Tara Devi Aggarwal Vs. Commissioner of
Income-Tax, West Bengal, Calcutta [1972] INSC 283 (27 November 1972)
REDDY, P. JAGANMOHAN 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 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.
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 Rs, 600 after meeting her expenses up to March 1950;
10 37 (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
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 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.
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 Income tax 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 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.
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