1928 (3) TMI 5 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the notice under Section 22(4) of the Income Tax Act.
2. Entitlement of the Income Tax Officer to make an assessment under Section 23(4) for failure to comply with a notice under Section 22(4).

Issue-wise Detailed Analysis:

1. Validity of the notice under Section 22(4) of the Income Tax Act:

The first question addressed by the court was whether the notice issued under Section 22(4) was so defective as to be legally null and void. The court concluded that there is no illegality in combining notices under Section 23(2) and Section 22(4) in one document. The court observed that the assessee is given one date to produce certain accounts or documents required by the Income Tax Officer and is also told that on the same date, they will have an opportunity to produce any further evidence upon which they rely. The court found no objection to this procedure and referred to a similar opinion held by the Allahabad High Court in the case of Chandra Sen Jaini. Thus, the court answered the first question with a "No."

2. Entitlement of the Income Tax Officer to make an assessment under Section 23(4) for failure to comply with a notice under Section 22(4):

The second question examined whether the Income Tax Officer is entitled to make an assessment under Section 23(4) if an assessee has made a return in compliance with a notice under Section 22(2) but failed to comply with a notice under Section 22(4). The court analyzed the provisions of Sections 22 and 23 of the Income Tax Act. Section 22 allows the Income Tax Officer to require the production of accounts or documents, and this power is not limited by the filing of a return. The court emphasized that the power to call for accounts under Section 22(4) does not cease upon the making of a return.

The court further explained that Section 23(4) deals with three cases: (1) an assessee who makes no return at all, (2) an assessee who fails to comply with a notice to produce accounts or documents, and (3) an assessee who, having made a return, fails to comply with all the terms of a notice issued under Section 23(2). The court rejected the contention that the power to call for accounts under Section 22(4) ends with the filing of a return, stating that it would be paradoxical and improbable for the making of a return to terminate this power.

The court concluded that if an assessee withholds their books of account but wants to produce other evidence, the Income Tax Officer may treat them as defaulters and make an assessment to the best of his judgment. The court stated that the statute intends for those who deliberately make default in producing their accounts when asked to do so under Section 22(4) to be treated as defaulters. Thus, the court answered the second question with a "Yes."

Conclusion:

The court answered both questions against the assessees. The first question was answered with a "No," indicating that the notice under Section 22(4) was not legally null and void. The second question was answered with a "Yes," affirming that the Income Tax Officer is entitled to make an assessment under Section 23(4) for failure to comply with a notice under Section 22(4). The assessees were ordered to pay the costs of the reference.

Separate Judgments:

Charu Chander Ghose, J., and P.L. Buckland, J., both agreed with the judgment delivered by Rankin, J.