Patna High Court
Chatturam Horilram Ltd. vs Commr. Of Income-Tax on 20 March, 1953
Equivalent citations: [1954]25ITR326(PATNA)
ORDER
1. The assessee, Messrs. Chatturam Horil-ram Ltd. (hereinafter referred to as the Company), is a private limited Company which carries on mica business on a large scale. For the accounting year corresponding to calendar year 1938, the books of the Company showed a profit of Rs. 97,868/-. The books also showed that there was a loss of Rs. 1,15,481/- on account of previous years. The Income-tax Officer held in the course of assessment that the profit and loss account of the Company did not reflect the true profits, that, on the contrary, the Company had secreted its profits in the shape of cash deposits in the accounts of the share-holders, and that the true profits of the Company for the accounting year 1938 should be computed to be a sum of Rs. 4,86,351/- after making certain adjustments. The Income-tax Officer considered that the losses incurred prior to calendar year 1938 were wiped out toy the profits which were actually realised in calendar year 1938, Since the conditions requisite for the application of Section 23A were satisfied the Income-tax Officer wrote to the Inspecting Assistant Commissioner of Income-tax for his approval to make an order under Section 23A, On the 2nd of March, 1945, the Inspecting Assistant Commissioner issued a notice to the Company in the following terms:
"Please let me know within a week from the receipt of this notice if you have any objection to the application of Section 23A of the Income-tax Act."
The notice was received by the Company on -3-1945. The Company made no representation till 12-3-1945, when the Inspecting Assistant Commissioner approved the proposal of the Income-tax Officer that Section 23A should be applied to the assessment of the Company for calendar year 1938. On the same date, the Income-tax Officer made an order under Section 23-A directing that the undistributed portion of the assessable income as reduced by the taxes payable, namely, Rs. 3,79,966, should be deemed to have been distributed as dividend amongst the share-holders as on the date of the general meeting, and that a sum of Rs. 1,89,983/- should be taxed in the hands of each of the share-holders, namely, the Hindu undivided family of Chatturam and the Hindu undivided family of Darsanram, for the assessment year 1940-41, The Company preferred an appeal to the Appellate Assistant Commissioner, and the argument was that the order under Section 23-A had been passed by the Inspecting Assistant Commissioner without giving the assessee an opportunity of being heard in the matter. It was said that, as a week's time had been allowed by the Inspecting Assistant Commissioner for showing cause, the Company was entitled to appear before the Inspecting Assistant Commissioner on 13-3-1945, and make such representation as it thought fit. It was maintained that the date of service of the notice should be excluded for the purpose of counting a week's time given by the notice itself, and, since the order under Section 23-A had been passed on 12-3-1945, the Company was denied the opportunity of showing cause, which opportunity was a matter of statutory right. The Appellate Assistant Commissioner accepted the contention of the assessee, and set aside the order of the Income-tax Officer under Section 23-A, "directing the Income-tax Officer to resume proceedings from the stage of asking for approval of the Inspecting Assistant Commissioner, who would now give the Company the opportunity referred to in Section 23-A (2)." An appeal was taken by the Company to the Income-tax Appellate Tribunal and the ground of appeal was that the Appellate Assistant Commissioner was not competent to direct the Income-tax Officer to resume proceedings, and that no such direction ought to have been given to the Income-tax Officer. The Income-tax Appellate Tribunal rejected the contention of the assessee as follows:
"We do not agree with the learned Counsel for the assessee that the entire proceedings should have been quashed by the Appellate Assistant Commissioner, and that it was not competent to him to give the direction to the Income-tax Officer. The order of the appellate Assistant Commissioner seems to be the only order that could be passed under the circumstances. The contention is rejected."
At the instance of the Company, the Income-tax Appellate Tribunal has referred the following questions of law for the opinion of the High Court:
"(1) Whether the Appellate Assistant Commissioner could legally set aside the order passed by the Income-tax Officer under Section 23-A of Indian Income-tax Act, 1922, and direct him to resume proceedings from the stage of asking for approval of the Inspecting Assistant Commissioner?
(2) If the answer to question (1) is in the negative, whether the order of the Income-tax Officer under Section 23A of the Indian Income-tax Act, 1922, should be cancelled?"
2. After hearing learned counsel for the parties, we are satisfied that the first question has not been happily framed and that the question should be redrafted as follows in order to bring out the real controversy between the parties :
"Whether the Appellate Assistant Commissioner, while setting aside the order passed by the Income-tax Officer under Section 23A of the Indian Income-tax Act, 1922, could legally direct the Income-tax Officer to resume proceedings from the stage of asking for approval of the Inspecting Assistant Commissioner ?"
Question No. (2) as framed by the Income-tax Appellate Tribunal is in the following terms:
"If the answer to question (1) is in the negative, whether the order of the Income-tax Officer under section 23A of the Indian Income-tax Act, 1922, should be cancelled?"
On behalf of the assessee, Mr. Dutta pointed out the order of the Incoma-tax Officer under Section 23A has already been cancelled by the Appellate Assistant Commissioner, and it is not necessary for the High Court to answer this question since it does not arise out of the order of the Income-tax Appellate Tribunal. Mr. Gopal Prasad, on behalf of the Department, also agrees that this question does not arise out of the order of the Income-tax Appellate Tribunal, and the High Court need not answer this question.
3. Mr. Dutta, on behalf of the assessee, therefore, confined the whole argument to the first question which we have altered in the manner already indicated. The point taken by Mr. Dutta is that Section 31(3) (d) of the Income-tax Act conferred no authority on the Appellate Assistant Commissioner to direct the Income-tax Officer to resume proceedings under Section 23A from the stage of asking for approval of the Inspecting Assistant Commissioner. Section 31(3) states that, in disposing of the appeal, the Appellate Assistant Commissioner may, in the case of an order under Sub-section (2) of Section 25, or Sub-section (1) of section 23A or Sub-section (2) of section 26...... confirm, cancel or vary such order. Upon the wording of this sub-section, Mr. Dutta laid pointed stress, and argued that, in the case of an order passed under Section 23A(1), the Appellate Assistant Commissioner had the powers only to confirm or cancel or vary the quantum of the order of assessment and that the Appellate Assistant Commissioner had no power to make an order of remand or to give any direction to the Income-tax Officer that he should resume proceedings under Section 23A from the stage of asking for approval of the Inspecting Assistant Commissioner. Mr. Gopal Prasad, who appeared on behalf of the Income-tax Department, contested this proposition, and argued that the word "vary" in Section 31(3)(d) should be construed in a wide manner, and that the order passed by the Appellate Assistant Commissioner in the present case would come within the ambit of this sub-section.
We do not think it is necessary in this case to express any opinion as to which of these contentions is right for the question had become purely academic in view of the circumstance that the Company preferred an appeal to the Income-tax Appellate Tribunal from the order of the Appellate Assistant Commissioner made under Section 31(3)(d) of the Indian Income-tax Act. It was argued before the Income-tax Appellate Tribunal that the Appellate Assistant Commissioner had no power to order a remand of the case or to direct that the Income-Lax Officer should proceed from the stage of asking for approval of the Inspecting Assistant Commissioner. This argument was rejected by the Income-tax Appellate Tribunal, and it was held that the order of the Appellate Assistant Commissioner was the only proper order that could be passed under the circumstances. In effect, the action of the Appellate Assistant Commissioner in giving the direction to the Income-tax Officer was approved and affirmed by the Income-tax Appellate Tribunal. In substance, the order of the Appellate Assistant Commissioner was adopted by the Income-tax Appellate Tribunal, and it must be taken that the order directing the Income-tax Officer to resume proceedings from the stage of asking for approval is an order passed by the Income-tax Appellate Tribunal itself. It has not been, and it was not, contended by Mr. Dutta, who presented the case on behalf of the assessee, that it was not within the powers of the Income-tax Appellate Tribunal to make an order of remand or to direct the Income-tax Officer to resume proceedings under Section 23A from the stage of asking for approval of the Inspecting Assistant Commissioner.
The powers of the Income-tax Appellate Tribunal in disposing of an appeal are laid down in section 33(4) of the Indian Income-tax Act, which statas that "the Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate any such orders to the assessee and to the Commissioner". The powers conferred by Section 33(4) are of a very wide character, and it was not suggested by Mr. Dutta that, if the Income-tax Appellate Tribunal had itself set aside the order of assessment under Section 23A, and directed the Income-tax Officer to resume proceedings from the stage of asking for approval, such an order would not be legal or valid. The contention of Mr. Dutta, however, is that the Income-tax Appellate Tribunal, in disposing of the appeal, did not purport to pass an order of remand itself, but merely affirmed that the order of the Appellate Assistant Commissioner in making a remand was not illegal. There may be some point in the argument if regard is paid only to the form in which the Income-tax Appellate Tribunal has made the order complained against; but, in substance, the Income-tax Appellate Tribunal has adopted the order of remand passed by the Appellate Assistant Commissioner, and it must be assumed that the order of remand to the Income-tax Officer is an order made by the Income-tax Appellate Tribunal itself in disposing of the appeal. Assuming but not affirming, that the Appellate Assistant Commissioner had not authority to make an order of remand, the question raised in the statement of the case would be purely academic since the Income-tax Tribunal has validly passed the order directing the Income-tax Officer to resume proceedings from the stage of asking for approval of the Inspecting Assistant Commissioner. The order of the Appellate Assistant Commissioner, which is challenged in this case, has merged in the order of the Income-tax Appellate Tribunal which is the final order and which must be followed and obeyed by the Income-tax Officer. Since the order of the Income-tax Appellate Tribunal is a proper and legal order, there is hardly any point in the High Court answering the question whether the Appellate Assistant Commissioner had or had not the authority to make the order of remand under Section 31 (3) (d).
4. For the reasons expressed, we think that the question has become purely academic, and, according to the established authorities, the High Court is not bound to give an answer to a question of such character--see, for instance the decision of the Privy Council in -- 'Rajendra Narayan Bhanj Deo v. Commr. of Income-tax, Bihar and Orissa', AIR 1940 PC 158 (A).
5. We do not, therefore, propose to furnish any answer to either of the two questions formulated by the Income-tax Appellate Tribunal. There will not be any order as to costs of this reference.