1944 (3) TMI 9 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the assessments made subsequent to the year 1932-33.
2. Whether the Commissioner of Income Tax acted improperly in refusing to cancel the said assessments and order repayment.
3. Whether the assessees could be denied relief under Section 33 of the Income Tax Act on any valid ground.

Detailed Analysis:

1. Validity of the Assessments Made Subsequent to the Year 1932-33:
The central issue was whether the assessments made after the year 1932-33, including the supplementary assessment for the year 1931-32, were nullities in view of the Privy Council's decision. The Trust argued that the assessments were invalid from the start because the Act did not apply to income derived from property held under trust wholly for charitable purposes. The judgment emphasized that an assessment which is illegal or a nullity from the start cannot be treated as an assessment at all, and the Department has no right to retain the sums so received. The court concluded that the assessments were indeed nullities, as the Trust was outside the statute and nothing done by the Department was final or conclusive against it.

2. Commissioner of Income Tax's Refusal to Cancel Assessments and Order Repayment:
The court examined whether the Commissioner acted improperly in refusing to exercise his discretion under Section 33 to cancel the assessments and order repayment. The Commissioner had declined to grant repayment on the ground that the Trust had not kept the assessments alive by including them in the reference to the Privy Council. The court found this reasoning flawed, noting that the Commissioner had the authority to cancel the assessments regardless of whether the Trust had pursued each case to the Privy Council. The court highlighted that the Trust had consistently protested the assessments and that the Commissioner should have considered the broad point of view that the Crown should not take advantage of technical difficulties in refunding sums that the Trust was entitled to retain on the merits.

3. Denial of Relief Under Section 33:
The court addressed whether the assessees could be denied relief under Section 33 on any valid ground. It was argued that the Trust had not kept the assessments alive by filing appeals or applications for references to the High Court within the periods of limitation prescribed by the Income Tax Act. The court rejected this argument, stating that once it was conceded that the remedy under Section 33 was open to the assessee, it could not be argued that the Trust had lost all its remedies by not going up to the Privy Council in every case. The court emphasized that Section 33 conferred unfettered powers on the Commissioner to make any order regardless of the time that had expired, and that the Trust's application for relief was made within a reasonable time after the Privy Council's decision.

Conclusion:
The court answered the recast questions as follows:
1. The assessments made subsequent to the year 1932-33, including the supplementary assessment for the year 1931-32, were nullities in view of the Privy Council's decision.
2. The Commissioner of Income Tax acted improperly in refusing to cancel the said assessments and order repayment.
3. The assessees could not be denied relief under Section 33 of the Income Tax Act on any valid ground.

The court directed the Commissioner to pay the costs of the Trust in these proceedings, with counsel's fee assessed at Rs. 500 at the mandamus stage and Rs. 2,000 for the proceedings.