Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1961 Supreme(SC) 438

SUPREME COURT OF INDIA
P.B. Gajendragadkar, K. Subba Rao, M. Hidayatullah, J.C. Shah and Raghubir Dayal, JJ.
Lalji Haridas - Appellant
Versus
Income Tax Officer and anothers - Respondents
AND
Chhotalal Haridas - Appellant
Versus
M.D. Karnik and anothers - Respondents
Civil Appeal No. 146 of 1961 and Appeal from the judgment and Order dated the 18th March 1960 of the High Court, Bombay, in Special Civil Appln. No. 380 of 1960
Decided On : 25-07-1961

Advocates Appeared:
For the Appellant (in CA No. 145/59) :S.T. Desai, Senior Advocate (Rameshwar Nath, J.B. Dadachanji & Onkar Chand Mathur Advocates with him)
For the Appellant (in CA No. 146/61):M.K. Nambiar, Senior Advocate (J.B. Dadachanji, Advocate, with him)
For the Respondent (in both the Appeals):H.N. Sanyal, Addl. Solicitor General of India, & K.N. Rajagopala Sastri, Senior Advocate; (P.D. Menon, Advocate, with them)

The transfer of the case file to Bombay was invalid and unauthorized, and therefore the proceedings were properly pending before the first respondent and the notice issued by him was valid and legal.

Headnote:
INCOME TAX - Assessment - Jurisdiction - Transfer of case file - Validity - Protective assessment - Legality.
Fact of the Case:

The appellants, Lalji and Chhotalal, challenged the validity of notices issued against them by the Income Tax Officers under Section 23(2) of the Income Tax Act, claiming that the proceedings were barred by limitation and without jurisdiction.
Finding of the Court:

The Court held that the question of limitation could be raised before the Income Tax Officer and not in writ proceedings. The Court also held that the transfer of the case file to Bombay was invalid and unauthorized, and therefore the proceedings were properly pending before the first respondent and the notice issued by him was valid and legal.
Issues: 1. Whether the assessment proceedings were barred by limitation? 2. Whether the transfer of the case file to Bombay was valid? 3. Whether the proposed assessment was a precautionary or protective assessment and not recognized by the Act?
Ratio Decidendi: 1. The Court held that the question of limitation could be raised before the Income Tax Officer and not in writ proceedings. 2. The Court held that the transfer of the case file to Bombay was invalid and unauthorized, and therefore the proceedings were properly pending before the first respondent and the notice issued by him was valid and legal. 3. The Court held that the proposed assessment was not a precautionary or protective assessment and was recognized by the Act.
Final Decision: The appeals were dismissed.

JUDGMENT :

Gajendragadkar, J.

1. These two appeals arise out of two writ petitions filed by the two appellants who are brothers, Lalji Haridas and Chhotalal Haridas, against the respective Income Tax Officers in their areas. Lalji Haridas, who is a resident of Jamnagar, filed Special Civil Application No. 132 of 1957 in the High Court of Judicature, Bombay at Rajkot, challenging the validity of the notices, issued against him by the Income Tax Officer, Ward A, at Jamnagar under Section 23(2) of the Income Tax Act, claiming appropriate writ or order restraining the said Income Tax Officer from taking any further proceedings under the said notices. This petition was summarily dismissed by the High Court and the application made by Lalji for a certificate to file an appeal in this Court was also rejected. Thereupon he applied for and obtained special leave from this Court. It is with the special leave granted to him that Lalji has brought his appeal before this Court.

2. Chhotalal, who is a resident of Bombay, filed Special Civil Application No. 374 of 1960 in the High Court at Bombay challenging the validity of the notices issued against him by the 4th Income Tax Officer, Ward G, and claiming appropriate writ or order restraining the said officer from taking any further proceedings under the said notices. This application was summarily dismissed by the High Court and Chhotalal's request for a certificate was likewise rejected. Chhotalal then applied for and obtained special leave from this Court, and that is how his appeal has come to this Court.

3. In the notices issued by the respective Income Tax Officers against the two appellants an enquiry is proposed to be held in regard to the liability to pay tax on the alleged total income of Rs. 97,00,000 received by either or both of the two appellants. This income represents the remittances of monies through the Indian Overseas Bank, Ltd. Pondicherry, and the United Commercial Bank, Ltd. Pondicherry, and had accrued during Assessment Year 1952-53 respectively. Since both the appellants challenged the validity of the proceedings commenced against them in their writ petitions the present appeals can be conveniently treated as companion matters and have been accordingly placed for hearing together as such. We will first deal with the appeal preferred by Lalji.

4. It appears that the appellant Lalji filed return of his income for the year 1952-53 under Section 22 of the Act. Later, the Income Tax Officer, Ward B, Jamnagar, sent the file of the appellant to the 4th Income Tax Officer, Ward G, Bombay. On receiving the file the Bombay Officer summoned the appellant to produce his accounts and to attend in person in connection with the enquiry of the assessment proceedings for the year 1952-53, under Section 37 of the Act. The appellant objected to the validity of the transfer of his file to Bombay and disputed the jurisdiction of the Bombay officer to deal with the matter. On 30-9-1953 the Central Board of Revenue passed an order under Section 5(2) of the Act directing that the CIT (Central), shall perform his functions in respect of persons including the appellant. Subsequently, on 7-10-1953, the Commissioner purporting to exercise powers under Section 5(5) of the Act assigned the appellant case to the Income Tax Officer, Section 4 (Central), Bombay, and directed that the said officer shall perform the functions of an Income Tax Officer in respect of the case so assigned. The appellant attempted to persuade the Central Board to reconsider its order but his attempt failed. Then he filed Civil Suit No 226 of 1954 in which he claimed an injunction restraining the said Income Tax Officer from proceeding with the assessment. This claim was based on the allegation that the order of transfer passed by the Central Board of Revenue was illegal and without jurisdiction. An order of interim injunction passed in the suit naturally halted the proceedings before the Income Tax Officer. On 21-5-1956, the Ce

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