1944 (1) TMI 18 - HC - Income Tax

Summary

Issues Involved:
1. Whether in an appeal under Section 33(1) from a decision in appeal under Section 30(1), the validity of an assessment under Section 23(4) can be challenged when no proceeding under Section 27 of the Act was taken to cancel the order under Section 23(4).
2. Whether on the facts of the case, the lands taken over by the assessees in satisfaction of a debt should be independently valued and such valuation should be considered for the purpose of arriving at the figure of income.

Issue-Wise Detailed Analysis:

1. Validity of Assessment Under Section 23(4) in an Appeal Under Section 33(1):

The first question addressed whether the validity of an assessment under Section 23(4) could be challenged in an appeal under Section 33(1) from a decision in appeal under Section 30(1) when no proceeding under Section 27 was taken to cancel the order under Section 23(4). The assessees argued that they could question the validity of the assessment by way of appeal under Section 30, despite not adopting the procedure under Section 27. They contended that the amendment to Section 30 allowed for an alternate remedy.

The Court analyzed the provisions of the Income Tax Act, specifically Section 30 and Section 31, and concluded that Section 30, as amended, grants the right to object to the quantum of the assessment but does not allow for challenging the validity of the assessment without following the procedure provided by Section 27. The Court found that the Legislature intended to limit appeals under Section 30 to the quantum of the assessment or tax and not to the validity of the assessment itself. Therefore, the first question was answered in the negative.

2. Independent Valuation of Lands Taken Over in Satisfaction of Debt:

The second question considered whether the lands taken over by the assessees in satisfaction of a debt should be independently valued for the purpose of arriving at the figure of income. The assessees, who were money-lenders, had taken over properties from a debtor and valued them in their books. They argued that the Income Tax Officer should not have accepted these figures as the true value without further inquiry.

The Court referred to previous judgments, including the Rangoon High Court decision in Commissioner of Income Tax v. Burma P.L.S.M. Concern, Minhla, and the Privy Council decision in Commissioner of Income Tax, Bihar & Orissa v. Maharajadhiraj of Darbhanga. The Court noted that the assessees had valued the properties themselves and entered these valuations in their books. The Income Tax Officer, making an assessment to the best of his judgment, was justified in accepting these values as the true value. The Court held that the assessees' contention of suffering from not being allowed to give evidence as to the value of the properties had no weight. Therefore, the second question was also answered in the negative.

Conclusion:

The Court concluded that the assessees could not challenge the validity of the assessment under Section 23(4) in an appeal under Section 33(1) without following the procedure under Section 27. Additionally, the Court held that the Income Tax Officer was justified in accepting the valuations of the properties as entered by the assessees in their books. The assessees were ordered to pay the costs assessed at Rs. 200 plus the costs of the paper book assessed at Rs. 50.