Sachchidanand Sinha vs The Commissioner of Income Tax

This is an application tinder Section 66 of the Income Tax Act, 1922, praying that the Commissioner of Income Tax be called upon to state a case and refer it to the High Court for determination.

It appears that the applicant, the Hon''ble Mr. S. Sinha, was assessed with Income Tax for the year 1923-24 and the usual assessment form was issued on the 25th of May, 1923. That assessment was principally upon the salary of the applicant as Member of the Executive Council, Bihar and Orissa and was made by the Income Tax Officer through whose authority and under whose signature the assessment form was issued.

On the 12th October, 1923, the Commissioner of Income Tax wrote to Mr. Sinha as follows:

I have the honour to say that your return of income for the year 1922-23 does not show any income from house property which I understand you possess. If my information is correct, I would request you to furnish particulars of its bona fide annual value, by October 26th.

Mr. Sinha thought that the house referred to by the Commissioner was his newly built house at Patna, and in his letter of the 14th October, 1923, he explained the omission of house property from, the return submitted by him as being due to the fact that he had removed to his new house only on the 1st of April, 1923, previous to which he was occupying a rented house.

The Commissioner in his letter of the 23rd October, 1923, pointed out that the properties referred to in his previous letter were Mr. Sinha''s two houses, one at Allahabad and another in or near Simla. To this, Mr. Sinha replied on the 6th of November, 1923, that he possessed a house at Allahabad (No. 7, Elgin Road) in which his mother and other members of his family had been residing since 1898; that his son has another house at Solon which he has inherited from his maternal grand father. Mr. Sinha in this letter further offered to supply any additional, information that the Commissioner might require.

On the 13th December, 1923, the Commissioner of Income Tax wrote to Mr. Sinha stating that the annual letting value of his house at 7, Elgin Road, Allahabad, was ascertained to be Rs. 2,400, and asked him to show cause u/s 33 of the Indian Income Tax Act, 1922, by the 21st December, why the said sum of Rs. 2,400 should not be added to Mr. Sinha''s income for the purpose of assessment to Income Tax and super tax. In reply to this, on the 20th December, 1923, Mr. Sinha while "on tour" as noted in his letter, wrote to the Commissioner stating that he was under the impression that all the payments in connection with his house at Allahabad were made at Allahabad but if the assessment of his Allahabad house was to be made at Patna he would have no objection to his being assessed on the value of that house. He further stated that he would be returning to Patna on the 2nd January, 1924, when he would write to the Commissioner of Income Tax definitely on the subject and that in the meantime he had written to his nephew at Allahabad making enquiries about the matter.

Accordingly, on his return to Patna, Mr. Sinha wrote to the Commissioner on the 19th January, 1924, as follows:

In continuation of my letter seat to you from 9-3, Hungerford Street, Calcutta, dated the 20th December, 1923, I now write to say as the result of enquiries made by me that no assessment has been recently made of my Allahabad house for the purpose of Income Tax. While this is so, you will permit me to add that looking into the law and taking into consideration the facts and circumstances of the case, which are not yet fully known to you, I am not quite sure that my Allahabad house is liable to assessment. In the circumstances, it seems to me that it would be in the interest of justice if you kindly give mean opportunity of stating my views before you pass final orders on the subject.

To this the Commissioner of Income Tax replied, as per his letter of the 23rd January, 1924, stating that he had already passed final orders in his case on 22nd December, 1923, and that he had no flower to review the order already passed by him. The Commissioner added:

I would, however, point out that when I gave yon the opportunity (as required by law) of making any representation, you stated that you had no objection to raise except possibly that assessment had already been made in Allahabad.

Thereupon, on the 20th February, 19,24, Mr. Sinha applied to the Commissioner of Income Tax for review of his order or reference to the High Court. The application of Mr. Sinha was refused by the Commissioner as per his order, dated the 22nd February, 1924. The Commissioner held that he had no power to review his own order and that no question of law arose necessitating any reference to the High Court. Hence this application before us for asking the Commissioner of Income Tax to state the case and to refer it to the High Court for determination. The reference is sought on the following points:

(a) Whether the Commissioner of Income Tax having once passed an order u/s 33 has power to review his own order on sufficient grounds being shown?

(b) Whether the requirements of the proviso to Section 33(2) of the Income Tax Act, in regard to giving the petitioner reasonable opportunity of being heard, have been complied with in this case?

(c) Whether, in view of the provision of Section 14 of the Income Tax Act, income derived as a member of a Hindu undivided family can be assessed jointly with the petitioner''s personal income?

The first point is directed against the view of the Commissioner of Income Tax as to his power of reviewing his own order passed u/s 33 of the Act. The Commissioner in his order refers probably to an instruction issued by the Inland Board of Revenue, contained in paragraph 76 of the Income Tax Manual at page 111(a). The instruction runs as follows:

The power conferred by this section as a Commissioner can only be exercised once in any particular case, A Commissioner who has once passed an order in connection with any case u/s 33 cannot review that order even if he subsequently finds that he has made a mistake in passing such order.

The order in the present case was passed by the Commissioner upon his own initiative, and there is no appeal from his order. It is contended by Mr. Jayaswal that unless the aggrieved party is allowed to have the order reviewed by the Commissioner there is no remedy left to him and consequently the circular should not be allowed to override the principle that every Court or officer has power to review its or his own order on being convinced of its or his mistake. Mr. Jayaswal wants the authority of the circular to be tested. This is consequently a question of law which must be determined by the Court.

The next question is based upon the proviso to. Section 33, Clause (2) of the Act. It is said that no reasonable opportunity was given to the applicant of being heard before the final order was passed by the Commissioner on the 22nd December, 1923. On the 13th December, 1923, the Commissioner wrote to Mr. Sinha intimating him the estimated letting value of his house at Allahabad and asking him to show cause u/s 33 why that value should not be added to his incomes in order to assess additional tax and super tax. This letter was written from Ranchi and was received by Mr. Sinha while on tour. The date fixed for the disposal of the case was the 21st of December, 1923. The letter did not state the place where the cause was to be shewn On the 20th December, 1923, Mr. Sinha wrote to the Commissioner of Income Tax stating that he was "on tour" and that on his return he would write in detail and virtually asked him to postpone the disposal of the matter until his return. The matter Was disposed of on the 22nd December, 1923, after the receipt of this letter of the 20th December. Mr. Jayaswal contends that no opportunity was given to Mr. Sinha of being heard before the matter was disposed of.

The circumstances set forth above raise a question of law which justifies a reference by the Commissioner to the High Court for determination of point (b) mentioned above.

The last point is obviously a question of law upon which a reference is necessary.

As to the High Court''s power to call for a reference in this case, Mr. Jayaswal has referred to the principles underlying the decision of their Lordships of the Judicial Committee in Alcock Ashdown and Company Limited v. The Chief Revenue Authority of Bombay AIR 1923 P.C. 138. He says that in accordance with the order passed on the 22nd December, 1923, by the Commissioner suo motu u/s 33 the Income Tax Officer revised on the 9th January, 1924, the original assessment made by him and imposed an additional assessment of tax upon the value of the house referred to above. Against this additional assessment there could be no appeal either u/s 31 or 32 of title Act, particularly when the assessment was made in pursuance of the order of the Commissioner u/s 33. Under Clause (1) of Section 66 the Commissioner could, on his motion, refer the questions of law that arose in the case for the opinion of the High Court. The Commissioner when moved by the assessee to make a reference refused to do so. We think that the High Court can in the circumstances call for a reference.

Accordingly, we call upon the Commissioner of Income Tax to state a case on all the three points (a), (b) and (c) mentioned above, setting forth the facts relating to the matters in question and refer the same for the opinion of the High Court.