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HIGH COURT OF CALCUTTA
P. B. Mukharji, C. N. Laik
KOOKA SIDHWA AND CO. , CALCUTTA - Appellant
Versus
COMMISSIONER OF INCOME-TAX, WEST BENGAL - Respondent
Income-Tax Reference 8 Of 1960
Decided On : FEBRUARY 27, 1963
INCOME TAX - Appeal - Maintainability - Order passed by Income-tax Officer revising the original assessment as directed by the Appellate Tribunal - Whether partakes the character of procedural law only - Whether appellant had no substantive right to prefer the appeal under Section 30 of the Act.
Fact of the Case:
The assessee, a Managing Agent of a limited concern, was entitled to a remuneration of Rs. 1,000/- per month and 10% of the net profits. Despite a resolution increasing the remuneration to Rs. 2,000/- per month and 25% of the net profits, the Income-tax Officer allowed the deduction in respect of Managing Agency Commission at Rs. 2,000/- per month and 25% of the net profits, as permissible expenses under Section 10 (2) (iv) of the Act. The balance was assessed as the taxable income and excess profits of the firm for the relevant assessment years. The Appellate Tribunal held that the entire amount of the managing agency remuneration was the income in the hands of the assessee but it was exempt from Income-tax under a Notification of the Central Government, Finance Department. The Tribunal directed the Income-tax Officer to revise the assessments and authorise him to amend the assessments made on the partners if necessary. The Income-tax Officer revised the assessment of Income-tax and made certain major amendments in the order originally passed by him. The assessee filed appeals, which were admitted and the Appellate Assistant Commissioner went into the merits of the appeals and held that the Income-tax Officer had correctly recomputed the applicant's total income in accordance with the direction of the Tribunal. Being aggrieved by the order of the Appellate Assistant Commissioner the applicant filed appeals before the Appellate Tribunal, now for the second time, in which a preliminary objection was taken on behalf of the department that the appeals were not maintainable, on the ground that the orders passed by the Income-tax Officer under the direction of the Appellate Tribunal given on August 31, 1950 were not orders passed under the provisions of Section 23 (3) of the Income-tax Act and, therefore, the orders passed by the Income-tax Officer were not appealable. The Appellate Tribunal did not go into the merits of the appeals but gave effect to the preliminary objection and dismissed the appeals, holding that they were not maintainable, following the decision of the Supreme Court in the case of Commr. of income-tax, Madras v. Arunachalam Chettiar.
Finding of the Court:
The Tribunal was not justified in refusing to admit the appeals filed by the assessee in respect of the revision of its assessments for the assessment years 1944-45, 1945-46 and 1946-47.
Issues: Whether the order passed by the Income-tax Officer revising the original assessment as directed by the Appellate Tribunal would partake the character of procedural law only and whether the appellant had no substantive right to prefer the appeal under Section 30 of the Act.
Ratio Decidendi: The order passed by the Income-tax Officer revising the assessment, made originally under Section 23 of the Act, under the direction of the Appellate Tribunal, would partake the character of a fresh assessment order and would be no less an order as made under Section 23 (3) of the Act within the ordinary acceptation of the term from which an appeal would lie to the Appellate Assistant Commissioner. A right of appeal is a creature of the statute conferred on the assessee by Section 30 (1) of the Act. The said right, which is substantive, cannot be taken away unless it is expressly provided.
Final Decision: Question answered in the negative, in favour of the assessee.
( 1 ) THIS is a consolidated Reference under Section 66 (1) of the Income-tax Act at the instance of the assesses in respect of three assessment years 1944-45, 1945-46 and 1946-47 where the following question has been referred:"whether on the facts and in the circumstances at-the case the Tribunal was justified In not admitting the appeals filed by the assesses in respect of the revision of its assessments for the assessment year 1944-45, 1945-46 and 1946-47". In other words, whether the order passed by the Income-tax Officer revising the original assessment as directed--by the Appellate Tribunal would partake the character of procedural law only I. e. whether the appellant had no substantive right to prefer the appeal under Section 30 of the Act
( 2 ) THE facts material for the purpose of the reference are: The applicant-firm Messrs. Kooka Sidhwa and Company, Calcutta, is the Managing Agent of limited concern, viz. , the Globe Theatres Ltd. , Calcutta. Under the terms of the agreement of the Managing Agency, Kooks Company was entitled to a remuneration of Rs. 1,000/- per month and 10% of the net profits. On August 17, 1942, the Globe Theatres Ltd. passed a special resolution increasing the remuneration of the Managing Agents to Rs. 2,000/- per month and 25% of the net profits. Despite the resolution, the Income-tax Officer assessing the Globe Theatres for the relevant assessment years, allowed the deduction in respect of Managing Agency Commission at Rs. 2,000/- per month and 25% of the net profits, as permissible expenses under Section 10 (2) (iv) of the Act The Income-tax Officer disallowed the balance as expenditure not incurred wholly and exclusively for the purpose of the company's business. In the Aands of Kooka Company i. e. the assessee, the Income-tax Officer however assessed the entire amount of the Managing agency remuneration at Rs. 2,000/ per month and 25% of the net profits as the taxable income and excess profits of the firm for the relevant assessment years. The Income-tax Officer negatived the argument, as unsound which was advanced to the effect, that the Income should not be assessed twice.
( 3 ) WHEN the matter came up before the Appellate Tribunal in the first instance, it held that the entire amount of the managing agency remuneration was the income in the hands of the assessee but it was exempt from Income-tax under a Notification of the Central Government, Finance Department, being Notification No. 878-F (Income-tax), dated March 21, 1922, published under the authority of Sec. 60 of the Indian Income-tax Act The Tribunal therefore, on August 31, 1950 passed the following order:"the result is that the three Income-tax appeals are allowed in part. We direct the Income-tax Officer to revise the assessments and authorise him to amend the assessments made on the partners if necessary. The excess-profits-tax appeals are dismissed".
( 4 ) IN compliance with the said order, the Income-tax Officer revised the assessment of Income-tax and made certain major amendments in the order originally passed by him. The assessee, however, being dissatisfied with the same preferred the appeals, which were admitted and the Appellate Assistant Commissioner went Into the merits of the appeals and held on July 26, 1957 that the Income-tax Officer had correctly recomputed the applicant's total income in accordance with the direction of the Tribunal. It might be stated that no objection was raised on behalf of the department before him as to the competence or the maintainability of the appeals or the jurisdiction of the Appellate Assistant Commissioner to tear such appeals.
( 5 ) BEING aggrieved by the order of the Appellate Assistant Commissioner the applicant filed appeals before the Appellate Tribunal, now for the second time, in which a preliminary objection was taken on behalf of the department that the appeals were not maintainable, on the ground that the orders passed by the Income-tax Officer under the
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