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HIGH COURT OF CALCUTTA
Sinha
DAWJEE DADABHOY AND CO. - Appellant
Versus
S. P. JAIN - Respondent
Matter 120 Of 1956
Decided On : DECEMBER 4, 1956
INCOME TAX - Registration of firm - Cancellation of registration - Power of Commissioner under Section 33B of the Indian Income-tax Act - Scope and extent - Legality of Section 33B - Whether ultra vires - Whether discriminatory - Whether arbitrary - Whether proceedings under Section 33B can be interfered with at an interlocutory stage - Held, Section 33B is intra vires and valid - Proceedings under Section 33B cannot be interfered with at an interlocutory stage.
Fact of the Case:
The petitioner, a partnership firm, was registered under the Indian Income-tax Act and assessed as a registered firm for the assessment years 1950/51, 1951/52, 1952/53, and 1953/54. In September 1955, the Income-tax Officer refused to renew the registration of the firm. The petitioner filed an appeal against the order of refusal, which was pending before the Appellate Assistant Commissioner of Income-tax. In June 1956, the Commissioner of Income-tax issued notices to the petitioner under Section 33B of the Indian Income-tax Act, calling upon the petitioner to show cause why the order of registration and the order of assessment for the relevant assessment years should not be cancelled or modified. The petitioner filed writ petitions challenging the validity of the notices and seeking to restrain the Commissioner from taking any further steps with regard to them.
Finding of the Court:
The court held that Section 33B of the Indian Income-tax Act is intra vires and valid. The court also held that the proceedings under Section 33B cannot be interfered with at an interlocutory stage. The court further held that the petitioner could not challenge the validity of the notices under Section 33B before the Commissioner of Income-tax, but could only do so after the Commissioner had passed an order.
Issues: 1. Whether Section 33B of the Indian Income-tax Act is ultra vires? 2. Whether the proceedings under Section 33B can be interfered with at an interlocutory stage? 3. Whether the petitioner can challenge the validity of the notices under Section 33B before the Commissioner of Income-tax?
Ratio Decidendi: 1. Section 33B of the Indian Income-tax Act is not ultra vires. It is not arbitrary, discriminatory, or unnecessary. It is a valid exercise of the legislative power of the Parliament. 2. The proceedings under Section 33B cannot be interfered with at an interlocutory stage. The Commissioner of Income-tax has the power to call for and examine the records of any proceedings and to pass orders thereon, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. This power can only be exercised after giving the assessee an opportunity of being heard. The assessee can challenge the order of the Commissioner in appeal to the Appellate Tribunal and thereafter to the Board of Revenue. The assessee can also file a reference to the High Court under Section 66 of the Act. 3. The petitioner cannot challenge the validity of the notices under Section 33B before the Commissioner of Income-tax. The Commissioner has the power to issue notices under Section 33B and to proceed with the inquiry. The assessee can only challenge the validity of the notices after the Commissioner has passed an order.
Final Decision: The writ petitions were dismissed.
( 1 ) THESE four matters have been heard together and the questions of fact and law are common. The facts are briefly as follows:--
( 2 ) THE petitioner In all these applications Is a partnership firm duly constituted under the Indian Partnership Act. It Is stated that" the firm was established as early as 1894 and has continued all along, except for reconstitution of the personnel from time to-time, with the death or retirement of a partner and/or admission of a new partner or legal heir of a deceased partner. It appears also that the partnership deed was accordingly changed from time to time. A partnership deed was executed on or about November 14, 1949 and another on or about July 2, 1953. The latest partnership deed is dated 31st August 1954. In these applications we are concerned with the Income-tax Assessment years 1950/51, 1951/52, 1952/53 and 1953/54. For all these years, the firm has been assessed as a registered firm, that Is to say, registered under the Indian Income-tax Act. In other words, it was registered under Section 26a of the Indian Income-tax Act and assessed as a registered firm in accordance with Section 23 (3) read with Section 23 (5) (a) of the said Act, The registration of a firm is for the period of one year on each occasion, and the registration had been renewed from year to year until on or about September 30 1955 an order has been passed by which renewal of registration has been refused. The petitioner firm has filed an appeal under Section 30 of the said Act against the order refusing registration. This appeal is pending before the Appellate Assistant Commissioner of Income-tax Range ' (C ). Before I proceed further it will be necessary for me to advert to the law of registration of firms under the Indian Income-tax Act. Under the said Act, a firm can be assessed as a separate entity. In the normal course, therefore, a firm would be assessed on its total income. The Act. however, provides for registration of firms. This is done under Section 26a which runs as follows:--26a (1)--"an application may be made to the Income-tax Officer on behalf of any firm, constituted under an instrument of partnership specifying the individual shares of the partners, for registration for the purposes of this Act and of any other enactment for the time being in force relating to income-tax or super-tax. " (2 ).-- "the application shall be made by such person or persons, and at such times and shall contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed; and it shall be dealt with by the Income-tax Officer in such manner as may be prescribed. "
( 3 ) SECTION 59 of the Act confers power upon the Central Board of Revenue to make rules for carrying out the purposes of the Act, and rules have been framed known as the Income-tax Rules 1922. Rule 2 of the said Rules lays down as to how application for registration should be made. Rule 3 lays down that the application should be made in a particular form and verified in the manner stated therein. It must be remembered that under Section 26a of the Act, registration can only be granted to a firm which is constituted under an instrument of partnership, that is to say, a written document, which document must specify the individual shares of the partners. That being one of the essential ingredients of registration, it is not surprising that in Rule 3 it has been laid down that the application in the prescribed form is to be accompanied by the original instrument of partnership. The form of an application for registration of a firm contains a clause whereby an applicant has to certify that the profits or losses, if any, of the previous year were, or will be, divided or credited as shown in the schedule, and that the information given in the schedule as also in the body of the application, were correct. In the schedule, particulars have to be given, including the names of the partners, and their respective shares, in the b
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