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TMI Blog1938 (4) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... oided a good many of the difficulties in which they subsequently found themselves involved. Unfortunately they completely ignored the notices. The duty of the Income-tax Officer in such circumstances is prescribed by Section 23(4) of the Act. It is to make the assessment to the best of his judgment. One of the peculiarities of most Income Tax Act is that the word assessment is used as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act for imposing liability upon the tax-payer. The Indian Income Tax Act is no exception in this respect, and some discussion took place before their Lordships as to the meaning of the words make the assessment in Section 23(4), the question debated being whether the words mean no more than compute the total income or whether they include also the determination of the tax payable. It was pointed out that by sub-section (1) of the same section, which deals with the cases where the officer is satisfied with the return made by the tax-payer, the officer is in terms directed both to assess total income and to determine the sum payable on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to as super-tax) at the rate or rates laid down for that year by Act of the Indian Legislature. By virtue of Section 56 the total income of an unregistered firm is for the purposes of super-tax the total income as assessed for the purposes of income-tax, and an assessment (which here must mean a computation) of total income that has become final and conclusive for the purposes of income-tax is made final and conclusive for the purposes of super-tax for the same year. By Section 58 all the provisions of the Act (with certain exceptions not material for the present purpose) are made applicable so far as may be to the charge, assessment, collection and recovery of super-tax. By Section 2(4) the words registered firm are defined as meaning a firm constituted as therein mentioned of which the prescribed particulars have been registered with the Income-tax Officer in the prescribed manner. On May 18, 1926, the respondents applied to the Income-tax Officer for registration and such registration was effected by him on January 17, 1927. It is now necessary to return to the assessment made by the Income-tax Officer under Section 23(4) and the notice of demand served by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as he thinks fit: Provided that he shall not pass any order prejudicial to an assessee without hearing him or giving him a reasonable opportunity of being heard. The circumstances in which in the present case the Commissioner exercised or purports to exercise the powers conferred upon him by the section have been described by him in the following words:- In January, 1928, it was brought to the notice of the Commissioner of Income-tax that the deed of partnership produced by the firm for the purposes of its registration was not a valid deed of partnership and that, therefore, the order granting registration was not correct. Hence a notice under Section 33 of the Act was issued to the firm on January 9, 1928, calling upon it to show cause why the Income-tax Officer's order of January 17, 1927, registering the firm be not set aside. The firm thereupon sent a written representation and after considering it, the Commissioner, in virtue of his powers under Section 33 of the Act, revised on February 13, 1928, the Income-tax Officer's order regarding registration of the firm and ordered its cancellation, directing the Income-tax Officer to take the necessary action the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer in making the order complained of was acting in pursuance of the directions given to him by the Commissioner under Section 33; and at that time, as has already been stated, no appeal could be brought against an order made under that section. But no such order can be made that is inconsistent with the other provisions of the Act. One of the questions, therefore, arising upon the appeal, was whether the Income-tax Officer had any power to make the order apart from the direction given to him by the Commissioner. If he had not, the fact that such direction was given an irrelevant circumstance. Another question arising upon the appeal was as to its competency. Having regard to Sec. 58(1) of the Act, the provisions contained in Section 30(1) giving a right to appeal to the Assistant Commissioner in the case of an assessee denying his liability to be assessed under the Act , which must mean in that context charged with tax under the Act , is as applicable to super tax as it is to ordinary income tax. But the proviso to that sub-section has to be considered. If the order of May 4, 1929, can properly be described as an assessment under Section 23(4), no appeal would lie. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quisition, the Commissioner shall state and refer the case accordingly . The application to the Commissioner to set aside the order of the Income tax Officer was rejected by the Commissioner as was the application to state a case. He regarded the case as a clear one of assessment under Section 23(4) in respect of which no appeal would lie. The appellate proceedings before the Assistant Commissioner and the appellate order were, therefore, in his opinion illegal. Hence, said he, I quash them under Sec. 33 of the Act . The proceedings having been quashed, there was, in his view, no order out of which any questions of law could arise and nothing, therefore, that could be referred to the High Court under Section 66(2). He accordingly refused to state a case. In their Lordships' opinion the Commissioner was plainly wrong in so doing. One of the questions of law arising out of the order of the Assistant Commissioner was whether the appeal to him was competent in view of the proviso to Section 30(1). By deciding the question himself adversely to the respondents, the Commissioner could not deprive the respondents of the right of having the question decided by the Court. This w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable for income tax and the sum payable for super tax. The notice of demand in the prescribed form also provides for the sums payable for income tax and super tax being specified separately. Considerable discussion accordingly took place before the High Court on the question whether a demand for super tax in order to be valid ought to be made simultaneously with the demand for income tax. Aston, A.J.C., considered that the demand for super tax should be made within a reasonable time of the assessment for income tax, meaning no doubt, by assessment the service of the notice of demand for income tax which normally completes the assessment. Rupchand Bilaram, A.J.C., was of opinion, that the demand for super tax should be made within a reasonable time, and, therefore, almost simultaneously with the demand for income tax. Both of them held for this reason (amongst others) that the service of the Notice of Demand of May 4, 1929, was illegal and inoperative to impose liability upon the respondents. Their Lordships do not find it necessary to express any opinion upon this point inasmuch as in their view and for the reasons which they will now proceed to give it does not call for determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndents as a registered firm and so subject the respondents to liability to pay super-tax. Their Lordships would, in any case, hesitage long before acceding to a contention that would lead to so extravagant results. In their opinion, however, the contention cannot prevail. The Commissioner's power under Section 33, can only be exercised subject to the provisions of the Act of which the provisions in Sections 34 and 35, are in this respect of the greatest importance. These sections are or were at the material time as follows: 34. If for any reason income, profits or gains chargeable to income-tax has escaped assessment in any year, or has been assessed at too low a rate, the Income-tax Officer may at any time within one year of the end of that year, serve on the person liable to pay tax on such income, profits or gains, or, in the case of a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of Section 22 and may proceed to assess or re- assess such income, profits or gains, and the provisions of this Act shall, so far as may be, apply accordingly as if the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondents' registration-and the order effecting the cancellation would have formed part of that record-it would be apparent that a mistake had been made in stating that no super-tax was leviable. The Income- tax Officer took no further step, however, until May, 1929, and by then he was hopelessly out of time whichever of the two sections was applicable. Their Lordships are accordingly of opinion that the order of May 4, 1939, was one that the Income-tax Officer had no power to make, and that the second of the two questions to which they have referred must be answered in the affirmative. For the order could only be justified, if at all, as one made, not under Section 23(4) but under either Section 34 or Section 35. If it was made, as the Commissioner has found, in purported exercise of the powers given by Section 23(4) the assessee nevertheless had a right of appeal to the Assistant Commissioner under Section 30 and the Commissioner was in error when he quashed the proceedings on that appeal. For, as was truly said by Sir Shadi Lal in the case of Duni Chand v. Commissioner of Income-tax, at p. 601: The mere fact that the assessment purports to have been mad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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