Case Note & Summary
The appeal arose from a writ petition filed by a Hindu undivided family assessee against orders of the Income-tax Officer and Commissioner of Income-tax concerning capital gains tax under the Indian Income-tax Act, 1922. The assessee was one of the partners of an Agency Firm which managed Gujarat Cotton Mills Co. Ltd. In 1946, due to internal differences, the partners agreed to sell their shareholding and surrender the managing agency to a purchaser firm at Rs. 65 per share. The assessee held 11,230 shares and received the price. For assessment year 1948-49, the Income-tax Officer initially treated the excess realization as business income; the Appellate Assistant Commissioner confirmed, but the Income-tax Appellate Tribunal held it was taxable as capital gains under Section 12B and directed modification. The Income-tax Officer recomputed the capital gains on September 28, 1955 but did not issue a notice of demand under Section 29, preventing the assessee from appealing. The assessee's application for a notice of demand was refused, and an appeal against that refusal was dismissed as not maintainable. Meanwhile, the assessee filed a revision petition under Section 33A(2) before the Commissioner on September 27, 1956, drawing attention to a Bombay High Court decision in Baijnath's case interpreting capital gains computation on the same transaction. The Commissioner dismissed the revision on March 28, 1959, doubting maintainability and rejecting on merits, ignoring the Bombay decision. The assessee then filed a writ petition in the Allahabad High Court seeking certiorari to quash the Commissioner's and Income-tax Officer's orders and mandamus to compel fresh orders and issuance of demand notice. The High Court dismissed the writ petition in limine, criticizing the affidavit as unsatisfactory and holding the revision lacked merit and the Bombay decision was distinguishable. Before the Supreme Court, the Revenue raised a preliminary objection that the Commissioner's order under Section 33A(2) was administrative, so no writ of certiorari could lie under Article 226. The Court rejected this, holding that the revisional jurisdiction conferred on the Commissioner is judicial in nature; the nature of jurisdiction and rights decided carry the duty to act judicially, and therefore certiorari could lie. The Court also overruled three earlier decisions that had treated such orders as administrative. Even if the order were administrative, the assessee would be entitled to mandamus directing the Income-tax Officer to perform his statutory duty of passing the order and issuing notice of demand under Section 29. The Court further held that the affidavit filed in support of the writ petition was adequate because the phrase 'deponent's own knowledge' includes knowledge derived from perusal of relevant documents, and in any event the High Court should have allowed an opportunity to rectify any defects instead of dismissing in limine. The Court also found that the High Court erred in distinguishing the Bombay High Court decision, as both cases arose from the same transaction of sale of shares by the Agency Firm; the existence of a Division Bench decision in favor of the assessee indicated the question was arguable and required serious consideration. Accordingly, the Supreme Court allowed the appeal, set aside the High Court's order, quashed the Commissioner's order, and directed the Commissioner to entertain the revision and dispose of it according to law, and directed the Income-tax Officer to issue a notice of demand under Section 29 to enable the assessee to pursue statutory remedies.
Headnote
A) Constitutional Law - Writ Jurisdiction - Article 226 - Quasi-Judicial Nature of Commissioner's Revisional Power - Indian Income-tax Act, 1922, Section 33A(2) - The Commissioner's order under Section 33A(2) dismissing the assessee's revision petition was quasi-judicial and not administrative, because the jurisdiction conferred and the rights decided impose a duty to act judicially. The Supreme Court held that a writ of certiorari could quash the order, and earlier decisions holding the power administrative were overruled. Held that the Commissioner erred in dismissing the revision without considering the Bombay High Court decision (Pages 544-548). B) Income Tax - Revision - Maintainability - Indian Income-tax Act, 1922, Sections 33A(2), 30, 29 - The assessee had no appeal to the Appellate Assistant Commissioner against the Income-tax Officer's computation, so revision under Section 33A(2) was maintainable. The Court also held that even if the Commissioner's order were administrative, the assessee was entitled to a writ of mandamus directing the Income-tax Officer to perform his statutory duty of passing the order and issuing a notice of demand under Section 29 (Pages 546-548). C) Constitutional Law - Writ Practice - Affidavit Defects - Constitution of India, Article 226 - The High Court erred in dismissing the writ petition in limine on the ground that the affidavit was unsatisfactory. The phrase 'deponent's own knowledge' includes knowledge derived from perusal of relevant documents, and even if defective, the High Court should have allowed an opportunity to file a better affidavit (Pages 547-548). D) Precedent - Distinguishing Decisions - Same Transaction - Indian Income-tax Act, 1922, Section 12B - The High Court also erred in holding that the Bombay High Court decision in Baijnath's case was on different facts, when in fact both cases arose from the same transaction of sale of shares by the Agency Firm to the Purchaser Firm. The Bombay decision indicated the question was arguable and required serious consideration (Pages 548).
Issue of Consideration
Whether the Commissioner's power under Section 33A(2) of the Indian Income-tax Act, 1922 is administrative or quasi-judicial and whether a writ of certiorari lies under Article 226 of the Constitution; whether the High Court erred in dismissing the writ petition on grounds of defective affidavit without giving an opportunity to rectify; whether the High Court erred in distinguishing the Bombay High Court decision when facts arose from the same transaction; whether revision under Section 33A(2) was maintainable when no appeal lay to the Appellate Assistant Commissioner against the Income-tax Officer's computation
Final Decision
The Supreme Court allowed the appeal, set aside the High Court's order, quashed the Commissioner's order dated March 28, 1959, and directed the Commissioner to entertain the revision petition and dispose of it according to law, giving suitable directions to the Income-tax Officer. The Court held that the Commissioner's power under Section 33A(2) is quasi-judicial, not administrative, and that a writ of certiorari lies to quash the erroneous order; even if the order were administrative, a writ of mandamus should issue directing the Income-tax Officer to pass the order and issue notice of demand under Section 29. The Court also held that the High Court should not have dismissed the writ petition in limine for alleged affidavit defects without allowing rectification, and that the High Court erred in distinguishing the Bombay High Court decision. Earlier decisions holding the power administrative were overruled.
Law Points
- Commissioner's power under Section 33A(2) of Indian Income-tax Act
- 1922 is quasi-judicial
- not administrative
- Writ of certiorari lies against Commissioner's revisional order
- High Court should not dismiss writ petition in limine for defective affidavit without opportunity to rectify
- Phrase 'deponent's own knowledge' includes knowledge derived from perusal of relevant documents
- Decision of Division Bench of another High Court on same transaction indicates arguable question requiring serious consideration
- Writ of mandamus can issue directing Income-tax Officer to perform statutory duty of passing order and issuing demand notice under Section 29
- Sitalpore Colliery Concern Ltd. v. Union of India
- Additional Income-tax Officer
- Cuddapah v. Cuddapah Star Transport Co. Ltd.
- and Suganchand Saraogi v. Commissioner of Income-tax overruled
