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TMI Blog1942 (2) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 68,007 represented his professional earnings. For the year 1933-34 he was again assessed under Section 23(1) of the Act on the 15th November, 1933, on the total income of the previous year, which amounted to ₹ 53,218. The details were as below : Rs. Salary ... ... 27,917 Professional earnings ... ... 21,940 Interest on securities ... ... 1,650 Other Interest ... ... 1,711 Total ... 53,218 The assessee did not appeal from either of these two assessments. On the 28th April, 1939, the assessee preferred an application for relief under Section 25(3) of the Act in respect to the assessment of 1932-33. Paragraph 3 of that application is in the following terms : "That during the assessment year 1932-33 the petitioner practised the profession of law, as stated above, partly in April and partly between the months of July and the 16th of October 1932, after which date, your petitioner discontinued the profession, and that during this period your petitioner's total income from the profession was ₹ 21,940 and his income as a Judge of the High Court was ₹ 27,917 for which the petitioner was assessed at source." From paragraph 5 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an amount of tax has already been paid in respect of the income, profits and gains of the previous year exceeding the amount payable on the basis of such assessment, a refund shall be given of the difference. " By a letter dated the 7th June, 1939, the Commissioner of Income-tax, Central and United Provinces, referred the matter to the Central Board of Revenue. The Commissioner's view was that relief should not be granted. He says: "The claim of the petitioner is extremely belated and he should have put in his claim for the benefits of Section 25(3) during the course of the proceedings for the assessment year 1933-34. In fact according to paragraph 96 of the Income-tax Manual (7th Edn.), a claim to be assessed under Section 25(3) could only be admitted, in this particular case, if it was made not later than the end of the calendar year 1933." The rule to which the Commissioner refers is admittedly a departmental rule, which can in no way affect a legal claim. The Commissioner's letter then goes on to say : "The petitioner, however, is a Judge of the Allahabad High Court who sits on the Bench to hear income-tax references and as he obviously cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar has elapsed since the passing of 1he last order by the subordinate authority, he should not do so without first consulting the Central Board of Revenue-page 268, paragraph 104, Income-tax Manual (7th Edn.). In view of the above provision, my predecessor consulted the Central Board of Revenue if the application under Section 33 could be entertained, but the Board has replied to the effect that it is unable to authorise the Commissioner to exercise his powers of revision in this case. I am, therefore, unable to exercise my powers of revision under Section 33 of the Income-tax Act." On the 18th September, 1939, the assessee prayed for a reference to the High Court under Section 66(2) of the Act. After that he apparently received a letter dated 12th January, 1940, from the Commissioner and on the 18th January he sent a reply to that letter. Paragraph 3 of the reply reads as follows: "In paragraph 2 of your letter you refer to Section 25(5) of the Act and observe that as my claim for a refund under Section 25(3) was made after 1st April, 1939, it is time barred under Section 25(5). I am advised however, that Section 25(2) cannot affect my rights, which had accrued befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the first time in 1939, can only apply to assessments made after the passing of the Amending Act of 1939 and cannot apply to assessments made previously, even though claims for relief under Section 25(3) may be made in regard to such assessments after the passing of the said Amending Act. This aspect of the matter also should be clearly brought out in the statement of the case and a clear question formulated thereon for the consideration of the Hon'ble Court." On the 31st July, 1940, the Commissioner of Income-tax Mr. V.R. Wall made this reference to the High Court. Before considering the questions of law which have been referred to us we may mention a concession which has been made before us by the Advocate-General and which indeed was made by Mr. Ansari in his order of 29th August, 1939. It is conceded that the assessee was overcharged, that he had a perfectly good claim on merits and that the relief now sought for could have been granted by the Income-tax Officer if he had been aware of the fact that the assessee had discontinued his profession as an advocate. The equities are thus with the assessee ; but the Advocate-General contends that the Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e two provisos to this sub-section, the first of which is that "a reference shall lie from an order under Section 33 only on a question of law arising out of that order itself, and not on a question of law arising out of a previous order under Section 31 or Section 32, revised by the order under Section 33." In the present case the second part of this proviso has no application inasmuch as there is no question of law before us arising out of a previous order under Section 31 or Section 32, revised by the order under Section 33. What we have to decide is whether the order of the Commissioner dated 29th August, 1939, under Section 33 was or was not an order "otherwise prejudicial" to the assessee. In Central India Spinning. Weaving and Manufacturing Co., Ltd. v. Commissioner of Income-tax [1937] 5 ITR 267, a Bench of the Nagpur High Court following the decision of a Bench of three Judges of the Madras High Court in Venkatachalam Chettiar v. Commissioner of Income-tax, Madras [1935] 3 ITR 55, held that where the Commissioner of Income-tax, acting under Section 33, refuses to review the order of an Assistant Commissioner, the position of the assessee not being alt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial. It could not be said that a decree of an appellate Court dismissing an appeal from a Court of first instance is not prejudicial to the appellant. It is just as prejudicial as the original decree. There is no difference in this respect between a dismissal of an appeal and the dismissal of an application for revision when the law permits such an application to be made." The learned Chief Justice then considers the first proviso to Section 66(2) and says:- "Mr. Patanjali Sastri has suggested that the proviso only relates to orders under Sections 31 and 32 revised under Section 33. In other words, he asks the Court to read the second part of the proviso as governing the first part. I do not read it in this way. I consider the effect of the proviso to be this : A reference shall lie only when a question of law arises out of the order passed under Section 33, but if the matter is one which relates to an order under Section 31 or Section 32 a question of law which arose out of the previous order alone cannot be referred." We are in full agreement with this interpretation of the proviso. At page 267 the learned Chief Justice refers to the Nagpur decision which we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies were referred to. In Nanhe Mal Janki Nath v. Commissioner of Income-tax, ( Lahore ) [1940] 8 ITR 437. Dalip Singh, J., was inclined to agree with the view taken by the Madras High Court in Voora Sreeramulu Chetty's case (supra) . An argument was addressed to the learned Judges of the High Court at Lahore with a view to show that the above mentioned decision was wrong, and at page 439 Dalip Singh, J., observes: "It is unnecessary to decide this point in view of the decision to which we have come on the other point, but I may remark that the word 'prejudicial' in Section 33 need not have the same meaning as the word 'prejudicial' in Section 66(2). In Section 33 there is no application necessarily before the Commissioner at all. If he does act of his own motion, there is no necessity for him to pass any order at all and therefore when Section 33 says that he cannot pass an order prejudicial to the assessee without hearing him, the word 'prejudicial' there is obviously used in the narrower sense of a prejudice occasioned to the assessee by the order of the Commissioner himself. In Section 66(2) the reasoning does not apply because Section 66(2) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come, profits and gains of the said period, and if an amount of tax has already been paid in respect of the income, profits and gains of the previous year exceeding the amount payable on the basis of such assessment, a refund shall be given of the difference." The words "no tax shall be payable" impose a duty on the Income-tax Officer, and this is conceded ; but it is contended that the Income-tax Officer was in no way responsible for the non-performance of this duty for the reason that he had no knowledge of the fact that the assessee had discontinued his profession. In his order of 29th August, 1939, Mr. Ansari has stated that the Income-tax Officer "was bound to exclude this income from the assessment of 1933-34 if he only could be aware of the discontinuance of the profession, but it appears that he had no idea of the discontinuance." The appointment of the assessee as a Puisne Judge was notified, as we have already said, in the Gazette of 22nd July, 1933, that is to say, four months before the order of assessment for the year 1933-34. It may be said with reason that the income-tax authorities cannot be expected to acquaint themselves with every appoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner in his statement of the case says: "It may.........be taken as established that an interview took place between the assessee and the Income-tax Officer on the subject of the former's claim in March, 1939, but a formal application for a refund under Section 25(3) was not made till the 28th April, 1939, when the assessee's application under Section 33 was presented to the Commissioner." Thus it is a matter of admission that the assessee did make a verbal claim in March, 1939. It is contended on behalf of the department that a claim for relief under Section 25(3) of the Act should be in writing; but there is nothing in the Act to justify this contention. The learned Advocate-General pleads that, having regard to the scheme of the Act as it appears from Chapter IV, which is headed "Deductions and Assessments" and which contains Sections 18 to 39, it must be held to have been contemplated by the Legislature that any such application should be preferred during the assessment year. What the Legislature may have contemplated is a matter of speculation, but a claim for refund of tax wrongly assessed cannot be barred except by statute and there was no su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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