Case Note & Summary
The dispute arose from an order passed by the Commissioner of Income-tax, West Bengal, under Section 33B of the Income-tax Act, 1922, cancelling the assessment of the assessee for the assessment year 1960-61. The assessee had filed voluntary income-tax returns for assessment years 1955-56 to 1959-60, giving an address in Calcutta within the jurisdiction of Income-tax Officer J Ward. The Income-tax Officer completed the assessments on 23 December 1959, accepting the initial capital, sale of ornaments, income from business, and investments without any inquiry or evidence, based solely on a declaration signed by the assessee. For the assessment year 1960-61, the assessee filed a voluntary return dated 6 July 1960, and after informing the Income-tax Officer of a change of address to Howrah, the file was transferred to Income-tax Officer D Ward, Howrah. The Income-tax Officer Howrah noted that the assessee could not produce details of speculative transactions or evidence of interest received, but nevertheless assessed the total income at Rs 9,037 without further investigation. On 7 June 1963, the Commissioner issued a notice under Section 33B requiring the assessee to show cause why the assessment for 1960-61 should not be cancelled, stating that the assessee neither resided nor carried on business from the address given, and that the Income-tax Officer was not justified in accepting the initial capital, sale of ornaments, income, and investments without inquiry. After considering the assessee's reply, the Commissioner cancelled the assessment and directed the Income-tax Officer to make a fresh assessment after making inquiries regarding jurisdiction, business carried on, possession of initial capital, acquisition and sale of ornaments, purchase of plot of land, resources, and money invested. The Income-tax Appellate Tribunal held in favour of the assessee on the question of the Commissioner's jurisdiction under Section 33B, but the High Court of Calcutta, on a reference under Section 66(1), held in favour of the Revenue. The assessee then appealed to the Supreme Court by certificate. The Supreme Court dismissed the appeal, holding that the Commissioner had ample jurisdiction under Section 33B to cancel the assessment and initiate proceedings for assessment against some other assessee who, according to the income-tax authorities, was liable for the income. The Court reasoned that even where income had not been earned and is not assessable in the assessee's hands, an assessment made merely because the assessee wants it assessed to assist someone else who would otherwise be assessed to a larger amount is erroneous and prejudicial to the interests of revenue. The Court followed the decision in Rampayari Devi Saraogi v. Commissioner of Income-tax and explained Commissioner of Income-tax v. Rao Thakur Narayan Singh. Accordingly, the appeal was dismissed, and the Commissioner's order was upheld.
Headnote
A) Income Tax - Revision by Commissioner - Section 33B, Income-tax Act, 1922 - Power to Cancel Erroneous Assessment Prejudicial to Revenue - Assessee voluntarily returned income for assessment year 1960-61, which was accepted by Income-tax Officer without inquiry into suspicious circumstances such as lack of residence/business at given address, unverified initial capital, sale of ornaments, and investments; Commissioner found assessment erroneous and prejudicial and cancelled it, directing fresh assessment - Held that even where income had not been earned and is not assessable in assessee's hands, an assessment made merely because assessee wants it assessed to assist another person who would otherwise be assessed to larger amount is erroneous and prejudicial to revenue; Commissioner has ample jurisdiction under Section 33B to cancel assessment and initiate proceedings against the proper assessee (Paras Not mentioned).
Issue of Consideration
Whether the Commissioner of Income-tax had jurisdiction under Section 33B of the Income-tax Act, 1922 to cancel an assessment made by the Income-tax Officer when the assessee had voluntarily returned income and was assessed, on the ground that the assessment was erroneous and prejudicial to the interests of revenue.
Final Decision
The Supreme Court dismissed the appeal, holding that the Commissioner had ample jurisdiction under Section 33B of the Income-tax Act, 1922 to cancel the assessment made by the Income-tax Officer for assessment year 1960-61. The assessment was erroneous and prejudicial to the interests of revenue because it was made without inquiry into suspicious circumstances, and even if the voluntarily returned income was not assessable in the assessee's hands, the assessment could be used to assist another person who would otherwise be assessed to a larger amount. The Commissioner's direction for fresh assessment with necessary inquiries was upheld.
Law Points
- Scope of Section 33B of Income-tax Act
- 1922
- Commissioner's power to cancel assessment if erroneous and prejudicial to revenue
- assessment based on voluntary return can be prejudicial if made to assist another person
- duty of Income-tax Officer to make inquiries before accepting declared income
