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Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Chagla, C.J
  • Tendolkar, J.
Acts
  • rule 7 of the Income-tax (Appellate Tribunal) Rules. Sub-rule (1) of rule 7
  • petition.2. Section 64(1) of the Income Tax Act
  • SECTION 34 INDIAN INCOME TAX ACT
  • sub-rule (2) and construes section 66(1)
  • sub-section (3) of section 64
  • sub-section (2) of section 22
  • sub-rule (2)
  • sub-rule (1)
  • rule 7(1).
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Chagla, C.J
  • Tendolkar, J.
Acts
  • rule 7 of the Income-tax (Appellate Tribunal) Rules. Sub-rule (1) of rule 7
  • petition.2. Section 64(1) of the Income Tax Act
  • SECTION 34 INDIAN INCOME TAX ACT
  • sub-rule (2) and construes section 66(1)
  • sub-section (3) of section 64
  • sub-section (2) of section 22
  • sub-rule (2)
  • sub-rule (1)
  • rule 7(1).
See more information ...
Smart Summary

Judgment Summary — Chagla, C.J.

Factual and Procedural Background

The first respondent (an Income-tax Officer) served the petitioners with a notice under section 34 of the Income Tax Act dated 5 January 1956; the notice was served on 13 January 1956 and required the petitioners to submit their return by 17 February 1956. The petitioners applied for extensions of time; the final application for extension was made on 15 March 1956 and the time for filing was extended to 29 March 1956. On 27 March 1956 the petitioners posted a letter challenging the Income-tax Officer's jurisdiction; that letter was received by the Income-tax Officer on 31 March 1956. The Income-tax Officer refused to entertain the jurisdictional challenge on the ground that it was made after the expiry of the time allowed by the notice under section 34; the petitioners then filed the present petition challenging that refusal.

Legal Issues Presented

  1. Whether the petitioners' objection to the jurisdiction of the Income-tax Officer was timely — in particular, whether the extended filing date (29 March 1956) governed the period for raising jurisdictional objections under the relevant proviso to section 64(3).
  2. Whether the act of posting the letter on 27 March 1956 (before receipt) constituted calling the jurisdiction in question for the purposes of the limitation provision, or whether communication (receipt) on 31 March 1956 was the relevant date.
  3. Whether, once the objection to jurisdiction is raised, the Income-tax Officer is obliged to refer the question to the Commissioner under the third proviso to section 64(3), even where the Income-tax Officer considers the objection to be time-barred.
  4. Whether the Income-tax Officer's decision to refuse to entertain the jurisdictional challenge without hearing the petitioners violated the rules of natural justice.

Arguments of the Parties

Petitioners' (Appellant's) Arguments — as advanced by Mr. Palkhivala

  • The extension of time to 29 March 1956 meant the petitioners could challenge jurisdiction up to that extended date; therefore the Income-tax Officer erred in treating 17 February 1956 as the relevant cut-off.
  • The relevant date for raising the objection should be the date of posting (27 March 1956), not the date of receipt (31 March 1956); once the letter was put into transmission and beyond recall, the jurisdiction should be deemed challenged on 27 March 1956.
  • Reliance on the Orissa High Court decision in Sri Popsing Rice Mills v. Commissioner of Income-tax (1949-17 ITR 420 : AIR 1949 Orissa 53) which held that sending an application by registered post sufficed for compliance with a statutory condition and the time in transmission should not be included in the limitation period.
  • The Income-tax Officer should have referred the question of limitation/jurisdiction to the Commissioner under the third proviso to section 64(3) rather than dismiss the objection summarily.
  • The Income-tax Officer's refusal to entertain the jurisdictional objection without hearing the petitioners violated natural justice; the petitioners should have been given an opportunity to be heard on the limitation point.

Respondent's (Income-tax Officer's) Position

  • The Income-tax Officer treated the jurisdictional challenge as having been raised after the expiry of the time allowed by the notice under section 34 and therefore refused to entertain it; in that view there was no obligation to refer the matter to the Commissioner under section 64(3).
  • Implicit in the Officer's action is the position that communication (receipt) of the challenge is the operative event for calling into question the place of assessment and that posting alone does not constitute such communication.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Sri Popsing Rice Mills v. Commissioner of Income-tax, 1949-17 ITR 420 : AIR 1949 Orissa 53 Held that an application sent by registered post to the Appellate Tribunal satisfied the condition of "application made to the Appellate Tribunal" and that time in transmission should not count against the applicant. The Court rejected the correctness of this decision for the present context, finding that the Orissa High Court erred in construing section 66(1) in light of rule 7(1) while ignoring rule 7(2) (which deems an application sent by post to be presented only on receipt). The Chagla court considered the Orissa decision not persuasive here.
Firm Motilal Hiralal Shisodia v. Commissioner of Income-tax, 1951-19 ITR 96 : AIR 1951 Nag 224 Consideration of when an application or communication is treated as made/presented for limitation purposes (contrary approach to the Orissa decision). The Court cited this Nagpur High Court decision as taking the contrary view to the Orissa decision and preferred this view in the present case.
Firm Khushiram Raghunath Sahai v. Commissioner of Income-tax, 1953-24 ITR 170 : AIR 1953 Punj 300 Similar contrary approach on when postal transmission constitutes presentation/communication for limitation purposes. The Court relied on this Punjab High Court view as one of several authorities preferring the rule that receipt (not posting) is the operative event; the Court preferred this contrary view.
Commercial and Industrial Bank Ltd., Hyderabad v. Commissioner of Income-tax, 1954-26 ITR 612 : AIR 1954 Hyd 169 Another High Court decision adopting the view that filing/presentation by post is deemed only on receipt and that posting does not suffice to stop limitation. The Court cited this Hyderabad High Court decision among those taking the contrary view to Orissa and expressed preference for this line of authority.
Nagappa Chettiar v. Commissioner of Income-tax, 1954-26 ITR 741 : AIR 1955 Mad 162 Madras High Court decision taking the contrary position to the Orissa case on whether posting suffices for limitation/compliance. The Court adopted the Madras High Court's approach as preferable and, together with the other authorities, held that the petitioners' objection was time-barred because it was not communicated until 31 March 1956.

Court's Reasoning and Analysis

The court conducted its analysis by reference to the relevant statutory provisions and the timing of communication of the jurisdictional objection.

1. Statutory framework: Section 64(1) prescribes which Income-tax Officer assesses a particular assessee. Section 64(3) provides for determination of questions as to the place of assessment by the Commissioner (or multiple Commissioners or the Central Board of Revenue), and contains a proviso requiring that the assessee be given an opportunity to represent his views before such determination. A second proviso to section 64(3) states that if an assessee has not made a return the place of assessment shall not be called in question after the expiry of the time allowed by the notice under subsection (2) of section 22 or under section 34 for making a return.

2. Timing of the objection: The Income-tax Officer's view was that the petitioners called his jurisdiction into question after the expiry of the time allowed by the notice under section 34 and so he was not bound to refer the matter to the Commissioner under the third proviso to section 64(3). The court found it unnecessary to decide whether the extension of time (to 29 March 1956) would affect the computation, because even accepting the petitioners' contention about extension, their letter challenging jurisdiction was not communicated to the Income-tax Officer until 31 March 1956 — two days after the extended period — and was thus beyond time.

3. Posting versus receipt: The petitioners argued that the objection should be treated as raised on 27 March 1956 when the letter was posted. The court rejected this argument. It explained that posting is delivery to the petitioners' agent (post office), not to the Income-tax Officer; the post office was not the Income-tax Officer's agent. The operative act required by the statute is calling the jurisdiction in question, which occurs only when the objection is communicated to the Income-tax Officer. Because communication did not take place until 31 March 1956, the court held the objection was not called in question until that date.

4. Precedential analysis: The court examined the Orissa High Court decision in Sri Popsing Rice Mills which held that putting an application into the post would suffice for compliance with a statutory condition. The Chagla court found that decision incorrect for the present purpose because the Orissa court read section 66(1) in the light of rule 7(1) of the Income-tax (Appellate Tribunal) Rules but ignored rule 7(2), which expressly deems a memorandum sent by post to have been presented only on receipt in the Tribunal's office. The Chagla court therefore preferred the contrary view taken by the Nagpur, Punjab, Hyderabad and Madras High Courts and held that the petitioners' objection was taken beyond time.

5. Obligation to refer to the Commissioner: The court explained the operation of the third proviso to section 64(3): where the place of assessment is called in question by an assessee, if the Income-tax Officer is not satisfied on merits he must refer the matter to the Commissioner for determination. The court clarified that this obligation arises only where the Income-tax Officer has considered the objection on its merits and is not satisfied with it. If the Income-tax Officer concludes the objection is barred by limitation (i.e., dismisses it in limine), there is nothing on the merits for him to refer to the Commissioner and hence no obligation to refer.

6. Natural justice / hearing: The petitioners argued that the Income-tax Officer ought to have heard them before holding their objection time-barred. The court acknowledged the general rule of natural justice that a person affected by a judicial or quasi-judicial order should be heard. However, the court found it unnecessary to decide whether the Officer's order was judicial or quasi-judicial or whether a hearing was strictly required in the circumstances because (a) even if the Officer erred by not hearing the petitioners, the only remedy would be to direct a hearing, and (b) the court itself had heard the petitioners at length and was satisfied that the objection was in any event barred by limitation. Thus no useful purpose would be served by remitting the matter for a hearing.

Holding and Implications

Holding:

PETITION DISMISSED. The court held that the petitioners' objection to the Income-tax Officer's jurisdiction was communicated only on 31 March 1956 and therefore was taken after the expiry of the relevant time; consequently the Income-tax Officer was not obliged to refer the matter to the Commissioner and the petition fails. The petition was dismissed with costs.

Implications:

  • Direct effect on the parties: The petitioners' challenge to the Income-tax Officer's jurisdiction was held to be time-barred and the petition dismissed; the Income-tax Officer's refusal to entertain the objection stands.
  • On referral obligation: The decision clarifies that the duty to refer under the third proviso to section 64(3) arises only where the Income-tax Officer considers the objection on its merits and is not satisfied — not where the objection is dismissed as time-barred in limine.
  • On posting versus receipt: The court accepted and applied the view that, for the purpose of the limitation provision in question, the operative event is communication/receipt by the officer (not mere posting), and it preferred the line of High Court authorities that so hold over the Orissa High Court decision.
  • Precedential impact: The opinion preferred existing High Court authorities that treat postal transmission as not constituting presentation until receipt; the court did not purport to lay down any broader overriding precedent beyond its reasoning in this case.

Order pronounced by D.H.Z: Petition dismissed.

Show full summary ...

    Vishwanath Gopal Oil Mill v. S.C Prashar And Another Opponents.

    Chagla, C.J:— The first respondent served a notice upon the petitioners under section 34 of the Indian Income Tax Act dated 5-1-1956. The notice was served on 13-1-1956. By this notice the petitioners were asked to submit their return by 17-2-1956. The petitioners asked for extention of time and the final application for extension was made by them on 15-3-1956 and the time was extended upto 29-3-1956. On 27-3-1956 the petitioners wrote to the first respondent challenging his jurisdiction to issue a notice or to assess them and this letter reached the first respondent on 31-3-1956. The first respondent refused to entertain the application of the petitioners with regard to his jurisdiction on the ground that the jurisdiction was challenged beyond time, and on that the petitioners have come before us on this petition.

    2. Section 64(1) of the Income Tax Act lays down which Income-tax Officer has to assess a particular assessee, and sub-section (3) of section 64 provides:

    “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 States than one, by the Commissioners concerned or, if they are not in agreement, by the Central Board of Revenue:

    Provided that, before any such question is determined, the assessee shall have had an opportunity of representing his views”.

    3. There is a second proviso to this sub-section (3) and that is to the effect:

    “Provided that if he has not made such a return the place of assessment shall not be called in question after the expiry of the time allowed by the notice under sub-section (2) of section 22 or under S. 34 for the making of a return.” And the view taken by the Income-tax Officer was that as his jurisdiction was called in question after the expiry of the time allowed by the notice under section 34, he was not bound to refer the matter to the Commissioner under the third proviso.

    4. The first contention urged by Mr. Palkhiwala is that inasmuch as time for making the return was extended he could call the jurisdiction of the Income-tax Officer in question upto the extended time and that the Income-tax Officer was in error when he took the view that limitation for this purpose ran out on 17-2-1956 when the time mentioned in the notice expired. In our opinion, it is unnecessary to consider this question because the view we take is that even if Mr. Palkhivala's contention is sound the objection to the jurisdiction has been taken beyond time. Admittedly, the letter of the petitioners challenging the jurisdiction of the Income-tax Officer reached him on 31-3-1956, two days beyond the extended time, and in order to get over this difficulty Mr. Palkhivala has contended that the relevant date for this purpose is not 31-3-1956 but 27-3-1956, i.e, the date when the petitioners' letter to the Income-tax Officer was posted, and a rather curious argument is advanced that inasmuch as the letter was put in the course of transmission on 27-3-1956 and as the letter was beyond recall by the petitioners, the jurisdiction must be deemed to have been challenged on the 27th March 1956 and not on 31-3-1956. In our opinion, that contention is entirely untenable. It is not suggested and it cannot be suggested that the post office was constituted the agent of the Income-tax Officer. If that had been done, then undoubtedly the posting or the letter by the petitioners on 27-3-1956 would have been the delivery of the letter to the agent of the first respondent. In this case the post office was the agent of the petitioners and not of the first respondent. The true position therefore is that the petitioners having delivered the letter to their agent, their agent failed to deliver the letter to the first respondent in time. We are not in the realm of contract and we do not understand the significance of the argument that the letter was put in the course of transmission. What has got to be done under the second proviso to S. 64(3) is to call in question the jurisdiction of the Income-tax Officer, and the jurisdiction is not called in question till the objection is communicated to the Income-tax Officer, and inasmuch as that communication did not take place on 27-3-1956 the jurisdiction was not called in question.

    5. Mr. Palkhivala has relied on a judgment of the Orissa High Court reported in Sri Popsing Rice Mills v. Commr. of Income-tax, 1949-17 ITR 420 : (AIR 1949 Orissa 53) (A). The Orissa High Court was considering the period of limitation for the purpose of S. 66(1) and the High Court read the words “require by application made to the Appellate Tribunal” to mean sending an application to the Registrar or other authorised officer by registered post, & they held that for the purpose of compliance with the condition in the enactment, it was enough that the applicant put the application into such a machinery for transmission and the time occupied in transmission of the application should not be computed as part of the period of limitation of sixty days. With very great respect, we are unable to accept this decision as correct. The High Court has read section 66(1) in the light of rule 7 of the Income-tax (Appellate Tribunal) Rules. sub-rule (1) of rule 7 provides that a memorandum of appeal to the Tribunal may be sent by registered post to the address of the Registrar or to such officer by him. Now, if this rule stood by itself it would be possible to argue that by reason of this rule the Tribunal had constituted the post office its agent. But sub-rule (2) makes it clear that

    “A memorandum of appeal sent by post under sub-rule (1) shall be deemed to have been presented to the Registrar or to the officer authorised by the Registrar on the day on which it is received in the office of the Tribunal at Bombay or as the case may be in the office of such officer”.

    6. Now the High Court of Orissa ignores sub-rule (2) and construes section 66(1) in the light of rule 7(1). It is difficult to understand how, when the rule in terms provides that the application will be deemed to be received when the postal communication has been received by the Tribunal, it could be said that the application is duly made when the application is put in the course of transmission. We find that this view of the Orissa High Court has not been accepted by the other High Courts before whom this question came for consideration. The Nagpur High Court in Firm Motilal Hiralal Shisodia v. Commr. of Income-tax, 1951-19 ITR 96 : (AIR 1951 Nag 224) (B), the Punjab High in Firm Khushiram Raghunath Sahai v. Commr. of Income-tax, 1953-24 ITR 170 : (AIR 1953 Punj 300) (C), the Hyderabad High Court in Commercial and Industrial Bank Ltd. Hyderabad v. Commr. of Income-tax, 1954-26 ITR 612 : (AIR 1954 Hyd 169) (D), and the Madras High Court in Nagappa Chettiar v. Commr. of Income-tax, 1954-26 ITR 741 : ((S) AIR 1955 Mad 162) (E), have all taken the contrary view, and with respect we prefer the view taken by these other High Courts to the view taken by the Orissa High Court. Therefore, in our opinion, inasmuch as the objection to the jurisdiction raised by the Petitioners was not communicated to the first respondent till 31-3-1956, in any view of the case the objection was taken beyond time.

    7. It is then urged by Mr. Palkhivala that it was incumbent upon the Income-tax Officer to refer the question of limitation to the Commissioner. Now, the third proviso to section 64(3) is in the following terms:

    “Provided further that if the place of assessment is called in question by an 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”.

    8. Therefore, it is only when the Income-tax Officer considers the objection of the assessee on merits and does not agree with the contention put forward by the assessee that he must refer the question to the Commissioner, and what is referred to the Commissioner is the determination, again, on merits. Therefore, it is clear that if the Income-tax Officer comes to the conclusion that the objection taken by the assessee is barred by limitation there is no obligation upon him to refer anything to the Commissioner at all; indeed there is nothing to refer to the Commissioner. It is only when an objection is validly taken and there is an objection which the Income-tax Officer can himself consider that the question of reference to the Commissioner arises. But when the objection is dismissed in limine, then no question of the Income-tax Officer considering it on merits arises, much less the question of the Income-tax Officer referring it to the Commissioner arises.

    9. The third contention raised by Mr. Palkhivala is that the decision of the Income-tax Officer is vitiated by failure to observe the rules of natural justice, and what is said is that before holding that the objection of the petitioners was barred by limitation no opportunity was given to the petitioners to be heard. In the first place, reference is made to the first proviso to section 64(3) which says: “Provided that before any such question is determined, the assessee shall have had an opportunity of representing his views”. This proviso cannot help the, assessee because it is clear that the proviso refers to the determination of the question on merits and what it provides is that before the Commissioner decides the question on merits he must hear the assessee. But what is urged by Mr. Palkhivala is that apart from any specific provision in section 64, it is clearly implicit in every provision of the law which provides for the passing of a judicial or a quasi-judicial order that the person who passes this order must hear the party affected by the order that he proposes to pass. Mr. Palkhivala is right that is the ordinary rile of natural justice that before a Court or a tribunal or an authority exercising judicial functions passes an order which prejudicially affects a party, the Court, tribunal or authority must hear the party in his defence and give him an opportunity to show cause against the order that it proposes to pass. In our opinion, it is unnecessary to decide whether in this particular case the order that the Income-tax Officer passed was a judicial or a quasi-judicial order, and whether, even if it was a judicial or a quasi-judicial order, it was incumbent upon the Income-tax Officer to hear the petitioners on the question of limitation, because in our opinion it is clear that even if the Income-tax Officer did not hear the petitioners, no prejudice was caused to them. Assuming we took the view that the Income-tax Officer was in error in not hearing the petitioners, the most that we can do on this petition is to direct the Income-tax Officer to hear the petitioners and all that the petitioners could urge before him would be the question of law as to whether their objection was barred by limitation or not. Now, that very question has been urged and urged at some length by Mr. Palkhivala before us. So that we have had an opportunity of hearing the petitioners and being satisfied that the Income-tax Officer was right in coming to the conclusion that the objection raised by them was barred by limitation. As no useful purpose would be served even if we were to take the view for which Mr. Palkhivala contends, in our opinion it is unnecessary to decide this question on this petition.

    10. The result is that the petition fails and must be dismissed with costs.

    D.H.Z
    Petition dismissed.
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    Comments

    Vishwanath Gopal Oil Mill v. S.C Prashar And Another Opponents.
    (Sep 13, 1956)