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1947 Supreme(SC) 62
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD SIMONDS, LORD NORMAND AND LORD MACDERMOTT.
COMMISSIONER OF INCOME TAX, PUNJAB, NORTH-WEST FRONTIER AND DELHI PROVINCES, LAHORE - Appellant
Versus
TRIBUNE TRUST, LAHORE - Respondents
On Appeal from the High Court at Lahore.
Decided On : Oct. 14. 1947
Solicitor for appellant:The Solicitor, India Office. Solicitors for respondent: Douglas Grant & hold.
Assessments that become final and conclusive are not "nullities" even if incorrect. Section 33 of the Income-tax Act, 1922, provides administrative review powers but does not create a legal right for assessees to demand relief or refunds.
Headnote:(A) Indian Income-tax Act, 1922 - Sections 4(3)(i), 33, 48, 66 and 67 - Exemption for charitable purposes - Finality of assessments - Power of revision - Right to refund - Assessments made and paid for multiple years became final and conclusive before a decision was reached on a separate year's exemption - Subsequent claim for refund of taxes paid for other years based on the decision for one year - Whether assessments not giving effect to an exemption are a "nullity" - Held: Assessments duly made are not nullities simply because they might have been set aside if challenged in time - The Act provides an exhaustive code for remedies; collateral rights based on equity and good conscience are not permissible. (Paras 15, 17)
(B) Section 33 - Scope and Nature - Power of the commissioner to call for records and pass orders - Whether this section creates a right for the assessee to seek relief - Held: Section 33 is administrative machinery for executive review and does not confer a legal right or duty to grant relief upon the application of an assessee. (Paras 21, 22)
(C) Section 66 - Reference to High Court - "Prejudicial" order - Whether a reference lies from an order under Section 33 refusing to set aside an assessment - Held: An order under Section 33 is "prejudicial" only if it places the assessee in a worse position than before the order - A mere refusal to reopen a final assessment is not prejudicial. (Paras 23, 24)
Facts of the case:
A trust was assessed for income tax over several years. For one specific year, the highest court held the trust's income was exempt as it was held for charitable purposes. The trust then sought refunds for other years where assessments had already become final and conclusive, arguing that those assessments were nullities or should be revised under the commissioner's discretionary powers. The lower court ruled in favor of the trust, holding the assessments were nullities and the commissioner acted improperly in refusing the refund.
Findings of Court:
The assessments were not nullities as they were duly made according to the law. The commissioner did not act improperly in refusing to exercise discretion, as the taxpayer failed to utilize the statutory appeal process. Section 33 does not create a right to relief for the assessee. Furthermore, the reference to the high court was incompetent because the commissioner's refusal to reopen assessments was not "prejudicial" to the assessee.
Issues: (1) Whether assessments that fail to apply a valid exemption are a nullity; (2) Whether the commissioner's refusal to exercise discretionary power to refund tax is improper based on equity; (3) Whether Section 33 creates a right to relief for the assessee; (4) Whether a reference under Section 66 is maintainable if the order under Section 33 is not prejudicial.
Ratio Decidendi: The income tax law is an exhaustive code; remedies must be sought within the Act, and principles of equity cannot create collateral rights to refunds once assessments are final. Section 33 is a tool for administrative oversight, not a source of assessee rights. A reference under Section 66(2) requires a "prejudicial" order, meaning the assessee's position must be worsened by the order itself.
Result: Appeal allowed.
Legal Category Hierarchy
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tax law
-
income tax
- exemptions
- assessment and appeals
- revision and review
- refunds
-
income tax
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practice and procedure
- judicial reference
- finality of assessments
Judgement
Appeal (No. 83 of 1946) from a judgment of the High Court (March 23, 1944) which was delivered on a reference under s. 66, sub-s.3, of the Indian Income-tax Act, 1922, pursuant to a mandamus issued by the same court (April 3, 1941).
The following facts are taken from the judgment of the Judicial Committee. The respondent, the Tribune Trust, hereinafter referred to as "the respondent,” was created by one Sardar Dayal Singh in the year 1898, and it appeared to have been assessed to, and to have paid, income tax on the income, profits or gains of its property from the year 1917-18 to the year 1931-32. But in respect of its assessment for the year 1932-33 it raised an objection on the ground that it was exempt from taxation by virtue of s. 4, sub-s 3 (i.), of the Income-tax Act which provided This Act shall not apply to " the following classes of income (i.) any income derived " from property held under trust or other legal obligation " wholly for religious or charitable purposes . . . ." That claim led to a reference to the High Court of Judicature at Lahore under s. 66 of the Act. That court, on June 4, 1935, held, contrary to the contention of the respondent, that its income was not exempt from tax. The respondent appealed to His Majesty in Council, and the Board, after referring the matter back to the commissioner for further findings of fact, on June 13, 1939, reversed the judgment of the High Court and held that the income, in respect of which the respondent had been assessed for the year in question, was exempt from tax. Their Lordships decision is reported, Tribune Press Trustees, Lahore
v. Income Tax Commissioner (( 1939) L. R. 66 I. A. 241.).
The assessments of the respondents income for the years subsequent to 1932-33 were held in abeyance pending the judgment of the High Court in the matter of the assessment for that year, but after its judgment in June, 1935, assessments were completed in accordance therewith, and payments were duly made by the respondent in respect of the assessments for the years 1933-34, 1934-35, 1935-36, 1936-37, 1937-38, 1938-39 and also in respect of supplementary assessments for the years 1931-32 and 1936-37. The history of those assessments was briefly as follows
1931-32. A supplementary assessment was made under s. 23, sub-s. 4, read with s. 34 of the Act, on November 14, 1936. An appeal to the assistant commissioner was dismissed as no appeal from an order under s. 23, sub-s. 4, was then competent, and an application to the commissioner under s. 33 was also rejected.
1933-34 and 1934-35. Orders of assessment were passed under s. 23, sub-s. 3, on September 4, 1935. The respondent appealed to the assistant commissioner under s. 31 and its appeals were rejected on
August 31, 1936. No further action was taken by the respondent.
1935-36. The assessment was made under s. 23, sub-s. 3, on January 27, 1936. No appeal was filed.
1936-37. The assessment was made under s. 23, sub-s. 3, on November 11, 1937. An appeal was
rejected by the assistant commissioner on May 14, 1938. No further action was taken by the
respondent.
1937-38. The assessment was made under s. 23, sub-s. 3, on January 26, 1938. No appeal was filed.
1938-39. The assessment was made under s. 23, sub-s. 3, on October 26, 1938. No appeal was filed.
The relevant dates of the different stages of those assessments are tabulated
below
Date of Date of Appellate Order
Assessment Year Assessment Payment dismissing
Order Appeal
1931-32 supplementary 24.11.36 22.1.37 22.7.37
1933-34 …. ….. ….. 4.9.35 21.10.35 31.8.36
1934-35 …. ….. ….. 4.9.35 21.10.35 31.8.36
th1705 1935-36 …. ….. ….. 27.11.36 4.1.37 ……
1936-37 …. ….. ….. 11.9.37 4.10.37 14.5.38
1936-37 supplementary 26.10.38 8.12.38 ……
1937-38 …. ….. ….. 26.1.38 26.3.38 ……
1938-39 …. ….. ….. 26.10.38 7.1.38 ……
It was not disputed that all those assessments had been made, and had become final and conclusive, before the Board gave its decision in respect of the assessment for the year 1932-33. O
