1934 (1) TMI 19 - Commissioner - Income Tax

Issues Involved:
1. Validity of the demand for super-tax after a delay.
2. Legality of the cancellation of firm registration by the Commissioner after more than a year.
3. Competency of the Assistant Commissioner to hear the appeal.
4. Right of the assessee to appeal under Section 30 of the Income Tax Act.
5. Simultaneity of demand for income tax and super-tax.

Detailed Analysis:

1. Validity of the Demand for Super-tax After a Delay:
The primary contention was that the demand for super-tax made on 4th May 1929, more than two years after the initial assessment, was illegal. The court agreed, stating, "Two years and four months or thereabouts was, in my opinion, a wholly unreasonable time. The demand, therefore, of Rs. 5,468-12-0 on 4th May, 1929, was, in my opinion, illegal." This conclusion was based on the principle that demands for tax should be made within a reasonable time, as supported by the precedent in Rajendra Narayan v. Commissioner of Income Tax, Bihar and Orissa.

2. Legality of the Cancellation of Firm Registration by the Commissioner After More Than a Year:
The court found that the Commissioner's cancellation of the firm's registration on 13th February 1928, more than a year after the initial order of 17th January 1927, was invalid. The judgment stated, "The words 'subject to the provisions of this Act'... indicate that the Commissioner's powers under Section 33 of the Act are subject to the time limit of one year mentioned in Sections 34 and 35." This was further supported by cases like Jesa Ram v. Commissioner of Income Tax and Ganesh Das v. Commissioner of Income Tax.

3. Competency of the Assistant Commissioner to Hear the Appeal:
The court held that the Assistant Commissioner had jurisdiction to hear the appeal. Despite the Commissioner's argument that the Assistant Commissioner's order was ultra vires, the court noted, "whether the Assistant Commissioner had jurisdiction or not, he did in fact hear the appeal of the assessee and he passed an appellate order under Section 31 dismissing the appeal; so the requirements of Section 66(2) were satisfied." This was in line with the precedent set in Wazir v. Palit.

4. Right of the Assessee to Appeal Under Section 30 of the Income Tax Act:
The court concluded that the assessee had the right to appeal under Section 30 of the Act. The judgment stated, "Prima facie, it is within the competence of such firm to deny its liability to be assessed to super-tax under Section 56 of the Act, and to appeal against a demand made for payment of such tax." The court emphasized that the proviso to Clause (1) of Section 30 did not eliminate the right of appeal in cases where the assessee challenged the liability to be taxed in a different capacity.

5. Simultaneity of Demand for Income Tax and Super-tax:
The court held that the demands for income tax and super-tax should be made simultaneously or within a reasonable time frame. The judgment stated, "I agree with the view expressed in Rajendra Narayan v. Commissioner of Income Tax, Bihar and Orissa, that in order to be valid a demand for super-tax should be made within a reasonable time of the assessment for income tax." The court found that the delay of two years and four months was unreasonable and thus illegal.

Conclusion:
The court ruled in favor of the applicants on all counts, declaring the delayed super-tax demand and the cancellation of firm registration as illegal. The Commissioner of Income Tax was ordered to bear the costs. The judgment underscored the importance of timely actions by tax authorities and upheld the right of the assessee to appeal against tax demands and assessments.

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