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1960 Supreme(Pat) 86
PATNA HIGH COURT
V.Ramaswami and R.K.Choudhary JJ.
Mahabir Glass Manufacturing Co.
Versus
Commissioner Of Income Tax
Miscellaneous Judicial Case No. 544 of 1958 ;
Decided On : APRIL 25, 1960
The Income-tax Officer has the power to refuse to register a firm under Sec.23(4) of the Indian Income-tax Act if the assessee firm fails to comply with all the terms of the notice issued under Sec.23(2). There is no requirement in the Act for the Income-tax Officer to give notice to the assessee before refusing to register a firm.
Headnote:
INCOME TAX - Refusal to grant renewal of registration under Sec.26A - Whether notice is required to be given to the assessee before refusing to renew registration - Interpretation of Sec.23(4) of the Indian Income-tax Act.
Fact of the Case:
The assessee, a firm, applied for renewal of registration under Sec.26A of the Indian Income-tax Act along with the return of income for the assessment years 1951-52 and 1952-53. The Income-tax Officer issued a notice under Sec.23(2) requiring the assessee to attend his office and produce evidence in support of the return. The assessee failed to comply with the notice despite several adjournments. The Income-tax Officer then completed the assessment under Sec.23(4) and refused to register the firm. The assessee appealed to the Appellate Assistant Commissioner and the appellate Tribunal, both of which confirmed the assessment and the refusal to renew registration.
Finding of the Court:
The court held that the Income-tax Officer was justified in refusing to grant renewal of registration under Sec.26A of the Indian Income-tax Act. The court interpreted Sec.23(4) of the Act and held that there is no requirement for the Income-tax Officer to give notice to the assessee before refusing to renew registration. The court also held that the assessee had availed itself of the right of appeal against the order of the Income-tax Officer and had been given sufficient opportunity to know the case against it and to answer that case, and therefore there was no violation of the principle of natural justice.
Issues: Whether the Income-tax Officer was justified in refusing to grant renewal of registration under Sec.26A of the Indian Income-tax Act without giving notice to the assessee.
Ratio Decidendi: The court held that the Income-tax Officer has the power to refuse to register a firm under Sec.23(4) of the Indian Income-tax Act if the assessee firm fails to comply with all the terms of the notice issued under Sec.23(2). The court also held that there is no requirement in the Act for the Income-tax Officer to give notice to the assessee before refusing to register a firm. The court further held that the assessee had availed itself of the right of appeal against the order of the Income-tax Officer and had been given sufficient opportunity to know the case against it and to answer that case, and therefore there was no violation of the principle of natural justice.
Final Decision: The court answered the question of law referred by the Income-tax Appellate Tribunal against the assessee and in favour of the Income-tax Department. The assessee was ordered to pay the costs of the reference.
1. In this case the assessee has been taxed for the assessment years 1951-52 and 1952-53 in the status of an unregistered firm. It appears that an application for renewal of registration of the firm was made under Sec.26A along with the return of income for each of the two assessment years. Notice was issued by the Income-tax Officer under Sec.23. Sub-section (2) requiring the assessee to attend the Income-fox Officers office and to produce any evidence in support of the return. The assessee failed to comply with the notice; but several adjournments were given by the Income-tax Officer.
At the last and final chance the case was adjourned to the 21st of November, 1952, and the assessees representative was warned that if compliance was not made by the adjourned date, there would be ex parte assessment of income-tax in the case of the firm and of its partners. No compliance was made by the assessee on the adjourned date also and therefore, the Income-tax Officer proceeded to complete the assessment under Sec.23(4). He also refused to register the firm as it had not complied with the notice under Sec.23(2) of the Statute. In the course of his order the Income-tax Officer stated as follows : "The assessees representative Mr. Banerji who brought the application for time was clearly warn-ed (vide my order, dated 14-11-1952 in the 52-53 order-sheet) that if compliance was not made on 21-11-52, ex parte assessment in the case of the firm and of the partners would be completed. Re-peated warnings had, however, no effect on the assessee and on 21-11-52, another telegram was received asking for two months adjournment. It is to be noted that whereas in application dated 13-11-52, the assessee bad asked for adjournment after the middle of December, in this telegram two months adjournment was requested for. The ground given for adjournment was that their accountant was not coming.
It was obvious that the assessment proceedings could not be indefinitely held up if a particular accountant of the assessee did not choose to come back. The assessee had already been allowed three ninths time during which period to arrange to engage any other accountant if the particular person was not in position to come back; In any case, there was absolutely no reason for holding back the accounts and other evidence; as some other person or any of the partners could comply with the notice. The application for time was accordingly rejected and this intimation was given to the assessees by my letter, dated 21-11-52. Till this date there has been ho further response from the assessees side. The default in this case is thus, clearly established. For non-compliance with the statutory notice under Sec.23(2), I am constrained to complete the assessment under Sec.23(4) to the best of my knowledge and information. I also refuse to register the firm as it has not complied with the notice under Sec.23(2)."
The assessee went up in appeal before the Appellate Assistant Commissioner, and it was contended on its behalf that notice should have been given to the assessee before refusing to renew registration. The argument was rejected by the Appellate Assistant Commissioner and the assessment was confirmed. The same argument was put forward before the appellate Tribunal, which dismissed the appeal and confirmed the order of assessment and also the refusal of the Income-tax Officer to renew registration of the firm.
2. Under Sec. 66(1) of the Indian Income-tax Act, the Income-tax Appellate Tribunal has submitted the following question of law for the opinion of the High Court :
"Whether on the facts and in the circumstances of this case, the Income-tax Officer was justified in refusing to grant renewal of registration under Sec.26A of the Indian Income-tax Act?"
3. On behalf of the assessee learned counsel put forward the argument that the Income-tax Officer should have given notice to the assessee before refusing to grant renewal of registration. It was submitted that the
