9911796707
TMI Blog1963 (3) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... Province of Bombay. By the Taxation Laws (Extension to Merged States and Amendment) Act, 1949, the Act of 1922, along with other statutes was extended to the merged States including the State of Miraj. The Income-tax Officer, Satara South, Sangli, started making certain enquiries from the petitioner and actually two notices were issued dated 1st February, 1952, under section 34 of the Act of 1922 with regard to the aforesaid years. The petitioner filed the returns of income on 8th March, 1952, showing that no income had accrued or arisen or been received in the then British India. The petitioner also addressed a letter dated 3rd March, 1952, giving a detailed explanation of the amounts deposited by the petitioner with various banks and another firm, a copy of which is annexure A . The Income-tax Officer, Sangli, supplied to the petitioner a statement of the reasons for which the proceedings were started. The relevant parts have been set out in paragraph 7 of the petition and need not be referred to. In a letter dated 15th November, 1952, the Income-tax Officer, Sangli, wrote to the petitioner as follows (annexure B ): On further consideration of the various contentions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1961 (to be referred to as the Act of 1961), and on 5th December, 1962, respondent No. 2 served notices dated 30th November, 1962, under section 148 of the Act of 1961 for the aforesaid assessment years after obtaining the necessary permission of the Central Board of Revenue. In the present petition, which is under article 226 of the Constitution, it is the validity and legality of these notices which have been challenged, principally on the ground of absence or excess of jurisdiction. Although a number of grounds have been raised in paragraph 19 of the petition, Mr. Palkhivala, learned counsel for the petitioner, confined his arguments mainly to certain questions only which shall be presently examined. It is contended that after the Central Board of Revenue had transferred the case from the Income-tax Officer, Sangli, to the Income-tax Officer, Bombay, under section 5(7A) of the Act of 1922, the assessments were completed and final orders were made by him and if the latter was competent to make those orders, no fresh notices could be issued under section 34 of the Act of 1922 or section 148 of the Act of 1961, in respect of escapement of the same items of income. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f jurisdiction of that officer to make the assessments and it was the Appellate Assistant Commissioner who himself took the view that the Income-tax Officer, Sangli, had no jurisdiction to issue a notice under section 34, with the result that he held that the assessments made by the Income-tax Officer, Bombay, were without jurisdiction and he annulled them. It were the respondents who were aggrieved parties in respect of the orders of the Appellate Assistant Commissioner and they should have gone up in appeal or taken other appropriate proceedings for getting the order of the Appellate Assistant Commissioner corrected or set aside. As they failed to do so, it must be accepted that the orders of the Income-tax Officer, Bombay, were never validly set aside and they would constitute an effective bar to the issue of fresh notices by the respondents based on the same material. The first aspect of the matter requiring determination is whether the order of transfer made by the Central Board of Revenue on 15th November, 1955, under section 5(7A) had the effect of validly transferring the proceedings pending before the Income-tax Officer, Sangli, pursuant to the notice issued by hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed simultaneously and all proceedings under the Act which may be commenced after the date of such transfer in respect of any year whatever are also included therein so that the Income-tax Officer to whom such case is transferred would be in a position to continue the pending proceedings and also institute further proceedings against the assessee in respect of any year. The proceedings pending at the date of transfer can be thus continued but in the case of such proceedings the provision in regard to the issue of notices contained in the main body of section 5(7A) would apply and it would not be necessary to reissue any notice already issued by the Income-tax Officer from whom the case is transferred. In the present case there can be little doubt that all the proceedings pending before the Income-tax Officer, Sangli, with regard to the assessments of the petitioner stood transferred to the Income-tax Officer, Bombay. This result will flow not only from the fact that the order under section 5(7A) related in particular to the petitioner but also because the previous notification which had the effect of conferring jurisdiction on respondent No. 2 with regard to the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h he resides. (3) Where any question arises under this section as to the place of assessment, such question shall be determined by the Commissioner, or, where the question is between places in more States than one, by the Commissioners concerned, or, if they are not in agreement, by the Central Board of Revenue: Provided that, before any such question is determined, the assessee shall have had an opportunity of representing his views: Provided further that the place of assessment shall not be called in question by an assessee if he has made a return in response to the notice under sub-section (1) of section 22 and has stated therein the principal place wherein he carries on his business, profession or vocation, or if he has not made such a return shall not be called in question after the expiry of the time allowed by the notice under sub-section (2) of section 22 or under section 34 for the making of a return: Provided further that if the place of assessment is called in question by an assessee the Income-tax Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under this sub-section before assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax [1945] 13 ITR 39 (FC), the Federal Court had to deal with the question whether an assessment made by the Income-tax Officer, Company Circle, Bombay, on the total income including certain income which arose in England and having its central management and control in England had been validly made. In that case the Tribunal had held that the assessment was in conformity with both clauses (1) and (2) of section 64 because the assessee company was carrying on the business in Bombay as a partner of Messrs. Wallace and Company. After referring to clause (3) of section 64 and the third proviso to that clause it was observed that the matter was more one of administrative convenience than of jurisdiction and that in any event it was not one for adjudication by the court. The following observations at page 45 may be referred to with advantage: The second proviso to clause (3) further enacts that the place of assessment shall not be called in question by an assessee if he has made a return in response to the notice under sub-section (1) of section 22, or if he has not made such a return, it shall not be called in question after the expiry of the time allowed by the notice for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 67 , 101, it has been laid down that the section does not give a right to the assessee to have his assessments at a particular place but determines the Income-tax Officer who is to have power to assess him. Reference may be made to the following observations at page 581: It may be noted, however, that in the passage at page 719 of the majority judgment in Bidi Supply Co. v. Union of India [1956] 29 ITR 717 ; [1956] SCR 267, this court regarded the benefit conferred on the assessee by these provisions of section 64(1) and (2) of the Act as a right and it is too late in the day for us to say that no such right to be assessed by the Income-tax Officer of the particular area where he resides or carries on his business is conferred on the assessee. This right, however, according to the authorities above referred to, is hedged in with the limitation that it has to yield to the exigencies of tax collection. Mr. Palkhivala has relied on the view expressed at page 584 that the hierarchy of officers entrusted with work under the Act is an administrative machinery which is set up for assessing the income of the assessee which is chargeable to income-tax, but at the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any proceedings whatsoever including the issuing of notices under section 34, with the result that the assessments made by the Income-tax Officer, Bombay, pursuant to those notices were rendered illegal and ineffective for the simple reason that if the notices had been issued by an officer who had no authority in that behalf, the subsequent proceedings could not be valid and legal. It is true that no objection was raised by the petitioner before the Income-tax Officer, Bombay, but apart from the fact that those assessments were set aside by the Appellate Assistant Commissioner, they suffered from the infirmities referred to before and could be of no avail to the petitioner in the sense of constituting a bar to fresh proceedings being initiated under section 34 of the Act of 1922 or section 148 of the Act of 1961. In this view of the matter it is unnecessary to decide what would be the effect of no appeal having been taken against the order of the Appellate Assistant Commissioner which according to Mr. Palkhivala was patently erroneous. The next question which requires determination and which has been canvassed is whether respondent No. 2 could validly issue the impugned no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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