COMMISSIONER OF INCOME-TAX (CENTRAL) Vs. BISHWAMBHARLAL MAHESHWARI

JUDGEMENT

(1.) This is a reference made by the Commissioner of Income-tax under Section 66(2) of the Indian Income-tax Act, 1922, raising three questions. The first question is : Whether the Commissioner's refusal to interfere with the Appellate Assistant Commissioner's findingsi on the question of the inadmissibility of the foreign losses was an order prejudicial to the assessee within the meaning of Section 66(2) of the Act ? The second question relates to the claim to set off foreign losses.

(2.) So far as the first question is concerned, the Income-tax Officer made his assessment, and there was an appeal to the Assistant Commissioner, who agreed with the Income-tax Officer's order. Then an application was made to the Commissioner to refer a case under Section 66(2) of the Act, but he refused to do so. The assessee did not then apply to the Court to direct the Commissioner to refer a case under Section 66(5), as he might have done, but applied to the Commissioner to revise the order of the Assistant Commissioner under Section 33. The Commissioner heard the parties at length, and made an order declining to interfere with the Assistant Commissioner's order.

(3.) Section 33 of the Indian Income-tax Act, before the amendment of 1939, provides that the Commissioner may of his own motion call for the record of any proceeding under the Act which has been taken by any authority subordinate to him or by himself exercising the powers of an Assistant Commissioner, and on receipt of the record the Commissioner may make such inquiry or cause such inquiry to be made and, subject to the provisions of the Act, may pass such orders thereon as he thinks fit. Then there is a proviso that he shall not pass any order prejudicial to an assessed without hearing him or giving him a reasonable opportunity of being heard. Section 66(2) provides that within sixty days of the date on which he is served with notice of an order under Section 31 or Section 32, or of an order under Section 33 enhancing an assessment or otherwise prejudicial to him, the assessee may, as therein mentioned, require the Commissioner to refer to the High Court any question of law arising out of such order or decision. Then there is a proviso that a reference shall lie from an order under Section 33 only on a question of law arising out of that order itself, and not on a question of law arising out of a previous order under Section 31 or Section 32, revised by the order under Section 33. Orders under Section 31 are orders made by the Assistant Commissioner in appeal, and those under Section 32 are made by the Commissioner in appeal on certain questions. The question raised by the Commissioner is whether in this case there is any prejudicial order within Section 66(2), and the cases on the subject are not altogether in agreement.