Rm. P. R. Viswanathan Chettiar v. Commissioner Of Income Tax, Madras

RAJAGOPALAN, J.

The question referred to this Court under Section 66(1) of the Indian Income-tax Act ran :-

"Was the Tribunal right in holding that the assessment in this case was made within the period of limitation prescribed under Section 34(2) of the disposal of limitation prescribed under Section 34(2) of the Act " *

The facts necessary for the disposal of this case were never in dispute. The assessment was under Section 34 of the Act, and the assessment year was 1942-43, the accounting year having ended with April 12, 194

2. The assessment was completed on 24th March, 194

7. The assessment order as well as the demand notice under Section 29 of teh Act were despatched by the Income-tax Officer on March 25, 194

7. They were received by the assessee on April 2, 1947.

The relevant portion of Section 34(2) of the Act ran :-

"No order of assessment............... or reassessment under subsection (1) of this section shall be made after the expiry .......... of four years, from the end of the year in which the income, profits or gains were first assessable." *

The contention of the assessee, which was negatived by the departmental authorities and the Appellate Tribunal, was that the assessment in question "was made" within the meaning of Section 34(2) of the Act only on April 2, 1947, when the assessment order was communicated to him, and that that was more than four years after the close of the assessment year 1942-4

3. The Appellate Tribunal agreeing with the Income-tax Officer and the Appellate Assistant Commissioner held that the assessment "was made" within the meaning of Section 34(2) of the Act on March 24, 1947.

In support of his contention that the assessment in question, that is, the assessment for the assessment year 1942-43, was not made, with in the meaning of Section 34(2) of the Act, till April 2, 19947, on which date alone a copy of the assessment order was communicated to the assessee, the learned counsel for the assessee relied on Swaminathan v. Letchmanan and Muthiah Chettiar v. Commissioner of Income-taxThe principles laid down in Abdul Ali v. Mirza Khan were followed in Swaminathan v. Letchmanan. Both were cases under Section 77 of the Registration Act, and the statutory expression that had to be construed was the "making of the order" of refusal. In Secretary of State for India in Council v. Gopisetti Narayanaswami Nayudu, the learned Judges held that the expression "date of decision" in Section 13 of Madras Act IV of 1897 was the date when the decision was passed, and the learned Judges further held :-

"A decision cannot be said to be passed until it is in some way pronounced or published under such circumstances that the parties affected by it have a reasonable opportunity of knowing what it contains. Till then though it may be written out, signed and dated, it is nothing but the decision which the officer intends to pass." *

In Muthiah Chettiar v. Commissioner of Income-tax. Rajamannar, C.J, explained the principle underlying Secretary of State for India in Council v. Gopisetti Narayanaswami Nayudu and Swaminathan v. Letchmanan :-

"........... the rule laid down.... is based upon a salutary and just principle, namely, that if a person is given a right to resort to a remedy to get rid of an adverse order within a prescribed time, limitation should not be computed from a date earlier than that on which the party aggrieved actually knew of the order or had an opportunity of knowing the order and therefore must be presumed to have had knowledge of the order." *

That was the principle which the learned Judges applied in Muthiah Chettiar v. Commissioner of Income-tax to construe the expression "an order made" as it was used in sub-section (2) of section 33-A of the Income-tax Act.

Even without a reference to the cases listed under the expression "made" in Strouds Judicial Dictionary, III Edition, Vol. 3, at pages 1698 to 1700 it should be obvious that that expression as a statutory expression should be constructed with reference to the context in which that expression has been used in that statute.In Secretary of State for Indian in council v. Gopisetti Narayanaswami Nayudu, itself at page 154 the learned Judges dealt with the contention based upon Section 24 of Madras Act IV of 1897, which required that the decision should be recorded in writing with its reason and should also be communicate to the parties. The learned Judges pointed out :-

"Though, therefore, this provision supports the Government Pleader to the extent that it shows that the date of the order and the date of communication may, in the contemplation of the legislature, be different dates, still it does not support the more important inference that the Act contemplates the starting of limitation before the communication of the order to the parties." *

As explained by Rajamannar, C.J., in Muthiah Chettiar v. Commissioner of Income-tax, it was for the limited purpose of computing the period of limitation that the expression "the date on which the order was made" was construed in Secretory of State for India in Council v. Gopisetti Narayanswami Nayudu as the date on which it was communicated to the parties affected. In Muthiah Chettiar v. Commissioner of Income tax the learned Judges negatived the contention that the provision in sub-section (2) of Section 33-A the Income-tax was not really a provision prescribing the time limit for the exercise of the right of the party aggrieved, but that it imposed only a limit to the exercise of revisional powers by the commissioner. Sub-section (I) of section 33-A provided that the the Commissioner could on his own motion exercise his revisional powers, provided the order had not been made more than one year previously. Sub-section 33-A provided for the application by an assessee to the Commissioner invoking his revisional powers, which application had to be made within one year from the date of the order. The learned Judges explained in Muthiah Chettiar v. Commissioner of Income tax that the date of the order or purpose of sub-section (I) of section 33-A could be different from the date of the order for purposes of sub-section (2) of Section 33-A. Dealing with the contention, that time must be computed for both the date when the order was actually passed, Rajamannar. C.J., observed :-

"Plausible though this argument may be, so far as sub-section (I) of Section 33-A is concerned, we are of opinion that it is not sound so far as the right given to the party aggrieved under sub-section (2) is concerned. In a case falling under sub-section (I) the commissioner acts of his own motion. There is no question of the aggrieved party invoking his jurisdication. There can therefore be no occasion to apply the rule enunciated in Secretary of State for India in Council v. Gopisetti Narayanswami Nayudu. It may be said that the Commissioners power to call for the record ceases with the lapse of one year from the date of the order by the subordinate authority. But in a case falling under sub-section (2) the party aggrieved has got to take the step of applying for revision and he is allowed one year from the date of the order. The provision is, therefore, certainly in the nature of a time limit for the application." *

In Mahabir Prasad v. Commissioner of Income tax, a Division Bench of the Punjab High Court dissented from the views which underlay the decision in Muthiah Chettiar v. Commissioner of Income-tax. We are naturally bound by the law laid down by a Division Bench of this Court in Muthiah Chettiar v. Commissioner of Income-tax But Muthiah Chettiar v. Commissioner of Income-tax. But Muthiah Chettiar v. Commissioner of Income-tax. does not support the contention of the learned advocate for the assessee, that the date of the order "made" within the meaning of sub-section (2) of Section 34 of the Act should be given the same meaning as was accorded to the "date of the order" as used sub-section (2) of Section 33-A.

As we pointed out before, the scope of the expression "made" with reference to an order of assessment, as it occurs in Section 34(2) of the Income-tax Act, will have to be defined with reference to the context in which that expression is used. The assessment of escaped income for which Section 34 provided has to be made under Section 23 of the Act. Section 23(I) provides for the assessment where a return submitted by the assessee under Section 22 is accepted as correct and complete by the Income-tax Officer. The Income-tax Officer has then to assess the total income of the assessee and determine the sum payable by him on the basis of such return. Sub-section (4) of Section 23 provides for assessment where the assessee defaults compliances. In such cases the Income-tax Officer has to make the assessment to the best of his judgment and determine to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment. Sub-section (3) of Section 23 provides for assessment where the Income-tax Officer is not satisfied with the correctness of the return submitted by the assessee. In such cases, after issuing the notice under sub-section (2) of Section 23 and after enquiry, the Income-tax Officer "shall, by an order in writing, assess the total income of the assessee and determine the sum payable by him on the basis of such assessment." With reference to the assessment, a specific provision for an order in writing is made only under sub-section (3) of section 2

3. But that difference need not detain us further in determining the question when an order of assessment is "made" within meaning of Section 34(2) of the Act. Sub-sections (I), (4) and (3) of Section 23 provide for one stage, assessment of the income and the determination of the sum payable by the assessee as the tax on the basis of such assessment of the income. That, it seems to us, determines the scope of "making" an order of assessment within the meaning of section 34(2) of the Income-tax Act. It is that stage that has to be completed within the period of limitation prescribed by Section 34(2), in this case four years the close of the year of assessment, 1942-43.Sub-section (5) of Section 23 lay down the procedure to be adopted for the assessment of the incomes of the incomes of firms (a) registered, and (b) unregistered. Sub-section (6) requires the Income-tax Officer who makes a determination of sub-section (5) of Section 23, to notify the firm an order in writing, the amount of the total income on which the determination has been based and the apportionment thereof between the several partners. That is the stage next after the assessment of the income and the determination of the tax payable. In the case of a firm assessed under sub-section (5) of Section 23, the income is assessed and the amount payable determined, but it is not the firm that has to pay the tax. Sub-section (6) therefore only provides for intimation to the firm of the assessment of the total income. The intimation to the assessee, who has to pay the tax determined on the basis of the assessed income, is provided for by Section 29 of the Act. Sub-section (6) of Section 23 and Section 29 of the Act thus provide for the next stage, the intimation to the assessee of the tax he has to pay, the tax determined on the basis of the income assessed.

Sub-section (2) of Section 34 itself, in our opinion, makes it clear that expression "no order of assessment shall be made" has to be given an identical meaning, whether the assessment is under Section 23 or whether the assessment is under sub-section (I) of Section the Act. What we have stated above with reference to the provisions of Sections 23 of the Act should make it clear that the order of assessment provides for a stage that precedes the communication of the tax due under Section 29 of the Act, that is, the sum payable by the assessee on the basis of the assessment of the income within the meaning of sub-section (I), (3) or (4) of Section 2

3. The assessment and the order of assessment are steps to be taken by the Income-tax Officer. There is no question of anything further that has to be done by the assessee himself at that stage. As pointed out in Muthiah Chettair v. Commissioner of Income-tax itself, there could be no occasion to apply to such a case, the rule enunciated in Secretory of State for India in Council v. Gopisetti Narayanswami Nayudu or Swaminathan v. Letchmanan, and extended to application under Section 33-A of the Income-tax Act, which was designed to protect the interests of the assessee when he had to do something, that is, when he had to take steps within the period of limitation allowed by the law to avoid the order with which he felt aggrieved.In Barlow v. Vestry of St. Mary Abbots, Kensington 1886 (11) AC 257., the expression to be construed was "an order made in writing on the person", who is directed to take the building down etc. Lord Watson observed at page 266 :-

"But it is admitted that, although the magistrate announced the terms of his judgment on the January 24, the order itself was not reduced to writing or subscribed by him until the March 21, following. It was never served upon the person to whom it was directed; and the fact of a written order having been made did not come to his knowledge before the expiry of the day upon which it was issued. I am of opinion that an order verbally intimated by the magistrate is not in any sense an order in writing within the meaning of the Act; and further, that in proceedings like these of a harsh and penal character a written order can not be regarded as made on the defendant until it has been duly served upon him or otherwise brought to his knowledge." *

The necessity to bring the terms of the order to the knowledge of the person affected therefore turned on the expression "on" and not so much as on the necessity to have the order in writing. There is no such provision in Section 23(3) of the Act, though it requires an order of assessment to be in writing.

As we have already pointed out, the time limit of four years for which sub-section (2) of Section 34 provided was the period within which the Income-tax Officer had to complete one stage of the proceedings, that is, the assessment of the income and determination of the tax payable, and that stage could be completed by the Income-tax Officer himself, even if the terms of the order of assessment were not communicated within that period of four years to the assessee. The rights of the assessee aggrieved by such an order of assessment have been specifically provided for by other sections of the Act.We answer the question in the affirmative and against the assessee. As the assessee has failed, he shall pay the costs of the Commissioner of the Income-tax which we fix at Rs. 250.

Referance answered in the affirmative.