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HIGH COURT OF CALCUTTA
DURGADAS BASU, J.
Gopal Chandra Sen - Appellant
Versus
Income Tax Officer – Respondent
Appeal No : Civil Rule No. 3690 of 1960
Decided On : Feb 20, 1963
INCOME TAX - WRIT OF CERTIORARI - ORDER OF CIT UNDER S. 33A(2) - MAINTAINABILITY - JURISDICTION - ADDITION OF INCOME FROM SHARE IN UNREGISTERED FIRM - S. 14(2)(A) AND S. 16(1)(A) - INTERPRETATION - NATURAL JUSTICE - HEARING - REQUIREMENT.
Fact of the Case:
The petitioner, the Karta of a HUF, challenged the orders of the AAC and the CIT adding his 1/3 share of the income from the business of an unregistered firm, M/s Sen Bros. and Co., to his personal income for the purpose of determining the rate of taxation under s. 16(1)(a) of the IT Act, 1922. The petitioner contended that the addition was without jurisdiction as the assessment on the firm was not made in compliance with s. 14(2)(a), and that the impugned orders violated the principles of natural justice as he was not given a hearing before the CIT.
Finding of the Court:
The court held that the application for a writ of certiorari was not maintainable against the order of the CIT under s. 33A(2) of the IT Act, 1922, as such an order was not deemed to be prejudicial to the assessee. The court further held that the addition of the petitioner's income from the share in the unregistered firm was within the jurisdiction of the ITO as the tax on the firm's income had been paid by the receivers managing the business, and that the petitioner had been exempted from paying tax on that income under s. 14(2)(a). The court also held that the requirement of a hearing before the CIT under s. 33A(2) was not mandatory and that the principles of natural justice were not violated by the impugned orders.
Issues: 1. Whether the application for a writ of certiorari was maintainable against the order of the CIT under s. 33A(2) of the IT Act, 1922? 2. Whether the addition of the petitioner's income from the share in the unregistered firm was within the jurisdiction of the ITO? 3. Whether the principles of natural justice were violated by the impugned orders?
Ratio Decidendi: 1. The court held that an order of the CIT under s. 33A(2) of the IT Act, 1922, was not deemed to be prejudicial to the assessee and therefore, a writ of certiorari was not maintainable against such an order. The court relied on the second proviso to s. 33A(2), which stated that an order by the CIT declining to interfere shall not be deemed to be an order prejudicial to the assessee. 2. The court held that the addition of the petitioner's income from the share in the unregistered firm was within the jurisdiction of the ITO as the tax on the firm's income had been paid by the receivers managing the business, and that the petitioner had been exempted from paying tax on that income under s. 14(2)(a). 3. The court held that the requirement of a hearing before the CIT under s. 33A(2) was not mandatory and that the principles of natural justice were not violated by the impugned orders. The court relied on the fact that the legislature had deliberately omitted the requirement of a reasonable opportunity of hearing from s. 33A(2) and that the CIT was only required to make such inquiry as he thought fit.
Final Decision: The court dismissed the application for a writ of certiorari.
1. In this application under Art. 226 the petitioner has obtained a rule for a writ of certiorari to quash the orders of the AAC and the CIT (respondents Nos. 2 and 3) dt. 5th June, 1957, and 3rd Feb., 1960, respectively. The case of the petitioner is that he is the Karta of a HUF, constituted by the heirs of one Manmatha Nath Sen and as such is liable to pay income-tax in respect of the income of the deceased Manmatha Nath to the extent of the estate inherited by the family from him. Manmatha Nath happened to be a partner of an unregistered firm called M/s Sen Bros. and Co. carrying on business at 15, College Square. The ITO (respondent No. 1) in assessing the income of Manmatha Nath for the asst. yrs. 1950-56 added to his personal income from house property, his 1/3 share of the income from the business of the said firm and charged tax accordingly. Since the business of the firm was in the hands of receivers, it was the receivers who were chargeable with the tax. The 1/3 share of the income of the firm could not be added to the personal income of Manmatha Nath, for the purposes of assessment, unless the business was assessed as an unregistered firm. The impugned order being, according to the petitioner, illegal and ultra vires the petitioner appealed to the AAC who dismissed the appeal on 5th June, 1957, and from his order the petitioner moved the CIT in revision, under s. 33A(2) of the IT Act, 1922, but the CIT rejected the application of the petitioner by order dt. 5th Feb., 1960, without giving the petitioner an opportunity of representing his case.
2. The grounds taken in the affidavit filed on behalf of the respondents is that the application is vitiated by inordinate delay; that M/s Sen Bros. were in fact assessed as an AOP and that the alleged addition of the 1/3 share of the business income was made in pursuance of a request made by Manmatha Nath himself, in his letter of 1st June, 1954, to the ITO as follows : "Please realise my share of income-tax from my business, M/s Sen Bros. and Co., which is at present under the management of joint receivers, Sri Kanai Lal Sen and Sri Sisir Kumar Basu." As regards the contention of the petitioner that he was not given a hearing before rejecting his application for revision it is urged that no such hearing is required by s. 33A(2) of the Act. It has also been urged that the petitioner is not entitled to any remedy under Art. 226. The points for decision are : (a) is the application liable to be refused on the ground of delay ? (b) is the application under Art. 226 maintainable ? (c) are the impugned orders without jurisdiction ? (d) have the principles of natural justice been violated by the impugned orders ? Point (a) : Annexure "B" is the assessment order of the ITO dt. 26th March, 1953. Annexure "D" is the order of the AAC dt. 5th June, 1957, and annexure "E" is the order of the CIT dt. 5th Feb., 1960. This application under Art. 226, impugning the orders of 5th June, 1957, and 5th Feb., 1960, was presented on 14th Sept., 1960. The order of the CIT being the final order, there has been a delay of over seven months from that order. Nevertheless, I do not think that this application for certiorari can be rejected on this ground alone if the petitioner is able to establish on the merits that the impugned orders are in violation of the principles of natural justice. Point (b) : The original order of assessment in annexure "B" is not and cannot be challenged in this application since the original order has merged in the appellate order in annexure "D" as held by the Supreme Court in CIT vs. Amritlal (1958) 34 ITR 130 (SC). Similar is the position in regard to the appellate order in annexure "D" in view of the recent pronouncement of the Supreme Court in Collector of Customs vs. East India Commercial Co. (1936) AIR SC 1124, reversing the decision of this Court (1960) AIR Cal 1 (FB), that even where the order of a subordinate authority is confirmed by an appellate or revisi
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