- (1.) Civil Nos. 1 168-1171 of 1971 are by special leave and civil Nos. 2376-2379 of 1968 are by certificate. These appeals arise from the decision of the Calcutta High court in certain tax references. In those references the High court was considering the one question referred to it by the tribunal under S. 66 (1) of the Indian Income-tax Act, 1922 (in brief 'the Act') and two other questions referred to it by the tribunal in accordance with the directions given by that court under section 66 (2) of the Act. The High court has only answered the question referred to it by the tribunal under S. 66 (1) of the Act and it has not answered the other two questions as being unnecessary. The question referred under S. 66 (1) is : "Whether on the facts and in the circumstances of the case, the notice issued under S. 33-B of the Indian Income-tax Act, 1922, met the requirements of the law and whether the Commissioner of income-tax validly exercised jurisdiction under S. 33-B of the indian Income-tax Act, 1922 -
(2.) The facts of the case lie within a narrow compass. The concerned assessment years are 1959-60 and 1960-61, the corresponding accounting years having ended on December 31 of each of the years 1958 and 1959. The assessee M/s. Electro House claimed to be a firm constituted under a deed of partnership, dated 2/01/1958. The business of that firm wasstarted by Baidyanath Gorai sometimes in. the year 1949 and upto the assessment year 1958-59, he was assessed as the sole proprietor thereof. On 2/01/1958, he purported to enter into a partnership with his mother-in-law and son-in-law. Under that partnership he had 40% share and his mother-in-law and son-in-law had 30% share each in the profits and losses of the firm. The Income-tax Officer accorded registration of the partnership in question under S. 26-A of the Act for the two assessment years with which we are concerned in these appeals. The Commissioner of Income-tax, west Bengal, however appears to have found on an examination of the records that the orders of the Income-tax Officer granting registration to the assesses firm for the assessment year 1959-60 and renewal of registration for the assessment year 1960-61 were erroneous and prejudicial to the interests of the revenue. He therefore proceeded against the assessee under S. 33-B of the Act. Before doing so, he issued a notice to the firm on 18/07/1962 which read thus : "Fromshri F. H. Vallibhoy commissioner of Income-tax, west Bengal. To m/s. Electro House, g. T. Rdad, asansol. Gentlemen, subject:-Income-tax Assessment-1959-60 and 1960-61, M/s. Electro House-Registration under S. 26-A of the Income-tax Act-Wrongly granted-Proposal under S. 33-B to cancel orders under S. 26-A-Notice regarding: on a perusal of the orders under S. 26-A passed by Income-Tax Officer, "a" Ward, Asansol on 5/10/1960, and february 25, 1961, for the assessment years 1959-60 and 1960-61 respectively in the above case and the connected records, I consider that the said orders are erroneous and prejudicial to revenue, inasmuch as registration under S. 26-A of Income-Tax Act, 1922, for the assessment year 1959-60 and renewal of registration under S. 26-A of the said Act for the assessment year 1960-61 should not have been granted as there are prima facie reasons and grounds to hold that the partnership brought into existence by the partnership deed, dated 2/01/1958, is not a genuine one. I, therefore, propose to cancel the orders under S. 26-A of the income-tax Act, 1922, for the assessment years 1959-60 and 1960-61 under powers vested in me under S. 33-B of the Income-tax Act, 1922, unless you show cause why the orders should not be so cancelled. I am prepared to hear your objections, if any, at 11 a. m. on 3/08/1962) at my office as noted above. Objections in writing, if any submitted on or before the above date will also be duly considered. Yours faithfully (Sd. ) F. H. Vallibhoy, Commissioner of Income-tax west Bengal. "
(3.) The question for consideration is whether this notice is an invalid notice and consequently the Commissioner had no jurisdiction to proceed under Section. 33-B. The tribunal came to the conclusion that the notice issued was not one required to be issued by the Act and hence its validity or invalidity did not affect the jurisdiction of the Commissioner. It also held that it was a valid notice. But the High court differing from the conclusions reached by the tribunal opined that the notice issued was not valid and therefore the Commissioner had no jurisdiction to proceed with the enquiry. In that view it thought it unnecessary to consider the remaining questions. S. 33-B (1) reads: "The Commissioner may call for and examine the record of any proceeding under this Act and if he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such orders thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. ";