TMI Blog1970 (3) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in setting aside the order of the Commissioner of Income-tax under section 33B on the ground that the Commissioner had used materials against the assessee without giving the assessee an opportunity to rebut the same ? If the answer to either of the above questions is in the negative, then, (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in setting aside the order of the Commissioner under section 33B ?" These questions arise out of nine applications under section 66(1) of the Income-tax Act, 1922, of the Commissioner of Income-tax requiring the Tribunal to refer as many as nine common questions of law said to arise on the Tribunal's consolidated order in I.T.A. Nos. 11728 to 11736 of 1962-63 dated the 22nd December, 1965. The facts are briefly as follows: The assessee is Smt. Panna Devi Saraogi, wife of Shri Narsingdas Saraogi, an employee of M/s. Thakurdas Sureka Iron Foundry Ltd. The assessee filed voluntary returns of income all dated 14th December, 1960, for the assessment years 1953-54 to 1960-61 before the Income-tax O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respective assessment orders. A further deposit of Rs. 10,000 with M/s.Thakurdas Sureka Iron Foundry Ltd., in the assessment year 1961-62, appears to have been accepted by the Income. tax Officer. The total incomes assessed for these nine years were respectively Rs. 6,290, Rs. 4,195, Rs. 4,477, Rs. 4.600, Rs. 5,145, Rs. 5,455, Rs. 6,343, Rs. 6,720 and Rs. 7,777. The Commissioner of Income-tax called for the records of the assessment for the relevant years and upon an examination thereof he considered that the assessment orders passed by the Income-tax Officer on the 29th December, 1960, and the 28th August, 1961, for the assessment years 1953-54 to 1961-62, were erroneous in so far as they were prejudicial to the interest of the revenue. He, therefore, issued a consolidated notice to the assessee by his letter dated 19th December, 1962, stating that he considered the assessment orders as erroneous in so far as they were prejudicial to the interest of the revenue. In that notice he further stated that he considered the assessment orders of the Income-tax Officer as erroneous in so far as they are prejudicial to the interest of revenue " for the following reasons amongst others " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... policies framed by the Central Board of Revenue, New Delhi. And hence the action contemplated by you is entirely misconceived in the facts and circumstances of the case of your petitioner. 9. That in so far as your petitioner carried on business from the place of business disclosed by her and as the Income-tax Officer, Howrah, having jurisdiction over her, completed the assessments exercising cautious discretion along with income from investments, as disclosed in the statements filed at the time of assessment, the same should not be assailed as erroneous or prejudicial to the interest of revenue. 10. That your petitioner carried on business and had income from other sources are matters of record. " It will be clear from the above that this reply does deal with the question of the petitioner carrying on business and asserts that she had income from other sources and although she says they are matters of record before the Income-tax Officer, she did not comply with paragraph 3 of the notice of the Commissioner dated the 19th December, 1962, quoted above, namely, " objections in writing accompanied by necessary evidence, if any, on or before the appointment for personal hearing, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 33B of the Income-tax Act, 1922. Analysing these questions it appears that the first question relates to the jurisdiction of the Income-tax Officer over the assessee in the facts and circumstances of the case. The second question related to the principle of natural justice in the sense whether the Commissioner had used materials against the assessee without giving the assessee an opportunity to rebut the same. But, fundamentally, the third question remains, which raises the real controversy in this proceeding, namely, whether the Tribunal was right in setting aside the order of the Commissioner under section 33B, no matter whether on this reason or on that reason. We shall first deal with the first question about jurisdiction of the Income-tax Officer over the assessee. On a perusal of the records we are satisfied that the Income-tax Officer in this case had no jurisdiction whatever over the assessee and he arrogated to himself a jurisdiction which was not vested in him under the law. This question of jurisdiction has been argued on two foundations, one alphabetical and the other geographical. It is said on behalf of the assessee that the name " Panna Devi Saraogi " is a n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same incomes or classes of income or the same area, in accordance with any orders which the Commissioner of Income-tax may make for the distribution and allocation of the work to be performed. " It is plain from section 5(5) of the Income-tax Act, 1922, that the Commissioner of Income-tax is the authority for distribution and allocation of work to the Income-tax Officer in respect of assessees or classes of assessees in respect of particular areas. In our view, the method of filekeeping or a G.I.R. record, therefore, cannot override the order of the Commissioner of Income-tax. In this respect the Tribunal, in our view, was misled by relying on the decision in Rampyari Khemka v. Commissioner of Income-tax. The Tribunal's decision is dated December 22, 1965. But, unfortunately, immediately thereafter on December 23, 1965, the Division Bench in Commissioner of Income-tax v. Rampyari Khemka set aside on appeal the previous judgment on which the Tribunal relied. In this view of the matter, the Income-tax Officer was clearly beyond jurisdiction in dealing with this assessee. This answers the alphabetical point on the issue of jurisdiction raising the controversy between " P" and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raph 9 of its order as follows: " Furthermore, the Commissioner has also in his order stated that there had been prejudice to the revenue because the entire sum of Rs. 50,000 was not treated as the undisclosed income of the assessee for the assessment year 1960-61 and he also stated that he was satisfied that the said amount really belonged to her husband, Sri Narsingdas Saraogi. The assessee was not, however, allowed an opportunity to meet this aspect of the case which appears to have influenced the mind of the Commissioner very considerably. As already noted, nothing was said in the show cause notice about these investments with the result that the assessee could not say anything in rebuttal in her written submission to the Commissioner dated 24th December, 1962. " In paragraph 2 of the Commissioner's notice dated 19th December, 1962, the Commissioner expressly stated, " the Income-tax Officer was not justified in accepting the initial capital, the income from business, etc., without any enquiry or evidence whatsoever " and he also asked for necessary evidence to accompany objections in writing to this notice under section 33B of the Income-tax Act. Nothing was done by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... significant similarities of facts with the instant reference before us, namely, (1) stereotyped assessment order made for each assessment year, (2) no evidence in respect of money-lending business done and interest income shown, (3) no bank account or any proper books of account maintained, and (4) no names given of parties to whom the loans were advanced with amounts and rates of interest. But the Supreme Court decision in Rampyari's case is also important from another point of view because it points out the distinction between the " supporting material " and the " basic ground ". At page 88 of that report of Rampyari Devi Saraogi v. Commissioner of Income-tax, the following observations were made by the Supreme Court : " We agree with the High Court that all this material was supporting material and did not constitute the basic grounds on which the orders under section 33B were passed by the Commissioner. There was ample material to show that the Income-tax Officer made the assessments in undue hurry. " We are satisfied on the records of this case that the "basic grounds" of the order of the Commissioner under section 33B in the instant reference are sound and unassailable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue " in his order under section 33B of the Income-tax Act. Section 33B deals with the powers of the Commissioner to revise the Income-tax Officer's orders. Section 33B, inter alia, reads as follows: "(1) The Commissioner may call for and examine the record of any proceeding under this Act and if he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment." The following features of this power of revision in the Commissioner of Income-tax must be emphasised. In the first place, the Commissioner may call for and examine the records of any proceeding under this Act. For this purpose, he does not need to show any reason. It is a part of his administrative control to call for records and examine them. As administrative authority, he has this power in the interest of administr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he principles of natural justice on the question of opportunity being given to the assessee. That opportunity was reasonably given, reasonably stating the basic grounds, in which the Commissioner thought that the Income-tax Officer's order was erroneous and gave such reasonable opportunity to the assessee even to produce evidence along with her written objections. The fourth feature under section 33B is the power of the Commissioner under section 33B. The Commissioner can enhance or modify the assessment. He has not done it in the sense that he has not made any assessment himself. He has also the power to cancel the assessment and directing fresh assessment as provided in section 33B. That he has done. That means the assessee will again get the fullest opportunity of making her case at that stage, when a " fresh assessment " as directed will be made. We are, therefore, satisfied that there has been no violation of any principle of natural justice in the instant reference. The central problem is the basic ground about the prejudice to the revenue. Mr. Roy for the assessee drew our attention to the meaning of the expression "prejudicial to the interest of the revenue" as laid dow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on any business then it was not understood as to how the assessments made were prejudicial to the interests of revenue, as, on the contrary, certain amount of tax had been realised by the department". The Commissioner then points out that " in the absence of any documentary and satisfactory evidence with regard to alleged carrying on of the money-lending and speculation business, the Income-tax Officer should not have given the spread-over claim by the assessee and made the assessments from 1953-54 to 1961-62, but she should have made the assessment for one year only, i.e., 1960-61 and brought to tax the entire sum of Rs. 50,000 in that year as income from undisclosed sources and the tax in that event would have been about Rs. 16,000 as against Rs. 475 ". If this is not prejudicial to the interests of the revenue, then one fails to understand what it is. The Commissioner then proceeds to say that " in the absence of any evidence with regard to the acquisition of initial capital and carrying on of money-lending and speculation business, a valid and justifiable presumption can be drawn that the investment made in the name of the assessee really pertained to the moneys of her husband ..... X X X X Extracts X X X X X X X X Extracts X X X X
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