TMI Blog1931 (6) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ting forth his total income during the previous year, that is for 1926-27. He wrote a letter to the Income Tax Officer in the following terms: Sir, I have already intimated to you that I do not reside at Sambalpur, i.e., in British India and all my business is done in the Native States and no part of my income, gain or profit accrues or arises in British India. The provisions of the Indian Income Tax Act do not apply to my income. I would submit my proof, in support of my statement herein above made as soon as I come down to Sambalpur in the course of a month. Yours faithfully, (Sd.) Kunwarji Ananda, Contractor, 10-10-1927. 3. He did not fill up the form provided by the Act nor did he verify such form in the prescribed manner. An attempt was made to argue that the letter written by the assessee was a fulfillment of the requirement to make a return but this contention cannot seriously be relied upon and it must be taken that he failed to make a return. The Income Tax Officer also served a notice upon him under Section 22(4) requiring him to produce certain accounts. He failed also to comply with this notice. Thereupon the Income Tax Officer under Section 23(4) m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers to the definition of total income contained in Section 2(15) which is as follows: Total income' means total amount of income, profits and gains from all sources to which this Act applies computed in the manner laid down in Section 16. 9. The assessee's contention is that he is bound to furnish a return only of such income as is liable to assessment under the Act and therefore if he has no such income he need make no return and no part of the Act including Section 23(4) and Section 30(1) is applicable to him or to such income. Section 30(1) of the Act which is, in my opinion, conclusive against this contention, is as follows: Any assessee objecting to the amount or rate at which he is assessed under Section 23 or Section 27 or denying his liability to be assessed under this Act, or objecting to a refusal of an Income Tax Officer to make a fresh assessment under Section 27, or to any order against him under Sub-section (2), Section 25 or Section 25-A or Section 28, male by an Income Tax Officer, may appeal to the Assistant Commissioner against the assessment or against such refusal or order: Provided that no appeal shall lie in respect of an assessment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xable under the Act he may serve upon him a notice requiring a return. It is open to that person to make a return in the prescribed manner and accompanied by the required verification and to state, if such be the fact that he has no income to which the Act applies. If made in the required form, and verified in the required form this is a good and sufficient return. The Income Tax Officer may however demand to see any books of account specified by him, whether or not these books of account do or do not, in the opinion of the assessee, refer to the assessee's taxable income. Indeed if the assessee truly says he has no taxable income it will follow that such books as he may keep cannot have any reference to a taxable income. Nevertheless, the Income Tax Officer is, under Section 22(4) entitled to see the books specified by him in the notice. Furthermore, if required by the Income Tax officer, under S., 23(2) to do so, the assessee must attend at the office and produce any evidence upon which he may rely in support of the return made by him. Failure to make a return in the prescribed form or failure to comply with the notice to produce books of account as specified by the Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t having regard to the contention of the Crown, it is nevertheless most important to see whether or not an assessee is entitled to come to this Court upon the limited question as to whether he has so conducted himself as to render him liable in law to the penalty imposed by the proviso to Section 30(1). 14. The argument for the department amounts to saying that the question of whether or not the conduct of the assessee (as found in fact by the Income Tax Officer or the Assistant Commissioner) is such conduct as will render the assessee liable to the penalty set forth in the proviso to Section 30(1), can never in any circumstances be brought before the Court, save perhaps by the doubtful process of an independent suit by the assessee. Whatever the technical legal considerations the general duty of the Court to stand between the subject and the Crown in the matter of illegal taxation forces me to regard this contention as very unattractive, and it is, in my opinion, unsound. It is undoubtedly the duty of the Assistant Commissioner when the order of the Income Tax Officer comes before him on appeal to decide whether or not he is precluded by the Act from going into the amount or ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts which in his opinion entitle him to make such summary assessment. The assessee is entitled to go to the Assistant Commissioner and if the Assistant Commissioner finds that the facts so found are established and that as established they amount in law to a default by the assessee justifying the application of the proviso he should refuse to go into the merits of the assessment. But his decision on this point and his rejection of the appeal are proceeding in connexion with an assessment and it is the duty of the Commissioner, if required by the assessee, to state a case raising the question of law whether or not the facts established before the Assistant Commissioner are such as to bring the assessee within the ambit of the proviso to Section 30(1). 16. To answer now the questions submitted to us I would reply that a person who has been assessed under Section 23(4) is not entitled to prefer an appeal to the Assistant Commissioner on the ground of liability to assessment and that upon this point the proviso to Section 30(1) is a bar to the appeal. The second question whether on the facts of the present case the assessee is liable to be assessed under the Act really raises the que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de British India and that no income accrued to him in British India undertaking at the same time to furnish proof on his next visit to Sambalpur. This was by a letter dated 10th October 1927. The assessee subsequently appeared before the Income Tax Officer, but produced neither proof of his contentions, nor any books of account. Having therefore failed to comply with the demand to make a return and with the notice under Section 22, sub Section (4), the Income Tax Officer proceeded to assess him to the best of his judgment under Section 23(4). From information which he received the Income Tax Officer found that the assessee had house property at Sambalpur and that the profits of his contract business accrued and were invested in British India. 22. According to the case stated by the Commissioner the fact that the profits were invested in British India was proved to his satisfaction from books of account of two assessees who had been assessed by the officer. 23. As a result of this assessment there was an appeal by the assessee to the Assistant Commissioner and at the same time there was a petition under Section 27 of the Act to the Income Tax Officer. This petition was rejecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : that is to say if the High Court is of the opinion that a point of law arises, the High Court may call upon the Commissioner to state a case thereon. Whether the High Court ought or ought not to use its discretion in favour of the assessee in any particular set of circumstances is another matter. Further the very argument of the assessee which is indicated by the first question which my learned brothers Das and James, JJ., decided is the point of law which on one view of the facts is stated to have arisen in this case, and if indeed such a question does arise it cannot be argued that the jurisdiction of the High Court is limited in ordering the Commissioner to state a case thereon. 26. It would appear that the argument of the Crown amounts to this: that as the first question which is stated to have arisen in this case must be answered in favour of the Crown, therefore the High Court has no jurisdiction to order the Commissioner to state a case. If indeed in the result it be found that no question of law contemplated by Section 66, arises, but only a question of jurisdiction, the case, in my opinion, would have to be answered in favour of the Crown and to that extent the substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this fact before serving a notice under the Sub-section. That there is no method provided under the Act enabling the assessee to question the actions of the Income Tax Officer is clear. 31. The next section is Sub-section (4), Section 23, which provides that if any other person fails to make a return under Sub-section (2), Section 22, and fails to comply with the terms of the notice under Sub-section (4) the Income-tax-Officer shall make the assessment to the best of his judgment. 32. The assessee after such an assessment has a certain remedy with regard to this under Section 27, that is to say, he can show that he was prevented from making a return by sufficient cause or that he did not receive the notice under Sub-section (4), the Income Tax Officer shall cancel the assessment and will proceed to make a fresh assessment under the main provisions of Section 23. Indeed Section 23(4) appears to provide a penalty for not complying with the provisions of the Act and the orders of the Income Tax Officer thereunder. It is not seriously disputed that the assessee has made himself liable to a summary assessment. 33. I think that it must be conceded that the Income Tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; that is to say, although he cannot question the amount before the Assistant Commissioner he may question his liability in law to be assessed. When the Income Tax officer or the Assistant Commissioner, is dealing with an assessment under the Income Tax Act he has to apply his mind to two main questions: the first is whether the assessee has any taxable income (this involves both questions of fact and law); the next matter he has to address himself to, when, having satisfied himself that there is an income which under the law is liable to assessment, is what is the proper rate at which he should be assessed and it does not seem to me that it is possible to read the expression assessment in the proviso otherwise than in the sense which I have indicated in the foregoing statement. That is to say, in exercising his best judgment under Section 23(4) the Income Tax officer exercises it both as regards liability and as regards the amount. It cannot be assumed that the Income Tax officer has acted arbitrarily or that it could be said that he was assessing the assessee to the best of his judgment if he deliberately assessed a person whom he knew to be not liable to assessment in law. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its alternative form in the affirmative. 43. The further argument addressed to us on this point is this. It is said that this Court is not disposing of an ordinary action, that we are not entitled to say that the decision of a part of the case disposes of the whole and reliance is placed in this connexion on Section 66, Sub-section (5) which provides: The High Court upon the hearing of any such case shall decide the question of law raised thereby, and shall deliver its judgment thereon containing the grounds on which such decision is founded. 44. It is argued that the expression the question of law raised thereby means such questions as this Court was of the opinion arose when the application was made by the assessee to order the Commissioner to state a case. I do not agree with that contention. Under the section [Sub-section (2), Section 66] the Commissioner shall within 60 days of the receipt of such application draw up a statement of the case and refer it with his own opinion thereon to the High Court. That of course is the provision relating to a Commissioner stating a case on the application of the assessee; but, in my judgment, the case stated by the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not only as regards the amount or rate at which the assessment has been made, but also as regards the liability of the assessee to be assessed under the Act. It has been contended on behalf of the Crown that when an appeal is barred an order of the Assistant Commissioner dismissing the appeal on the ground of its being barred under the proviso to Section 30(1) is not an order passed under Section 31 within the meaning of Section 66(2), Income Tax Act. This contention I am unable to accept. An order holding that no appeal lies is an order disposing of an appeal within the meaning of Section 31 and the question of law which can be referred to the High Court under Section 66 against such an order is, whether upon the facts found the assessment was properly made under Section 23(4). In my opinion that is the point of law which can be referred to the High Court under Section 66 and the reference should be confined only to that point and to no other point. I am unable to accept the contention of Mr. Manohar Lal that when a reference to the High Court properly lies under Section 66, then the question as to whether the assessee was liable to assessment under the Act can also be raised bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and after dealing with the point as to whether the assessee was liable to be taxed under the Act or not, confirmed the assessment on the ground that the assessment had been rightly made under Section 23(5). The question is whether this order or decision was or was not one under Section 31. 49. The learned Assistant Government Advocate contends that once it is found that no appeal lay to the Assistant Commissioner, the order passed by that officer cannot be regarded as one passed under Section 31. Now Section 31 provides that the Assistant Commissioner may in disposing of the appeal confirm, reduce, enhance or annul the assessment or may set it aside and direct the Income Tax Officer, to make a fresh assessment after making such further inquiry as the Income Tax Officer thinks fit. In this case the Assistant Commissioner passed an order which is at least in form an order under Section 31. In passing the order the Assistant Commissioner also purported to act as the ordinary appellate authority and as far as I am aware there is no section in the Income Tax Act except Section 31 under which the order could have been passed. It appears to me therefore that the moment suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late Income Tax authority was quoram non judice. The decision nevertheless shows that there may arise in actual practice cases where it may be a debatable question whether a certain assessment has or has not been made under Section 23(4). The view that I am inclined to take is also indirectly supported by the decision of the Lahore High Court in Duni Chand v. Commissioner of Income tax (1). In that case there was an assessment under Section 23(4) and it was finally decided that no appeal lay to the Assistant Commissioner of Income tax. Nevertheless the matter was brought up to the High Court under Section 66 and no one raised the question that the provisions of Section 66 were not applicable because the assessment was not appealable. 51. In Commissioner of Income Tax v. A.R.A.N. Chetiiyar Firm A.I.R. 1928 Rang. 108 a preliminary point was raised on behalf of the Crown that no appeal lay and so the High Court had no jurisdiction to deal with the case under Section 66, but this did not prevent the learned Judges of the Rangoon High Court from dealing with the points which arose in the reference. The learned Counsel for the petitioner also relied on a number of cases which support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led with costs in the event of failure. 53. The next question to be determined in this reference has been formulated thus: Whether a person who has been assessed under Section 23(4) is entitled to prefer an appeal to the Assistant Commissioner on the ground that he was not liable to be assessed under the Act or whether the proviso to Section 30(1) is a bar to the appeal. 54. The answer to the latter part of the question was given in the affirmative by a Full Bench of the Lahore High Court composed of five Judges in Duni Chand v. Commissioner of Income Tax A.I.R. 1929 Lah. 593, and fully agree with the view expressed in that case. The first part of Sub-section (1) makes it quite clear that it is open to an assessee to attack the assessment on three grounds namely, (1) as to the amount; (2) as to the ratio at which he is assessed and (3) on the ground that he is not liable to be assessed under the Income Tax Act. The proviso to Section 30(1) makes it equally clear that where an assessment has been made under Section 23(4) it cannot be attacked on any of those three grounds whatsoever. In other words, the assessee can neither impugn the correctness of the amount on which he i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest and a decision thereon is wholly unnecessary. It is urged by him that once we hold that the assessee had no right of appeal under the Act and the order rejecting his appeal is unassailable, no further question can arise for the purpose of taking action under Section 66. This argument has been urged with considerable force and the majority of my colleagues are disposed to accept it. Speaking for myself, I am in some doubt as to its soundness. 57. On the other hand, Mr. Manohar Lal who appears for the petitioner contends with some force that once it is held that the order rejecting the appeal is an order under Section 31 and it is found that the order deals not only with the question of the maintainability of the appeal but with other questions of law raised by the assessee, the High Court will have jurisdiction to decide those other questions, because they arise out of the order, even though it may take the view that the appeal was not competent. In this view it would seem that the present question, namely, whether the assessee's income under one of the heads was taxable at all cannot be shut out because it has been dealt with by the Income Tax authorities and does a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge. I would therefore agree to the order proposed by my Lord the Chief Justice that this application should be dismissed with costs. Sankara Balaji Dhavle, J. 60. As regards the first question, learned Counsel for the assessee has endeavoured, by a close analysis of Sub-section 1, Section 30 of the Act and of the proviso to it, to show that the proviso has no application to the case of the assessee as he has no income, profits or gains coming within the Act, Section 4(1). The proviso bars an appeal in respect of an assessment made under Sub-section 4, Section 23, while Section 30(1) gives an appeal against the assessment; but I cannot agree that the change from against to in respect of points to a difference, in favour of the assessee, between the scope of the main provision and that of the proviso. If an appeal is barred in respect of an assessment, it seems clear that no appeal can be maintained against that assessment. Mr. Manohar Lal has also laid stress on the fact that while the proviso speaks of an assessment made under Sub-section 4, Section 23, Section 30(1) speaks of denying liability to be assessed under this Act. But this only shows the limited operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y assessee denying his liability to be assessed under the Act may under Sub-section 1; Section 30, appeal against the assessment, no appeal shall lie in respect of an assessment made under Sub-section 4, Section 23. The liability to be assessed under Sub-section 4, Section 23, is only a particular instance of liability to be assessed under the Act, and it is this latter that is mentioned in Section 30(1) as one of the reasons for an appeal against an assessment. But for the proviso a person assessed tinder Sub-section 4, Section 23, could have appealed against the assessment on the ground that he was not liable under the Act at all, and the proviso bars an appeal by such a person on any ground whatever. 62. It seems clear from this that where the Income Tax Officer has served notices under sub-Ss. 2 and 4, Section 22, upon a person whose income was, in the Income Tax Officer's opinion, of such an amount as to render him liable to income tax, and such person has failed to comply with either of the notices, the Income Tax Officer's jurisdiction to make an assessment under Sub-section 4, Section 23, depends not (as contended for the assessee) on the actual existence of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, Section 23. The defaults that bring Sub-section 4, Section 23 into play have before now actually given rise to questions of law, and I see nothing improbable or incongruous in the legislature disallowing appeals against assessments while laying it open to the assessee to obtain a reference to the High Court under sub-Ss. 2 and 3, Section 66 on questions of law arising out of the order of the Assistant Commissioner rejecting an appeal on the ground that it is barred by the proviso to Sub-section 1, Section 30. References arising out of orders relating to the proviso to Sub-section 1, Section 30, have actually been entertained by more than one High Court, and Section 66 does not in terms require as a foundation an appellate order on the merits but only an order under Section 31 . The summary assessment under Sub-section 4 Section 23 and the barring of an appeal against the assessment under the proviso to Sub-section 1, Section 30, are the penalty for the defaults specified in Sub-section 4, Section 23, and if it had been intended by the legislature to add to this penalty by depriving the assessee of any assistance under Section 66, I consider that that would have been done in unm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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