HIDAYATULLAH, J.: - (1.) THE following Judgment of the court was delivered by
(2.) THIS appeal, by special leave of this court, is directed against the judgment and order of the High court of Judicature at Bombay dated 26/02/1953, in Appeal No. 108 of 1952. By that judgment, the Divisional bench (Chagla, C. J. and Shah, J.) declined to interfere, in Letters Patent Appeal, with the judgment of Tendolkar, J., dated 8/07/1952, in Miscellaneous Application No. 48 of 1952. In the petition which was originally filed in the High court under Art. 226 of the Constitution, a writ of mandamus was asked against the Union of India and two Income-tax Officers to compel them to give effect to the appellate order of the Appellate Assistant Commissioner of I. T. F. Range, Bombay, dated 29/04/1949. The High court in both the judgments declined the writ. The facts of the case are as follows: The appellant, Messrs. Sarupchand arid Hukamehand and Co., (hereinafter referred to as the assessee firm) was carrying on business, inter alia, as shroffs, merchants and commission agents at Bombay, Indore, Ujjain and Calcutta. It had, in the relevant account years, two partners, Sir Sarupchand Hukamchand and Sri Hiralal Kalyanmal. The two partners were also separately liable to income-tax, the former as a Hindu undivided family and the latter as an individual. We are concerned here with the assessment years 1940-41, 194142 and 1942-43. These correspond to the account years, 1995-1996 (Samvat) to 1997-1998 (Samvat). When the assessment of the assessee firm was made, the Income-tax Officer, Section VIII (Central), Bombay, treated the firm as ` resident and ordinarily resident `. For the assessment year 1940-41 the Income-tax Officer found a profit of Rs. 80,358.00, and applying s. 23(5)(b) of the Indian Income-tax Act (hereafter called the Act), he proceeded to treat the firm which was unregistered as registered for the purpose of assessment. On 15/03/1945, he therefore assessed the two partners carrying the profit into their individual returns and made no demand upon the firm. It appears that an application for registration had already been filed under s. 26A of the Act before the Income-tax Officer, but it was rejected-and quite correctly-because no instrument of partnership was disclosed. That order was also passed on the same date. For the assessment years 1941-42 and 1942-43, the Income-tax Officer by his orders dated 31/07/1945, and 31/10/1945, respectively, treated the firm as ` resident and ordinarily resident ` and as an unregistered firm. For the first of the two assessment years, he assessed the firm on a total income of Rs. 2,30,798.00 to income-tax and super-tax, and for the second year, its British Indian income was taken at Rs. 2,62,827.00 and the total income at Rs. 7,00,116.00 and was also treated accordingly. The assessee firm appealed against these assessments. The Appellate Assistant Commissioner by his order passed in the consolidated appeals on 29/04/1949, held that the assessee firm was non-resident and excluded the income of the firm outside British India, though it was included in the total word income for the purpose of computing the rate of tax. He also found error in the computation of income made by the Income-tax Officer, and held that in the assessment year 1940-41 there was a loss of Rs. 1,61,084.00 in the total world income of the assessee firm. For the subsequent years also there were slight variations in the amounts determined by the Income-tax Officer, but it was held that the assessee firm had made profits in those years. The following is the summary of the findings of the Appellate Assistant Commissioner, as given by him in his order: JUDGEMENT_1207_AIR(SC)_1959Html1.htm In addition to these findings, the Appellate Assistant Commissioner added a direction to the following effect : ` The Income-tax Officer is directed to modify the assessments accordingly.`
(3.) WHEN the matter reached the Income-tax Officer, he gave effect to the order of the Appellate Assistant Commissioner under s. 31 of the Act and carried the loss to the partners in their assessments for the year 1940-41, and granted a refund of Rs. 16,977-11-0 to Sir Sarupchand Hukamchand and Rs. 68,339.00 to Sri Hiralal Kalyanmal. The assessee firm, however, was not satisfied, and embarked upon voluminous correspondence beginning with a letter dated 10/09/1949, by which it claimed that inasmuch as it had been shown to have incurred a loss in the first of the three assessment years, it could not for that year be treated as a registered firm, and that as an unregistered firm it was entitled therefore to carry forward the loss to the subsequent years. In addition to the correspondence, the assessee firm moved in turn the Income-tax Officer as well as the Appellate Assistant Commissioner respectively under s. 35 of the Act for rectification of the assessment to the same effect. The officers of the Department at both levels declined to interfere, and stated that the direction of the Income-tax Officer under s. 23(5)(b) was not appealable, and had become final. They also pointed out that the period during which the original order of the Income-tax Officer could be rectified (viz., 4 years) had already run out, and that the petitions were accordingly out of time. The assessee firm moved the Commissioner as well as the central Board of Revenue, but failed to get the desired order. Finally, after the receipt of the order of the central Board of Revenue, the assesee firm applied on 16/07/1951, to the Additional Income-tax Officer, Section VIII (Central), to give effect to an order which the assessee firm had secured from the Appellate Assistant Commissioner earlier. By that order, the Appellate Assistant Commissioner had, at the request of the assessee firm, directed the Income-tax Officer to take the losses of the first assessment year into the accounts of the partners, which direction, in the opinion of the Appellate Assistant Commissioner, his predecessor had omitted to make in the first instance. It was after this that fresh assessment forms were drawn up, and the refund was determined. It may be pointed out here that the partners withdrew the amount of refund, though in making the request to the Additional Income-tax Officer the assessee firm had reserved its right `to move further in the matter as may be advised `, and had pointed out that the action was without prejudice to such rights. Having failed to obtain relief from the Department, the appellate authorities and the central Board of Revenue, the assessee firm filed the petition under Art. 226 of the Constitution in the High court of Judicature at Bombay. That petition was heard by Tendolkar, J., and he declined to interfere mainly on the ground that it was possible to take two views of the matter whether after a profit assessment was turned into a loss assessment by the Appellate Assistant Commissioner, the original order of the Income-tax Officer under s. 23(5)(b) remained outstanding or not. He thought that this was not a fit case for the issuance of a writ of mandamus by the High court. In appeal which was taken from this decision, Chagla, C. J., looked at proviso (d) to s. 24(2), and also came to the view that there was a possibility of two views being taken in the matter, and that the learned single Judge was right in not interfering. Shah, J., in a concurring judgment, explained what he considered was the meaning of s. 23(5)(b) read with s. 24(2), proviso (d), but he also felt that this was not a case in which a Writ could be claimed against the Union of India or the Income-tax Officers. Chagla, C. J., however, expressed the hope that the taxing authorities would not deny the assessee firm its rights under the Act on any technical ground, such as limitation, or failure to pursue a particular procedure. In the result, the Divisional bench sustained the order of Tendolkar, J., who had dismissed the petition earlier. This court on 3/05/1954, granted special leave to appeal against the judgment of the Divisional bench. ;