TMI Blog1963 (2) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... 1942, the Globe Theatre? Ltd. passed a resolution increasing the remuneration to the managing agents to ₹ 2,000 per mensem and 25% of the net profits. Despite the resolution, the Income-tax Officer assessing the Globe Theatres Ltd. for the relevant assessment years allowed the deduction in respect of managing agency commission at ₹ 2,000 per mensem and 10% of the net profits, as permissible expenses under section 10(2)(xv) of the Act. The Income-tax Officer disallowed the balance as expenditure not incurred wholly and exclusively for the purposes of the company's business. In the hands of the applicant-firm, however, the Income-tax Officer assessed the entire amount of the managing agency remuneration at ₹ 2,000 per mensem and 25% of the net profits as the taxable income of the firm for the relevant assessment years. When the matter came before the Appellate Tribunal in the second appeals filed by the applicant-firm against the income-tax assessments, the Tribunal held that the entire amount of the managing agency remuneration was the income in the hands of the applicant-firm but it was exempt from income-tax, under the notification of the Central Government, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.C.R. 463. Dr. D. P. Pal, for the assessee E. R. Meyer and B. L. Pal, for the Commissioner JUDGMENT LAIK J.- This is a consolidated reference under section 66(1) of the Income-tax Act at the instance of the assessee in respect of the three assessment years, 1944-45, 1945-46 and 1946-47, where the following question has been referred: Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not admitting the appeals filed by the assessee in respect of the revision of its assessments for the assessment years 1944-45, 1945-46 and 1946-47? In other words, whether the order passed by the Income-tax Officer revising the original assessment as directed by the Appellate Tribunal would partake the character of procedural law only, i.e., whether the appellant had no substantive right to prefer the appeal under section 30 of the Act. The facts material for the purpose of the reference are: The applicantfirm, Messrs. Kooka Sidhwa Company, Calcutta, is the managing agents of a limited concern, viz., the Globe Theatres Ltd., Calcutta. Under the terms of the agreement of the managing agency, Kooka Company was ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the direction of the Tribunal. It might be stated that no objection was raised on behalf of the department before him as to the competence or the maintainability of the appeals or the jurisdiction of the Appellate Assistant Commissioner to hear such appeals. Being aggrieved by the order of the Appellate Assistant Commissioner the applicant filed appeals before the Appellate Tribunal, now for the second time, in which a preliminary objection was taken on behalf of the department that the appeals were not maintainable, on the ground that the orders passed by the Income-tax Officer under the direction of the Appellate Tribunal given on August 31, 1950, were not orders passed under the provisions of section 23(3) of the Income-tax Act and, therefore, the orders passed by the Income-tax Officer were not appealable. The Appellate Tribunal did not go into the merits of the appeals but gave effect to the preliminary objection and dismissed the appeals holding that they were not maintainable following the decision of the Supreme Court in the case of Commissioner of Income-tax v. Arunachalam Chettiar [1953] 23 I.T.R. 180; [1953] S.C.R. 463. In consequence, the Tribunal refused to adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , mainly contended that the principles laid down in the said decision of the Supreme Court in the case of Arunachalam Chettiar* had been impliedly overruled by another decision of the Supreme Court in the case of Melaram Sons v. Commissioner of Income-tax [1956] 29 I.T.R. 607; S.C.R. 166. According to him the facts in the earlier decision are also different. He, therefore, contended that the ratio decidendi of the said earlier decision of the Supreme Court, viz., that of Arunachalam Chettiar [1953] 23 I.T.R. 180; [1953] S.C.R. 463, had been wrongly applied by the Appellate Tribunal in the instant case. Dr. Pal submitted, though generally but forcefully, that it was our duty to follow a later decision of the Supreme Court on the same point even if the earlier decision of the Supreme Court was neither expressly overruled nor followed by their Lordships of the Supreme Court in the later decision and in that event it is the option of the High Court judges even not to take any notice of the earlier decision. Mr. Meyer, appearing on behalf of the revenue, argued with equal, rather greater force and took a preliminary objection, so to speak, by contending that it is our duty to follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent. No appeal was filed against this order and it became final. But acting on a suggestion made in the order of the Appellate Assistant Commissioner the assessee filed an original miscellaneous application before the Appellate Tribunal for relief. On this miscellaneous petition the Tribunal set aside the findings of the Income-tax Officer and directed him to make a fresh computation. Thereafter, at the instance of the Commissioner of Income-tax, the Tribunal referred the following question under section 66(1) of the Act to the Madras High Court: Whether on the facts and circumstances of this case the order of the Bench dated 20th February, 1946, in the miscellaneous application is an appropriate order and is legally valid and passed within the jurisdiction and binding on the Income-tax Officer. The High Court declined to answer this reference on the ground that the order of the Tribunal was not one passed in an appeal under the provisions of section 33(1) of the Act and that, in consequence, the reference under section 66(1) was itself incompetent. The correctness of the decision was challenged on appeal to the Supreme Court and in affirming the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence should have been admitted by the Tribunal. As proposed to be done by my learned brother, I need not detail myself in dealing with the scope and meaning of section 23 of the Act, the true effect of the expressions final assessment , revision and amendment of the assessment on this branch of the law or by referring to the decisions cited at the bar, viz., three Privy Council decisions, Seth Badridas Daga v. Commissioner of Income-tax([1949] 17 I.T.R. 209 (P.C.), Rajendranath Mukherji v. Commissioner of Income- tax(5) and Commissioner of Income-tax v. Khemchand Ramdas ([1934] 2 I.T.R. 71 (P.C.), and two other decision of the Supreme Court, viz., C.A. Abraham v. Income-tax Officer, Kottayam([1938] 6 I.T.R. 414 (P.C.)) and Income-tax Officer, V Circle, Madras v. S.K. Habibullah ([1962] 44 I.T.R. 809 (S.C.), three Calcutta decisions, viz., Metropolitan Structural Works Ltd. v. Union of India(1), Ladhuram Taparia v. D.K. Ghosh(2) and Ajit Kumar Ganguli v. Union of India(3), two Allahabad decisions, viz., Santosh Kumar v. Commissioner of Income-tax(4) and J.K. Cotton Spinning Weaving Mills Co. Ltd. v. Commissioner of Income-tax(5) and the decision of the Madras High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly question is whether the Tribunal was justified in refusing to admit the assessee's appeals. In coming to its conclusion the Tribunal holds that in carrying out the direction of a previous Tribunal and in doing what the Income-tax Officer did on the 26th September, 1945, the Income-tax Officer cannot be regarded as having acted under section 23 or under section 27 of the Income-tax Act. Therefore, the Tribunal holds no appeal lies from that order of the Income- tax Officer under section 30(1) of the Act. The Tribunal came to the conclusion that there was no proper appeal before the Appellate Assistant Commissioner such as is contemplated by section 30(1) of the Act, and, therefore, the order made by the Appellate Assistant Commissioner cannot be regarded as an order made by him under section 31(1). The Tribunal gives the reason for this conclusion that an order under section 31(1) of the Act can only be made in disposing of an appeal properly filed under section 30 of the Act and, consequently, no further appeal lies to the Appellate Tribunal under section 33(1) so as to enable the Appellate Tribunal to make an order under sub-section (4) of that section. In giving thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 463 has been considerably reduced and circumscribed by the subsequent decision of the Supreme Court in Mela Ram Sons v. Commissioner of Income-tax [1956] 29 I.T.R. 607; [1956] S.C.R. 166. The original order of the previous Tribunal which started these proceedings was made on the 31st August, 1950, whereby the Tribunal said: We direct the Income-tax Officer to revise the assessments and authorise him to amend the assessments made on the partners if necessary. The Income-tax Officer, pursuant to these directions, made the revision and the amendment of the assessments which he had previously made. It is clear from this order of the Tribunal that this direction to revise and amend the assessment is an order under section 33(4) of the Income-tax Act although the order itself does not quote this section or refer to it. This order of the Tribunal is well within the ambit and the amplitude of section 33(4) of the Income-tax Act, which provides: The Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate any such orders to the assessee and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Assistant Commissioner and the Tribunal recognised by the Income-tax Act. If, therefore, such higher appellate authorities such as the Appellate Assistant Commissioner or the Tribunal directs or orders him to do something again with regard to the assessment he has already made and that by way of revision or amendment, the Income-tax Officer must be held to be still under section 23 of the Act on the process of assessing the total income of the assessee and determining the sum payable on the basis of the return already filed by him. No other construction or interpretation of section 23 of the Act seems to me to be sensible or consistent with the scheme of the Act. The Privy Council in Commissioner of Income-tax v. Khemchand Ramdas [1938] L.R. 65 I.A. 236; [1938] 6 I.T.R. 414 clearly laid down the law on this branch of the procedure of the Income-tax Act. Lord Romer, in giving the advice of the Privy Council in that case, first referred to the fact that the word assessment is used in the Income- tax Act as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act for imposing li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances detailed in sections 34 and 35 of the Act (to which reference is made hereafter) and within the time limited by those sections. Therefore, Lord Romer makes it clear that the duty of assessing the total income and of determining the sum payable by the assessee, which is cast upon the Income-tax Officer under section 23 of the Act, is not complete until these further proceedings by way of appeals come to an end. Therefore, it is inescapable that the revision and amendment of the assessment made by the Income-tax Officer under the order of the Tribunal under section 33(4) must be one under section 23 of the Income-tax Act. This decision of the Privy Council, although not mentioned by the Supreme Court in Commissioner of Income-tax v. Arunachalam Chettiar [1953] 23 I.T.R. 180; [1953] S.C.R. 463 is nevertheless followed and approved by the Supreme Court in Income-tax [1962] 44 I.T.R. 809, 813-814 Officer, V Circle, Madras v. S.K. Habibullah. This was also approved by the Supreme Court in C.A. Abraham v. Income-tax Officer, Kottayam [1961] 41 I.T.R. 425, 429. The other Privy Council decision which discusses the scope and meaning of section 23 is Seth Badridas Daga v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st by reference to such words as confirm , reduce , or enhance or annual or set aside as used in section 31(3) of the Income-tax Act. I am not impressed by that argument. The word revise certainly comes within the meaning of such orders thereon as it thinks fit in section 33(4) of the Income-tax Act. Incidentally Mr. Meyer is further faced with the difficulty that he is to meet in making reference to other sections of the Act and specially the second proviso to section 34(3) of the Income-tax Act, which says: 34. (3) Provided further that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or reassessment may be made, shall apply to a reassessment made under section 27 or to an assessment or reassessment made on the assessee or any person in consequence of?or to give effect to any finding or direction contained in an order under section 31, section 33, section 33A, section 33B, section 66 or section 66A. That clearly seems to indicate the amenability of the Income-tax Officer to directions and order of his appellate authorities and that is natural enough. Then Mr. Meyer embarked on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 29 of the Income-tax Act dealing with the notice of demand. All that section 30(2) says, inter alia, is that the thirty days may be computed from the receipt of notice of demand relating to each assessment . Now there is already a notice of demand. The word the assessment includes the assessment which naturally the Income-tax Officer has to make under section 23 of the Act. The notice of demand relating to the assessment as used in section 30(2) of the Act would certainly include the demand which the Income-tax Officer will make by an order in writing under section 23(3) when he has revised and amended the assessment under the direction of the Tribunal because it says The Income-tax Officer shall by an order in writing assess the assessee and determine the sum payable by him on the basis of such assessment. Now the limitation will run only when there is a notice of demand by the Income-tax Officer on this revised and amended assessment and not before. Once such notice of demand is made then the appeal must be filed within thirty days from such demand under section 30(2) of the Act. Even if there is no notice of demand the assessee may certainly file an appeal to the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantive right of appeal given in the section must disappear will be really to beg the question. For these reasons we overrule Mr. Meyer's objections on these grounds. The last submission on behalf of the income-tax authorities is that this reference itself is incompetent and without jurisdiction and therefore this court should refuse to answer the question asked. The steps in this argument are first that the Income-tax Officer was without jurisdiction to revise and amend the assessment he had already made even under the orders ?f the Tribunal under section 33(4), secondly, it follows from the first premise that the Appellate Assistant Commissioner was also without jurisdiction to entertain the appeal, and, thirdly, the Tribunal, therefore, in refusing to admit the appeal was also without jurisdiction because it could only entertain an appeal under section 33, i.e., a properly constituted appeal from the Appellate Assistant Commissioner. In support of this submission Mr. Meyer relied on two decisions in Ramaswami Chettiar v. Commissioner of Incometax [1956] 30 I.T.R. 281 and in Balbhadhar Mal Kuthiala v. Commissioner of Income-tax [1957] 31 I.T.R. 930. I am unable to acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition. In fact, there the original assessment had become final and no appeal had been preferred against that assessment order as pointed out at page 284 of that report. Secondly, there in the Madras case the legal position was not challenged by the learned counsel for the petitioner and at page 286 the same learned judge, discussing the Supreme Court decision in Commissioner of Income-tax v. Arunachalam Chettiar [1953] 23 I.T.R. 180; [1953] S.C.R. 463, observed: But the petition filed by Ramaswami Chettiar in the present case is certainly not one of those enumerated in the Act, and no appeal therefore lies from the order passed adversely to the applicant in such an application as the same is not covered by section 30 of the Act. The Appellate Assistant Commissioner was, therefore, right in the view that no appeal lay to him. In this view we uphold the preliminary objection and decline to answer the question referred to this court. These significant facts are absent in this reference. This is not a miscellaneous petition nor a miscellaneous order. In that view of the distinction it is not necessary for me to say whether the Madras decision was right or wr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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