C.I.T., West Bengal II, Calcutta Vs.
M/S. Electro House  INSC 232 (2 September 1971)
Income-tax Act (11 of 1922), s. 33B-Whether
jurisdiction of Commissioner depends on issue of proper notice to assessee.
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.
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
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 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 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 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 a notice to be served
on the assessee as in the case of section 34. Section 33B merely requires that
an opportunity of being heard should be given to the assessee and the stringent
requirement of service 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.