Dayaldas Kashiram Vs. the Commissioner of Income-tax (Central) - Court Judgment

John Beaumont, Kt., C.J.

1. In this case the Appellate Tribunal, Bombay, has submitted four questions to this Court under Section 66(2) of the Indian Income-tax Act, 1922. The questions arise in these circumstances.

2. The assessment upon the assessee for the year 1937-38 was made on October 8, 1937, by the Income-tax Officer, C Ward, Section II, which was one of the divisions of Bombay City for the purposes of the Indian Income-tax Act made by the Commissioner of Income-tax, Bombay, Sind and Baluchistan, under Section 5 of the Act before the amendment of 1929, On October 21, 1938, the Commissioner of Income-tax, Bombay, Sind and Baluchistan created a Special Provincial Circle, for which he appointed certain Income-tax Officers to exercise jurisdiction throughout the limits of his own jurisdiction, that is Bombay, Sind and Baluchistan, in respect of certain cases transferred to them, and on October 31 he transferred to that Special Provincial Circle the assessee's case. The Special Provincial Circle Officer on December 20, 1938, served a notice under Section 34 of the Act alleging that part of the assessee's income for the year 1937-38 had escaped assessment. Thereafter that Officer had before him the assessment of the assessee for 1938-39, and the re-assessment for 1937-38. On March 9, 1938, the Commissioner of Income-tax, Bombay, Sind and Baluchistan, seems to have felt some doubt about the validity of his order transferring the assessee's case to the Special Provincial Circle, and he, therefore, purported to make an order under Section 64(3) of the Act that the assessments in the cases of assessees shown in the accompanying statement for the year shown against each of them should be made by the Income-tax Officer, C Ward, Section II; and the accompanying statement contained the name of the assessee, and against it the year 1938-39. So the assessment for 1938-39 was retransferred to the Income-tax Officer, C Ward, but nothing was said about the re-assessment of 1937-38 under the notice under s, 34. I should have supposed that that decision was due to the view of the Commissioner that the notice under Section 34 was invalid and a nullity, so that there was nothing to transfer in respect to that, but that view is rather negatived by the subsequent order made by the Commissioner on April 1, 1939, under the Act as then amended, whereby under Section 5(5) of the amended Act the Income-tax Officer, C Ward, Section II, was appointed to hold charge of the duties of the Income-tax Officers of the Special Provincial Circle, for Income-tax, Bombay, in addition to his own for the purposes of assessments in the cases of assessees shown in the accompanying statement for the years mentioned against them, which statement contained the name of the assessee, and against it the year 1937-38 under Section 34. So that the re-assessment purported to be covered by that order. Subsequently, the Commissioner of Income-tax, Central, who had been appointed by the Central Board of Revenue under the amended Act, made various orders, including one of July 12, 1939, which are discussed in my judgment in Dayaldas Kushiram v. Commissioner of Income-tax, Central, (1939) 42 Bom. L.R. 414 which dealt with the present assessee's case, and it is sufficient to say that the Commissioner, Central, purported to assign the assessee's case to one Mr. Shah, who was one of the Income-tax Officers appointed by the Central Commissioner without reference to area. In December, 1939, this Court gave the decision to which I have just referred, the effect of which was that it was not competent to the income-tax authorities to transfer the case of the assessee to an Income-tax Officer, appointed without reference to area, since he was entitled to be assessed by the local officer under Section 64(1) which had not been amended. As a consequence of that decision, the Governor General promulgated an Ordinance on December 28, 1939, to which I will refer in detail when I come to answer question (4).

3. In those circumstances the questions raised are, first :

Whether the order dated July 12, 1939, passed by the Commissioner of Income-tax, Central, under Section 64(3) of the Income-tax Act, 1922, deciding the place of assessment of the petitioner, can be the subject of an appeal to the Income-tax Appellate Tribunal under Section 33 of the Act

That question seems to be founded in error, because when one looks at the order of July 12, 1939, which, as I have mentioned, is one of the orders made by the Commissioner of Income-tax, Central, the Commissioner states that it is clear beyond doubt that no question arises for determination within the meaning of Section 64(3). The order which the Commissioner passed that the case of the assessee had been properly allotted to the Income-tax Officer, Section II, Central, was apparently based on his view of the terms of Section 5(2) of the Income-tax Act; so that the order of July 12 was not in fact made under Section 64(3). Moreover, there appears this difficulty that the Governor General's Ordinance directs that the provisions of Sub-section (1) and Sub-section (2) of Section 64 of the Indian Income-tax Act are to be deemed not to apply, and never to have applied to the present assessee, and as Section 64(3) is confined to deciding any question arising under the section as to the place of assessment, I do not see how any order under Section 64(3) could affect the assessee. I think, therefore, that question No. 1 does not arise, and need not be answered.

4. The second question is :

Whether the Income-tax Appellate Tribunal has power to entertain in appeal a question as to the place of assessment of an assessee, even in the absence of an order of a Commissioner of Income-tax under Section 64(3) of the Act ?

To my mind that question is also based in error. The Income-tax Act does not determine the place of assessment. What it does do is to determine the officer who is to have power to assess, and in some cases it does so by reference to locality, but I apprehend that an appeal would be, not against an order of the Commissioner as to the place of assessment, but against the order of assessment of the Income-tax Officer. I apprehend that the sort of question which the tribunal had in mind is whether, when an assessee is assessed by an Income-tax Officer, and it is suggested that the Income-tax Officer had no jurisdiction to make the assessment, because an order purporting to give him such jurisdiction, made under Section 64(3), was wrongly made, a right of appeal would lie. When a question of that sort arises, we will decide it to the best of our ability, but at present it does not arise. I will only observe that such a question could probably not be answered merely' by looking at Section 30 and observing that under that section no right of appeal against an order under Section 64 (3) is conferred, since the appeal would probably be, not against an order made under Section 64(3), but against the consequences following from such order. However, I am satisfied that we ought not to answer a question which does not arise.

5. The third question is based on the assumption that either of the first two questions is answered in the negative, and as we have not answered the first two questions either in the affirmative or in the negative, the third question does not arise.

6. The fourth question is the only one which arises, and it is in these term's;

Whether the Governor General's Ordinance No. IX of 1939 (later incorporated in Section 64 of the Income-tax Act by an amendment of 1940) has the effect of regularising or validating the proceedings of re-assessment of the petitioner for the charge year 1937-38, irrespective of whether they were initiated by the Income-tax Officer, Special Provincial Circle, without jurisdiction to make the assessment.

7. The position under the orders to which I have referred seems to me to be that the Income-tax Officer, Special Provincial Circle, was validly appointed under Section 5(4) of the Act before amendment. His appointment was confined to the area over which the Commissioner, who appointed him, had jurisdiction, and in my view was valid, but, as held by this Court, the assignment to that officer of the assessee's case was invalid by reason of the provisions of Section 64. Apart from any difficulty created by Section 64, it is, in my opinion, clear that the assessee's case was subsequently assigned by the Commissioner, Central, to the Central Officer, Mr. Shah, who purported to continue the re-assessment of 1937-38. The question is whether he could do so, and that depends on the terms of the Ordinance.

8. Section 2 of the Ordinance provides so far as material that the provisions of Sub-section (1) and Sub-section (2) of Section 64 of the Indian Income-tax Act, 1922, shall not apply, and shall be deemed never at any time to have applied, to any assessee on whom a re-assessment for the purposes of that Act is being made in the course of any case or class of cases in respect of which a Commissioner of Income-tax appointed without reference to area under Sub-section (2) of Section 5 of the Act is exercising the functions of a Commissioner of Income-tax under the Act. This Ordinance is retrospective in character, and must undoubtedly be construed strictly, and no case should be brought within it which is not fairly within its language.

9. It is argued by Mr. Coltman that you cannot say that a re-assessment of the assessee was being made in the course of a case in respect of which the Central Commissioner was exercising the function of a Commissioner, because the re-assessment was never validly started. It was, however, validly started, in my view, apart from the difficulty arising under Section 64. The difficulty which Mr, Coltman points out seems to me to be removed so far as the assessee is concerned by the latter part of Section 3 of the Ordinance which provides :

No assessment made in accordance with Section 2 before the commencement of this Ordinance, and no proceedings taken in the course of or for the purposes of so making an assessment before the commencement of this Ordinance shall be or continue to be invalid by reason of anything contained in Section 64 of the Indian Income-tax Act, 1922.

To my mind the only invalidity in this re-asssessment arose under Section 64. Apart from that section, I think all the orders made by the two Income-tax Commissioners concerned were valid, and it seems to me that sis. 2 and 3 of the Ordinance had removed the invalidity of the orders made prior to the passing of the Ordinance, so far as they relate to the assessee.

10. In my opinion, therefore, we must answer the fourth question in the affirmative.

11. No order as to costs.

12. Negative certificate under Section 205 of the Government of India Act to be granted.

Kania, J.

13. The relevant facts, orders and sections of the Act and the Ordinance have been summarised in the judgment just delivered by the learned Chief Justice.

14. As regards the first question submitted for the Court's opinion in the reference, it is sufficient to state that no order under Section 64(3) has been made by the Commissioner as expressly stated in his order dated July 12, 1939. It cannot, therefore, be said that the question arises for decision in this case.

15. The second question is framed generally. In respect of questions of jurisdiction the point may arise under Section 64(3) or otherwise, and the jurisdiction of the tribunal to entertain disputed questions of jurisdiction of the particular Income-tax Officer will depend on the proper construction of the relevant sections of the Income-tax Act. It is not proper for the Court on different hypotheses to give different answers without the particular facts being clearly put before it. In that view I do not think that the second question arises here and is proper to be decided by the Court under the circumstances of the case.

16. Question (3) need not be answered, because it follows questions 0) and (2).

17. As regards question (4), shortly put, the only question is whether the notice dated December 20, 1938, was invalid on the ground that the assessee had acquired a right under Section 64(1), or it was invalid on the ground that the appointment of the officer 'Special Provincial Circle' was ultra vires. If it was invalid on the ground of Section 64, the same is validated by reason of the Ordinance and the wide terms thereof making its operation retrospective. Section 2(a) read with the words at the end of that section and the words in the latter half of Section 3 clearly validate any proceeding in the matter of an assessment or re-assessment pending before an Income-tax Officer, Central, at the moment when the Ordinance was issued, if the alleged invalidity was. on the ground of Section 64 of the Income-tax Act. If the legality of the notice dated December 20, 1938, is challenged on the ground that the appointment of the Income-tax Officer, Special Provincial Circle, was invalid, the same has to be considered, apart from the Ordinance, under Section 5 of the Income-tax Act before its amendment in 1939. Section 5(4) in terms authorised the Commissioner of Income-tax to appoint Income-tax Officers for certain areas and also in respect of certain cases, which I read as confined to those areas. The order made by the Commissioner in this case dated October 21, 1938, in terms created the post of an Income-tax Officer, Special Provincial Circle, within the area of Bombay Province, Sind and Baluchistan. Apart from the considerations brought to bear on reading Section 64, I do not think the appointment as such was invalid under Section 5(4). The previous decision of the Court, which has been much relied upon, does not help the petitioned because the decision of the Court, was only that the assessee having acquired a right to be assessed under s, 64 by the particular officer, and that as an officer with the designation covered by the words of Section 64 existed, his right cannot be taken away by a later amendment of Section 5 of the Income-tax Act without a corresponding amendment of Section 64. That case did not purport, and did not decide anything beyond this. Therefore, the assessee's contention raised in question (4) must fail. The answer, therefore, is as stated in the judgment of the learned Chief Justice.