9911796707
TMI Blog1965 (12) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... n 23(3)/34(1)(a) into an assessment under section 23(3)/34(1)(b) when it was satisfied that the requisites of section 34(1)(b) were found on the record ? " The assessee is a Hindu undivided family. In its capital account there were two credit entries, one of Rs. 12,000 and odd made on December 12, 1953, and the other of Rs. 14,000 and odd made on January 13, 1954. The assessee's explanation for the credit entries was disbelieved and the amounts were held by the Income-tax Officer to be its income from an undisclosed source. It has selected the Diwali year as its previous year. If the previous year for the undisclosed source with gave rise to the income was the financial year, the income could be assessed in the assessment year 1954-55, whereas if it was the Diwali year (on the ground that the income was from the disclosed business), it could be assessed in the assessment year 1955-56. The income was included in the assessment for the assessment year 1955-56 by the Income-tax Officer and the Appellate Assistant Commissioner, but the Tribunal on second appeal of the assessee held that the previous year for the income, it being an income from an undisclosed source, was the financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re on the part of an assessee to make a return of his income... for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits...... have escaped assessment for that year ", whereas clause (b) applies when notwithstanding that there has been no omission or failure as mentioned in clause (a) " the Income-tax Officer has in consequence of information in his possession reason to believe that income, profits...... have escaped assessment for any year ". Action is to be taken under section 34 by serving on the assessee a notice " containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22 " and the notice may be served at any time if it is under clause (a) and only within four years of the end of the year if it is under clause (b). Before issuing a notice under clause (a), the Income-tax Officer is required (vide proviso (iii)) to record his reasons for issuing it and to obtain the approval of the Central Board of Revenue in certain circumstances or the Commissioner in other circumstances. A notice issued under section 22(2) calls upon a person to furnish within a certain peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the Income-tax Officer to proceed under clause (b) or treating the proceeding as one under clause (b) is outside the scope of their jurisdiction. The essential conditions for the application of clause (b) are : (1) the Income-tax Officer has certain information in his possession, (2) he forms the belief that a certain income has escaped assessment, and (3) the belief is based on the information. I take it that " having reason to believe " means that not only there is a reason for the belief but also that the belief is entertained or formed. Having reason to believe means that there is a reason coupled with the belief. In the instant case, the Income-tax Officer had formed the belief that certain income had escaped assessment for the assessment year 1954-55, but that fact alone would not justify his proceeding under clause (b). He could proceed under clause (b) only if he had certain information in his possession and that information furnished a reason for the belief. Even if he had certain information which could furnish a reason for the belief, it would not justify his proceeding under clause (b) unless he actually formed the belief on account of the information. If he formed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Officer has first to find the assessment year in respect of which there is an escape. If he finds an escape for a particular assessment year, he cannot assess the escaped income for another assessment year and what he cannot do cannot be done by the Appellate Assistant Commissioner or the Tribunal on appeal. What has happened in this case is that the Income-tax Officer thought that the assessee failed to disclose fully and truly all material facts necessary for its assessment for 1954-55 ; he does not claim to have in his possession certain information nor does he claim that on account of that information he had reason to believe that income for the assessment year 1954-55 had escaped assessment. He certainly formed the belief that a certain income had escaped assessment for the assessment year 1954-55 and he certainly had reason for the belief but according to him the reason of the escape was the assessee's omission or failure to disclose fully or truly all material facts necessary for its assessment for 1954-55. It had filed the return but it concealed from it the fact that the amounts of Rs. 12,000 and odd and Rs. 14,000 and odd received by it on December 12, 1953, and Januar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al facts necessary for the assessment. Clause (b) applies when there is no omission or failure mentioned in clause (a), i.e., the return disclosed fully and truly all material facts necessary and, in addition, there is information. The case in which the return does not disclose fully and truly all material facts is not governed by clause (b) nor does information that a return believed to disclose fully and truly all material facts really did not disclose fully and truly all material facts which come within its scope. Since the assessee has disclosed fully and truly all material facts in respect of the escaped income, the information contemplated by clause (b) is normally in respect of the law applicable to the facts unless the Income-tax Officer made a mistake in disbelieving or ignoring some of the facts or of assuming some facts which did not exist at all. When an income is liable to be assessed, the facts relating to it are disclosed fully and truly and yet it is not assessed, it is obvisously a case of a mistake and the information required by clause (b) is about the mistake. In the instant case there is no question of any mistake ; when assessing the assessee for 1954-55, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or when a return is filed but there is a failure to disclose fully and truly all material facts ; clause (b) applies where a return has been filed and there is no failure. The word " or " occurring first in clause (b) has the meaning of " and ". Clause (b) is alternative to clause (a), i.e., it governs what is not governed by clause (a). Omission to file a return is governed by clause (a) as well as failure to disclose all material facts fully and truly ; therefore, clause (b) applies when there is neither the omission nor the failure. Thus the two clauses are mutually exclusive ; in a given set of circumstances, one or the other can apply but both can never apply. When an Income-tax Officer applies clause (a), it follows that the circumstances in which clause (b) can apply are non-existent and neither the Appellate Assistant Commissioner nor the Tribunal can apply it. If he states the facts found by him and they attract clause (b) and not clause (a), his saying that clause (a) is applicable will not make clause (b) not applicable by the Appellate Assistant Commissioner or the Tribunal because then it would be a simple case of applying a wrong law to the facts found. But if the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income-tax, where the Supreme Court observes that the word " ' information ' in section 34(1)(b) includes information as to the true and correct state of the law ". It was argued that the Tribunal's finding in the earlier order stating that the escaped income was assessable in the assessment year 1954-55 was information in the Income-tax Officer's possession. It was for the Income-tax Officer to treat it as information and to say that he was informed about the correct state of the law. He could not be said to have been informed if the Tribunal's finding did not register any impression in his mind. Every statement made to a person is not information to him ; it is not if he does not understand it or does not give any thought to it or does not believe it. The first proviso to section 34 was amended with effect from April 1, 1956, and now under clause (iii) of it reasons have to be recorded by the Income-tax Officer, and the Commissioner's approval for the issue of notice under section 34 is required, only if he proceeds under clause (a). It was contended by Sri R. L. Gulati that the proviso in force in the assessment year 1954-55 governs the case and not the proviso in forc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itute clause (b) for clause (a) in the assessment order. So, prior to April 1, 1956, the Tribunal had no power to alter the clause. It cannot be said that the amendment to the proviso with effect from April 1, 1956, has added to the Tribunal's power and now empowered it to alter the clause. The power conferred upon the Tribunal by section 33(4) is certainly very wide but not absolutely unlimited or arbitrary. The power to consider a certain order to be fit to be passed is controlled by the provisions of the Act ; it has not the power to consider any order as one fit to be passed. If in view of what the Income-tax Officer did and ordered the reassessment cannot be done under clause (b), the Tribunal should not consider it fit to alter the reassessment from one under clause (a) to one under clause (b) ; if it must not find such alteration fit, it has no jurisdiction to order it. Sri Das argued that the power to act under clause (b) is smaller than the power to act under clause (a) and, therefore, the Tribunal can alter the acting under clause (a) to acting under clause (b). The analogy of an appellate court's power to alter a conviction to one for a smaller offence does not apply. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner's or the Tribunal's proceeding under clause (b) of section 34 when the Income-tax Officer has refused to proceed under it or proceeded instead under clause (a). The essential distinction between the two cases is that the opinion referred to in the proviso is to be formed not for the purpose of assuming jurisdiction but in the course of exercise of jurisdiction and all that the Income-tax Officer does in the process of assessment is subject to the Tribunal's appellate jurisdiction. The facts mentioned in clause (a) or clause (b) are, on the other hand, jurisdictional facts required for the very assumption of jurisdiction and while the assumption of jurisdiction is, the refusal or failure to assume jurisdiction is not, subject to the Tribunal's appellate jurisdiction. All that the Income-tax Officer does in the exercise of his jurisdiction is objective or justiciable and is subject to the Tribunal's appellate jurisdiction. All that he does after assuming jurisdiction can be done by the Appellate Assistant Commissioner or the Tribunal but an Appellate Assistant Commissioner or the Tribunal cannot assume jurisdiction under section 34 when he has refused to do it. In Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (b) or amend the assessment to one under clause (b). Then section 33(5) specifically deals with the power invoked in the case before the Supreme Court. The observations of Subba Rao J., therefore, do not support the contention that the Tribunal has the power to convert an assessment under clause (a) into one under clause (b). The Tribunal has not drafted the statement correctly and formulated the questions, intelligently. Question No. 1 is on the face of it suggested by the Commissioner and not by the assessee. The assessee could not have suggested it because the Tribunal's decision was in its favour. It had contended in the appeal before the Tribunal that clause (b), and not clause (a), applied. The statement has been submitted at its instance and the question that was sought to be referred by it is the question about the Tribunal's power to alter the assessment from one under clause (a) to one under clause (b). Question No. 2 formulated by the Tribunal brings out this question but only if question No. 1 is in the negative. Even if the Tribunal could frame questions at the suggestion of the Commissioner, its duty was first to frame questions sought by the assessee to be refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (5) to decide the questions of law raised by the statement. Since the High Court's duty is simply to decide the questions of law raised by the statement, the Tribunal is required to frame the questions of law arising out of the statement. All sorts of questions of law can arise out of a statement but the High Court is required to decide only such of them as are raised by the statement, i.e., as arise out of the Tribunal's order and are mentioned in the application under sub-section (1). The Tribunal is required to incorporate such questions in the statement so that the High Court is spared the trouble of ascertaining which questions are to be answered by it. Several questions of law may be raised before the Tribunal during the hearing of an appeal, some at the instance of the assessee and others at the instance of the Commissioner. Some questions of law may be answered by the Tribunal in the assessee's favour and others in the Commissioner's favour. One question may arise out of the answer given to another question and one of these questions may be answered in the assessee's favour and the other in the Commissioner's favour. If the order, i.e., the final decision in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute previously and a question had arisen on account of it, the dispute may come to an end on the answer being given to the question and the state of " no question " will come into existence. The reference under sub-section (1) is of questions of law arising out of the Tribunal's order passed under section 33(4). There can be no reference of any question, even if of law, arising out of any other order of the Tribunal. When a High Court answers the questions of law referred to it by the Tribunal and sends a copy of its judgment to the Tribunal the Tribunal is required by sub-section (5) to dispose of the case " conformably to such judgment " . Any order that the Tribunal passes under this provision is not an order under section 33(4) and, therefore, no question, even if of law, arising out of its order can be referred under section 66(1). In other words, there cannot be two references under sub-section (1) in one case ; all questions of law that arise must be referred in one instalment. When the Tribunal's order depends upon an answer given to one question which arises out of the answer given to another question, the latter question also must be referred if required by the party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions may be suggested either by the party which wants a reference or by the party which, is content with the decision of the Tribunal. " Modi and Chhangani JJ. of the Rajasthan High Court followed Girdhardas & Co. Ltd. in Educational and Civil List Reserve Fund No. 1 v. Commissioner of Income-tax. The Commissioner could not apply under sub-section (1) (because the Tribunal's order was in his favour). If he still applied and the Tribunal referred the question (whether clause (a) applied or clause (b)), the High Court could refuse to answer it. Still, Sri Gulati argued, he should have as a precaution made an application under sub-section (1) for referring the question to the High Court so that if the assessee applied, the questions suggested by both could be referred by the Tribunal. He added that the Commissioner could withdraw the application if the assessee did not make any application within the prescribed period. The alternative suggestion was that when the assessee applied, the Commissioner also should have applied for reference of the question. The alternative suggestion cannot always be adopted because there is a period of limitation prescribed for an application and, by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved in the question actually referred by it and the words " on the facts and in the circumstances of this case " only meant the Tribunal's finding that the deed was not in operation. The fact that in the instant case the Tribunal has actually referred the question at once distinguishes it from D. Arokiaswami Chetti & Co. Though the learned judges referred to an application by the other party, they had no occasion to decide, and did not decide, that without such an application no question could be framed at the suggestion of the opposite party. What we have to decide is whether the Tribunal could refer the question at the instance of the Commissioner without an application by him and this question never arose, and was not decided, in D. Arokiaswami Chetti & Co. Sri Gulati referred us to Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd which lays down that a High Court acting under sub-section (2) of section 66 cannot ask the Tribunal to refer to it a question not raised by the applicant in his application under sub-section (1). Even if an assessee and the Commissioner apply under sub-section (1) and the Tribunal rejects both the applications and only the assessee appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed at Rs. 200. MANCHANDA J.--I agree with my Lord the Chief Justice that the questions require to be reframed, and that the second question as reframed be answered in the affirmative and against the assessee but I am inclined to take a different view on question No. 1, as it raises an important point as to the power of the Tribunal to alter a more onerous and stringent sub-section under which assessment or reassessment proceedings are taken by the Income-tax Officer to a comparatively less severe and more advantageous sub-section for the assessee. In this particular case the assessee may gain some advantage by the question being answered in his favour but by and large if the Tribunal is held not to have any such power, the taxpayer will be the loser. I agree to the proposed answer to question No. 2 and this is in itself sufficient to dispose of the reference but as the matter may not be allowed to rest here I would express my views on both the questions for what they are worth. The material facts in respect of the two questions as reframed are these. The relevant year of assessment is the assessment year 1954-55. The status of the assessee was that of a Hindu undivided fami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 1955-56, which explanation, as already observed, had been rejected both by the Income-tax Officer and the Appellate Assistant Commissioner and the merits were not agitated before the Tribunal for that assessment year. Having succeeded in getting the amount of Rs. 27,707 deleted from the assessment for 1955-56, on what after all was a technicality, the assesee now before the Tribunal for the first time challenged the validity of the notice under section 34, particularly if it was one issued under section 34(1)(a) as that would inevitably lead to penalty proceedings under section 28(1)(c) of the Act. The argument before the Income-tax Officer was that once a cash credit had been included in the assessment for a particular year and, if for any reason it was deleted, it could not be included under the provisions of section 34(1)(a) in any other year as the error would be one of law and not of fact and action under section 34 could only be taken if there was an error of fact and not of law. The Income-tax Officer rejected this contention observing, " while going through the facts of the case I find that the material facts which govern the application of the provisions of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration for one reason or the other. The inclusion was accordingly upheld. When the case came up before the Tribunal again, the inclusion on the merits was not challenged but the only ground taken was that action under section 34 was bad, for the reason that the assessee was not bound to disclose, in the assessment proceedings for 1954-55, the impugned credits, which appeared in the account books relating to the assessment proceedings for the year 1955-56. The Tribunal was impressed by this argument and held that " law does not expect the assessee to assume the cash credits were income receipts, that the financial year was the previous year in respect thereof, and, although they did not appear in the account books in that year, it was bound to disclose in the assessment year relevant to the financial year..... " They, however, went on to hold " we however find that the assessment should have been made under section 34(1)(b). The fact that the cash credits were deleted by the Tribunal in a later year does constitute information for taking action under section 34(1)(b). All the necessary facts are found on the record and no further investigation is necessary and we had put th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... latter year is concerned, if it was at all income assessable in that year, then undoubtedly that income had escaped assessment. The only question that would then arise would be whether the reassessment proceedings should be under section 34(1)(a) or section 34(1)(b) of the Act. The prerequisite conditions under section 34(1)(a) are more stringent than those under section 34(1)(b). Sub-section (1)(b) is the general provision for bringing to assessment escaped or under-assessed income. That does not require any act of commission or omission on the part of the assessee before it can be invoked. All that is necessary is that the Income- tax Officer in consequence of information in his possession should have reason to believe that some income has escaped assessment " for any year ". It is well settled that the information need not necessarily be one of fact but may even be information as to the correct state of the law. The position in law as to what was the previous year for income from an undisclosed source was not clear or settled at the time when the original assessment in the present case was made. That is why no such objection was taken by the assessee till the matter reached the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed source. It is well settled that what the Income-tax Officer himself could have done, the appellate court can also do. The powers of the appellate court are generally speaking the same as that of the original court. Therefore, even though the Income-tax Officer may have chosen to make the assessment under the more stringent and onerous provisions of section 34(1)(a), there is nothing to prevent the appellate court from invoking section 34(1)(b), provided the prerequisite conditions are satisfied and they are found on the record. In the present case the requisite conditions for invoking section 34(1)(b) were all present. There was information as to the correct state of law in the shape of the order of the Tribunal for the assessment year 1955-56 which led the Income-tax Officer to believe that the sum of Rs. 27,707 had escaped assessment for the assessment year 1954-55 and the notice was issued within the prescribed period of limitation. Apart from the principle that an appellate court has ordinarily the same powers as the original court, the provisions of section 33(4) of the Act give the Tribunal plenary powers " to pass such orders thereon as it thinks fit ". These ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f accounting. " The Supreme Court in Commissioner of Income-tax v. Kanpur Coal Syndicate, affirming, the decision of the Allahabad High Court, held that the Appellate Tribunal has ample power under section 33(4) to set aside an assessment made on an association of persons and direct the Income-tax Officer to assess the members individually or to direct amendment of the assessment already made on the members. It was there observed : " The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is conterminous with that of the Income-tax Officer. He can do what the Income-tax Officer can do and also direct him to do what he has failed to do. If the Income-tax Officer has the option to assess one or other of the entities in the alternative, the Appellate Assistant Commissioner can direct him to do what he should have done in the circumstances of a case... Under this section (section 33(4)) the Appellate Tribunal has ample power to set aside the assessment made on the association of persons and direct the Income-tax Officer to assess the individuals or to direct the amendment of the assessment already made on the members. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment which was made upon the assessee for the relevant assessment year 1954-55. They were, therefore, neither disclosed in the return nor was the attention of the Income-tax Officer drawn by the assessee in the assessment proceedings for 1954-55. These credits were only discovered by Income-tax Officer when making the assessment for 1955-56. The assessee ultimately succeeded before the Tribunal only on the technical ground that the impugned credits were added as income from an undisclosed source and as such were assessable not in 1955-56 as they fell within the financial year 1953-54 relevant for the assessment year 1954-55. In these circumstances it would not be unreasonable to hold that it was equally open to the Income-tax Officer to take a technical stand that, as it was established that the credits were income from an undisclosed source (even if the assessee did not admit it to be so) and as the amount had found its way into its books of account, albeit the capital accounts, it was obliged to draw the attention of the Income-tax Officer to the existence of such an amount in its books of account, for the financial year 1953-54, during which the credits had actually f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir own costs of this reference. Counsel's fee is assessed at Rs. 200. BY THE COURT (December 27, 1965) As we differ about the answer to be given to question No. 2, we direct that the case be laid before the Hon. the Chief Justice for obtaining a third judge's opinion on the following question : " Had the Tribunal the power, in the circumstances of this case, to maintain on appeal an assessment made by an Income-tax Officer under section 34(1)(a) of the Income-tax Act on its holding that though it could not be made under that provision it could be made under section 34(1)(b) ? " V. BHARGAVA J. (9-2-1966)--In this reference I have heard learned counsel for the assessee as well as learned counsel for the income-tax department. The question referred to me for opinion by the Division Bench is : " Had the Tribunal the power, in the circumstances of this case, to maintain on appeal an assessment made by an Income-tax Officer under section 34(1)(a) of the Income-tax Act on its holding that though it could not be made under that provision it could be made under section 34(1)(b) ? " When dealing with this reference, a question arose whether, in answering this question, " the circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally and has set aside the assessment made validly by the Income-tax Officer under section 34(1)(a). It has been contended before me by learned counsel for both the parties that, in fact, the Bench, when referring this case, did not at all intend that this circumstance should be taken into account by me and the question should not be answered on this basis. It was suggested to me by learned counsel and it also seems to me that the question, which the Bench really wanted to be answered by me, was the abstract question of law, whether the Tribunal had jurisdiction to convert an assessment made under section 34(1)(a) by the Income-tax Officer into an assessment under section 34(1)(b) in appropriate cases where section 34(1)(a) does not apply and section 34(1)(b) would be applicable and could be validly applied by the Tribunal. If such an abstract question has to be answered by me, it is clear that I should not be called upon to take into account all the circumstances of this particular case, which include the circumstances that this court has already held that in this particular case the assessment was valid under section 34(1)(a) and should be made under section 34(1)(a). Consequentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to me for opinion under the proviso to section 66A, my jurisdiction is confined to answering this question on the point on which there has been difference of opinion between the members of the Bench and I have no power to go into the question whether this reference is necessary or what the result of answering this reference will be. It seems to me that, in these circumstances, it would not be proper for me to hold that this reference is unnecessary and to decline to give any opinion on the point referred. It will, of course, be open to the referring Bench to reconsider whether the question is a necessary one and needs to be referred for my opinion. The papers may be laid before the Bench concerned at a very early date. BY THE COURT (22-2-1966) We have perused the judgment of the third learned judge to whom the point of law upon which we had differed, was referred. The question that we meant to refer was the question of jurisdiction of the Tribunal to alter the provision or section under which an assessment was made when the matter came up before it on appeal. We, therefore, now clarify the position and refer the following for opinion (in substitution of the order previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the Tribunal in a later year does constitute information for taking action under section 34(1)(b). We are competent to convert the assessment under section 34(1)(a) into 34(1)(b). All the necessary facts are found on the record and no further investigation is necessary and we had put this question to the learned counsel for the assessee also at the time of the argument. The assessee's counsel is not taken by surprise for effectively meeting this case. It would be unjust, in our opinion, to annul the assessment when section 34(1)(b) applies to the facts of the case. We, therefore, alter the assessment to one under section 34(1)(b). " At the instance of the assessee the Tribunal made a reference to this court. It framed the following questions : " 1. Whether on the facts and in the circumstances of the case was the department correct in making the assessment under section 34(1)(a) ? 2. If the answer to the first question is in the negative then was the Tribunal correct in altering an assessment made under section 23(3)/34(1)(a) into an assessment under section 23(3)/34(1)(b) when it was satisfied that the requisites of section 34(1)(b) were found on the record ? " The refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) to initiate the assessment proceedings can be invoked. They are two distinct jurisdictions, one flowing from clause (a) and the other from clause (b) and the invoking of each jurisdiction is dependent upon the existence of conditions preceding the exercise of the corresponding jurisdiction. The jurisdiction under clause (a) to assess or reassess the income, profits or gains or recompute the loss or depreciation allowance can be invoked only when the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under that Act, or excessive loss or depreciation allowance have been computed. The jurisdiction under clause (b) can be invoked when, although there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (a) or clause (b). Where the notice is under clause (a) and the Income-tax Officer proceeds to make an assessment, the assessment order passed by him is an order under clause (a) of sub-section (1). Where the notice is under clause (b), the assessment order passed by the Income-tax Officer is one under clause (b) of sub-section (1). From all these considerations, it is clear that clauses (a) and (b) of sub-section (1) of section 34 contemplate two distinct and mutually independent jurisdictions. Having analysed the nature of the two jurisdictions conferred upon the Income-tax Officer by sub-section (1) of section 34, I shall now turn to consider the question whether the Tribunal can convert an assessment made by the Income-tax Officer under clause (a) of that sub-section to an assessment under clause (b). The jurisdiction of the Tribunal is set out by section 33. The Tribunal has the power to hear appeals against an order passed by the Appellate Assistant Commissioner under section 28 or section 31. Upon such appeals the Tribunal has jurisdiction to " pass such orders thereon as it thinks fit ". There can be little doubt that the jurisdiction conferred upon the Tribunal by this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iso to section 13 applied even though the language of the proviso appeared to indicate that it was the Income-tax Officer who had to form the opinion about the applicability of the proviso. It is important to remember that the question of applying the proviso to section 13 arises when the assessment proceeding has commenced, and during the course of that proceeding. It is applied for the purpose of determining the true income, profits or gains, and in the course of the exercise of jurisdiction already commenced. It is not applied for the purpose of determining whether or not the jurisdiction to assess can be invoked at all. The question whether the proviso to section 13 should be applied is a matter falling for objective consideration. To my mind, the law laid down in McMillan's case can have no relevancy to the question raised before me. Upon all these considerations it seems to me that the Tribunal, in an appeal before it, cannot exercise the functions of the Income-tax Officer and decide that an assessment can be sustained under clause (a) or clause (b) of sub-section (1) of section 34. If the Tribunal does not enjoy that jurisdiction, it does not have jurisdiction to convert a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(a) applied. There was, however, disagreement on the second question as to whether an assessment made under section 23(3)/34(1)(a) by the Income-tax Officer could be changed by the Income-tax Appellate Tribunal to an assessment under section 23(3)/34(1)(b) of the Act. This point was referred for opinion of a third judge, Pathak J., who has given his decision holding that the Tribunal had no jurisdiction to convert or alter the assessment made by the Income-tax Officer under section 34(1)(a) to one under section 34(1)(b) and maintain it as such. The papers have now been laid before a Division Bench of which the Chief Justice is no longer a member as he has retired and his place has been taken by M. H. Beg J. The practice of the court has been that in such a case the matter is merely laid before a Bench to give effect to the opinion of the majority of the judges who have heard the case, including those who first heard it. That is also what is provided in the proviso to section 66A of the Income-tax Act, 1922. In these circumstances, the case is only laid before the Bench now constituted for giving effect to the orders already passed and determining the incidental question of costs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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