TaxTMI 
TaxTMI 
1963 (2) TMI 47
X X X X Extracts X X X X
X X X X Extracts X X X X
....ration of Rs. 1,000 per mensem besides 10% of the net profits. On 17th August, 1942, the Globe Theatre? Ltd. passed a resolution increasing the remuneration to the managing agents to Rs. 2,000 per mensem and 25% of the net profits. Despite the resolution, the Income-tax Officer assessing the Globe Theatres Ltd. for the relevant assessment years allowed the deduction in respect of managing agency commission at Rs. 2,000 per mensem and 10% of the net profits, as permissible expenses under section 10(2)(xv) of the Act. The Income-tax Officer disallowed the balance as expenditure not incurred wholly and exclusively for the purposes of the company's business. In the hands of the applicant-firm, however, the Income-tax Officer assessed the entire amount of the managing agency remuneration at Rs. 2,000 per mensem and 25% of the net profits as the taxable income of the firm for the relevant assessment years. When the matter came before the Appellate Tribunal in the second appeals filed by the applicant-firm against the income-tax assessments, the Tribunal held that the entire amount of the managing agency remuneration was the income in the hands of the applicant-firm but it was exempt ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....944-45, 1945-46 and 1946-47?" *[1953] 23 I.T.R. 180 (S.C.); [1953] S.C.R. 463. Dr. D. P. Pal, for the assessee E. R. Meyer and B. L. Pal, for the Commissioner JUDGMENT LAIK J.- This is a consolidated reference under section 66(1) of the Income-tax Act at the instance of the assessee in respect of the 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 of the case, the Tribunal was justified in not admitting 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?" 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. The facts material for the purpose of the reference are: The applicantfirm, Messrs. Kooka Sidhwa & Company, Calcutta, is the managing agents of a limited....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t Commissioner went into the merits of the appeals and held on July 26, 1?57, 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 hear such appeals. 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 de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tax Officer revising the original assessment, on the direction of the Appellate Tribu?al, would be an order passed under section 23 of the Act and would be open to appeal and further appeal. Dr. Debi Pal, appearing on behalf of the assessee-applicant, mainly contended that the principles laid down in the said decision of the Supreme Court in the case of Arunachalam Chettiar* had been impliedly overruled by another decision of the Supreme Court in the case of Melaram & Sons v. Commissioner of Income-tax [1956] 29 I.T.R. 607; S.C.R. 166. According to him the facts in the earlier decision are also different. He, therefore, contended that the ratio decidendi of the said earlier decision of the Supreme Court, viz., that of Arunachalam Chettiar [1953] 23 I.T.R. 180; [1953] S.C.R. 463, had been wrongly applied by the Appellate Tribunal in the instant case. Dr. Pal submitted, though generally but forcefully, that it was our duty to follow a later decision of the Supreme Court on the same point even if the earlier decision of the Supreme Court was neither expressly overruled nor followed by their Lordships of the Supreme Court in the later decision and in that event it is the option of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... I.T.R. 180, 187; [1953] S.C.R. 463, 472 the facts were that an appeal was preferred by the assessee under section 31(1) of the Act against an order of the Income-tax Officer, and the same was dismissed by the Appellate Assistant Commissioner as incompetent. No appeal was filed against this order and it became final. But acting on a suggestion made in the order of the Appellate Assistant Commissioner the assessee filed an original miscellaneous application before the Appellate Tribunal for relief. On this miscellaneous petition the Tribunal set aside the findings of the Income-tax Officer and directed him to make a fresh computation. Thereafter, at the instance of the Commissioner of Income-tax, the Tribunal referred the following question under section 66(1) of the Act to the Madras High Court: "Whether on the facts and circumstances of this case the order of the Bench dated 20th February, 1946, in the miscellaneous application is an appropriate order and is legally valid and passed within the jurisdiction and binding on the Income-tax Officer." The High Court declined to answer this r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m unable to accept Mr. Meyer's contention because their Lordships in the case of Mela Ram made it clear that the observations referred to in pages 474 and 475 came to be made by way of an answer put forward by the learned Attorney-General in support of the appeal. Therefore on the principles in Mela Ram's case ([1956] 29 I.T.R. 607 (S.C.)), the appeals giving rise to the instant reference should have been admitted by the Tribunal. As proposed to be done by my learned brother, I need not detail myself in dealing with the scope and meaning of section 23 of the Act, the true effect of the expressions "final assessment", "revision" and "amendment of the assessment" on this branch of the law or by referring to the decisions cited at the bar, viz., three Privy Council decisions, Seth Badridas Daga v. Commissioner of Income-tax([1949] 17 I.T.R. 209 (P.C.), Rajendranath Mukherji v. Commissioner of Income- tax(5) and Commissioner of Income-tax v. Khemchand Ramdas ([1934] 2 I.T.R. 71 (P.C.), and two other decision of the Supreme Court, viz., C.A. Abraham v. Income-tax Officer, Kottayam([1938] 6 I.T.R. 414 (P.C.)) and Income-tax Officer, V Circle, Madras v. S.K. Habibullah ([1962] ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at 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. This reference is a battle for procedure. The controversy raised is a purely procedural controversy. No substantive question of income-tax law is raised in this reference. The main question and the only question is whether the Tribunal was justified in refusing to admit the assessee's appeals. In coming to its conclusion the Tribunal holds that in carrying out the direction of a previous Tribunal and in doing what the Income-tax Officer did on the 26th September, 1945, the Income-tax Officer cannot be regarded as having acted under section 23 or under section 27 of the Income-tax Act. Therefore, the Tribunal holds no appeal lies from that order of the Income- tax Officer under section 30(1) of the Act. The Tribunal came to the conclusion that there was no proper appeal before the Appellate Assistant Commissioner such as is contemplated by section 30(1) of the Act, and, therefore, the order made by the Appellate Assistant Commissioner cannot be regarded as an order made by him under sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ant Commissioner to be incompetent. The Appellate Assistant Commissioner, therefore, decided the appeal on merits. This question of incompetence of the appeal was raised only when there was a further appeal to the Tribunal. The Tribunal decided in the manner quoted above. Thirdly, the scope of application of the decision in Arunachalam Chettiar's case [1953] 23 I.T.R. 180; [1953] S.C.R. 463 has been considerably reduced and circumscribed by the subsequent decision of the Supreme Court in Mela Ram & Sons v. Commissioner of Income-tax [1956] 29 I.T.R. 607; [1956] S.C.R. 166. The original order of the previous Tribunal which started these proceedings was made on the 31st August, 1950, whereby the Tribunal said: "We direct 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, pursuant to these directions, made the revision and the amendment of the assessments which he had previously made. It is clear from this order of the Tribunal that this direction to revise and amend the assessmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssment by a direction from the Tribunal under section 33(4) he cannot any more do it under section 23 because no fresh return is made under section 22 nor any further notice is given to the assessee. This argument is based on a fallacy. The Income-tax Officer's duty to assess the total income of the assessee and to determine the sum payable by him on the basis of the return under section 23 of the Act is the whole process of assessment which may end with his order or may be revised by the higher appellate authorities including the Appellate Assistant Commissioner and the Tribunal recognised by the Income-tax Act. If, therefore, such higher appellate authorities such as the Appellate Assistant Commissioner or the Tribunal directs or orders him to do something again with regard to the assessment he has already made and that by way of revision or amendment, the Income-tax Officer must be held to be still under section 23 of the Act on the process of assessing the total income of the assessee and determining the sum payable on the basis of the return already filed by him. No other construction or interpretation of section 23 of the Act seems to me to be sensible or consistent with ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....clear by Lord Romer in Khemchand Ramdas's case [1938] L.R. 65 I.A. 236; [1938] 6 I.T.R. 414, 424, at page 248, in these terms: "It is possible that the final assessment may not be made until some years after the close of the fiscal year. Questions of difficulty may arise and cause considerable delay. Proceedings may be taken by way of appeal and cause further delay. Until all such questions are determined, and all such proceedings have come to an end, there can be no final assessment. But when once a final assessment is arrived at, it cannot, in their Lordships' opinion, be reopened except in the circumstances detailed in sections 34 and 35 of the Act (to which reference is made hereafter) and within the time limited by those sections." Therefore, Lord Romer makes it clear that the duty of assessing the total income and of determining the sum payable by the assessee, which is cast upon the Income-tax Officer under section 23 of the Act, is not complete until these further proceedings by way of appeals come to an end. Therefore, it is inescapable that the revision and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tions given by him are binding on him, not as res judicata, but as orders to which he is subject." The same High Court in another case, Santosh Kumar v. Commissioner of Income-tax [1962] 46 I.T.R. 1236, emphasies the important basic fact in Arunachalam Chettiar's case [1953] 23 I.T.R. 180, namely, that there the whole procedure originated with a miscellaneous application and ended with a miscellaneous order unknown to the Income-tax Act. Mr. Meyer, learned counsel for the revenue authorities, looking at the array of authorities against his contention made an attempt to reclassify the Tribunal's order to revise in this case by saying that the word "revise" is loose language to be used by the Tribunal and Mr. Meyer was anxious to remind us to make a contrast by reference to such words as "confirm", "reduce", or "enhance" or "annual" or "set aside" as used in section 31(3) of the Income-tax Act. I am not impressed by that argument. The word "revise" certainly comes within the meaning of "such orders thereon as it thinks fit" in section 33(4) of the Income-tax Act. Incidentally Mr. Meyer is further faced with the difficulty that he is to meet in making reference to other ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... India [1962] 46 I.T.R. 104, where, at page 121, it was said: "In the case of Metropolitan Structural Works Ltd. v. Union of India** the second course mentioned above was followed; and it was held that the successive demand notices were legal, and limitation would run from the last demand notice." This line of argument adopted by Mr. Meyer for the income-tax authorities suffers from many defects. In the first place this argument seems to assume that section 30(2) of the Income-tax Act somehow or other refers to notice of demand under section 22 of the Act. It is necessary to point out that no reference to section 22 of the Act is expressly made in section 30(2) of the Act which prescribes the ordinary time for filing appeal to be thirty days of the payment of tax, nor does section 30(2) refer expressly either to section 29 of the Income-tax Act dealing with the notice of demand. All that section 30(2) says, inter alia, is that the thirty days may be computed from the "receipt of notice of demand relating to each assessment". Now there is already a notice of demand. The word "the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "ordinarily" and which also may be extended and excused if the Appellate Assistant Commissioner is satisfied about sufficient cause for not presenting it within the period prescribed. Section 30(3) also insists that the appeal shall be in the prescribed from and shall be verified in the prescribed manner. The statutory right of appeal cannot be wiped out by the procedural formalities which the appellant has to observe. Mr. Meyer's argument at best makes a confusion between the right of appeal with the procedural requisites for such appeal. Were it necessary for us to hold that the right of appeal was clearly given under section 30(1) but no time-limit was prescribed for such appeal we would have held in favour of the right of appeal even though there was no limitation for filing such appeal. To argue back that because the time for presenting the appeal in a particular case was not specially mentioned, therefore the substantive right of appeal given in the section must disappear will be really to beg the question. For these reasons we overrule Mr. Meyer's objections on these grounds. The last submission on behalf of the income-tax authorities is that this reference itsel....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Appellate Tribunal within the meaning of section 66(1) of the Act. No doubt if it had originated in a miscellaneous order on a miscellaneous application unknown to the procedure recognised by the Income-tax Act then this argument of Mr. Meyer would have acquired great force. But the facts do not justify and support this argument in this reference. The two cases are of no help to Mr. Meyer. The case of Ramaswami Chettiar v. Commissioner of Income-tax [1956] 30 I.T.R. 281 is distinguishable. In the first place, in that case the application that was considered was an application not recognised by the Income-tax Act at all as pointed out by Rajagopala Ayyangar J., at page 285, where the learned judge observed that: "It will be seen that this was not an application contemplated by any of the provisions of the Indian Income-tax Act; and it is for this reason that we have termed it a miscellaneous petition." In fact, there the original assessment had become final and no appeal had been preferred against that assessment order as pointed out at page 284 of that report. Secondly, there in....