Case: Commissioner of Income Tax, West Bengal II Vs. Electro House

1. Civil Appeals Nos. 1168 to 1171 of 1971 are by special leave and Civil Appeals Nos. 2376 to 2379 of 1968 are by certificate. These appeals arise from the decision of the Calcutta High Court in certain tax references. In those references the High Court was considering the one question referred to it by the Tribunal under section 66(1) of the Indianx Act, 1922 (in brief "the Act"), and two other questions referred to it by the Tribunal in accordance with the directions given by that court under section 66(2) of the Act. The High Court has only answered the question referred to it by the Tribunal under section 66(1) of the Act and it has not answered the other two questions as being unnecessary. The question referred under section 66(1) is "Whether, on the facts and in the circumstances of the case, the notice issued under section 33B of the Indianx Act, 1922, met the requirements of the law and whether the Commissioner ofx validly exercised jurisdiction under section 33B of the Indianx Act, 1922?"      2. The facts of the case lie within a narrow compass. The concerned assessment years are0 and, the corresponding accounting years having ended on December 31 of each of the years 1958 and 1959. The assessee, M/s. Electro House, claimed to be a firm constituted under a deed of partnership dated January 2, 1958. The business of that firm was started by Baidyanath Gorai some time in the year 1949 and up to the assessment year9 he was assessed as the sole proprietor thereof. On January 2, 1958, he purported to enter into a partnership with hisw and. Under that partnership he had 40 per cent. share and hisw andw had 30 per cent. share each in the profits and losses of the firm. Thex Officer accorded registration of the partnership in question under section 26A of the Act for the two assessment years with which we are concerned in these appeals. The Commissioner of, West Bengal, however appears to have found on an examination of the records that the orders of thex Officer granting registration to the assessee firm for the assessment year0 andrenewal of registration for the assessment yearWest Bengal      To      M/s. Electro HouseG. T. Road      Asansol      Gentlemen      Sub:M/s. Electro HouseRegistration under section 26A of theProposal under section 33B to cancel orders under section 26ANotice regarding      On a perusal of the orders under section 26A passed by thex Officer, "A" Ward, Asansol, on 5th October, 1960, and 25th February, 1961, for the assessment years0 and1 respectively in the above case and the connected records, I consider that the said orders are erroneous and prejudicial to revenue, inasmuch as registration under section 26A of thex Act, 1922, for the assessment year0 andrenewal of registration under section. 26A of the said Act for the assessment year1 should not have been granted as there are prima facie reasons and grounds to hold that the partnership brought into existence by the partnership deed dated 2nd January, 1958, is not a genuine one      I, therefore, propose to cancel the orders under section 26A of thex Act, 1922, for the assessmentyears0 and1 under powers vested in me under section 33B of theF.H. Vallibhoy      Commissioner of Income Tax      West Bengal."

Reasoning:
This section unlike section 34 does not prescribe any notice to be given. It only requires the Commissioner to give an opportunity to the assessee of being heard. The section does not speak of any notice. It is unfortunate that the High Court failed to notice the difference in language between sections 33Band34. For the assumption of jurisdiction to proceed under section 34 the notice as prescribed in that section is a condition precedent. But no such notice is contemplated by section 33B. The jurisdiction of the Commissioner to proceed under section 33B is not dependent on the fulfilment of any condition precedent. All, that he is, required to do before reaching his decisionandnot before commencing the enquiry, is that he must give the assessee an opportunity of being heardandmake or cause to make such enquiry as he deems necessary. Those requirements have nothing to do with the jurisdiction of the Commissioner. They pertain to the region of natural justice. Breach of the principles of natural justice may affect the legality of the order made but that does not affect the jurisdiction of the Commissioner. At present we are not called upon to consider whether the order made by the Commissioner is vitiated because of the contravention of any of the principles of natural justice. The scope of these appeals is very narrowOur answer to that question has already been made clear. In our judgment no notice was required to be issued by the Commissioner before assuming jurisdiction to proceed under section 33B. Therefore the question what that notice should contain does not arise for consideration. It is not necessary nor proper for us in this case to consider as to the nature of the enquiry to be held under section 33B. Therefore, we refrain from spelling out what principles of natural justice should be observed in an enquiry under section 33B. This court in Gita Devi Aggarwal v. Commissioner of Income-tax ruled that section 33 B does not in express terms require a notice to be served on the assessee as in the case of section 34. Section 33B merely requires that an opportunity of being heard should be given to the assesseeandthe stringent requirement of service of notice under section 34 cannot, therefore, be applied to a proceeding under section 33BFor the reasons mentioned above, we allow Civil Appeals Nos. 1168 to 1171 of 1971, discharge the answer given by the High Court to the question set out earlierandanswer that question as follows: The notice issued did not contravene section 33Bandthe Commissioner validly exercised his jurisdiction under section 33B. But as the High Court has not considered the other questions referred to it, these cases will now go back to the High Court for considering those questionsThis section unlike section 34 does not prescribe any notice to be given. It only requires the Commissioner to give an opportunity to the assessee of being heard. The section does not speak of any notice. It is unfortunate that the High Court failed to notice the difference in language between sections 33Band34. For the assumption of jurisdiction to proceed under section 34 the notice as prescribed in that section is a condition precedent. But no such notice is contemplated by section 33B. The jurisdiction of the Commissioner to proceed under section 33B is not dependent on the fulfilment of any condition precedent. All, that he is, required to do before reaching his decisionandnot before commencing the enquiry, is that he must give the assessee an opportunity of being heardandmake or cause to make such enquiry as he deems necessary. Those requirements have nothing to do with the jurisdiction of the Commissioner. They pertain to the region of natural justice. Breach of the principles of natural justice may affect the legality of the order made but that does not affect the jurisdiction of the Commissioner. At present we are not called upon to consider whether the order made by the Commissioner is vitiated because of the contravention of any of the principles of natural justice. The scope of these appeals is very. All that we have to see iswhether before assuming jurisdiction the Commissioner was required to issue a noticeandif he was so required what that notice should have contained ?Our answer to that question has already been made clear. In our judgment no notice was required to be issued by the Commissioner before assuming jurisdiction to proceed under section 33B. Therefore the question what that notice should contain does not arise for consideration. It is not necessary nor proper for us in this case to consider as to the nature of the enquiry to be held under section 33B. Therefore, we refrain from spelling out what principles of natural justice should be observed in an enquiry under section 33B. This court in Gita Devi Aggarwal v. Commissioner ofx ruled that section 33 B does not in express terms require a notice to be served on the assessee as in the case of section 34. Section 33B merely requires that an opportunity of being heard should be given to the assesseeandthe stringent requirement of service of notice under section 34 cannot, therefore, be applied to a proceeding under section 33BFor the reasons mentioned above, we allow Civil Appeals Nos. 1168 to 1171 of 1971, discharge the answer given by the High Court to the question set out earlierandanswer that question as follows: The notice issued did not contravene section 33Bandthe Commissioner validly exercised his jurisdiction under section 33B. But as the High Court has not considered the other questions referred to it, these cases will now go back to the High Court for considering those