Case: Union Of India &amp; Ors Vs. Seth R. Dalmia

The petitioner had been assessed as an individual for the aforesaid assessment years in accordance with the provisions of the Indian Income-Tax Act, 1922. Thereafter a Commission known as Vivian Bose Commission was appointed to enquire into the affairs of various companies with which the appellant was alleged to have been associated. On the facts disclosed in the report of enquiry, the Income-tax Officer, Special Investigation Circle A, New Delhi, issued the aforesaid two sets of notices to the petitioner under Section 148 of the Act. The notices informed the petitioner that these were issued "after obtaining the necessary satisfaction of the Central Board of Direct Taxes, New Delhi". This claim was questioned by the petitioner in the High Court and one of the grounds on which the validity of the notices was challenged was that sanction of the Central Board of Direct Taxes had not been taken before the notices were issued as required by Section 151 of the Act. The High Court accepting this contention quashed all the six notices served on the petitioner and by issuing a writ of prohibition restrained the appellants, the Union of India, the Central Board of Direct Taxes, New Delhi and the Income-tax Officer, Special Investigation Circle A, New Delhi from taking any action upon these notices. As the writ petitions succeeded on this ground, the High Court did not consider the other objections to the notices raised in, the petitions.The propriety of that decision is in question in these appeals.

Court's reasoning:
It is not quite clear whetherthe High Court was not satisfied that Shri J. P. Singhs proposal for a change in the allocation of work was at all approved by the Government or that in the absence of a formal order to that effect the approval was of no consequence.The High Court does not appear to have taken any note of the affidavit of Shri P. G. Gandhi in paragraph 5 in which it is stated that all assessment work of Income-tax was assigned to Shri Narayana Row with the approval of the Central Government. From the affidavit of Shri J. P. Singh, the-then Chairman of the Central Board of Direct Taxes, part of which we have extracted above, it appears that Shri Singh had referred to the Secretary, Ministry of Finance (Department of Revenue and Expenditure) the proposal for transfer of work relating to sanction under Section 151 (1) of the Act from the Chairman to the Member of the Board; that Shri Singh personally discussed the matter with Shri V. T. Dehejia who was then the Secretary, Ministry of Finance, and that Shri Dehejia approved the proposal. Shri J. P. Singhs affidavit adds that the note he made in the office file on June 18, 1964 - "Discussed with Secy. (R and E). It is just a minor internal arrangement. No formal order is necessary." - refers to these facts. In the face of the statements appearing in the affidavits of Shri J. P. Singh and Shri P. G. Gandhi that the work relating to the reopening of assessments was assigned to Shri Row with the previous approval of the Central Government, it is difficult to see how it can be said that the office notes were not in line with the averments in the affidavits. The High Court did not disbelieve the statement of Shri J. P. Singh that he had discussed the proposal with Shri V. T. Dehejia, who approved the proposal. Possibly, the absence of a formal order expressing the approval led to the observation that Shri Singhs affidavit was not in line with the office notes and also the ultimate finding that the notices issued upon the satisfaction of the member of the Board was "without jurisdiction andit seems to us, when the note said "no formal order is necessary" it could not possibly mean that approval of the Central Government was unnecessary, and we have no doubt that it meant that no formal order conveying the approval was necessary. Regarding the statements in the affidavits of Shri J. P. Singh and Shri P. G. Gandhi that all work relating to the reopening of assessments was assigned to Shri Narayana Row with the approval of the Centralstated already, the High Court did not question the truth of the facts stated in Shri Singhs affidavit nor do we find any reason to do so. We have no doubt that the office note made by Shri J. P. Singh on June 18. 1964 supports the statements made in hishave already held that upon the material on record such approval appears to have been given. Fonsecas case, (supra) is hardly of any assistance on the question whether in this case the approval of the Central Government should have been recorded in a formaldo not think that the distribution of work by the Chairman of the Board can be equated with legislation. The allocation of business and the approval are matters of internal arrangement not affecting anyones rights. Initially the Board consisting of the Chairman and the member had the jurisdiction to deal with the matter in question. Thereafter, in exercise of the power conferred by Rule 4 of the Central Board of Direct Taxes (Regulation of Transaction of Business) Rules, 1964 the Chairman with the approval of the Central Government distributed the business of the Board between himself and the member, keeping all assessment work of income-tax to himself. Then, again with the approval of the Central Government, he assigned this work to the member. Rule 4 of the Central Board of Direct Taxes (Regulation of Transaction of Business) Rules, 1964 does not prescribe any special or particular manner in which the approval is to be recorded. The approval given at that stage does not touch the rights of the assessees. The fact that approval was given must of course be proved and in our view, that has been done in this case; no question of publication of the order of allocation and the approval accorded to it by the Central Government can therefore arise. The office file does not also disclose any formal order approving the original distribution of work as between the Chairman and the member of the Board. It appears from the office note of January 1, 1964 that a draft showing the allocation of work was signed by Shri J. P. Singh and Shri V. T. Dehejia, Secretary of the Ministry of Finance (Department of Revenue and Expenditure) appended his signature below Shri Singhs. This shows clearly that a formal expression of the approval was not considered necessary. If there is no reason to doubt the truth of the statements made in Shri J. P. Singhs affidavit, and we think there is none, then the legality of the impugned notices under Section 148 of the Act cannot be challenged on the ground that they were issued upon the satisfaction of Shri Narayanain our opinion the impugned notices were issued in due compliance with the requirements of R. 4 of Central Board of Direct Taxes (Regulation of Transaction of Business) Rules, 1964, we do not find it necessary to consider the provisions of this Act for the purpose of these appeals.