Manohar Lall, J.:— In this case the Commissioner of Income-tax was called upon to state a case as to whether his order, dated the 20th September, 1937, was prejudicial to the assessee within the meaning of the proviso to Section 33 or sub-section (2) of Section 66 of the Indian Income-tax Act.
2. The facts giving rise to this proceeding are very simple. The assessee was assessed to income-tax by an order of the Income-tax Officer dated the 31st March, 1935. The assessee unsuccessfully claimed from the Income-tax Officer a deduction from the assessable income of certain items of debts, which, he asserted, were irrecoverable and had become bad during the ‘previous year’. On an appeal to the Assistant Commissioner of Income-tax, the contention with regard to these irrecoverable debts was overruled by paragraphs 32, 33, 34 and 35 of the order. Against the order of the Assistant Commissioner the assessee filed a combined application under the provisions of Section 33 and Section 66(2) of the Act. By the latter part of the application he desired the Commissioner to refer to the High Court certain questions of law including the question which is thus formulated: “whether in the circumstances of the case as submitted the officers below had any power to disallow the debts treated as bad owing to the debtors having become altogether traceless and incapable of paying his or their debts”.
3. This question was apparently framed upon the findings of fact given by the Assistant Commissioner of Income-tax in paragraph 35 of the order. When the matter came up before the learned Commissioner of Income-tax, he disposed of the question, which I have just stated, by referring to the well-known case of the Commissioner of Income-Tax, Central Provinces v. Sir S.M Chitnavis and holding that “the question whether a particular debt is a bad debt and when it became bad was held to be primarily a question of fact to be determined by the Income-Tax authorities on evidence to be placed before them by the assessee. Accordingly the admissibility of each of the bad debts claimed by the assessee will be examined and determined as a question of fact and the question (b) propounded in the application will not be referred to the High Court. So much for the application under Section 66(2)”. The wording of this order has given rise to the contention that the learned Commissioner of Income-tax did not dispose of the application under Section 66(2) on that date but kept it open and disposed of it only when he received the further report dated the 13th of September, 1937. The Assistant Commissioner of Income-tax, who was asked to submit a report, went into the matter elaborately in the presence of the assessee and based his report upon the findings of fact as they emerged from the documents produced by the assessee himself and came to the conclusion “that it would appear that there was no justification for writing off the debt in the accounting year Dewali year 1987-88”. The further passage in the report need not be referred to. When this report was received by the Commissioner of Income-tax, he on the 20th of September, 1937, went into the matter again and without hearing the assessee came to the distinct conclusion that he accepted these findings in the report and rejected the entire claim for the deduction of bad debts amounting to Rs. 29,087. In paragraph 5 of the same order, he says very clearly “and as already announced in paragraph 3 of the interim order no reference will be made to the High Court under Section 66(2).”
4. Learned Counsel for the assessee submits that his client has been prejudiced on account of the failure of the learned Commissioner to hear the assessee over again when he was passing the order on the 20th of September, 1937, which he contends should be treated as if it was an order under Section 66(2) also. I do not agree with this contention, but even if the argument of the learned Counsel was correct, the error committed by the learned Commissioner was a mere error of procedure. The assessee must still show to us whether there is any point of law which arises out of this order under Section 33 as provided by the amended Section 66(2) in the proviso. It is clear from what I have stated above that the order of the 20th September, 1937, cannot be treated as an order under Section 66(2). The original order under this sub-clause had already been passed at page 19. That the Commissioner himself took the same view may be seen by reference to paragraph 5 of the order dated the 20th September, 1937. When this was pointed out to the learned Counsel, he argued that the order under section 66(2) at page 19 itself provides ample materials for a question of law to be raised before the High Court. If this could be shown, the argument would be correct; but here again the learned Counsel is in difficulty, because the question of law which could arise at that stage was whether on the facts at that time before the department the assessee could be said to have been assessed for the amount of the debts without any materials or without any evidence in support thereof. As to this it is enough to say that the order of the Assistant Commissioner of Income-tax, who is the final court of fact, at page 16 is in these words:— “The assessee admits the facts found by the Income-tax Officer. In regard to the last four items, he states that the debtors became traceless some years before the accounting year in this case”. Indeed, the question of law framed for reference to the High Court is based upon these very findings of fact contained in paragraph 35 of the order of the Assistant Commissioner of Income-tax. I do not see any question of law which arises whether out of the order at page 13 or out of the order at page 27. The assessee has no grievance whatsoever. The order has never been passed to his prejudice—the order of the Assistant Commissioner of Income-tax has remained all the time against the assessee and has never been altered to his prejudice. The Commissioner himself had heard the assessee in full before be made an order for further report from the Assistant Commissioner of Income-tax, and if he, on considering the report, did not think it necessary to hear the assessee this does not make out any question of law which can arise out of that order. Moreover, the assessee had never asked the Commissioner that he should be given an opportunity to be heard again on the report which would be submitted by Mr. Sharan the Assistant Commissioner of Income-tax; nor was Mr. Sharan intimated that the assessee would require the Commissioner to hear him before the final order was passed.
5. In my opinion the answer to the question formulated for the decision of this Court is in the negative. I would order the assessee to pay three gold mohurs as costs to the Commissioner of Income-tax.
Harries, C.J:— I agree.
6. Reference answered in the negative.