Case Note & Summary
These two appeals by special leave challenged two orders of the Income-tax Appellate Tribunal (Calcutta Bench) dated 28 November 1952, which upheld assessments made by the Income-tax Officer, District N-C (I.T. cum E.P.T.), Calcutta, for income-tax for the assessment year ending 31 March 1944 and excess profits tax for the chargeable accounting period ending 31 March 1943. The original assessee, Rai Bahadur Seth Teomal, was the manager of a Hindu undivided family carrying on business as a railway contractor at Lalmonirhat in the district of Rangpur, now in Pakistan. After his death on 30 May 1944, Seth Ottanmal became the manager and appellant. In April 1943, a notice under Section 22(2) of the Indian Income-tax Act, 1922 was served on the assessee at Rangpur, and the return was filed on 28 February 1944. Notices under Sections 22(4) and 23(2) were issued, but before final assessment, the Central Board of Revenue passed an order under Section 5(2) assigning the assessee's case, along with other cases, to the Commissioner of Income-tax (Central), Calcutta, because the cases were reported to have Excess Profits Tax liabilities. On 11 February 1948, the Income-tax Officer, Calcutta, issued fresh notices and completed the income-tax assessment on 15 March 1948 and the excess profits tax assessment on 30 March 1948. The assessee appealed to the Appellate Assistant Commissioner, challenging the jurisdiction of the Calcutta Income-tax Officer and the validity of the transfer. The appeals were dismissed. The Income-tax Appellate Tribunal also dismissed the appeals, holding that the objection related to place of assessment and could not be raised before it, relying on Wallace Brothers & Co. Ltd. v. Commissioner of Income-tax, Bombay, Sind and Baluchistan. The Commissioner of Income-tax refused to refer the question of jurisdiction under Section 66(1), and the High Court dismissed the application under Section 66(2) on 23 July 1954. No appeal was filed against the High Court order, but the assessee appealed to the Supreme Court against the Tribunal's orders. In the Supreme Court, the assessee contended that under Section 64(1) and (2) he was entitled to be assessed by the Income-tax Officer of the area where his business was situated, that the transfer order was invalid because it should have been made under Section 5(7A) and not Section 5(2), and that the Calcutta officer lacked jurisdiction. The Revenue raised a preliminary objection that since no appeal was filed against the High Court's order, the appeal against the Tribunal should not be entertained, but the Court proceeded to examine the substantive issues. The Supreme Court held that Section 5(7A) does not modify or cut down the power under Section 5(2); the two sub-sections are complementary and operate in separate spheres. The Board's order assigning the case to the Commissioner of Income-tax (Central), Calcutta, fell under Section 5(2) and was valid. It further held that under Section 64(5)(a), sub-sections (1) and (2) of Section 64 did not apply when an order under Section 5(2) had been made, so the jurisdiction of the Calcutta Income-tax Officer could not be challenged. The Court also affirmed the principle that objections as to place of assessment cannot be raised in appeal before the Appellate Assistant Commissioner or the Appellate Tribunal, and therefore no question of law arose for reference to the High Court. The Court distinguished Pannalal Binjraj and Bidi Supply Co., and relied on Wallace Brothers and Seth Kanhaiyalal. Dayaldas Kushiram and Dina Nath Hem Raj were distinguished. Accordingly, both appeals were dismissed.
Headnote
A) Income Tax - Transfer of Case - Section 5(2) and Section 5(7A) of Indian Income-tax Act, 1922 - The Central Board of Revenue's power to assign functions to Commissioners under s.5(2) is distinct from its power to transfer cases between Income-tax Officers under s.5(7A); the two provisions are complementary and operate in separate spheres, and s.5(7A) does not modify or cut down s.5(2). In this case, the CBDT assigned the assessee's case along with others to the Commissioner of Income-tax (Central), Calcutta, because of reported E.P.T. liabilities, which fell under s.5(2) and not s.5(7A). Held that the transfer order was valid. (Paras Not mentioned) B) Income Tax - Jurisdiction - Section 64(5)(a) of Indian Income-tax Act, 1922 - Where the Central Board of Revenue makes an order under s.5(2), sub-sections (1) and (2) of s.64 do not apply, and the jurisdiction of the Income-tax Officer Calcutta to make the assessment cannot be challenged. Held that the Income-tax Officer Calcutta had jurisdiction to assess the appellant. (Paras Not mentioned) C) Income Tax - Appeal and Reference - Place of Assessment Objection - Sections 66(1), 66(2), 64 of Indian Income-tax Act, 1922 - Objections as to the place of assessment cannot be raised in appeal before the Appellate Assistant Commissioner or the Appellate Tribunal, as held in Wallace Brothers and Seth Kanhaiyalal; Dayaldas Kushiram and Dina Nath Hem Raj were distinguished. Consequently, no question of law as to jurisdiction could arise out of the Tribunal's order for reference to the High Court. Held that the Tribunal correctly refused to entertain the jurisdiction objection and the reference applications were rightly dismissed. (Paras Not mentioned) D) Constitutional Law - Supreme Court Jurisdiction - Article 136 of Constitution of India - Preliminary Objection - The Revenue raised a preliminary objection that since the appellant had not appealed against the High Court's order refusing reference under s.66(2), the appeal against the Tribunal's order should not be entertained. The Court noted the objection but proceeded to decide the appeals on merits against the appellant. Held that the appeals failed on substantive grounds. (Paras Not mentioned)
Issue of Consideration
Whether the transfer of the assessee's case by the Central Board of Revenue under Section 5(2) of the Indian Income-tax Act, 1922 was valid; whether the Income-tax Officer, Calcutta had jurisdiction to make the assessment; whether objections to place of assessment could be raised in appeal or referred to High Court.
Final Decision
Appeals dismissed. The transfer of case under Section 5(2) was valid; Income-tax Officer, Calcutta had jurisdiction to make assessments; objections to place of assessment cannot be raised in appeal and no question of law arose for reference.
Law Points
- Legal points not extracted
- Section 5(2) and Section 5(7A) of Income-tax Act
- 1922 are complementary and operate in separate spheres
- Section 5(7A) does not modify or cut down power under Section 5(2)
- Section 64(5)(a) excludes applicability of Section 64(1) and (2) when CBDT passes order under Section 5(2)
- Objections to place of assessment cannot be raised in appeal before Appellate Assistant Commissioner or Appellate Tribunal
- Question of place of assessment cannot be referred to High Court under Section 66(2)
- Assessment by Income-tax Officer Calcutta valid
