Ishwar Das Kungoomal v. Commissioner Of Income-Tax, U.P

Pathak, J.:— The Income-tax Appellate Tribunal has referred the following two questions for the opinion of this court:

“1. Whether, on the facts and in the circumstances of the case, the Commissioner of Income-tax was competent to take proceedings under section 33B and to pass an order under section 33B?

2. If the answer to the above question is in the affirmative, whether the order passed by the Commissioner of Income-tax under section 33B was a valid and proper order?”

2. The assessee-firm was assessed by the Income-tax Officer as an unregistered firm for the years 1960-61 and 1961-62, respectively. The Commissioner of Income-tax, having satisfied that the assessments made were prejudicial to the interests of the revenue and that section 23(5)(b) of the Indian Income-tax Act, 1922, was attracted, purported to take proceedings under ‘section 33B of that Act to revise those orders. On August 6, 1962, he issued a notice under section 263 of the Income-tax Act, 1961, calling upon the assessee to appear on August 16, 1962. The notice was served on the assessee on August 9, 1962. The assessee filed a writ petition in this court and obtained an interim order on August 24, 1962, staying the proceedings. The stay order was communicated to the Commissioner of Income-tax by the assessee's counsel. The income-tax department, being apprehensive that the proceedings under section 33B, so far as they related to the assessment year 1960-61, would shortly be barred by limitation, applied to this court for a modification of the stay order so as to enable it to complete the proceedings. The order was modified by the court on August 22, 1962. The Commissioner was allowed to complete the revisional proceedings but was directed by the court: not to take any step to enforce any adverse order against the assessee. Meanwhile, an order dated August 8, 1962, was issued by the Central Government under section 298 of the Income-tax Act, 1961. Paragraph 4 of the order provided that proceedings by way of appeal, reference or revision in respect of any order made under the Income-tax Act, 1922, should be instituted and disposed of as if the Act of 1961 had not been passed, and further any such proceedings instituted under the Act of 1961 after March 31, 1962, and before August 8, 1962, should be deemed to have been instituted under the Act of 1922 and should be disposed of as if the Act of 1961 had not been passed. The Commissioner issued a fresh notice on August 27, 1962, this time under section 33B of the Act of 1922. The notice required the assessee to appear on August 29, 1962. It was served on one Sundar Das on August 28, 1962. The department also attempted to serve the notice on one of the partners, Mangal Das, but he, it appears, was avoiding the service of the notice and it was served by affixation. When the proceedings were taken up by the Commissioner on August 29, 1962, one Pokar Das, representing himself to be an employee of one of the partners, attended before the Commissioner along with a letter stating that the proceedings had been stayed. A copy of the order dated August 24, 1962, was also filed. The Commissioner pointed out that that order had been modified by this court and he was entitled to complete the proceedings. He inquired of Pokar Das whether he had anything to say on the merits but it seems that Pokar Das’ was unable to present the assessee's case. The Commissioner, in the view that limitation was shortly expiring, found himself unable to adjourn the proceedings. The Commissioner made an order on the merits of the case, and in the view that it would be beneficial to the revenue to register the firm under section 23(5)(b) he directed the Income-tax Officer to modify the assessments of the firm and its partners accordingly. The assessee appealed to the Income-tax Appellate Tribunal. The Tribunal has dismissed the appeals. At the instance of the assessee, this reference has been made.

3. On the first question, that is, whether on the facts and in the circumstances of the case, the Commissioner of Income-tax was competent to take proceedings under section 33B and to pass an order under section 33B, learned counsel for the assessee has conceded that the point is concluded by the decision of the Supreme Court in Kalawati Devi Harlalka v. Commissioner of Income-tax [1967] 66 I.T.R 680. In that case, the Supreme Court laid down that section 297(2)(a) of the Income-tax Act, 1961, includes within its scope a proceeding under section 33B of the Indian Income-tax Act, 1922, taken even after the repeal of the Act of 1922 by the Act of 1961. The Supreme Court also adverted to the Income-tax (Removal of Difficulties) Order, 1962, paragraph 4(2) of which, as we have pointed out above, declares that a proceeding instituted under the Act of 1961 after March 31, 1962, and before August 8, 1962, should be deemed to have been instituted under the Act of 1922 and should be disposed as if the Act of 1961 had not been passed.

4. Learned counsel for the assessee contends that the Income-tax (Removal of Difficulties) Order, 1962, is invalid??????o far as it is retrospective in operation, and section 298 of the Act of 1961, under which it was purportedly made, did not confer power upon the Central Government to make an order having retrospective effect. It see???s to us that the contention is without substance. Section 298 of the Act empowers the Central Government to make a general or special order to remove difficulties arising in giving effect to the provisions of the Act of 1961. It is for the removal of difficulties already arisen or apprehended in future that the power has been conferred upon the Central Government. It seems to us that section 298 includes within its scope orders which are retros???ective in operation.

5. The next contention of learned counsel for the assessee is that an adequate opportunity was not given to the a???ssee when the proceedings were taken up on August 29, 1962. It is po???ted out that the notice dated August 27, 1962, was served on the next day, and there was hardly any time for the assessee to prepare his case.

6. The question, we think, must be decided in the light of what prejudice, if any, has been caused to the assessee. The notice under section 33B issued on August 27, 1962, was served on Sundar Das the next day. Notice was also served by affixation. No attempt was made by the assessee to appear on August 29, 1962, through a person competent to participate in the proceeding if the case was considered on the merits. The assessee merely sent Pokar Das for the purpose of informing the Commissioner that the proceeding had been stayed by the High Court. According to the finding of the Tribunal no attempt was made by the assessee before the Commissioner to secure an adjournment of the proceeding on the ground that sufficient time had not been allowed for preparing the case. There is nothing to show that this finding is incorrect. The order of the Commissioner does not indicate that the assessee, either through Pokar Das or otherwise, made a grievance before the Commissioner of want of adequate time to present its case. We are satisfied that the conten???ion of the assessee that adequate time was not afforded to it must be rejected. Besides, the notice dated August 6, 1962, under section 263 of the Act of 1961 apprised the assessee of the contemplated proceeding as long ago as August 9, 1962. That notice must be treated as valid in view of the order dated August 8, 1962, issued under section 298 of the Act of 1961. Pursuant to that order the notice dated August 6, 1962, issued under the Act of 1961 must be deemed to have been issued under the Act of 1922. There is no dispute that the said notice was served on the assessee on August 9, 1962. It is difficult to accept the contention that the assessee did not have sufficient time for preparing its case.

7. It is also urged that the order under section 33B is erroneous in so far as it directs the modification of the assessments of the partners. The order, it is said, falls outside the scope of section 33B. The contention was raised before the Tribunal, and the Tribunal has pointed out that it was concerned with appeal filed by the firm. It was not considering any appeal by the partners. In other words, the Tribunal meant to say that the grievance could be voiced only by the partners and not by the firm. The Tribunal appears to be right in taking that view.

8. In our opinion, the Tribunal is right in holding that the order of the Commissioner of Income-tax under section 33B was fully within his competence and was a valid and proper order.

9. The questions preferred are answered in the affirmative. The Commissioner of Income-tax is entitled to his costs, which we assess at Rs. 200. Counsel's fee is also assessed in the same figure.

10. Questions answered in the affirmative.