The Hon''ble Mr. Sachdhitanandan Sinha vs Emperor

Dawson Miller, C.J.—The only question of any substance for determination in this case is whether the Commissioner of Income Tax was justified in the circumstances in ordering the Income Tax Officer to issue a supplementary demand upon the assessee purporting to act u/s 33 of the Indian Income Tax Act, 1922. What happened was that the assessee on the 25th May 1923 was assessed to Income Tax. The Income Tax Officers ascertained subsequently that he owned certain house property and communications took place with the assessee calling attention to his house in Patna, a house which he had in Allahabad and another house which he had at Solon or in that neighbourhood in the Himalayas. Some correspondence took place between the Commissioner of Income Tax and the assessee in which the latter pointed out that he had only got into his house in Patna at the end of March 1923, that his house in the Himalayas was in a Native State and not subject to taxation in British India and that with regard to his house in Allahabad he understood that that being in another Province, was being taxed there and consequently he had not included it in his return. In the result on the 13th December 1923 the Commissioner of Income Tax wrote to the assesses that it had been ascertained that the annual letting value of his house at Allahabad was Rs. 2,400 and he requested him to show cause u/s 33 of the Income Tax Act why a sum of Rs. 2,400 should not be added to his income for the purpose of assessment for the past financial year. It will be observed that in that letter, which is dated the 13th December, the Income Tax Commissioner gave Mr. Sinha exactly a week in which to reply to his letter. He did not make any appointment nor did he fix a place or time of meeting so as to give Mr. Sinha an opportunity of producing evidence before him or being heard within the meaning of Section 33 of the Income Tax Act and the question which we have to decide in this case is whether by that letter of the 13th December and by the subsequent order of the Commissioner made on the 22nd December the assessee was given a reasonable opportunity of being heard within the meaning of the Act. The section provides that 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 an Assistant Commissioner, under Sub-Section 4 of Section 5. The second clause of the section provides that on receipt of the record the Commissioner may make such enquiry or cause such enquiry to be made and, subject to the provisions of this Act, may pass such orders thereon as he thinks fit. It must be conceded that an enquiry was made under Sub-section 2 of Section 33 and that enquiry, which consisted partly of correspondence with Mr. Sinha and partly of enquiries made from other sources resulted in the information that this house was of the annual value of Rs. 2,400, and that having been done, then it was within the competency of the Commissioner to pass such orders thereon as he thought fit. But there is a provision at the end of the section which says "Provided that he shall not pass any order prejudicial to an assessee without hearing him or giving him a reasonable opportunity of being heard." What happened was this. On receipt of the letter of the 13th December Mr. Sinha, who is a member of the Executive Council of this Province, and who was on tour at the time, replied on the 20th December stating in effect that he was permanently residing in his house, at Allahabad for many years and all payments in connection with his house used to be made there; that he had been under the impression that the same system continued but that a nephew of his was now living in the house and was looking after the establishment there "but if on the ground that Income Tax is to be paid by a person where he ordinarily resides the payment in Allahabad was stopped I shall have no objection to your assessing. me on the assessed value of my Allahabad house." If the matter had ended there I think there might have been some ground for stating that the order passed by the Commissioner after the receipt of that letter was fair and reasonable but the letter goes on "I return to Patna on the 2nd January and shall then write to you definitely on the subject. In the meantime I have written to my nephew making enquiries about the matter." I may say at the outset that where an order is passed by the Commissioner u/s 33 in circumstances such as the present, that is to say in circumstances where he is really exercising the duties of the Income Tax Officer under an earlier section, namely, Section 23, Sub-Section 2 of the Act, and is, in effect, calling upon the assessee to give evidence to support the original return made by him, then I think that a week''s notice or 8 days'' notice, as. was the case here, is certainly not sufficient time, but it will be observed from Mr. Sinha''s letter that he certainly considered that he would le given a further opportunity of considering this matter because he said that he would be back in Patna on the 2nd January and he would write to the Commissioner then defintely upon the subject. Therefore, he was certainly under the impression that he would be given a further opportunity of considering this matter and of definitely putting his views before the Commissioner. That opportunity, however, he was never given because on receipt of his letter which was written on the 20th the Commissioner passed the order on the 22nd directing the Income tax Officer to issue a supplementary demand. On the 19th January the demand having presumably been received Mr. Sinha wrote to the Commissioner of Income Tax in continuation of his previous letter and said that no assessment had been made recently on his Allahabad house for the purpose of Income Tax, and that whilst this was so, the facts and circumstances of the case were not yet fully made known to the Commissioner and Mr. Sinha was not quite sure that his Allahabad house was liable for assessment and he said that it would be in the interests of justice if the Commissioner would kindly give him an opportunity of stating his views before he passed any final orders on the subject. In answer to this the Commissioner wrote back and said that he had finally disposed of the matter on the 22nd December and he had no power to review his order and he refused to consider the matter any further. As I have already said it seems to me that the only question is whether the notice given on the 13th December and the subsequent order made on the 22nd December were justified having regard to the provisions of Section 33. I do not think that any reasonable opportunity was given at all to the assessee in this case either to present his case or to come and place his evidence before the Commissioner. He was given a week in which to reply. He said what in effect amounts to this that he had no objection to the assessment at the rate claimed but that he would write again definitely about the matter in a short time and meantime he would consult his nephew who was living in the house. On receipt of that letter the order was passed and no opportunity at all, certainly no reasonable opportunity within the meaning of Section 33, was, in my opinion, given to the assessee to put his case before the Commissioner, because the order was passed without informing the assessee what he proposed to do. The case of the assessee is that this house in Allahabad is really owned by him as a member of a Hindu joint family and under the provisions of Section 14 of the Act the tax shall not be payable by an assessee in respect of any sum which he receives as a member of a Hindu undivided family. It may be quite true that on the 13th December when Mr. Sinha wrote to the Income Tax Commissioner this matter was not present to his mind. The enactment is a recent one. It found place for the first time in the Act of 1922 but at the same time up to that time the assessee had had no reasonable opportunity of going into the matter and it/is not surprising that at the end of a week only he did not discover that this house being, owned not by himself in his personal capacity but as a member of a Hindu undivided family, was not subject to assessment as against him personally at all. As I have already stated I do not: think that the notice given in this case was reasonable within the meaning of Section 33 and that an opportunity ought to be given to the assessee to place his case before the Commissioner before any order is finally passed. The sum is a small one in this case. In addition to the cost of printing the paper-book and the deposit which the petitioner is entitled to get back, I think that the hearing fee should be assessed at 5 gold mohurs.

Foster, J.

I agree.