Gopal Rao Ekbote, J.
1. This is a reference made under Section 66(2) of the Income-tax Act, 1922 and arises in the following circumstances:
The assessee is an individual. The assessment year is 1949-50. The assessee derived income form property, business, and share income form firms in which he was partner. he, however, failed to disclose his 14/16th share in the firm of Messrs. Revenue Siddeswara Oil Company for the assessment year. He contended that he had nothing to do with the firm and that he was a mere financier and that he was receiving only interest on the amount which he had supplied to the firm. This contention was rejected. He was ultimately assessed on the share of income form that film also. The department had also initiated penalty proceedings against the assessee for his omission to account for the share income from the said firm. The explanation of the assessee was that he has not concealed any particulars of his income and that he had advanced certain moneies to the firm by way of loan charging interest therefore. he also stated that the firm since has been dissolved no penalty therefore was eligible. After this explanation was filed, the Income-tax Officer, who had issued the notice under S. 28 93) was transferred and was succeeded by a new Income-tax Officer without issuing any notice or informing the assessee of this intention to continue the proceedings passed the order levying penalty on the assessee.
The assessee took up the matter in appeal to the Appellate Assistant Commissioner. he confirmed the order of the Income -tax Officer. On a further appeal to the Appellate Tribunal, it was contended that the order of the succeeding Income-tax Officer levying penalty on the assessee without the issue of a notice was illegal. The Tribunal went into the merits of the case and while considering the abovesaid contention found that although with the change of Income-tax Officer no intimation was sent to the assessee, that does not in any was vitiate the proceedings. If the assessee had elected, he could have requested the Income-tax Officer to proceed afresh but he did not do so. The Tribunal further observed that as the assessee had not taken up the plea before the Appellate Assistant Commissioner, the Tribunal refused to entertain the plea at that late stage, although earlier it expressed its opinion.
The assessee thereafter filed an application before the Tribunal for reference. By its order dated 7-11-1962 the Tribunal refused to make a reference as in its opinion the case did not involve any legal principle or interpretation of any law. The assessee thereafter filed an application under Section 66(2) of the Act before this Court and this Court directed the Tribunal to state the case. The Tribunal has accordingly submitted the statement of the case dated 17-8-1965.
2. The question, which must necessarily be answered in this reference, is whether the levy of penalty by the succeeding officer without giving notice to the assessee is valid.
3. n order to provide a correct answer to this question, it is necessary to read Section 28(3) and Section 5(7-C) of the Income-tax Act, 1922.
Section 28(3):---
No order shall be made under sub-section 910 or sub-section 920 unless the assessee or partner, as the case may be, has been hear, or had been given a reasonable opportunity of being heard.
Section 5(7-C):-----
Whenever in respect of any proceeding under this Act an Income-tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises jurisdiction, the Income-tax authority so succeeding may continue the proceeding form the stage at which the proceeding was left by his predecessor:
Provided that the assessee concerned may demand that before the proceeding is so contained the previous proceeding or any part thereof be re-opened or that before any order for assessment is passed against him he be re-heard:
provided further that in computing the period of limitation for the purpose of sub-section (3) of Section 34, the time taken in re-opening the whole or any part of the proceeding or in giving an opportunity to the assessee to be re-heard under the proceeding proviso shall be excluded.'
4. Section 28, which specifically relates to imposition of penalty for concealment of income, provides in sub-section (3) that no order imposing penalty under sub-section (1) or (2) shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. This sub-section therefore embodies in itself the wholesome principle of audi alteram partem. Fro the purposes of this enquiry, it is not necessary to enunciate as to what a hearing means and includes. It is also unnecessary to consider as to when reasonable opportunity would be deemed to have been given for the purposes of the said section. No it is necessary to consider as to whether the notice issued under Section 28(3) in the penalty proceedings is valid. It is sufficient to say that it is obligatory on the part of the authorities imposing penalty under Section 28(3) to hear or give a reasonable opportunity to the assessee before any order imposing penalty is passed. The sub-section is peremptory and couched in mandatory language. Its compliance is essential to make the order of penalty valid.
5. We are, however, more concerned in this case with Section 5(7-C). That provision was inserted by the Amending Act of 1953 which amendment came into effect from 1-4-1952. It provides that whenever in respect of nay proceeding under the Act, which it is admitted will include a proceeding for imposition of penalty under Section 28 of the Act, an income-tax authority is succeeded by another authority, the succeeding authority may continue the proceeding form the stage where it was left by his predecessor. In the absence of any such provision, it would have been a matter of controversy as to whether the succeeding officer can act upon the material which was gathered in an enquiry by his predecessor. In order to remove any such controversy, the provision has been inserted with effect form 1-4-1952. There are, however, tow provisos added to the main enacting provision, Section 5(7-C). The first proviso entitles the assessee to demand that the previous, proceeding or any part thereof conducted by the predecessor be reopened before the succeeding officer decides to continue the proceedings form the stage at which it was left by the predecessor, or ask for a rehearing before any order of assessment is passed against him.
6. It is a well recognised principle of construction that there is no rule that the enacting part is to be rule that the enacting part is to be constructed without reference to the proviso. The proper course is to apply the broad general rule of construction, which is that a section or enactment must be constructed as a whole, each portion throwing light, if need be, o the rest. Thus the true principle is that the sound interpretation and meaning of the statue, on a view of the enacting clause and provisos taken and construed together should prevail.
7. Now, the function of a proviso is well known. To quote from Statutory Construction by France J. Mc. Fray (1953) para 56, page 115 'either to except something form the enacting clause, or to qualify or restrain its generality, or to exclude some possible ground of misinterpretation of it, as enacting to cases not intended by the Legislature to be brought within its purview.'
8. The learned author in the same work in paragraph 91 at page 121 states: 'A proviso is a clause added to an enactment for the purpose of acting as a restraint upon , or as a qualification of the generality of the language which it follows'.
9. Craies on Statue Law, 6th edition, observes at page 217 as follows:--
'the effect of an exception or qualifying proviso, according to the ordinary rules of construction, is to except out of the preceding portion of the enactment, or of qualify something enacted therein, which but for the proviso would be within it.'
10. It will thus be seen that a proviso to a particular provision embraces the filed which is covered by the main provision. It carves out an exception of the main provision and deals with a case which would otherwise fall within the general language of the main enactment.
It thus acts as a restraint upon or serves as a qualification of the generality of the language of the main provision. The proviso is often in the nature of a condition precedent to the enforcement of the operative clause. See Annie Besant V. Emperor. AIR 1918 Mad 1266, M. & S. M. Rly. v. Bezwada Municipality , R. N. Sons Limited v. Asstt. Sales Tax Commr. : [1955]2SCR483 and C. I. T. Mysore Etc. v. Indo Mercantile Bank : [1959]36ITR1(SC) .
11. If the two provisos are carefully read in the light of the foregoing, it will leave no one in doubt that the power to continue to proceedings conferred upon the succeeding officer from the stage where the predecessor had left is qualified or restrained by the first proviso with the effect that such a power is made subject to the right which the first proviso confers on the assessee. If the assessee demands that the previous proceedings should be reopened before it is decided to be continued or that he should be reheard before an order of assessment is passed, the Income-tax Authority has no option whatsoever except to direct the reopening of the proceeding or rehearing, as the case may be. The compliance of the first proviso is a condition precedent for the exercise of the power to continue the proceedings by the succeeding officer. It is true that the assessee under the first proviso may demand reopening or rehearing or may not demand or even waive his right of reopening or rehearing of the proceeding, but he must have an opportunity of exercise that right. If in spite of such opportunity he either expressly decides not to exercise , then the succeeding income-tax, officer can continue the proceedings. But in the absence of any opportunity provides for the exercise of his right or without the knowledge that any such opportunity exists, the assessee cannot be deemed to have declined to a valid of the opportunity be demanding rehearing or reopening of the case, nor he could be deemed of have waived it.
12. How then the assessee can exercise this right unless he knows that the predecessor of the income-tax authority before whom his case was being heard and was not finally disposed of is succeeded by another Income-tax Officer who intends to continue the proceedings from the stage at which it was left by his predecessor? If the hearing of the case like the trial of a civil suit either goes on from day-to-day or from date-to-date fixed in the presence of the assessee, then as the assessee has entered appearance and is aware of the dates of hearing, no intimation of the change of officer or of fact that the succeeding officer proposes to continue the hearing form the stage at which it was left by his predecessor would be necessary or even would be called for. But where as here the dates of hearing are not fixed in the present of the assessee or his representatives and admittedly the practice is that whenever the officer requires fresh information the assessee is called upon to provide the same by issuing him a notice to that effect, then it becomes necessary to give intimation to him of the fact that the Income-tax officer before whom his case was going on has ceased to exercise jurisdiction and instead a new officer has come who has the necessary jurisdiction and is proposing to continue the proceedings from the stage where it was left by the predecessor so that the assessee may elect to demand a reopening or rehearing as the case may be.
The contention that even where the dates of hearing are not fixed by the Income-tax Officer even then it is the duty of the assessee to follow the notifications published notifying the transfers of Income-tax Officers with a view to exercise his right to claim reopening of the case is not sound any cannot be accepted. The argument that no duty is cast upon the succeeding officer to communicate his intention to continue the proceedings to the assessee and therefore it would not be proper to expect form him any notice to the assessee is also devoid of any substance. To accept such a contention would only mean that while conferring on the assesses a right to demand reopening of the case and making the right of the succeeding officer to continue the proceedings subject to such a right, the notice has been deliberately dispensed with. We do not think that such a construction is valid. The more appropriate approach to such a case would be to hold that the question of notice merely escaped the observation of the Legislature. But form such an omission, no inference can properly be drawn against the necessity of notice before the proceedings are decided to be continued as any such interpretation will defeat the real object of the provisions.
13. It is not disputed that in very many cases the penalty proceedings are kept in abeyance awaiting the final result of the assessment proceedings and although notice under Section 28(3) is served upon the assessee and he filed a written explanation, for months and sometimes years together the penalty proceeding are kept in abeyance and the assessee has no knowledge as to what has happened or is happening except when he gets the final order made in the proceedings served upon him. In such a case, if the assessee due to a long lapse of time assumes that his explanation perhaps was found to be satisfactory and the proceedings were dropped, he cannot be said to be altogether wrong in such assumption. If officers after officers succeed when the proceedings are thus pending and the assessee does not even know about such transfers, then how is he to exercise his right to demand reopening r rehearing if he has no notice that the succeeding officer proposes to continue the proceedings. The assessee must therefore be told about the intention of the succeeding officer to continue the proceedings and who can tell him so except the succeeding officer who proposes to continue the proceedings and who also knows that he cannot continue the proceedings if he is told by the assessee that he wants him to re-open the case or give him a rehearing.
It is thus inherent in the situation that the succeeding officer should give notice to the assessee not under Section 28(3) but under Section 5 95-C0 itself intimating him that the succeeding officer proposes to continue the proceedings. This intimation alone would provide the assessee with an opportunity to exercise or decline to exercise the right given to him by the first proviso to Section 5(7-C). The second proviso lends considerable support to such a construction. The notice is thus necessarily implied in the provisions of Section 5(7-C) as the right to continue the proceedings is made dependent upon the assessee's right of demanding re-opening or rehearing of the case. it cannot be assumed that the Legislature has given with one hand right to the assessee to demand reopening or rehearing and has taken away that right with the other by not intending to inform him about the opportunity to exercise such a right by not expecting any notice to be given of the assessee by the succeeding officer of his intention to continue the proceedings. Any such interpretation would mean that the enactment has conferred on the assessee a mere illusory right.
14. In this connection, it is well to remember, that the proceedings under the Act, which can be said to fall within the purview of Section 5(7-C) are of a quasi judicial character. The penalty proceeding in any case are of a quasi-criminal nature. It can therefore safely be presumed that the Legislature while conferring the power on the succeeding officer to continue the proceeding from the stage where it was left by his predecessor thought it property to provide an opportunity of the assessee to demand reopening or rehearing of the case and that is why the power to continue the proceedings is made subject to such a right. The notice therefore for the exercise of such right becomes necessary.
15. That such a notice is implicit under Section 5(7-C) becomes very clear when we remind ourselves of the principles of construction of statutes in such cases.
16. It is cardinal principle of construction that in giving quasi-judicial powers to affect prejudicially the rights of persons, a statute is understood as silently implying when it does not expressly provide the condition or qualification that the power is to be exercised in accordance with the fundamental rules of judicial procedure, such, for instance, as that which requires that, before its exercise, the persons sought to be prejudicially affected shall have an opportunity of defending himself. See Maxwell on Interpretation of Statutes, page 358.
17. That this is so is well supported by an oft-quoted in Cooper v. Wardsworth Board of Works, (1863) 32 LJ PC 185. In that case, the Metroplos Management Act, 1855, Section 176, which required that before, laying foundations of a building 7 days' notice should be given to the District Board and authorised that Board to order the demolition of any building erected without such notice, was construed impliedly as imposing on the Board the condition of giving the presumed defaulter either a hearing before making the order or notice that the order has been made, so that he might remonstrate, or appeal before proceeding to the demolition of his building and a District Board which had confined itself to the letter of the Act and had demolished a building respecting which it had received no notice without first calling on the owner to show cause against its order for doing so was held liable in an action as a wrong-doer. Justice Byles laid down that 'although there may be no positive words in a statue requiring that a party shall be heard yet a long course of decisions, beginning with DR. Bentley's case established that the justice of the common law will supply the omission of the Legislature.'
18. To use the words of North, J., 'although it is a very lamented way of legislating that one should be driven to get at the meaning of these Acts by removing difficulties (as far as can be done) by construction rather than that the intention of the legislature should be clearly expressed upon the face of the Act.' Yet the Courts have quite often to give meaning and effect to the expressed intention of the legislature by supplying the omission by adopting the well recognised tools of interpretation of statutes. And it is firmly held that if a statute is passed for the purpose of enabling something to be done, but omits to mention in terms some detail which is of great importance, if not actually essential, to the proper and effectual performance of the work which the statute has in contemplation, the Courts are at liberty to infer that the statue by implication empowers the detail to be carried out; See Craies, p. 111.
19. We are therefore satisfied that even though Section 5(7-C) does not in terms or expressly provide for any notice by the succeeding officer to the assessee informing him of his intention to continue the proceedings from the stage at which the predecessor has left, by necessary implication it provides for such an intimation. We must, we think, infer from the power given to the succeeding officer that such a notice was intended by the Legislature. When the Legislature has directed something to be done, it must be considered to have empowered something ancillary to be denote which is necessary in order to accomplish the ultimate object of Section 5 (7-C). What must follow is that the succeeding officer must give notice to the assesse before he decides to continue the proceedings form the stage where it was left by his predecessors.
20. The assessee may or may not exercise the right conferred on him by the first proviso to Section 5(7-C). In the light of what the assessee demands or does not demand, the succeeding officer has to decide as to whether he has to reopen or rehear the case or continue the proceedings form the stage where it was left.
21. It must in this connection be borne, in mind that the notice issued by the predecessor under Section 28(3) in the penalty proceedings ought not to be confused with the notice, the issue of which is necessarily implied under Sec. 5(7-C). It is no doubt true that once a notice under Section 28(3) is served upon the assessee and he puts in his appearance, it is then not necessary to issue a fresh notice for the completion of the proceedings if the same officer continues to exercise the jurisdiction in the case. If the assessee his filed a written explanation and has not asked for anything else for the purpose of competing the hearing the officer who had given the notice might well conclude the proceedings without any further reference to the assessee. But the situation is altogether different when the income-tax authority, who had issued the notice under Section 28(3) and had received the written explanation from the assessee, ceases to exercise jurisdiction and is succeeded by another income-tax authority who has and exercises jurisdiction in the given case. Such a succeeding officer is empowered only by Section 5(7-C) to continue the proceedings from the stage at which the proceeding was left by his predecessor.
This power to continue the proceedings is made expressly subject to the right of the assessee to reopen or rehear the case as is mentioned in the first proviso to Section 5(7-C). By necessary implication therefore a notice to the assessee becomes necessary to give meaning and effect to those competing rights conferred on the succeeding officer on the one hand and the assessee on the other. Sections 28(3) and 5(7-C) should not therefore be confused in so far as the question of notice under Section 5(7-C) is concerned. It is true that Section 5(7-C) empowers the succeeding officer to continue the proceedings initiated under Section 28 but in so far as the succeeding officer's jurisdiction to continue the proceedings is concerned, it is expressly controlled by the first proviso to Section 5(7-C). It would not be correct to characterise the demand of reopening or rehearing of the matter under the first proviso to Section 5(7-C) as a further or additional opportunity which the assessee is demanding under Section 28. It is a right which the assessee can assert in a given situation referred to in the main provision, that is Section 5(7-C) which has nothing to do with the additional or further opportunity asked in the main case if the outgoing income-tax authority had continued to exercise the jurisdiction in the case.
22. It must be borne in mind that the stage at which the predecessor left the case may vary form case to case. In some cases it may be that the predecessor merely gave notice under Section 28(3) and then he ceased to exercise the jurisdiction. In other cases he may have received the written explanation in response to his notice. Yet there may be cases where he may have recorded the evidence partly or wholly or there may be cases where he had even heard the arguments but had not written the final order as by that time he had ceased to have jurisdiction over the case. To all such cases the provision of Sec. 5(7-C) apply and it would not be correct to contend that only in ceases where arguments were heard but order was not passed, that a notice to the assessee would be necessary and in all other cases it would be unnecessary. If the succeeding officer is authorised to continue the proceedings form the stage where it was left as he is under Section 5(7-C), then it is meaningless to divide the stages with a view to hold as to in what cases he can continue without giving notice and in what cases he can continue only after notice. In all cases where the succeeding officer is empowered to continue, that power is made subject to the first proviso and no such artificial division in the stages of proceeding can be permitted to affect the right of the assessee which he has under the first proviso.
23. In Calcutta Tanneries (1944 ) Ltd. v. Commr. of Income-tax : [1960]40ITR178(Cal) the question which falls for our consideration was raised before the Calcutta High Court, Lahiru. C. J., who wrote the opinion or the Bench, observed that 'This argument is of some force.' But the Court did not allow the assessee to raise that point as in its opinion it did not arise out of the order of the Tribunal. Moreover, that point was not in contention before that Tribunal and it was not invited to rule upon it.
24. The Calcutta High Court however held that the assessee has not lost the right of hearing under Section 28(3) on account of its failure to exercise its right of having the proceedings reopened under the first proviso to Section 5(7-C). His Lordship observed:
'In my opinion there may be a hearing without having the proceeding reopened and that hearing may be confined to the hearing of argument only'.
It was further observed:--
'In a penalty proceeding the assessee has a statutory right of being heard under Section 28 (3).'
and thus concluded:---
'The combined effect of the two section is to authorise the succeeding Income-tax Officer to pass an order upon the evidence produced before his predecessor in office. But the effect is not to authorise the former to pass an order upon arguments advanced before the latter.'
This conclusion was obviously based on Section 23 (3) and not under Section 5 (7-C). It obviously rested upon the wholesome principle that even if the succeeding officer is entitled to continue, as no demand for reopening was made, even then he cannot pass an order based on the arguments which were addressed to his predecessor and not to him because one who decides ought to hear the case.
25. In Mulidhar Tejpal v. Commr. of Income-tax : [1961]42ITR129(Patna) the facts were that a notice under Sec. 28(3) was issued by Sri K. P. Kumar, Income-tax Officer, on 30th November, 1948. The assessee submitted written explanation before the same officer on 10th January, 1949. The final order, however, was passed by his successor Sri V. Jha to issue another show cause notice under Section 28(3) before the penalty was actually imposed. Rejecting that contention, it was observed at pages 134, and 135:--
'Reading, therefore, Section 28(3) of the Act in the context and background of Section 5(7-C) of the Act, it is manifest that Sri V. Jha, successor in office of Sri K. p. Kumar, had authority to continue the proceeding started against the assessee under Section 28(1) of the Act and to impose property penalty under that Section . It was argued on behalf of the assessee that Section 28(3) requires oral hearing by the Income-tax officer before the order imposing penalty is passed against the assessee. We do not think that this argument is correct. Section 28(3) requires that there should be a hearing of the assessee, or in the alternative, the assessee should be given a reasonable opportunity of being hear. After receiving the notice under Section 28(3) it is open to the assesee to appear before the income-tax officer to make oral submission or to send a representation in writing if he prefers to do so.'
The learned Judges further stated at page 135:---
'In our opinion the combined effect of Section 28(3) and Section 5(7-C) of the Indian Income-tax Act is that the succeeding income-tax officer has a authority to pass an order upon the explanation of the assesee produced before his predecessor in office, if the assessee had failed to exercise his right under Section 5(7-C) demanding that the proceedings should be reopened. It is admitted in the present case that the assesse did not make any demand for reopening the proceeding before Sri V. Jha, the succeeding Income-tax Officer under the first proviso to Section 5(7-C) of the Income-tax Act. If the assessee had chosen to do so, he might have exercised his statutory right under Section 5(7-C) of the Income-tax Act. If the assessee had chosen to do so, he might have exercised his, statutory right under Section 5(7-C) of the Income-tax Act, and required the succeeding Income-tax Officer to take a fresh explanation form him before making any order of penalty, but she admitted position is that in the present case, the assessee did not exercise his statutory right under Section 5(7-C).' It is thus clear that their Lordships were not concerned in that case with the question as to whether a notice under Section 5(7-C). is necessary with a view to provide an opportunity to the assessee to exercise his statutory right, a right which this decision also recognises as conferred on him under the first proviso, to Section 5(7-C). This decision therefore cannot be said to be an authority for the proposition that no notice under Sec. 5(7-C) as above is necessary.
26. Kanila Gatani v. Commr. of Income-tax, (1963) 48 ITR 262 is a case which distinguished the Calcutta case : [1960]40ITR178(Cal) . The facts were that Mr. A. De, Income-tax Officer, gave a notice under Section 23(3) on 3rd March, 1957 to the assesses. The assessee filed a written statement before the said Income-tax Officer. After some adjournments Mr. De was told by the assessee's Advocate that beyond his written statement already filed, he had nothing to add. Before Mr. De could pass an order finally, he was transferred and was succeeded by one Mr. S. No. Roy. Mr. Roy occurring with the draft order which Mr. De had already prepared made an order of penalty. The question referred to the High Court was whether in view of Section 28(3) which is a mandatory provision, imposition of penalty by the succeeding officer, who had not heard the assessee was legal. The High Court of Calcutta said:--
'A hearing of a case may be of many kinds. It usually involves the calling of witnesses, their examination and cross examination and then arguments are addressed to the Tribunal. Where witnesses have been called and examined, or where arguments have been advanced it is clear that one man cannot hear the case and another man pass judgment. The reason is that much may depend on the view that the Tribunal takes as to credibility of witnesses and his mind may be swayed one way or the other, by the demeanour of witnesses and as a result of arguments. This is such an intangible and personal task, that it cannot be handed over to the successor. Where, however, no witnesses have been called and no arguments have been advanced, but the matter depends on written objection filled then the successor is in the same position as the officer who originally was in the conduct of the case. Therefore, as long as the successor applies his mind to the materials before him this is sufficient.'
In regard to the earlier Calcutta case, it is said at page 269:---
'In my opinion, this judgment supports rather than destroys the proposition I have mentioned above. it would be observed that the order in this case was made prior to the amendment, but even prior to the amendment the position was not different'.
It was further observed at the same page:
'In this case, we are not concerned with the provisions Section 5(7-C), but the position seems to be as stated above, even under the Income-tax Act as it stood previous to the amendment.'
It is therefore evident form the abovesaid extracts that the said case was not concerned with the construction of section 5(7-C) and although the earlier Calcutta case was sought to be distinguished as it was a case decided after sec. 5(7-C) was introduced, even then it was considered that the said case supported the view taken in the later case. It is however, clear that this decision does not consider the implications of Section 5(7-C) and a already noted, even the earlier Calcutta case had declined to go into that question. This case also therefore cannot be said to be an authority for the proposition which we have laid down.
27. Shop Siddegowda & Family v. Commr. of Income-tax : [1964]53ITR57(KAR) is the next case, after a notice in a penalty proceedings was served upon the assessee, he filed his explanation in writing. He did not choose to appear nor ask for any opportunity to adduce oral evidence or to address arguments. The Income-tax Officer was succeeded by another before an order was passed. The question referred was whether it is incumbent on the officer passing an order to hear the assessee even though the predecessor had given reasonable opportunity of being hear. After noticing Section 5(7-C) and Section 28(3), it is stated that the succeeding Income-tax Officer can continue the proceedings from the stage where it was left. When the assessee was content with a mere written explanation he cannot claim a further opportunity of being hear, even though the assessee did not seek to reopen the proceeding under the proviso to sec. 5(7-C). The High Court referring to : [1960]40ITR178(Cal) observed that the conclusions in that case appears to be obvious and stated:--
'It will be a mockery if it is held that one officer could hear the arguments and another officer could decide the case. But this principle la law is inapplicable in cases where the officers concerned have only to see the written representation.'
The Mysore High Court refrained form expressing any opinion on the question that if witnesses are examined before one officer whether the succeeding officer can pass any order based on such evidence.
28. It will thus be apparent that both the abovesaid sections although were read combinedly the implications of Section 5(7-C) and the competing rights which it confers on the assessee were not considered form the succeeding officer's point of view. It would therefore be incorrect to treat this case as holding a contrary view to the view which we have expressed.
29. Hulekar & Sons v. Commr. of Income-tax : [1967]63ITR130(KAR) is another decision of the Mysore High Court. The question referred to was whether the succeeding Income-tax Officer was competent to levy penalty without giving the assessee a fresh opportunity of being heard. Since the question was referred in that fashion, the High Court answered it by saying that as no request was made to the succeeding officer by the assessee that the proceedings should be reopened or he should be reheard,, there was complete compliance of Section 28(3) and Section 5(7-C) of the Act. it will immediately be plain that if the question was referred as to whether under Section 5(7-C) a notice to the assessee is implied for the purpose of exercising the right under the first proviso to Section 5(7-C), the Court would have been required to consider that question which directly has fallen for our consideration. This decision also therefore renders very little assistance to our case. In any case that is not an authority which can be said to be taking a contrary view.
30. Then comes A. C. Metal Works v. Commr. of Income-tax decided by the Rajasthan High Court. The question referred in that case was whether it was obligatory on the succeeding Income-tax officer to given another opportunity of showing cause before imposing the penalty under Section 28. The High Court decided that where one Income-tax Officer issued notice and the assessee remained content with filing a written explanation and did not choose to appear or ask for an opportunity to adduce evidence or address argument nor demanded rehearing under the proviso to Section 5(7-C), the succeeding officer had authority to continue the proceedings and impose penalty considering the written statement file by the assessee. it was however recognised in the judgment that 'under the first proviso to that section the assessee could demand an opportunity of rehearing'. But in that case the High Court thought that the assessee had not asked any such rehearing form the succeeding officer. Whether the successor should have given notice for the exercise of such a right by the assessee under Section 5(7-C) or not was not considered. This case therefore can be clubbed with the cases already referred to above.
31. The last case to which we would refer is a decision of the Punjab and Haryana High Court, but the decision is reported in Satprakash Ram Naranjan v. Commr. or Income-tax, (1968) 70 ITR 33 by way of short notes. The facts as they appear form the short notes are that a notice under Section 28(1) (c) was given by the Income-tax Officer B-ward. The case was subsequently transferred to the Income-tax Officer, C-ward who without any notice imposed the penalty. The Tribunal upheld the order on the ground that the assessee having knowledge of the change of jurisdiction did not make nay request for allowing him an opportunity of being heard. On a reference, it was held that the Income-tax Officer C-ward was bound to give the assesee an opportunity of being heard and the order imposing penalty was illegal. Some of the cases considered by us above seem to have been considered by the said High Court in the decision.
In the absence of the full judgment, it is not possible to say that the High Court has held that a notice under Section 5(7-C) was necessary before the succeeding officer continued the proceedings and as no notice was given the penalty imposed was illegal. It is also not possible to say whether it held as was held by the first Calcutta case referred to above that even though the assesses had not exercised his right under the first proviso to S. 5(7-C), the succeeding officer is bound to give notice under Section 28(3) itself before he makes an order imposing penalty. It would therefore be not property to seek any assistance from this decision not fully reported.
32. We are not in this case called upon to consider as to which of the two views expressed by the Calcutta and Punjab and Haryana High Courts on the one hand and Patna, Mysore and Rajasthan high Courts on the other, that is to say, whether a notice under Section 28(3) itself would be necessary even if the assessee failed to exercise his rights under the first proviso to sec. 5(7-C) by the succeeding officer before he imposes any penalty, is correct. Nor it is necessary to decide that question in the view which we have taken in the light of the construction we have put on Section 5(7-C).
33. From a careful consideration of the abovesaid case, it would be clear that the point which we have decided was expressly raised only in : [1960]40ITR178(Cal) but was declined to be considered because of certain reasons. In no other case its point was directly raised and considered. Thus it can safely be said that the point although extremely a short one is really one of the first impression. In our judgment, no assistance can be derived in the present case form the authorities referred to above as they do not provide even a close parallel to the present case.
34. In this connection, it is proper to bear in mind that nothing is more likely to conduce to just and right decisions than the habit of first giving an opportunity to a party who has certain rights and who is going to be affected by any decision. All powers needs to be so exercised, whether it is judicial, quasi-judicial or even administrative. The underlying reality is that the Judges have always regarded it as intolerable that an act of drastic power such as imposition of penalty by succeeding officer should be put into effect against anyone without is first being given a fair chance to avert it, if possible by exercising his rights which the statute conferred upon him. It is therefore proper that a person liable to be directly affected by the proposed continuance of the proceedings by the succeeding officer, i.e. the assessee, be given adequate notice of what is proposed by the succeeding officer so that the assessee may be in a position to make representation and assert his right of reopening or rehearing.
35. It is a common ground that after the succeeding officer assumed the jurisdiction, no notice was given to the assessee. The assessee therefore had not opportunity to exercise his right under the first proviso to Section 5(7-C). it is not doubted that if it is found that notice was necessary and was not given, the entire proceedings conducted by the succeeding officer would be illegal, and any order passed in such proceedings cannot be given nay effect.
36. It was however, contended by the learned standing counsel for the Department that the Tribunal had not allowed the assessee to raise this question as it was raised before it at a later stage and was not raised before the Appellant Assistant Commissioner. It s true that the Tribunal in its order stated that it declined to give permission to the assesee to raise such a question. Nevertheless the Tribunal dealt with that question and held that the omission to give any intimation by the succeedings officer id not in any way vitiate the proceedings. It is also true that when in the reference application this point was stressed the Tribunal stated that it had not allowed this plea to be raised at the late stage. but even in with reference order in a way it is conceded that certain decisions were brought to its notice and the Tribunal thought that there was some conflict between the decisions cited before it. In spite of this feeling that it is a question of law on which there is a conflict, it refused to refer the case. In any case, the question which this court has framed covers the point which we have considered; and it cannot be said that it dies not arise form the order of the Tribunal. We therefore do not experience any difficulty in rejecting this contention.
37. For the aforesaid reasons, we answer the question in he negaitve in favour of the assessee and against the Department. The assessee will be entitled to his costs from the department Advocate's fee Rs. 250/-
38 .Reference answered in negative.