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Smt. Bhagirathi Devi Jalan v. Commissioner Of Income-Tax, West Bengal Iii, Calcutta

Calcutta High Court

Dec 9, 1976

Judgment

Subsequent
References

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Summary of the Opinion delivered by Sankar Prasad Mitra, C.J.

Factual and Procedural Background

This reference under section 66(2) of the Indian Income-tax Act, 1922 arose from the Commissioner of Income-tax's exercise of power under section 33B (power to revise orders of the Income-tax Officer). The assessee filed voluntary returns for the assessment years 1953-54 to 1961-62 on 12 May 1961. The Income-tax Officer took cognizance on 17 November 1961 and completed the assessments on 4 December 1961.

The Commissioner, considering the assessment orders erroneous and prejudicial to revenue, issued a show-cause notice dated 18 October 1963 and fixed a hearing for 12 November 1963. The notice by registered post was returned with the postal remark "not known". Personal service was attempted at a different address (No. 5, Abdul Rasul Avenue); after unsuccessful attempts the notice was served by affixation on 21 October 1963. No appearance or written communication was received from the assessee, and the Commissioner passed an ex parte order cancelling the assessments for the years 1953-54 to 1961-62 and directed the Income-tax Officer to make fresh assessments.

The assessee appealed under section 33B(3) to the Appellate Tribunal, contending lack of proper service and that she had no knowledge of the show-cause notice. The Tribunal held there was a prima facie ground for action under section 33B but accepted that there was no proper service and therefore the assessee had not been given the opportunity to be heard as required. The Tribunal vacated the consolidated order under section 33B and directed the Commissioner to pass appropriate orders afresh after giving due opportunity to the assessee. The question whether the Tribunal was correct in directing a fresh disposal notwithstanding the time-limit in section 33B was referred under section 66(2).

Legal Issues Presented

Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in authorising the Commissioner to pass an order under section 33B of the Indian Income-tax Act, 1922 after the period of limitation laid down in that section by directing him to dispose of the matter afresh.

Arguments of the Parties

Assessee's Arguments (as presented by Mr. Murarka)

The special two-year period of limitation provided in section 33B(2)(b) of the 1922 Act barred the Commissioner from revising the Income-tax Officer's orders because more than two years had elapsed since the dates of those orders.
While the second proviso to section 34(3) of the 1922 Act makes time-limit exceptions for certain reassessments or actions consequent to directions under various sections (including section 33B), section 33B itself does not contain an express provision permitting the Commissioner to make a fresh order after a remand by the Tribunal once two years from the Income-tax Officer's order had expired. The omission in section 33B is deliberate and cannot be supplied by the court.
Any second order the Commissioner would be required to pass pursuant to the Tribunal's direction would still be an order under section 33B and thus would be subject to the two-year limitation in that section.
The Tribunal under section 33(4) could not give a direction which the Commissioner could not lawfully execute because of the special limitation contained in section 33B.

The opinion does not contain a detailed record of specific legal arguments advanced by counsel for the Revenue in this appeal beyond the factual account and the Tribunal's findings.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Income-tax Reference No. 117 of 1967: National Taj Traders v. Commissioner of Income-tax (Division Bench)	The Division Bench had held, on similar facts, that the Tribunal should not direct the Commissioner to dispose of the case afresh (i.e., it answered the reframed question in the negative and against the revenue).	The court observed that this Division Bench judgment was inconsistent with later reasoning in the Supreme Court decision (Pooran Mall) and concluded that it could no longer be followed.
Director of Inspection of Income-tax (Investigation) v. Pooran Mall & Sons [1974] 96 ITR 390 (Supreme Court)	The Supreme Court held that where an initial order was made within a statutory time-limit, a subsequent order made pursuant to a direction by the notified authority or a court (under the relevant provision) is not itself subject to the original statutory time-limit; otherwise the subsections providing for review or remedies would be rendered meaningless.	The court treated the Supreme Court's general propositions as controlling. Applying that precedent, it held that the special period prescribed in section 33B applied only to the first order made by the Commissioner (which was within time) and that a subsequent order required by the Tribunal's direction must be given effect irrespective of the period of limitation in section 33B.

Court's Reasoning and Analysis

The court proceeded in a structured manner:

It identified the statutory framework: section 33B(1) empowers the Commissioner to revise orders prejudicial to revenue; section 33B(2)(b) provides that no order shall be made under subsection (1) after expiry of two years from the date of the order sought to be revised; section 33B(3) preserves appeal rights to the Appellate Tribunal.
It set out the facts that the Commissioner passed an initial order within the prescribed time and that the Tribunal later vacated that order for want of proper service and directed the Commissioner to pass fresh orders after giving the assessee an opportunity to be heard.
It summarized the assessee's central contention that the Commissioner would have no power to pass any fresh order after the two-year period in section 33B had expired and that the Tribunal could not lawfully direct the Commissioner to do what the statute forbade.
The court considered prior authority. A Division Bench had earlier taken a view adverse to the revenue (Income-tax Reference No. 117 of 1967), but the court analysed and found that the Supreme Court's subsequent decision in Director of Inspection of Income-tax (Investigation) v. Pooran Mall & Sons was directly on point in principle.
The court relied on the Supreme Court's holding in Pooran Mall that where a first order had been made within a statutory period, a fresh order made pursuant to a direction under the relevant appellate or supervisory provisions (or by a court) is not itself constrained by the original time-limit; to hold otherwise would render the remedial subsections nugatory.
Applying that principle, the court concluded that the special two-year limitation in section 33B applied only to the first order of the Commissioner (which had been made within time). When the Tribunal vacated that order for procedural defect (lack of opportunity) and directed a fresh disposal, the Commissioner was required to give effect to that direction irrespective of the two-year limit in section 33B.
On that basis the court concluded that the Tribunal's direction was legally effective and that the Tribunal had been correct in ordering a fresh disposal after vacating the Commissioner's order.

Holding and Implications

Holding: The court answered the referred question in the affirmative and in favour of the revenue. The Tribunal was correct to vacate the Commissioner's consolidated order and to direct the Commissioner to pass fresh orders after giving the assessee an opportunity of being heard; the Commissioner must give effect to that direction irrespective of the two-year limitation in section 33B.

Implications:

The special two-year limitation in section 33B applies to the first order made by the Commissioner; if that first order was made within the prescribed period, any subsequent order made pursuant to a valid direction of the Tribunal (or by an authority/court empowered to direct) is not circumscribed by the original two-year limit.
The decision relies on and follows the principle laid down by the Supreme Court in Director of Inspection of Income-tax (Investigation) v. Pooran Mall & Sons. Consequently, the court treated an earlier Division Bench decision (National Taj Traders) as no longer authoritative.
The immediate practical effect is that the Commissioner must proceed to pass fresh orders after affording the assessee the required opportunity to be heard, notwithstanding that more than two years may have elapsed since the Income-tax Officer's original orders.
The court made no order as to costs. An oral application for a certificate of leave to appeal to the Supreme Court was rejected on the ground that the judgment was based on the Supreme Court decision (Pooran Mall).
No new legal rule contrary to the Supreme Court's precedents was laid down; the judgment applies established Supreme Court principles to the section 33B context.

This summary strictly reflects only the information contained in the provided opinion and does not add or infer facts or law beyond that text.

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The Judgment of the Court was delivered by

Sankar Prasad Mitra, C.J:— In this reference under section 66(2) of the Indian Income-tax Act, 1922, the question under consideration is:

“Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in authorising the Commissioner to pass an order under section 33B of the Indian Income-tax Act, 1922, after the period of limitation laid down in that section by directing him to dispose of the matter afresh?”

2. The relevant provisions of section 33B run thus:

“33B. Power of Commissioner to revise Income-tax Officer's orders.:—

(1) The Commissioner may call for and examine the record of any proceeding under this Act and if he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.

(2) No order shall be made under sub-section (1)—……

(b) after the expiry of two years from the date of the order sought to be revised.

(3) Any assessee objecting to an order passed by the Commissioner under sub-section (1) may appeal to the Appellate Tribunal within 60 days of the date on which the order is communicated to him……”

3. In the instant reference the assessee filed voluntary returns for the assessment years 1953-54 to 1961-62 on May 12, 1961. The assessee gave her address as 13, Rameswar Malia Lane, Howrah, before the Income-tax Officer, “D” Ward, Howrah. For the assessment years 1960-61 and 1961-62 the assessee's name was described as M/s. Universal Trading Corporation. The Income-tax Officer took cognizance of the above returns on November 17, 1961, and completed the assessments on December 4, 1961.

4. The Commissioner of Income-tax upon going through the assessment records was of opinion that the assessment orders were erroneous in so far as they were prejudicial to the interests of the revenue.

5. The Commissioner issued a show-cause notice to the assessee by a letter dated 18th October, 1963, for giving her an opportunity of being heard on 12th November, 1963.

6. There was no appearance on 12th November, 1963, on behalf of the assessee. The assessee also did not send any written communication.

7. As the notice was served first by registered post and then by affixation the Commissioner took the view that the notice had been duly served. He proceeded to pass an ex parte order. He cancelled the assessment orders for the years 1953-54 to 1961-62 and directed the Income-tax Officer to make fresh assessments in accordance with law.

8. The assessee went up on appeal under the provisions of section 33B(3). Before the Tribunal the assessee submitted that no notice to show cause under section 33B had been served on her either actually or constructively. The Commissioner sent the show-cause notice by registered post addressed to the assessee at 13, Rameswar Malia Lane, Howrah, but it came back unserved with the postal remark “not known”.

9. Thereafter, personal service was attempted through process server at No. 5, Abdul Rasul Avenue. On 21st October, 1963, the Inspector reported that he went to No. 5, Abdul Rasul Avenue, but he was informed that the assessee was out of station and was expected to return within a week. The Inspector reported further that he received the notice on 19th October, 1963; he tried to contact the assessee for personal service on two dates, namely, 19th October, 1963, and 21st October, 1963, and having failed in these attempts he served the notice by affixation on 21st October, 1963.

10. The Tribunal was satisfied that there was prima facie ground for the Commissioner to take action under section 33B but the Tribunal accepted the assessee's submission that there was no proper service and, as such, the assessee did not have knowledge of the show-cause notice and was not given an opportunity of being heard as required by section 33B. The Tribunal held that it would be just and proper to send the matter back to the Commissioner of Income-tax and, accordingly, vacated the consolidated order under section 33B. The Tribunal directed the Commissioner to pass appropriate orders afresh after giving due opportunity to the assessee of being heard.

11. On the facts and in the circumstances aforesaid the above question has been referred to us pursuant to the provisions of section 66(2) of the Indian Income-tax Act, 1922.

12. On behalf of the assessee reliance has been placed on sub-section (3) of section 34 of the 1922 Act and on section 263 of the Act of 1961, Sub-section (3) of section 34 of the 1922 Act provides:

“No order of assessment or reassessment, other than an order of assessment under section 23 to which clause (c) of sub-section (1) of section 28 applies or an order of assessment or reassessment in cases falling within clause (a) of sub-section (1) or sub-section (1A) of this section shall be made after the expiry of four years from the end of the year in which the income, profits or gains were first assessable…….

Provided further that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or reassessment may be made shall apply to a reassessment made under section 27 or to an assessment or reassessment made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 31, section 33, section 33A, section 33B, section 66 or section 66A.”

13. Sub-section (1) of section 263 of the 1961 Act and sub-section (1) of section 33B of the 1922 Act make provision for revision by the Commissioner of orders prejudicial to the revenue, and sub-sections (2) of these two sections provide, inter alia, that no order shall be made under subsection (1) after the expiry of two years from the date of the order sought to be revised.

14. Mr. Murarka, for the assessee, argues that in view of the special period of limitation provided in section 33B of the 1922 Act the Commissioner has no power to revise the orders of the Income-tax Officer inasmuch as two years have already passed from the date of the orders of the Income-tax Officer and hence the Tribunal had no power to direct the Commissioner to pass orders afresh under that section because, according to him, the Commissioner has no power to give effect to it in view of the aforesaid special period of limitation.

15. In support of the above contentions he argues that, so far as the Income-tax Officer is concerned, the Act of 1922 in respect of the identical situations makes provisions in the second proviso to section 34(3) but, so far as the Commissioner is concerned, omits to provide in section 33B to enable him to make an order afresh after his order is remanded to him by the Tribunal on appeal after the expiry of two years from the order of the Income-tax Officer. In section 263 of the 1961 Act this contingency has been taken into account and specific provision has been made. There is, therefore, a deliberate omission in section 33B and such omission cannot be filled in by the court.

16. It is argued further that the second order which the Commissioner would have to pass to give effect to the Tribunal's direction would still be an order under section 33B and such order must satisfy the limitations provided in that section.

17. Thirdly, the Tribunal under section 33(4) may give such directions as it thinks fit but it cannot give a direction which in law could not be given effect to by the Commissioner in view of the special period of limitation in section 33B.

18. It appears that similar arguments were advanced before a Division Bench of this court in Income-tax Reference No. 117 of 1967 (National Taj Traders v. Commissioner of Income-tax). The Division Bench reframed the question as follows:

“Whether, on the facts and in the circumstances of the case, the Tribunal acted properly in directing the Commissioner to dispose of the case under the said section afresh after giving due opportunity to the assessee after having vacated the order of the Commissioner under section 33B?”

19. The facts in that reference (Income-tax Reference No. 117 of 1967) were similar to those ip the instant reference. The Division Bench answered the question in the negative and against the revenue.

20. After this judgment of the Division Bench was delivered, the Supreme Court was faced with identical problems in Director of Inspection of Income-tax (Investigation) v. Pooran Mall & Sons reported in [1974] 96 ITR 390 (SC). In the Supreme Court case sections 132(5), (10), (11) and (12) of the 1961 Act came up for consideration. The said provisions are as follows:—

“132(5). Where any money, bullion, jewellery or other valuable article or thing (hereinafter in this section and section 132A referred to as the assets) is seized under sub-section (1), the Income-tax Officer, after affording a reasonable opportunity to the person concerned for being heard and making such enquiry as may be prescribed, shall, within ninety days of the seizure, make an order, with the previous approval of the Commissioner……

(10) If a person legally entitled to the books of account or other documents seized under sub-section (1) objects for any reason to the approval given by the Commissioner under sub-section (8), he may make an application to the Board stating therein the reasons for such objection and requesting for the return of the books of account or other documents.

(11) If any person objects for any reason to an order made under subsection (5), he may, within thirty days of the date of such order, make an application to such authority, as may be notified in this behalf by the Central Government in the Official Gazette (hereinafter in this section referred to as the notified authority), stating therein the reasons for such objection and requesting for appropriate relief in the matter.

(12) On receipt of the application under sub-section (10) the Board, or on receipt of the application under sub-section (11) the notified authority, may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit.”

21. In the Supreme Court case [1974] 96 ITR 390 pursuant to an authorisation issued under section 132(1) of the Income-tax Act, 1961, searches were carried out on October 15 and 16, 1971, at the residence and business premises of P, an individual, and at certain premises of firms in which he was a partner, and jewellery, cash and account books were seized. There was also a search of two banks and a restraint order was made under section 132(3) in respect of 114 silver bars pledged with those banks on the ground that they were the property of P.

22. On January 12, 1972, the Income-tax Officer passed a summary order under section 132(5) on the basis that all the assets seized and the 114 silver bars belonged to P.

23. Thereupon, P & Sons? one of the firms in which P was a partner, filed a petition under article 226 of the constitution challenging the order dated January 12, 1972. On April 6, 1972, on the basis of consent of the parties, the High Court quashed the order and permitted the department to make a fresh enquiry after giving an opportunity to the petitioner to pass a fresh order within two months. After a fresh enquiry the Income-tax Officer passed an order on June 5, 1972, holding that the silver bars belonged to P, the individual, and not to the firm, P & Sons.

24. Thereupon, the firm and P again filed a writ petition challenging the second order. The High Court held that the Income-tax Officer had no jurisdiction to pass that order beyond the period prescribed in section 132(5) and set aside the order. The High Court directed the return of 114 silver bars.

25. The Supreme Court has held, inter alia, that the order made in pursuance of a direction given under section 132(2) or by a court in writ proceedings was not subject to the limitations prescribed under section 132(5). The Supreme Court observed— See [1974] 96 ITR 390, 394, 395:

“Even if the period of time fixed under section 132(5) is held to be mandatory that was satisfied when the first order was made. Thereafter, if any direction is given under section 132(12) or by a court in writ proceedings, as in this case, we do not think an order made in pursuance of such a direction would be subject to the limitations prescribed under section 132(5). Once the order has been made within ninety days the aggrieved person has got the right to approach the notified authority under section 132(11) within thirty days and that authority can direct the Income-tax Officer to pass a fresh order. We cannot accept the contention……that even such a fresh order should be passed within ninety days. It would make the subsections (11) and (12) of section 132 ridiculous and useless.”

26. In view of the general propositions which the Supreme Court has laid down in the above case, it seems to us that our Division Bench judgment in Income-tax Reference No. 117 of 1967 can no longer be followed.

27. We are, therefore, of opinion that the special period prescribed in section-33B applies to the first order that the Commissioner had made in the instant reference. That order was passed within time. The subsequent order of the Tribunal has to be given effect to by the Commissioner irrespective of the period of limitation prescribed by section 33B.

28. In this view of the matter, our answer to the question referred to us is in the affirmative and in favour of the revenue. We make no order as to costs.

29. In this case Mr. Murarka, appearing for the assessee, orally applies for a certificate for leave to appeal to the Supreme Court. As our judgment is based on the Supreme Court decision reported in [1974] 96 ITR 390 the application of Mr. Murarka is rejected.

Deb, J.:— I agree.