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TMI Blog1928 (11) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal. The question referred to us is the applicant having made a return of his income and having complied with the terms of the notice issued by him under Section 23 (2), was there any jurisdiction in the Income Tax Officer to revert to Section 22 (4) and make an assessment under Section 23 (4) for non-compliance with the notice under Section 22 (4) ? The assessee contends that in those circumstances the Income Tax Officer had no power to make an arbitrary assessment under Section 23 (4), from which there was no right of appeal. 2. This question has been before four of the Indian High Courts. It has been answered against the assessee by a unanimous Full Bench of three Judges of the Calcutta High Court in In the matter of Messrs. Harmukhrai Putichand (1928) 32 C.W.N. 710,by a unanimous Full Bench of five judges of the Patna High Court in Ram Khelazvan Ugam Lal v. Commissioner of Income Tax, Bihar and Orissa AIR1928Pat529 ,overruling Brij Raj Rang Lal v. Commissioner of Income Tax, Bihar and Orissa AIR1927Pat390 ,a decision of two Judges, and by a Division Bench of the Allahabad High Court in In the matter of Chandra Sen Jaini I.L.R. (1928) A. 589. Now that the earlier deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be after the return has come in, not before, that the Income Tax Officer has any need to see the assessee's accounts. If the provision for calling for accounts were restricted to the period before the return is submitted, it would be of comparatively little use. Until he knows whether a company is going to submit its return by the 15th June or any other assessee is going to submit its return by the date specified in the notice to him under Section 22 (2), the Income Tax Officer need not trouble about accounts at all, as, if no return is submitted in time, he can, as is unquestioned, make this arbitrary assessment under Section 23 (4) without referring to any accounts or evidence. It is very highly improbable that the only specific provision made by the Legislature for calling for accounts would apply only to the period when accounts are least required. But it has been argued--and the argument was adopted in Khushi Ram Karam Chand v. Commissioner of Income Tax, Punjab A.I.R. 1928 Lah. 219 and in the overruled case in the Patna High Court--that this surprising restriction of the effect of Section 22 (4) has been introduced by the Legislature in a cryptic and backhanded way by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a series of years may provide evidence on a specified point; but to describe them as evidence on a specified point is obviously inappropriate. To my mind the language of Section 23 (3) adds force to the Commissioner's contention. If accounts can be called for at any stage, before or after the return is submitted, then in the inquiry under Section 23 (3) power to call for further evidence on specified points is enough and the language of that sub-section need not be strained in any way. 5. And, though Mr. Krishnaswami Aiyangar has called Section 23 (3) to his aid as showing an implied restriction of Section 22 (4), on examination it throws light on the question of immediate importance in this case--whether failure to produce accounts when called for after a return has been submitted entails the penalty of arbitrary assessment under Section 23 (4). Failure to comply with a direction under Section 23 (3) does not entail that penalty. If the power of the Income Tax Officer under Section 23 (3) is confined to the plain meaning of that sub-section, viz., to call for evidence on specified points, it is reasonable that failure to comply with such a direction should not entail th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired after the submission of a return than before it. But it is contended that the wording of Section 23 (4) has that surprising result. It is quite clear, that, if a company or other assessee fails to submit a return by the proper date, the penalty of arbitrary assessment is to be enforced. That is what the sub-section first provides. Then it goes on to provide the same penalty for failure to comply with all the terms of a notice issued under Sub-section (4) of Section 22. If the notice under Section 22 (4) can be issued at any time--and that I do not think can now be doubted--there is nothing so far to suggest that the penalty is attached only to failure to comply with a notice issued under Section 22 (4) before a return is submitted. But Section 23 (4) goes on to provide that, if a company or other assessee having made a return fails to comply with all the terms of a notice issued under Section 23 (2) the penalty shall apply. The contention of the assessee in this case rests upon the insertion of the words having made a return. It is urged with truth that failure to comply with a notice under Section 23 (2) can occur only after making a return as that notice cannot be issued ..... X X X X Extracts X X X X X X X X Extracts X X X X
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