1929 (7) TMI 5 - HC - Income Tax

Summary

Issues Involved
1. Maintainability of the petition under Section 66, Clause 8, Income Tax Act.
2. Timeliness of the application before the Commissioner of Income Tax and the High Court.
3. Compliance with notices under Section 22, Clause 4 and Section 23, Clause 2, Income Tax Act.
4. Validity of the assessment under Section 23, Clause 4, Income Tax Act.
5. Appealability of the assessment under Section 23, Clause 4, Income Tax Act.
6. Legitimacy of the Assistant Commissioner's rejection of the appeal.
7. Exclusion of time for obtaining a copy of the order in computing the period of limitation.

Detailed Analysis

1. Maintainability of the Petition
The petitioners filed an application under Section 66, Clause 8, Income Tax Act, requesting the High Court to direct the Income Tax Commissioner to state the case and refer it to the Court. The Income Tax Commissioner had refused to state the case on the grounds that the application was out of time and no question of law arose. However, the Court found that the Commissioner had elaborately dealt with the points of law raised by the petitioners, thus fulfilling the requirements of Section 66, Clause 3. Therefore, the petition was maintainable.

2. Timeliness of the Application
The Assistant Commissioner of Income Tax rejected the petitioners' appeal on 5th July 1928, and the order was communicated via a postcard dated 7th July 1928, which reached the petitioners sometime after 8th July 1928. The petitioners filed an application under Section 66, Clause 2, on 4th August 1928, which was received by the Commissioner on 1st August 1928, appearing out of time by three days. Similarly, the application to the High Court was also filed a few days late. The petitioners contended that the period of limitation should be computed from the date of communication of the order, not from the date of the order itself. The Court, however, held that the plain language of the section does not support this contention.

3. Compliance with Notices
The petitioners were asked to produce their books of account and other evidence but failed to do so. They claimed that the books were destroyed by white ants. The Income Tax Officer proceeded to assess the income under Section 23, Clause 4. The Court found that the petitioners did not comply with the notices under Section 22, Clause 4, and Section 23, Clause 2, as they neither appeared on the date fixed nor produced any evidence. Therefore, the assessment under Section 23, Clause 4, was justified.

4. Validity of the Assessment
The Court held that the assessment made under Section 23, Clause 4, was valid as the petitioners failed to comply with the notices. The petitioners' argument that they relied on the findings of Income Tax Officers of Calcutta and Darbhanga was not sufficient compliance.

5. Appealability of the Assessment
The Court found that no appeal lies from an assessment made under Section 23, Clause 4, as per the Income Tax Act. Therefore, the provisions of Section 66 do not apply, and the Court cannot direct the Commissioner to state the case and refer it to the High Court.

6. Legitimacy of the Assistant Commissioner's Rejection
The Assistant Commissioner rejected the appeal on the ground that the notice of demand was subsequently amended. The Court criticized this approach, stating that an appeal lies against the assessment, not the demand notice. However, since the assessment was made under Section 23, Clause 4, no appeal was maintainable.

7. Exclusion of Time for Obtaining a Copy
The Court referred to Section 29 of the Limitation Act, which allows the exclusion of time required for obtaining a copy of the order in computing the period of limitation. The Court cited decisions from the Rangoon and Lahore High Courts supporting this view. Therefore, the time taken to obtain the copy should be excluded, making the applications within time.

Conclusion
The petition was dismissed due to the legal difficulty that no appeal lies from an assessment made under Section 23, Clause 4. The petitioners weakened their case by not producing their books of account and setting up a rejected plea that the books were destroyed by white ants. There was no order as to costs.