COMMISSIONER OF INCOME-TAX, UNITED AND CENTRAL PROVINCES Vs. BADRIDAS RAMRAI SHOP, AKOLA, OWNER LAXMINARAYAN BADRIDAS SHRAWAGI

JUDGEMENT

(1.) In this case the Commissioner of Income-tax for the United and Central Provinces appeals from a judgment of the Court of the Judicial Commissioner, Central Provinces, on a reference under S. 66 (2), Income-tax Act, (11 of 1922). The respondent tax, payer did not appear on the hearing of the appeal. The case relates to an assessment made by the Income-tax Officer under S. 23 (4) of the Act, subsequently to an alleged failure by the taxpayer to comply with all the terms of a notice issued under S. 22 (4) of the Act. It will be convenient before stating the facts of the case to set out the provisions of the Act [as amended by the Income-tax (Amendment) Act, 1930, and the Income-tax (Second Amendment) Act, 1930] which are relevant, and under which the various steps in the case, leading up to the reference, were taken. They are the following: 22.-(1)....... (2) In the case of any person other than a company whose total income is, in the Income-tax Officer's opinion, of such an amount as to render such person liable to income-tax, the Income- tax Officer shall serve a notice upon him requiring him to furnish, within such period, not being less than thirty days as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth (along with such other particulars as may be provided for in the notice) his total income during the previous year. (3) If any person has not furnished a return within the time allowed by or under sub-s. (1) or sub-s. (2), or having furnished a return under either of those sub-sections, discovers any omission or wrong statement therein, he may furnish a return or a revised return, as the case may be, at any time before the assessment is made, and any return so made shall be deemed to be a return made in due time under this section. (4) The Income-tax Officer may serve on the principal officer of any company or on any person upon whom a notice has been served under sub-s. (2) a notice requiring him, on a date to be therein specified, to produce, or cause to be produced, such accounts or documents as the Income-tax Officer may require : Provided that the Income-tax Officer shall not require the production of any accounts relating to a period more than three years prior to the previous year. 23.-(1) If the Income-tax Officer is satisfied that a return made under S. 22 is correct and complete, he shall assess the total income of the assesses, and shall determine the sum payable by him on the basis of such return. (2) If the Income-tax Officer has reason to believe that a return made under S. 22 is incorrect or incomplete, he shall serve on the person who made the return a notice requiring him, on a date to be therein specified, either to attend at the Income-tax Officer's office or to produce, or cause to be there produced, any evidence on which such person may rely in support of the return. (3) On the day specified in the notice issued under sub-s. (2), or as soon afterwards as may be, the Income-tax Officer, after hearing such evidence as such person may produce and such other evidence as the Income-tax Officer may require, on specified points, shall, by an order in writing, assess the total income of the assesses, and determine the sum payable by him on the basis of such assessment. (4) If the principal officer of any company or any other person fails to make a return under sub- s. (1) or sub s. (2), S. 22, as the case may be, or fails to comply with all the terms of a notice issued under sub-s. 4 of the same section or, having made a return, fails to comply with all the terms of a notice issued under sub-s. (2) of this section, the Income-tax Officer shall make the assessment to the best of his judgment and, in the case of a registered firm, may cancel its registration: Provided . . . 27. Where an assessee or in the case of a company, the principal officer thereof, within one month from the service of a notice of demand issued as hereinafter provided, satisfies the Income-tax Officer that he was prevented by sufficient cause from making the return required by S. 22, or that he did not receive the notice issued under sub-s. (4) of S. 22, or sub-s. (2) of S. 23, or that he had not a reasonable opportunity to comply, or was prevented by sufficient cause from complying, with the terms of the last-mentioned notices, the Income-tax Officer shall cancel the assessment and proceed to make a fresh assessment in accordance with the provisions of S. 23. 30.-(1) Any assessee objecting to the amount or rate at which he is assessed under S. 23 or S. 27, or denying his liability to be assessed under this Act, or objecting to a refusal of an Income- tax Officer to make a fresh assessment under S. 27, or to any order against him under sub-s. (2) of S. 25 or 8. 25-A or 8. 28, made by an Income-tax Officer, may appeal to the Assistant Commissioner against the assessment or against such refusal or order: Provided that no appeal shall lie in respect of an assessment made under sub-s. (4), S. 23, or under that sub-section read with S. 27. (2) .... (3)..... 31.-(1) .... (2) The Assistant Commissioner may, before disposing of any appeal, make such further inquiry as he thinks fit, or cause further inquiry to be made by the Income-tax Officer. (3) In disposing of an appeal the Assistant Commissioner may, in the case of an order of assessment- (a) confirm, reduce, enhance or annul the assessment, or (b) set aside the assessment and direct the Income-tax Officer to make a fresh assessment after making such further inquiry as the Income-tax Officer thinks fit or the Assistant Commissioner may direct, and the Income-tax Officer shall thereupon proceed to make such fresh assesment. . .. (c) . . . . (d) .... Provided. . . . 33.-(1) The Commissioner may of his own motion call for the record of any proceeding under this Act which has been taken by any authority subordinate to him or by himself when exercising the power of an Assistant Commissioner under sub-s. (4), S. 5. (2) On receipt of the record the Commissioner may make such enquiry or cause such enquiry to be made, and, subject to the provisions of this Act, may pass such orders thereon as he thinks fit: Provided that he shall not pass any order prejudicial to an assessee without hearing him or giving him a reasonable opportunity of being heard.

(2.) The respondent having been served on 29 April 1931, with a notice under S. 22 (2), furnished a return, dated 27 July 1931, which consisted of a printed return form, and contained but two- statements only, viz., (a) opposite the paragraph relating to business the words and figures 'Rs. 1,700. Approximate amount of loss' and (b) in the place where should appear the total amount of profit and gains or income, the same words and figures. A return in such a form was obviously unsatisfactory and incomplete. The officer thereupon served upon the respondent on 8 September 1931, a combined notice requiring the respondent [under S. 22 (4)] to "produce or cause to be produced at my office," his accounts for three years, and [under S. 23 (2)] either to attend or to produce or cause to be produced any evidence on which he might rely in support of his return. The date specified was 14 September 1931. On 12 September 1331, he applied for and obtained an adjournment until 19 October 1931, for which date a fresh combined notice was issued and served on 23rd September 1931. On 19 October 1931, the respondent applied in writing for a further adjournment, alleging that he had been ill for the last month and could do no work; and that his agent, who had been away, had returned. With this application he seems to have sent a medical certificate, which, however, merely stated that the respondent 'was suffering from influenza some fifteen days ago,' that he had gone very weak since that time and that he was still weak and suffering from a cough. Their Lordships are not surprised that the officer was unable to accept such a certificate, and refused to grant any further adjournment. There would appear to be ample ground for his view that the application, backed by such a certificate, was merely a device to obtain a postponement. No accounts were produced or caused to be produced by the respondent, and the officer proceeded as enjoined to do by S. 23 (4) to make the assessment to the best of his judgment. No accounts being available he took into consideration the local repute that the respondent's moneylending business was extensive, and included the purchasing of debts at large profit to himself, and that he was easily the richest man in the district. Further, as stated in the assessment note, 'local inquiries' had shown that his fluid resources amounted to ten lacs. The officer estimated the respondent's income at one lac.

(3.) From an assessment made under S. 23 (4) there is no appeal; but the assessee may endeavour to satisfy the officer as to the relevant question of fact specified in S. 27, and if he succeeds the officer must cancel the assessment and make a fresh assessment in accordance with the provisions of S. 23. The respondent applied for cancellation under S. 23. His application was heard (with witnesses) in December 1931, by the Income-tax Officer then in office. He refused the application. The only excuse alleged by the respondent for his failure to comply with the notice relating to the production of accounts was that he could not attend to produce them in person. As he could have caused them to be produced by sending them by messenger, he failed to satisfy the officer as required by S. 27. From this refusal the respondent (as entitled under S. 30) appealed to the Assistant Commissioner. His appeal was heard on 27 February 1932, and was rejected on the ground that he had not been able to show that he had sufficient cause for withholding the accounts on 19 October 1931. The assessment was accordingly confirmed by order made under S. 31. Down to this point in the history of this matter it appears to their Lordships that the provisions of the Act had been strictly complied with by the income-tax officials. No further appeal lay open to the respondent, but it was no doubt open to the Commissioner to exercise the powers of revision or review contained in S. 33.