1948 (9) TMI 18 - HC - Income Tax

Summary

Issues Involved:

1. Jurisdiction of the Commissioner of Income Tax to reallocate cases.
2. Necessity of issuing a fresh notice of assessment upon reallocation.
3. Right of the assessees to be assessed by a particular officer.
4. Determination of the firm's residency status.
5. Attribution of remittances to profits.
6. Taxability of an item in the brokerage account.

Detailed Analysis:

1. Jurisdiction of the Commissioner of Income Tax to reallocate cases:

The primary issue was whether the Commissioner of Income Tax, Central, had the authority to reallocate the case of the assessees after initially allocating it to another officer. The court held that Section 5(5) of the Indian Income Tax Act allowed the Commissioner to allocate or distribute work multiple times. The court found no basis for the contention that the Commissioner's power was exhausted after the first allocation. Therefore, the order made on October 14, 1939, reallocating the assessment to the Income Tax Officer, Section VII, was deemed competent and valid.

2. Necessity of issuing a fresh notice of assessment upon reallocation:

The assessees contended that a fresh notice of assessment should have been issued under Section 22(2) following the reallocation. They relied on sub-section (7A) of Section 5, which was incorporated by the Amending Act XI of 1940. The court noted that this sub-section was not retrospective and did not apply to the period in question. The court further stated that there was no requirement under the law, as it existed before the Amending Act, for a fresh notice to be issued upon reallocation. Therefore, the absence of such a notice did not render the assessment invalid.

3. Right of the assessees to be assessed by a particular officer:

The assessees argued that they had a right to be assessed by a specific officer and that this right was violated by the reallocation. The court referred to Section 64(5), which explicitly removed the right to be assessed by a particular officer when a case was allocated by the Commissioner under Section 5(5). As this right was legislatively removed, the court concluded that there was no requirement for a fresh assessment notice upon reallocation.

4. Determination of the firm's residency status:

The court examined whether there was sufficient evidence to conclude that the assessees were a resident firm. The court noted that the High Court had previously considered this issue for the assessment year 1935-36 and had placed significant weight on the registration certificate issued by the Registrar of Partnerships, which stated that the principal place of business was Bombay. The court found that the same evidence and additional materials were considered for the assessment year 1936-37, leading to the conclusion that the assessees were a resident firm in British India.

5. Attribution of remittances to profits:

The assessees contended that remittances made in the year of account should be viewed in the context of cumulative profits and losses over four years, arguing that there was a net loss overall. The court noted that there was no evidence that losses from previous years were carried forward or set off against profits of 1991-92. The Tribunal found that there were profits in 1991-92, and remittances were made from these profits. The court held that the determination of remittances being attributed to profits was a factual issue, not a legal one, and upheld the Tribunal's findings.

6. Taxability of an item in the brokerage account:

The assessees sought to exempt Rs. 25,575 from tax, claiming it was paid to sub-brokers. However, no payment or liability entry for this amount appeared in the books of account for the relevant year. The court noted that the books were maintained on a mercantile basis, but there was no entry showing liability to sub-brokers. The Tribunal's rejection of the claim was upheld, and the court found no legal question arising from this decision.

Conclusion:

The court answered the questions raised by the Tribunal as follows: Questions 1, 2, and 3 were answered in the affirmative; Questions 4 and 6 did not arise; Questions 5 and 7 were answered in the negative; Question 8 was answered in the affirmative; and for Question 9, reference was made to the judgment. The assessees were ordered to pay the costs of the reference, and the notice of motion was dismissed with costs.