1942 (2) TMI 26 - HC - Income Tax

Summary

Issues Involved:
1. Whether the order of the Commissioner dated 29th August 1939 under Section 33 of the Act is an order prejudicial to the assessee within the meaning of Section 66(2) of the Act.
2. Whether the Income-tax Officer was justified in assessing the assessee to income-tax without giving him relief under Section 25(3) of the Act.
3. Whether the assessee's claim for relief under Section 25(3) of the Act in respect of his assessment for 1933-34 is barred by limitation.
4. Whether the Commissioner's discretion under Section 33 of the Act can legally be controlled by the Central Board of Revenue and if so, whether the Central Board of Revenue acted judicially in refusing to authorise the Commissioner to exercise his power of revision in this case.

Issue-wise Detailed Analysis:

1. Prejudicial Order under Section 33 of the Act:
The preliminary question is whether the Commissioner's order dated 29th August 1939 under Section 33 of the Act is prejudicial to the assessee within the meaning of Section 66(2) of the Act. The judgment discussed various precedents, including the decisions in Central India Spinning, Weaving and Manufacturing Co., Ltd. v. Commissioner of Income-tax and Venkatachalam Chettiar v. Commissioner of Income-tax, Madras, which held that an order confirming a prejudicial order is itself prejudicial. The court agreed with the interpretation of the Madras High Court in Voora Sreeramulu Chetty v. Commissioner of Income-tax, Madras, which stated that if an order of the Income-tax Officer is prejudicial, an order which confirms it or rejects an application asking that it be revised is also prejudicial. The court concluded that the order of the Commissioner was "otherwise prejudicial" to the assessee and thus the reference was competent. The preliminary question was answered in the affirmative.

2. Justification of Assessment without Relief under Section 25(3):
The second issue was whether the Income-tax Officer was justified in assessing the assessee to income-tax without giving him relief under Section 25(3) of the Act. Section 25(3) imposes a duty on the Income-tax Officer to exclude income from assessment if the profession is discontinued. The court noted that the Income-tax Officer was aware of the assessee's judicial appointment, as evidenced by the notice addressed to "The Hon'ble Mr. Justice" and the assessment form. Therefore, the Income-tax Officer had sufficient material to inquire about the discontinuance of the profession. The court concluded that the Income-tax Officer was not justified in assessing the assessee without giving him relief under Section 25(3). This question was answered in the negative.

3. Limitation for Claim under Section 25(3):
The third issue was whether the assessee's claim for relief under Section 25(3) of the Act in respect of his assessment for 1933-34 is barred by limitation. The court discussed the addition of sub-section (5) to Section 25 by the Amending Act of 1939, which imposed a one-year limitation for claims. However, the court noted that the right had accrued to the assessee before the 1st April 1939, and he had made a verbal claim in March 1939. The court held that a verbal claim was sufficient and that there was no statutory bar of limitation before the Amending Act. The court concluded that the claim was not barred by limitation. This question was answered in the negative.

4. Control of Commissioner's Discretion by Central Board of Revenue:
The final issue was whether the Commissioner's discretion under Section 33 of the Act can legally be controlled by the Central Board of Revenue and whether the Central Board acted judicially. The court held that while the Commissioner must obey departmental orders, his discretion cannot be "legally" controlled as it is vested in him by statute. The only control known to the law is that the discretion must be exercised judicially. Since the discretion is a statutory one, the second part of the question did not arise. The first part of the question was answered in the negative, and the second part was deemed unnecessary to answer.

Conclusion:
The court answered the preliminary question in the affirmative, indicating that the reference was competent. The first and second questions of law were answered in the negative, meaning the Income-tax Officer was not justified in his assessment and the claim was not barred by limitation. The first part of the third question was also answered in the negative, and the second part was deemed unnecessary to address.