1963 (4) TMI 79 - HC - Income Tax

Summary

Issues:
1. Jurisdiction of the Income-tax Officer to assess the petitioner under section 23(4) of the Income-tax Act, 1922.
2. Compliance with the notice under section 23(2) of the Act for the assessment year 1959-60.
3. The obligation of the petitioner to produce account books under section 23(2) and the subsequent actions of the Income-tax Officer.

Analysis:

1. Jurisdiction of the Income-tax Officer:
The petitioner challenged the assessment order dated 19th November, 1962, made under section 23(4) of the Act, arguing that there was no non-compliance with the notice under section 23(2) for the assessment year 1959-60. The court agreed with the petitioner, emphasizing that the Income-tax Officer had no jurisdiction to assess under section 23(4) if there was compliance with the notice under section 23(2). The court highlighted the importance of the assessee's choice to produce evidence in support of the return and stated that the petitioner had fulfilled its obligation by producing account books multiple times.

2. Compliance with Notice under Section 23(2):
The court observed that a notice under section 23(2) was issued on 31st July 1959, and the petitioner had complied with it to the best of its ability by producing account books on several occasions. The court noted that the Income-tax Officer did not issue a notice under section 22(4) for the assessment year 1959-60, which would have been necessary if the Officer required the production of account books again. The petitioner's willingness to cooperate and produce account books, even when not obligated to do so, was highlighted as a factor supporting the lack of non-compliance with the notice under section 23(2).

3. Obligation to Produce Account Books:
The court emphasized that the petitioner's duty was to produce account books under section 23(2) to support the return, not to provide a basis for assessment under section 23(4). The Income-tax Officer's rejection of the petitioner's request for assistance in obtaining the books from authorities in Delhi was deemed unjustified. The court directed the Income-tax Officer to assist the petitioner in summoning the books or sending an officer to inspect them in Delhi for a lawful assessment. The assessment order dated 19th November, 1962, was quashed, and costs were awarded to the petitioner.

In conclusion, the court found that the Income-tax Officer's assessment under section 23(4) was without jurisdiction due to the petitioner's compliance with the notice under section 23(2. The court emphasized the importance of the assessee's choice to produce evidence and the obligation to support the return, ultimately ruling in favor of the petitioner and directing the Income-tax Officer to proceed with a lawful assessment process.