COMMISSIONER OF INCOME-TAX, BOMBAY PRESIDENCY AND ADEN Vs. MESSRS KHIEMCHAND-RAMDAS

JUDGEMENT

(1.) The respondents to this appeal are a firm who carry on business at Bunder Abbas and Kerman outside British India but are assessable to taxation in respect of their income under the provisions of the Income-tax Act, 1922. Their total income during the fiscal year ending on 3l March, 1926, being in the opinion of the Income-tax Officer, Shikarpur, of such an amount as to render them liable to income-tax under that Act for the year ending 31 March 1927, a notice was served upon them by that official in accordance with the provisions of S. 22 (2) requiring them to make a return of that income. He also served upon them a notice under sub-s. (4) of the same section requiring production of the relevant accounts and documents. Had the respondents thought fit to comply with these notices they would have avoided a good many of the difficulties in which they subsequently found themselves involved. Unfortunately, they completely ignored the notices. The duty of the Income-tax Officer in such circumstances is prescribed by S. 23 (4), of the Act. It is to 'make the assessment to the best of his judgment." One of the peculiarities of most Income-tax Acts is that the Word " assessment " is used as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act for imposing liability upon the tax-payer. The Indian Income-tax Act is no exception in this respect, and some discussion took piece before their Lordships as to the meaning of the words "make the assessment " in S. 23 (4), the question debated being whether the words mean no more than "compute the total income" or whether they include also the determination of the tax payable. It was pointed out that by sub.s. (1) of the same section, which deals with the cases where the officer is satisfied with the return made by the tax-payer, the officer is in terms directed both to assess the total income and to determine the sum payable on the basis of such return. So too, under sub-s. (3), which deals with the cases where the officer is not satisfied that the return is correct or complete. In such cases the sub-section requires that the officer, after hearing evidence as therein mentioned, shall " assess the total income of the assessee and determine the sum payable by him on the basis of such assessment." Sub.s. (4) on the other hand merely directs the officer to " make the assessment to the best of his judgment, " and contains no specific reference to a determination by him of the sum payable. Unless, therefore, the word " assessment " in sub.s. (4) is intended to mean something more than the word means in sub.ss. (1) and (3) (and it may be observed that this is by no means improbable in an Income-tax Act), the officer is not in terms given any power to determine the sum payable by the tax-payer. Their Lordships do not find it necessary to express any opinion upon this question, which seems to them to be merely one of academic interest. For even if such a power be not given expressly by the direction to ''make the assessment," it is in their opinion, plainly implied, reading the section as a whole. And this view is strongly corroborated by S. 29, which is in these terms :

(2.) When the Income-tax Officer has determined a sum to be payable by an assessee under S.23?? the Income-tax Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum so payable. Now the prescribed form in terms applies to an assessment under S. 23 (4). In the present case the officer in due course acted under the sub-section and made an assessment to the best of his judgment, and at the same time or shortly afterwards served upon the respondents a notice of demand under S.29. But before dealing further with such assessment and demand, it is necessary to refer to some other provisions of the Act and the rules made thereunder. By S. 55 of the Act it is provided as follows:

(3.) In addition to the income-tax charged for any year there shall be charged, levied and paid for that year in respect of the total income of the previous year of any individual, Hindu undivided family, company, unregistered firm or other association of individuals, not being a registered firm, an additional duty of income-tax (in this Act referred to as super-tax) at the rate or rates laid down for that year by Act of the Indian Legislature. By virtue of S. 56, the total income of an unregistered firm is for the purposes of super-tax the total income as assessed for the purposes of income-tax, and an assessment (which here must mean a computation) of total income that has become final and conclusive for the purposes of income-tax is made final and conclusive for the purposes of super-tax for the same year. By S. 58, all the Provisions of the Act (with certain exceptions not material for the present purpose) are made applicable so far as may be to the charge, assessment, collection and recovery of super-tax. By S. 2 (14) the words "registered firm' are defined as meaning a firm constituted as therein mentioned of which the prescribed particulars have been registered with the Income-tax Officer in the prescribed manner.