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Judgment
Bhagwati, J.—This reference arises out of an assessment made on the assessee for the assessment year 1949-50, the previous year being
Samvat year 2004, that is, 13th November, 1947, to 1st November, 1948. The assessee was, during the previous year, a resident of Veraval in
the rest while State of Saurashtra and carried on business at that place. Income Tax legislation was introduced for the first time in the State of
Saurashtra by the Saurashtra Income Tax Ordinance, 1949, from the assessment year 1949-50. Subsequently, there was financial integration of
the State of Saurashtra and the Indian Income Tax Act, 1922, was made applicable to the territories of the State of Saurashtra from the
assessment year 1950-51. In 1951 the Government of India announced the voluntary disclosure scheme and taking advantage of that scheme, the
assessee addressed a letter dated 25th January, 1952, disclosing the following income alleged to have arisen to him in the State of Saurashtra from
money-lending and speculation during the years mentioned against the respective figures :
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Income. Assessment year. Previous year.
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Rs.
50,000 1949-50 Samvat year 2004
40,000 1950-51 Samvat year 2005
7,998 1951-52 Samvat year 2006
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The assessee also disclosed that he had a share in a firm called Messrs. Rameshchandra Manilal and Company, carrying on business at
Kozhikode, from the assessment year 1950-51. On the basis of this disclosure the assessee was assessed to Income Tax on an income of Rs.
50,000 for the assessment year 1949-50 under the Saurashtra Income Tax Ordinance, 1949, which was applicable in respect of that assessment
year and for the assessment year 1950-51 and 1951-52, the assessee was assessed to Income Tax on incomes of Rs. 40,062 and Rs. 14,098
respectively under the Indian Income Tax Act, 1922, which had by then been applied to the territories of the State of Saurashtra.
It appears that in 1958, the Income Tax Officer, Ward-A, Junagadh, who has territorial jurisdiction over Veraval being the place where the
assessee was residing and carrying on business during the previous year, Samvat year 2004, received information from which he had reason to
believe that the assessee had remitted during that previous year certain moneys from Bombay for making an investment in Kozhikode. There being
no explanation for the source of these moneys and the assessee not having filed a return of income under the Indian Income Tax Act, 1922, for the
assessment year 1949-50, the Income Tax Officer issued a notice u/s 34(1)(a) of the Indian Income Tax Act, 1922, for the assessment year
1949-50, after obtaining the necessary approval of the Commissioner of Income Tax, Bombay North, Ahmedabad. The notices u/s 34(1)(a) along
with the notice u/s 22(2) was served on the assessee on 5th March, 1958. On 8th April, 1958, within the period of 35 days prescribed for filing a
return after receipt of the notice u/s 22(2), a letter was filed before the Income Tax Officer by the advocate appearing on behalf of assessee and
the following objections were raised :
... I had no business or business place in British India and according to section 64 of the Income Tax Act, 1922, there can be no jurisdiction to
assess me here. I am a permanent resident of Veraval and have already been assessed under the Saurashtra Income Tax Ordinance and hence I
raise the objection to the jurisdiction of assessment and assessment place and hence withhold the return and state that I cannot be treated as
defaulter for late submission, etc., unless under the above objections are cleared up by your honour."" The Income Tax Officer thereafter issued a
notice dated 13th September, 1959, to the assessee u/s 28(4) of the Saurashtra Income Tax Ordinance, 1949, fixing an appointment on 29th
September, 1959. The advocate of the assessee appeared on that date and presented a letter of the same date objecting to the notice u/s 28(4) of
the Saurashtra Income Tax Ordinance, 1949, on the ground that it was not according to law. The Income Tax Officer, realising that the notice was
wrongly issued u/s 28(4) of the Saurashtra Income Tax Ordinance, 1949, When the proceedings were initiated u/s 34(1)(a) of the Indian Income
Tax Act, 1922, made a note on the letter of the assessee that the notice u/s 28(4) of the Saurashtra Income Tax Ordinance, 1949, was issued
through oversight and that the pending assessment proceedings were to be completed under the Indian Income Tax Act, 1922, and obtained the
signature of the assessee''s advocate below the note. Thereafter, the Income Tax Officer issued a notice on 8th December, 1958, u/s 22(4) of the
Indian Income Tax Act, 1922, calling for the production of the books of account and bank pass-books of the assessee relevant to the assessment
year 1949-50 on 19th December, 1958. The assessee, however, addressed a letter dated 18th December, 1958, to the Income Tax Officer
contending that in respect of the assessment year 1949-50 it was the Saurashtra Income Tax Ordinance, 1949, which was applicable and not the
Indian Income Tax Act, 1922, and that no proceedings could, therefore, be instituted against the assessee u/s 34(1)(a) of the Indian Income Tax
Act, 1922, in respect of the assessment year 1949-50 and the notices issued u/s 34(1)(a), 22(2) and 22(4) of the Indian Income Tax Act, 1922,
were accordingly invalid. Since the assessee failed to make the return required by the notices u/s 22(2) and did not comply with the terms of the
notice issued u/s 22(4), the Income Tax Officer proceeded to make a best judgment assessment u/s 23(4) and determined the income accruing or
arising in Bombay at Rs. 35,000 and assessed the assessee as a non-resident in respect of such income. The assessment order was made by the
Income Tax Officer on 24th December, 1958. The objection raised by the assessee to the jurisdiction of the Income Tax Officer disposed of by
the Income Tax Officer in the following words :
He wanted to point out that Junagadh Income Tax Officer had no jurisdiction but he has never mentioned where he wants to be assessed. Under
the circumstances, it is clear that the jurisdiction of the assessment is with this office as per the circular of the Central Board of Revenue. . .
The Circular of the Central Board of Revenue referred to by the Income Tax Officer was the Circular No. 9-I.T. dated 13th February, 1956,
adding a certain entry in the notification of the Central Board of Revenue No. 44-I.T. dated 1st July, 1952.
Immediately after the assessment order was made by the Income Tax Officer, the assessee made an application to the Income Tax Officer u/s
27 for cancelling the assessment on the ground that he was prevented by sufficient cause from making a return required by the notice u/s 22(2) and
complying with the terms of the notice u/s 22(4). The ground urged by the assessee as constituting sufficient cause was that, though the assessee
had raised an objections to the place of assessment, the Income Tax Officer had not referred the question as to the place of assessment to the
Commissioner of Income Tax as required by section 64(3) and the assessee had, therefore, a reasonable apprehension in his mind that if he
submitted a return in pursuance of the notice issued u/s 22(2) or complied with the terms of the notice issued u/s 22(4) he might be regarded as
having accepted the jurisdiction of the Income Tax Officer and that was the reason why he had not filed the return or complied with the notice
issued by the Income Tax Officer. The Income Tax Officer rejected the application by an order dated 31st March, 1959. The Income Tax Officer
observed :
... He never claimed that his jurisdiction was with a particular Income Tax officer. Unless he informs this point, the question of jurisdiction is not to
be decided . . .
An appeal was preferred to the Appellate Assistant Commissioner but it was rejected by him. The Appellate Assistant Commissioner took the
view that the question of reference to the Commissioner u/s 64(3) could arise only if the assessee claimed specifically that some Income Tax
Officer other than the Income Tax Officer issuing the notice had jurisdiction over the case of the assessee and that since in the present case all that
the assessee did was to go on repeating that the Income Tax Officer, Ward-A, Junagadh, had no jurisdiction over his case and did not claim
specifically that any other Income Tax Officer had such jurisdiction, he could not be said to have raised an objection to the place of assessment
which was required to be referred to the Commissioner for his decision u/s 64(3). The Appellate Assistant Commissioner also held that the
question of jurisdiction of a particular Income Tax Officer to assessee could not be raised in an appeal u/s 30(1). Still, however, the Appellate
Assistant Commissioner proceeded to consider whether the Income Tax Officer, Ward-A, Junagadh, had jurisdiction to assess the assessee and
held that having regard to the circular of the Board of Revenue to which reference has already been made by us earlier, while referring to the order
of the Income Tax Officer, the Income Tax Officer Ward-A, Junagadh, had such jurisdiction.
The assessee thereupon carried the matter in appeal to the Tribunal. The Tribunal took the view that the assessee had at no stage of the
proceedings stated as to what was the ground on which he was challenging the jurisdiction of the Income Tax Officer, Ward-A, Junagadh, to
assess him and that the objection taken by him was vague and that it was, therefore, not required to be referred to the Commissioner u/s 64(3).
The Tribunal held that it was apparent from the record that the assessee was all along avoiding to file a return on the plea that the Income Tax
Officer, Ward-A, Junagadh, had no jurisdiction to assess him and that there was no sufficient cause which prevented him from filing the return as
required by the notice issued u/s 22(2) or from producing the books of account and bank pass-books as required by the notice issued u/s 22(4).
The Tribunal, in this view of the matter, dismissed the appeal. The assessee thereupon made an application to the Tribunal u/s 66(1), asking the
Tribunal to refer to this court four questions of law which according to the assessee arose out of the order of the Tribunal. The Tribunal took the
view that the first two questions suggested by the assessee arose out of its order and were, therefore, liable to be referred to this court; but so far
as questions Nos. 3 and 4 were concerned, they were redundant. The Tribunal accordingly referred to this court the following two questions of
law arising out of its order :
(1) Whether the Income Tax Officer had jurisdiction to decide or was justified in finalising the proceedings taken pursuant to the notices u/s 22
and section 34 before the question of jurisdiction was disposed of u/s 64(3) of the Act ?
(2) Whether on the facts and in the circumstances of the case the assessee was prevented by sufficient cause from making the return required u/s
22 read with section 34 of the Indian Income Tax Act within the meaning of section 27 of the Act ?
On the first question Mr. D. H. Dwarkadas, learned advocate appearing on behalf of the assessee, contended that the assessee had by his letter
dated 7th April, 1958, raised an objection to the jurisdiction of the Income Tax Officer, Ward-A, Junagadh, to assess him and that the objection
being an objection as to the place of assessment, if the Income Tax Officer was not inclined to accept the validity of the objection, the Income Tax
Officer was bound to refer the matter to the Commissioner u/s 64(3), and it was not opened to the Income Tax Officer to determine the objections
himself and to proceed to assessee to tax on the basis that he had jurisdiction to assess the assessee. Since the Income Tax Officer was not
entitled, argued Mr. D. H. Dwarkadas, to proceed with the assessment of the assessee without getting the question as to the place of assessment
determined by the Commissioner u/s 64(3), the assessee had sufficient cause for not filing the return pursuant to the notice u/s 22(2) and not
complying with the terms of the notice u/s 22(4) so long as the question was not determined by the Commissioner and it was not held by the
Commissioner that the Income Tax Officer, Ward-A, Junagadh, had jurisdiction to assess the assessee. Mr. D. H. Dwarkadas thus invoked the
aid of section 64(3) for making out sufficient cause for setting aside the assessment within the meaning of section 27. The contention based on
section 64(3) is, however, not well-founded and must be rejected since in our view on the facts no question as to the place of assessment as
contemplated by section 64(3) was raised by the assessee which was required to be referred to the Commissioner for his decision before the
Income Tax Officer could proceed with the assessment.
The contention of Mr. D. H. Dwarkadas involves a consideration of the provisions of section 64. Section 64 deals with the place of assessment.
Sub-section (1) provides that where an assessee carries on business, profession or vocation at any place, he shall be assessed by the Income Tax
Officer of the area in which that place is situate or where the business, profession or vocation is carried on in more places than one, by the Income
Tax Officer of the area in which the principal place of his business, profession or vocation is situate. Under sub-section (2), in all other cases, an
assessee is liable to be assessed by the Income Tax Officer of the area in which he resides. Sub-section (4) declares that notwithstanding anything
contained in section 64, every Income Tax Officer shall have all the powers, conferred by or under the Act on an Income Tax Officer in respect of
any income, profits or gains accruing, or arising or received within the area for which he is appointed. Sub-section (5) then lays down certain cases
in which the provisions of sub-section (1) and (2) shall not apply and shall be deemed never at any time to have applied to an assessee. Sub-
section (3) deals with a situation where a question may arise as to the place of assessment. An assessee may raise an objection to the jurisdiction
of a particular Income Tax Officer to assess him on the ground that he is not liable to be assessed by such Income Tax Officer but that some other
Income Tax Officer has jurisdiction to assess him. The question of place of assessment is a question of some importance to the assessee and an
assessee may very well tell the taxing authorities that he is liable to be assessed only by a particular Income Tax Officer under the provisions of
section 64. What is to happen in such a case ? Sub-section (3) provides the machinery for determination of such question when it arises. The
second proviso to sub-section (3) provides that the place of assessment cannot be called in question by an assessee if he has made a return in
response to the notice u/s 22(1) and has stated therein the principal place where he carries on his business, profession or vocation, for in that event
the assessee himself having stated the principal place where he carries on his business, profession or vocation, he cannot be permitted to raise an
objection to the place of assessment determined on the basis of such statement. An assessee is also precluded by the second proviso to sub-
section (3) from calling in question the place of assessment after the expiry of the time allowed by the notice u/s 22(2) or section 34 for the making
of a return. If he has not made a return in response to the notice u/s 22(1) stating therein the principal place where he carries on his business,
profession or vocation, by this provision in sub-section (3) the time for making an objection to the place of assessment is limited to the period
allowed by the notice u/s 22(2) or section 34 for the making of a return and, once such period has expired, the assessee cannot thereafter raise any
objection to the place of assessment. Where, however, an assessee raises an objection to the place of assessment and contends that he is liable to
be assessed not by the Income Tax Officer who claims to assess him but by some other Income Tax Officer, the question as to the place of
assessment which thus arises can be determined only by the Commissioner and where the questions is between places of assessment in more
States than one, then by the Commissioners concerned or where they are not in agreement, then by the Central Board of Revenue. The first
proviso to sub-section (3) enacts that before any such question is determined in the manner aforesaid, the assessee shall have an opportunity of
representing his views. The third proviso to sub-section (3) makes it obligatory on the Income Tax Officer to refer the matter for determination by
Commissioner if the Income Tax Officer is not satisfied with the correctness of the claim as to the place of assessment made by the assessee. The
machinery thus devised by sub-section (3) for determination of the place of assessment is that if any question as to the place of assessment is raised
by an assessee during the period allowed by the second proviso and the Income Tax Officer does not accept the correctness of the claim made by
the assessee in regard to the place of assessment, the Income Tax Officer is bound to refer the matter for determination by the Commissioner and
before determining the question, the Commissioner is bound to give an opportunity to the assessee to represent his views. Once the Commissioner
has determined the question as to the place of assessment after complying with this procedure his decision on the question is final and it cannot be
challenged by the assessee. Now it will be clear from this discussion that, before the Income Tax Officer can be required to refer the matter to the
Commissioner for his determination under sub-section (3), there must arise before him a question as to the place of assessment which requires to
be determined. When such question is referred by the Income Tax Officer to the Commissioner, the Commissioner, after hearing the views of the
assessee, determines the question by deciding the place of assessment at which the assessee is liable to be assessed. The scheme of sub-section
(3) thus clearly contemplates a controversy between two rival points of view as to the place of assessment which controversy is required to be
determined by the Commissioner after hearing the assessee who is party to the controversy. Mr. D. H. Dwarkadas on behalf of the assessee
contended that it was enough to bring sub-section (3) into play, that an assessee should raise an objection to the jurisdiction of the Income Tax
Officer who claims to assess the assessee and that it was not necessary that the assessee should state as to who according to him was the Income
Tax Officer entitled to assess the assessee. His contention was that there may be cases where it may be possible for an assessee to say that the
Income Tax Officer who claims to assess him has no jurisdiction u/s 64 but it may not be possible for him to state as to who is the Income Tax
Officer who has jurisdiction to assess him. In such a case, to take the view that an assessee must in raising objection to the jurisdiction of the
Income Tax Officer, who claims to assess the assessee, must also state who according to the assessee is the other Income Tax Officer entitled to
assess him, would be to deny the benefit of the machinery provided by sub-section (3) to such assessee. Now, Mr. D. H. Dwarkadas is certainly
right when he contends that, in order to attract the applicability of sub-section (3), it is not necessary for an assessee to point out specifically a
particular Income Tax Officer, who, according to him, would have jurisdiction to assess him under the provisions of section 64. But it is certainly
not enough for an assessee to rest content by merely raising an objection to the jurisdiction of the Income Tax Officer who claims to assess him.
The objection to be raised by the assessee must be specific objection stating the ground why he says that the particular Income Tax Officer has no
jurisdiction to assess him so that from the ground stated by the assessee it can be determined as to who according to the assessee would be the
Income Tax Officer entitled to assess him. The assessee must raise a controversy as to the place of assessment and there must be two points of
view between which the Commissioner is called upon to adjudicate. It must be remembered that the Commissioner has to determine the place of
assessment and a mere negative objection that a particular Income Tax Officer has no jurisdiction to assessee the assessee cannot attract the
applicability of sub-section (3). If a ground is stated by the assessee as to why according to him the Income Tax Officer claiming to assess him has
no jurisdiction, such ground, if well-founded, would clearly indicate who would otherwise be the Income Tax Officer entitled to assess him and
between these two points of view, the Commissioner would have to determine as to which is the right point of view and on the basis of that, fix the
place of assessment. The objection taken by the assessee in the present case was merely a negative objection. The objection taken by the assessee
in the present case was merely a negative objection. The assessee did not do anything more than merely assert that the Income Tax Officer, Ward-
A, Junagadh, had no jurisdiction to assess him. He did not state as to what were the grounds on which he contended that the Income Tax Officer
had no jurisdiction to assess him. He did not raise any controversy between any two or more places of assessment which was required to be
determined by the Commissioner. This being the position no question as to the place of assessment was raised by the assessee which was required
to be referred by the Income Tax Officer to the Commissioner under the provisions of section 64(3) and the Income Tax Officer did not act
illegally in not referring the matter to the Commissioner under that section. In this view of the matter it is clear that the assessee is not entitled to rely
on the provisions of section 64(3) for the purpose of contending that he was prevented by sufficient cause from filing the return pursuant to the
notice u/s 22(2) and from complying with the terms of the notice u/s 22(4).
We may point out that the first question as framed does not really bring out the point in controversy between the parties. It assumes that there
was a question of jurisdiction raised before the Income Tax Officer which was required to be disposed of by the Commissioner u/s 64(3) which
premise itself is in dispute between the assessee and the Commissioner. We would, therefore, reframe the question as follows so as to bring out the
real nature of the controversy between the parties :
Whether, on the facts and in the circumstances of the case, a question as to the place of assessment was raised by the assessee as contemplated
by section 64(3) which was required to be referred to the Commissioner for his decision under the provisions of that section ?
Our answer to this question will be in the negative.
That takes us to the second question, namely, whether the assessee was in any event prevented by sufficient cause from making the return
required u/s 22(2) read with section 34 so as to bring the case within section 27. On this question Mr. D. H. Dwarkadas found himself in
considerable difficulties because the facts found by the Tribunal were against him and on the facts so found it was not possible to say that the
assessee had sufficient cause which prevented the assessee from filing the return pursuant to the notice u/s 22(2) and complying with the terms of
the notice u/s 22(4). The Tribunal found as a matter of fact that the assessee had no intention of filing a return and was all along avoiding to file a
return by taking a frivolous plea that the Income Tax Officer had no jurisdiction to assess him. If this finding of fact could not be challenged on
behalf of the assessee, it is obvious that the assessee could not possibly contend that he had sufficient cause within the meaning of section 27. Mr.
D. H. Dwarkadas, therefore, tried to challenge this finding of fact by contending that it was unreasonable or perverse. We cannot agree with this
contention of Mr. D. H. Dwarkadas. It is not possible to say that this finding of fact reached by the Tribunal is unreasonable or perverse. If this
finding of fact stands, then, though the question whether a particular cause is sufficient within the meaning of section 27 would be a question of law,
it would have to be held that the assessee had no sufficient cause within the meaning of that section. The only way in which Mr. D. H. Dwarkadas
could put his case was that the assessee was under a bona fide belief that the Income Tax Officer had no jurisdiction to assess him and that in any
event the Income Tax Officer was not entitled to assess him unless his objection to the jurisdiction of the Income Tax Officer was determined by
the Commissioner and that this constituted sufficient cause which prevented him from filing the return and complying with the terms of the notice
issued by the Income Tax Officer. But according to the finding of fact reached by the Tribunal, the assessee had no such genuine belief in the plea
taken by him and he was all along avoiding to file a return by taking a frivolous plea. We must, therefore, hold on the facts and circumstances of the
case that it cannot be said that the assessee was prevented by sufficient cause from filing the return required u/s 22(2) read with section 34 as
contemplated by section 27. Our answer to second question will, therefore, be in the negative.
The assessee will pay the costs of the reference to the Commissioner.
Questions answered in the negative.