TaxTMI 
TaxTMI 
1944 (3) TMI 9
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....uary, 1933, the Income Tax Officer repelled this contention and on the 8th June, 1933, an appeal against this order to the Assistant Commissioner also failed. The matter came before this Court under sub-section (3) of Section 66 of the Income Tax Act and was ultimately disposed of by a Full Bench composed of Sir Douglas Young, Chief Justice, Mr. Justice Addison and Mr. Justice Tek Chand. On the 4th June, 1935, the majority of the Court, Mr. Justice Tek Chand dissenting, found against the Trust and their decision is reported in In re The Trustees of the Tribune Trust. Against this decision the Trust preferred an appeal to His Majesty in Council and their Lordships on the 13th June, 1939, delivered judgment in favour of the Trust. The judgment is reported in In re The Trustees of the Tribune Trust. In the meantime, however, returns had been furnished and assessments made relating to the assessment years 1933-34, 1934-35, 1935-36, 1936-37, 1937-38 and 1938-39. Further, a supplementary assessment relating to 1931-32 and also been made meanwhile. The details of these assessments being relevant to the question at issue before us are set out below for facility of reference. On the 1....
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....he High Court dealing with the case had on a deference of opinion referred the matter to a Full Bench, the examination of accounts may be postponed till such time as the final orders were pronounced. The decision of the Full Bench was pronounced on the 4th June, 1935, and on the 18th July, 1935, the manager of the Trust wrote a letter (Ex. F) to the Income Tax Officer stating that the accounts were being submitted but under protest, inasmuch as it was still considered that the institution was a charitable trust and that in the opinion of the trustees its income could not be assessed under the existing law. He was further informed that the Trust was contemplating an appeal to his Majesty in Council against the decision of the High Court. The Income Tax Officer did not agree and made an assessment on the 4th September, 1935. On the 21st October, 1935, the tax was paid under protest and on the 31st August, 1936, the appeal filed by the Trust against the order of the Income Tax Officer was dismissed by the Assistant Commissioner. No further action was taken by the assessees. The return relating to the assessment year 1934-35 (accounting year 1933) had also been furnished under prote....
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....ry, 1939. In this year too there was no appeal. After the decision of their Lordships of the Privy Council in June, 1939, Mr. Sondhi wrote a letter to the Commissioner of Income Tax on the 30th August, 1939, (Annexure B), stating "that in view of the judgment of the Privy Council the assessments for the years 1933-34, 1934-35, 1935-36, 1936-37, 1937-38 and 1938-39 as well as the supplementary assessment made under Section 34 relating to the assessment year 1931-32 should also be reviewed and cancelled and refund granted for the sums already paid." To this letter a statement was attached showing the various payments made and the dates on which they were made. The total sum due from the department amounted to Rs. 97,152/1/- including the tax deducted at source on the securities held by the Trust as well as on the dividends earned by it. It may be observed here that two of these payments had been made within one year from the day of the year in which the tax was recovered, namely, Rs. 20,181/2/- for the assessment year 1937-38 made on the 26th March, 1938, and Rs. 18,262/- for the assessment year 1938-39 made on the 3rd January, 1939. These sums included the tax deducted at source ....
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....ce the Privy Council was not likely to ordeal with the question for some time and a substantial amount of revenue was clearly due to Government under the existing orders. (3) Some of the returns were submitted under protest but except to the extents stated above the assessees made no attempt to keep these assessments alive by filing appeals or applications for references to the High Court within the periods of limitation prescribed by the Income Tax Act. (4) No reference lay to the High Court on the basis of his order since that order merely amounted to a refusal to reopen the question which could previously have been referred to the High Court on the basis of the orders passed by the Assistant Commissioner. In this connection he relied on a case decided by the Nagpur High Court and reported as Central India Spinning, Weaving and Manufacturing Co., Ltd. (Empress Mills) v. Commissioner of Income Tax, C.P. & U.P., and distinguished a case of the Madras High Court reported as Voora Sreeramulu Chetty v. Commissioner of Income Tax, Madras. (5) The question considered in the Assistant Commissioners order was the only question of law which could be said to arise....
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....act under Section 33 of the Act and to cancel the assessments made after the assessment which become the subject matter of reference was ultimately decided by their Lordships of the Privy Council ? (2) Whether the order under Section 33 is not an order prejudicial to the assessee, and whether it is necessary that a question if law that can be Referred to the High Court under Section 66 (3) should be one which is common to the decision of the Assistant Commissioner of Income Tax and the Commissioner of Income Tax, and whether it was obligatory in law on the assessee to keep alive all these assessments when the matter of principle of taxation was pending for decision before the Privy Council on a reference made by the Commissioner himself ? (3) Whether in law, regarding an illegal and ultra vires assessment it is necessary for the assessee to keep alive all subsequent assessments after the question of the illegality of a previous assessment is pending for decision in accordance with law before the highs Tribunal, and whether in law the decision on the reference under Section 66 (2) does not bind the assessments of all subsequent years ? These applications were di....
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....o the year 1932-33 are not ultra vires and therefore no assessments in the eye of the law at all ? Before concluding he further made the following observations :- "I may say in this connection that I am definitely of opinion that the Income Tax Commissioner would have exercised a wise discretion under Section 33 if, without raising technical objections to the refundability or otherwise of the sums levied, he had merely considered the question from the broad point of view that the Crown should not take advantage of any technical difficulties in refunding what obviously the assessee was entitled to retain on the merits." When the time for stating the case arrived, Mr. Shearer had been succeeded by Mr. Harper. In the statement of the case drawn up by him he again made a preliminary submission that in spite of the decision of the Bench to the contrary no reference was competent. On the questions forwarded by the Bench he adopted practically the same reasoning as had been employed by Mr. Shearer and proposed that the first question should be answered in the affirmative and the second and third in the negative. On the first question he stated : "The Trust was not dep....
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....ted a refund to the assessee under Section 50 of the Act in respect of the last three assessments, i.e., the 1936-37 (supplementary), 1937-38 and 1938-39. I may remark at this stage that in the course of the arguments addressed to us it was suggested that the real points at issue had not been entirely covered by the three questions formulated by the Bench at the mandamus stage and that the present Bench could recast them, so as to cover entirely all the issues raised in the case. My learned brother had no objection to this course being adopted and by consent of the parties the three questions originally formulated were recast in the following manner :- (1) Whether the assessments made subsequent to the year 1932-33 including the supplementary assessment for the year 1931-32 were nullity in view of the decision of their Lordships of the Privy Council reported in I.L.R. 20 Lah. 475 ? (2) Whether the Commissioner of Income Tax acted improperly in refusing to exercise the discretion vested in him to cancel the said assessments and to order to repayment of the sums received from the assessees on account of those assessments ? (3) Whether the assessees could....
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.... (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." It may be observed here that this section has subsequently been amended to a very large extent and inserted as Section 33A but we have to deal with it as it stood prior to its amendment, as it was in force in that form at the time when the question was raised before the Commissioner. Sub-section (2) of Section 66 so far as it concerns us runs as follows :- "Within sixty days of the date on which he (the assessee) is served with notice..... of an order under Section 33 enhancing an assessment or otherwise prejudicial to him... the assessee in respect of whom the order.... was passed may, by application..... require the Commissioner to refer to the High Court any question of law arising out of such order.... Provided that a reference shall lie from an order under Section 33 only on a question of law arising out o....
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....ndent order which to all intents and purposes was prejudicial to the assessee and, therefore, there was no question of his having affirmed the previous order made by the subordinate authorities. Section 66 (2) clearly contemplates a reference on any order prejudicial to the assessee and the words used can in no manner be confused with the words "enhancing an assessment" that occur before. We cannot lose sight of the word "otherwise" used by the Legislature to qualify the word "prejudicial." An order enhancing an assessment is no doubt prejudicial to an assessee but if the order is prejudicial in any other way it is still covered by this sub-section. With all due deference to Mr. Harper I may say that I do not fully appreciate the argument employed by him in the third paragraph of his preliminary submission to justify his contention that no reference lay in this matter. The Trust moved the Commissioner to cancel the assessments made subsequently to the order of the Privy Council and while he did not decline to entertain that application he refused to cancel the assessment. How in these circumstances it can be argued that that order was not prejudicial to the Trust passes ones com....
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....he wording of the statue which says that the Act does not apply to any income derived from property held under trust or other legal obligation wholly for charitable purposes. In my view, there is force in this contention. Section 48 does not contemplate such assessments as are outside the Act and consequently Chapter VII does not apply to the present assessment. But even if it were held that the tax paid by the Trust during the years following 1932-33 and before the case was decided by the Privy Council was wrongly paid within the meaning of sub-section (2), the claim of the Trust would in any circumstances have been within time in respect of Rs. 38,670/2/- made up as follows :- Calendar year Assessess-ment Date of Assessme-nt Order Date of payment Amount of Tax deducted Gr. And total Income Tax paid at source on securities 1936 1937-38 26-1-38 26-3-38 17576/5/- 2604/13/- 20181/2/- 1937 1938-39 26-10-38 3-1-89 15283/8/- 2978/8/- 18262/-/- 1935/36 1936-37 26-10-38 6-12-38 227/- - 227/-/ 33,086/13/- 5,583/5- 38,670/2/- Counsel for the Trust has urged that ....
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....denied by the Department at any stage. Mr. Shearer had in his order of the 23rd November 1939 declined to grant repayment to the assessee merely on the ground that the assessee had not kept "these assessments alive by having them included in the reference to the Privy Council." And this opinion is reflected both in the order of Mr. Shearer passed later on on the 9th April 1940 and the statement of the case drawn up by Mr. Harper on the 1st April 1943. In fact, counsel for the Commissioner has conceded before us that the Commissioner had jurisdiction to grant the relief prayed for but he has added that as the matter was only discretionary with him and the discretion had been exercised against the assessees the High Court could not interfere with it. The question, therefore, arises whether in the face of the admission made by the Department that the Commissioner had authority to cancel these assessments under Section 33, it can reasonably be said that under the law it was incumbent upon the assessee to have gone up to the Privy Council in every case so as to enable him to have secured the refund. In my opinion, once it is conceded that the remedy under Section 33 was open to the asse....
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....ny period within which the Commissioner may exercise the powers vested in him and, consequently, he cannot be justified in rejecting an application merely on the ground that it was belated. Counsel for the Income Tax Department neither cited any authority before us to support the opinion of the Commissioner nor did not discuss the matter any further beyond reiterating what had already been stated by the Commissioner either in the order refusing reference or in the statement of the case drawn up. Counsel for the Trust himself brought to out notice certain cases which could be pointed out were distinguishable. In Marriot v. Hampton, it was observed that "where money has been paid by the plaintiff to the defendant under the compulsion of legal process which it afterwards discovered not to have been due, the plaintiff cannot recover it back in an action for money had and received." The principle underlying this judgment was discussed by Lord Justice Turner in Shama Purshad Roy Chowdhry v. Hurro Purshad Roy Chowdhry, and distinguished in a case in which an attempt had been made to recover by a new suit certain money which had been paid under a decree. His Lordship observed : ....
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.... enhanced. Before the date of the Privy Council judgment the defendant had obtained several other judgments for enhanced rent against the plaintiff. After the decision of the Privy Council, without making any application for review of those judgments, the plaintiff brought a suit to recover the difference between the amount of enhanced rent recovered and the final rent which he was bound to pay. Three learned Judges of the Calcutta High Court basing their decision on Shama Purshad Roy Chowdhry v. Hurro Purshad Roy Chowdhry held that the decrees for enhanced rent had been superseded had that the suit was competent. The remaining two members of the Bench distinguished the Privy Council case and applying the principle of Marriot v. Hampton came to the conclusion that the plaintiff was not entitled to recover. Sir Richard Garth, Chief Justice, who wrote the designating judgment in concurrence with Mr. Justice Jackson mainly based his decision on the ground that on looking at the language of their Lordships of the Privy Council in the decree relied upon he could not discover that they had dealt, or intended to deal, with anything else than the actual subject-matter of the suit upon whic....
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.... appears to me that a review of judgment would be not only the most complete, but the most appropriate and unobjectionable remedy." It may be remarked in this connection that Section 33 is headed power of review. But whether it is review in the technical sense of the term or revision, the fact remains that the Commissioner has been clothed with unfettered powers to make any order he likes under this section regardless of the time that has expired. Counsel for the Trust further refereed to the various sections dealing with revisional powers both under the Code of Civil Procedure and the Revenue Acts with a view to emphasize the fact that inasmuch as no time limit was prescribed in these sections, petitions for revision had been entertained in some cases more than seven months after the order (Kapur Singh v. Firm Thakar Das Gokul Chand), in some after about ten months (Yegnasami Iyer v. K. Chidambaranath Mudaliar), in some after seventeen months (Fazl Ilahi v. Muhammad Jan and Others) and in some after more than three years (2 P. R. 1889 Rev.). It is not necessary, however, to examine these cases at length as in the present case if the Trust was entitled to the relief claimed o....