Full Judgment Text
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PETITIONER:
C.I.T., WEST BENGAL II, CALCUTTA
Vs.
RESPONDENT:
M/S. ELECTRO HOUSE
DATE OF JUDGMENT02/09/1971
BENCH:
ACT:
Income-tax Act (11 of 1922), s. 33B-Whether jurisdiction of
Commissioner depends on issue of proper notice to assessee.
HEADNOTE:
The Commissioner of Income-tax found that the orders of the
Income-tax Officer granting registration to the assessee
firm and renewal of registration for the next year were
erroneous and prejudicial to the interests of revenue. He
therefore proceeded against the assessee under s. 33B of the
Income-tax Act, 1922, after issuing notice to the assessee.
The High Court, on reference, held that the notice was not
valid and that therefore, the Commissioner had no
jurisdiction to proceed with the enquiry.
Allowing the appeal to this Court,
HELD : Section 33B, unlike s. 34 of the Act does not
prescribe any notice to be given. For the assumption of
jurisdiction to proceed under s. 33B a notice is not a
condition precedent. The section only requires the
Commissioner to give an opportunity to the assessee before
reaching his decision and not before commencing the enquiry.
The requirement is only a principle of natural justice, and
its breach may affect the legality of the order, but does
not affect the jurisdiction of the Commissioner. Therefore,
the question as to what the notice given in the present case
should have contained did not arise at it]. [592 C-H]
Gita Devi Aggarwal v. C.I.T., West Bengal, 76 I.T.R.
496(S.C.), followed.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 2376 to
2379 of 1968 and 1168 to 1471 of 1971.
Appeals by certificate/special leave from the judgments and
orders dated May 2, 1968 of the Calcutta High Court in
Incometax Reference Nos. 63, 112 and 113 of 1965.
Jagadish Swarup, Solicitor-General, A. N. Kirpal, R. N.
Sachthey and B. D. Sharma, for the appellant (in all the
appeals).
S.T. Desai and D. N. Mukherjee, for the respondent (in
all the appeals).
The Judgment of the Court was delivered by
Hegde, J. Civil Appeals Nos. 1168-1171 of 71 are by special
leave and Civil Appeals Nos. 2376-2379 of 68 are by
certificate. These appeals arise from the decision of the
Calcutta High Court in certain tax references. In those
references the High Court was considering the one question
referred to it by the Tribunal under section 66(1) of the
Indian Income-tax Act, 1922 (in brief ’the Act’) and two
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other questions referred to it by the Tribunal in accordance
with the directions given by that
590
Court under section 66 (2) of the Act. The High Court has
only answered the question referred to it by the Tribunal
under section 66(1) of the Act and it has not answered the
other two questions as being unnecessary. The question
referred under section 66(i) is :
"Whether on the facts and in the circumstances
of the case, the notice issued under, section
33B of the Indian Income-tax Act, 1922 met the
requirements of the law and whether the
Commissioner of Income-tax validly exercised
jurisdiction under section 33B of the Indian
Income-tax Act, 1922 ?
The facts of the case lie within a narrow compass. The
,concerned assessment years are 1959-60 and 1960-61, the
corresponding accounting years having ended on December 31
of each of the years 1958 and 1959. The assessee M/s.
Electro House claimed to be a firm constituted under a deed
of partnership dated January 2, 1958. The business of that
firm was started by Baidyanath Gorai sometimes in the year
1949 and up to the assessment year 1958-59 he was assessed
as the sole proprietor thereof. On January 2, 1958 he
purported to enter into a partnership with his mother-in-law
and son-in-law. Under that partnership he had 40% share and
his mother-in-law and son-in-law had 30% share each in the
profits and losses of the firm. The Income-tax Officer
accorded registration of the partnership in question under
section 26 A of the Act for the two assessment years with
which we are concerned in these appeals. The Commissioner
of Income-tax, West Bengal, however appears to have found on
an examination of the records that the orders .of the
Income-tax Officer granting registration to the assessee
firm for the assessment year 1959-60 and renewal of
registration for the assessment year 1960-61 were erroneous
and prejudicial to the interests of the revenue. He
therefore proceeded against the assessee under section 33B
of the Act. Before doing so, he issued a notice to the firm
on July 18, 1962 which reads thus
"From
Shri F. H. Vallibhoy
Commissioner of Income
Tax,
West Bengal.
To
M/s. Electro House
G. T. Road,
Asansol.
Gentlemen,
591
SUB.-Income Tax, Assessment-1959-60 and 1960-
61 M/s. Etectro House-Registration u/s 26A of
the Income Tax Act-Wrongly granted-Proposal
u/s 33B to cancel orders u/s 26A-notice
regarding:-
On a perusal of the orders u/s 26A passed by Income Tax
Officer, "A" Ward Asansol on 5th October. 1960 and 25th
February, 1961 for the assessment year", 1959-60 and 1960-61
respectively in the above case and the connected records, I
consider that the said orders are erroneous and prejudicial
to revenue, inasmuch as registration u/s 26A of Income Tax
Act 1922, for the assessment year 1959-60 and renewal of
registration u/s 26A of the said Act for the assessment year
1960-61 should not have been granted as there are prima
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facie reasons and grounds to hold that the partnership
brought into existence by the partnership deed dated 2nd
January, 1958 is not a genuine one.
1, therefore, propose to cancel the orders u/s 26A of the
Income-tax Act, 1922 for the assessment years 1959-60 and
1960-61 under powers vested in me under section 33B of the
Income, Tax Act 1922, unless you show cause why the orders
should not be so cancelled.
I am prepared to hear your objections, if any, at 11 A.M. on
3rd August, 1962 at my office as noted above. Objections in
writing, if any submitted on or before the above date will
also be duly considered.
Yours faithfully,
Sd./- F. H. Vallibhoy,
Commissioner of Income Tax
West Bengal."
The question for consideration is whether this notice is an
invalid notice and consequently the Commissioner had no
jurisdiction to proceed under section 33B. The Tribunal
came to the conclusion that the notice issued was not one
required to be issued by the Act and hence its validity or
invalidity did not affect the jurisdiction of the
Commissioner. It also held that it was a valid notice. But
the, High Court differing from the conclusions reached by
the Tribunal opined that the notice issued was not valid and
therefore the Commissioner had no jurisdiction to proceed
with the enquiry. In that view it thought it unnecessary to
consider the remaining questions.
592
Section 33B (1) reads :
"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 canceling the assessment and
directing a fresh assessment."
This section unlike section 34 does not prescribe any notice
to be given. It only requires the Commissioner to give an
opportunity to the assessee of being heard. The section
does not speak of any notice. It is unfortunate that the
High Court failed to notice the difference in language
between section 33B and 34. For the assumption of
jurisdiction to proceed under section 34 the notice as
prescribed in that section is a condition precedent. But no
such notice is contemplated by section 33B. The
jurisdiction of the Commissioner to proceed under section
33B is not dependent on the fulfillment of any condition
precedent. All that he is required to do before reaching
his decision and not before commencing the enquiry, he must
give the assessee an opportunity of being heard and make or
cause to make such enquiry as he deems necessary. Those
requirements have nothing to do with the jurisdiction of the
Commissioner. They pertain to the region of natural
justice. Breach of the principles of natural justice may
affect the legality of the order made but that does not
affect the jurisdiction of the Commissioner. At present we
are not called upon to consider whether the order made by
the Commissioner is vitiated because of the contravention of
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any of the principles of natural justice. The scope of
these appeals is very narrow. All that we have to see is
whether before assuming jurisdiction the Commissioner was
required to issue a notice and if he was so required what
that notice should have contained ? Our answer to that
question has already been made clear. In our judgment no
notice was required to be issued by the Commissioner before
assuming jurisdiction to proceed under section 33B.
Therefore the question what that notice should contain does
not arise for consideration. It is not necessary nor proper
for us in this case to consider as to the nature of the
enquiry to be held under section 33B. Therefore we refrain
from spelling out what principles of ,natural justice should
be observed in an enquiry under section 33B. This Court in
Gita Devi Aggarwal v. Commissioner of Income-tax, West
593
Bengal and others(1) ruled that section 33B does not in
express terms require anotice to be served on the assessee
as in the case of section 34. Section 33B merely requires
that an opportunity of being heardshould be given to the
assessee and the stringent requirement ofservice of
notice under section 34 cannot, therefore, be applied to a
proceeding under section 33B.
For the reasons mentioned above, we allow Civil Appeal Nos.
1168 to 1171 of 7112 discharge the answer given by the High
Court to the question set out earlier and answer that
question as follows
The notice issued did not contravene section 33B and the
Commissioner validly exercised his jurisdiction under
section 33B. But as the High Court has not considered the
other questions referred to it, these cases will now go back
to the High Court for considering those questions.
Civil Appeals Nos. 2376 to 2379 of 68 are dismissed as being
not maintainable, as the certificates on the basis of which
those appeals were brought to this Court are not in
accordance with law. But in those appeals there will be no
order as to costs.
V.P.S. C.A. No;. 1168-1171/71 allowed.
C.A. Nos. 2376-2379/68 dismissed.
(1) 76 I.T.R. p. 496.
4-L3Sup.C.I./72
594