TaxTMI 
TaxTMI 
1938 (4) TMI 1
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....espondents thought fit to comply with these notices, they would have avoided a good many of the difficulties in which they subsequently found themselves involved. Unfortunately they completely ignored the notices. The duty of the Income-tax Officer in such circumstances is prescribed by Section 23(4) of the Act. It is to "make the assessment to the best of his judgment." One of the peculiarities of most Income Tax Act is that the word "assessment" is used as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act for imposing liability upon the tax-payer. The Indian Income Tax Act is no exception in this respect, and some discussion took place before their Lordships as to the meaning of the words "make the assessment" in Section 23(4), the question debated being whether the words mean no more than "compute the total income" or whether they include also the determination of the tax payable. It was pointed out that by sub-section (1) of the same section, which deals with the cases where the officer is satisfied with the return made by the tax-payer, the officer is in terms directed bo....
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....any, unregistered firm or other association of individuals, not being a registered firm, an additional duty of income-tax (in this Act referred to as super-tax) at the rate or rates laid down for that year by Act of the Indian Legislature." By virtue of Section 56 the total income of an unregistered firm is for the purposes of super-tax the total income as assessed for the purposes of income-tax, and an assessment (which here must mean a computation) of total income that has become final and conclusive for the purposes of income-tax is made final and conclusive for the purposes of super-tax for the same year. By Section 58 all the provisions of the Act (with certain exceptions not material for the present purpose) are made applicable so far as may be to the charge, assessment, collection and recovery of super-tax. By Section 2(4) the words "registered firm" are defined as meaning a firm constituted as therein mentioned of which the prescribed particulars have been registered with the Income-tax Officer in the prescribed manner. On May 18, 1926, the respondents applied to the Income-tax Officer for registration and such registration was effected by him on January 17, 192....
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.... has been taken by any authority subordinate to him........" "(2) On receipt of the record the Commissioner may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may pass such orders thereon as he thinks fit: Provided that he shall not pass any order prejudicial to an assessee without hearing him or giving him a reasonable opportunity of being heard." The circumstances in which in the present case the Commissioner exercised or purports to exercise the powers conferred upon him by the section have been described by him in the following words:- "In January, 1928, it was brought to the notice of the Commissioner of Income-tax that the deed of partnership produced by the firm for the purposes of its registration was not a valid deed of partnership and that, therefore, the order granting registration was not correct. Hence a notice under Section 33 of the Act was issued to the firm on January 9, 1928, calling upon it to show cause why the Income-tax Officer's order of January 17, 1927, registering the firm be not set aside. The firm thereupon sent a written representation and after considering it, the Commissioner, in virtue o....
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.... power of the Income tax Officer to make the order at all. Accordingly on June 4, 1929, they appealed to the Assistant Commissioner under Section 30(1) asking that the order might be set aside. It is clear from the Commissioner's statement cited above that the Income- tax Officer in making the order complained of was acting in pursuance of the directions given to him by the Commissioner under Section 33; and at that time, as has already been stated, no appeal could be brought against an order made under that section. But no such order can be made that is inconsistent with the other provisions of the Act. One of the questions, therefore, arising upon the appeal, was whether the Income-tax Officer had any power to make the order apart from the direction given to him by the Commissioner. If he had not, the fact that such direction was given an irrelevant circumstance. Another question arising upon the appeal was as to its competency. Having regard to Sec. 58(1) of the Act, the provisions contained in Section 30(1) giving a right to appeal to the Assistant Commissioner in the case of an assessee denying his liability to be "assessed under the Act", which must mean in that context "....
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....ny application being made under sub-section (2) the Commissioner refuses to state the case on the ground that no question of law arises, the assessee may........apply to the High Court, and the High Court, if it is not satisfied with the correctness of the Commissioner's decision, may require the Commissioner to state the case, and, to refer it, and on receipt of any such requisition, the Commissioner shall state and refer the case accordingly". The application to the Commissioner to set aside the order of the Income tax Officer was rejected by the Commissioner as was the application to state a case. He regarded the case as a clear one of assessment under Section 23(4) in respect of which no appeal would lie. The appellate proceedings before the Assistant Commissioner and the appellate order were, therefore, in his opinion illegal. "Hence," said he, "I quash them under Sec. 33 of the Act". The proceedings having been quashed, there was, in his view, no order out of which any questions of law could arise and nothing, therefore, that could be referred to the High Court under Section 66(2). He accordingly refused to state a case. In their Lordships' opinion the Commissio....
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....wing steps. In the first place the taxable income of the taxpayer has to be computed. In the next place the sum payable by him on the basis of such computation has to be determined. Finally a notice of demand in the prescribed form specifying the sum so payable has to be served upon the tax payer. The second of these steps involves the determination of two sums, namely, the sum payable for income tax and the sum payable for super tax. The notice of demand in the prescribed form also provides for the sums payable for income tax and super tax being specified separately. Considerable discussion accordingly took place before the High Court on the question whether a demand for super tax in order to be valid ought to be made simultaneously with the demand for income tax. Aston, A.J.C., considered that the demand for super tax should be made within a reasonable time of the assessment for income tax, meaning no doubt, by assessment the service of the notice of demand for income tax which normally completes the assessment. Rupchand Bilaram, A.J.C., was of opinion, that the demand for super tax should be made within a reasonable time, and, therefore, almost simultaneously with the demand for....
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....inally determined and none the less because the question of their liability to super-tax had been determined in their favour. It was, indeed, contended before their Lordships that the assessment could not be regarded as having been determined inasmuch as the Commissioner might at any time, and apparently after any lapse of time, however long, cancel the registration of the respondents as a registered firm and so subject the respondents to liability to pay super-tax. Their Lordships would, in any case, hesitage long before acceding to a contention that would lead to so extravagant results. In their opinion, however, the contention cannot prevail. The Commissioner's power under Section 33, can only be exercised subject to the provisions of the Act of which the provisions in Sections 34 and 35, are in this respect of the greatest importance. These sections are or were at the material time as follows: "34. If for any reason income, profits or gains chargeable to income-tax has escaped assessment in any year, or has been assessed at too low a rate, the Income-tax Officer may at any time wit....