COMMISSIONER OF INCOME TAX Vs. BIDHU BHUSAN SARCAR
LAWS(CAL)-1963-2-10
HIGH COURT OF CALCUTTA
Decided on February 07,1963

COMMISSIONER OF INCOME TAX Appellant
VERSUS
BIDHU BHUSAN SARCAR Respondents


Referred Judgements :-

PATIALA CEMENT CO. LTD. VS. CIT [REFERRED TO]
CHAKOO BHAI GHELABHAI VS. STATE OF ORISSA [REFERRED TO]
BELLAND VS. BANARASI DEBI [REFERRED TO]
BRINDABAN CHANDRA BASAK VS. INCOME TAX OFFICER [REFERRED TO]
BIDU BHUSAN SARCAR VS. COMMISSIONER OF INCOME TAX [REFERRED TO]
COMMISSIONER OF INCOME-TAX VS. MSHAW WALLACE AND CO [REFERRED TO]



Cited Judgements :-

KALAWATI DEVI HARLALKA VS. COMMISSIONER OF INCOME TAX [LAWS(CAL)-1964-12-11] [REFERRED TO]


JUDGEMENT

H.K. BOSE, C.J. - (1.)THIS is an application for a certificate under s. 66A(2) of the Indian IT Act r/w Art. 135 of the Constitution in respect of a decision of a Division Bench of this Court dt. 10th Jan., 1962, by which certain questions of law were answered in favour of the assessee in a reference under s. 66(1) of the Indian IT Act.
(2.)BIDHU Bhusan Sarcar, since deceased, used to be assessed in respect of his income in the district of 24-Parganas. On 22nd Dec., 1947, he filed a voluntary return before the ITO, District 24- Parganas, in respect of the asst. yr. 1947-48 declaring a net loss of Rs. 330. Subsequently, on account of the change in the territorial jurisdiction, the assessee's place of business fell within the jurisdiction of the ITO, District I(2), Calcutta, with the result that the file of the assessee was transferred to the ITO, District I(2), and it came within the jurisdiction of the Eighth Addl. ITO, District I(2). On 16th Jan., 1949, the Eighth Addl. ITO, District I(2), took action under s. 34 of the Indian IT Act presumably because he considered that the voluntary return filed on 22nd Dec., 1947, was invalid and could not be acted upon. The notice under s. 34 was issued on 23rd Feb., 1950, but as no return was filed in response to the notice even upto 15th Jan., 1952, the Eighth Addl. ITO, issued a notice under s. 22(4) of the Indian IT Act. It appears that prior to this on 31st March, 1949, the assessee filed another voluntary return for the asst. yr. 1947-48 to the ITO, District I(2), declaring a loss of Rs. 11,33,940. In August, 1950, the ITO, District I(2), acting on this voluntary return dt. 31st March, 1949, issued a notice under s. 23(2) of the Act. On 4th Feb., 1952, the Eighth Addl. ITO, District I(2), passed an order filing the case as there was already another file of the assessee in the same district. On 12th Feb., 1952, the ITO District I(2), cancelled the proceeding in respect of voluntary return dt. the 31st March, 1949, on the view that a voluntary return of loss was not valid and he, thereafter, took action under s. 34 and issued a notice under that section on 12/14th Feb., 1952. This proceeding resulted in an assessment under s. 23(4)/34 on 31st Jan., 1953. Against this order of assessment the assessee filed an appeal before the AAC. In appeal it was pointed out by the ITO that he had no jurisdiction over the assessee as there was already a file with the Eighth Addl. ITO. The AAC by an order dt. the 27th Dec., 1955, set aside the assessment made on 31st Jan., 1953, with a direction that the assessment should be completed according to law by an officer having proper jurisdiction over the case. Against the decision of the AAC, the assessee went up on appeal before the Tribunal. The grievance of the assessee before the Tribunal was that the AAC should have annulled the assessment without giving a direction for making a fresh assessment. The Tribunal, accepted this contention and by its order dt. the 23rd April, 1957, cancelled the assessment. In the meantime, on 30th Dec., 1955, the CIT passed an order under s. 5(7A) of the IT Act transferring the case of the assessee from the Eighth Addl. ITO to the ITO District I(2), and thereafter the ITO District I(2), issued a fresh notice under s. 34 of the IT Act dt. 11th Feb., 1956, and on 2nd May, 1956, he made an assessment under s. 23(4)/34 of the IT Act. The assessee took an appeal against this assessment order to the AAC. The contention raised before him was that the Eighth Addl. ITO had jurisdiction when he issued notice on 23rd Feb., 1950, and unless and until the assessment was completed in pursuance of that notice which was a valid notice it could not be said that any income had escaped assessment. The further contention raised was that the assessment in pursuance of the notice dt. the 23rd Feb., 1950, should have been completed on or before 31st March, 1952, or 31st March, 1956, as the case fell within the purview of s. 34(1)(a) or s. 34(1)(b). Another contention which was pressed before the AAC was that the proceeding which as started pursuant to notice under s. 34 dt. the 23rd Feb. 1950, had not lapsed but remained alive at the time when the CIT by the issue of a special notification had transferred the file of the assessee to the ITO, District I(2). The AAC accepted the contention of the assessee and held that the notice dt. 11th Feb. 1956, was void ab initio and the assessment should have been completed by 31st March, 1956, and it had become barred when the assessment was completed on 2nd May, 1956. As against the order of the AAC, the ITO filed an appeal before the Tribunal and contended that there is no bar under the law against the issue of more than one valid notice under s. 34 and as the assessment dt. the 2nd May, 1956, was actually completed within one year from the date of the issue of the notice dt. Feb., 1956, the assessment was within time. The Tribunal came to the conclusion that the proceeding started by the Eighth Addl. ITO on the basis of the notice dt. 23rd Feb., 1950, having been directed to be "filed" was no longer a live proceeding and could not be continued by the principal ITO and no valid assessment could be made in respect thereof. In this view of the matter the Tribunal allowed the appeal of the IT Department and restored the order of the ITO District I (2). The assessee thereupon made an application of the Tribunal for a reference and the Tribunal referred the following questions of law to the High Court : "1. Were the notice under s. 34 issued by the principal ITO on 11th Feb., 1956, and the assessment raised in pursuance thereof valid in law in view of the fact that the proceedings commenced by the Eighth Addl. ITO under s. 34 on the basis of notice dt. 23rd Feb., 1950, were filed ? 2. Whether, on the facts and circumstances of the case, the assessment dt. the 2nd May, 1956, made by the principle ITO District (I) (2) was barred by time ?"
This reference came up for hearing before a Division Bench of this Court presided over by G. K. Mitter and A. N. Ray, JJ. and by judgment delivered by this Division Bench on 10th Jan., 1962, in Bidhu Bhusan Sarcar vs. CIT (1966) 59 ITR 531 (Cal) : TC10R.555 the questions were answered in favour of the assessee. The Division Bench held that the notice dt. 23rd Feb., 1950, was a valid notice and the Revenue authorities could not extend the period of limitation after the expiry of eight years by issuing a second notice on the eve of the expiry of eight years to obtain a period of one additional year from the date of the service of the second notice. The assessment was, therefore, barred by limitation because the assessment should have been completed by 31st March, 1956. It is against this decision of the Division Bench that the petitioner now intends to prefer an appeal to the Supreme Court.

The points which the petitioner intends to urge before the Supreme Court are that the Division Bench should have held upon a correct interpretation of the relevant provisions of the Indian IT Act, 1922, that the "filing" of the case amounted to a termination of the proceeding which had been initiated by the Eighth Addl. ITO with the notice under s. 34 dt. 23rd Feb., 1950. The other question which the petitioner intends to urge before the Supreme Court and which is related to the first point intended to be raised is that the notice under s. 34 issued on 11th Feb., 1956, by the ITO, District I(2), was a valid notice and on the date the assessment in pursuance of this notice was made, namely, 2nd May, 1956, the proceeding for the assessment had not become barred by limitation. Reference was also made before us to Brindaban Chandra Basak vs. ITO (1962) 46 ITR 14 (Cal) : TC51R.2018 and Belland vs. Smt. Banarsi Debi (1962) 46 ITR 28 (Cal) : TC51R.1781 on the question of limitation. It appears from the decision of the Division Bench that in support of the respective contentions of the parties which involved determination of certain incidental questions, citations were made of a large number of cases bearing on the points and it was upon a consideration of these authorities cited that the learned judges came to the final conclusion and answered the questions in favour of the assessee. We are satisfied that the case involves substantial questions of law which make it a fit one for appeal to the Supreme Court. The amount of tax involved is also a very large one and is to the tune of about rupees thirteen lakhs, and the case is one of considerable private importance between the parties. But before any certificates as asked for can be granted, we have to consider certain preliminary objections which have been raised on behalf of the respondent as to the maintainability of this application. The first objection which is raised is that Art. 135 of the Constitution cannot be invoked in the facts and circumstances of this case. Art. 135 is as follows :

"Until Parliament by law otherwise provides the Supreme Court shall also have jurisdiction and powers with respect to any matter to which the provisions of Art. 133 or Art. 134 do not apply if jurisdiction and powers in relation to that matter were exercisable by the Federal Court immediately before the commencement of this Constitution under any existing law."

(3.)IT is well-known that by the insertion of s. 66A(2) by the IT (Amendment) Act, 1926 (Act 24 of 1926), a right of appeal to His Majesty-in-Council from any judgment of the High Court delivered on a reference made under s. 66 in any case which the High Court certified to be a fit one for appeal to His Majesty-in-Council was conferred. Later on after the Federal Court came into existence by virtue of the provisions of the Government of India Act, 1935, certain rights of appeal came to be conferred on the Federal Court by reason of the Federal Court Enlargement of Jurisdiction Act, 1947 (Act 1 of 1948).
Subsequently, the Abolition of the Privy Council Jurisdiction Act, 1949 (Act V of 1949), was passed with the result that before the Constitution came into force, the Federal Court had the same jurisdiction that the Privy Council had under s. 66A(2) of the Indian IT Act. It will thus appear that in the present case the provisions of Art. 135 of the Constitution are attracted and the petitioner has, therefore, a right of appeal in respect of the judgment which was delivered by the Division Bench on a reference under s. 66 of the Indian IT Act.



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