1947 (6) TMI 8 - HC - Income Tax

Whether an order of the Appellate Assistant Commissioner, Rawalpindi Range, of the 18th January, 1942, imposing on the appellant a penalty of ₹ 14,000 under Section 28 of the Indian Income-tax Act, 1922, as amended up to the relevant date, is a valid order? Held that - Neither in the incompleteness of the return nor in the fact that in an accompanying statement the appellant referred to his return as an estimate can their Lordships find any possible justification for the plea that the assessment was incompetent or that the Appellate Assistant Commissioner had no jurisdiction to entertain the appeal proceedings which the appellant himself initiated. For the first time before their Lordships the appellant by his counsel raised the contention that the Income-tax Officer could not lawfully have made the assessment under Section 23 (3) as he had not given the necessary notice under Section 23 (2), and that for this reason the assessment must be treated as having been made under Section 23 (4). This plea depends for its validity upon questions of fact which have not been investigated and it is in their Lordships opinion too late for the appellant to raise it now. In the result their Lordships will humbly advise His Majesty that this appeal must be dismissed

Summary

Issues:
Validity of order imposing penalty under Section 28 of the Indian Income-tax Act, 1922

Analysis:
The case involved an appeal questioning the validity of an order imposing a penalty of Rs. 14,000 under Section 28 of the Indian Income-tax Act, 1922. The appellant, a supply contractor, failed to furnish a return for the year 1938-39 despite notices. The Income-tax Officer assessed the appellant at a net income of Rs. 1,00,488, leading to a penalty imposition. The appellant contended that the return was not valid due to non-compliance with Note 5 of the form. The Assistant Commissioner affirmed the assessment and imposed the penalty, which the Tribunal upheld. The Tribunal rejected arguments challenging the validity of the return and the jurisdiction of the Assistant Commissioner. The appellant then sought a reference to the High Court, questioning the validity of the return and the assessment process.

The Court of the Judicial Commissioner ruled in favor of the appellant, stating that the return was valid. The appellant argued that the Income-tax Officer should have made an assessment under Section 23(4) due to the alleged invalidity of the return, depriving the Assistant Commissioner of jurisdiction to impose a penalty. The Court's decision was limited to the issues raised in India. The appellant's failure to provide details as per the form's requirements was considered by the Court, but it found no basis for invalidating the return. The Court emphasized that the Income-tax Officer had the authority to accept the return and proceed with the assessment under Section 23(3) despite its incompleteness.

During the appeal to the Privy Council, the appellant raised a new argument regarding the Income-tax Officer's failure to give the necessary notice under Section 23(2) before making the assessment under Section 23(3). However, the Privy Council deemed this argument untimely and lacking factual investigation. Consequently, the Privy Council dismissed the appeal, affirming the validity of the penalty order and directing the appellant to pay the costs of the appeal.