NIRMAL KUMAR SINGH NOWLAKSHA Vs. SECRETARY OF STATE

JUDGEMENT

(1.) This is a Reference made to us by the Commissioner of Income Tax in accordance with a previous direction of this Court). The Respondent was called upon by the Income-Tax Officer of Murshidabad to forward a return under the provisions of Section 22 of Act XI of 1922. Considerable delay occurred in furnishing the return and extensions of time ware granted on several occasions. Ultimately, on the 11 October the return was filed and so far as I have been able to ascertain this return which was filed by the gomasthas or servants of the Respondent was examined on the 12 and the 13 of October in the presence of the gomasthas. On the 13 of October an assessment was made upon the Respondent). It appears that the Respondent's return of the profits of his six businesses was accepted, but that the Income-Tax Officer refused to accept the deductions which the Respondent sought to make in respect of the expenses of his business and made a percentage deduction from the profits to represent the legitimate deductions for expenditure incurred and we are told that this percentage was calculated without any relation to the actual facts of the expenditure incurred. An appeal was presented against the assessment to the Assistant Commissioner of Income-Tax of the Burdwan Range and he upheld the assessment) and the Commissioner refused to make a reference. An application was accordingly made to this Court and the Commissioner was directed to make the reference which is now before us. It is now necessary to turn to the provisions of the Act. Section 23 of the Income-Tax Act provides that if the Income-Tax Officer has reason to believe that the return made under Section 22 is incorrect or incomplete he shall serve on the person who made the return a notice requiring him on a day specified therein either to attend at the office of the Income-Tax Officer or produce or cause to be produced at the office any evidence on which the assesses relies in support of the return. Sub-section (3) provides that on the date specified in the notice the Income-Tax Officer after hearing such evidence as the assesses may produce and any other evidence which he may require on specified points shall by an order in writing assess and determine the sum payable on the basis of such assessment. Sub-section (4) provides for cases in which there is a failure to make a return under Section 22 or failure to comply wish the notice issued under Sub-sec, (4) of Section 22. The sub-section further deals with a failure to comply with all the terms of a notice issued under Sub-section (2) of Section 23. There is no doubt that if the Income-Tax Officer is not satisfied with the return he is bound to serve the notice specified in Sub-section (2). In the present case no such notice was served, but I think that the notice was waived. The return was made in person, as I have already stated, on the 11 of October and it was examined on toe 12 and the 13 of October in the presence of the servants of the assessee. I cannot conceive that there was not considerable discussion at any rate with regard to the items which were disallowed and it must be that arguments were urged and reasons adduced by the servants of the assessee as to what items of expenditure should have been allowed. Apparently, no application was made by the servants of the assessee to adduce any further evidence, oral or documentary, with regard to the items disallowed and the only conclusion which I can draw is that no other evidence was available and that at the interview on the 12 and the 13 when the accounts were examined all matters were urged by the servants of the assessee which could have been urged against the disallowance. It has been urged before us that there is some obligation on the Income-Tax Officer to serve a notice indicating the points on which evidence should be produced. I do not find any such indication in Section 23. It in true that under Sub-section (3) id is open to the Income-Tax Officer, if he so desires, to require evidence to be produced on .specified points but he is not bound to specify any point on which evidence is required, and in my opinion it is a sufficient compliance with the provisions of the Section on his part either to give notice to attend or notice to produce evidence in general terms and in my view the reference to " all the terms of notice " in sub" sac, (4) means all the terms of the notice directed to specified points if the Income Pas Officer thinks fit to specify any special points on which he requires evidence. But; as I have already stated, I do not think that the section imposes upon him any obligation to directly specify the points upon which evidence should be given. In my view in the present case although no notice was served under Sub-section (2) of Section 23 as required by the Act this was waived and I think that the servants of the assessee were fully aware of all the matters in the return which were questioned by the Income Tax-Officer and that they should not now be given any further opportunity of adducing evidence which they did not ask or desire to adduce either on the 12 or the 13 of October. But my learned brother takes a different view and as I do not think that this is a question upon which there should be a reference be a third Judge and, as I understand he thinks that the assessee should have a further opportunity of adducing evidence with regard to the items which were disallowed, I do not think that I should stand in the way.

(2.) The result will be that this judgment and that of my brother Mukerji will be forwarded to the Commissioner in accordance with the provisions of Section 66, Sub-section (5) in order that he may dispose of the case in conformity with the judgment. Mukerji, J.

(3.) This is a Reference made by the Commissioner of Income-Tax under the provisions of Section 66, Sub-section (3) of the Income-Tax Act, XI of 1922. The Reference has been made in pursuance of an order passed by this Court, on the 28 August 1924, in Civil Rule No. 478 of 1924. The circumstances under which the order was passed by this Court and the facts out of which the Reference arises have been set out in detail in the judgment just delivered by my learned brother and it will not be necessary for me to re-capitulate them.