Appeal No 30456
Appeal by special leave from the judgment and order dated July 19 1954 of the former Travancore
Cochin High Court in Income tax Reference No 5 of 1952
A V Viswanatha Sastri R Ganapathy Iyer and G Gopalakrishnan for the appellant
K N Rajagopal Sastri and D Gupta for the respondent
September 1
The Judgment of the Court was delivered by SHAH J
The Commissioner of Income Tax for Mysore Travancore Cochin and Coorg at Bangalore 60 468 referred under section 85 of the Travancore Taxation on Income Investigation Commission Act 1124 Malayalam Era hereinafter referred to as the Investigation Act read with section 113 of the Travancore Income Tax Regulation 1096 Malayalam Era hereinafter referred to as the Income Tax Act the following questions to the High Court of Travancore Cochin 1 Whether on the facts and in the circumstances of the case there was any evidence before the commission to come to the conclusion to which it came in its report  2 On the facts and in the circumstances of the case was the order C No 76 1 IT51 dated 25 10 1951 of the Government of India passed under the provisions of section 82 of the Travancore Taxation on Income Investigation Commission Act read with section 3 of the of 1950 a legal and valid order  3 Whether on the facts and in the circumstances of the case the order passed by the Income Tax Officer in pursuance of the directions of the Government under section 82 of the Travancore Taxation on Income Investigation Commission Act 1124 was a legal and valid order The High Court answered the three questions in the affirmative
Against the order of the High Court answering the reference this appeal has been preferred with special leave
The facts which gave rise to the reference are briefly these
The appellants are a firm of merchants carrying on business in yarn in the Districts of Trivandrum and Nagercoil in the Travancore Cochin State
For the accounting year 1118 M E August 17 1942 to August 16 1943 the appellants submitted a return under the Income Tax Act showing a net return of Rs4785945 0 as assessable income and they were assessed to income tax and super tax by the Income Tax Officer on that return
In 1124 M E the Legislature of Travancore enacted the Investigation Act conferring authority upon the Government of Travancore to constitute a commission to be called an Income Tax Investigation Commission to investigate and report on all matters 469 relating to taxation on income with particular reference to the extent to which the existing law relating to and procedure for the assessment and collection of such taxation was inadequate to prevent evasion thereof and to investigate in accordance with the pro visions of the Act in cases referred on or before February 16 1950 to it under section 5
The Government was authorised after consideration of the report to direct that proceedings be taken under the various Acts including the Income Tax Act in respect of any period commencing after August 16 1939
By sub section
4 of section 8 all assessment or reassessment proceedings taken in pursuance of the direction under sub section
2 the findings recorded by the Commission on the case or on the points referred to it were subject to the provisions of sub sections
5 and 6 to be final
Sub section 5 of section 8 provided for a reference to the High Court on any question of law arising out of any order made by the Commission
The State of Travancore Cochin merged with the Indian Union on March 7 1949 but the Income Tax Act and the Investigation Act continued to apply to that area notwithstanding the merger
On August 6 1949 the Government of Travancore Cochin passed an order referring the case of the appellants to the Commission for investigation and report under section 5 of the Investigation Act
On the evidence led before it the Commission held by its report dated February 1 1950 that the appellants had in the accounting year 1118 M E made a secret profit of Rs 131750 which was not included in the earlier assessment
The Commission then proceeded to compute the tax payable by the appellants and found that the amount of tax payable by the appellants on their true income was Rs 135736 8 0 and that they were liable to pay that amount subject to credit for the tax already paid The Government of Travancore Cochin by order dated February 14 1950 accepted the report of the Commission and directed that immediate steps be taken to recover under the Income Tax Act from the appellants the tax due according to the findings recorded by the Commission
Pursuant to this direction the 470 Income Tax Officer without holding any fresh assessment proceedings issued on March 151950 a demand notice under section 42 of the Income Tax Act for the additional tax imposed on the appellants according to the findings of the Commission and called upon the appellants to pay Rs 13337 13 0 as additional tax
The Union Legislature enacted on April 17 1950 the providing for the extension of certain opium and revenue laws to certain parts of India
By section 2 of that Act amongst others the Taxation on Income Investigation Commission Act XXX of 1947 enacted by the Central Legislature and all rules and orders made thereunder which were in force immediately before the commencement of Act XXX of 1950 were extended to the rest of India except the State of Jammu and Kashmir but by section 3 in so far as it is material it was provided that  If immediately before the commencement of this Act there is in force in any part B State other than Jammu and Kashmir any law x x x x corresponding to the Taxation on Income Investigation Commission Act 1947 XXX of 1947 that law shall continue to remain in force
with the following modifications a all cases referred to or pending before the State Commission by whatever name called in respect of matters relating to taxation on income other than agricultural income shall stand transferred to the Central Commission for disposal Provided        b        bb        c Any reference in the State law by whatever form of words to the State Government or the State Commission shall in relation to income other than agricultural income be construed as a reference to the Central Government or the Central Commission as the case may be
Purporting to exercise authority under section 82 of the Investigation Act read with section 3 cl
c of the  471 1950 the Government of India on October 25 1951 directed that appropriate assessment proceedings under the Income Tax Act be taken against the appellants with a view to assess or reasses the concealed income of Rs 131750 which had escaped assessment On January 1 1952 the Commissioner of Income Tax withdrew the notice of demand dated March 15 1950 and thereafter the Income Tax Officer commenced reassessment proceedings against the appellants and by his order dated March 29 1952 directed the appellants to pay income tax and super tax on the concealed income
At the instance of the appellants a reference was made to the High Court of Travancore Cochin under section 85 of the Investigation Act and the three questions set out hereinbefore were referred to that court
ID the view of the High Court there was evidence on which the Commission could arrive at the conclusion recorded by it
Evidently the High Court was incompetent in answering the question to enter upon a review of the evidence in exercise of its advisory jurisdiction and Mr Viswanatha Sastri on behalf of the appellants has fairly not attempted to challenge the answer recorded by the High Court on the first question
The Government of India had on a consideration of the report of the Commission directed on October 25 1951 that assessment proceedings be started against the appellants
Section 82 of the Investigation Act in so far as it is material reads as follows  After considering the report our Government shall by order in writing direct that such proceedings as they think fit under the Travancore Income Tax Act VIII of 1096 shall be taken against the person to whose case the report relates in respect of the income of any period commencing after the last day of Karkadagom 1124 August 16 1939 and upon such a direction being given such proceedings may be taken and completed under the appropriate law not withstanding the restrictions contained in section 25 of the Travancore Income Tax Act VIII of 1960 and notwithstanding any lapse of time or any decision to 472 a different effect given in the case by any Income Tax authority or Income Tax Appellate Tribunal 
By section 3 of the  XXXIII of 1950 the Investigation Act continued to remain in force with the modification that reference in the State law to the State Government was in relation to income other than agricultural income to be construed as a reference to the Central Government
Whatever authority could be exercised by the Travancore Cochin Government before the enactment of the  could therefore since the application of that Act be exercised by the Central Government and the latter Government could direct in respect of a case that proceedings for reassess ment be commenced against a tax payer
The case of the appellants was referred to the Investigation Commission by the Travancore Cochin Government and report was made to that Government by the Commission and the authority of the Government of Travancore Cochin to take action on the report having been conferred upon the Central Government by section 3c of the  the Central Government was primal facie competent to direct that proceedings under the Income Tax Act as may be justifiable be taken against the appellants
But Mr Viswanatha Sastri appearing on behalf of the appellants contests that view on two grounds 1 that the Central Government may direct proceedings to be taken under the Income Tax Act only if the report was made by a commission appointed under the Taxation on Income Investigation Commission Act XXX of 1947 and not on a report made by a commission appointed by the Travancore Cochin State under the Investigation Act and 2 that the Travancore Cochin Government having once taken action directing recovery of the tax due it was not competent to the Central Government under section 82 of the Investigation Act again to take any action on the report
473 In our view there is no force in either of these con tentions
The expression  the report  in section 82 refers to the report made under section 81 by the members of the Commission appointed by the Travancore Cochin Government under the Investigation Act and on a consideration of that report the Government of India has since the enactment of the  power to direct that proceedings for assessment or re assessment be taken under the Income Tax Act
On the plain language used by the Legislature in section 3c of the  the contention raised on behalf of the appellants is unsustainable
By order dated February 14 1950 the Government of Travancore Cochin had accepted the report of the Commission and had directed the Board of Revenue to take necessary action for recovery of the amount of tax due from the appellants and pursuant to that direction without holding proceedings for assessment or reassessment a demand notice was issued by the Income Tax Officer
The order passed by the Government of India on October 25 1951 is not in any way inconsistent with the order dated February 14 1950
Both the orders direct that steps be taken for recovery of the amount of income tax due from the appellants But if as appears evident from section 84 of the Investigation Act liability to pay income tax could arise only on an effective order of assessment the Income Tax Officer not having assessed the income before the demand notice was issued the Government of India was in our judgment competent to direct that proceedings be taken for assessing the liability of the appellants to pay tax consistently with the provisions of the Income Tax Act
The order passed by the Government of India on October 25 1951 may there
fore be regarded as effectuating the earlier order passed by the Travancore Cochin Government on February 14 1950
In any event there IN nothing in section 82 which justifies the contention that action may be taken thereunder only once
If an unauthorised 474 direction is given under section 82 there is nothing in that provision which prevents rectification of that order
By sub section
4 of section 8 of the Investigation Act the findings recorded by the Commission in cases or points referred to them are made final in all assessment or reassessment proceedings
The Act has by sub section
2 of section 8 removed the bar of limitation which arose by section 25 of the Income Tax Act
It was competent therefore to the Income Tax Officer to reopen the assessment proceedings notwithstanding any lapse of time and the previous order of assessment did not operate as a bar to such reassessment
The High Court was therefore in our judgment right in recording its answers on the three questions submitted by the Commissioner of Income Tax
In that view the appeal fails and is dismissed with costs
Appeal dismissed


Summary:
Section 71 of the UP District Boards Act 1922 as amended in 1933 provided that a resolution of the Board for the dismissal of its secretary shall not take effect until the period of one month has expired or until the State Government have passed orders on any appeal preferred by him
A District Board passed a resolution for dismissal of its secretary and also for his suspension till the matter of his dismissal was decided under section 71 of the Act on an appeal if any preferred by the secretary Held that under section 90 of the Act a secretary could be suspended only as a punishment or pending inquiry or 1123 pending the orders of any authority whose sanction is neces sary for his dismissal
The words pending the orders of any authority whose sanction is necessary for his dismissal could not appropriately cover the case of a suspension like the present one and the resolution for suspension was therefore ultra vires
Held further that since the Board was created by stat ute and its powers of dismissal and suspension are defined and circumscribed by sections 71 and 90 of the Act it would not be legitimate to have resort to general or implied powers under the law of master and servant or under section 16 of the UP General Clauses Actand even under section 16 of that Act powers which are vested in an authority to suspend or dismiss any person appointed are to be operative only unless a different intention appears and such a different intention is to be found in sections 71 and 90 of the Act which codify the powers of dismissal and suspension vested in the Board