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Andhra Pradesh High Court
Judges : M.SESHACHALAPATI, P.CHANDRA REDDY
Vuppala China Sambamurthy - Appellant
Versus
Addl.Income-tax Officer, Visakhapatnam - Respondent
Decided On : 04-14-58
INCOME TAX - Assessment - Provisional assessment - Order of assessment made under Section 23-B of the Indian Income-tax Act - Whether valid - Whether Section 35 of the Act is attracted - Scope of Section 23-B - Interpretation of Sub-sections 1 and 2 - Doctrine of estoppel - Applicability - Jurisdiction of the court under Article 226 of the Constitution - Exercise of discretion - Interference by the court.
Fact of the Case:
The appellant, a partner in a registered firm, submitted a return of income-tax declaring an income including a provisional sum as his share of income from the firm. The Income-tax Officer accepted the request and made an assessment determining the tax payable. Later, the firm's assessment was completed, and the appellant's correct share of income was found to be higher than the provisional amount. The Income-tax Officer made a final assessment based on this income and passed an order. The appellant challenged the order, arguing that it was not made under Section 23-B of the Indian Income-tax Act and that Section 35 of the Act was not attracted.
Finding of the Court:
The court held that the assessment made in the year 1951 was a provisional assessment under Section 23-B of the Indian Income-tax Act. The court also held that the appellant was estopped from challenging the validity of the order as he had induced the Department to make the assessment on the basis of his undertaking to pay the correct tax after the firm was finally assessed. The court further held that the failure to issue notice of the final assessment did not render the proceedings void as the appellant was present at the time of the firm's assessment. The court also held that the jurisdiction of the court under Article 226 of the Constitution could not be invoked in the interests of injustice and that the exercise of discretion by the learned Judge in refusing to issue certiorari was not erroneous or improper.
Issues: 1. Whether the assessment made in the year 1951 was a provisional or final one? 2. Whether the order of assessment was made under Section 23-B of the Indian Income-tax Act? 3. Whether Section 35 of the Act was attracted to the instant case? 4. Whether the appellant was estopped from challenging the validity of the order? 5. Whether the failure to issue notice of the final assessment rendered the proceedings void? 6. Whether the jurisdiction of the court under Article 226 of the Constitution could be invoked in the interests of injustice? 7. Whether the exercise of discretion by the learned Judge in refusing to issue certiorari was erroneous or improper?
Ratio Decidendi: 1. The court interpreted Section 23-B of the Indian Income-tax Act and held that it confers powers upon the Income-tax Officer to make provisional assessments in advance of regular assessments. 2. The court held that the assessment made in the year 1951 was a provisional assessment as it was made on the basis of the appellant's return and the accounts and documents accompanying it, and it was subject to revision when the firm's assessment was completed. 3. The court held that Section 35 of the Act was not attracted to the instant case as the assessment made in the year 1951 was a provisional assessment and not a regular assessment. 4. The court held that the appellant was estopped from challenging the validity of the order as he had induced the Department to make the assessment on the basis of his undertaking to pay the correct tax after the firm was finally assessed. 5. The court held that the failure to issue notice of the final assessment did not render the proceedings void as the appellant was present at the time of the firm's assessment. 6. The court held that the jurisdiction of the court under Article 226 of the Constitution could not be invoked in the interests of injustice. 7. The court held that the exercise of discretion by the learned Judge in refusing to issue certiorari was not erroneous or improper.
Final Decision: The court dismissed the writ appeal and held that the order of the Income-tax Officer was valid.
( 2 ) THE appellant, one of the partners of a registered firm of Messrs. Vuppala Peda Venkata Ramaiah and Sons, submitted a return of income-tax on 31-1-1951 for the assessment year 1951-52. He declared an income of Rs. 30,823. 00 including therein a provisional sum of Rs. 10,986. 00 as his share of income from the aforesaid firm. At that time, the firms assessment was not completed. Therefore, the assesses requested the Taxing Officer to accept his share of the income from the profits derived by the firm as shown in the return as correct subject to the condition that the assessment may be revised by the Department as and when the firms assessment was completed. The Income-tax Officer acceded to the request and that is not in dispute now. Accordingly, he made an assessment determining the tax payable as Rs. 5,841. 00, Finally, the assessment of the Firm was made on 31-3-1955 under Section 23 (1) computing the total income at Rs. 1,10,934. 00 for the assessment year 1951-52, which means the appellants correct share of the income was at Rs. 27,279. 00 and not of Rs. 10,986. 00 as adopted in the original assessment. The Income-tax Officer thereupon made the final assessment on the basis of this income as per the agreement reached between him and the asses-see and passed an order that was the subject-matter of the challenge before the learned Judge and before us too. Several points were debated before the learned Judge but only two or three contentions are relevant for the purpose of this enquiry. One is whether the order can be said to have teen made under Section 23-B of the Indian Income-tax Act (hereinafter called the Act) and whether Section 35 of the Act is attracted to the instant case.
( 3 ) THE first problem to be solved is whether the assessment made in the year 1951 is a provisional or final one. The answer to this depends upon the interpretation of Section 23-B of the Indian income-tax Act. Section 23-B recites: " (1) The Income-tax Officer may at any time after the receipt of a return made under Section 22, proceed to make in a summary manner, a provisional assessment of the tax payable by the assessee, on the basis of his return and the accounts and documents, if any, accompanying it, after giving due effect (i) the allowance referred to in paragraph (b) of the proviso to Clause (vi) of Sub-section 2 of Section 10, and (ii) any loss carried forward under Sub-section (2) of Section 24. (2) A partner of a firm may be provisionally assessed under Sub-section (1); in respect of his share in the firms income, profits and gains, if its return has been received, although the return of the partner himself may not have been received. (3) A firm may be provisionally assessed under Sub-section (l)as if it were am in registered firm unless the firm fulfils such conditions as the Central Government may by notification in the Official Gazette, specify in that behalf. (4) There shall be no right of appeal against a provisional assessment made under Sub-section (1 ). (5) For the avoidance of doubt, it is hereby declared that the provisions of Section 45 (except the first proviso) and Section 46 apply in relation to any tax payable in pursuance of a provisional assessment made under Sub-section (1) as if it were a regular assessment made under Section 23. (6) Income-tax paid or deemed to have been paid under Section 18 or Section 18-A in respect of any income provisionally assessed under Sub-section (1) shall be deemed to have been paid towards the provisional assessment. (7) After a regular assessment has been made under Section 23, any amount paid or deemed to have been paid towards provisional assessment made u
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