CHAKRAVARTTI, C.J. - (1.) THIS reference causes a most unpleasant impression, both because of the careless and misguided manner in which the proceedings were conducted by the legal advisers of the assessee and the carefree and inconsiderate manner in which they were dealt with by the officers of the IT Department. An application, purporting to be an application for a refund, was made in August, 1945, and not till June, 1950, was it finally disposed of--the interval having been occupied by a protracted correspondence as also frequent interviews, alternating with interludes of silence on both sides.
(2.) THE facts are as follows : On 18th Aug., 1945, S.K. Sawday & Co., a firm of income-tax practitioners, addressed a letter to the ITO, Companies District I, regarding what was called "Sardar Bahadur Sardar Indra Singh's Trust" and stating that the Trust being one wholly for charitable purposes its income was exempt from tax and therefore a refund ought to be granted at an early date. THE refund was asked for in respect of the tax deducted at source from certain dividend amounts. THE application or letter which related to the asst. yr. 1945-46 was accompanied by the dividend warrants concerned as also what was described as a statement of accounts. The application appears to have been dealt with by the IT Department as an application for refund, for on 3rd Nov., 1945, the ITO, Companies District I, wrote to S.K. Sawday & Co. to say that the matter would be dealt with by the ITO, District III(I), to whom all papers were being forwarded for necessary action. The next letter, dt. 28th Feb., 1946, asked for the production of the trust deed in the original, and by a letter dt. 15th May, 1946, S.K. Sawday & Co. sent to the ITO, District III(I), a copy of the deed. Thereafter, on 27th May, 1946, the ITO informed the income-tax practitioners that they should depute a responsible representative to attend at his office on 31st May, 1946, with the trust deed in the original for a discussion of the matter and a similar letter was written on 3rd June, 1946, following. Why a second letter was necessary is not clear, but, apparently, no one had attended in response to the first letter or perhaps the discussion had not been concluded. Thereafter, for two long years silence appears to have fallen on both sides. The next letter which one finds in the paper-book is a letter, dt. 20th Sept., 1948, which really relates to the next assessment year, but includes in it a reminder about the claim made for earlier years. Similar letters from the assessee's side were written on 26th Nov., and 7th Dec., 1948, and then on 4th July, 1949. The next letter bears the date 20th Sept., 1949, and it says that the writers were sending a copy of a letter from Sir Indra Singh, apparently the settlor of the trust, in answer to the ITO's enquiry as to whether a scheme or arrangement, as provided for in the trust deed had actually been framed or made. Then came, at long last, a letter, dt. 24th Nov., 1949, from the ITO which purports to be an answer to all the several applications, claiming refund for the years 1945-46, 1946-47, 1947-48 and 1948-49. The applications are described as applications "for exemption under S. 4(3)(i), IT Act," and with regard to the trust deed it is stated that "the beneficiaries have not been indicated with reasonable certainty and therefore no valid trust was created by the execution of the deed". The letter concluded by saying, "The income of the trust, therefore, would not be exempted under S. 4(3)(i) of the IT Act". This letter provoked from the assessee's side a long series of letters, the purpose or utility of which it is extremely difficult to understand. The original claim for a refund was made on the basis that the income of the trust was wholly exempt from tax, as it was a trust for charitable purposes in its entirety. The reply to that claim was that there was no valid trust at all and, therefore, the income could not be exempt from taxation. Why the assessee should have thought that this reply did not mean a refusal of the claim for a refund is not clear, but this much is clear that it considered it necessary that the ITO should state in express terms that the claim for a refund had been refused in order that it might appeal. A letter to that effect was written by S.K. Sawday & Co. to the ITO on 30th Nov., 1949, and thereafter began persistent knockings at the door, if I may use that expression, of the ITO with no response from within for about seven or eight months. There was letter after letter, interview after interview, for what practical purpose one finds it difficult to understand. In all these letters and during all these interviews, the representatives of the assessee were asking for a specific order in express terms that the claim for a refund was being refused. Matters went on in that fashion till 26th May, 1950, when the ITO woke up to realise that something had to be done and on that date he addressed a letter to the representatives of the assessee in which he said that a reply regarding the exemption asked for by the trust had been issued from his office by a letter, dt. 24th Nov., 1949, and he did not know why that letter had not been received by the assessee or its representatives. Apparently, the ITO thought that persistent enquiries made by the representatives of the assessee and the demand made by them for an order had been caused by non-receipt of the letter of 24th Nov., 1949. He, therefore, enclosed a copy of that letter for information of the assessee.
(3.) THE representatives of the assessee replied on the next day and they said that they thought that the ITO and themselves were at cross-purposes, because what they had been informed by the letter of 24th Nov., 1949, was that the income of the trust was not exempt from taxation, but they had not applied for an exemption certificate and therefore their demand for an order, refusing the refund, was in no way disposed of by the earlier letter. THEy therefore asked the ITO to frame his refusal, with his reasons, in the form of a proper order, covering each respective year and to do so as soon as possible. That letter was replied to by the ITO on 2nd June, 1950. THE letter ought to be quoted in full. It reads as follows : "No application for refund as prescribed under s. 48 of the IT Act r/w rr. 36 and 37 of the Income-tax Rules has been submitted by the trust so far, and as such the question of granting or refusing refund does not arise. Any application for claim of refund may now kindly be made to the ITO, R.C. Raja Chamber, Hastings Street, Calcutta." On receipt of that letter which, apparently, the assessee took as a refusal of the claim for refund, obtained at long last, it preferred an appeal to the AAC. That Officer dismissed the appeal on the ground that from the order of 2nd June, 1950, no appeal could lie. According to him, the letter or application of 18th Aug., 1945, such as it was, had been disposed of by the order of 24th Nov., 1949, and even that order was, perhaps, not appealable in strict law, because it had merely refused the claim for exemption under s. 4(3)(i) of the Act and did not contain a refusal of a refund under s. 48. The assessee appears to have contended that s. 48 did not apply at all, but the AAC met that point by saying that if s. 48 did not contain a refusal of a refund under s. 48. The assessee appears to have contended that s. 48 did not apply at all, but the AAC met that point by saying that if s. 48 did not apply and no formal refusal upon a proper application made under that section was essential for the purpose of sustaining an appeal, that was all the greater reason why an appeal should have been preferred, if any appeal lay from any order at all, from the order of 24th Nov., 1949. In any event, the AAC concluded, the letter of 2nd June, 1950, had decided nothing and certainly had not itself dealt with the assessee's letter of 18th Aug., 1945, and the claim for a refund made therein on the basis of a total exemption from tax liability. Accordingly, he held that the appeal preferred before him was not maintainable.;