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1961 (2) TMI 86

for the Respondent JUDGMENT Rajagopalan Offg. ,CJ. The petitioner and Murugan were partners, each with a half share in the firm of Messrs. Murugan Arulanandam and Co. which carried on business at Tuticorin. The petitioner himself was a resident of Ceylon. The Income-tax Officer refused registration of that firm for the assessment year 1951-52 also, as he had refused it in the previous years from 1949-50. The Income-tax Officer completed the assessment for 1951-52 on November 11, 1954. It was the unregistered firm that was assessed. The only source of income of the petitioner in the taxable territories was his share of the profits of that firm. He filed a separate return, wherein he claimed that he was a non-resident. On February 24, 1955, the Income-tax Officer closed the individual assessment of the petitioner. The petitioner was treated as resident and ordinarily resident, as against his claim that he was a nonresident. There was, however, no assessment of tax, and it was treated as a case of "no demand", because his share of the income of the. firm had already been assessed along with the rest of the income of the unregistered firm. The petitioner himself did not pursu .....

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35 to show cause why the order of assessment in his case, dated February 24, 1955, should not be rectified (1) to assess him as a non-resident, and (2) to assess him on his share of the profits of the registered firm. The petitioner was eventually given time till December 15, 1958, to file his objections. Without preferring his objections within the time allowed to him by the Income-tax Officer the petitioner moved this court for the issue of a writ of prohibition under article 226 of the Constitution and obtained, a rule nisi on December 8, 1958. In C.M.P. No. 7602 of 1958, the petitioner asked for an interim stay of all further proceedings before the Income-tax Officer, and on December 8, 1958, itself this court granted an order ex parte the respondent staying the proceedings for three weeks. Apparently both the department and the petitioner lost sight of the feature that the court limited the interim stay to three weeks. As the period of four years within which rectification could be effected under section 35 would run out on February 24, 1959, the respondent applied to this court for permission to complete the proceedings. On December 16, 1959, this court ordered: "The int .....

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erfere with the finality of the assessment ordered on February 24, 1955, and that the petitioner's case did not fall within the scope of either section 35(1) or section 35(5) of the Act. The further contention of the petitioner was that, even if rectification was permissible under section 35, the exercise of the jurisdiction on February 19,1959, was vitiated, as that order was passed without giving the petitioner an effective opportunity to present his objections. It is easier to dispose of the second contention. It is true that though the petitioner was given time till December 15, 1958, he did not prefer his objections. Before the expiry of that period he obtained on December 8, 1958, an interim stay of further proceedings before the Income-tax Officer. The petitioner was not, therefore, bound to lodge his objections within the time originally allowed, December 15, 1958. It is true that the stay was limited to three weeks, and even after that ceased on December 29, 1958, the petitioner did not file his objections or seek further time from the Income-tax Officer. But then, it should be fairly obvious that both the department and the petitioner fell into the same error, that th .....

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ctions the petitioner could put forward. The petitioner was entitled as a normal rule of natural justice to an opportunity, to an effective opportunity, to be heard by the Income-tax Officer, before an order to the detriment of the petitioner was passed by the Income-tax Officer. That opportunity the petitioner did not have. The denial of that opportunity vitiated the order dated February 19, 1959, and on that ground alone the order is liable to be set aside by the issue of a writ of certiorari. Though it becomes really unnecessary to decide whether the notice dated November 18, 1958, was without jurisdiction-relief can be granted to the petitioner in these proceedings under article 226 of the Constitution without determining that question-we shall indicate our views. We shall however refrain from examining the question with the same elaborateness with which arguments were addressed. The respondent relied at one stage on section 35(5) of the Act. It should be obvious that the petitioner's case did not come within the scope of section 35(5). There was no reassessment of the income of the firm; nor was there an appeal against the assessment of the firm. The only appeal of the fir .....

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an express direction to grant registration, was only to set aside the order of the Income-tax Officer, the position would be that the original application presented to the Income-tax Officer for registration had still to be disposed of and the Income-tax Officer could and had to grant registration. We can see no force in the contention of the learned counsel for the petitioner that on March 29, 1956, the Income-tax Officer had no jurisdiction to grant registration. It is not really necessary to decide in this case whether the record of the assessment of the firm including the proceedings under section 26A can be viewed as part of the record of the assessment of the petitioner. Ex facie the order dated February 24, 1955, which dealt with the petitioner's assessment, showed that his income was a share in the profits of an unregistered firm, and that was why that income was not assessed to tax. It was a registered firm. That the registration was granted subsequent to February 24, 1955, did not make it any the less a registered firm. The description that it was an unregistered firm therefore constituted a mistake apparent on the face of the order of assessment itself. We, therefor .....

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ips of the Privy Council pointed out that section 34 and section 35 were exhaustive and prescribed the only circumstances in which and the only time in which fresh assessments could be made. There again their Lordships had no occasion to go into the question whether section 34 and section 35 were alternatives or whether they were mutually exclusive. No direct decision on the question has been brought to our notice. We are of opinion that the approach should be whether the statutory requirements of section 34 or section 35 have been satisfied. If in a given case the requirements of both section 34 and section 35 are satisfied the application of neither can be ruled out, though obviously both cannot be applied at the same time. In the case of the petitioner it would be a case of escape from assessment coming within the scope of section 34(i)( b). But then it would also be a case of mistake apparent on the face of the record of the petitioner's assessment. We have already held that the requirements of section 35(1) were satisfied in this case. It is no doubt true that the application of section 34 would have been more favourable to the petitioner. Apart from the slightly shorter p .....

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rcise of that jurisdiction was vitiated when the order was passed on February 19, 1959, violating the principles of natural justice. One other feature requires notice. The assessment of the firm was left intact even on February 19, 1959, and it should be remembered that it was as an unregistered firm that that firm was assessed. Apparently the tax assessed on the firm was collected in full. On the same income there cannot be two sets of assessment. The learned counsel for the petitioner was well founded in his contention, that without setting aside the assessment on the firm and without apportioning the income between the partners under section 23(5)(a), and without carrying out the mandate imposed by section 23(6) of the Act, the Income-tax Officer could not have assessed the petitioner on his share of the income of the firm. What would not have been permissible in the case of the original assessment would not be open in what was virtually a reassessment under section 35(1) of the Act. Further, while the order dated September 29, 1955, which was subsequently set aside by the Income-tax Officer himself, showed ex facie that the petitioner was given credit for his share of the tax p .....

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