Decided on December 02,1970



K.L.Roy, J. - (1.) This application under Article 226 of the Constitution raises a short but an interesting question as to the interpretation of Section 297(2)(a) of the Income-tax Act, 1961, For the assessment year 1961-62 the petitioner filed his return voluntarily on the 1st December, 1961, before the respondent-Income-tax Officer, Howrah, On the 1st February, 1963, a notice under Section 23(2) of the Income-tax Act, 1922, was issued and served on the petitioner by the said Income-tax Officer. On 17th March, 1966, a further notice under Section 23(2) of the aforesaid Act was issued calling upon the petitioner to attend on the 22nd March, 1966, at the Income-tax Officer's office for completion of the assessment. Or the 23rd March, 1966, the petitioner informed the Income-tax Officer that as the aforesaid notice was served on him after 1 p.m. on the 22nd it was not possible for him to comply therewith. Thereafter, on the 31st December, 1966, a notice under Section 221 of the Income-tax Act, 1961, was issued by the respondent-Income-tax Officer, on the petitioner to show cause why penalty should not be imposed on him for not paying the tax assessed. On the 11th January, 1967, another notice under Section 154/155 of the 1961 Act. was issued by the respondent-Income-tax Officer for rectification of the purported assessment made under Section 144 of that Act. On the 21st January, 1967, two applications were presented by the petitioner to the respondent-Income-tax Officer. In the first application the petitioner contended that the assessment was ultra vires as it was made under the 1961 Act and not under the 1922 Act, and therefore no question of penalty could arise. In the second, objection was taken to the competency of the notice of rectification of the order of assessment already made. On the 16th February, 1967, a notice of demand and a corresponding challan and the assessment order under Section 144 of the 1961 Act for the assessment year 1961-62 were served, on the assessee and on the same date the assessee made an application to the respondent-Income-tax Officer requiring him to cancel the assessment and to make a reassessment as he was not given reasonable opportunity to comply with the notice dated the 17th March, 1966. The petitioner's aforesaid application was accepted and the respondent-Income-tax Officer cancelled the assessment and made a fresh assessment for the said year under Section 143(3)/146 of the 1961 Act on 6th September, 1967. The petitioner took an appeal from the aforesaid order of assessment and in the grounds of appeal objections were taken to the inclusion of certain items in the total income and there was an omnibus ground at the end, namely, that the assessment was otherwise bad in law in the facts and circumstances of the case. Apparently, before the Appellate Assistant Commissioner no arguments were advanced that the assessment was bad because it was made under the provisions of the 1961 Act and the Appellate Assistant Commissioner gave the petitioner certain reliefs by way of deductions which were given effect to by the respondent-Income-tax Officer under Section 250 of the 1961 Act in the order of assessment. No further appeals were taken by the petitioner to the Tribunal. On the 28th June, 1968, a challan was issued for realisation of the tax on the basis of the modified assessment and on the 18th July, 1968, the respondent-Income-tax Officer issued a notice under Section 221 of the 1961 Act on the petitioner to show cause why penalty should not be imposed for failure to pay the tax assessed and demanded within the time allowed by the Act. This rule was obtained on 20th August, 1968, calling upon the respondents, the Income-tax Officer, Howrah, the Appellate Assistant Commissioner and the Union of India to show cause why the aforesaid order of assessment as well as the demand for tax and the notice for showing cause why the penalty should not be imposed as well as the appellate order of the Appellate Assistant Commissioner should not be quashed.
(2.) Mr. J. C. Pal, learned counsel for the petitioner, referred me to the relative provisions of Section 297 of the Income-tax Act, 1961. Sub-section (1) repeals the Indian Income-tax Act, 1922. Sub-section (2) provides that notwithstanding the repeal of the 1922 Act,-- " (a) Where a return of income has been filed before the commencement of this Act by any person for any assessment year, proceedings for the assessment of that person for that year may be taken and continued as if this Act had not been passed ; (b) Where a return of income is filed after the commencement of this Act.... the assessment of that person for that year shall be made in accordance with the procedure specified in this Act. "
(3.) The Income-tax Act, 1961, was brought into operation from the 1st April, 1962. Mr. Pal contends that as in this case the petitioner's return for 1961-62 was filed before the 1st April, 1962, the assessment for that year should have been made under the provisions of the 1922 Act, the respondent-Income-tax Officer had no jurisdiction to make the assessment under the 1961 Act. As such the order of assessment and all subsequent proceedings were ultra vires and invalid and the order passed in appeal therefrom was also invalid and void. Mr. Pal further submitted that though the words used in Section 297(2)(a) are " may be taken and continued ", the rule is mandatory and the Income-tax Officer has no option but to make the assessment under the provisions of the repealed Act. In this connection an observation made by the Supreme Court in Jain Brothers v. Union of India, is instructive. In that case the question was whether the provisions in Section 297(2)(f) and (g) relating to the imposition of penalty in the 1961 Act should be applied to the case of an assessee whose assessment has been made under the repealed Act. Their Lordships observed that imposition of penalty could take place only after assessment had been completed and for this reason there was every justification for providing in Clauses (f) and (g) that the date of the completion of the assessment would be determinative of the enactment under which the proceedings for penalty were to be held. It might be that the legislature considered that a separate treatment should be given in the matter of assessment itself and under Clauses (a) and (b) of Section 297(2) the point of time when a return of income had been filed was made decisive for the purpose of application of the Act of 1922 or the Act of 1961. Mr. Pal's contention that in this case it was the provisions of the Act of 1922 that were applicable for the purpose of the petitioner's assessment for 1961-62 must be accepted. Mr. Pal next referred me to the penultimate paragraph in the judgment of the Supreme Court in Shivram Poddar v. Income-tax Officer, where after deprecating the practice of taking recourse to the High Court under Article 226 for obtaining relief in matters of assessment of income-tax as the Income-tax Act itself provided complete machinery for assessment and for relief in respect of improper or erroneous orders made by the revenue authorities, the court observed that resort to the High Court in exercise of its extraordinary jurisdiction conferred or recognised by the Constitution in matters relating to assessment, levy and collection of income-tax might be permitted only when questions of infringement of fundamental rights or where on undisputed facts the taxing authorities were shown to have assumed jurisdiction which they did not possess. According to Mr. Pal in this case on the undisputed facts the respondent-Income-tax Officer could have no jurisdiction to make the assessment under the 1961 Act and, hence, this court could exercise its extraordinary powers under Section 226 and quash the impugned orders.;

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