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TMI Blog1934 (1) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... er complete accounts had been produced or those for a particular branch of the assessees' business were the only accounts then produced is not clear. It is, however, clear that the Income Tax Officer did not then raise any question concering the accounts. The proceedings took place before the Income Tax Officer, Muzaffarnagar, who made certain enquiries from the Income Tax Officer, Rohtak, where the assessees had some business connections. The latter informed the Income Tax officer, Muzaffarnagar, that the assessees had considerable business in that district in the names of their sons and grandsons, and suggested that the personal accounts of their sons and grandsons should be carefully examined. In the meantime the Income Tax Officer, Muzaffarnagar, who had first made the assessment, was succeeded by another officer, who took proceedings under Section 34, which provides for assessment on income which had escaped notice and for cases in which too low an assessment was made. The assessees were called upon by a notice to produce their accounts for Sambat 1986. They did not produce such accounts and alleged that the same had been lost. They relied upon evidence consisting of a pol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o raise and which, they submitted, is one of law, was whether an Income Tax Officer can arbitrarily assess on an assumed income in making a best judgment assessment under Section 23 (4). The Commissioner held that in the first place the assessment was not arbitrary, and in the second place, even if it was arbitrary, there could be no appeal or reference against it. There were other subsidiary questions which it is not necessary to mention. A preliminary question which calls for decision in this case is whether the High Court can require the Commissioner to state a case for decision by the High Court of questions of law arising from an assessment under Section 23(4) Income Tax Act. Having carefully examined the scheme of the Act, I am constrained to hold that the High Court has no such power. Section 66(1) empowers the Commissioner to make a reference to the High Court whenever in the course of any assessment a question of law arises before him. But the right of the assessee to insist on the Commissioner making a reference to the High Court and his right to move the High Court for an order requiring the Commissioner to state a case and make a reference are limited. Under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal and is held by the tribunal to be incompetent. Where the Assistant Commissioner rejects what purports to be an appeal on the ground that none lies, he gives effect to the Proviso to Section 30, and his order should be deemed to be one under it and not under Section 31. In passing such an order, the Assistant Commissioner refuses to entertain the appeal, and cannot be considered to be disposing of an appeal, which implies the assumption that the appeal lay, was entertained and disposed of, after discussion of some question falling within the purview of the appeal. In my opinion it is not open to the Assistant Commissioner to express the opinion that the Income Tax Officer should not have assessed to the best of his judgment under Section 23(4) if the latter stated in his order that a case existed for assessment to the best of his judgment. Any abuse of power by the Income Tax Officer or perversity of judgment is to be corrected by the Commissioner in revision, but the Assistant Commissioner has no jurisdiction, where he has before him what purports to be an appeal from an assessment under Section 23(4). It is only if he has jurisdiction to entertain the appeal that he can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt to require a reference to be made in respect of questions of law arising from orders under Section 33 as in case of orders under Section 31. The present case itself affords a striking instance of the desirability of such power being given. The Income Tax Officer who made an assessment in the first instance, found the income to be ₹ 5,113. In making a fresh assessment to the best of his judgment his successor estimated the income to be ₹ 75,000. The 'estimate' rests on nothing but what the Income Tax Officer chose to assume as the income in Sambat 1986. The so-called reasons, on which the estimate is based, if justifiable, can as well warrant the assumption that the income was much more or much less. Where the Income Tax Officer is to make an assessment to the best of his judgment it should not be an assessment by way of penalty; his judgment ought to proceed on some data, including legitimate presumptions arising from non-production of the account books. The assessee' books for the preceding years and those for subsequent years were available, and in making an assessment to the best of his judgment the Income Tax Officer might well have drawn inferences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that the petitioners had been guilty of non-production of the said books? (3) Whether the Income Tax Officer, being fully aware by January 15, 1931, that the petitioners were not in possession of the aforesaid 4 account books for the Sambat year 1986 was justified in commencing proceedings under Section 34 of the Act and whether his action in demanding production of the said books and then proceeding under Section 23(4) of the Act was legal and regular? (4) Whether under the circumstances of the case the assessment was really made under Section 23(3) of the Act and the appeal to the Assistant Commissioner of Income Tax should have been entertained and heard on the merits? (5) Whether the assessment being purely arbitrary and based on no materials whatever was justified in point of law? The facts of the case have been set out in the order of the Income Tax Officer making the assessment dated June 29, 1932, These facts are that for the year in question 1930-31 there was first of all an assessment made and in that assessment, dated May 20, 1930, a tabular statement was quoted showing totals which were derived from the account books for the Sambat year 1986 which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner referred to the ruling reported in Abdul Bari Chowdhury v. Commissioner of Income Tax, Burma, that the assessee had no right of application for reference to the High Court in the case of a best judgment assessment under Section 23(4). The first question which has arisen for decision in this appeal is whether the order which the assessee desires can be made by this Court. The powers of this Court to require the Commissioner to state a case are given in Section 66(3) which begins: If on any application being made under sub-section (2) the Commissioner refuses to state a case etc. This shows that the power of requisition of this Court is limited in the same manner that an application under sub-section (2) is limited. Sub-section (2) states: Within one month of the passing of an order under Section 31 or Section 32 the assessee in respect of whom the order was passed may......require the Commissioner to refer to the High Court any question of law arising out of such order.......... A question therefore must be in regard to any question of law arising out of an order under Section 31 or Section 32. Section 31 deals with the hearing of an appeal by an Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment dated May 20, 1930. The assessee desired the Court to believe that these books had been lost subsequently. The burden of proof of that fact lay on him. It was for the Income Tax Officer and the Assistant Commissioner to decide whether he had discharged that burden or not. They considered that the evidence which he produced was not sufficient to prove his allegation. No question of law arises from their decision on this point. The question No. 3 which I have quoted does not appear to embrace any point of law which could arise and it appears to be merely an argument against the action of the Income Tax Officer based on the idea that because the assessee had made the allegation in regard to the loss of his books, which was subsequently held to be untrue, therefore the Income Tax Officer ought not to have taken proceedings under Section 34 and 23(4) of the Act. No question of law can arise out of such an argument. The remaining questions Nos. 4 and 5 raise the point in regard to the assessment under Section 23(4) and therefore this involves the point as to whether the order of the Assistant Commissioner in respect to this matter was or was not made under Section 31. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the assessee at all. Another case on which the assessee relies is Muhammad Hayat Haji Muhammad Sardar v. Commissioner of Income Tax. In that ruling a Full Bench of the Lahore High Court considered the question as to whether in the making of an assessment under Section 23(4) the Income Tax Officer possesses arbitrary authority or should be guided by judicial principles. It was held that he did not posses arbitrary authority but was bound by strict judicial principles and he should be guided by rules of justice, equity and good conscience, and that the assessment should be reasonable and should not proceed purely on the Income Tax Officer's private opinion to the exclusion of the material before him. But the ruling is not authority whatever for the proposition put forward by learned counsel for the assessee, that is, that the assessee has a right to ask this Court to call upon the Income Tax Commissioner to state a case on this point. Learned counsel had altogether failed to notice that the ruling in question arises on a reference by the Commissioner of Income Tax himself, as is stated on page 130. A reference by the Commissioner comes under Section 66(1), and suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee Judges held that it is the duty of the Commissioner, if required by the assessee, to state a case raising the question of law whether or not the facts established before the Assistant Commissioner are such as to bring the assessee within the ambit of the Proviso to Section 30(1). (Page 311, column 1). He also held on page 310, columns 1 and 2: In so rejecting the appeal he is, in my opinion, under Section 31 'disposing of an appeal' and such disposal is 'a proceeding in connection with an assessment under this Act.' In column 2 he then proceeds to discuss the ruling, Duni Chand v. Commissioner of Income Tax, which says that When the Assistant Commissioner is satisfied that the assessment was made, not ostensibly but genuinely under that sub-section, he must stay his hand and decline to adjudicate upon the merits of the appeal on the short ground that the Proviso to Section 30(1) bars an appeal in such a case. With great respect to the learned Chief Justice of Patna I am unable to agree that this quotation supports the view that the order of the Assistant Commissioner is an order disposing of the appeal under Section 31. The other gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's main contention is that in spite of the Proviso to sub-section (1), Section 30, he has had an appeal to the Assistant Commissioner. The argument is based on the interpretation which he desires this Court to place upon the word 'assessment' in the Proviso to sub- section (1), Section 30. The argument is that when you come to the Proviso to the sub-section the word 'assessment' only is used, and it is contended that what is meant by the use of the word is merely assessment as regards the amount and that the Proviso does not prohibit the assessee in the case of a 'summary assessment from appealing as regards his liability......In my judgment the word 'assessment' in the Proviso is used in the wider sense... If the assessee had no appeal there could be no order under Section 31 excepting an order stating that no appeal lay. It is not such an order which is contemplated by Section 66, and if it is not, the Commissioner cannot be called upon to state a case as no question of law arises. (Page 314, column 2). It appears to me that the main objections to the view of the majority of the Judges of the Patna High Court are: (1) The Proviso of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r an assessment under Section 23(4) is valid or not is not a question of law that arises or can arise out of an order of the Assistant Commissioner passed under Section 31, and consequently such a question cannot be made the ground for an order by the High Court under Section 66(3) requiring the Commissioner to state a case. The judgment proceeds on the point that the Proviso to Section 30(1) bars any appeal against an assessment under Section 23(4) and therefore such an assessment cannot be the subject of an order in appeal under Section 31, and therefore cannot be the subject of a reference under Section 66 (2) and (3). This Full Bench judgment of the Rangoon High Court, in my opinion, correctly lays down the law on the point and therefore I follow it. Some reference was made for the assessee to Act No. XVIII of 1933 amending the Indian Income Tax Act, which was published in the U.P. Gazette of October 7, 1933, at page 154. By Section 28 of the Amending Act an amendment is made in Section 66 of the Income Tax Act. It was claimed that by that amendment if there was a revision under Section 33 then a right to require a reference would arise under Section 66(2). This claim is inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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