Decided on October 17,1962

Gaurishanker Kedia Appellant


TAMBE, AG.C.J. - (1.)THIS is a reference under sub -section (1) of section 66 of the Income -tax Act. We are here concerned with the assessment year 1946 -47, the relevant previous year being one ended with 31st March, 1946. The 4th Income -tax Officer, C III -Ward, Bombay, came to know that the assessee received a remittance of Rs. 1,50,000 by telegraphic transfer on October 29, 1945. The said amount was dispatched from Bombay and was credited in the assessee's account in the Bank of Jaipur Limited in its Jaipur branch. On further inquiries, the Income -tax Officer came to know that the assessee was carrying on business at Kalbadevi Road, Bombay. He, therefore, after obtaining the necessary sanction, took action under section 34(1) (a) of the Income -tax Act. A notice under section 34(1) (a) read with section 22(2) was served on the assessee by affixing it at the premises, 232 -234, Kalbadevi Road, Bombay, where, according to the information received by the Income -tax Officer, the assessee was carrying on business in Bombay. This notice was pasted on the premises on March 29, 1955. The assessee did not furnish any return of his income in response to the aforesaid notice. During the inquiries, the Income -tax Officer further came to know that there were also other remittances from Bombay to the assessee's account and the extent of such transactions was quite a large one. In an assessment under section 23(4), the Income -tax Officer held that the amounts credited in the bank accounts represented the profits of the assessee in the business of speculation. This finding was based on the fact that the address of the assessee in Bombay was Marwari Chambers, which was in occupation of speculators. The Income -tax Officer estimated the income of the assessee at Rs. 3,00,000 and completed the assessment under section 23(4) on 24th March, 1956, treating the assessee as a resident. Consequent on the assessment under section 23(4), a notice of demand was issued, and was served at the same address, i.e., 232 -234, Kalbadevi Road, Bombay. On April 21, 1956, the assessee made an application praying that the assessment made under section 23(4) (b) be cancelled and the Income -tax Officer should proceed to make a fresh assessment after taking into consideration the objections raised by him in his application under section 27. In this application, the assessee contended that in the relevant assessment year, the assessee was residing in Jaipur only and, therefore, was a non -resident in the taxable territories; in that year, he had never come to Bombay, and it was also not correct that he was carrying on any business in Bombay, or that he had any taxable income accruing or arising to him in Bombay. He further stated in the application that it was not correct that he had any address in British India, much less at the address at 232 -234, Kalbadevi Road, Bombay -2. The assessee further stated in the application that as there was no taxable income, he did not file any return; section 34, therefore, had no application to his case. Lastly, he complained that as he was not residing at Bombay, and as he had no address in Bombay, no notice either under section 22(4) or section 23(2) or any other notice was received by him, and, therefore, he had no opportunity to comply with the notice. On these grounds, the aforesaid prayer was made by the assessee.
(2.)IT appears from the order of the Income -tax Officer under section 27, which is annexure 'B' to the statement of the case, that he fixed the hearing on 3rd August, 1956. The advocated appearing for the assessee requested that the hearing may be adjourned by one month. The hearing was, therefore, adjourned to 3rd September, 1956. But, on that date, no one appeared before the Income -tax Officer. The Income -tax Officer, therefore, for the reasons given by him in his order, dismissed the application of the assessee on 3rd September, 1956. He has dealt with each one of the contentions raised by the assessee in his application, and rejected the same. No appeal was filed by the assessee against the order of the Income -tax Officer dismissing his application under section 27 of the Act. He, however, filed an appeal against the order of assessment made by the Income -tax Officer under section 23(4) of the Act. In this appeal, the assessee challenged the assessment order of the Income -tax Officer under section 23(4) on the following grounds : '(1) That the proceedings under section 34
(1) are bad in law;

(2) that the assessment was invalid because the Income -tax Officer had no jurisdiction to assess the applicant who is a non -resident;

(3) that the service of notice under section 34 was invalid;

(4) that the assessment was erroneously made under section 23(4); and

(5) that the estimate of income at Rs. 3 lakhs was excessive.'

The Appellate Assistant Commissioner rejected every one of these contentions and dismissed the appeal. The assessee took a further appeal to the Tribunal against the order of the Appellate Assistant Commissioner. One of the contentions raised in the grounds of appeal but the question of legality of assessment under section 23(4) was given up. The grounds which were pressed before the Tribunal were :

'(1) That section 34 was not properly invoked in the case as the Income -tax Officer had no jurisdiction to make assessment and as there could be no reasonable satisfaction about income having escaped assessment;

(2) that the assessee was not carrying on business at 232 -234, Kalbadevi Road;

(3) that the applicant was not a resident; and

(4) that the estimate was excessive.'

(3.)THE Tribunal took the view that the appeal before the Tribunal should be restricted to the quantum of assessment, and the question of jurisdiction of the Income -tax Officer to make assessment could not be challenged in an appeal against the best judgment assessment under section 23(4). It placed reliance in support of this conclusion on a decision of this court in Mauladin Ayub Firm v. Commissioner of Income -tax. In this view of the matter, the first contention was not dealt with. As regards the second contention, the Tribunal in paragraph 6 of its order, held that the Income -tax Officer was justified in holding that the appellant was carrying on business in that place, i.e., 232 -234, Kalbadevi Road, Bombay, and proceeding to make assessment on that basis. As regards the assessee's third contention, the Tribunal in paragraph 7 of its order held that the office (Income -tax Officer) was justified in concluding that the appellant was a resident in the taxable territories. As regards the last contention of the assessee, the Tribunal reduced the quantum of the income from Rs. 3,00,000 to Rs. 2,00,000. Paragraph 10 of the order of the Tribunal shows that it did not allow the assessee to lead additional evidence which he wanted to place before the Tribunal in the form of certain affidavits. On an application made by the assessee under section 66(1), the Tribunal has drawn up the statement of the case referring the following question to us : 'Whether, on the facts and circumstances of this case, where an assessment is made under section 23(4) of the Income -tax Act, it is open to the assessee to raise in a quantum appeal filed to the Appellate Assistant Commissioner under section 30 any question other than the quantum of the best judgment assessment ?'

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