1961 (7) TMI 8 - SC - Income Tax

Whether the transfer of the case papers in regard to the appellant s assessment for the year 1952-53 had been validly effected by what he described as a notification passed in that behalf Whether Lalji is liable to pay the tax on the income in question? Held that - It would be idle for the appellant to contend that the proceedings had been validly transferred to any Income-tax Officer in Bombay. That being so it follows that the proceedings are properly pending before the first respondent and the notice issued by him is valid and legal. In our opinion therefore there is no substance in the question of jurisdiction raised by the appellant. We do not think that Mr. Nambiar would be justified in resisting the enquiry which is proposed to be held by respondent No. 1 in pursuance of the impugned notice issued by him against the appellant. Under these circumstances we do not propose to deal with the point of law sought to be raised by Mr. Nambiar. All objections which Lalji may have to raise against his alleged liability would undoubtedly have to be considered in the said proceedings. Proceedings against Chhotalal may also be taken by the Income-tax Officer and continued and concluded but until the proceedings against Lalji are finally determined no assessment order should be passed in the proceedings taken against Chhotalal. If in the proceedings taken against Lalji it is finally decided that it is Lalji who is responsible to pay tax for the income in question it may not become necessary to make any order against Chhotalal. If however in the said proceedings Lalji is not held to be liable to pay tax or it is found that Lalji is liable to pay tax along with Chhotalal it may become necessary to pass appropriate orders against. Chhotalal. When we suggested to the learned counsel that we propose to make an order on these lines they all agreed that this would be a fair and reasonable order to make in the present proceedings. Appeal dismissed.

Summary

Issues Involved:
1. Validity of notices issued by Income-tax Officers.
2. Jurisdiction of Income-tax Officers.
3. Limitation under section 34(3) of the Income-tax Act.
4. Concept of precautionary or protective assessment.

Detailed Analysis:

1. Validity of Notices Issued by Income-tax Officers:

The appellants, Lalji Haridas and Chhotalal Haridas, challenged the validity of the notices issued against them by their respective Income-tax Officers. Lalji's notice was issued by the Income-tax Officer, Ward A, Jamnagar, while Chhotalal's notice was issued by the Fourth Income-tax Officer, Ward G, Bombay. Both appellants sought writs to restrain further proceedings under these notices. The court found that the notices issued by the respective Income-tax Officers were valid and legal. In Lalji's case, the court noted that the subsequent orders passed by the Commissioner of Income-tax (Central), Bombay, were invalid due to the invalidity of the original transfer order by the Central Board. Therefore, the proceedings were properly pending before the first respondent, the Income-tax Officer, Ward A, Jamnagar. Similarly, in Chhotalal's case, the court found that the notice issued under section 34 of the Act was valid.

2. Jurisdiction of Income-tax Officers:

Lalji contested the jurisdiction of the Bombay officer to deal with his case. The court examined the sequence of orders and found that the original transfer order by the Central Board of Revenue was illegal and unauthorized. Consequently, the subsequent assignment of Lalji's case to the Income-tax Officer, Section IV (Central), Bombay, was also invalid. Therefore, the court concluded that the proceedings were properly pending before the Income-tax Officer, Ward A, Jamnagar, who had the jurisdiction to deal with the case under section 64 of the Act. In Chhotalal's case, the court noted that the Fourth Income-tax Officer, Ward G, Bombay, had jurisdiction to assess the appellant.

3. Limitation under Section 34(3) of the Income-tax Act:

Lalji's counsel, Mr. S. T. Desai, argued that the assessment proceedings were barred by limitation under section 34(3) of the Act. However, the court held that the question of limitation should be raised before the Income-tax Officer and not in writ proceedings. The court refrained from dealing with this point and suggested that Lalji could raise it before the first respondent, who would address it in accordance with the law.

4. Concept of Precautionary or Protective Assessment:

Chhotalal's counsel, Mr. Nambiar, argued that the concept of a precautionary or protective assessment was not recognized by the Act and any attempt to levy such an assessment was illegal. The court examined the respondent's statements and found that the notices issued against the two brothers were intended to determine who was responsible for paying tax on the income in question. The court acknowledged that at the initial stage, it was permissible for the income-tax authorities to determine the liable party through appropriate proceedings. Therefore, the court did not find merit in Mr. Nambiar's argument against the precautionary or protective assessment.

Separate Judgments:

The court issued a direction that the proceedings against both appellants should continue and be dealt with expeditiously. The Income-tax Officer handling Lalji's case was instructed to make an exhaustive enquiry to determine Lalji's liability. Proceedings against Chhotalal could continue, but no assessment order should be passed until Lalji's proceedings were concluded. If Lalji was found liable, no order against Chhotalal would be necessary. If Lalji was not liable or was liable along with Chhotalal, appropriate orders against Chhotalal could be made. This approach was agreed upon as fair and reasonable by the counsel.

Conclusion:

The appeals were dismissed without any order as to costs, upholding the validity of the notices and the jurisdiction of the Income-tax Officers, and allowing the proceedings to continue as directed.