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TMI Blog1969 (9) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings against the assessee for his omission to account for the share income from the said firm. The explanation of the assessee was that he had not concealed any particulars of his income and that he had advanced certain monies to the firm by way of loan charging interest therefor. He also stated that since the firm had been dissolved, no penalty, therefore, was exigible. After this explanation was filed the Income-tax Officer, who had issued the notice under section 28(3), was transferred and was succeded by a new Income-tax Officer. The succeeding Income-tax Officer without issuing any notice or informing the assessee of his intention to continue the proceedings passed the order levying penalty on the assessee. The assessee took up the matter in appeal to the Appellate Assistant Commissioner. He confirmed the order of the Income-tax Officer. On a further appeal to the Appellate Tribunal, it was contended that the order of the succeeding Income-tax Officer levying penalty on the assessee without the issue of a notice was illegal. The Tribunal went into the merits of the case and while considering the above-said contention found that, although with the change of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of income, provides in sub-section (3) that no order imposing penalty under sub-section (1) or sub-section (2) shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. This sub-section, therefore, embodies in itself the wholesome principle of audi alterim partem. For the purpose of this enquiry it is not necessary to enunciate as to what a hearing means and includes. It is also unnecessary to consider as to when reasonable opportunity would be deemed to have been given for the purpose of the said section. Nor is it necessary to consider as to whether the notice issued under section 28(3) in the penalty proceeding is valid. It is sufficient to say that it is obligatory on the part of the authorities imposing penalty under section 28(3) to hear or give a reasonable opportunity to the assessee before any order imposing penalty is passed. The sub-section is peremptory and couched in mandatory language. Its compliance is essential to make the order of penalty valid. We are, therefore, more concerned in this case with section 5(7C). That provision was inserted by the Amending Act, 1953, which amendment came into effect from April 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to except out of the preceding portion of the enactment, or to qualify something enacted therein, which but for the proviso would be within it. " It will thus be seen that a proviso to a particular provision embraces the field which is covered by the main provision. It carves out an exception to the main provision and deals with a case which would otherwise fall within the general language of the main enactment. It thus acts as a restraint upon or serves as a qualification of the generality of the language of the main provision. The proviso is often in the nature of a condition precedent to the enforcement of the operative clause: See Annie Besant v. Emperor, M. S. M. Railway v. Bezwada Municipality, Ram Narain Sons Ltd. v. Assistant Sales Tax Commissioner and Commissioner of Income-tax v. Indo-Mercantik Bank. If the two provisions are carefully read in the light of the foregoing, it will leave no one in doubt that to the power to continue the proceedings conferred upon the succeeding officer from the stage where the predecessor had left is qualified or restrained by the first proviso with the effect that such a power is made subject to the right which the first proviso con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction and instead a new officer had come who has the necessary jurisdiction and is proposing to continue the proceedings from the stage where it was left by the predecessor so that the assessee may elect to demand a reopening or rehearing, as the case may be. The contention that even where the dates of hearing are not fixed by the Income-tax Officer even then it is the duty of the assessee to follow the notifications published notifying the transfers of Income-tax Officers with a view to exercise his right to claim reopening of the case is not sound and cannot be accepted. The argument that no duty is cast upon the succeeding officer to communicate his intention to continue the proceedings to the assessee and therefore it would not be proper to expect from him any notice to the assessee is also devoid of any substance. To accept such a contention would only mean that while conferring on the assessee a right to demand reopening of the case and making the right of the succeeding officer to continue the proceedings subject to such a right the notice has been deliberately dispensed with. We do not think that such a construction is valid. The more appropriate approach to such a case wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd right to the assessee to demand reopening or rehearing and has taken away that right with the other by not intending to inform him about the opportunity to exercise such a right by not expecting any notice to be given to the assessee by the succeeding officer of his intention to continue the proceedings. Any such interpretation would mean that the enactment has conferred on the assessee a mere illusory right. In this connection, it is well to remember that the proceedings under the Act, which can be said to fall within the purview of section 5(7C), are of quasi-judicial character. The penalty proceedings in any case are of a quasicriminal nature. It can therefore safely be presumed that the legislature while conferring the power on the succeeding officer to continue the proceedings from the stage where it was left by his predecessor thought it proper to provide an opportunity to the assessee to demand the reopening or rehearing of the case and that is why the power to continue the proceedings is made subject to such a right. The notice, therefore, for the exercise of such right becomes necessary. That such a notice is implicit under section 5(7C) becomes very clear when we r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t if a statute is passed for the purpose of enabling something to be done, but omits to mention in terms some detail which is of great importance, if not actually essential, to the proper and effectual performance of the work which the statute has in contemplation, the courts are at liberty to infer that the statute by implication empowers the detail to be carried out. (See Craies, page 111]. We are, therefore, satisfied that even though section 5(7C) does not in terms or expressly provide for any notice by the succeeding officer to the assessee informing him of his intention to continue the proceedings from the stage at which his predecessor has left, by necessary implication it provides for such an intimation. We must, we think, infer from the power given to the succeeding officer that such a notice was intended by the legislature. When the legislature has directed something to be done, it must be considered to have empowered something ancillary to be done which is necessary in order to accomplish the ultimate object of section 5(7C). What must follow is that the succeeding officer must give notice to the assessee before he decides to continue the proceedings from the stage whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be correct to characterise the demand of reopening or rehearing of the matter under the first proviso to section 5(7C) as a further or additional opportunity which the assessee is demanding under section 28. It is a right which the assessee can assert in a given situation referred to in the main provision, that is, section 5(7C), which has nothing to do with the additional or further opportunity asked for in the main case if the outgoing income-tax authority has continued to exercise the jurisdiction in the case. It must be borne in mind that the stage at which the predecessor left the case may vary from case to case. In some cases it may be that the predecessor merely gave notice under section 28(3) and then he ceased to exercise the jurisdiction. In other cases he may have received the written explanation in response to his notice. Yet there may be cases where he may have recorded the evidence partly or wholly or there may be cases where he had even heard the arguments but had not written the final order as by that time he had ceased to have jurisdiction over the case. To all such cases, the provisions of section 5(7C) apply and it would not be correct to contend that only in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e one who decides ought to hear the case. In Murlidhar Tejpal v. Commissioner of Income-tax, the facts were that a notice under section 28(3) was issued by Sri K. P. Kumar, Income-tax Officer, on 30th November, 1948. The assessee submitted a written explanation before the same officer on 10th January, 1949. The final order, however, was passed by his successor, Sri V. Jha. It was contended before the Patna High Court that it was necessary for Sri V. Jha to issue another show cause notice under section 28(3) before the penalty was actually imposed. Rejecting that contention it was observed at pages 134 and 135: "Reading, therefore, section 38(3) of the Act, in the context and background of section 5(7C) of the Act, it is manifest that Sri V. Jha, successor in office of Sri K. P. Kumar, had authority to continue the proceeding started against the assessee under section 28(1) of the Act and to impose proper penalty under that section. It was urged on behalf of the assessee that section 28(3) requires oral hearing by the Income-tax Officer before the order imposing penalty is passed against the assessee. We do not think that this argument is correct. Section 28(3) requires that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeded by one Mr. S. N. Roy. Mr. Roy concurring with the draft order which Mr. De has already prepared made an order of penalty. The question referred to the High Court was whether in view of section 28(3), which is a mandatory provision, imposition of penalty by the succeeding officer, who had not heard the assessee, was legal. The High Court of Calcutta said: " A hearing of a case may be of many kinds. It usually involves the calling of witnesses, their examination and cross-examination and then arguments are addressed to the Tribunal. Where witnesses have been called and examined, or where arguments have been advanced, it is clear that one man cannot hear the case and another man pass judgment. The reason is that much may depend on the view that the Tribunal takes as to credibility of witnesses and his mind may be swayed one way or the other by the demeanour of witnesses and as a result of arguments. This is such an intangible and personal task, that it cannot be handed over to the successor. Where, however, no witnesses have been called and no arguments have been advanced, but the matter depends on written objections filed, then the successor is in the same position as the of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x, observed that the conclusion in that case appears to be obvious and stated: "It will be a mockery if it is held that one officer could hear the arguments and another officer could decide the case. But this principle of law is inapplicable in cases where the officers concerned have only to see the written representation." The Mysore High Court refrained from expressing any opinion on the question that if the witnesses are examined before one officer whether the succeeding officer can pass any order based on such evidence. It will thus be apparent that both the above said sections, although were read combinedly, the implications of section 5(7C) and the competing rights which it confers on the assessees were not considered from the succeeding officer's point of view, it would therefore be incorrect to treat this case as holding a contrary view to the view which we have expressed. Hulekar Sons v. Commissioner of Income-tax is another decision of the Mysore High Court. The question referred to was whether the succeeding Income-tax Officer was competent to levy penalty without giving the assessee a fresh opportunity of being heard. Since the question was referred in that fash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Tribunal upheld the order on the ground that the assessee having the knowledge of the change of jurisdiction did not make any request for allowing him an opportunity of being heard. On a reference, it was held that the Income-tax Officer, C-Ward, was bound to give the assessee an opportunity of being heard and the order imposing penalty was illegal. Some of the cases considered by us above seem to have been considered by the said High Court in the decision. In the absence of the full judgment, it is not possible to say that the High Court had held that a notice under section 5(7C) was necessary before the succeeding officer continued the proceedings and, as no notice was given, the penalty imposed was illegal. It is also not possible to say whether it was held, as was held by the first Calcutta case referred to above, that even though the assessee had not exercised his right under the first proviso to section 5(7C), the succeeding officer is bound to give notice under section 28(3) itself before he makes an order imposing penalty. It would, therefore, be not proper to seek any assistance from this decision not fully reported. We are not in this case called upon to consider as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 5(7C). It is not doubted that if it is found that notice was necessary and was not given, then the entire proceedings conducted by the succeeding officer would be illegal, and any order passed in such proceedings cannot be given any effect. It was, however, contended by the learned standing counsel for the department that the Tribunal had not allowed the assessee to raise the question as it was raised before it at a late stage and was not raised before the Appellate Assistant Commissioner. It is true that the Tribunal in its order stated that it declined to give permission to the assessee to raise such a question. Nevertheless, the Tribunal dealt with that question and held that the omission to give any intimation by the succeeding officer did not in any way vitiate the proceedings. It is also true that when in the reference application this point was stressed the Tribunal stated that it had not allowed this plea to be raised at that late stage. But even in the reference order, in a way, it is conceded that certain decisions were brought to its notice and the Tribunal thought that there was some conflict between the decisions cited before it. In spite of this feeling that it i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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