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Case Number

C.W No. 51 of 1971

Attorney(S)

— Mr. N.D Karkhanis, Sr. Advocate, with Mr. H.K Puri, Advocates for the Petitioner.
— Mr. G.C Sharma with Mr. Randhir Chawla and Mr. B.R Dewan, Advocates.

Judges

Mr. Justice Hardayal Hardy
Mr. Justice V.S. Deshpande

Acts

Central Boards of Revenue Act, 1963,(b) Directors of Inspection,(c) Commissioners of Income-tax,(d)
Sections 116 and 117.Section 130 consists of two sub-sections. Clause (a) of sub-section (1)
SECTION 83 INCOME TAX ACT 1961
Section 121 of the Punjab Panchayat Samities and Zila Parishads Act.
SECTION 121 A INCOME TAX ACT
Sections 263 and 264 of the Income-tax Act, 1961
Income-tax Act, 1961 by the Finance Act 1970
provisions of Section 81 (1) (c) or Section 83
SECTION 263 INCOME TAX ACT 1961
Section 263 and 264 of the Income-tax Act,
rule 30 (1) (b) of the Defence of India Rules
Section 3 (1) of the Defence of India Act
SECTION 139 INCOME TAX ACT 1961
Section 10 (2) Criminal Procedure Code,
Section 3 (2) read with clause (15) (1)
sections 253, 254, 256, 263 and 264,
provisions of sub-section (1)
Section 263 and Section 264
sections 253, 254, 256, 263,
Section 10 (1) of the Code
INCOME TAX ACT 1961
Finance Act of 1970
Finance Act 1970
INCOME TAX ACT

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Smart Summary

Structured Summary of the Opinion — Hardayal Hardy, J.

Factual and Procedural Background

The petition under Article 226 challenged a notice dated 16-9-1970 issued by the Additional Commissioner of Income-tax (Delhi-II) proposing revision under Section 263 of the Income-tax Act, 1961 of an assessment order dated 23-12-1969 made by the Income-tax Officer (District VI). The petitioner is a co-operative society whose members are state-level co-operative societies. For the assessment year 1965-66 the petitioner filed a return under Section 139 claiming exemption under Sections 81(1)(c) and 83; the Income-tax Officer accepted the claim and made no assessment by his order dated 23-12-1969.

On 22-6-1970 the Income-tax Officer made inquiries challenging the basis of the exemption claim. The petitioner reiterated its claim on 20-7-1970 and challenged the jurisdiction of the Income-tax Officer to reopen the assessment on grounds of finality and limitation. On 16-9-1970 the Additional Commissioner issued a revision notice under Section 263; the petitioner contended that only the Commissioner (and not an Additional Commissioner) could exercise the power under Section 263 and raised objections including double jeopardy. The Additional Commissioner declined to withdraw the notice and the petitioner filed this writ petition seeking quashing of the notice and prohibition of further proceedings under Section 263.

Legal Issues Presented

Whether the Additional Commissioner of Income-tax may validly exercise revisionary powers under Section 263 (and, by extension, Section 264) of the Income-tax Act, 1961 — i.e., whether those powers can be exercised concurrently with the Commissioner of Income-tax.
Whether the notification of the Central Board of Direct Taxes (S.O. 2162 dated 29-5-1970) conferring concurrent jurisdiction on Additional Commissioners of Income-tax is intra vires the statute such that the Additional Commissioner is not a mere persona designata excluded from exercising the statutory functions under Sections 263 and 264.

Arguments of the Parties

Petitioner's Arguments

The order purporting to revise the assessment under Section 263 could only be made by the Commissioner of Income-tax and not by an Additional Commissioner.
Where the statute designates the Commissioner as persona designata, a notification cannot enable an Additional Commissioner to perform those statutory functions; counsel relied on Ajaib Singh v. Gurbachan (AIR 1965 SC 1619) to support this proposition.
Analogy to decisions (including a Bench decision of the Punjab High Court in Guru Datt v. Sohan Singh) where a deputy or designated officer alone could perform certain functions and an additional officer could not exercise those powers.
Additional grounds raised included: the assessment had become final; limitation had run; and simultaneous action by different authorities amounted to double jeopardy (as pleaded by the petitioner in correspondence and reply to the notice).

Respondents' Arguments (as presented in affidavit)

The Finance Act, 1970 amended Sections 116, 117 and inserted a new Section 130, creating the post of Additional Commissioner of Income-tax and conferring concurrent jurisdiction on Additional Commissioners in respect of functions earlier vested in Commissioners, including revision under Sections 263 and 264.
The amendments were made to strengthen the Income-tax Department; forty Additional Commissioners were appointed by notification No. S.O. 2162 dated 29-5-1970.
The Central Board's notification specified that Additional Commissioners would have concurrent jurisdiction with Commissioners and could perform all or any of the functions of the respective Commissioners for the specified jurisdiction (the notification relied upon Section 121(1) authority of the Board).
Practical administration points were made: for the quarter ending September 1970 many revision petitions and Section 263 orders were handled by Additional Commissioners; a claim was made that Additional Commissioners had been appointed as heads of departments and were not subordinate to the Commissioner of Income-tax.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Ajaib Singh v. Gurbachan and others, AIR 1965 SC 1619	The principle that where a statute or rule designates a particular office-holder (persona designata) to exercise a power, a notification or delegation that substitutes or permits a different officer to exercise that power may be invalid; the case involved the limits on an Additional District Magistrate exercising detention powers where the statute required an authority not lower than a District Magistrate.	The court examined and distinguished this decision: it found the statutory and factual matrix different in the present case. Unlike the Ajaib Singh facts, the Income-tax statute (as amended) had created the post of Additional Commissioner and placed it in the same class as Commissioner; the Additional Commissioner had been designated by the Board's notification to exercise concurrent jurisdiction. Therefore Ajaib Singh did not control the present situation.
Guru Datt v. Sohan Singh, 1964 PLR 1116 (Bench, Punjab High Court)	The ratio that where a statutory rule requires presentation to a specific office-holder (Deputy Commissioner as persona designata), an Additional Deputy Commissioner could not be treated as competent to perform that function even if declared equivalent by Government order.	The court distinguished Guru Datt on the ground that there was no statutory provision in that case making the Additional Deputy Commissioner equal in rank to the Deputy Commissioner; in the present case the statute itself (after amendment) places Additional Commissioners in the same class as Commissioners and the Board's notification confers concurrent jurisdiction — accordingly the Punjab decision did not apply.

Court's Reasoning and Analysis

The court confined the dispute to the single legal question whether revisionary powers under Sections 263 and 264 were among those powers that an Additional Commissioner was authorized to exercise concurrently with a Commissioner after the Finance Act, 1970 amendments.

The court's analysis proceeded in logical steps drawn directly from the statute and the Board's notification:

Statutory amendments (Finance Act, 1970) altered Sections 116 and 117 and introduced a new Section 130, thereby creating the office of Additional Commissioner of Income-tax and placing that office in the same statutory category as the Commissioner of Income-tax for purposes of the Act.
Section 130(1) was construed to show that the term "Commissioner" in those provisions would "obviously include the Additional Commissioner" where two or more commissioners had concurrent jurisdiction and the Board empowered a commissioner to perform a function. Section 130(2) specifically stated that for purposes of Sections 253, 254, 256, 263 and 264 "the Commissioner referred to therein shall, in relation to an assessee, be the Commissioner having for the time being jurisdiction over the assessee."
The court identified that the Commissioners' jurisdiction is defined by Section 121(1) and emphasized that the Central Board exercised its power under that section by issuing notification No. S.O. 2162 dated 29-5-1970, which expressly directed that Additional Commissioners named in the Annexure would have concurrent jurisdiction and perform all or any functions of the respective Commissioners in respect of jurisdiction vested in them.
Applying the notification to the facts, the court observed that under the Board's schedule the Additional Commissioner of Income-tax Delhi-II (the respondent) had been given concurrent jurisdiction with the Commissioner of Income-tax Delhi-II, including powers relating to revision under Sections 263 and 264.
The court addressed the petitioner's reliance on precedent (Ajaib Singh and Guru Datt) and analogous notions of persona designata. It examined the factual and statutory basis of the precedents and distinguished them: in Ajaib Singh the statutory scheme explicitly limited detention authority to an officer not lower than a District Magistrate and no valid appointment under the relevant provision made the Additional District Magistrate the District Magistrate for that purpose; in Guru Datt there was no statutory provision equating the additional officer with the designated statutory officer. By contrast, in the present case the statute itself (as amended) and the Board's notification had created and designated Additional Commissioners as authorities of the same class with concurrent jurisdiction.
On these grounds the court concluded the notification was intra vires the statute and that the Additional Commissioner was not a mere persona designata excluded from exercising the statutory powers of revision.
The court observed that it was unnecessary to decide the subsidiary question raised in the proceedings — whether the Additional Commissioner is subordinate to the Commissioner — although it recorded that the respondents' submission on that point had prima facie force. The decision was based on statutory amendment and the Board's notification, not on the question of subordination.

Holding and Implications

Holding: The petition was dismissed. The court held that the Additional Commissioner of Income-tax Delhi-II was validly empowered to issue the notice under Section 263 by virtue of the Finance Act, 1970 amendments and the Central Board of Direct Taxes' notification No. S.O. 2162 dated 29-5-1970.

DISPOSITION: Petition dismissed with costs; counsel's fee awarded Rs. 200/-.

Implications:

Direct effect: The notice issued by the Additional Commissioner under Section 263 was not quashed; the Additional Commissioner may proceed with revisionary action as authorized by statute and notification.
Scope and precedent: The court rested its conclusion on the statutory amendments (Finance Act, 1970) and the Board's notification; the opinion distinguishes prior authorities relied upon by the petitioner and does not purport to lay down a broader new legal precedent beyond the statutory construction and factual context adjudicated. No broader principle overturning earlier case law was announced; rather earlier decisions were distinguished on their facts and statutory contexts.

Order rendered by Hardayal Hardy, J.: petition dismissed, costs awarded (counsel's fee Rs. 200).

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National Agricultural Co-Operative Marketing Federation Ltd. Petitioner v. Central Board Of Direct Taxes & Others

Hardayal Hardy, J.:— The only question raised in this petition under Article 226 of the Constitution is with respect to the notice dated 16-9-1970 issued by an Additional Commissioner of Income-tax to the petitioner revising an order dated 23-12-1969 made by the Income-tax Officer District VI (6) in purported exercise of the power of the Additional Commissioner under Section 263 of the Income-tax Act, 1961.

The contention urged on behalf of the petitioner is that such an order could only be made by the Commissioner and not by the Additional Commissioner of Income-tax. It appears that before the Finance Act of 1970 was passed by Parliament there were the following classes of Income —

(a) the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963,

(b) Directors of Inspection,

(c) Commissioners of Income-tax,

(d) Assistant Commissioner of Income-tax, who may be either Appellate Assistant Commissioners of Income-tax or Inspecting Assistant Commissioners of Income-tax,

(e) Income-tax Officers, and

(f) Inspectors of Income-tax.

By that Act Section 116 was amended by the substitution of the following clause for (c), namely: —

“ (c) Commissioners of Income-tax and Additional Commissioners of Income-tax.”

Section 117 was also amended by the insertion of the words “Additional Commissioners of Income-tax” after the words “Directors of Inspection, Commissioners of Income-tax” in sub-section (1). In place of S. 130 the following new section was ordered to be substituted, namely: —

“130. Commissioner competent to perform any functions —

(1) In respect of any function to be performed by Commissioner under any provision of this Act in relation to an assessee, the Commissioner referred to therein shall — (a) in a case where only one Commissioner has jurisdiction over such assessees, be such Commissioner;

(b) in a case where two or more Commissioners have concurrent jurisdiction over such assessee, be the commissioner empowered to perform such function by the Board.

(2) Subject to the provisions of sub-section (1) for the purposes of sections 253, 254, 256, 263 and 264, the Commissioner referred to therein shall, in relation to an assessee, be the Commissioner having for the time being jurisdiction over the assessee.”

The petitioner is a co-operative society and its members are themselves co-operative societies at the state levels. For the assessment year 1965-66 (accounting period 1-7-1963 to 30-6-1964) the petitioner submitted under Section 139 of the Income-tax Act, 1961 a return of its total income. In the return filed by the petitioner, in Part I of section F of the return it claimed exemption of business profits amounting to Rs. 6,16,213/8 under the provisions of Section 81 (1) (c) and Section 83 of the Income-tax Act, 1961. The petitioner also furnished statements of profit and loss, balance sheet etc. along with the return. It also produced all account books before the Income-tax Officer and claimed exemption from tax. The Income-tax Officer accepted the claim and made no assessment by his order dated 23-12-1969.

By a letter dated 22-6-1970 the Income-tax Officer made certain inquiries and called upon the petitioner to state the nature and details of the imports made during the accounting year relevant to the assessment year 1965-66 with break up of sales of each commodity and also asked for details regarding the sale of agricultural produce made by the members of the Society who were engaged in agricultural operations, it was also stated in that letter that the provisions of Section 81 (1) (c) or Section 83 could not be invoked to claim exemption.

By letter dated 20-7-1970 the petitioner reiterated the facts and claimed that the entire income was exempt from Income-tax. Jurisdiction of the Income-tax Officer to make any inquiry was also challenged on the ground that the assessment had become final and no revision or re-assessment could be made by mere change of opinion. It was also pointed out that the Income-tax Officer had no jurisdiction as the period of limitation run out.

On 16-9-1970 the Additional Commissioner of Income-tax Delhi-II issued a notice to the petitioner stating that the assessment order made by the Income-tax Officer was in his opinion prejudicial to the Revenue and he proposed to revise the same. The petitioner was also given an opportunity to be heared in person or through a representative duly authorised on its behalf. In reply to that notice the petitioner stated that the Additional Commissioner of Income-tax Delhi-II had no jurisdiction to issue the said notice. According to the petitioner, the exercise of such drastic powers could only be by the Commissioner of Income-tax and none else. It was also stated that the Income-tax Officer had also proposed to re-open the assessment on the ground that the income had escaped tax. Such simultaneous action by the authorities amounted to double jeopardy which was repugnant to the rules of natural justice. There was subsequent correspondence between the petitioner and the Additional Commissioner of Income-tax Delhi-II whereby the Commissioner was asked to withdraw the notice.

The Additional Commissioner having declined to withdraw the notice, the present petition has been filed by the petitioner for a direction that the notice issued by the Additional Commissioner of Income-tax under Section 263 of the Income-tax Act, 1961 should be quashed and that the said respondent be prohibited from proceeding under that section.

On behalf of the respondents an affidavit has been filed by Shri S.S Seth, Additional Commissioner of Income-tax Delhi-II wherein the main defence taken by the respondents is that by the amendments made by the Finance Act 1970 concurrent jurisdiction has been conferred on the Additional Commissioner of Income-tax along with the Commissioner of Income-tax inter alia, in respect of the powers which were previously conferred on the Commissioner of Income-tax under Section 263 and 264 of the Income-tax Act, 1961.

It is stated that the said amendments were made by the Finance Act 1970 as urgent necessity was felt for strengthening the machinery of the Income-tax department. By the said amendments the Income-tax Act was suitably amended with a view to enabling the Additional Commissioners of Income-tax to perform various statutory functions. The conferment of jurisdiction in the matter of revision under Sections 263 and 264 of the Act, was one such function. Forty Additional Commissioners of Income-tax were appointed with the powers conferred on them by notification No. S.O 2162, dated May 29, 1970 issued by the Central Board of Direct Taxes.

For the quarter ending September 1970, the number of revision petitions under Section 264 disposed of by 22 Additional Commissioners of Income-tax was 3664 and the Additional Commissioners of Income-tax also passed a large number of orders under Section 263 as well. A claim has also been made in the said affidavit that the Addl. Commissioners have been appointed as Heads of departments and are not subordinate to the Commissioner of Income-tax.

The question that falls for determination is whether the power of revision under Sections 263 and 264 of the Income-tax Act, 1961 is one of the powers which the Addl. Commissioner of Income-tax is required to exercise concurrently with the Commissioner of Income-tax and whether that power has been validly conferred on the said authority.

We have already said that by the amendment of sections 116 and 117 and by the insertion of a new section 130, the post of an Additional Commissioner of Income-tax has been newly created. The post of Additional Commissioner of Income-tax has been placed in clause (c) of Section 116. He has therefore been placed in the same category with the post of Commissioner of Income-tax. In Section 117 the post of Additional Commissioner of Income-tax has been inter-posed between the posts of Directors of Inspection and Appellate or Inspecting Assistant Commissioners of Income-tax along with the Commissioners of Income-tax. The effect of amendment of these sections is that the Additional Commissioner of Income-tax is an authority in the same class with the Commissioner of Income-tax in Sections 116 and 117.

Section 130 consists of two sub-sections. Clause (a) of sub-section (1) provides that in a case where only one Commissioner has jurisdiction over an assessee, the function to be performed by the Commissioner will be by that Commissioner. Clause (b) provides that in a case where two or more Commissioners have concurrent jurisdiction over such assessee it shall be the Commissioner empowered to perform such functions by the Board. The word “Commissioner” here obviously includes the Additional Commissioner.

Sub-section (2) lays down that subject to the provisions of sub-section (1) for the purposes of sections 253, 254, 256, 263, and 264 the Commissioner referred to therein shall, in relation to an assessee, be the Commissioner having for the time being jurisdiction over the assessee. If the assessee therefore is subject to jurisdiction of two or more Commissioners who have concurrent jurisdiction over him, it is the Commissioner who for the time being has jurisdiction over the assessee that shall have jurisdiction to hear the matters that come within the purview of sections 253, 254, 256, 263 and 264.

The jurisdiction of Commissioners is laid down by section 121 of the Income-tax Act. Sub-section (1) of that section states that the Commissioners shall perform their functions in respect of such areas or of such persons or classes of persons or of such income or of such cases or classes of cases as the Board may direct. By notification No. S.O 2162, dated May 29, 1970 the Central Board of Direct Taxes, in exercise of its powers under sub-section (1) of Section 121 of the Income-tax Act, 1961 directed that the Additional Commissioners of Income-tax and Additional Commissioners of Income-tax (recovery) specified in column 3 of Annexure A appointed by the said notification, will have concurrent jurisdiction along with Commissioners of Income-tax specified in column 2 of Annexure A and will perform all or any of the functions performed by the respective Commissioners of Income-tax in respect of jurisdiction vested in them under the Board's notifications issued from time to time.

In the present case we are not concerned with the Additional Commissioners of Income-tax (recovery) nor are we concerned with the Additional Commissioners of Income-tax for other areas in India. Under serial No. 9, the Additional Commissioner of Income-tax Delhi-II, New Delhi has been given concurrent jurisdiction with the Commissioner of Income-tax Delhi-II New Delhi just as the Additional Commissioner of Income-tax Delhi-I. New Delhi has been given concurrent jurisdiction with the Commissioner of Income-tax Delhi-I, New Delhi under serial No. 8. The Additional Commissioner of Income-tax Delhi-II has therefore the same powers as the Commissioner of Income-tax Delhi II in matters inter alia, relating to revision under Section 263 and Section 264 of the Income-tax Act.

Counsel for the petitioner referred us to a decision of the Supreme Court in Ajaib Singh v. Gurbachan and others (AIR 1965 SC 1619) (1) and stated that the word Commissioner in Section 263 of the Income-tax Act, 1961 was person a designata and the notification issued by the Central Board of Direct — Taxes could not therefore enable the Addl. Commissioners of Income-tax to perform statutory functions of the Commissioner of Income-tax under Section 263. Where the power is to be exercised by the Commissioner of Income-tax as persona designate the Additional Commissioner of Income-tax though he may exercise all the powers of a Commissioner cannot perform the functions which are specifically allotted to him by the statute.

It was said that although under Section 10 (2) Criminal Procedure Code, the Addl. District Magistrate was invested with all the powers of a District Magistrate he was not District Magistrate in law for he was below in rank. An other of detention made by him under rule 30 (1) (b) of the Defence of India Rules was therefore without authority.

An examination of that case however shows that Section 3 (1) of the Defence of India Act gave power to the Central Government by a notification in the official Gazette to make such rules as appeared to it necessary or expedient for securing the defence of India and several other matters. Section 3 (2) provided for the making of rules for various purposes without prejudice to the generality of the power conferred by Section 3 (1). The relevant portion of the 15th clause which provided for detention laid down that the authority empowered to detain was in no case lower in rank than that of a District Magistrate. The source of power under Section 3 (2) read with clause (15) (1) therefore was that the authority empowered to detain shall not be lower in rank than that of District Magistrate. An Additional District Magistrate was admittedly an authority lower in rank than the District Magistrate, Sh. Lal Singh who was Additional District Magistrate Amritsar in that case was no doubt invested with all the powers of District Magistrate under the code. He also carried on the duties of the office of the District Magistrate, but at the same time no other officer was posted as District Magistrate nor was there any order under Section 10 (1) of the Code appointing Shri Lal Singh as District Magistrate of Amritsar. In the absence of an order under Section 10 (1) appointing Shri Lal Singh as District Magistrate of Amritsar he could not be the District Magistrate of Amritsar for the purposes of passing an order of detention under the Rules and the Act whatever might be his powers to carry on the administration of the district.

In the present case, the Additional Commissioner of Income-tax having been designated as an authority under the Income-tax Act, 1961 having concurrent jurisdiction with the Commissioner of Income-tax and having been appointed as such by the order of the Board there can be no question of want of authority in his case as an Addl. Commissioner of Income-tax. He was equal in rank to the Commissioner of Income-tax and had all the powers and functions which had been assigned to him under the Board's notification No. S.O 2162 dated May 29, 1970, the revisionery powers under Sections 263 and 264 being one of those powers.

The next case to which our attention was invited by the counsel for the petitioner is a Bench decision of Punjab High Court in Guru Datt v. Sohan Singh (1964 PLR 1116) (2). This was a case of an election petition under Section 121 of the Punjab Panchayat Samities and Zila Parishads Act. The petition had to be presented to the Deputy Commissioner within whose jurisdiction the Panchayat or Zila Parishad was situated as per rule 4 of the relevant Election Rules. It was held that the Deputy Commissioner alone was competent to deal with the petition and that he being a persona designata the petition could not be transferred to or disposed of by an Addl. Deputy Commissioner.

The ratio of the decision is that the Deputy Commissioner being a persona designata alone could perform the functions which the statute and the rules made thereunder had conferred on him. The order of the Governor declaring the ex-cadre posts of Additional Deputy Commissioners to be equivalent in status and responsibility to the cadre posts of Deputy Commissioners did not and indeed could not modify the statutory provision according to which an election petition had to be presented to the Deputy Commissioner because an officer specially appointed to perform the functions of a Deputy Commissioner was expressly debarred from performing any function in respect of which the decision of the Deputy Commissioner was made final.

In the present case, the statute itself having declared that an Additional Commissioner of Income-tax was an authority equal in rank to the Commissioner of Income-tax could perform the same functions which the Commissioner alone was required to perform. It could not therefore be said that he was not a Commissioner of Income-tax. As an Additional Commissioner of Income-tax and when Sections 263 and 264 provided that the revisionary powers were to be exercised by the Commissioner he had the same powers as the Commissioner had in respect of that matter.

The case decided by the Punjab High Court had therefore no application to the facts of the present case. There was no statutory provision in that case which made the Additional Deputy Commissioner equal in rank to the Deputy Commissioner. There was only a Government declaration to the effect and that was not enough for the purpose.

This being the only question raised before us the other question whether the Additional Commissioner of Income-tax is subordinate to the Commissioner of Income-tax which was raised in the respondents' affidavit and was also taken up by the petitioner, does not appear to us to be necessary to be decided in this case, although prima facie speaking there is a great deal of force in the submission made on behalf of the respondents. In any case, in view of the amendments made in the Income-tax Act, 1961 by the Finance Act 1970 the notification issued by the Central Board of Direct Taxes is intra vires the statute and there is no question of the Commissioner of Income-tax having been designated as persona designata.

The petition has therefore no merit and is dismissed with costs. Counsel's fee Rs. 200/-.

Petition dismissed.

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