N. 1109 (Makhan Lal Sen v. Director of Panchayats, Government of West Bengal. In this case the order of appointment was made by the Director of Panchayats who was the component authority under a Government notification. But before the order was communicated to the petitioner it was recalled and cancelled. On these facts this court decided that an order to be effective must be completed and it can only be completed when it is communicated to the person against whom and in whose favour it has been made, that is to say, the person who would be affected by that order. Until such communication is made, it could be varied as many times as necessary. This case also, we are afraid, cannot be invoked in aid of the petitioner for the reasons as stated by us before.
In the premises the application is rejected and the leave asked for is refused. Opposite party will get costs of this application.
GUPTA J. - I agree.