- (1.) THIS is a reference under 66(3) of the Indian Income-tax Act, XI of 1922. The proceedings in connection with which the reference arose were proceedings under Sec. 27 of the Act and the assessment year was the year 1932-33 ending with Chait 1989. The assessee was one Lala Ramji Das who was a banker and carried on money-lending business on an extensive scale. He maintained his accounts by the year ending on the 15th Chait which corresponds roughly with the financial year. The previous year or the accounting year would in the present case end with the 15th of Chait 1388. When the assessment began Ramji Das was alive, but he died on April 9, 1933, and the application under Sec. 27 which was submitted by Ramji Das was continued by his widow Mst. Rajmani Devi. The Income tax Officer dismissed the application under Sec. 27 on April 13, 1934, and an appeal against the said decided was dismissed by the Assistant Commissioner on July 24, 1934. On August 27, 1934, the assessee filed a combined application for review and reference to the High Court. On October 8, 1934, the learned Commissioner refused to state a case and on the application for review he remitted certain issues to the Income tax Officer. We are not concerned in the present proceeding with the result of the application for review. The assessee, then filed an application in the High Court praying that we should require the Commissioner to state a case under Sec. 66(3) of the Act. By our order dated February 27, 1936, we required the Commissioner to state a case and formulated three questions of law. We mentioned then that the only matter which he had to decide at that state was was whether a question of law arose out of the decision of the Assistant Commissioner, and we were of the opinion that the three questions formulated by us did arise and we did not agree with the opinion of the Commissioner that no question of law arose although counsel for the department also pressed that point before us even at that stage.
(2.) THE learned Commissioner has now stated a case and has referred the three question of law which we had ourselves formulated, but once more he has lodged a mild protest questioning our jurisdiction in requiring him to state a case under Sec. 66(3), for he is still of the opinion that a question of law did not arise. He thinks that a question of law is foreign to an appeal pending before the Assistant Commissioner against an adverse order passed by an Income tax Officer under Sec. 27. He says : THE expression prevented by sufficient cause in Sec. 27 involves some definite active cause, making compliance with a notice impossible and not a passive cause such as the opinion that compliance is not obligatory because of rights supposed to be secured under the Act. This means that if an applicant wishes to submit that he was prevented by sufficient cause from complying with the terms of a notice, the applicant must allege and prove some such fact as illness or accident etc., and a decision on this point would obviously be a decision on a question of fact. The learned Commissioner is further of the opinion that it is not possible for an applicant to say that he was prevented by sufficient cause from complying with the notice, because the notice was illegal. We may state at the very outset that we cannot agree with the general proposition that it is not possible to evolve a question of law out of the various circumstances mentioned in Sec. 27 of the Act. It now remains to discuss a few decisions of some of the High Courts on which reliance has been placed by the learned Commissioner. They are the cases of Jot Ram Sher Singh v. Commissioner of Income-tax; Mohan Lal Hardeo Das v. Commissioner of Income-tax, Bihar and Orissa; In re Abdul Bari Chowdhary v. Commissioner of Income-tax, Burma and A. K. R. P. L. A. Chettiar Firm v. Commissioner of Income-tax, Burma. In Jot Ram Sher Singhs case the matter that was directly decided by this Court was that a question whether an assessment under Sec. 23(4) is valid or not is not a question of law that arises or Can arise out of an order of t he Assistant Commissioner passed under Sec. 31, and consequently such a question cannot be made the ground for an order by the High Court under Sec 66(3) requiring the Commissioner to state a case, and therefore that case is not of any help to the point that we are at present considering. The learned Commissioner, however, has made reference to a certain passage occurring at page 277 of the Allahabad Law Journal Reports. The passage is : A refusal to make a fresh assessment under Sec. 27 can proceed only on the ground that the assessee was not prevented by any sufficient cause from complying with the notice under Section 22 or Sec. 23 If any question of law arises from such refusal it can certainly be the subject of reference under the order of the High Court. But any question of law which arises from the best judgment assessment sought to be set aside by an application under Sec. 27, cannot fall within the purview of Sec. 27.
(3.) FROM the words which we have underlines it is clear that the learned Judge was of the opinion that a question of law can arise from a refusal by the Income-tax Officer to cancel an assessment under Sec. 27 of the Act. This case, therefore, does not in any way support the opinion of the Commissioner. The Patna case also has no bearing on the present matter, for al that was decided in that case was that where an application under Section 27 of the Income -tax Act to reopen an assessment under Sec. 23(4) for failure to produce account books called for under Sec. 22(4) was dismissed by the Income tax Officer and an appeal therefrom was rejected by the Assistant Commissioner, such questions alone within the terms of Sec. 27 of the Act, which could have been taken on the appeal before the Assistance Commissioner, could be raised on a reference to the High Court under Sec. 66 and not questions regarding the assessment under Sec. 23(4) which is not appealable under Sec. 30(1) proviso. It would thus appear that all that was decided in this case was that as the assessment under Sec. 23(4) was not appealable no question regarding such assessment could be raised in proceedings under Sec. 27 and it was not decided as a general proposition that no question of law could arise in proceedings under Section 27. On the contrary the case decides that certain questions may form the subject of a reference under Section 66. The same may be said about the Rangoon case of Abdul Bari Chowdhary. Here also the question that was directly decided was that no question of law arises out of the Assistant Commissioners order in an appeal against a best judgment assessment because of the proviso to Section 30(1) and in the body of the judgment Page, C.J., observed : Under Section 27, however, the Income-tax Officer has to determine whether the assessee prevented by sufficient cause from Complying with the requirements of the law as set out in Sec. 27. That is essentially a question of fact and not of law.;