AI Structured Summary
Not yet generated for this judgment
Judgment
Malik, C.J.—The question referred to us u/s 66(2) of the Indian income tax Act is as follows:
Q. Whether in an appeal u/s 33(1) of the income tax Act, against an order passed u/s 23(4), the validity of the assessment made u/s 23(4) can be challenged when no second appeal against the order of the Appellate Assistant Commissioner confirming the order of the income tax Officer passed u/s 27 refusing to cancel the assessment so made was filed?
On 16th October, 1942, the income tax Officer made an assessment u/s 23(4) of the Indian income tax Act on an estimated income of Rs. 10,000. The Assessee had made a return and had claimed that he had suffered a loss of Rs. 13,320-5-3. The income tax Officer thereafter issued notice to the Assessee to produce his Sauda Bahi so that the income tax Officer may be able to ascertain whether the Assessee''s contention that he had suffered loss to the extent mentioned by him was correct. The Assessee, however, did not produce the Sauda Bahi and the income tax Officer made the assessment as stated above.
The Assessee then made an application u/s 27 of the Indian income tax Act, stating that he was not able to produce the Sauda Bahi as he did not maintain it and praying that the income tax Officer might cancel the assessment order, dated the 16th of October, 1942, and make a fresh assessment in accordance with the provisions of Section 23. This application was dismissed by the income tax Officer on the 27th of January, 1943.
The Assessee then filed, two appeals before the Appellate Assistant Commissioner of income tax-one against the assessment order, dated 16th October, 1942, and the other against the order, dated 27th January, 1943, refusing to set aside the order of the 16th of October. 1942, and make a fresh assessment. These two appeals were heard separately by the Appellate Assistant Commissioner of income tax on different dates. On the 5th of August, 1943, the Appellate Assistant Commissioner of income tax dismissed the appeal against the order, dated 27th January, 1943, and on 7th August, 1943, he partly allowed the appeal against the order, dated 16th October, 1942, and modified that order. Against the order, dated 7th August, 1943, an appeal was filed before the income tax Appellate Tribunal. At the time of the hearing of the appeal, however, it was argued that the assessment made u/s 23(4) of the Act was wrong and that the application u/s 27 should, therefore, have been granted and a fresh assessment made in accordance with the provisions of that section. The Tribunal said as follows:
But no appeal against the Appellate Assistant Commissioner''s order u/s 31 confirming the income tax Officer''s order u/s 27, having been brought up to the Tribunal and the present appeal being one relating to the merits of the assessment, we cannot go into the question about the propriety of the assessment having been made u/s 23(4).
The Assessee thereafter made an application praying that the point of law may by referred to this Court and the question mentioned above has been referred to us for opinion.
Learned Counsel admitted that there is no direct authority on the point. We have, however, examined the provisions of the Indian income tax Act and are satisfied that the Tribunal was right in its views that, no appeal having been filed against the order refusing to make a fresh assessment, it was not open to it to go into that question. The income tax Officer has a right u/s 23(4) of the Act to make a best judgment assessment under the circumstances mentioned in that Sub-section which are to the following effect:
If any person fails to make the return required by any notice given under Sub-section (2) of Section-22 and has not made a return or a revised return under Sub-section (3) of the same section or fails to comply with all the terms of a notice issued under Sub-section (4) of the same section or, having made a return fails to comply with all the terms of a notice issued under Sub-section (2) of this section, the income tax Officer shall make the assessment to the best of his judgment and determine the sum payable by the Assessee on the basis of such assessment....
Against a best judgment assessment u/s 23(4) of the Act, previous to the amendment made in 1939, there was no appeal. The Assessee, however, had a right to make an application u/s 27, explaining the reasons for his default and in case the income tax Officer was satisfied that the Assessee was prevented by sufficient cause, he was entitled to set aside his previous order, cancel the assessment and proceed to make a fresh assessment, but in case he was not satisfied and refused the application u/s 27 of the Act, an appeal to the Appellate Assistant Commissioner of income tax was provided u/s 30(1) of the Indian income tax Act. By the Amending Act of 1939, however an appeal was provided against a best judgment assessment also with the result that, after the said amendment, Section 30 of the Act provided for the appeals-one against an assessment order passed u/s 23(4) and the other against an order passed u/s 27 of the Indian income tax Act, refusing to make a fresh assessment. An Assessee may u/s 30(1) appeal against an order of refusal to make a fresh assessment u/s 27 but where the income tax Officer has made an assessment u/s 23(4) of the Act, or, has made a fresh assessment u/s 27, the Assessee can appeal u/s 30(1) and object to the amount of income assessed or the amount of loss computed or, to the amount of tax determined. The scope of the two appeals is, therefore, entirely separate and while, in the case of one, the question for consideration is whether sufficient cause had or had not been made out for a fresh assessment in the other it is accepted that the income tax Officer was entitled to make the assessment u/s 23(4) and the disputed merely related to the merits of the case, i. e., whether the amount assessed was in excess, or, whether the right amount of income tax had been imposed on the Assessee. In the case of Naba Kumar Singh Badhuria v. Commissioner of income tax, Bengal 1944 ITR 327 at page 333 it was observed that:
On repealing the proviso in the old section the Legislature has expressly limited the manner in which appeals may be allowed against decisions u/s 23 or Section 27, and by inserting the words applicable to Section 23 or Section 27 with the word ''amount'' they have definitely intended that the Assessee''s right of appeal u/s 30 should be limited as regards those Sections to the quantum of the assessment or tax.
In the appeal against the order, dated the 27th of January, 1943, the Appellate Assistant Commissioner of income tax was concerned with the determination of the question whether Assessee was justified in refusing to comply with the notice requiring him to produce the Sauda Bahi. In the appeal against the order, dated 16th October, 1942, the Appellate Assistant Commissioner of income tax was concerned with the question whether the amount assessed was correct in view of the facts and circumstances of the case. Both these appeals were separately disposed of by separate orders.
Section 33(1) of the Indian income tax Act provides for an appeal by an Assessee "objecting to an order passed by an Appellate Assistant Commissioner. The Appellate Assistant Commissioner of income tax had, in this case, passed two orders u/s 31. The Assessee had filed an appeal against the order, dated the 7th of August, 1943, which dealt only with the question of quantum of the tax payable. He had filed no appeal against the order, dated the 25th of August, 1943, which dealt only with the question whether the Assessee had made out a sufficient case for a fresh assessment after setting aside the previous assessment order. The income tax Appellate Tribunal, therefore, had before it only an appeal against the order dealing with the quantum of the tax payable and it was, no doubt entitled to "pass such orders there on as it thought fit" (see Section 33(4) of the Act. The words such orders there on as it thought fit are, no doubt, very wide but they must relate to the matters that arise in the appeal before the income tax Appellate Tribunal. The appeal in this case, as we have already said, related to the quantum of the tax payable and, in that appeal, the question whether there was sufficient cause for not complying with the previous notice did not arise, no appeal having been filed against the order u/s 27 though an appeal was provided for by the income tax Act.
In the circumstances of this case, the view taken by the income tax Appellate Tribunal appears to us to be correct and the answer to the question referred to us is, therefore, in the negative.
The Assessee must pay the costs to the Department which we assess at Rs. 300/-