1962 (3) TMI 110 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Income-tax Officer.
2. Legality of the assessment order.
3. Requirement of approval by a superior officer.
4. Validity of notices under section 22(4) of the Income-tax Act.
5. Entitlement to refund.

Detailed Analysis:

Jurisdiction of the Income-tax Officer:
The petitioner challenged the jurisdiction of the Income-tax Officer to take further proceedings on the notice under section 22(4) of the Income-tax Act, arguing that the assessment had been completed in February 1954. The respondents denied this, contending that the assessment order prepared in May 1954 was only tentative and required approval from the Inspecting Assistant Commissioner, which was never given. The court had to determine whether the so-called draft assessment could be considered a completed assessment under section 23 of the Act.

Legality of the Assessment Order:
The petitioner contended that there was no legal warrant in the Income-tax Act for an assessment to be made subject to the approval of a superior officer. The court referred to the principle established in Dossabhai Bejanji Motivala v. The Special Officer, Salsette Building Sites, which held that once an officer is appointed to make an assessment, it must be done according to his judgment without interference from a superior. The court found that the direction for the approval of the Inspecting Assistant Commissioner was illegal and unwarranted.

Requirement of Approval by a Superior Officer:
The court examined whether the assessment order, described as a draft by the respondents, amounted to an assessment. It was argued that there is no provision in the Income-tax Act requiring an assessment order to be approved by a superior officer. The court held that once the Income-tax Officer had given his considered judgment, the process of submitting his order for approval or revision by a superior was not permissible.

Validity of Notices under Section 22(4) of the Income-tax Act:
The petitioner received notices under section 22(4) in September 1956 and August 1957, calling for the production of account books. The court found that these notices were issued based on the assumption that the assessment was not completed. However, since the court held that the assessment order made by the Income-tax Officer was final, the issuance of these notices was deemed illegal.

Entitlement to Refund:
The petitioner claimed entitlement to a refund of about Rs. 20,000, which included Rs. 4,000 for excess profits tax and Rs. 16,000 for ordinary income-tax. The court noted that a refund of Rs. 4,049 had been made by the Excess Profits Tax Officer, but the income-tax refund was withheld due to the pending approval of the assessment. Since the court held the assessment to be final, the petitioner was entitled to the refund.

Conclusion:
The court concluded that the assessment order made by the Income-tax Officer in February 1954 was a valid assessment and did not require approval from the Inspecting Assistant Commissioner. Consequently, the notices issued under section 22(4) were illegal, and further proceedings based on these notices were quashed. The petitioner was entitled to the refund, and the petition was allowed with costs awarded to the petitioner.

Judgment:
The petition was allowed, and the court ordered the quashing of further proceedings based on the notices under section 22(4). The petitioner was also awarded costs of Rs. 250.