S.K. Mal Lodha, J. - (1.) THE following question has been referred by the Income-tax Appellate Tribunal, Delhi Bench 'A' (for short "the Tribunal ") to this court for answer : "(1) Whether, on the facts and in the circumstances of the case, the service of the notice on Shri Rawat Singh complied with the requirements of Section 263 that the assessee should be provided a reasonable opportunity of being heard against the proposed order under Section 263 ?"
(2.) THE assessee-respondent is an individual. THE assessment year is 1961-62. THE assessee-respondent filed a return for the assessment year 1961-62 on June 4, 1965. THE assessee had income from a lime kiln business at Banner. He had income from contract for removal of coal ash from Northern Railway, income from trucks and jeeps, income from confectionery business and also income from property and share income from a firm. THE return showed an income of Rs. 3,000. No basis for the return was given by the assessee. THE ITO completed the assessment on a total income of Rs. 97,511 on March 10, 1966, under Section 143(3) of the I.T. Act (No. XLIII of 1961) (for short 'the Act')). THE Commissioner of Income-tax (CIT) was of the opinion that the ITO ought to have charged while completing the assessment, interest from the assessee under Section 18A(3) of the Indian I.T. Act, 1922 ("the old Act" herein) read with Section 217 of the Act. Section 18A(3) of the old Act provided that the assessee should furnish an estimate of its income in advance and also pay income-tax in advance. THE assessee had neither filed an estimate nor paid advance-tax in respect of the assessment year 19.61-62. THE CIT was of the opinion that interest was chargeable under the above provision. As the ITO failed to charge such interest, the CIT considered the order dated March 10, 1966, of the ITO to be prejudicial to the interest of the Revenue. He, therefore, initiated proceedings under Section 263 of the Act for revision of the assessment order. THE CIT issued a letter dated February 3, 1969, to the assessee asking him to show cause why action should not be taken under Section 263 of the Act for restoring loss to the Revenue caused in the said matter. Show-cause notice was not served and it was received back with the postal remark "left without address". THE CIT issued another notice to the assessee fixing February 24, 1968, for hearing. This notice was served on Shri Rawat Singh, who held a power of attorney for the assessment year 1961-62 from the assessee. THE power of attorney dated March 31, 1965, in favour of Shri Rawat Singh, is as follows : "Stamp for Rs. 3/- Before the Income-tax Officer, C-Ward, Jodhpur. Power of attorney I, Girdharilal, s/o Trilokchand, hereby appoint and authorise Shri Rawat Singh, I.T.P., to appear before all income-tax authorities, on my behalf, proceedings for the assessment year 1961-62. He is authorised to attend, to file applications, seek adjournments, produce books, answer queries, and is authorised to do all those acts, which I am personally authorised to do, in connection with the said proceedings. His acts, pleadings, arguments, applications and submissions made by him, on my behalf before all authorities, under his signatures, shall be effectively and irrevocably lawfully binding on me. Barmer 31-8-1965. Sd/- (Assessee) I being a qualified practitioner, hereby accept the above appointment. Sd/- Rawat Singh, I.T.P. Barmer." The date of hearing fixed on February 24, 1968, was adjourned to February 28, 1968. A notice of this adjournment was served on Shri Rawat Singh. On February 27, 1968, Shri Rawat Singh sent a telegram asking for extension of time for one month on the ground that he was ill and also to enable him to contact the assessee. The CIT fixed the hearing on March 4, 1968, as the action under Section 263 of the Act was to become time-barred on March 10, 1968. Shri Rawat Singh was asked to produce material evidence in support of the contentions. On March 4, 1968, a telegram was again received from Shri Rawat Singh seeking further adjournment. The contents of the telegram are as under : "Self confined to bed could not contract assessed. No instructions please serve further communications directly on assessee. However circumstances do (sic) lawfully warrant proposed action which would be illegal pray accordingly Rawat Singh." Having regard to the proceedings that had been taken till then, the CIT was of the opinion that the Income-tax Practitioner for the assessee was trying to drag on the proceedings. It was observed by the CIT that the notice has been served on Shri Rawat Singh, as early as on February 16, 1968, and as such he should have consulted the assessee by March 4, 1968. The CIT did not consider personal service on the assessee necessary. He, therefore, proceeded to decide the matter ex parte. The CIT came to the conclusion that the charge of penal interest under Section 18A(8) of the old Act (Section 217 of the Act) for the assessee's default under Section 18A(3) of the old Act (Section 212(3) of the Act) was mandatory and that the ITO had no discretion to waive or reduce it except to the extent and in the manner provided for in Rule 48/40 of the I.T. Rules, 1922/1962. The CIT by its order dated March 6, 1968, directed the ITO to modify the assessment suitably and levy penal interest chargeable under Section 18A(8) of the old Act/ Section 217 of the Act in accordance with law. An appeal was filed by the assessee to the Tribunal. The Tribunal reached the conclusion by its order dated August 1, 1970, that the notice issued by the CIT has not been properly served and, therefore, the order under Section 263 of the Act cannot be upheld. The reasons given by the Tribunal in support of its order are : (i) that the notice issued by the CIT was not properly served on the assessee ; and (ii) that the power of attorney given by the assessee in favour of Shri Rawat Singh did not authorise him to receive any notice and that at any rate it did not authorise him to receive any notice in proceedings under Section 263 of the Act. In view of the aforesaid reasons, the Tribunal set aside the order of the CIT. The CIT submitted an application for reference under Section 256(1) of the Act stating the question of law arising out of the order of the Tribunal dated August 1, 1970. The Tribunal has referred the aforesaid question. We have heard Mr. Mehta, learned counsel for the Revenue, and Mr. J. P. Joshi, learned counsel appearing for the assessee-respondent. It was contended by Mr. Mehta that the opportunity of being heard was afforded to the assessee-respondent against the proposed order under Section 263 as service of the notice on Shri Rawat Singh was substantial compliance with the requirements under Section 263 of the Act.
(3.) THE material portion of Section 263 of the Act reads as under: "263(1). 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 inquiry as he deems necessary, pass such order 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...... (3) Notwithstanding anying contained in Sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court." It may be stated that this section corresponds to Section 33B of the old Act, which, however, did not contain any provision similar to the present Sub-section (3) and the Explanation. There is no room for debate that a notice, as in the case of Section 147 of the Act, is not required to be served on the assessee. In was held in Gita Devi Aggarwal v. CIt [1970] 76 ItR 496 (SC), (1) that Section 33B of the old Act does not in express terms require a notice to be served on the assessee as in the case of Section 34 of the old Act and that Section 33B of the old Act merely requires that an opportunity of being heard should be given to the assessee and the stringent requirement of service of notice under Section 34 cannot, therefore, be applied to a proceeding under Section 33B. Their Lordships agreed with the conclusion drawn by the High Court to the effect that the appellant was given an opportunity of being heard before the CIt. Gita Devi's case [1970] 76 ItR 496 (SC) was followed in CIt v. Electro House [1971] 82 ItR 824 (SC), wherein it was observed (see head-note) ; "Unlike Section 34, Section 33B of the Income-tax Act, 1922, does not require any notice to be issued by the Commissioner before he assumes jurisdiction to proceed to revise an order passed by the Income-tax Officer. The jurisdiction of the Commissioner to proceed under Section 33B is not dependent on the fulfilment of any condition precedent. He is not required to give any notice before commencing the inquiry. All that he is required to do, before reaching his decision and not before commencing the inquiry, is to give the assessee an opportunity of being heard and make or cause to make such inquiry as he deems necessary. These requirements have nothing to do with the jurisdiction of the Commissioner. They pertain to the region of natural justice. Breach of the principles of natural justice may affect the legality of the order made but that does not affect the jurisdiction of the Commissioner." ;