TMI Blog1934 (4) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... Court agent, filed an application, accompanied by a medical certificate, asking for further extension of time to comply with the terms of the notice on the ground that he was unable to attend the Court in person on account of his illness. Mr. Gore, the Income Tax Officer, instead of passing any order, oral or written, on this application and communicating it to the non-applicants agent asked him to wait and when leaving the office at 5 p.m., informed him that the order would be conveyed in due course. In the meantime the officer had proceeded under Section 23 (4) of the Act and written out the assessment order, the last part of which reads as under :- In the light of the foregoing facts, I cannot do otherwise than to proceed ex-parte. It is a patent fact that the assessee has got extensive money lending which is being done by him in several ways. In addition to this he purchases the debts of others at a comparatively small cost and reaps huge gains therefrom when the civil Court ultimately passes the decree in his favour. It need hardly be said that he can always command the best legal advice and help by virtue of his finances. Local inquires show that his fluid resources amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to proceed under Section 23 (4), Income Tax Act, and making ex parte assessment in this case when there is no legal evidence to show that the assessee deliberately failed to comply with the notice issued under Section 22 (4), Income Tax Act (2) Whether the circumstances alleged and proved by the assessee could not in law be deemed to be sufficient cause under Section 27, Income Tax Act (3) In view of the wording of the notice under Section 22 (4) of the Act and the undisputed fact that the assessee was too ill to attend the Court and the further admitted fact that the Income Tax Officer did not pass or communicate to the assessees servant or to the assessee any order for immediate production of account books or any other fair order, could not the assessee under law claim cancellation of the ex parte assessment order dated 19th October, 1931 (4) Whether the procedure adopted by the Income Tax Officer in causing notices to be served under Sections 23 (2) and 22 (4), Income-tax Act, was legal and proper and whether the income Tax Officer could under the circumstances proceed under Section 23 (4) and make ex parte assessment (5) Is there evidence to substantiate the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 23 (4), on the part of the non-applicant with the terms of the notice calling for account books and evidence. Technically therefore, Mr. Gore had jurisdiction to make the summary assessment against the non-applicant under Section 23 (4) of the Act. This does not however mean that the procedure adopted by Mr. Gore in the present case was either desirable or justifiable. Although the Act does not specifically provide for granting adjournments to comply with the terms of the notices served on the assessees under Sections 22 (4) and 23 (2), it is conceded that, in practice, adjournments are generally allowed for sufficient cause on the principle of justice, equity and good conscience. This practice has also received judicial recognition in Commissioner of Income Tax v. Perianna. It therefore necessarily follows that if, for any reason, a prayer for adjournment has to be refused a definite order, either oral or written, must be passed by the officer and communicated to the assessee or his agent, when he is present, before proceeding with the drastic action of summarily assessing him under Section 23 (4) of the Act. In the present case if Mr. Gore had even orally communicated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decisions are expressly overruled in In re Abdul Bari v. Commissioner of Income Tax, Burma. But this statement is not absolutely correct as the following observations, at p. 284 (of I.L.R. 3 Rang. 281) of the report of Abdul Baris case would clearly show that the reference did not invite the opinion of the Full Bench on the correctness or otherwise of those decisions on the point under consideration : The first contention is based on a passage in the judgment of this Court in Commissioner of Income Tax v. E. M. Chettyar Firm where it was said : It has, however, been held that the question whether there was any evidence on which an Assistant Commissioner or a Commissioner could come to a finding of fact is a question of law. On the strength of that decision read with the decision in P. K. N. P. R. Chettyars case a question of law will be held to arise out of the Assistant Commissioner order if there was no evidence to support the Income Tax Officers finding that the applicant failed to show that he was prevented by sufficient cause from complying with the notice under Section 23 (4). But in the present case there was at any rate the evidence as to the nature of the business wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port of their return, was a question of law which the High Court was entitled, under Section 66 (3) of the Act, to require the Commissioner of Income Tax to refer to it for decision. We therefore accept the law laid down in this Calcutta case and in Commissioner of Income Tax v. P. K. N. P. R. Chettiar Firm and P. K. N. P. R. Chettiar Firm v. The Commissioner of Income Tax, Burma, as correct. We also respectfully adopt the following observations of the learned Chief Justice in Kichilappa Naicker v. Ramanujan Pillai as laying down the test were made with reference to a case under Section 5, Limitation Act : The test is, has the discretion been exercised after appreciation and consideration of all the facts which are material for the purpose of enabling the Judge to exercise a judicial discretion and after the application of the right principle to these facts ? If a discretion is exercised under these conditions and a certain conclusion is arrived at, that conclusion, it seems to me, would be an exercise of discretion judicially sound, though an appellate tribunal might be disposed to draw a different inference from the facts. To the same effect are the observations in Ranch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and that in recording a contrary finding the Income Tax Officer and the Assistant Commissioner failed to exercise their discretion on reasonable and proper grounds. In view of the conclusion reached by us on the first four points it seems unnecessary, in the present case, to decide the last three points of the reference but as they were fully argued and are of vital importance to the assessees of these provinces it is well to record our considered decision thereon. These will be treated together as they appertain to the same matter, viz., the legality or otherwise of the ex parte order of assessment, the material portion of which is already set out in extenso in para. 2. above. In supporting the order of the Income Tax Officer the learned Commissioner makes the following observations : No evidence to substantiate the Income Tax Officers reasoning for making an ex parte assessment is necessary, because in this respect, the Income tax Officer is the sole Judge. If he were to state that the assessees total income was ₹ 1,00,000 it was enough and that would have been a correct assessment also : Krishna Kumar v. Commissioner of Income Tax, Bengal. An Income Tax Officer i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfied as to the meaning that the learned Judges intended the word arbitrary to bear in the question propounded. If the word is taken to mean that the Income Tax Officer, regardless of information in his possession, deliberately, recklessly or fraudulently has made an assessment under Section 23 (4) which he knows that he was not justified in making, in such circumstances, and assuming that the assessee has failed to obtain redress as provided in the Act, I should not be prepared to hold, as at present advised, apart altogether from the provisions of the Income Tax Act, that this Court does not possess jurisdiction in virtue of its inherent prerogative powers to order the Income Tax Officer to do his duty. The aforesaid observations clearly envisage the possibility of a question of law arising in an ex parte assessment, and its decision by a chartered High Court under its inherent powers. If this view is accepted as correct it would follow that in the provinces in which such a High Court is not established, as here, an unfortunate assessee who has suffered substantial injustice from the vagaries of the income tax authorities will have no remedy of redressing the wrong. Muhamma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Income Tax Officer made a local inquiry before making this assessment under Section 23 (4). He recorded a note of the details and results of his inquiry. I have seen his note which has been printed in the paper book and see no reason to suppose that the officer did not act to the best of his judgment. His note contains sufficient details to enable me to see that the assessment was according to the rules of reason and justice and not arbitrary, vague and whimsical. In my opinion, therefore, in the facts and circumstances of the case the assessment was to the best of the judgement of the Income Tax Officer, and the question should be answered accordingly. The High Court simply answered the question in the affirmative without giving any reasons, but it is apparent that the answer would have been in the negative if the Income Tax Officer had made no local inquiry and not placed a detailed note thereof on the record in support of the assessment. While the aforesaid remarks of the Commissioner of Income Tax, Bengal, impliedly concede that local inquiry and the placing on record of a note of the results of such inquiry are essential in law to sustain an ex parte assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a note of the details and results of his inquiry in order that the Commissioner of Income Tax under Section 33 or the High Court under Section 66 (2) or (3) may be in a position to see that the assessment was according to the rules of reason and justice and not arbitrary. It is such an assessment alone which would satisfy the requirements of an assessment by the Income Tax Officer made to the best of his judgment within the meaning of Section 23 (4), Income Tax Act. It is clear to us that the ex parte assessment in the present case does not satisfy the aforesaid test. There is undoubtedly an undated note styled as a report of the Income Tax Officer on the record, but it entirely fails to indicate the materials necessary for the finding that the non-applicants total assessable income in the previous year that is Diwali 1930 , was one lac of rupees. The learned counsel for the Commissioner of income Tax made no attempt before us to show how the information compiled in the above note could lead to the estimate of the non-applicants assessable income for the year ending Diwali 1930 at ₹ 1,00,000. The remarks, which follow the figures as also those embodied in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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