1968 (5) TMI 3 - HC - Income Tax

Notice issued u/s 33B - natural justice - if the notice starting the proceedings u/s 33B did not meet the requirements of law that is to say was opposed to the principles of natural justice then the exercise of the jurisdiction by the Commissioner u/s 33B should be struck down on the ground that the initiation of the proceeding were opposed to the principles of natural justice

Summary

Issues Involved:
1. Validity of the notice under section 33B.
2. Sufficiency of the opportunity given to the assessee to be heard.
3. Proper exercise of jurisdiction by the Commissioner under section 33B.

Detailed Analysis:

1. Validity of the Notice under Section 33B:

The primary issue was whether the notice issued under section 33B of the Indian Income-tax Act, 1922, met the legal requirements. The Commissioner of Income-tax issued a notice to the assessee-firm, proposing to cancel the registration granted by the Income-tax Officer for the assessment years 1959-60 and 1960-61, on the grounds that the partnership was not genuine. The Tribunal had repelled the assessee's contentions, stating that the notice sufficiently met the requirements of section 33B, which only necessitated giving the assessee a reasonable opportunity of being heard and did not mandate a statutory notice.

2. Sufficiency of the Opportunity Given to the Assessee to be Heard:

The assessee's counsel argued that the opportunity provided must be reasonable, not merely token. The Supreme Court in Khem Chand v. Union of India emphasized that the opportunity must be reasonable, and the person should be informed about the charges against them and the evidence supporting those charges. The court noted that the notice in question only stated "prima facie reasons and grounds" without specifying the particular reasons for doubting the genuineness of the partnership, leaving the assessee to speculate about the exact charges.

3. Proper Exercise of Jurisdiction by the Commissioner under Section 33B:

The court held that the Commissioner, acting judicially under section 33B, must conform to principles of natural justice, which includes providing a fair hearing. The notice must be sufficiently revealing to inform the assessee of the specific grounds for action. The court referred to the case of M. Chockalingam and M. Meyyappan v. Commissioner of Income-tax, where it was held that authorities must give a fair hearing and sufficient notice to the assessee. The court found that the notice in the present case did not meet these requirements, as it failed to specify the exact reasons for doubting the genuineness of the partnership.

The court distinguished the present case from the Supreme Court decision in Rampyari Devi Saraogi v. Commissioner of Income-tax, where the notice contained basic materials indicating the grounds for action. In the present case, the notice lacked such basic materials, leaving the assessee in doubt about the specific charges. The court concluded that the notice did not meet the requirements of natural justice, and therefore, the initiation of the proceedings under section 33B was invalid.

Conclusion:

The court answered the referred question in the negative, holding that the notice issued under section 33B did not meet the legal requirements and that the Commissioner did not validly exercise jurisdiction under section 33B. The court emphasized the necessity of providing a sufficiently detailed notice to ensure a fair hearing, adhering to principles of natural justice.