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TMI Blog1962 (11) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... hammad & Co., which latter firm was being assessed at Dhanbad in Bihar State. After the petitioner had succeeded to this firm, he made an application to the Central Board of Revenue (hereinafter called the Board) for a transfer of the case of that firm under section 5(7A) of the Income-tax Act, 1922 (hereinafter called the Act) and after correspondence between the representative of the petitioner with the Board, the Board by its order C. No. 29A(97)-IT/50 dated May 12, 1951, instructed the Commissioner of Income-tax, Bihar and Orissa, Patna, to cancel the assessment already made in the case of Himatlal Fateh Mohammad & Co. (successor M/s. Devi Dayal & Co.) and to "transfer the records of the case to the Commissioner of Income-tax, Delhi, Rajasthan, Ajmer and Madhya Bharat, Delhi, for the purposes of making a fresh assessment, provided a formal security bond is executed for payment of the tax which may be found due". Subsequent to this communication, the assessments were evidently being made by the Income-tax Officer at Delhi till 1955. Thereafter, it appears that the Income-tax Officer at Delhi had tried to serve certain notices and a representative of the petitioner, one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppears that a reply was in fact sent on August 29, 1959, by the petitioner in which, apart from representation relating to the assessments already made, he, inter alia, asserted that his principal office of business is situate at 65/16, Rohtak Road, Delhi, that he went to Hyderabad temporarily on account of certain business exigencies, that the Hyderabad Income-tax Officer had no jurisdiction over him since the principal place of business is situate at Delhi and that the assessment records should not be transferred. From the record, it appears that after the receipt of this letter, the Income-tax Officer addressed the Commissioner of Income-tax at New Delhi for steps being taken for determining the place of assessment to be at Hyderabad. In the counter, the second respondent submits that while these proceedings were being taken at Delhi, it came to the notice of the Income-tax Officer, Special Survey Circle, Hyderabad, in April, 1960, that the petitioner was carrying on substantial business and had entered into a number of transactions of purchase and sale of evacuee properties at Hyderabad to the tune of about 14 lakhs of rupees, that he took on lease from the Government (State) D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this, notices for 1961-62 were also issued to the firm Devi Dayal & Co., as well as Devi Dayal, individual. Since the place of assessment was objected to, the Income-tax Officer referred the case to the Commissioner of Income-tax, who by his letter dated January 23, 1962, informed the petitioner to appear before him on January 31, 1962, at 11 a.m. with all evidence, if any, in support of his objections for the determination of the place of assessment and for transfer of the case to New Delhi on the ground that the principal place of business was at New Delhi. He was also informed that if he failed to appear on the above date, it would be construed that he has no objections. His letter was served on the petitioner on January 26, 1962, and on the next day, he wrote to the Commissioner, Income-tax, stating that as he had a fracture in the ankle, he could not appear and asked for three weeks adjournment. This letter was received on January 29, 1962. But, on the due date, viz., January 31, 1962, no one appeared on behalf of the petitioner and since the application for adjournment was not accompanied by any medical certificate, the Commissioner took up the matter and communicated to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdiction to determine the place of business under section 64(3) by virtue of the inhibition contained in section 64(5) of the Act; (2) that even if the above contention is negatived, the provisions of section 64(3) have not been complied with inasmuch as the petitioner was not given an opportunity, and, if given, it was not given by both the Commissioners, namely the Commissioner at Hyderabad as well as at Delhi; and, in any case, he was not given a reasonable opportunity; (3) that if it be held that the order of the Board transfering the records to the Commissioner of Income-tax at Delhi was not an order under section 5(7A) of the Act, it should be held that it is an order under section 5(2) and that as long as that order is there, the determination of the principal place of business cannot be made under section 64(3). The learned advocate for the department contends that the order of the Board dated May 12, 1951, is not an order of transfer within the meaning of section 5(7A) of the Income-tax Act nor is it an order under section 5(2) because the Board can only make over the case where there are more than one Commissioner for the same area or a new Commissioner is appointed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udes all proceedings under this Act which may be commenced after the date of the transfer in respect of any year........ (8) All officers and persons employed in the execution of this Act shall observe and follow the orders, instructions and directions of the Central Board of Revenue: Provided that no such orders, instructions or directions shall be given so as to interfere with the discretion of the Appellate Assistant Commissioner in the exercise of his appellate function." "64. Place of assessment.--(1) Where an assessee carries on a business, profession or vocation at any place, he shall be assessed by the Income-tax Officer of the area in which that place is situate or, where the business, profession or vocation is carried on in more places than one, by the Income- tax Officer of the area in which the principal place of his business, profession or vocation is situate. (2) In all other cases, an assessee shall be assessed by the Income-tax Officer of the area in which he resides. (3) Where any question arises under this section as to the place of assessment, such question shall be determined by the Commissioner, or, where the question is between places in more St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged with the function of making such assessment by the Central Board of Revenue or by the Commissioner of Income-tax to whom he is subordinate, as the case may be." It may be stated that these two sections were amended from time to time, and though section 5 deals with the income-tax authorities, the powers conferred on the Central Board of Revenue have also been specified therein. Before the Amendment Act of 1939, sub-section (2) of section 5 had not empowered the appointment of Commissioners of Income-tax without reference to area and it was for the first time by that Act that the Central Government was empowered to appoint not more than three Commissioners of Income-tax without reference to area and to the exclusion of any Commissioner appointed for an area, to discharge the functions of a Commissioner in respect of any case or classes of cases assigned to him by the Central Board of Revenue. The present sub-section (2) has been inserted by the Amendment Act XXV of 1953, with effect from 1st April, 1952. Again sub-section (7A) of section 5 was added by Act IV of 1940, and in 1956, by Amendment Act XXVI of 1956, as a result of the decision of the Supreme Court in the Bidi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicability of that section, Spens C.J. delivering the judgment of the court observed at page 79: "It however seems to us open to serious doubt whether the appellant is entitled to raise this question at all and whether it is really a matter for decision by the court. Clause (3) of section 64 provides that any question as to the place of assessment shall be determined by the Commissioner or by the Central Board of Revenue. The third proviso to the clause enacts that if the place of assessment is called in question by the assessee, the Income- tax Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under this sub-section before assessment is made. . Page No : 0839 These provisions clearly indicate that the matter is more one of administrative convenience than of jurisdiction and that in any event it is not one for adjudication by the court. The second proviso to clause (3) further enacts that the place of assessment shall not be called in question by an assessee if he has made a return in response to the notice under sub- section (1) of section 22, or if he has not made such a return, it shall not be called in question after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bombay Presidency and in respect of the year 1937-38, assessment was made. For the year 1938-39 the assessee received a notice to make a return, but no assessment had actually been made, nor was assessment made for the year 1939-40 to which the amended Income-tax Act applied. For the year 1937-38 the assessee was served with a notice under section 34 alleging that certain income had escaped assessment. As already noted, sub-section (2) of section 5 had by then been amended in 1939 and the Central Board of Revenue, therefore, had appointed a Commissioner of Income-tax (Central) with head-quarters at Bombay under the provisions of that sub-section, and the cases of the assessee were assigned to him. It is in respect of that assessment that the assessee had filed an application under section 45 of the Specific Relief Act of 1877, asking the court: (a) to direct the Commissioner of Income-tax, Central, to forbear from exercising jurisdiction and passing orders in the assessment of the petitioner for the years 1937-38 and 1938-39; and (b) to direct the Income-tax Officer, Section II Central, to forbear from exercising jurisdiction, passing orders and continuing assessment proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner, Central, under him. In my opinion section 64 is not so controlled. The two sections can stand together without encroaching on each other and that natural construction should be adopted. The words of section 64, Income-tax Act, clearly provide that the assessee shall be assessed by the Income-tax Officer of the area in which his place of business or residence is situate." These passages clearly indicate what we have already observed, namely, that the provisions of section 64(1) and (2) vest a right in the assessee to have his assessment made at the principal place of business, and in the case of any objection relating thereto, to have the same determined. It is probable as a consequence of this decision that sub-section (5) of section 64 was added, clauses (a) and (b) of which deal with the assignment of cases to Commissioners of Income-tax appointed without reference to an area or where a transfer is made by the Board under section 5(7A). Their Lordships of the Supreme Court in Bidi Supply Co. v. Union of India [1956] 29 I.T.R. 717; [1956] S.C.R. 267, while citing the observations of Beaumont C.J. and Kania J. in Dayaldas Kushiram v. Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Officer of the particular area where he resides or carries on his business is conferred on the assessee. This right, however, according to the authorities above referred to, is hedged in with the limitation that it has to yield to the exigencies of tax collection." What considerations may prevail with the determining authority is a different matter. But, that it is a right conferred on the assessee can now admit of no doubt. Though no doubt the Supreme Court in the case of Seth Teomal v. Commissioner of Income-tax## observed that there is nothing in the Bidi Supply case [1956] 29 I.T.R. 717; [1956] S.C.R. 267 which in any way detracts from the efficacy of the decision of the Federal Court in Wallace Brothers case [1945] 13 I.T.R. 39 (F.C.), the emphasis in both the cases was the maintainability of an objection as to the place of assessment in an appeal against the assessment after the assessment has been made. In Dina Nath Hem Raj v. Commissioner of Income-tax [1927] I.L.R. 49 All. 616 the assessee who was carrying on business at Calcutta was sought to be assessed at Kanpur and an objection was taken to the Income-tax Officer, Kanpur, making the assessment. The Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter under sub-section (3) of section 64. At this stage it may also be observed that Sri Kondaiah for the department argued that even if it is an order under section 5(7A) or section 5(2) the provisions of sub-section (3) of section 64 should be given full force and effect irrespective of the inhibition in sub- section (5). His reasoning is as follows: Sub-sections (1) and (2) of section 64 deal with the place of business, where no dispute arises, and it is only in such cases where orders are made by the Board under section 5(2) or section 5(7A) that the Income-tax Officer is inhibited from entertaining jurisdiction contrary to the orders of the Board. But where a dispute arises that since the Board has been empowered even under sub-section (3) to determine the question in the event of there being disagreement between both the Commissioners, that power is not one which is in contemplation of sub-section (5)(b) of section 64. It is contended that section 64(3) is independent and does not embody a consequential power to be exercised in cases where any question arises under sub-sections (1) and (2) of section 64. This is said to be so as sub-section (5) does not mention sub-sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable to support this contention either by authority or by reference to any provisions of the Income-tax Act. The only provisions, as we have stated, are those contained in section 64, and none of those provisions have any reference to any other power under sub- section (2). Construing the order as one possibly falling under section 5(7A), it is obvious that the primary requisite for an order under that provision is that the Commissioner or the Board is empowered to only transfer from one Income-tax Officer to another, whether within the State by the Commissioner or within or without the State by the Board. The order in question is one which does not purport to transfer the cases of the petitioner to any Income-tax Officer. On the other hand, it purports to assign them to a Commissioner to be dealt with by him under the provisions of the Act. Mr. Kondaiah contends that it is an order made under sub-section (8) of section 5, which empowers the Board to issue administrative directions to its subordinates and in exercise of those powers the cases of the petitioners were transferred to the Commissioners. We are however clear in our minds that sub-section (8) does not empower the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s must be exercised judicially by the authorities in consonance with the statutes and the law declared by the High Court of the territory and the Supreme Court. The system of Government prevailing in this country fortunately rejects arbitrariness and subjects those in authority to the governance by the rule of law. It appears to us in the view we have taken of the order of May 12, 1951, namely, that it is not one under section 5(7A) or though it is contended that it is one under section 5(2), it is certainly not one under that sub- section as contemplated under section 64(5)(b), to further consider under what provisions the transfer was made from the Commissioner of Bihar to the Commissioner of Delhi. That order was not, as we have stated already, an order of transfer from one Income-tax Officer to the other. It was an order directing the Commissioner of Bihar to cancel, on security being furnished, the ex parte assessment and to make over the case thereafter to the Commissioner of Delhi. The assessee himself admits that subsequently he has been filing his returns under section 22 till 1955 at Delhi. Therefore, the proviso to section 64(3) precludes him from challenging the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, or through a representative or even by an affidavit. As long as the assessee is given an opportunity to state his objections to the proposed determination of the place of assessment, that would satisfy the requirements of the proviso. When the Income-tax Commissioner at Hyderabad served a notice on him asking him to make his representations and even inviting him to be present at his office to do so, it does not mean that he could be deemed to have had an opportunity if he was heard in person. If he was unable to attend on the due date, he could have sent a written representation, affidavit or even authorized some one to represent him on his behalf. In this case, his representations against the transfer were before the Income-tax Commissioner. That apart, we cannot say that the Commissioner was not justified in treating his absence as non-compliance with the notice served on him to make representations, or that the petitioner (assessee) was not given an opportunity or that the Commissioner had not considered his representations. No medical certificate was in fact produced and, in the circumstances of the case, the Commissioner was perfectly justified in considering the matter, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pting the final order of the Commissioner or Commissioner or the Central Board of Revenue proceeds to make an assessment, the plea of jurisdiction cannot be raised before the Assistant Commissioner on appeal, and the High Court cannot deal with that question under section 66 of the Act. It was held that no right of appeal would lie against an order under section 64(3). On the facts and circumstances, it was also held that the assessee must be deemed to have been afforded an opportunity within the meaning of the proviso to sub- section (3) of section 64 of the Act, if he had given any affidavit called for by the Commissioner. It may be observed that in that case the Commissioner of United Provinces called for his representations and subsequently after correspondence, both the Commissioners had agreed on the question of place of assessment. It was not the case that both the Commissioners should give an opportunity for making representations or for personally being heard by either or both of them. At page 30 it was observed thus: "The words occurring in the proviso are that the assessee should have had an opportunity of representing his views and not that the assessee should ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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