1964 Supreme(Cal) 155

High Court of Calcutta
B.N. Banerjee, J.
Bagsu Devi Bafna – Appellant
Versus
Commissioner of Income-Tax – Respondent
Matter 181 of 1963
Decided on : July 06, 1964

The Commissioner of Income-tax must disclose, in his notice to the assessee, the grounds on which he desires to revise. This is essential otherwise the assessee may not be able to show any cause and the "opportunity of being heard", which Section 33B requires, may prove illusory to the assessee. If the assessee does not know on what point he is to be heard, he may not visualise what ha has to say at the hearing at all.

Headnote:

INCOME TAX - Revision of assessment - Section 33B of the Income-tax Act, 1922 - Principles of natural justice - Scope and extent - Grounds for revision to be disclosed in the notice - Reasonable time to be given to the assessee to show cause - Commissioner's power to make enquiries - Disclosure of materials collected on enquiry - Use of undisclosed materials as supporting materials - Effect of failure to disclose grounds or materials - Absence of assessee at hearing - Commissioner's duty to give further notice.

Fact of the Case:

The petitioner, an assessee, filed voluntary returns of income for the assessment years 1953-54 to 1961-62. The Income Tax Officer assessed the petitioner for the assessment year 1953-54 to a total income of Rs. 5,000. For the subsequent years, the same officer passed stereotyped assessment orders more or less in the line indicated above and assessed the total income of the petitioner as indicated. On February 28, 1963, the respondent Commissioner of Income-tax sent a notice under Section 33-B of the Income Tax Act, 1922, to the petitioner, which read as follows. "On calling for and examining the records of your case for the assessment years 1953-54, 1954-55, 1955-56, 1956-57, 1957-58, 1958-59, 1959-60, 1960-61 and 1961-62 and other connected records I consider that the orders of assessment passed by the Income Tax Officer 'B' Ward, 24-Parganas on 23-3-61 and 17-1-62 are erroneous in so far as they are prejudicial to the interests of revenue for the following reasons amongst others, 2. Enquiries made have revealed that you neither resided at 19 Purna Mitra Place, Calcutta, nor carried on any business from the said address. Also the Income Tax Officer was not justified in accepting the initial capital, the income from business etc. without any enquiry or evidence whatsoever. 3. I, therefore, propose to puss such orders thereon as the circumstances of the cases justify after giving you an opportunity of being heard under the powers vested in me under Section 33-B of the Income-tax Act, 1922. The cases will be heard at 11 A.M. on 8-3-63 at my above office when you are required to produce the necessary evidence in support of your contentious. Objections In writing accompanied by the necessary evidence, if any, received on or before the appointment for personal hearing will also be duly considered. Please note that no adjournment of the hearing will be granted." On receipt of the notice the asscssee petitioner wrote back to the respondent Commissioner, on March 7, 1963, to the following effect: "You have been pleased to mention that certain enquiries made had revealed that the assessee never resided at 19, Purna Mitra Place, Calcutta. In this connection it is submitted that the assessee did reside at the said premises No. 19, Purna Mitra Place, Calcutta. Such residence at the aforesaid place was during the months January 1961 to June 1961, both inclusive. The rent receipts in son's name are available and the same are forwarded herewith. With regard to the observation that the Income-tax Officer was not justified in accepting initial capital, etc., without any enquiry or evidence whatsoever it is submitted that in this connection the Income-tax Officer did make enquiries and as required by him, detailed explanation was also furnished by the assessee in writing. The initial capital which has been accepted by the Income-tax Officer was Rupees 9,400 most of which were received from rather and other relations and had amounted to the aforesaid sum including interest earned during several years and further small gifts received in connection with various ceremonies as usual in the community, such amounts are not unreasonable to be in possession of ladies. Certain evidences were also produced before him which were also looked into and the assessment was completed thereafter. With regard to the assessment for 1961-62, it is submitted that the said assessment was made by subsequent Income-tax Officer at a later date mainly from income from dividend. With regard to the contention that the assessee used to earn interest from time to time in respect of amounts advanced to various persons on security of ornaments or otherwise, certificates from the several persons have been obtained, within the short time allowed, in support of the above facts and the same are forwarded herewith in original. From the above it would be clearly proved that the assessee was earning interest on loans and/or pawning."

Finding of the Court:

The Commissioner of Income-tax found that the Income-tax Officer had made the orders of assessment without enquiry and without supporting evidence. He also found that the assessee was either not carrying on any pawn-broking business or that even if she was carrying on some loan business, was doing so as a benamdar of her husband and that she filed voluntary returns, therein alleging false address and further alleging carriage of pawn-broking business with capital of her own, in order to explain away large investments made by her in the business of her husband.

Issues: Whether the revision order is to be set aside because of the defect noted above.

Ratio Decidendi: The Commissioner of Income-tax did not find that the notices were not properly issued or served or that the records were interpolated in order to make a show of service. The ground relied on by the Commissioner of Income-tax was that the Income-tax Officer had passed the orders of assessments without enquiry and without evidence. That ground was disclosed to the petitioner. In order to establish that ground the respondent Commissioner, firstly, relied on the fact that between the filing of the returns and the making of the order not even a week elapsed, within which period the notices under Section 23(2) were issued, the date of hearing was fixed, the representative of the party was heard and the order was made. These facts were all within the knowledge of the petitioner and, appearing as they did from the records, did not require to be ascertained by the Commissioner of Income-tax, by private enquiries. The respondent Commissioner did not infer from these facts that the Income-tax Officer was manipulating the records to help the assessee but utilised those facts to establish the ground that the Income-tax Officer proceeded in haste and without enquiry. Secondly, he quoted from the record, by way of example, one assessment order so as to emphasise upon the scrappy nature of the order made in all the assessment years. The ground disclosed was that the Income-tax Officer had made assessment without enquiry and evidence. To establish that ground, the haste with which the assessments were completed and the scrappy nature of the orders were of relevant consideration. These facts were matters of record, all within the knowledge of the assessee petitioner and did not require to be included in the notice by way of exemplification. The last set of facts relied on by the respondent Commissioner, in support of this ground, namely, (i) that the assessee was either not carrying on any pawn-broking business or that even if she was carrying on some loan business, was doing so as a benamdar of her husband and (ii) that she filed voluntary returns, therein alleging false address and further alleging carriage of pawn-broking business with capital of her own, in order to explain away large investments made by her in the business of her husband, were no doubt facts ascertained by the respondent Commissioner himself, namely, the absence of pawn-broking business, the benami loan business and the investments made by the assessee petitioner in her husband's business. In my opinion, the aforesaid facts were referred to by the respondent Commissioner as supporting materials for his conclusion that the Income-tax Officer had made the orders of assessment without any enquiry and without probing into the evidence. What the Commissioner of Income-tax meant to say was that if the Income-tax Officer had not proceeded so hastily, the aforesaid facts might not have escaped his notice and revenue would not have suffered. I, therefore, find that the present case is not distinguishable from the S.N. Namasivayam Chettiar's case (supra). Moreover, in the case of State of Orissa v. Bidyabhushan the Supreme Court observed that where a disciplinary proceeding was started on more charges than one and where the High Court found that the findings on some of the charges only violated the principles of natural justice the High Court had no power to interfere with the penalty and ask the authorities to reconsider the penalty.

Final Decision: Rule discharged with costs.