The Commissioner of Income Tax vs Pl. S. Sivaswami Chettiar

Kumaraswami Sastri, J.—Two points referred to us for decision are: (1) whether a combined notice under Sections 23(2) and 22(4) is a valid notice, and whether on a non-compliance of the terms of such a notice, an assessment u/s 23(4) could be justified? and (2) whether in respect of an assessee who has submitted a return of his income u/s 22(2), a notice issued u/s 22(4) is valid so as to justify an assessment u/s 23(4) in the event of non-compliance of the terms of the notice?

As regards the first point we think it is covered by authority. That a combined notice may be sent has been held in In re Harmukhrai Duiichand

I.L.R.(1928) C. 39 (F.B.), In the matter of Chandra Sen Jaini I.L.R.(1928) A. 589 Commissioner of Income Tax, Burma v. R. M.P. Chettiar

I.L.R.(1929) Rang. 26. Firm and Ram Kissendas Bagri v. The Commissioner of Income Tax, Bengal (1927) 2 I.T.C. 324 (F.B.).

The second question has, we think, been practically answered in Ramaswami Chettiar v. Commissioner of Income Tax I.L.R.(1928) M. 194 :

56 M.L.J. 141 (F.B.). If a combined notice can be issued, there is nothing to prevent the Income Tax Officer from sending a notice, as he has

done, in Form B, requiring the production of accounts which he wants to be produced and are specified on the back of his notice and also requiring the person to appear personally. Now, in cases where a person appears but does not produce the accounts he is asked to produce, we think the penalty u/s 23(4) can be applied. It is not necessary that another notice should be sent u/s 23(2) because u/s 23(4) any one of the defaults is sufficient to attract the provision that the Income Tax Officer can assess on the best of his information. The argument of Mr. Krishnaswami

Aiyar, as we take it, is, where a return has been submitted and even in cases where the Income Tax Officer acts u/s 22(4) and wants the production of accounts, he must still issue a notice u/s 23(2) and act after issuing that notice. That is reading into Section 23(4) what is not there.

An Income Tax Officer is not bound to make up his mind the moment he receives a return as to whether he accepts it or not; it is open to him before he deals with the question to call for the production of accounts and, as the accounts have to be proved by somebody, to call the assessee to appear in person. If the assessee appears in person but does not produce the accounts there is no reason to say that the penalty u/s 23(4) is not attracted simply because another notice has not been sent u/s 23(2) asking him to attend office and produce or cause to be produced any records which he may rely on in support of his return. This would pre-suppose that the Income Tax Officer must work up his mind at once one way or the other and then act and that he cannot suspend judgment until he calls for the person assessed to substantiate his return or calls for the accounts to substantiate his evidence.

We think both these questions have to be answered against the petitioner that a combined notice is valid and that an assessee can be assessed

u/s 23(4) in the event of non-compliance with the terms of the notice requiring the production of accounts which the officer in law entitled to call upon him to produce. The petitioner will pay the costs of the reference, Rs. 250.