Case Note & Summary
The case concerned the validity of an income-tax assessment and an excess profits tax assessment made by an Income-tax Officer in Calcutta after the assessee's case was transferred from Rangpur. The original assessee, a Hindu undivided family represented by its manager, carried on a railway contract business at Lalmonirhat in the district of Rangpur, now in Pakistan. In April 1943, the Income-tax Officer, Rangpur, served a notice under Section 22(2) of the Indian Income-tax Act, 1922, and the return was filed on February 28, 1944. Notices under Sections 22(4) and 23(2) were issued, but before the assessment could be completed, the Central Board of Revenue, by an order under Section 5(2), transferred the case to the Commissioner of Income-tax (Central), Calcutta, citing excess profits tax liabilities. On February 11, 1948, the Income-tax Officer, District N-C, Calcutta, issued fresh notices and completed the income-tax assessment on March 15, 1948, and the excess profits tax assessment on March 30, 1948. The assessee appealed to the Appellate Assistant Commissioner, who dismissed the appeals, and then to the Income-tax Appellate Tribunal, which also dismissed the appeals, holding that the objection related to the place of assessment and was not within its jurisdiction. The assessee's application for a reference under Section 66(1) was dismissed, and his application to the High Court under Section 66(2) was also dismissed on July 23, 1954. He then appealed to the Supreme Court by special leave against the Tribunal's orders. The legal issues before the Supreme Court were: first, whether the transfer of the case was valid under Section 5(2) or should have been made under Section 5(7A); second, whether the Income-tax Officer, Calcutta, had jurisdiction to assess in view of Section 64(5)(a); and third, whether an objection as to the place of assessment could be raised in appeal. The appellant argued 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, and that the transfer should have been made under Section 5(7A). The Revenue contended that the transfer was validly made under Section 5(2), that the Income-tax Officer, Calcutta, had jurisdiction by virtue of Section 64(5)(a), and that the objection to the place of assessment was not appealable. The Supreme Court held that Section 5(7A) and Section 5(2) operate in separate spheres and are complementary; the order assigning the case to the Commissioner fell under Section 5(2) and was valid. It further held that Section 64(5)(a) excludes assessees subject to an order under Section 5(2) from the territorial rules in Section 64(1) and (2), so the Income-tax Officer, Calcutta, had jurisdiction. Finally, relying on Wallace Brothers and Seth Kanhaiyalal, the Court held that objections as to the place of assessment cannot be raised in appeal before the Appellate Assistant Commissioner or the Appellate Tribunal, and therefore no referable question of law arose. The appeals were dismissed, and the Tribunal's orders were upheld.
Headnote
A) Income Tax - Transfer of Case - Section 5(2) versus Section 5(7A) - Indian Income-tax Act, 1922, Sections 5(2), 5(7A) - The Central Board of Revenue's power to specify which Commissioner shall perform functions in respect of certain cases under Section 5(2) is complementary to, not modified by, Section 5(7A) which empowers transfer of cases between Income-tax Officers; the two operate in separate spheres. In this case, the Board assigned the appellant's case to the Commissioner of Income-tax (Central), Calcutta, which fell under Section 5(2), and the order was valid. Held that the transfer order was valid and not vitiated by non-use of Section 5(7A). (Paras 1-5) B) Income Tax - Jurisdiction - Section 64(5)(a) - Indian Income-tax Act, 1922, Section 64(5)(a) - Section 64(1) and (2) prescribe the place of assessment by reference to the area of business, but sub-section (5)(a) excludes assessees in respect of whom an order has been made by the Central Board of Revenue under Section 5(2). Consequently, the Income-tax Officer, Calcutta, had jurisdiction to assess the appellant despite the business being carried on outside Calcutta. Held that the jurisdictional challenge failed. (Paras 6-8) C) Income Tax - Place of Assessment - Appealability - Indian Income-tax Act, 1922, Sections 66(1), 66(2) - Objections as to place of assessment cannot be raised in appeal before the Appellate Assistant Commissioner or the Appellate Tribunal, as they do not arise out of the Tribunal's order and are not referable to the High Court. The Tribunal correctly overruled the appellant's objection, relying on Wallace Brothers. Held that the appellant's objection was not maintainable. (Paras 9-10)
Issue of Consideration
Whether the Central Board of Revenue's order transferring the appellant's case was valid under Section 5(2) of the Indian Income-tax Act, 1922, rather than Section 5(7A); whether the Income-tax Officer, Calcutta, had jurisdiction to assess the appellant in view of Section 64(5)(a); whether an objection as to place of assessment could be raised in appeal before the Appellate Assistant Commissioner or the Appellate Tribunal.
Final Decision
The Supreme Court dismissed both appeals, upholding the orders of the Income-tax Appellate Tribunal. It held that the transfer of the case under Section 5(2) was valid, that the Income-tax Officer, Calcutta, had jurisdiction to assess the appellant, and that objections as to place of assessment could not be raised in appeal or referred to the High Court.
Law Points
- Legal points not extracted
- Power under Section 5(2) to assign cases to Commissioner is distinct from Section 5(7A) transfer between Income-tax Officers
- Section 64(5)(a) excludes assessees subject to Section 5(2) order from territorial rules under Section 64(1) and (2)
- Objection to place of assessment cannot be raised in appeal or referred to High Court.
