COMMISSIONER OF INCOME-TAX Vs. KISHORESINH KALYANSINH SOLANKI

JUDGEMENT

(1.) THIS reference taken out at the instance of the Commissioner of Income -tax, Ahmedabad, raises a question of construction of a provision hi Section 33B of the Indian Income -tax Act. The assessment year is 1954 -55 and the assessment for that year was made on the assessee in the status of a registered firm on August 31, 1954. The Commissioner of Income -tax was of the opinion that the order granting registration to the firm and the order of assessment made thereafter were prejudicial to the interest of the Revenue, and he, therefore, took action under Section 33B(7) and on July 5, 1956, revised the order of the Income -tax Officer holding as under: There being grave doubts about the genuineness of the firm it was wrong on the part of the Income -tax Officer to have passed an order under Section 26A registering the firm and dividing the profits in the name of the alleged partners. Both the orders of the Income -tax Officer, namely the assessment order as well as the order granting registration, are, therefore, vacated with a direction that a fresh assessment after giving proper opportunity to the assessee should be made. The assesse went to the Tribunal in appeal against that Order and contended inter alia that sufficient opportunity had not been given to him to show cause why the order of assessment and the order granting registration should not be vacated. The Tribunal decided the appeal on January 22, 1957, and reached its conclusion as under: Consequently, not only we hold that the assessee was not given sufficient opportunity of being heard as contemplated by Section 33B of the Indian Income -tax Act but we are also of the opinion that the order passed by the Commissioner of Income -tax is not quite in consonance with the intention of the Statute as contained in Section 33B of the Income -tax Act. Consequently we set aside the order of the Commissioner of Income -tax and remand the case to him for giving the assessee sufficient opportunity of being heard, that is of showing cause as to why the order of the Income -tax Officer should not be cancelled and also to find as a fact as to whether there was or was not in existence a genuine firm constituted which carried on the business during the year under consideration. This finding should be given after making or causing to be made such enquiry as he deems necessary in this connection. He can thereafter pass such appropriate orders as he thinks proper in the light of the conclusions drawn upon the basis of the enquiry made. Thereafter, the Commissioner of Income -tax examined the books of account and the statements of the alleged partners and other material and. passed an order on July 4, 1957, holding that no genuine firm had come into existence and by that order he cancelled both the assessment order and the order of registration under Section 26A and directed that the assessment should be made on Kishoresinh Kalyansinh in his individual capacity. The assessee carried the matter once again in appeal to the Tribunal and the contention put forward by him in the forefront of his appeal was that theorder of the Commissioner of Income -tax under Section 33B -the second order -had been made beyond the period of two years from the date of the order sought to be revised and the order in revision was, therefore, invalid and ineffective in law. It will be convenient to set out the whole of Section 33B: 33B. (1) 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 cancelling the assessment and directing a fresh assessment. (2) No order shall be made under Sub -section (1) - (a) to revise an order of re -assessment made under the provisions of Section 34; or (b) after the expiry of two years from the date of the order sought to be revised. (3) Any assessee objecting to an order passed by the Commissioner under Sub -section (1) may appeal to the Appellate Tribunal within 60 days of the date on which the order is communicated to him. (4) An appeal to the Appellate Tribunal under Sub -section (3) shall be in the prescribed form and shall be verified in the prescribed manner and shall be accompanied by a treasury receipt in support of having paid the fee of Rs. 100, and such appeal shall be dealt with in the same manner as if it were an appeal under Sub -section (1) of Section 33. The greatest stress was laid before the Tribunal on the provision contained in Clause (i) of Sub -section (2) of Section 33B. It was urged that the plain and clear meaning of this provision was that no order revising an order passed by an Income -tax Officer could be made by the Commissioner after the expiry of two years from the date of the order sought to be revised. On behalf of the Commissioner of Income -tax, it was urged that the order dated July 4, 1957 (the Second Order) that was passed by the Commissioner of Income -tax could not be regarded as an order made under Section 33B(7)simpliciter, but must be regarded as one under Section 33B(7) read along with Sub -section (4) of that section which provides for an appeal to the Tribunal and which appeal had to be dealt with in the same manner as if it were an appeal under Sub -section (7) of Section 33. It was also urged that the original order under Section 33B(7) having been passed by the Commissioner of Income -tax on July 5, 1956, within the prescribed period of limitation, thesetting aside of such an order by the Tribunal did not have the effect of making it invalid for all purposes and his subsequent order was merely in continuation of the earlier order passed by him, which was within time. The Tribunal was of the opinion that the assessee's objection had force in it. It has stated in its Order that there was a lacuna in the Act, as it did not provide for an extension of the period of limitation under s.33B(1) in circumstance as has arisen in the instant case. Then, it has observed in its judgment: Perhaps, if the Tribunal had not set aside the assessment and had merely called for a remand report, then no question of limitation would have arisen. The Tribunal having set aside the order of the Commissioner of Income -tax made it impossible for him to overcome the provisions of Section 33B(2)(b) when he came to make a fresh order under Section 33B(1) of the Act. When the Commissioner's order under Section 33B(1) is set aside by the Tribunal or High Court, then it becomes well nigh impossible for the Commissioner to pass another order under Section 33B(1) within two years period of limitation. But the remedy lies with the legislature and not with the Court whose duty is merely to interpret law.

(2.) IT is argued before us by Mr. G.N. Joshi, learned Counsel for the Revenue, that what, is to be regarded is not the second Order but the first Order which indisputably was made on July 5, 1956, and that was within two years of the the original order of assessment made on August31, 1954. It is further said that the original order having been passed within the prescribed period, what happened thereafter did not have the effect of making the subsequent order invalid for all practical purposes and what happened subsequently was merely in continuation of the earlier order passed by the Commissioner. It is extremely difficult to accept this argument. Here is an order made under Section 33B(7) which is vacated and in terms it is stated that the order is set aside. There can, therefore, he nothing like a continuation of that order when subsequently the Commissioner was directed to carry out the directions given by the Tribunal, by its order made on January 22, 1957.

(3.) ALTERNATIVELY , learned Counsel has urged that in any case the construction submitted by the Revenue is the preferable construction. It is pointed out that any such order passed by the Commissioner in revision is, according to the machinery provided by the Act, subject to an appeal to the Appellate Tribunal and thereafter there can be further proceedings by way of Reference to the High Court and ultimately an appeal to the Supreme Court. All this would take a number of years and the Legislature could not possibly contemplate a situation wherein notwithstanding any express order or direction given by the Appellate Authority or the High Court or the Supreme Court the Commissioner would be disentitled to carry out that order or that direction simply on the ground that a period of two years had expired from the date of the Order sought to be revised. The argument is that the literal construction of the section which has found favour with the Tribunal and which has been pressed on behalf of the assessee would lead to manifest absurdity.