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TMI Blog1964 (1) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... firm and should pay tax directly. Below that in a separate paragraph the Income-tax Officer has stated: Order under section 26A- Application for renewal of registration has been filed in time. The assessee-firm has not complied with notices under sections 22(2) and 22(4) issued from this office. Registration is a concession granted to assessees under certain circumstances detailed in the Rules and in the Act prescribed for the same. This concession is not surely meant for recalcitrant assessees. This is one of such cases where return under section 22(2) has not been filed though the scheduled time for the same is long over. I, therefore, refuse to grant registration to this firm under section 23(4) of the Income-tax Act. The assessee made an application under section 27 which was rejected by the Income-tax Officer. The assessee appealed against it. The Appellate Assistant Commissioner did not interfere with the order of the Income-tax Officer. The assessee also appealed to the Appellate Assistant Commissioner against the order refusing renewal of registration. It contended that the Income-tax Officer's refusal to grant renewal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 23(4) refusing registration was passed only for one default or one contumacy namely, non-compliance with the notice under section 22(2) for filing the return. The assessee thereafter preferred its appeal against the order under section 23(4) refusing renewal of registration and not against any order passed under section 26A. The Appellate Assistant Commissioner, continues Mr. Pal, had come to the finding that this default, that is, non-compliance with the notice under section 22(2) on the part of the assessee, was there, there being no sufficient grounds for such non-compliance. Having come to that finding, the Appellate Assistant Commissioner had no option but to affirm the order under section 23(4). He had no jurisdiction to go into the question whether for any particular reason the assessee could not comply with the requirements of section 26A. No matter concerning section 26A was the subject-matter of the appeal before him and he was, therefore, precluded from going into it. Mr. Pal has submitted to us that the question referred by the Tribunal should be reframed by this court as follows: Whether in view of the fact that the Appellate Assistant Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Officer is relying not merely on default under section 22(2) but also on default under section 22(4). In any event, it cannot be said that the default under section 22(4) had no effect on the mind of the Income-tax Officer. The Appellate Assistant Commissioner also has understood the order of the Income-tax Officer in the same sense as indicated in the foregoing paragraph. At page 8 of the paper book the Appellate Assistant Commissioner says: According to the Income-tax Officer the appellant-firm has not complied with notice under section 22(2) and 22(4) and as the registration is a concession granted to the assessee under certain circumstances detailed in the Rules and in the Act, and as this concession is not meant for recalcitrant assessees, the registration was refused by the Income-tax Officer. The Appellate Assistant Commissioner has also recorded the Income-tax Officer's further statement with respect to default under section 22(2) in the concluding portion of his order but the fact remains that the Appellate Assistant Commissioner has to take note of the position that the Income-tax Officer had taken into consideration both the defa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at its hands are tied by the assessment under section 23(4). And that is why the Tribunal did not go into the merits of the exercise of discretion by the Income-tax Officer in the appeal before it. I would now support the conclusions we have reached by the facts mentioned in the statement of the case. From paragraph 2 of the statement we get two facts namely, (1) there was no compliance with the notices issued under section 22(2) and section 22(4); and (2) the assessee made an application under section 27 which was rejected by the Income-tax Officer. In paragraph 4 of the statement the contention of the department before the Tribunal has been noted and the Tribunal also refers to paragraphs 4 and 5 of its order the basis whereof is a valid and a proper assessment under section 23(4). Then the following significant statement is made: The Tribunal found that if the section 23(4) order stood as it must because the section 27 appeal had been dismissed by the Appellate Assistant Commissioner, the Income-tax Officer's right, (the more proper word to use would have been discretion), could not be assailed. This particular sentence in the statement of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is subject to appeal, but the Court of Appeal will not be ready to interfere with the judge's exercise of his discretion unless it is shown that he was clearly wrong. In a recent case our appellate court (P.N. Mookerjee and Law JJ.) has expressed itself on this point in Serajuddin Co. v. Michael Golodetz [1958-59] 63 CWN 717 at page 725 in these words: Before, however, we deal with the said question on the merits, it is necessary to make some preliminary observations. Rightly or wrongly, the discretion in the matter has been exercised by the learned trial judge in favour of the defendants. It is urged on the defendants' behalf that we, as the appellate court, ought not to interfere with the said exercise of discretion. That it should not be lightly interfered with is well established on the authorities, but we do not think that law does, in any way, fetter the power of the appellate court to interfere in a proper case. Where the discretion has been exercised on a consideration of all relevant materials and circumstances and in accordance with sound judicial principles and no injustice has been done or is likely to result from the trial court's orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment assessment under section 23(4) and consequently refuses an application for the registration of a firm, if the assessee is satisfied with the best judgment assessment under section 23(4) he need not make an application under section 27, but if he is dissatisfied with the order refusing to register the firm he can appeal against that order of the Income-tax Officer challenging it on any ground whatsoever including grounds on which he could have asked for cancellation of the assessment under section 27. The mere fact that he did not make an application under section 27 for the cancellation of the best judgment assessment cannot stand in the way of his challenging the order refusing to register the firm on the same ground. When an appeal is filed against the order passed under section 23(4) refusing to register a firm, the appellate authorities should examine on its merits the finding of the Income-tax Officer that the assessee had committed the default mentioned in section 23(4) ignoring the fact that no application was made under section 27 for cancellation of the best judgment assessment. Mr. Balai Pal, learned counsel for the Commissioner does not dispute these propos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 3(1)(a) was not sustainable. The Supreme Court observes that to say that the other ground which still remains is quite sufficient to sustain the order would be to substitute an objective judicial test for the subjective decision of the executive authority which is against the legislative policy underlying the statute. In such cases the position would be the same as if one of these two grounds was irrelevant for the purpose of the Act or was wholly illusory and this would vitiate the detention order as a whole. It is well settled, the Supreme Court has said, that the power to issue a detention order under section 3 of the Preventive Detention Act depends entirely upon the satisfaction of the appropriate authority specified in that section. The sufficiency of the grounds upon which such satisfaction purports to be based provided they have a rational probative value and are not extraneous to the scope or purpose of the legislative provision cannot be challenged in a court of law except on grounds of mala fides. Section 11 of the Preventive Detention Act lays down what action the Government is to take after the advisory board has submitted its report. If in the opinion of the board t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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