TMI Blog1934 (1) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... y, 1927, the Income Tax Officer ordered the registration of the firm under Rule 4, Income Tax Rules. On 4th February, 1928, the Income Tax Officer, Shikarpur, took proceedings against the firm under Section 34, Income Tax Act, with reference to alleged income which he believed had escaped assessment in 1926-27. These proceedings were eventually withdrawn on 7th May, 1929. On 9th January, 1928, a notice was served on the firm under Section 33 of the Act to show cause why the Income Tax Officer's order dated 17th January, 1927, for the registration of the firm should not be set aside. On 13th February, 1928, the Commissioner, after considering the representation made by the firm in response to the notice, in the exercise of his powers under Section 33 cancelled the order of the Income Tax Officer for the registration of the firm. In view of the cancellation of registration the same Income Tax Officer on 7th May, 1929, demanded a sum of ₹ 5,468-12-0 as super-tax under Section 29 of the Act. On 4th June, 1929, the firm appealed to the Assistant Commissioner of Income Tax against this order. The Assistant Commissioner considering the appeal to be one under Section 30 hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... January, 1927, under Section 23(4) was illegal and that the cancellation of registration on 13th February, 1928, more than a year after the order of registration was illegal. I am opinion that their contentions are well founded. The form of notice of demand under Section 29, Income Tax Act, 1922, provided by the Income Tax Rules shows a simultaneous demand both for income-tax and super-tax. I agree with the view expressed in Rajendra Narayan v. Commissioner of Income Tax, Bihar and Orissa, that in order to be valid a demand for super-tax should be made within a reasonable time of the assessment for income tax. Two years and four months or thereabouts was, in my opinion, a wholly unreasonable time. The demand, therefore, of ₹ 5,468-12-0 on 4th May, 1929, was, in my opinion, illegal. I am also of opinion that the order of the Commissioner, cancelling the order of the Income Tax Officer directing the registration of the firm more than a year after the order was made was invalid. The words subject to the provisions of this Act as Mr. Rajagopala Chari points out in the Law of Income Tax in India at p. 198 indicate that the Commissioner's powers under Section 33 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he period of limitation. The amended provisions of Section 23, Clause (4), which empower an Income Tax Officer to cancel registration of a firm on failure to make a return were not in force at the time of the assessment in question, and the applicants say that there is not only no question of the Income Tax Officer being able to act under the provisions of the amended section, but he has not attempted to do so. For all intents and purposes therefore assessment levied on the applicants as a registered firm became final after the expiry of one year from the date of the order passed by the Income Tax Officer. The Commissioner of Income Tax issued a notice dated 9th January, 1928, to the applicants to show cause why the registration of their firm should not be withdrawn, and on 13th February purporting to act under Section 33 he cancelled the registration of the firm. On the strength of this order, the Income Tax Officer issued a notice under Section 29 of the Act requiring the applicants to pay super-tax. The applicants challenge the validity of the order passed by the Commissioner cancelling the registration of their firm, and contend that the order even if valid, did not empow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the notice of demand for income tax under the same section. It has been argued that the points raised by the Commissioner are not the real points in dispute, and, at any rate, they are not all points of law which arise for our determination. I agree with my learned brother that it is open to us to resettle, if necessary, the points of law which arise out of a case submitted to us under Section 66(3), subject however to the limitation laid down by this Court in the Commissioner of Income Tax, Bombay v. Sind Light Ry. Co. Ltd., and to give our decision thereon. In Attorney-General v. Avelino Aramayo and Co. at p. 108, Atkins, L.J., has said: As I read the statutory procedure, which at that time depended on Section 59, Taxes Management Act, 1880, the Court is not limited to particular questions raised by the Commissioner in the form of questions on the case. All that the section provides is that if the appellant is dissatisfied with the determination as being erroneous in point of law, he may require the Commissioners to state and sign a case, and the case shall set forth the facts and the determination, and upon that being done, the Court has to decide whether or not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered firm such person is further required to pay an additional tax called super-tax. As a matter of fact, the order recognising the applicants as a registered firm might have been passed a few days earlier or even a year earlier, and they might even have been taxed as a registered firm for the previous year. Can it be then said that merely because the applicants failed to fill up their form, they lost their right of challenging their liability to pay the super-tax and thus pay a double penalty of not only being made to pay the ordinary income tax upon a supposed basis of income, but also be made to pay additional tax as an unregistered firm? Can it also be said that prior to the amendment of Section 23 authorising the Income Tax Officer to cancel registration, his action in levying super-tax from a registered firm could have been maintained and that the mere failure on the part of the assessees to make the return would have been considered sufficient to deprive them of their right to appeal? Or, as matter of that, even under Section 23 as amended if the Income Tax Officer had cancelled the registration of the firm without complying with the terms of the proviso to Clause (4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other which does not, the latter construction should prevail: Hildesheimer v. W.F. Faulkner. In my opinion, there is no scope for argument that the proviso in question has the effect of taking away a right of appeal in cases where the assessee does not challenge the assessment levied on him under Section 23, Clause (4), but only challenges his liability to be taxed in a different capacity than that possessed by him and more so when such a capacity has been duly recognised by the Income Tax Officer. Even if the proviso be open to a double construction, I would hold that the proviso should be so interpreted as to exclude an appeal only in respect of an assessment levied under Section 23, Clause (4), and not to an appeal of this nature. Although there may be good grounds for depriving a party, who has not made a return, of appealing against the assessment levied on him on such materials as are available, he being the party at fault, I can see no reason why the right of appeal conferred upon him by Clause (1) should be denied to him when he does not challenge the assessment so levied, or that he should be penalised further by being made to pay additional duty as a different taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, I am of opinion that both demands should be made about the same time although they need not be contained in the same notice. ISSUE 2.-Whether the demand for super-tax should have been made within reasonable time and whether a demand after a delay of two years and four months was unreasonable, rendering the demand illegal? I think this issue brings out more clearly the real point in dispute than the first question under the third heading propounded by the Commissioner. I agree with my learned brother in his opinion that the demand for super-tax should have been made within a reasonable time, and that the demand having been made after a lapse of nearly two years and four months was illegal. With regard to the last point raised by my learned brother which equally arises from the case stated to us and forms the substratum of the second demand notice which is in issue, I am of opinion that the order passed on review by the Commissioner does not in law empower the Income Tax Officer to make a fresh demand for super-tax on the strength of such order. It may be that it is open to the Commissioner to review a wrong order at any time, and he can certainly do this for the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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