Income Tax Appellate Tribunal - Nagpur
Haji Ali Mohammad vs Commissioner Of Income Tax, C.P. & U.P. on 8 December, 1939
Equivalent citations: [1940]8ITR243(NAG)
ORDER
This is a application under Section 66 (3) of the Income-tax Act asking that the High Court require the Income-tax Commissioner to state a case. Admittedly the application fails unless there is some point of law which the case stated will serve to elucidate; and we have failed to find any point of law in this case.
The main argument is as follows and is founded on In re Messrs. Mahaliram Ramjeedas, (A.I.R. 1938 Cal. 557). On the 18th of February 1933 the Income-tax Officer made a minute to the following effect : "I have reason to believe that income from cloth business Karanja was assessed at too low a figure". Thereafter there are very numerous minutes in his record indicating an attempt to find out whether this was in fact a justified doubt or not. It is said that before an Income-tax Officer can proceed under Section 34, which is the section giving him power to increase an assessment made in a previous financial year, he must hold an inquiry, at which the assessee shall be given a chance to be present, and shall satisfy himself that he is in a position to formulate to the assessee the income that he is going to state has been omitted from the previous assessment : and it is only after inquiry made and conclusion formed that the Income-tax Officer is entitled to serve the notice under Section 34. If that was the decision of the learned Judges of the Calcutta High Court we should, with great respect, find difficulty in agreeing with them. Towards the end of the judgment there are certain observations which look as though it was there thought that an Income-tax Officer could not be regarded in law as having reason to believe until he had done something positive that amounted to a discovery; and that positive thing should involve an inquiry wherein the assessee should be given a hearing, evidence should be taken, conclusion arrived at, and so forth. But on the facts of that case we doubt whether their Lordships desire to go so far as to say that Section 34 could not be used until there had been a preliminary inquiry concluded which had resulted in the Income-tax Officer concluding that a particular term of income had been omitted. It seems to us that any such reading of Section 34 might result in very serious evasions. It is to be noticed that the Income-tax Officer is strictly limited as to time. He has, before he can make any re-assessment, to serve the assessee with a notice, and that notice must be served within a year of the end of the year of assessment. It may well be that the evasion is discovered only as such time is expiring. Any inquiry that must be made, if the above reading of 1938 Cal. 557 that has, been urged before us is correct, cannot be made within the year and consequently the notice cannot be given in time and accordingly no re-assessment can be made. Further, it seems to us that the whole purpose of the notice is to determine whether in point of fact the suspicion is justified. As was pointed out in Commissioner of Income-tax, Bombay v. Gopal Vaijnath, (I.L.R. 59 Bom. 626), the burden of showing that income has escaped assessment lies on the Income-tax Officer. But the Income-tax Officer, if he receives information which would justify him in concluding that income has escaped assessment, is not thereby justified in re-assessing. He must give the assessee a chance to be heard and to explain, but we feel that this is done not before the notice is served but in the course of the inquiry which is generally started as a consequence of the notice being served.
In the present case it has been found as a fact that cash sales to the extent of over Rs. 40,000 have been suppressed. It has been found that the suppression consisted in the following expedient, that the books of the partnership which carried on business at various branches were not correct books but the correct figures were in books kept at a place called Bantheley which books have been suppressed and that the headquarters accounts at Bantheley have been withheld. It has been very strenuously argued before us that we are concerned with the year of assessment, financial year 1929-30 and that the partnership in question terminated the preceding year and was succeeded by a smaller partnership having different branches. Neither partnership had any business at Bantheley; and it is the conclusion of the various Income-tax Officers that have considered this case that at Bantheley were to be found the true accounts of the previous partnership and that throw accounts did not come to an end with the termination of the preceding partnership but continued and that the continuing accounts are to be found somewhere, and that after numerous notices they have not been produced. It is urged before us that there is no admissible evidence leading to any such inference. We doubt as to whether even if that proposition were accepted there would emerge any point of law, but we are not prepared - nor is it necessary - to go as for as to say that, because it seems to us that there is a good deal of evidence on which that finding could be founded. It is of course conceded before us that question of fact are question with which we are not concerned.
The second point that has been pressed is this : The order of assessment that has now been passed has been passed under Section 23(4), and it is said that it should have been made under Section 23(3), and that as to whether it should be made under this sub-section or that is a question of law and is a question which the Income-tax Commissioner has been asked to state and has refused on the ground that no appeal lies where Section 23(4) is applied. It is pointed out in Commissioner of Income-tax, Bombay v. Khemchand Ramdas, (I.L.R. 1938 Bom. 487), that the Court must be satisfied that Section 23(4) applies. Whether Section 23(4) applies or not depends upon, inter alia, whether this is a case of a failure to comply with the terms of a notice under Section 22(4). Section 22(4) confers power on the Income-tax Officer to serve a notice requiring the production of such accounts or documents as the Income-tax Officer may require so long as such accounts do not relate to a period more than three years prior to the previous year. Here the Officer served such a notice and that notice has not been complied with. It was not complied with because the assessee said there were no such books. In point of fact one such book was eventually produced by the person who had originally given information. It is true that that book related to 1929 when the partnership was different, but the Income-tax Officer for reasons which he states came to the conclusion of fact above noticed that the books of the assessee had not stopped with the dissolution of that earlier partnership but continued on into the year of assessment, and that therefore this was a case where there were books, where notice had been given to produce those books, and the books had not been produced, so that there was a failure to comply with the terms of the notice issued under sub-section (4) of Section 22, and Section 23(4) applied. Granted the finding of fact, the failure is obvious; and the failure being clear, the power to assess as the Income-tax Officer did assess is also clear.
In these circumstances, we do not consider that the Income-tax Commissioner should be called upon to state a case. The application accordingly fails. It is dismissed with costs.
Application dismissed.