Full Judgment Text
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PETITIONER:
TARA DEVI AGGARWAL
Vs.
RESPONDENT:
COMMISSIONER OF INCOME-TAX, WEST BENGAL,CALCUTTA
DATE OF JUDGMENT27/11/1972
BENCH:
REDDY, P. JAGANMOHAN
BENCH:
REDDY, P. JAGANMOHAN
HEGDE, K.S.
KHANNA, HANS RAJ
CITATION:
1973 AIR 254 1973 SCR (2)1035
1973 SCC (3) 482
ACT:
Income-tax Act (11 of 1922) s. 33B.-Power of Commissioner to
cancel assessment and re-open-Prejudicial to the interests
of revenue’, scope of.
HEADNOTE:
Section 33B of the Income-tax Act, 1922, enables the
Commissioner to call for and examine the record of any
proceeding under the Act and to pass such orders as he deems
necessary, as the circumstances of the case justify when he
considers the order passed erroneous insofar as it is
prejudicial to the interests of the revenue.
In the present case, the assessee-appellant submitted a
return and the income-tax officer, though he was not
satisfied about the various sources of, the assessee’s
income, passed an order of assessment. The Commissioner of
income-tax, after notice under s. 33B of the Income-tax Act,
1922, held that inquiries revealed that the assessee neither
resided in nor carried or, any business from the address
given in the return, that the income-tax officer was not
justified in accepting the initial capital, the sale of
ornaments, the income from business, the investments etc.,
without any inquiry or evidence whatsoever, and that there
were suspicious circumstances showing connection with the
business of the assessee’s husband. In the result, he held
that the order of the income-tax officer was erroneous and
prejudicial to the revenue and directed the income-tax
officer to make a fresh assessment, after making inquiries
with regard to the jurisdiction and the business carried on
by the assessee, the possession of initial capital,
acquisition and sale of ornaments, purchase of plot of land
and resources, and the money invested in the name of the
assessee.
On the question of the jurisdiction of the Commissioner to
pass the order the Appellate Tribunal held in favour of the
assessee, and the High Court, on reference, in favour of the
Revenue.
In appeal to this Court, it was contended that the
Commissioner had no jurisdiction under S. 33B to cancel the
assessment made by the income-tax officer inasmuch as it
cannot be said that where an assessee has been assessed to
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tax it was prejudicial to the interests of revenue on the
ground that no assessment could have been made in respect of
the income of which she made a voluntary return.
Dismissing the appeal,
HELD : Even where an income had not been earned and is not
assessable, I merely because the assessee wants it to be
assessed in his or her hands in order to assist someone else
who would have been assessed to a larger amount, an
assessment so made can certainly be erroneous and
prejudicial to the interests of revenue. If so, the
Commissioner, under s. 33B, had ample jurisdiction to cancel
the assessment and to initiate proceedings for assessment
under the provisions of the Act against some other assessee
who, according to the income-tax authorities, is liable for
the income thereof. [1040 H; 1041 A-C]
1036
Rampayari Devi Saraogi v. Commissioner of Income-tax, 87
I.T.R. 84 followed.
Commissioner. of Income-tax v. Rao Thakur Narayan Singh, 56
I.T.R. 234 explained.
JUDGMENT:
CIVIL APPELLATE JURISDICTION Civil Appeal No.
2387 of 1969.
Appeal by certificate from the judgment and order dated May
16, 1969 of the Calcutta High Court in Income-tax Refe-
rence No. 25 of 1966.
G. C. Sharma, Randhir Chawla, O. P. Dua, R. P. Soni, S. R.
Gupta and M. V. Goswami for the appellant.
P. L. Juneja, S. P. Nayar and R. N. Sachthey for the, res-
pondents.
The Judgment of the Court was delivered by
JAGANMOHAN REDDY, J.-This is an appeal by certificate
against the judgment of the High Court of Calcutta rendered
on a reference under sub-s.(1) of s.66 of the Indian Income-
tax Act, 1922 (hereinafter referred to as the ’Act). The
assessee, it appears, had filed voluntary returns of income
for the assessment years 1955-56 to 1959-60 giving her
address as 5/A Bysack Street, Calcutta which was then
within the jurisdiction of the Income-tax Officer, ’J’
ward, District 1 (1) Calcutta. ’Me return for 1958-59 was
dated 22nd August 1959 while the assessments for the other
years were antedated. It also appears from the order sheet
that the Income-tax Officer had directed issue of notice
under s.23 (2) in respect of five years on 14th December
1959 which notices were purported to have been received
personally by the authorised representative of the assessee
on the same date. The cases were heard on 21st and 23rd
December 1959 and the assessment for these years was
completed by the Income-tax Officer on 23rd December, 1959.
It further appears from the records that the assessee had
signed a declaration on 15th December 1959 stating inter
alia that:-
(i) at the time of her marriage with Sri Ram
Prasad Luharwala about 15 years ago, the
assessee received presents and dowry and birth
day presentations on different occasions in
kind as well as in cash to the extent of Rs.
18,000 and also a sufficient quantity of
ornaments.
(ii) with this amount of cash, she started
business of investment on interest and out of
the interest received. she could save about
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Rs, 600 after meeting her expenses up to March
1950;
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(iii) the sum of money at-her disposal in
March 1950 was Rs. 13,500 which had been shown
as the initial capital for the accounting year
1950-51;
(iv) subsequently she started speculation
business, in shares in addition to the
investment business and out of the income from
this business she made the following
investments and acquisition :-
(A) purchase of a piece of land on 14-8-1956
for Rs. 2,299.
(B) investment of two sums of Rs. 50,000
each on 26th November, 1957 and 28th November,
1957 with M/s Kaluram Prahledrai on interest;
(v) she sold some of her ornaments in the
year 1955-56 for Rs. 30,600 and the remainder
of her ornaments in 1956-57 for Rs. 37,400 and
the certificates showing the sale of such
ornaments were enclosed with declaration;
(vi) the assessee was doing the aforesaid
business in her individual capacity and this
business had no connection with the business
of her husband,
(vii) she kept, no regular books of account
and neither had she any bank account.
The Income-tax Officer, J-Ward District 1(1) Calcutta who
made the assessment for the years 1955-56 to 1959-60
accepted the initial capital and the fact that the assessee
had been carrying_ on money lending and speculation
business. He made an addition of Rs. 1,000 to the disclosed
income of Rs. 4,300 and made an assessment on a total income
of Rs. 5,300 for the assessment year 1955-56. Similar short
stereo-typed assessment orders were made for each of the
years 1955-56 to 1959-60., the income assessed for these
years being Rs. 5,500, Rs. 6,000 Rs. 6,900 and Rs. 7,500
respectively.
For the assessment year 1960-61 also a voluntary return
dated July 6, 1960 was received by the Income-tax Officer
on July 20, 1960 and on November 30, 1960 the Income-tax
Officer directed the issue of a notice under s.23(2) fixing
the date of hearing on February 25, 1961. Thereafter by her
letter dated March 13. 1961 the assessee informed the
Income-tax Officer that her place of business had been
shifted to No. 1, Gunsala Road Lillooah, Howrah and on the
basis of this letter the assessee’s file was transferred to
the Income-tax Officer ’D’ Ward,’, Howrah. On July 2, 1961
the Income-tax Officer Howrah again issued notice under
s.23(2) of the Act fixing the hearing on July 10, 1961.
This notice was also received by the ’assessee’s authorised
re-
1038
presentative and the assessment for that year was made on
the date of hearing, viz., 10th July 1961, when the demand
notice, challan and a copy of the assessment order were
stated to have been personally served on the said authorised
personal representtative on 10th July 1961.
In his assessment for the above year the Income-tax Officer
Howrah while remarking that the source of income of the
assessee during the accounting year was income from
speculation and interest on investments stated that neither
the assessee was able to produce the details and vouchers of
the speculative transactions made during the accounting year
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nor was there any evidence regarding the interest received
by her from different parties on her investments.
Notwithstanding these defects he did not investigate into
the various sources but assessed the appellant on a total
income of Rs. 9,037/-. Thereafter on 7th June 1963 the
Commissioner by a notice under s. 33-B of the Act required
the assessee to show cause on or before June 25, 1963 why
appropriate orders should not be passed under that section
in respect of the assessment year 1960-61 as the enquiries
revealed that the assessee neither resided nor carried on
any business from the address given in the return, that the
Income-tax Officer was not justified in accepting the
initial capital, the sale of ornaments, the income from
business, the investments etc. without any enquiry or
evidence whatsoever and that the order of assessment wts
erroneous and prejudicial to the interests of revenue. In
response to the aforesaid notice, the assessee showed cause
on June 24, 1963 and after considering the objections of the
assessee, the Commissioner passed an order cancelling the
assessment for 1960-61 and directing the Income-tax Officer
to make a fresh assessment according to law after making
enquiries with regard to the jurisdiction and the business
carried on by the assessee, the possession of initial
capital, acquisition ;Ind sale of ornaments, purchase of
plot of land and resources and the money invested in the
name of the assessee. In his order the Commissioner held
that the assessments Made by the Income-tax Officer were
made in post haste without making any enquiry or
investigation into. the antecedents of the assessee. He
further held that on enquiry it had been ascertained that
the Income-tax Officer ’J’ Ward , District 1(1) Howrah had
no jurisdiction of the assessee, the assessments made by
them were ab initio void inasmuch as the departmental
enquiries revealed that the assessee never resided nor
carried on any business either at premises 5/A Bysack
Street, Calcutta or at No. 1 Gunsala Road, Lillooah, Howrah.
In fact the assessee had been living with her husband eve
since her marriage in 1946 at Raniganj and for that reason
he was of opinion that the Income-tax Officer was not
justified in accepting the claim of initial capital of Rs.
13,500/- without any evidences placed on record nor was he
justified in accepting that the assesse
1039
being a married lady was carrying on speculative business at
Calcutta. The Commissioner refused to believe the sale of
gold ornaments of the value of Rs. 68,000/- during the years
1955-56 and 1956-57 as genuine as no details of such
ornaments were given. He further stated that the
departmental enquiry had subsequently revealed that the firm
of Keshardeo Aggarwal & Co., of 29, Burtolla Street,
Calcutta through whom the ornaments were sold was not a
genuine firm and that the assessee’s husband was a partner
in a firm of M/s Kaluram Prahladrai of Asansol in which the
assessee is allowed to have made an investment of two sums
of Rs. 50,000/- on 26th and 28th November 1957. In the
result, having regard to the fact that the assessments for
the years 1955-56 to 1959-60 were already beyond time for
taking action, he cancelled the assessment for 1960-61 and
directed the Income-tax Officer to make a fresh assessment
as stated above.
The assessee appealed to the Tribunal against the aforesaid
order of the Commissioner and it was urged that under s. 33-
B the Commissioner could only call for and examine the,
proceedings of any particular assessment year if he
considered that any order passed therein by the Income-tax
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Officer was erroneous and prejudicial to the interests of
the revenue. This contention was accepted by the Tribunal
on the ground that as the assessment orders for the years
1955-56 to 1959-60 could not be interfered with by the
Commissioner under s. 33-B, he could not rely on those very
orders for coming to a conclusion that the assessment order
for 1960-61 was erroneous and prejudicial to the interests
of revenue. The Tribunal further held that if the orders
for 1955-56 to 1959-60 were left out and the assessment
order for 1960-61 was considered by itself, it could not be
said that the assessment order was prejudicial to the
interests of revenue. It was also observed that the factum
of advance of initial capital, realisation of amounts by
sale of gold ornaments and the carrying on of the money
lending and speculative business had already been accepted
and assessed in the previous years, that even in the year of
assessment in question the Income-tax Officer had added Rs.
1,499/- to the disclosed income from speculative business
and Rs. 1,270/- to the disclosed income from interest and
made the assessment on a total income of Rs. 9,037; as such
it could not be said that the assessment was prejudicial to
the interests of revenue and that at the most it could be
said that the assessee could not have carried on any
business at the addresses. given by her but where an
assessment has been made without territorial jurisdiction it
could not be said to be prejudicial to the interests of
revenue. On these findings the questions that were referred
to the High Court were as follows :-
1. Whether on the facts ’and in the circumstances of the
case, in taking action under s. 33-B(1) of the Income-tax
Act, 1922
1040
for the assessment year 1960-61, the Commissioner of Income-
tax was entitled to take into consideration the records of
the proceedings relating to the assessment of the assessee
for the assessment years 1955-56 to 1959-60 ?
2. Whether, on the facts and in the circumstances of the
case, the Tribunal was right in holding that there were no
materials before the Commissioner to justify his finding
that the assessment order for 1960-61 was erroneous insofar
as it was prejudicial to the interests of the revenue?
Apart from these, a further question which will be referred
to as the third question, was also referred, at the instance
of the assessee, namely,
Whether the Commissioner of Income-tax could lawfully
initiate proceedings under section 33-B of the Indian
Income-tax Act, 1922 on the 25th June, 1963, notwithstanding
the repeal of the aforesaid Act by the Income-tax Act, 1961
with effect from the 1st of April, 1962 ?
The High Court declined to answer the first question as in
its view it was merely academic. The assessee did not press
for an answer on the third question. The only other
question, therefore, was the second one which was answered
against the assessee on the ground that the Income-tax
Officer had no jurisdiction to make the order which itself
would have been sufficient for the Commissioner to set aside
the assessment. In this view of the matter, is held
that there were materials before the Commissioner to justify
his finding that the order of assessment for the year 1960-
61 was erroneous insofar as it is prejudicial to the
interests of revenue It however did not pronounce any
opinion on the question whether the Commissioner could have
considered materials of the previous year in arriving at
his conclusion in respect of the assessment for the year
1960-61.
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The learned advocate for the assessee contends that under s.
33B the Commissioner had no jurisdiction to cancel the
assessment made by the Income-tax Officer inasmuch as it
cannot said that where an assessee has been assessed to tax
it was prejudicial to the interests of revenue on the ground
that no assessment could ’have been made in respect of the
income of which she made a voluntary return. This
contention in our view is unwarranted by the language of s.
3 3B. The words of the section enable the Commissioner to
call for and examine the. record of any proceeding under the
Act and to pass such orders as he deems necessary as the
circumstances of the case justify when he considers the
order passed was erroneous insofar as it is prejudicial to
the interest of the revenue. It is not, as submitted by the
learned advocate prejudicial to the interests of the revenue
only if it is found the
1041
the assessment for the year was disclosed on the basis that
an income had been earned which is assessable. Even where
an income has not been earned and is not assessable, merely
because the assessee wants it to ’be assessed in his or her
hands in order to enable someone else who would have been
assessed to a larger amount, an assessment so made can
certainly be erroneous and prejudicial to the interests of
the revenue. If so-and we think it is so-the Commissioner
under s. 33B has ample jurisdiction to cancel the assessment
and may initiate proceeding s for assessment under the
provisions of the Act against some other assessee who
according to the income-tax authorities is liable for the
income thereof. Rampyari Devi Saraogi v. Commissioner of
Income-tax(1) lends support to this view. In that case this
Court in similar circumstances held that the Commissioner
had jurisdiction under s. 33B of the Act. It appears the
Commissioner of Incometax West Bengal had on enquiries made
by the department stated in the notice to the assessee that
he neither resided nor carried on any business declared in
the returns and had found that the Income,tax Officer was
not justified in accepting the initial capital, the gift
received and sale of jewellery and the income from business
without any enquiry or evidence whatsoever. It appeared in
that case, as in this case, the assessee had given a
fictitious address in order to invest the jurisdiction on a
particular Income-tax Officer to make the assessment. While
agreeing with the High Court that all this material was
supporting material and did not constitute the basic grounds
on which the order under s. 33B were passed by the Com-
missioner, this Court held that there was ample material to
show that the Income-tax Officer made the assessment in
undue hurry; that the assessee was a new assessee and filed
voluntary returns in respect of a number of years i.e. from
assessment years 1952-53 to 1960-61. The other
circumstances also were similar in nature to those in this
case.
The learned advocate further referred to the case of Commr.
of Income-tax v. Rao Thakur Nargvan Singh (2 ) in support of
his submission that past assessments against the assessee
were final and cannot be relied upon for the purpose of
exercising jurisdiction under s. 33B. A reference to the
case cited by him however would show that no steps had been
taken under s. 35 to rectify the mistake in the order of the
Appellate Tribunal nor was any reference to the High Court
sought against that order, but nonetheless, the Income-tax
Officer initiated fresh assessment proceedings under s. 34
with respect to interest income and made a fresh assessment
to include that income. In these circumstances it was held
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that where the order of the Appellate Tribuhal became final
the income-tax Officer could not initiate re-assessment
proceedings
(1). 87 I.T.R. 84.
(2) 56 I.T.R. 234.
1042
even in respect of interest income which was binding on him
a he could not therefore re-open the ’assessment to include
that come. "If that were not the legal position", this
Court observe it "would be placing an unrestricted power of
review in the hand of the Income-tax Officer to go behind
the findings given by hierarchy of Tribunals and even those
of the High Court Supreme Court with its changing moods."
This case therefore of little assistance. In the view we
have taken, the answer by the High Court cannot be disturbed
and the appeal is accordingly dismissed with costs.
V.P.S. Appeal dismissed
1043