MEHROTRA J. - The petitioner, Hardeodas Jagannath is a partnership firm carrying own business at Mawkhar, Shillong, in the district of United Khasi and Jaintia Hills. By an order dated March 14, 1959, the Income-tax Officer, Shillong, who has been amplitude as opposite party No. 1 to this petition assessed the petitioner under section 23(4) of the Indian Income-tax Act (hereinafter called the Act), for the assessment year 1958-59. The total estimated income was Rs. 9 lakhs and the tax demanded was Rs. 63,750 from the petitioner. The income of the firm was allocated according to the shares of the two partners J. N. Bawri and N. M. Bawri at Rs. 4,50,000 each. By this petition under article 226 of the Constitution it is prayed : (1) that a writ of mandamus be issued calling upon the respondent to withdraw and cancel and forbear from giving effect to the notice under sections 28(3), 46(5A) and proceedings under section 46(2) of the Act; (2) a writ of certiorari calling upon the respondent to send for the records of the case and quash the assessment for 1958-59; and (3) a writ of prohibition calling upon the respondent to cancel and forbear from giving effect to or in any way to take any steps in respect of the notices issued under sections 28(3) and 46(5A) and proceedings initiated under section 46(2) of the Act.
Briefly the facts on which the petitioner has based his claim are that on January 20, 1959 a notice purporting to be one under section 22(4) of the Act was issued against the petitioner which was served on it on or about January 24, 1959. By this notice the petitioner was called upon to produce account books and bank pass books for the Sambat year 2014 being the previous year for the assessment year 1958-59, on January 29, 1959. Although there is no mention of the date of the service of the notice under section 22(2) of the Act in the notice issued under section 22(4) it is asserted by the opposite party that a notice was issued on May 31, 1958 under section 22(2) of the Act calling upon the applicant to submit his return of the total income. The notice, according to the opposite party was served on the petitioner on July 3, 1958. On January 27, 1959 the petitioner applied for the adjournment of the proceedings initiated by the notice under section 22(4) and the time was extended up to February 27, 1959. At this stage, there is some controversy between the parties as to the actual facts. According to the petitioner on February 27, 1959, Sri K. M. Brahmin advocate appeared on behalf of the petitioner before the opposite party No. 1 and the case was adjourned to March 12, 1959. The respondent denies that Shri K. M. Brahmin ever appeared before the Income-tax Officer on February 27, 1959, and thereafter the case was adjourned for March 12, 1959.
According to the petitioner, on March 12, 1959, Sri S. P. Sarma chartered accountant, appeared on behalf of the petitioner before respondent No. 1 and informed that the books of account of the petitioner of the relevant years had been seized by the Superintendent of Taxes, Government of Assam, Shillong, on March 6, 1959, and they could not therefore, be produced on the said date in terms of the notice issued under section 22(4) of the Act and prayed for farther adjournment. This verbal request was followed by a petition dated March 16, 1959. Thereafter on March 17, 1959, the petitioner received from respondent No. 1 a copy of the order of assessment dated March 14, 1959, and a notice under section 28(3) of the Act. The respondents contention with regard to this fact is the Sri S. P. Sarma never appeared before him on March 12, 1959, and no adjournment was granted at his request. After the receipt of the order of March 17, 1959, the petitioner on March 26, 1959, made an application under section 27 of the Act praying for the cancellation of the assessment under section 23(4) of the Act and for making a fresh assessment and by a separate application of the same date he prayed for the stay of the realisation proceedings. On that date a chalan for payment of Rs. 10,000 was issued and delivered to Sri J. N. Bawri, a partner of the firm towards the tax. The amount was paid by Sri. J. N. Bawri. Thereafter another application was made on April 8, 1959, to the respondent praying for a formal order staying the realisation of the tax demand.
On April 14, 1959, an appeal was preferred against the assessment order the Appellate Assistant Commissioner and on April 16, 1959, the petitioner made an application to respondent No. 1 under section 45 of the Act praying for an order not to treat the petitioner as a defalter till the final disposal of the appeal. On April 22, a notice alleged to be under section 46(5A) was issued to the United Bank of India Shillong, United Commercial Bank, Shillong, and the State Bank of India Shillong prohibiting them from making any payment to the petitioner.
Copies of these notices were received by the petitioner on April 24, 1959. Certificate under section 46(2) was also issued to the Collector by respondent No. 1. On April 29, 1959, the application under section 27 was fixed for hearing. On that date Sri Sarma the advocate for the petitioner, asked for the inspection of the service report or acknowledgment in token of the alleged service on the petitioner of the notice under section 22(2); but according to the petitioner the inspection was refused. On April 26, 1959, the petitioner made another application to respondent No. 1 to know about the orders passed on his previous application for the stay of realisation.
Thereafter, on May 4, 1959, an application was made to the Commissioner of Income-tax for a direction to respondent No. 1 not to treat the petitioner as a defaulter till the disposal of the appeal filed before the Appellate Assistant Commissioner. The application made under section 27 was subsequently found to have been dismissed on May 4, 1959, and the copy of the order was delivered on May 5, 1959. The Commissioner of Income-tax by his two order dated : May 8, 1959, and May, 14, 1959, rejected the application of the petitioner and refused to issue any direction to respondent No. 1 to treat the petitioner not to be a defaulter.
The petitioner on May 11, 1959, received a copy of the order passed by respondent No. 1 by which he purported to have rejected the petition made by the petitioner under section 27 of the Act and on that very day action was taken by respondent No. 1 under section 46(2) of the Act. On these facts, it is contended that the order of assessment is illegal and void and should be quashed. It is further contended that the subsequent proceedings for recovery of the tax amount are also illegal and should be cancelled. It is also contended that in the circumstances of the case, the opposite party No. 1 should be directed not to treat the petitioner as a defaulter till the disposal of the appeal. Various points of fact and law have been raised in this case an the arguments covered a very wide range.
The main contention raised by the applicant is that there was no service of the notice under section 22(2) of the Act and consequently, the order of assessement under section 23(4) is without jurisdiction and should be quashed by this court. The argument is that the condition precedent for the exercise of power under section 23(4) is the failure to file a return required by any notice given under sub-section (2) of section 22. A notice under section 22(2) can be said to have been given only if it has been served. Mere issue of a notice unleess it has been served on the assessee cannot be regarded as a "notice given under section 22(2)." Section 22(2) contemplates service of notice upon the assessee and not merely issue of notice.
On behalf of the opposite parties the Adovcate-General has taken a number of preliminary objections of the grant of relief of certiorari quashing hte order of assessemnt. He contends that the petitioner had an alternative remedy inasmuch as he can file an appeal against the cancellation of the assessment under section 27 of the Act. An appeal is provided against an order rejecting an application under section 27. The assessee, therefore, has an adequate alternative remedy available to him and this court should, therefore, not exercise its discretion in its favour under article 226 of the Constitution, until the alternative remedy under the Act has been exhausted. In the present case it is pointed out that the petitioner has not only an alternative remedy available to him, but in fact he has availed of the remedy inasmuch as he has filed an appeal against the assessment. He had filed an application to the Commissioner of Income-tax under section 27 which has also been rejected. A number of authorities were cited to show that when an alternattive remedy is available, this court will not exercise its powers under article 226 of the Constitution. As regards the maintainability of an application under article 226 of the Constitution where an alternative remedy exists, the following observation of the Supreme Court in the case of State of Uttar Pradesh v. Mohammad Nooh, will be apposite :
"There is no rule, with regard to certiorari as there is with mandamus, that it will lie only where there is no other equally effective remedy. Provided the requiste grounds exist certiorari will lie although a right of appeal has been conferred by statute. The fact that the aggrieved party has another and addequate remedy may be taken into consideration by the superior court in arriving at a conclusion as to whether it should, in exercise of its discretion, issue a writ of certiorari to quash the proceedings and decisions of inferior courts subordinate to to quash the proceedings and decisions of inferior courts subordinate to it and ordinarily the superrior court will decline to interfere until the aggrieeved party has exhausted his other statutory remedies, if any. But the rule requiring the exhaustion of statutory remedies before the writ will be granted is a rule of policy, convenience and discretion rather than a rule of law. The superior court will readily issue a certiorari in a case where there has been a denial of natural justice before a court of summary jurisdiction.
If, therefore, the existence of other adequate legal remedy is not per se a bar to the issue of a writ of certiorari and if in a proper case it may be the duty of the superior court to issue a writ of certiorari to correct the errors of an inferior court or tribunal called upon to exercise judicial or quasi-judicial functions and not to relegate the petitioner to other legal remedies available to him and if the superior court can in a proper case exercise its jurisdiction in favour of a petitioner who has allowed the time to Appeal to expire or has not perfected his appeal, e.g., by furnishing security required by the statute, it cannot then be laid down as an inflexible rule of law that the superior court must deny the writ when an inferior court tribunal by dischardi ng all principles of natural justice and all accepted rules of procedure arrived at a conclusion which shocks the sense of justice and fair play merely because such decision has been upheld by another inferior court or tribunal on appeal or revision.
There may conceivably by cases where the error, irregularity or ille gality touching jurisdiction or procedure committed by an inferior court or tribunal of first instance is so patent and loudly obtrusive that it leaves on its decision an indelible stamp of infirmity opr vice which cannot be obliterated or cured on appeal or revision. The superior court may, quite properly, exercise its power to issue the prerogative writ of certiorari to correct the error of the court or tribunal of first instance, even if an appeal to another inferior court or tribunal was available and recourse was not had to it or if recourse was had to it, it confimedd what ex facie was a nullity."
The reason why the courts refuse to entertian writs when an alternative remedy is available is that the Legislature has set up tribunals for decisions in appeals and, that the remedy which the court could give the petitioner could obtain from these tribunals. But whether the petitioner should be disentitled to maintain the petition or not is a matter of discretion with the court and if the court is satisfied that the peitioner will not get justice from the appellate tribunal or that he would have no confidence in the decision of the tribunal, or that the appeal would be nothing more than to use the language of Sir Trevor Harries an "appeal from Caesar to Caesar" then the court is not bound to accede to the submission of the department that it should not hear the petitioner.
It is true that we cannot judge administrative officers discharging judicial functions with the same strictness that we would judge a judge sitting in court. A judge has to maintian certain standards of detachment and objectivity apart from being impartial but an administrative officer has to do a considerable amount of adminsitrative work, decide questions of policy, give directions, give instructions which would be intolerable if they were done by a judge sitting in court; but this does not mean that although he may clearly express his opinion, although he may emphatically indicate what his views are, the assessee must still be compelled solemnly to go before him in appeal to hear in appeal the decision which he has parctically already given : Glaxo Laboratories (India) Private Ltd. v. A. V. Venkateswaran.
There is no inflexible rule that the existence of an alternative remedy is a bar to the issue of a writ of certiorari. The issue of various writs or directions is in the discretion of the court and the court while exercising iits discretion may take into consideration the existence of an alternative remedy as a matter of policy, but the existence of an alternative remedy is not per se a bar to the issue of a writ of certiorari.
The second line of argument developed by the Advocate-General is that having regard to the nature of the objection raised by the peitioner, this court will not issue a writ of certiorari quashing the order. The order of certiorari cannot be a substitute for the right of an appeal and if this court before issuing an order of certiorari has to go into questions of fact, the court will refuse to issue any orer or writ in the nature of certiorari. In what circumstances an order in the nature of certiorari will be issued by this court has been the subject-matter of numerous pronouncements of the Supreme Court. The position has been summarised by the Supreme Court in the case of Hari Vishnu Kamath v. Ahmad Ishaque as follows :
"There was considerable argument befpore us as to the character and scope of the writ of certiorari and the conditions under which it could be issued. The question has been considered by this court in Parry and Co. v. Commercial Employees Association, Madras, Veerappa Pillai v. Raman and Raman Ltd., Ebrahim Aboobakar v. Custodian General of Evacuee Property, New Delhi, and quite recently in Basappa v. Nagappa. On these authorities, the following propositions may be taken as established :
(1) Certiorari will be issued for correcting errors of jurisdiction, as when an inferior court or tribunal acts without jurisdiction or in excess of it, or fails to exercise it. (2) Certiorari will also be issued when the court or tribunal acts illegally in the exercise of its undoubted jurisdiction, as when it decides without giving an opportunity to the parties to be heard, or violates the principles of natural justice. (3) The court issuing a writ of certiorari acts in exercise of a supervisory and not appellate jurisdiction. One consequence of this is that the court will not review findings of fact reached by the inferior court or tribunal, even if they be erroneous. This is on the principle that a court which has jurisdiction over a subject-matter has jurisdiction to decide wrong as well as right, and when the Legislature does not choose to confer a right of appeal against that decision, it would be defeating its purpose and policy, if a superior court were to re-hear the case on the evidence, and substitute its own findings in certiorari. These propositions are well settled and are not in dispute."
In the case of Nagendra Nath Bora v. Commissioner of Hills Division and Appeals, Assam, the Supreme Court laid down what the expression "error apparent on the face of the record" connotes. The jurisdiction of the High Court on certiorari may be invoked if it is only an error of law apparent on the face of the record and not every error either of law or fact which can be corrected by a superior court in the exercise of its statutory powers as a court of appeal or revision.
Where the errors cannot be said to be errors of law apparent on the face of the record but they are merely errors in appreciation of documentary evidence of affidavits, errors in drawing inferences or omission to draw inferences, or in other words, errors which a court sitting as a court of appeal only could have examined and, if necessary, corrected, there is no case for the exercise of jurisdiction under article 226 of the Constitution. The principles underlying the jurisdiction to issue a writ or order of certiorari are no more in doubt, but the real difficulty arises in applying the principles to the particular facts of a given case.
The contention of the petitioner is that the condition precedent for the exercise of the power under section 23(4) is the failure to file the return on the giving of the notice under section 22(2) of of the Act. Unless, therefore, the preliminary fact of the giving of notice under section 22(2) is complied with the Income-tax Officer will have no jurisdiction to assess under section 23(4). Any determination by the Income-tax Officer of the existence or non-existence of this preliminary fact is examinable by this court in its supervisory jurisdiction under ar ticle 226 of the Constitution.
It is further significant that section 23(4) does not lay down that the best judgment assessment can be made if the return has not been filed on a notice being issued under section 22(2). Section 23(4) will be attracted only if the notice has been given, while in the case where the non-compliance with the notice under section 22(4) has been made a ground for best judgment assessment, the section will be attracted if the notice has been issued. Sub-section (2) of section 22 provides that the Income-tax Officer will serve a notice upon the assessee requiring him to furnish a return while the other sub-sections of section 22 only speak of the issue of the the notice. Unless, therefore, in the present case it is established that the notice was served on the petitioner in accordance with the law, there was no notice given under section 22(2), and consequently, the assessment under section 23(4) would be without jurisdiction. It is further pointed out that it may not be within the ambit of the powers of the appellate authority to to determine if there was a vaild notice under section 22(2) of the Act or not. Section 27 which gives power to cancel the assessment also lays down that the Income-tax Officer shall cancel the assessment, if he is satisfied that the assessee was prevented by sufficient cause from making the return required uner section 22. This section presupposes that there has been a service of the notice as contemplated by section 22(2), and the Income-tax Officer while dealing with applications under section 27 is not competent to go into the question as to whether there was any notice at all given under section 22(2). When this part of the section is contrasted with the subsequent portion of section 27, it will be clear that in ases where the assessment made on account of failure to comply iwth the notices under section 22(4) or section 23(2) can b canclled, the words "did not receive the notice" have been used.
It was also urged by the counsel for the assessee that in the present case there was no notice under section 22(2) as the service of the notice has not been established. What is the scope of the power of the superior court to examine collateral facts for issuing a writ of certiorari has been summarised in Halsburys Laws of England, Third Edition, Volume II, in paragraph 270, at page 142 as follows :
"The case is more difficult where the jurisdiction of the inferior tribunal depends, not upon some preliminary proceeding, but upon he existence of some particular fact. If the fact is collateral to the actual matter which the inferior tribunal has to try, that tribunal cannot, by a wrong decision with regard to it, give itself jurisidiction which it would not othewise possess unless by statute hte inferior tribunal is given power to determine conclusively questions relating to its own jurisdiction.
The inferior tribunal must, indeed, decide as to the collateral fact, in the first instance; but the superior court may upon certiorari inquire into the correctness of the decision, and may quash the proceedings in the lower court if such decision is erroneous. On the other hand, if the fact in question is not collateral, but a part of the very issue which the lower court has to inquire into, certiorari will not be granted, although the lower court may have arrived at an erroneous conclusion with regard to it."
Dealing with the question of want of jurisdiction the law has been thus summarised in paragraph 268 of Halsburys Laws of England :
"Where the inferior tribunal has acted without jurisdiction certiorari to quash the proceedings may be granted. Want of jurisdiction may arise from the nature of the subject-matter; so that the inferior tribunal had no authority to enter on the inquiry, or upon some part of it. It may also arise from the absence of some essential preliminary proceedings. Thus, although the inferior tribunal may have jurisdiction over the subject-matter of the inquiry it may be a condition precendent to the exercise of its jurisdiction that the proceedings should be begun within a specified time, so that some step should have been previously taken by the person who institutes proceedings before the tribunal. Under various statutes certain notices are requisite before the commencement of proceeings; and the omission to serve such notices deprives the inferior tribunal of juirisdiction and affords ground for certiorari."
The next argument pressed by the Advocate-General was that there was an adequate and appropriate machinery in the Income-tax Act itself for the determination of the question as to whether a notice under section 22(2) was served on the petitioner and to find out if there has been a porper assumption of jurisdiction to make a best judgment assessment under section 23(4) of the Act. Any view taken by the Income-tax Officer as regards the service of notices under section 22(2) may be erroneous, but such an error can be remedied in appeal or ultimately by a reference to this court under section 66. The Income-tax Act is a complete code an any grievance of the assessee can be remedied only by having recourse to the Act itself. Reliance was placed on the case of Raleigh Investment Co. Ltd. v. Governer-General in Council. Particular reference was made to the following passage at page 337 of the report :
"Under the Act the Income-tax Officer is charged with the duty assessing the total income of the assessee. The obvious meaning, and in their Lordships opinion the correct meaning, of the phrase assessment made under the Act is an assessment finding its origin in an activity of the assessing officer acting as such. The circumst ance that the assessin officer has taken into account an ultra vires provision of the Act is in this view immaterial in determining whether the assessment is made under the Act.
The phrase describes the provenance of the assessment : it does not relate to its accuracy in point of law. The use of the machinery provided by the Act, not the result of that use, is the test ... Jurisdiction to question the assessment otherwise than by use of the machinery expressly provided by the Act would appear to be inconsistent with the statutory obligation to pay arising by virtue of the assessment."
That was a case where the question related to the maintainability of a suit and the proper interpretation of section 67 of the Income-tax Act. It was a case prior to the Constitution and the question of the power of the High Court to issue direction or writs under article 226 was not before the Privy Council.
The next case relied upon is the case of K. S. Rashid and Son v. Income-tax Investigation Commission. The following observation at page 174 of the report has been relied upon :
"For purposes of this case it is enough to state that the remedy provided for in article 226 of the Constitution is a discretionary remedy and the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or subitable relief elsewhere."
As I have already indicated above, the existence of an alternative remedy under the Act is no absolute bar to this court granting relief under article 226 of the Constitution. But as the remedy provided for under article 226 of the Constitution is a discretionary remedy the fact of an alternative remedy has to be considered by the High Court in granting relief under article 226 of the Constitution. The proposition put widely that in no case where there is a complete machinery provided for under an Act for the redress of wrong the High Court will exercise its powers under article 226 of the Constitution, cannot be accepted.
The next case relied upon is the case of In re Lala Lachhman Das Nayar 2. The facts of the case were that prior to the assessment year 1937-38 the petitioner along with his several sons formed a Hindu undivided family. They were assessed as such. For the year 1938-39, returns were made on the basis of partnership. The Income-tax Officer refused to recognise this partnership. Ultimately on appeal by the assesses the Privy Council held that the firm was registrable as it was a valid partnership on July 29, 1947. For the assessment year 1940-41 to 1944-45 the assessment had been completed but as the High Court had held that the firm was not registrable as there was no genuine partnership the assessment was cancelled. On the returns which had been filed by the firm as constituted except for the year 1941-42 no assessment had been completed. Thereafter proceedings under section 34 were taken and the total income of the firm was assessed in the hands of the Hindu undivided family on February 14, 1945, before the judgment of the Privy Council. On March 16, 1949, a number of notices were issued by the Income-tax officer on the Hindu undivided family. The returns were made under protest on June 13, 1949, and on March 15, 1950, the Income-tax Officer made five separate orders of assessment under section 23(5) read with section 34. Further orders of reassessment of the undivided Hindu family were made. Several proceedings thereafter took place. On March 26, 1951, the Income-tax Officer issued several noticed under section 34 for the years 1942-43, 1943-44 and 1944-45 the validity of which was challenged by the petition before the High Court under article 226 of the Constitution. In that case the following propositions were laid down :
"(1) the Income-tax Act has entrusted to the Income-tax Officer the decision to of the facts and the law decided whether the provision of section 34 are applicable;
(2) the exisgencies of the State require that there should be a tribunal to expeditiously and at a small expense decide questions which arise in the matter of assessment;
(3) machinery has been created by the Act for the determination of the liability of an individual for assessment and the extent thereof;
(4) it is that machinery and that alone which can be used for the purposes of assessment and all complaints against such assessment are to be adjudicated upon in accordance with the machinery provided by the Act;
(5) it is the statutory duty of the Income-tax Officer to make the assessment which can only be challenged by way of appeal under this Act and the case stated to the High Court; and
(6) whether the attack on the proceeding under section 34 of the Act is due to the want of preliminary conditions or conditions precedent or to the bar of time or illegality due to the matter being rest judicata, or due to the provisions being ultra vires or the amendment being prospective they are all questions of law and do not affect the jurisdiction of the Income-tax Officer."
This decision is distinguishable on facts although the principle laid down therein cannot be doubted. Under section 34 the Income-tax Officer is given exclusive jurisdiction to reassess an assessee and further to conclusively determine the existence of the preliminary conditions necessary to the exercise of the powers under section 34. The same principle does not apply to the case of best judgment assessment under section 23(4). The condition precedent for exercise of power under section 23(4) is the failure to file a return on the notice being given under section 22(2) of the Act.
Under section 23(4) the Income-tax Officer has not been given any exclusive jurisdiction to determine the fact whether notice under section 22(2) was or was not served and any determination by the Income-tax Officer is amenable to a writ of certiorari by this court. Even if the existence of the preliminary condition has been assumed by the Income-tax Officer, it is examinable by this court in a writ of certiorari if the condition did or did not exist in the present case. In the case of R. v. Bolton, which is considered to be landmark in the history of certiorari it is observed as follows :
"It is contended that affidavits are receivable for the purpose of showing that they acted without jurisdiction and this is no doubt true, taken literally; the magistrates cannot, as it is often said, give themselves jurisdiction merely by their own affirmation of it. But it is obvious that he is may have two senses; in the one it is true; in the other on sound principle and on the best considered authority, it will be found untrue.
Where the charge laid before the magistrate as stated in the information does not amount in law to the offence over which the statute gives him jurisdiction his finding the party guilty by his conviction in the very terms of the statute would not avail to give him jurisdiction the conviction would be bad on the face of the proceedings, all being returned before us. Or if the charge being really insufficient he had misstated it in drawing up the proceedings, so that they would appear to be regular, it would be clearly competent to the defendant to show to us by affidavits what the real charge was and that appearing to have been insufficient we should quash the conviction.
In both these case a charge has been presented to the magistrate over which he had no jurisdiction, he had no right to entertain the question or commence an inquiry into the merits; and his proceeding to a conclusion will not give him jurisdiction. But as in the latter case we cannot get at the want of jurisdiction but by affidavits of necessity we must receive them. It will be observed however that here we receive them not to she that the magistrate has come to a wrong conclusion but that he never ought to have begun the inquiry."
The observation of Lord Esher M.R. in the case of R.V. Commissioners for Special Purposes of Income Tax has been quoted with approval by their Lordships of the Supreme Court and has been universally adopted as laying down correctly the circumstances when any decision by a tribunal of limited jurisdiction on collateral facts will be examinable by a writ of certiorari :
"When an inferior court or tribunal or body which has to exercise the power of deciding facts is first established by Act of Parliament the legislature has to consider what powers it will give that tribunal or body. It may in effect say that if a certain state of facts exists and is shewn to such tribunal or body before it proceeds to do certain things it shall have jurisdiction to do such things but not otherwise. There it is not for them conclusively to decide whether that state of facts exists and if they exercise the jurisdiction without its existence what they do may be questioned and it will be held that they have acted without jurisdiction. But there is another state of things which may exist. The legislature may entrust the tribunal or body with a jurisdiction which includes the jurisdiction to determine whether the preliminary state of facts exists as well as the jurisdiction on finding that it does exist to proceed further or do something more. When the legislature are establishing such a tribunal or body with limited jurisdiction they also have to consider whatever jurisdiction they give them whether there shall be any appeal from their decision for otherwise there will be none. In the second of the two cases I have mentioned it is an erroneous application of the formula to say that the tribunal cannot give themselves jurisdiction by wrongly deciding certain facts to exist because the legislature gave them jurisdicition to determine all the facts including the existence of the preliminary facts on which the further exercise of their jurisdiction depends."
In the case of R. V. Nat Bell Liquors Ltd. Lord Sumner dealing with the power of the superior court to interfere with the order of the inferior court by issuing a writ of certiorari observed in the following terms :
"That the superior court should be bound by the record is inherent in the nature of the case. Its jurisdiction is to see that the inferior court has not exceeded its own and for that very reason it is bound not to interfere in what has been done within that jurisdiction for in so doing it would itself in turn transgress the limits within which its own jurisdiction of supervision not of review is confined. That supervision goes to two points : one is the area of the inferior jurisdiction and the qualifications and conditions of its exercise; the other is the observance of the law in the course of its exercise."
It may be pointed out that the effect of the decision of the Privy Council in Raleigh Investment Companys case has been considerably modified by the decision of the Supreme Court in the case of State of Tripura v. Province of East Bengal. In the Supreme Court case, it was held that when a notice has been issued under an ultra vires provision and the gist of the wrongful act complained of was subjecting the plaintiff to the harassment and trouble by commencing against him an illegal and unauthorised assessment proceeding which might eventually result in an unalwful imposition and levy of tax a suit could be brought that the act was ultra vires. In the case of Prashar v. Vasantsen Dwarkadas it was held that the High Court could issue a writ of prohibition under article 226 of the Constitution if the notice issue under section 34 of the Income-tax Act was beyond eight years. It was observed that :
"Except for the territorial limitation placed upon it by the Constitution, there is no limit upon the right or the power of the High Court to issue a writ under article 226 or article 227. Undoubtedly, the courts for their won guidance have put limitations upon their very wide power but those are self-imposed limitations, they are not legal or constitutional limitations."
No tribunal and no officer can confer jurisdiction or authority or competence upon itself or himself by misconstruing a section. An authority cannot claim to exercise jurisdiction by construing a section erroneously and thereby contending that the section so wrongly construed gives him the necessary power. In such a case if the section has been wrongly construed gives him the necessary power. In such a case if the section has been wrongly construed it would be a clear case of absence of jurisdiction apparent on the face of the record because the court has got to look at the section and to decide whether to officer construing the section was in the right or in the wrong.
The next line of argument of the Advocate-General was that the jurisdiction of the Income-tax Officer to assess done not depend upon the validity or otherwise of the notice under section 22(2) of the Act. Even though therefore it may be accepted that the notice is not proved to have been properly served on the assessee the assessment under section 23(4) cannot be said to be without jurisdiction. Reliance has been placed for this proposition on the case of Chatturam v. Commissioner of Income-tax. The assesses in this case were residents of Jhumritalaiya, a place in the district of Hazaribagh in Chotanagpur Division of Bihar and were assessed for the year 1940-41, the accounting year being 1939-40. On the April 20, 1940, a notice under section 22(2) Income-tax Act was published in the newspapers requiring them to furnish a return in the prescribed from. On the April 22, 1940, a notice under section 22(1) Income-tax Act was published in the newspapers requiring persons generally to submit the returns in the prescribed form. The Indian Finance Act of 1940 had not been extended by any other notification up to that time to this partially excluded area. On May 26, 1940, a notification was issued under section 92(1) Government of India Act, 1935 extending the Indian Finance Act of 1940 to that area. The returns were submitted by the assessee to the Income-tax Officer and the assessments were completed on March 9, 1941. The assessments were challenged. A number of points were taken before the Federal Court as to the validity of the notification issued by the Governor and the applicability of the Income-tax Act to the excluded areas. One of the contentions raised was that the notification of May 26, 1940, by which the Indian Finance Act was made applicable to the excluded areas was issued after the notices had been issued under section 22(1) and (2) by the Income-tax Officer. The notices therefore when issued were without jurisdiction. By a subsequent notification the Governor could not give jurisdiction to the Income-tax Officer in respect of his ultra vires notices. That contention was repelled and the following observation in that connection was relied upon by the Advocate-General in support of his contentions 2 :
"This contention is founded on a misunderstanding of the jurisdiction of the Income-tax Officer and the operation of the Income-tax Act. The Income-tax assessment proceedings commence with the issue of a notice. The issue or receipt of a notice is not however the foundation of the jurisdiction of the Income-tax Officer to made the assessment or of the liability of the assesses to pay the tax. It may be urged that the issue and service of a notice under section 22(1) or (2) may affect the liability under the penal clauses which provide for failure to act as required by the notice.
The jurisdiction to assess and the liability to pay the tax however are not condition alone the validity of the notice.... The liability to pay the tax is founded on section 3 and 4 of the Income-tax Act, which are the charging sections. Section 22 etc. are the machinery sections to determine the amount of tax."
Various English authorities were considered and the following observation in the judgment of Sargant L.J. in Whitney v. Commissioner of Inland Revenue was approved :
"I cannot see that the non-assessment prevents the incidence of the liability though the amount of the deduction is not ascertained until assessment. The liability is imposed by the charging section namely section 38(of the English Act) the words of which are clear. The subsequent provisions as to assessment and so on are machinery only. They enable the liability to be quantified and when quantified to be enforced against the subject but the liablity is definitely and finally created by the charging section and all the materials for ascertaining it are available immediately."
I do not think that this case is of much assistance. The observation of Kania J. in the Federal Court decision referred to above clearly goes to show that the service of notice under section 22(1) and (2) may affect the liability of the penal clauses; but the jurisdiction of the Income-tax Officer to assess is not founded on the notice. In the present case the contention of the assessee is that before section 23(4) could be invoked it was necessary that the notices under section 22(2) should have been served and any wrong decision on the question of giving of the notice under section 22(2) cannot give jurisdiction to the Income-tax Officer to assess under sectio 23(4).
In the case of Commissioner of Agricultural Income-tax v. Sultan Ali Gharami the question which came up for decision was one under the Bengal Agricultural Income-tax Act. Section 24 of that Act which was similar to section 22 of the Income-tax Act and section 38 which was similar to section 34 of the Income-tax Act were considered. It was held in this case that mere issue of notice under section 22(1) does not commence the assessment proceedings. The assessment proceedings commence if in pursuance of a general notice under section 22(1) the return has been filed but if a notice under section 22(2) has been served the assessment proceedings commence as soon as the notice has been served. It is not necessary for the proceedings to wait to commence till the filing of the return in pursuance of the individual notice. In this case the return which was filed was treated not to be return filed in pursuance of the notice under section 22(2). It was held that endless a notice was issued under section 38 which corresponds to section 34 of the Income-tax Act, no assessment proceedings commenced taken. The contention that the assessment proceedings commenced after the general notice had been issued under section 22(1) was repelled. Dealing with the Federal Court decision it was observed as follows :
"I read that decision as meaning that the provisions relating to notices being merely procedural they could be made applicable with retrospective effect and that acts done under the sections being procedural acts they could be respectively validated... although the liability to be charged to tax may be there the charge could be brought home only by the Officer whom the Act authorises acting in the manner that the Act enjoins. Neither in the case be of the Federal Court nor in any of the English cases relied on in the judgment was there any departure from the provisions of the relevant Act. Besides it may be that when any particular notice is in fact issued a defect in it or an irregularity concerning it will not affected the validity of the assessment. But the question in the present case is not so much the invalidity of the notice under section 24(2), as the validity of the proceedings which were commenced without complying with the statutory requirement of a notice under section 38. The decision of the Federal Court does not cover an commission of a step which the statute regards as a condition precedent to the commencement of proceedings in exercise of jurisdiction. The absence of a notice under section 38 in the present case and the invalidity of the notice under section 24(2) cannot therefore be brushed aside as inconsequential."
I am in complete agreement with the observations quoted above.
In the case of Ram Niranjan Lal v. Additional District Magistrate Kanpur, the allotment of certain land to one Sardar Kartar Singh was challenged. The applicants in that case were the owners of 40 acres of land. They alleged that they were since their purchase in 1946 in the cultivator possession of the land. The alleged that they were since their purchase in 1946 in the cultivatory possession of the land. The Additional Collector, however alloted thge land to Sardar Kartar Singh under section 3 of the U.P., on Land Utilisation Act No. V of 1948, The order of allotment was expart and was passed by the Additional Collector on the ground that notice had been issued to the zamindar applicants; that they had taken the notice but had refused to endorse the acknowledgment. That was considered to be sufficient notice on the zamindar by the Additional Collector and the allotment was therefore made. The service of notice on the landlord in that case was held not properly proved. The reporter of the process server in that case was held not properly proved. The report of the process server in that case was to the effect that the notice was taken by the landlord but the refused to sign the acknowledgment. But there was nothing in the record to show that the report had been verified by an affidavit of the serving officer or the serving officer was examined on oath. It was observed that the finding of the Additional Collector that the notice had been served on the applicants was based on evidence which was not admissible in law at all. The order of allotment was therefore without jurisdiction. Regarding the contention of the power of the High Court to quash such an order under articles 226 and 227 of the Constitution it was observed that the powers of issuing writs directions or orders or of superintendence over inferior courts or tribunal cannot be curtailed modified or affected by any enactment of the Indian Parliament or of the the State Legislature. The power has been given to the High Court by the the Constitution. No doubt the power of issuing a writ direction or order was discretionary but in exercise of its discretion the High Court must be guided by judicial considerations the High Court in determining whether a particular writ direction of order will or will not issue will take onto consideration the historic background of that writ direction or order. In cases where the citizen has been left by an Act without any remedy in the shape of an ordinary suite it may be desirable in the interest of safeguarding the liberties for which these writs directions or orders are intended to help the citizen by the issue of a proper right direction or order.
The law as to the circumstances under which the writ of certiorari could be issued as set out in Halsburys Laws of England and referred to by me earlier in my judgment was quoted with approval. Another argument to which I have already referred in my judgment earlier may be considered. The alternative remedy suggested by the Advocate-General is the appeal against the order of assessment already filed in the present case. Cessation 30 of the Act which provides for an appeal gives to my mind a restricted right of appeal against an order of assessment under section 23(4). In an appeal against such an order the amount of income assessed under section 23 or 27 or the amount of tax determined under section 23 or 27 can be examined. No power has been given to the appellate authority to go into the question of the service of notice under section 22(2). The appeal therefore against an assessment order cannot be regarded to be any adequate alternative remedy available to an assessee. Section 27 does provide the method by which the validity of the service of notice under section 22(2) may be challenged. But that section gives power to the Income-tax Officer to decide if the assessee was prevented by sufficient cause from asking the return required by section 22.
In that connection it may be open to the assessee to say that as there was no service of notice under section 22(2) he was prevented by sufficient cause from filing his return. But in the present case the alternative remedy if any be making an application under section 27 was resorted to and a right of appeal against the order passed under section 27 cannot be said to be an adequate remedy available to the petitioner. Similar view has been taken by the Bombay High Court in the case of Mauladin Ayub Firm v. Commissioner of Income-tax.
In the result therefore in our opinion the preliminary objections raised by the Advocate-General cannot be accepted. Coming to the merits the case set out by the petitioner is that on January 20, 1959, notice under section 22(4) of the Act was issued on the petitioner calling upon him to produce account books and bank pass books for the accounting year by January 27, 1959. In this notice there was no mention of the fact that any individual notice under section 22(2) was served on the petitioner and that the notice under section 22(4) had been issued as a notice under section 22(2) had been served.
The petitioner denies the service of any notice under section 22(2) On January 27, the case is said to have been adjourned to February 27, 1959, and thereafter to March 12. On March 12, again prayer was made for adjournment as the account books of the assessee firm had been taken possession of by the Superintendent of Taxes Government of Assam, on March 6, 1959. On March 17, the petitioner was intimated that an ex parte order had already been passed on March 14, 1959, by the respondent. As I have already said, there is some controversy with regard to the fact whether the case was adjourned to February 27 at the request of the counsel for the assessee and that on March 12, 1959, the counsel for the assessee made a request for adjournment of the case.
In the counter-affidavit it is stated that on applicants application dated January 27, 1959, the date for supplying the account books in compliance with the notice under section 22(4) was adjourned to February 27, 1959. But it is denied that Shri Kedarmal Brahmin appeared for the petitioner on the adjourned date and at his request it was adjourned to March 12, 1959. The correct position was that the applicant had defaulted with the notice under section 22(4) of February 27, 1959, and continued to he in default till the assessment was completed under section 23(4).
It is asserted that as there on February 27 a default both under section 22(2) and 22(4) the assessment could have been made on that very date under section 23(4). As to the service of the notice it is alleged in paragraph 5 of the counter-affidavit that the notice was in fact issued on May 31, 1958, and served on July 3, 1958, and that the omission to mention the date of service of the notice under section 22(2) in the notice issued under section 22(4) was only a clerical commission. The assessment order dated March 14, 1959, under section 23(4) clearly shows that it was not made for the default of a notice under section 22(4) but for failure to fill a return after individual notice had been served under section 22(2).
The contention of the assessee is that a notice under section 22(4) could only be issued if a notice under section 22(2) had been served on the assessee. In the present case as no notice was served under section 22(2) on the assessee no valid notice could be issued under section 22(4) and the question of committing any default of such a notice would not arise. But as I have said the order of assessment under section 23(4) was made not for non-compliance with the notice under section 22(4) but for non-compliance with a notice under section 22(2).
The main question therefore to be considered is whether any notice under section 22(2) was served on the assessee. Section 63 of the Income-tax Act provides that a notice or requisition under this Act may be served on the person therein named either by post or as if it were a summons issued by a court under the Code of civil Procedure, 1908. Sub-section (2) of section 63 provides that any such notice or requistion may in the case of a firm or a Hindu undivided family be addressed to any member of the firm or to the manager of any adult male member of the family and in the case of any other association of persons be addressed to the principal officer thereof.
It is argued on behalf of the assessee that in the present case the notice was not served by post. It has therefore to be established by the department that the service was effected as if the notice was a summons issued by a court under the Code of civil Procedure. The notice is said to have been served through a peon of the department. It is addressed to the firm and there is some signature indicating that it had been received by someone on behalf of the firm. The processerver signed it saying that it has been served on July 3, 1958. In the order-sheet dated May 31, 1958, it is mentioned that the notice under section 22(2) has been issued calling upon the assessee to file return of total income of the previous year. The order-sheet shows that the notice under section 22(2) was put up before the officer and there is an endorsement below it showing the issue of notice. Thereafter there is no mention in the order-sheet when it was considered by the Income-tax Officer as to whether the notice had been properly served on the assessee. There is at no stage any determination by the Income-tax Officer of the fact whether there was proper service of the notice issued under section 22(2) on the assessee.
Order V rule 16 of the Code of Civil Procedure provides that where the serving officer delivers or tenders a copy of the summons to the defendant personally or to an agent or other person in his behalf he shall require the signature of the person to whom the copy is so delivered or tendered to an acknowledgment of service endorsed on the original summons. Rule 18 of Order V provides that the serving officer shall in all cases in which the summons has been served under rule 16 endorse or annex or cause to be endorsed or annexed on or to the original summons returned stating the time when and the manner in which the summons had been served and the name and address of the person if any identifying the persons serving and witnessing the delivery or tender of the summons.
The Calcutta High Court added rule 19A by which a declaration made and subscribed by the serving officer shall be received as evidence of the facts as to the service or attempted service of the summons. These provisions clearly point out that the evidence admissible to prove proper service of notice is an affidavit by the peon who is said to have effected the service. No averment has been made in the counter-affidavit by any person who had the personal knowledge of the service of the summons. The service has therefore not been proved by admissible evidence.
In the case of Gopiram Agarwalla v. First Additional Income-tax Officer the matter went up in appeal to a Division Bench from the single judges decision in a matter under article 226 of the Constitution. The Income-tax Officer in that case intended to proceed under section 34(1)(a) of the Act. The first step to proceed further under the aforesaid section is to serve a notice containing the essentials required to be mentioned to a notice under section 22(2) and unless a notice contemplated by section 34(1) is served on the assessee no further steps can be taken by the Income-tax Officer.
It was submitted in that case on behalf of the appellant that there was no proper service of the initial notice under section 34 of the Act and as such further proceeding were invalid. It was submitted on behalf of the department that the strict requirement of the provisions of the Civil Procedure Code could not be insisted upon in the matter of service of notice under the Income-tax Act as the provisions of the Code of Civil procedure were not applicable directly to the proceedings before an Income-tax Officer; but they were attracted through the medium of section 63 of the Act.
It was further submitted in that case that if the strict requirement of the Civil Procedure Code was insisted upon in these proceedings serious consequences were likely to ensue. That contention was repelled by the Bench. The fact that certain serious consequences will ensure is no ground for the courts to relax the rule of service. It was held that as there has not been a valid service of notice issued under section 34 in accordance with the procedure provided under the Code of Civil Procedure read with section 63 of the Income-tax Act, the proceedings taken by the Income-tax Officer on the assumption that there has been a valid notice under section 34 was without jurisdiction. In my opinion the service of notice under section 22(2) has not been proved in this case and as the condition precedent preliminary fact on which the jurisdiction of the Income-tax Officer to make an ex parte assessment under section 23(4) depends has not been established the assessment is without jurisdiction. The petitioner is entitled to a writ of certiorari quashing the order of assessment.
There is no verification as required under the Civil Procedure Code by the peon who is said to have served the notice. There is no affidavit filed on behalf of the peon who is said to have served the notice to the effect that the service was properly effected. There is no material on the records before us from which it can be inferred that the notice was received by one who was the authorised agent of the firm or that he was looking after the affairs of the firm in connection with income-tax matters nor is there any material to establish the fact that the person who is alleged to have signed on behalf of the firm and received the notice was carrying on the business on behalf of the firm.
The Advocate-General has contended that section 63 is not exhaustive. It only provides for some of the modes of service of notice. In the present case an application was filed by the assessee on January 27, 1959, for adjournment of the date to file the account books in pursuance of the notice under section 22(4). No objection was raised by the assessee in that application to the effect that the notice had not been served on him. It cannot therefore be said that the assessee had no knowledge of the fact that a notice under section 22(2) had been issued against him and that it should be presumed that the notice had been properly served.
As I have already pointed out at no stage the Income-tax Officer investigated the matter as to whether the notice had been properly served on the assessee. The Income-tax Officer assumed that the notice as it was issued in the name of the firm and is reported by the process-server to have been served on some one who accepted it on behalf of the firm has been served on the assessee and thus he had jurisdiction to make an ex parte assessment under section 23(4). The service of the notice being a condition precedent to the exercise of the power under section 23(4), this court can under article 226 examine the matter and see if notice has been properly served.
No attempt has been made in these proceedings even to file an affidavit on behalf of the peon to the effect that the notice was served by him on the person who represented himself to be the agent of the firm. Nor has any attempt been made to show that the person who received the notice was duly authorised to do so. When there is a categorical denial by the assessee of the fact of the receipt of the notice it could not be said that the department has discharged the burden to show that the notice had been served on the assessee in accordance with the provisions of section 63 or otherwise.
As to the argument that adjournment was sought to comply with the notice issued under section 22(4) that by itself does not establish the fact that the notice had been served under section 22(2). Notice had been issued under section 22(4) and if the assessee found that he was unable to comply with that notice in asking for adjournment, he could have only mentioned the circumstances under which he was unable to comply with the notice issued under section 22(4). At the highest it could be inferred that the assessee had knowledge that notice under section 22(4) had been issued against him, but that cannot be substituted for the mandatory requirement of the service of notice be substituted for the mandatory requirement of the service of notice under section 22(2) before action under section 23(4) could be taken.
It was also urged by the Advocate-General that even in the application made under section 27 for cancellation of the assessment, there is not mention of the fact that no notice under section 22(2) was served. The opening part of this application mentions that the petitioner had been assessed under section 23(4) for alleged defaults under section 22(2) and 22(4) of the Income-tax Act. This shows that the petitioner was under the impression that he had been assessed under section 23(4) for the default of the notice under section 22(4) and as such he was called upon only to justify his failure to comply with the notice under section 22(4). The subsequent paragraphs only, therefore, set out the reason under which he could not comply with the notice under section 22(4). It is significant to not that section 23(4) is attracted when the assessee fails to make the return required by any notice given under sub-section (2) of section 22 or revised return under sub-section (3) of the same. Mere failure to file a return after service of notice under section 22(2) is not enough under section 23(4), but that he has also not made a return under sub-section (3) of section 22. Section 22(3) gives a right to the assessee to file a return any time before the assessment has been made.
On February 27, 1959, when the default had been made under section 22(4) the assessee might have thought that either he would be granted some time to comply with the notice under section 22(4), thereby giving him sufficient time to file a return under section 22(3) or if the adjournment was refused and he was assessee under section 23(4) for default of notice under section 22(4), he had sufficient grounds to get the assessment cancelled. He could not have anticipated that although the date was fixed for complying with the notice under section 22(4), and the default if any had been committed of the notice under section 22(4) still the Income-tax Officer will regard it as a default under section 22(2) and proceed to assess under section 23(4) and thereby deprive him of an opportunity under section 23(3) to file return. No adverse inference, therefore can be drawn against the assessee regarding the service of notice under section 22(2) on him by his failure to mention that fact in his application for adjournment dated January 27, 1959, or in the application under section 27.
It was contended by the Advocate-General that on February 27, there was a default under section 22(2) by the petitioner in not filing his return by that time. Till March 14, 1959, when the assessment was made under section 23(4) no return had been filed and therefore the assessee had not even availed of the opportunity to file a return under section 22(3) and under these circumstances the Income-tax Officer was bound to assess him. He had no option to wait. The Income-tax Officer, as I have pointed out in his order, has not assessed him for noncompliance with the notice under section 22(4) which suggested that he had not come to conclusion that there was a non-compliance with the notice under section 22(4). But he assessed the firm under section 23(4) for non-compliance with the notice under section 22(2). Not only that in the order itself the Income-tax Officer has stated that a notice under section 22(2) was issued to him on May 31, 1958, but up to that date he had not held the return under that section either, and section 23(4) was, therefore, clearly attracted and by issuing a notice under section 22(4) the Income-tax Officer only made an attempt to examine the assessees account with the view to collect materials for the purpose of making his best judgment assessment under section 23(4), but the assessee did not choose to produce the account books. This also suggests that even on January 20, when he had issued notice under section 22(4) the Income-tax Officer had made up his mind that default of the notice under section 22(2) had been committed and that it was a case for ex parte assessment under section 23(4). Under these circumstances it was incumbent on the Income-tax Officer to mention in his notice issued under section 22(4) that the notice under section 22(2) had been served. On the date when he issued the notice under section 22(4) he had, therefore, come to the conclusion that it was a case for best judgment assessment under section 23(4). He should, therefore have mentioned in the notice under section 22(4) that notice under section 22(2) had been served on the assessee. The failure to do so cannot now be explained by saying that it was a clerical error and to my mind it is a very strong circumstance which goes to suggest that the service had either not been effected in accordance with the law or at any rate by that time the Income-tax officer had not decided after examining all the circumstances that the notice had been effected.
The next point which was urged by the petitioners counsel was that in the circumstances of the present case the Income-tax Officer should have declared the assessee not to be a defaulter under section 45 of the Act. The argument has been stressed from two-fold aspects. Firstly, that the discretion which has been given to the Income-tax Officer under section 45 to treat the assessee as not being in default is a statutory duty cast upon the said officer and there is a corresponding right in favour of the assessee which he can enforce against the Income-tax Officer by invoking the jurisdiction of this court under article 226 of the Constitution. Secondly, even if it is a discretion vested in the Income-tax Officer the discretion has to be exercised in a judicial manner and it is open to this court to examine the circumstances of each case under article 226 of the Constitution and find out if the discretion has been exercised on sound judicial principles. If this court finds that the discretion has been exercised by ignoring certain relevant considerations it will not be an exercise of discretion at all and this court can issue a direction to the Income-tax Officer to exercise the discretion having regard to all the relevant considerations.
The facts relevant for the decision of the submissions made in this behalf have been set out in my order earlier but to recapitulate them - on March 14, 1959, the assessment order under section 23(4) was made. On March 26, 1959, an application was made for cancellation of the assessment under section 27 of the Act and on the same date an application was made to the Income-tax Officer for the stay of the realisation of the tax amount. No appeal till then had been filed against the assessment order and consequently the proviso to section 45 of the Act was not attracted. By another application dated April 8, 1959, made to the Income-tax Officer, the petitioner formally prayed for the stay of the realisation of the tax demand. Thereafter on April 14, 1959, an appeal was filed against the assessment order and on April 16, 1959, an application was made under section 45 of the Act praying for an order not to treat the petitioner as a defaulter till the final disposal of the appeal. On April 22, 1959, notice alleged to be one under section 46(5A) of the Act was issued to various banks by the Income-tax Officer. The application under section 27 was fixed up for hearing on April 29, 1959. Before this on April 26, 1959, the assessee made an application to the Income-tax Officer to the effect that he should be intimated if any orders have been passed on his application dated April 16, for stay of realisation. As the assessee was not informed of the orders passed on his application dated April 16, the petitioner by his application dated May 4, 1959, approached the Commissioner of Income-tax for a direction to the Income-tax Officer not to treat the petitioner as a defaulter till the final disposal of the appeal.
By an order dated May 4, 1959, the opposite party No. 1 is purported to have rejected the application made by the petitioner under section 27. On May 11, 1959, the petitioner received the certified copies of the order by which the Income-tax Officer has ex parte rejected on April 28, 1959, the petition made by the applicant under section 45 of the Act. On the same date action under section 46(2) of the Act was also taken by the Income-tax Officer. The order is very brief and mentions that out of the sum of Rs. 73,000 and odd due from the petitioner as tax he had only paid Rs. 10,000 and odd due from the still outstanding. His petition was thus rejected. The order does not mention the reasons which led the income-tax Officer to reject the prayer of the petitioner. In the counter-affidavit filed, it is stated that in response to the application of the petitioner dated April 26, 1959, the copy of the other of April 20, 1959, rejecting the application was supplied to the applicant on May 7, 1959.
It is further submitted in the counter-affidavit that as the petitioner did not choose to furnish security for tax dues immediately, in spite of his having large cash in hand to the extent of Rs. 17 lakhs on February 28, 1959, the Commissioner refused to interfere with the order of the Income-tax Officer rejecting the petitioners application dated April 16, 1959. The commissioner in his order, which I shall examine later, has no doubt referred to certain circumstances which in his opinion disentitle the assessee to get the protection of the proviso to section 45. But the order of the Income-tax Officer gave no opportunity to the petitioner to furnish any security for due payment of tax and to establish his incapacity to pay the tax immediately. The finding that the petitioner had Rs. 17 lakhs on February 28, 1959, cash in hand was based on the examination of certain account books of the petitioner in the custody of the Superintendent of Taxes, Shillong. The account books were examined behind the back of the assessee. No opportunity was given to him to explain the entries in the account books. The best judgment assessment under section 23(4) was itself nased on those account books and on the assumption that the petitioner had a cash balance of Rs. 17 lakhs in hand on February 28, 1959. This order was itself the subject-matter of the appeal. Under those circumstances, if the Income-tax Officer wanted to exercise his discretion judicially and rely upon the fact that the petitioner had a cash balance of Rs. 17 lakhs on February 28, 1959, he should have given an opportunity to explain the position and should have himself determined the fact of the incapacity of the assessee to pay up the tax demand immediately.
The Advocate-General very strongly relied upon the two orders of the May 8 and 14, 1959, Income-tax Commissioner in connection with the application made by the petitioner for issue of a direction to the Income-tax Officer not to treat the petitioner as a defaulter, in support of his contention that there did exist circumstances which prompted the Income-tax Officer to reject the petitioners prayer. He submits that it cannot, therefore, be said that the discretion was not exercised by him in a judicial manner. On May 8, 1959, the Commissioner ordered the assessee to furnish the following information :
"(1) An affidavit (a) stating the amount of cash, which Sri J. N. Bawri and N. M. Bawri individually or collectively have in the name of the firm, Hardeodas Jagannath or otherwise, actually and in their hands and safes or anywhere else on February 28, 1959, as also the cash which they similarly have on the date of the affidavit,
(b) explaining the difference, if any, between the amount and the amount of the cash in hand show in the Milan Bahi,
(c) pointing out how the balance, if any, was used or invested, and
(d) setting out all the immovable properties and movable wealth, in any shape or from (apart from the things of small value) owned by the aforesaid persons in their won name or through benamidars as on the date of the affidavit and on the date on which he notices of demand has been served on them as well as the amounts of debts and liabilities owned by the assessee to the stated parties along with their full present address.
(2) Title deeds of immovable property.
(3) An undertaking to the effect that the movable assets and things will not be used or dissipated before the tax liabilities are finally determined and discharged.
(4) A letter addressed to the Superintendent of Taxes, Shillong, requesting him to hand over the seized account books to the Income-tax Officer, so that the assessee may be able to make the necessary adjustments in the presence of the Income-tax Officer for the purpose of determining the correct amounts of assessable income and wealth."
He further ordered that if the assessee did not comply with the above direction, orders will be passed by him on the 14th instant. In the opening portion of his order he had observed that prima facie the petition had no merit, because according to the assessees own books he had a cash balance of Rs. 17 lakhs on February 28, 1959, out of which it was very easy for him to pay up the tax demand of Rs. 7 lakhs. The counsel for the assessee repudiated that allegation, but the commissioner observed in his order that it was difficult to believe the allegation and further it was not possible for him to allow the relief prayed for without satisfactory proof and without full security for the safety of the tax demand.
On the 4th, the Commissioner observed that if the assessee were sincere about getting relief without causing any harm to the department they could have easily produced the title deeds of immovable property referred to in item No. 3, and the letter refer red to in item No. 4. They could also have stated the actual cash in hand with them today without referring to the account books not in their custody to the extent it was necessary for them to refer to these account books in order to prepare their affidavit; they could have applied to the Superintendent of Taxes that they could be given an opportunity for looking into those papers in the presence of the Officer. The simple letter of refusal that the petitioners have submitted today could have been submitted on the very day on which he passed the interim order.
The stand taken by the assessee was that he was prepared to furnish security for the amount found ultimately due and as to the cash balance on that date it was stated that it was not possible for them to supply that as the account books were in the custody of the Superintendent of Taxes. Whether that was a reasonable explanation or not is not a matter which we at this stage will consider. But it does appear that the assessee was prepared to furnish security and that all the time the matter which weighed with the departmental authority to refuse the prayer of the petitioner was the fact that the firm had a cash balance of Rs. 17 lakhs on February 28, 1959, and that he had kept double set of accounts. These were the matters for decision in appeal.
It was not fair to the assessee to assume these facts to be correct and to refuse the relief to the petitioner. Moreover, as I said, the discretion has got to be exercised by the the income-tax Officer himself under section 45 and any orders passed by the Income-tax Commissioner or any opportunity given by him to the petitioner, to explain his position, cannot substitute the discretion of the Income-tax Officer. The point submitted by the petitioner is that the Income-tax Officer did not discharge his duty in accordance with law and consequently it is no exercise of the discretion by him at all. The fact that opportunity was given by the Commissioner to the petitioner and the fact that the Commissioner has stated that in spite of the said opportunity the assessee had not fully co-operated with the department, points to the conclusion that the income-tax Officer had not applied his mind to these facts and he cannot be said to have exercised his discretion at all in the matter.
Section 45 of the Act lays down that any amount specified as payable in a notice of demand under sub-section (3) of section 23A or under section 29 or an order under section 31 or section 33 is to be paid within the time, at the place and to the person mentioned in the notice or order and that any assessee failing so to pay will be deemed to be in default provided that if an assessee has presented an appeal under section 30, the Income-tax Officer may in his discretion treat the assessee as not being in default as long as such appeal is undisposed of. Section 46 that provides the mode of recovery on the assessee being in default in making payment of the tax demand. The proviso to section 45 in terms gives power to the Income-tax Officer "in his discretion" to treat the assessee as not being in default.
It will be convenient to examine the authorities cited by the parties. The petitioner has referred to the case of Ladhuram Raparia v. B. K. Bagchi. In that case the petitioner carried on business in co-partnership under the name and style of Landhuram Taparia from February 28, 1941. For the assessment years 1943-44 and 1944-45 the firm was registered under section 26A of the Act, but for the assessment year 1945-46 the Income-tax Officer refused to renew the registration of the said firm. The assessment was made on March 29, 1950, and the notice of demand was dated March 30, 1950. The petitioners were required to pay a sum of Rs. 8,67,239-10-0 on or before the April 20, 1950. The petitioners filed an appeal both against the assessment and against the order refusing to renew the registration. On April 20 the petitioners firm applied to the Income-tax Officer for granting them sufficient time to consider the matter and for payment of the legitimate tax. But that was refused by the Income-tax Officer. Thereafter, an application was filed under section 45 of the Specific Relief Act for canceling the notice of demand and fore directing the Income-tax Officer to forbear from taking further steps. Bose J. held in the circumstances of that case that it was a fit case of mandamus and quoted with approval the following observation of Cairns L.C. in Julius v. Bishop of Oxford :
"They confer a faculty or power, and they do not of themselves do more than confer a faculty or power. But there may be something in the nature of the thing empowered to be done, something in the object for which it is to be done, something in the conditions under which it is to be done, something in the title of the persons for whose benefit the power is to be exercised, which may couple the power with a duty, and make it the duty of the person in whom the power is reposed to exercise that power when called upon to do so."
Bose J. observed that the discretion was conferred on the revenue authority, but if in proper cases he did not exercise that power he could be compelled to do so by order under section 45 of the Specific Relief Act. The decision of Bose J. was reversed in appeal on the ground that no appeal had been filed against the order of the assessment. This case, however, is an authority for the proposition that the discretionary power conferred upon an Income-tax Officer is coupled with the duty and if he did not exercise it when the occasion called for it or if he exercised it in a manner that it is no exercise of discretion at all he could be compelled to discharge his duty.
The next case referred to is to case of Vetcha Sreeramamurthy v. Income-tax Officer, Vizianagaram. In the Andhra case, Ramaswami J. had dismissed the petition filed by the assessee for quashing the proceedings taken under the Revenue Recovery Act for the sale of the properties and for stay. An appeal was filed to a Bench of two judges against the aforesaid decision which was rejected. The matter has no doubt been exhaustively dealt with in this case and, interpreting section 45 of the Income-tax Act, it was held that the discretion of the Income-tax Officer could not be said to be limited one.
The section no doubt does not give an absolute right to an assessee who has preferred an appeal to get an order from the Income-tax Officer treating him as not in default pending the appeal independently of the judgment or discretion of the officer. But if any Income-tax Officer declines to hear and consider the application of the assessee under section 45 for an order for stay, he fails to perform a duty cast upon him by the section which is enforceable by a mandamus. The Income-tax Officer has no free option or absolute and uncontrolled discretion in this matter, but is bound to receive, consider and give his decision on an application by an assessee invoking his jurisdiction under section 45. Where the officer has considered the application but in the exercise of his discretion has refused the application, in those cases also, if the officer has given no reasons at all for rejecting the application, he may be required to take up the application and dispose it of by giving the assessee an opportunity to be heard and giving reasons for his decision.
Where the Income-tax Officer is refusing the assessees application has allowed himself to be influenced by irrelevant and extraneous matters in point of fact he has exercised no discretion or has exceeded his jurisdiction, and the High Court can interfere by a writ. There may be cases where the exercise or discretion by the Income-tax Officer is so arbitrary and capricious that no reasonable man would have acted likewise. It is no exercise of discretion at all, and in such cases too the High Court might interfere.
The Advocate-General relied on the case of Lord Krishna Sugar Mills Ltd. v. Income-tax Officer, Ambala. There the petitioners were assessed to income-tax and a tax of Rs. 3 lakhs and odd was imposed on them. The notice of demand was sent to them on October 6, 1951, and an application was made under section 27 of the Income-tax Act for cancellation of the assessment. On November 17, 1951, that was dismissed and an appeal was taken to the Appellate Commissioner. In May, 1952, an appeal was filed before the Income-tax Appellate Tribunal which was pending. As against the orig inal order of assessment, an appeal was taken to the Appellate Assistant Commissioner in October, 1951, and an application was made to the Income-tax Officer under section 45 on October 26, 1951. The Income-tax Officer ordered the tax to be paid on monthly installments. But as nothing was paid, a penalty of Rs. 20,000 was imposed. Time was then given till March 10, 1952, and extended further to March 20, 1952. An interim order of stay was obtained by the assessee from the Central Board of Revenue which was also vacated on June 19, 1952. The assessee was then finally asked to pay the amount by July 8, 1952, and the writ was filed on the High Court on July 9. The assessee had approached the Income-tax Officer again on July 8, for stay of the recovery and the Commissioner again fixed installments, the last of which was to be paid on March 31, 1953. Under those circumstances, the High Court held that there was no case for the issue of a writ of mandamus directing the Income-tax Officer to exercise his discretion in favour of the assessee under section 45.
The next case relied upon is the case of Goverdhan Lal Jagadish Kumar v. Commissioner of Income-tax. That happens to be my judgment and on the circumstances of that case the writ was refused. It was held in that case that the filing of an appeal does not amount to an automatic stay of the realisation of the tax amount. It is discretionaly with the Income-tax Officer not to consider of discretion may be regarded as capricious or arbitrary and unreasonable and this court may in those circumstances direct the Income-tax Officer to consider the matter and exercise his discretion.
In the appeal filed against the judgment of Bose J. in the Calcutta case, it was observed by Harries C.J. that once an appeal was filed, it would be for the Income-tax officer then to consider whether in the particular circumstances, it would be just and proper to treat them as defaulters. If, for example, the question involved in the appeal were difficult and the prospects of success in the appeal were bright, it would be a very bold Income-tax Officer who could hold that the assesses were defaulters. The matter, however, is in his discretion having regard to the circumstances of the case. In the case of Kashiram Agarwalla v. Collector of 24-Parganas, it was observed by Das Gupta J. that whether or not an assessee would be considered to be in default after an appeal is filed against the assessment, is a matter entirely in the discretion of the Income-tax officer, who has, however, to exercise his discretion after due regard to the circumstances of the case.
If, in a particular case, the question of exercise of discretion has not been considered properly by the Income-tax Officer, that might be a good ground for issuing a writ directing him to treat the assessee to be not default. In the case of Aluminum Corporation of India Ltd. v. Balakrishnan this interpretation of the law was accepted by Sinha J. There an appeal had been preferred under section 23 of the Wealth Tax Act and thereafter an application had been made to the Wealth Tax Officer for stay under section 31(3) of the Act corresponding to section 45 of the Income-tax Act. An application was made to the Commissioner of Wealth praying for a direction not to treat the assessee to be in default till the disposal of the appeal which was rejected by him. A similar application was then made before the Wealth Tax Officer which was also rejected by him. The petition under article 226 of the Constitution was filed in the High Court against that order which was allowed and the matter was sent back to the Wealth Tax Officer directing him to consider the matter or merits. It was observed by Sinha J. that the matter was no doubt in the discretion of the Wealth Tax Officer, but the discretion had to be exercised judicially and the judicial exercise of the discretion involved a consideration of the facts and circumstances of the case in all its aspects. The difficulties involved in the issues raised in the case in all its aspects. The difficulties involved in the issues raised in the case and the prospects of the appeal being of the assessee is another. If the officer feels that the stay would put the realisation of the amount in jeopardy that would be a cogent factor to be taken into consideration. The amount involved is also a relevant factor. If it is a heavy amount, it should be presumed that immediate payment, pending an appeal in which there may be a reasonable chance of success, would constitute a hardship. Quick realisation of tax may be administrative expediency, but by itself it constitutes no ground for refusing a stay. While determining such an application the authority exercising discretion should not act in the role of a mere tax gatherer.
After having considered all the authorities, in my opinion, each case will depend upon its own circumstances. The extreme proposition that section 45 confers a power on the Income-tax Officer to stay realisation of the tax dues when an appeal has been filed is a power coupled with the duty to grant such a stay whenever such an occasion arises, cannot be accepted. Section 45 gives discretion to the Income-tax Officer not to treat the assessee as a defaulter. It may be that it casts of duty upon the Income-tax Officer to consider such a prayer if made by the assessee on its own merits and to exercise his discretion judicially. It is very difficult to exhaustively lay down the circumstances under which the exercise of discretion can be said to be a judicial exercise. But there are certain relevant considerations which go to point out if the exercise of the discretion has or has not been judicial. It will really be non-exercise of the discretion, if the Income-tax Officer has not considered the application at all or in considering the application has taken into consideration the matters which are extraneous of the object of the Act, or has failed to apply his mind to the relevant considerations. In such cases the exercise of his discretion may be considered to be no exercise of discretion at all and High Court can issue a mandamus directing him to consider the application or to exercise his discretion according to law. The exercise of discretion in such cases is capricious, arbitrary and unreasonable. The extreme position contended for by the Advocate-General that once an asessee has failed to pay up the tax demand, he is a defaulter and the Income-tax Officer is bound to proceeded with the realisation of the tax, and if he has acted within the ambit of his jurisdiction, this court cannot interfere with the exercise of his discretion and issue a mandamus directing him to stay the realisation, can also not be accepted.
Examining the facts of the present case in the light of the observations made above, it will appear that the order passed by the Income-tax Officer refusing the prayer of the petitioner contains no reasons. No opportunity was given to the petitioner contains the circumstances under which he was unable to pay up the tax demand within such a short time. The application was made on April 16, 1959. The best judgment assessment had been made on the March 14, and on the same date a demand notice had been issued. In the appeal filed against the assessment there was substantial questions to be determined. It was, therefore, a fit case where the Income-tax Officer should have applied his mind to the facts before exercising his discretion after giving an opportunity to the assessee to explain his position. The Income-tax Officer in effect did not exercise his discretion at all and acted in an arbitrary manner in disposition of the application of the assessee under section 45 of the Act.
Even in these proceedings, no counter-affidavit has been filed stating that the Income-tax Officer considered the circumstances pointed out in the counter-affidavit or in the order of the Commissioner justifying the refusal to exercise the discretion given to the Income-tax Officer under section 45. As I have pointed out earlier the Commissioner could not substitute his discretion to that of the Income-tax Officer and any proceedings before the Commissioner or opportunity given by him to the assessee are not relevant in considering the validity of the order passed by the Income-tax Officer.
The petitioner is, therefore, entitled to a mandamus direction the Income-tax Officer to exercise his discretion under the proviso to section 45 treating the assessee as not a defaulter. In fact, in the view which we have taken that the order of assessment under section 23(4) cannot be maintained it was not necessary to go into this matter; but as the point was canvassed I have considered it.
A number of points were raised challenging the constitutionality of the provisions of section 46(5A) on the ground that it infringes articles 19 and 14 of the Constitution. I do not think, however, that there is any substance in those points. We have already elaborately dealt with this matter in the case of Murlidhar Jalan v. Income-tax officer, Dibrugarh, Civil Rule No. 29 of 1959, and it is not necessary, therefore, to go into detail and examine the various submissions made in this behalf.
In result, therefore, we allow this petition quashing the order of assessment and issue a writ of mandamus directing the opposite party not to give effect to that order, with costs which we assess to be Rs. 250.
C. P. SINHA C.J. - I agree.
Petition allowed.