Rabi Pr. Gooptu vs Commissioner of Income Tax

Sankar Prasad Mitra, J.—This is a Reference u/s 66(1) of the income tax Act. The assessment year is 1952-53. The assessment was completed on March 25, 1957 ; the notice of demand was issued on March 30, 1957, by registered post and was served on the Assessee on April 1, 1957. u/s 34(3) of the Indian income tax Act an order of assessment for any year shall be made before the expiry of four years from the end of the year in which the income, profits or gains were first assessable. The Tribunal states that pursuant to this Sub-sections (3) of Section 34 the order of assessment should have been made before March 31, 1957, in the present case. The Assessee contention was that the order of assessment had been made on April 1, 1957, that is, on the date when the demand notice along with the assessment order was received by the Assessee. In the premises, it was contended that the assessment made on April 1, 1957, was barred by limitation. The Appellate Tribunal held that the issue of the notice of demand succeeded the making of an order by the income tax Officer. The order of assessment, according to the Tribunal, in the instant case, was made on March 25, 1957, and was not, therefore, barred by limitation.

The following question of law has been referred to us:

Whether on the facts and in the circumstances of the case, the order of assessment was made within the period of limitation prescribed by Section 34(3) of the Indian income tax Act.

Mr. E. R. Meyer, Learned Counsel for the applicant, has contended before us that the making of an order of assessment u/s 34(3) of the Indian income tax Act implies communication thereof and the order is not ''made'' till the order is communicated to the Assessee. The date of the order would, therefore, be the date of communication. In this case, the order admittedly should have been ''made'' before March 31, 1957, but since it was communicated to the Assessee on April 1, 1957, it was barred by limitation.

I am afraid there is a preliminary objection to entertaining this argument of Mr. Meyer. From para. 3 of the Tribunal''s order at p, 4 of the Paper Book it appears that it was contended on behalf of the Assessee before the Tribunal that the making of an assessment implied and postulated an integrated process beginning with the computation of income and ending with the service of the notice of demand u/s 29 of the income tax Act within the statutory period provided for in Section 34(3) of the Act. It was contended further on behalf of the Assessee that the service of notice on April 1, 1957, made the assessment barred by time. The departmental representative, on the other hand, relied before the Appellate Tribunal on the judgment of the Madras High Court in Vishwanathan Chettiar''s case (1) and that of this Court in Sushil Chandra Ghose Vs. Income Tax Officer, District V. and Others, in support of the proposition that an assessment was complete when an order of assessment was made and Section 34(3) did not postulate the service of a notice of demand u/s 29 as completing the assessment.

These were the respective contentions before the Appellate Tribunal. Before the Appellate Assistant Commissioner also the same points were urged by the Assessee: vide p. 11, para. 2 of the Paper Book. The Tribunal had, therefore, no occasion to consider the question raised by Mr. Meyer before us. In Commissioner of Income Tax, Bombay Vs. Scindia Steam Navigation Co. Ltd., the Supreme Court while considering the scope of Section 66(1) of the Indian ''income tax Act has pointed out that when a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it. It is observed:

If the true scope of the jurisdiction of the High Court is to give advice when it is sought by the Tribunal, it stands to reason that the Tribunal should have an occasion to consider the question so that it may decide whether it should refer it for the decision of the Court. How can it be said that the Tribunal should seek for advice on a question which it was not called upon to consider and in respect of which it had no opportunity of deciding whether'' the decision of the Court should be sought ?

Strictly speaking, therefore, the point that Mr. Meyer wants us to consider in this Reference does not arise out of the order of the Tribunal and we have no jurisdiction to deal with the same.

On the assumption, however, that this is a different approach to the same legal problem, we shall proceed to discuss the authorities relied on by Mr. Meyer.

In Nripendra N. Majumdar Vs. N.M. Bardhan and Others, an order of dismissal was passed against a municipal servant on April 26, 1952, but as he was on leave, it could not be served on him till May 3, 1952. Sinha, J. has expressed the view that an order may be taken to be made on the date it came into existence, if the nature of the order is such that it is not necessary to communicate it to any one. But where an order is made which affects the rights of a person, then the order must be communicated to such person in order to be complete and effective. The date of the order is the date when it is made known to the affected party. To this, however, there are certain exceptions, which are: (i) where the order is made in the presence of the party whose right has been affected ; (ii) where notice has been given to the party affected by the order to be present at the announcement, but in spite of such notice he fails to be present; (iii) where owing to the obstruction of the party affected himself the order cannot be communicated within a reasonable time; and (iv) where the authority making the order, in spite of reasonable efforts, has been unable to serve the order within a reasonable time or at all. An order of dismissal of an employee, Sinha J. has held, comes in the category of orders which affect the interest of a person and cannot be said to have been effectively made until it had been brought to his notice. In this case the order was held to have been made on May 3, 1952, when it was served on the municipal employee concerned.

The next case to which Mr. Meyer has referred is the case of Petlad Bulakhidas Mills Company Ltd. v. Raj Singh (1960) 37 ITR 264. This is a decision of the Bombay High Court on Section 33A(2) of the Indian income tax Act. It has been held that the expression ''order'' in Section 33A(2) means an order of which the party affected has actual or constructive notice. The right to make an application for revision is given to an Assessee against an order, and that right can only be effectively exercised if the party affected had knowledge, either actual or constructive, of that order. If the Assessee has neither actual nor constructive knowledge, it cannot be said that there is an order within the meaning of Section 33A(2) against which the Assessee could possibly make an application for revision. Limitation should not be computed, therefore, u/s 33A(2) from a date earlier than that on which the Assessee actually knew of the order or had an opportunity of knowing the order. The Appellate Commissioner made an order on January, 6, 1956. The order was served on the Assessee on January 27, 1956. The application for revision of that order u/s 33A of the Indian income tax Act was filed on January 25, 1957. It was held that since the application was made ''within one year from the date of the order'' within the meaning of Section 33A, it was not barred by limitation.

I must point out that the same conclusion was reached by the Madras High Court in O.A.O.A.M. Muthiah Chettiar Vs. The Comr. of Income Tax, . In this case, on February 18, 1949, the Assessee filed an application before the Commissioner of income tax u/s 33A(2) for a revision of an order passed by the income tax Officer on February 4, 1948, but received by the Assessee on February 24, 1948. The application was rejected in limine by the Commissioner on the ground that the application was not made within one year from the date of the order. The Assessee filed an application in the High Court for the issue of a writ of mandamus to the Commissioner directing him to entertain the application and dispose of it in accordance with law. It has been held by the Madras High Court, inter alia, that the application filed before the Commissioner under s, 33A(2) was not barred by limitation. The reason is that if a person is given a right to resort to a remedy to get rid of an adverse order within a prescribed time, limitation should not be computed from a date earlier than that on which the party aggrieved actually knew of the order or had an opportunity of knowing the order and, therefore, must be presumed to have had knowledge of the order.

The third case of Mr. Meyer is that of Director of Supplies and Disposals v. Member, Board of Revenue (1960) 11 S.T.C. 589. A Division Bench of this Court has considered in this case the provisions of Section 21 of the Bengal Finance (Sales Tax) Act, 1941. An application before the Board of Revenue u/s 20(3) was dismissed by the Board, and the order of the Board was communicated to the Assessee by a letter dated October 4, 1958, which was in the following terms:

The above petitions have been rejected by the Board. The Board''s order dated 26th September, 1958, passed in the matter is open to inspection on any day during office hours. This letter reached the Assessee on October 14, 1958. On October 17, 1958, the Assessee filed an application for a certified copy of the order and he obtained it on November 22, 1958. On January 2, 1959, the Assessee filed an application u/s 21(1) requesting the Board to refer to the High Court certain questions of law, but this application was dismissed by the Board on the ground that it was filed more than sixty days after the date of passing of the order by the Board. The Assessee thereafter filed an application in the High Court u/s 21(2)(b) of the Act. It was held, inter alia, that the starting point of limitation was not November 22, 1958, when the certified copy of the order passed by the Board was received by the Assessee, but October 14, 1958, when the order of the Board was communicated to the Assessee, and as the application u/s 21(1) was filed on January 2, 1959, it was barred by limitation and was rightly dismissed by the Board of Revenue.

From these authorities it is quite clear that when the Assessee has the right to make an application for revision of an order passed against him or to prefer an appeal against the order within a prescribed period of limitation, the date of passing of the order is the date on which the order is communicated to the Assessee. In other words, the passing of the order in such cases implies the communication or publication of the order," and till the order is actually published or communicated the order cannot be said to have been ''made''. This is the principle which was expounded by the Madras and the Bombay High Courts and by this Court in the cases cited above. This principle, to my mind, has no application to Section 34(3) of the Act which merely provides, inter alia, that no order of assessment shall be made after the expiry of four years from the end of the year in which the income, profits or gains were first assessable.

There is one other aspect of the matter. In many sections of the Indian income tax Act -there are specific provisions for communication of an order made. Section 31(5) provides that the Appellate Assistant Commissioner shall, on the conclusion of the appeal, communicate the orders passed by him to the Assessee and to the Commissioner. Section 33(1) prescribes that any Assessee objecting to an order passed by an Appellate Assistant Commissioner u/s 28 or Section 31 may appeal to the Appellate Tribunal within sixty days of the date on which such order is communicated to him. Section 33(4) lays down that, the Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate any such orders to the Assessee and to the Commissioner. Section 66(1) says, inter alia, that within sixty days of the date upon which he is� served with notice of an order under Sub-section (4) of Section 33, the Assessee or the Commissioner may require the Appellate Tribunal to refer to the High Court any question of law arising out of such order. Section 66(2) provides, inter alia, that if on any application being made under Sub-section (1), the Appellate Tribunal refuses to state the case on the ground that no question of law arises, the Assessee or the Commissioner, as the case may be, may within six months from the date on which he is served with notice of refusal apply to the High Court.

The reason why communication of the order is necessary in the above Section does not exist in the case of Section 34(3).

Indeed, the provisions of Section 34(3) were considered by the Madras High Court in Vishwanathan Chettiar v. Commissioner of income tax, Madras (Supra). At that time these provisions were in Section 34(2) as it then stood. The Madras High Court has held that the time limit of four years, which Sub-sections (2) of Section 34 provides, is the period within which the income tax Officer has to complete one stage of the proceedings, that is, the assessment of the income and the determination of the tax payable. That stage can be completed by the income tax Officer within that period and it is not necessary that the terms of the order of assessment should be communicated to the Assessee within that period.

In Balkrishna Malhotra v. Commissioner of income tax, West Bengal I.T. Ret. No. 4 of 1960 my learned brother and I have followed this judgment of the Madras High Court and we have held that an order of assessment u/s 34 is complete when the income tax Officer assessed the total income of the Assessee and determined the tax that the Assessee has to pay. In other words, the assessment is complete u/s 34(3) on the date the tax is computed by the income tax Officer.

In this view of the matter the answer to the question referred to us is in the affirmative. The applicant will pay to the Respondent the costs of this Reference. Certified for counsel.

K.C. Sen, J.

I agree.