1970 (9) TMI 26 - HC - Income Tax

Opportunity of being heard to assessee before commissioner - no material considered without assessee s knowledge - held that tribunal was justified in maintaining the order of the CIT under section 33B of the Indian Income-tax Act, 1922, setting aside the assessments and directing the Income-tax Officer to make fresh assessments

Issues Involved:
1. Justification of the Tribunal in maintaining the order of the Commissioner of Income-tax under section 33B of the Indian Income-tax Act, 1922.
2. Validity of the assessments made by the Income-tax Officer for the years 1956-57 to 1961-62.
3. Alleged procedural and jurisdictional errors in the original assessments.
4. Allegations of collusion between the assessee and the Income-tax Officer.
5. The relevance of initial capital for subsequent assessment years.

Issue-wise Detailed Analysis:

1. Justification of the Tribunal in maintaining the order of the Commissioner of Income-tax under section 33B of the Indian Income-tax Act, 1922:
The Tribunal upheld the Commissioner's order under section 33B, which set aside the original assessments and directed fresh assessments. The Tribunal noted that the original assessments were made hurriedly without proper enquiry into the facts alleged in the returns. The Tribunal cited the case of Smt. Bagsu Devi Bafna v. Commissioner of Income-tax and Commissioner of Income-tax v. Rampyari Khemka to support its decision, emphasizing that the assessments lacked corroborative evidence and were based on off-hand estimates.

2. Validity of the assessments made by the Income-tax Officer for the years 1956-57 to 1961-62:
The Commissioner of Income-tax found that the assessments were erroneous and prejudicial to the interests of the revenue. The assessments were made without proper enquiry or investigation into the jurisdiction, initial capital, and the business activities of the assessee. The Commissioner noted that the Income-tax Officer had no jurisdiction over the assessee and that the assessee did not reside or conduct business at the address provided in the returns. The Tribunal agreed with the Commissioner that the assessments were made without proper evidence and required fresh assessments.

3. Alleged procedural and jurisdictional errors in the original assessments:
The Commissioner highlighted several procedural errors in the original assessments, including the lack of enquiry into the assessee's residence and business activities, the acceptance of the initial capital without evidence, and the absence of proper accounts. The Tribunal concurred, noting that the assessee failed to produce any evidence to substantiate her claims. The Commissioner and the Tribunal both emphasized the need for a thorough investigation into these matters.

4. Allegations of collusion between the assessee and the Income-tax Officer:
The Commissioner suggested that the Income-tax Officer accepted the assessee's explanations without proper enquiry, which could have been done with an ulterior motive to oblige the assessee. However, the Tribunal clarified that this did not amount to a finding of collusion. The real issue was the lack of proper enquiry and investigation, which resulted in erroneous assessments prejudicial to the revenue.

5. The relevance of initial capital for subsequent assessment years:
The Commissioner and the Tribunal both considered the initial capital crucial for understanding the assessee's income in subsequent years. The assessee claimed that the initial capital came from the sale of gold ornaments received at her marriage. However, the Commissioner found no proper evidence for these sales. The Tribunal noted that the acquisition of initial capital was relevant for the assessments from 1956-57 to 1961-62, as it was the basis for the assessee's business activities.

Conclusion:
The Tribunal was justified in maintaining the order of the Commissioner of Income-tax under section 33B, setting aside the original assessments and directing fresh assessments. The original assessments were found to be erroneous and prejudicial to the interests of the revenue due to procedural and jurisdictional errors, lack of proper enquiry, and insufficient evidence. The allegations of collusion were not substantiated, and the initial capital's relevance was upheld for subsequent assessment years. The question was answered in the affirmative and in favor of the revenue, with the assessee ordered to pay the costs of the reference.

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