P.K. Achuthan vs Income Tax Officer and Another

Joseph Vithayathil, J.—The Petitioner in Original Petition No. 16 of 1954 of this Court is the Appellant. The original petition is for canceling the order passed by the Commissioner of Income Tax, Mysore, Travancore-Cochin and Coorg, u/s 43 of the Cochin Income Tax Act, VI of 1117, and for quashing the notice issued by the Income Tax Officer, Trichur, demanding payment of the Income Tax as per the order of the commissioner.

The Appellant''s income for the assessment year 1123 M. E. was assessed under the Cochin Income tax Act by the Deputy Commissioner of Income Tax, Trichur, at Rs. 51,643/- and he was directed to pay as Income Tax Rs. 14,126-3-0. He appealed to the Commissioner of Income Tax, Cochin, from this order of assessment. While the appeal was pending, the Indian Income Tax Act, Act XI of 1922, was extended to the State by the Finance Act, Act XXV of 1950.

Under the Indian Income Tax Act the appeal had to be heard by the Appellate Assistant Commissioner of Income Tax, Ernakulam. The Appellate Assistant The Commissioner heard the appeal and reduced the assessable income of the Appellant by Rs. 16,103/-. Consequently the Income Tax payable by the Appellant was reduced to Rs. 6973-7-0. The Commissioner of Income Tax, Mysore, Travancore-Cochin and Coorg, (second Respondent) called for the records of the case and revised the order of the Appellate Assistant Commissioner of Income Tax, Ernakulam u/s 43 of the Cochin Income Tax Act, VI of 1117. The order of the Appellate Assistant Commissioner was set aside and that of the Deputy Commissioner of Income Tax, was restored.

In O. P. No. 16 of 1954 filed by the Assessee he prayed for quashing the order of the Commissioner of Income Tax on two grounds, viz., (1) the Commissioner of Income Tax had no jurisdiction to revise the order of the Appellate Assistant Commissioner and (2) the Commissioner passed the order in revision without giving the Assessee reasonable opportunity of being heard.

M. S. Menon J., who heard the original petition held that the Commissioner of Income Tax had jurisdiction to revise the order of the appellate Assistant Commissioner u/s 43 of the Cochin Income Tax Act, VI of 1117 and that the Assessee was given reasonable opportunity of being heard before the Commissioner passed his order. The original petition was accordingly dismissed with costs. The appeal is from this order.

The two questions to be decided in the appeal are; (1) whether the Commissioner of Income Tax had jurisdiction to revise the order of the Appellate Assistant Commissioner u/s 43 of the Cochin Income Tax Act, VI of 1117, and (2) Whether the Assessee was given reasonable opportunity of being heard before the Commissioner passed his order.

As stated already, the assessment in this case related to the year 1123 M. E. and was made under the Cochin Income Tax Act, VI of 1117. Under that Act there were three classes of income - tax Authorities, viz., (1) the Commissioner of Income Tax, (2) the Deputy Commissioner of Income - tax and (3) Income Tax Officers (vide Section 8(1) Section 8(2) provided that Government might, by general or special notification, in the Cochin Government Gazette, direct that the powers conferred on the Income Tax Officer and the Deputy Commissioner of Income Tax, by or under the Act, should in respect of any specified case or classes of cases, be exercised by the Deputy Commissioner and the commissioner respectively and that, for the purposes of any case in respect of which such a notification applied, references to the Act or any Rule made hereunder to the Income Tax Officer and the Deputy Commissioner should be deemed to be references to the Deputy Commissioner and the Commissioner respectively. From an order of assessment made by the Income Tax Officer Appeal lay to the Deputy Commissioner of Income Tax and from the appellate order of the Deputy Commissioner of Income Tax a second appeal lay to the Commissioner of Income Tax.

In respect of cases in which the original order of assessment was made by the Deputy Commissioner of Income Tax appeal lay to, the Commissioner of Income Tax. Section 43 of the Act conferred on the Commissioner the power of revision. That section, as amended by Act XXII of 1122, read as follows;

43 (1) The Commissioner may of his own motion call for the record of any proceeding under this Act which has been taken by any authority subordinate to him or by himself when exercising: the powers of the Deputy Commissioner under Sub-section. (2) of Section 8(2) On receipt of the record the Commissioner may make such, enquiry or cause such enquiry to be made and notwithstanding the provisions contained in Sections 41, 42 and 44 enhance or reduce any assessment or penalty or pass such other orders as he thinks fit:

Provided that he shall not enhance an assessment or a penalty or pass any other order prejudicial to the Assessee without hearing him or giving him a reasonable opportunity of being heard; Provided further that an order of the Commissioner declining to interfere shall be deemed not to be an order prejudicial to the Assessee;

Provided further that the Commissioner shall not initiate any proceeding under this section after the expiration of one year from the date of the order sought to be revised.

According to learned Counsel for the Appellant the order of the Appellate Assistant Commissioner of Income Tax was not one passed by an authority subordinate to the Commissioner of Income Tax, and it was also not an order passed by the Commissioner himself when exercising the powers of the Deputy Commissioner u/s 8(2) of the Cochin Income Tax Act.

It was argued that the appellate Assistant Commissioner who was exercising the powers of the Commissioner of Income Tax, Cochin, in hearing the appeal from the order of the Deputy Commissioner of Income Tax could alone revise the order under the latter part of Section 43(1).

According to learned Counsel for the Respondents, although the Appellate Assistant Commissioner of Income Tax was exercising the powers of the Commissioner of Income Tax, Cochin, in hearing the appeal, he has no power of revision under the Indian Income Tax Act and that power can be exercised only by the Commissioner of Income Tax in whom alone the power of revision is vested under that Act The decision of this question depends on the Interpretation of Section 13(1) of the Finance Act, Act XXV of 1950. That section reads:

If immediately before the first day of April 1950 there is in force in any Part B State other than Jammu and Kashmir or in Manipur, Tripura or Vindhya Pradesh or in the merged territory of Cooch-Bihar any law relating to Income Tax or super-tax or tax on profits of business, that law shall cease to have effect except for the purposes of the levy, assessment and collection of Income Tax & super-tax in respect of any period not included in the previous year for the purposes of assessment under the Indian Income Tax Act, 1922 (XI of 1922), or the year ending on the 31st day of March 1951, or for any subsequent year, or as the case may be, the levy, assessment and collection of the tax on profits of business for any chargeable accounting period ending on or before the 31st day of March 1949.

Provided that any reference in any such law to an Officer, authority, tribunal or court shall be construed as a reference to the corresponding officer, authority, tribunal or court appointed or constituted under the said Act, and if any question arises as to who such corresponding officer, authority, tribunal or court, is, the decision of the Central Government thereon shall be final.

It is admitted by both sides that there has been no decision by the Central Government on the question as to who is the authority under the Indian Act corresponding to the Commissioner of Income Tax under the Cochin Act for the exercise of the power of revision u/s 43 of the, Cochin Income tax Act, VI of 1117.

Under the Indian Income Tax Act XI of 1922 it is only the Commissioner of Income Tax who has got the power of revision (vide Sections 33(A) and 33(B) Under that Act all original orders of assessment have to be made by the Income Tax. Officer and the appeal from the order of the Income Tax Officer has to be heard by the Appellate Assistant Commissioner.

There is a second appeal to the Income Tax Appellate Tribunal. The Commissioner has got the power of revision subject to certain conditions. Under the Cochin Act the original order of assessment was not always made by the Income Tax Officer.

In specified cases or classes of cases it had to be made by the Deputy Commissioner of Income Tax.

When the original order was made by the Income Tax Officer the appeal lay to the Deputy Commissioner of Income Tax and the second appeal to the Commissioner of Income Tax.

When the original order of assessment was made by the Deputy Commissioner of Income Tax the appeal lay to the Commissioner of Income Tax. Under S. 43 of the Act the Commissioner could revise an order passed by any authority subordinate to him or by himself in disposing of an appeal from ah original order of assessment made by the Deputy Commissioner of Income Tax.

Since the appeal from the original order of assessment made by the Deputy Commissioner had to be heard by the Commissioner the section provided that he could revise an order passed by himself when exercising the powers of the Deputy Commissioner u/s 8(2) of the Act. But, under the Indian Act, all appeals from the original order of assessment have to be heard by the Appellate Assistant Commissioner.

The Commissioner of Income Tax has no right of hearing an appeal either from the original order of assessment or from the first appellate order. Consequently the appeal, in this case, which was pending before the Commissioner of Income Tax, Cochin, had to be heard by the Appellate Assistant Commissioner. It is true that when hearing the appeal the Appellate Assistant Commissioner was exercising the power vested in the Commissioner of Income Tax Cochin, under the Cochin Act.

But that does not mean that the Appellate Assistant Commissioner has also the power of revision that was vested in the Commissioner of Income Tax, Cochin, to revise an order passed by him when exercising the powers of the Deputy Commissioner u/s 8(2) of the Cochin Act. As stated already, under the Indian Act the power of revision is vested only in the Commissioner.

So far as the power of revision is concerned. It cannot be said that the appellate Assistant Commissioner is the authority corresponding to the Commissioner of Income Tax, Cochin, although he Is the corresponding authority as regards the hearing of an appeal from an original order of assessment made by the Deputy Commissioner of Income Tax, Cochin.

That, in our opinion, is the reasonable interpretation of the proviso to S. 13 (1) of the Finance Act. We are, therefore, unable to accept the contention of the Appellant that it was the Appellate Assistant Commissioner and not the Commissioner of Income Tax, who could revise the order passed in appeal in this case.

As for the second contention, the proceedings before the Commissioner of Income Tax go to show that reasonable opportunity was given to the Appellant to appear before the Commissioner and present his case before the order in revision was passed. The Commissioner sent notice to the Appellant, on 5-9-1951 to show cause why the order of the Appellate Assistant Commissioner should not be revised.

The Appellant sent two objections, one on 11-9-1951 and the other on 23-1-1952. On 13-2-1953 the Commissioner sent a notice to the Appellant informing him that the case was posted for hearing at Bangalore on 23-2-1953. The notice was received by the Appellant only on 19-2-1952. Nothing took place on 23-2-1953 and the Commissioner sent another notice on 12-9-1953 to the effect that the case was posted for hearing on 18-11-1953. That notice was, however, served on the Appellant only on 26-11-1953. The Appellant''s case is that he did not receive any further notice relating to the posting of the case. But it is seen that another notice was issued to the Appellant on 2-12-1953 informing him that the case was posted for hearing on 17-12-1953. Ext. II is that notice The postal endorsement on it is to the effect that. the addressee refused to accept it.

The Appellant did not appear on 17-12-1953. The order of the Commissioner was passed only on 13-1-1954. If the endorsement on Ext. II notice is true it cannot be said that the Appellant was not given reasonable opportunity of being heard before the Commissioner passed his order. The Appellant has not attempted to prove that the endorsement is false.

In the circumstance, we find no reason to disagree with the finding of our learned brother, M.S. Menon J., that the Appellant was given reasonable opportunity of being heard before the Commissioner passed the order in revision on 13-1-1954.

We, therefore, confirm the order appealed against and dismiss the appeal with costs.