1969 (2) TMI 58 - HC - Income Tax

Whether the Tribunal was right in holding that an assessment under section 23(4) of the Indian Income-tax Act 1922 could not be made unless there has been a default on the part of the assessee not only under section 22(2) of the said Act but also under section 22(3) thereof - question must be answered in the negative and in favour of the revenue

Summary

Issues:
Assessment under section 23(4) of the Indian Income-tax Act, 1922 based on non-compliance with notices under sections 22(2) and 22(4) - Appeal against rejection of application under section 27 - Interpretation of default under sections 22(2) and 22(3) - Scope of compliance with notice under section 22(3) in attracting section 23(4) provisions.

Detailed Analysis:

The judgment involves the assessment of an unregistered firm for the assessment year 1958-59 under section 23(4) of the Indian Income-tax Act, 1922, due to non-compliance with notices under sections 22(2) and 22(4). The assessee filed an application under section 27, claiming inability to comply with the notices due to various reasons, including alleged illness of the accountant and domestic issues. The Income-tax Officer rejected the application, leading to an appeal before the Appellate Assistant Commissioner.

The Appellate Assistant Commissioner found discrepancies in the notice dates and concluded that the assessee did not have a reasonable opportunity to comply with the notice under section 22(4). The Appellate Assistant Commissioner allowed the appeal, directing a fresh assessment. The Revenue then appealed to the Income-tax Appellate Tribunal.

The Tribunal held that the assessee was prevented from filing the return under section 22(3), preventing the Income-tax Officer from making an assessment solely based on non-compliance with section 22(2). The Tribunal also considered the sufficiency of cause for non-compliance with the notice under section 22(4) and dismissed the appeal. The Tribunal's decision was challenged by referring a question to the High Court under section 66(1) of the Act.

The High Court analyzed the provisions of sections 22(2), 22(3), and 23(4) of the Act. It emphasized that failure to comply with the notice under section 22(2) alone could justify an assessment under section 23(4), without the necessity of default under section 22(3). The Court clarified that section 22(3) does not impose an obligation on the assessee but provides an additional opportunity for filing a return before assessment. The Court cited relevant case law to support its interpretation and ruled in favor of the Revenue, stating that the Tribunal's conclusion was incorrect.

In conclusion, the High Court held that the assessee's non-compliance with the notice under section 22(2) justified the Income-tax Officer's assessment under section 23(4) and rejected the Tribunal's decision. Each party was directed to bear its own costs, and both judges concurred with the judgment.