Rai Bahadur Seth Teomal vs The Commissioner Of Income Tax

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Civil Appeals Nos. 384 and 385 of 1957

Decision Date: 2 March 1959

Coram: J.L. Kapur, Bhuvneshwar P. Sinha, M. Hidayatullah

In this case the petition was brought by Rai Bahadur Seth Teomal against the Commissioner of Income Tax and the Commissioner of Excess. The judgment was delivered on 2 March 1959 by a bench consisting of Justice J. L. Kapur, Justice Bhuvneshwar P. Sinha and Justice M. Hidayatullah. The citation of the decision is 1959 AIR 742 and 1959 SCR Supplement (2) 301. The matter arose under the provisions of the Indian Income-Tax Act, 1922, specifically sections 5, 64 and related provisions concerning the place of assessment, transfer of a taxpayer’s case to another commissioner, and the jurisdiction of an income-tax officer.

The appellant, Rai Bahadur Seth Teomal, carried on the business of a railway contractor in a locality within the district of R. In April 1943 the income-tax officer of that district, who was under the charge of the Commissioner of Income-Tax, Bengal (Mufassil), issued a notice under section 22(2) of the Act. In response to the notice the appellant filed his income-tax return on 28 February 1944. Subsequently the officer served additional notices under sections 22(4) and 23(2) requiring the production of books and documents. Before the final assessment could be made, the Central Board of Revenue issued an order under section 5(2) transferring the appellant’s case, together with several other assessment files, to the Commissioner of Income-Tax (Central), Calcutta.

On 11 February 1948 the income-tax officer in Calcutta, to whom the case had been transferred, again issued notices under sections 22(4) and 23(2) and after conducting the usual inquiries made an assessment order on 15 March 1948. The appellant appealed this assessment first to the Appellate Assistant Commissioner and then to the Appellate Tribunal, challenging both the legality of the transfer to Calcutta and the jurisdiction of the Calcutta officer. Both of these appeals were dismissed. The Appellate Tribunal held that because the appellant’s objection related solely to the place of assessment, the Tribunal was not empowered to consider that question.

Following the dismissals the appellant applied to the Commissioner of Income-Tax for a reference under section 66(1). The application was rejected on the ground that the appellant had never raised any objection before the Calcutta officer regarding his jurisdiction, and that the question of jurisdiction could not arise from the Tribunal’s order. The appellant then filed an application under section 66(2) in the High Court, which was also dismissed. Although the order of dismissal was not appealed, the appellant proceeded to file an appeal before the Supreme Court against the order of the Appellate Tribunal. In his submissions before the Supreme Court the appellant contended that, under sections 64(1) and 64(2), he was entitled to be assessed by the income-tax officer of the area where his business was situated, that the assessment made by the Calcutta officer was therefore illegal, and that the Central Board of Revenue’s order of transfer made under section 5(2) was invalid because a transfer of assessment proceedings from one officer’s file to another could be effected only under section 5(7A) and not under section 5(2).

In this case the appellant argued that the assessment made by the Income-tax Officer of Calcutta was based on an illegal assumption of jurisdiction and further contended that the order transferring the assessment proceedings, issued by the Central Board of Revenue under section 5(2) of the Act, was invalid because a transfer of the file from one Income-tax Officer to another could be effected only under section 5(7A) and not under section 5(2). The Court held that subsection 7A of section 5, which empowers the Central Board of Revenue to transfer any case from one Income-tax Officer to another, does not alter or diminish the authority conferred on the Board by subsection 2 of section 5. Subsection 2 enables the Board to designate which Commissioner will perform functions with respect to particular areas, persons, incomes, cases or classes of cases. These two subsections operate in separate, complementary spheres and one does not restrict the other. The Court distinguished the authorities in Pannalal Binjraj v. Union of India [1957] S.C.R. 233 and Bidi Supply Co. v. Union of India [1956] S.C.R. 267. Applying the correct provision, the Court observed that the Central Board of Revenue directed the Commissioner of Income-tax (Central), Calcutta, to exercise his functions in respect of several cases, including the case of the appellant, and that this direction fell squarely within the ambit of section 5(2) rather than section 5(7A). Accordingly, the order of transfer was deemed valid.

The Court further held that the jurisdiction of the Income-tax Officer of Calcutta to make the assessment against the appellant could not be contested, because subsection 5(a) of section 64 of the Act expressly bars the application of subsections 1 and 2 of section 64 to any assessee for whom an order has been issued by the Central Board of Revenue under section 5(2). The Court then addressed the question of whether objections to the place of assessment could be raised on appeal. It ruled that such objections could not be raised before either the Appellate Assistant Commissioner or the Appellate Tribunal. In reaching this conclusion the Court relied upon the decisions in Wallace Brothers & Co. Ltd. v. Commissioner of Income-tax, Bombay, Sind and Baluchistan [1945] F.C.R. 65 and Seth Kanhaiyalal v. Commissioner of Income-tax [1936] 5 I.T.R. 739, while distinguishing the cases of Dayaldas Kushiram v. Commissioner of Income-tax (Central) [1939] 8 I.T.R. 139 and Dina Nath Hem Raj v. Commissioner of Income-tax [1927] I.L.R. 49 All. 616. Because the question of the proper place of assessment could not arise from the order of the Appellate Tribunal, the Court concluded that no such question of law could be referred to the High Court.

The judgment records that the civil appeals, numbered 384 and 385 of 1957, were filed by special leave against the order dated 28 November 1952 of the Income-tax Appellate Tribunal (Calcutta Bench) in I.T.A. No. 4067 and Excess Profits Tax Appeal No. 391 of 1951-52. Counsel for the appellant comprised N. C. Chatterjee, B. Sen Gupta and B. P. Maheshwari, while counsel for the respondents were K. N. Rajagopala Sastri, R. H. Dhebar and D. Gupta. The judgment was delivered on 2 March 1959 by Justice Kapur, who noted that the two appeals, permitted by special leave, challenged the two orders of the Income-tax Appellate Tribunal (Calcutta Bench) dated 28 November 1952.

On November 28 1952 the Income-Tax Appellate Tribunal issued two separate orders: one in appeal No 1 T A 4067 of 1951-52 concerning the income-tax assessment for the year ended 31 March 1944, and another in appeal No E P T A 391 of 1951-52 relating to the Excess Profits Tax assessment for the accounting period ended 31 March 1943. The original taxpayer named in the assessments was R. B. Seth Teomal, who acted as manager of a Hindu undivided family. Following Seth Teomal’s death on 30 May 1944, Seth Ottanmal succeeded him as manager and subsequently represented the Hindu undivided family as the appellant in the present proceedings. Throughout the judgment the appellants are referred to simply as “the appellant.” Seth Teomal had been engaged in the business of a railway contractor at Lalmonirhat, situated in the Rangpur district, an area that after partition became part of Pakistan. In April 1943 a notice was served on him under section 22(2) of the Income-Tax Act. The appellant filed the required return on 28 February 1944. The Income-Tax Officer of Rangpur thereafter issued further notices under sections 22(4) and 23(2) requiring production of books and documents. Although assessment proceedings continued before this officer, no final assessment was ever rendered. An affidavit later filed in this Court disclosed that the Central Board of Revenue, by an order made under sub-section (2) of section 5 of the Act, transferred the appellant’s matter, together with several other cases, to the Commissioner of Income-Tax (Central), Calcutta. The order bore endorsements indicating that the cases were forwarded to the Central Commissioner because they involved Excess Profits Tax liabilities. Consequently, the case that had originally been before the Income-Tax Officer under the jurisdiction of the Commissioner of Income-Tax, Bengal (Mofussil), was withdrawn from that officer and reassigned to the Central Commissioner in Calcutta. On 11 February 1948 the Income-Tax Officer of the District North-Calcutta (handling both income-tax and Excess Profits Tax matters) issued another notice under sections 22(4) and 23(2). After completing the usual inquiries, that officer made the income-tax assessment order on 15 March 1948, and subsequently issued the Excess Profits Tax assessment order on 30 March 1948. The appellant contested both orders by filing appeals to the Appellate Assistant Commissioner on 30 April 1948. In the appeal challenging the income-tax assessment, the appellant raised two principal jurisdictional objections: first, that no formal order effecting the transfer of the case from Rangpur to Calcutta had been shown, and therefore, without such an order and its communication, the assessment lacked jurisdiction; and second, that the appellant contested the jurisdiction on the ground that there was no proper transfer order, that the business operated outside Calcutta, and that assessments had never previously been made in Calcutta.

In the earlier appeal against the excess-profits-tax assessment, the appellant did not raise the jurisdictional ground that had been pleaded in the income-tax appeal. Both appeals were dismissed by the Appellate Assistant Commissioner, who held that the records showed the concern’s principal place of business was at Rangpur and that, because the income attracted excess-profits-tax liability, the case had been transferred to Calcutta under the orders of the Central Board of Revenue. Consequently, the Commissioner found no merit in the learned counsel’s contention that the assessment lacked jurisdiction. The appellant subsequently filed two appeals before the Income-Tax Appellate Tribunal. In the appeal challenging the income-tax assessment, the appellant put forward two specific jurisdictional objections. The first objection argued that the objection to jurisdiction that had been presented to the learned Assistant Accountant-Collector should not have been summarily disposed of by merely referring to the order transferring the case from Rangpur to Calcutta without a detailed discussion of when the jurisdictional question was seriously raised, under what circumstances the transfer occurred, to whom the case was transferred, and for what purpose. The second objection requested leave to reiterate that the transfer was not legal or proper and that no proper authority had effected the transfer to legalise it. In the parallel appeal concerning the excess-profits-tax assessment, the appellant also raised a jurisdictional objection, asserting that the assessment was void because it had been made without jurisdiction. The Appellate Tribunal addressed these submissions in a brief paragraph, holding that, with respect to the first objection, it lacked jurisdiction to consider the matter because the objection related to the place of assessment. Citing the 1945 decision reported in the Taxation Times Review, 39 (Wallace Brothers & Co. Ltd v. Commissioner of Income-Tax, Bombay, Sind and Baluchistan, Federal Court), the Tribunal stated that the question of the proper place of assessment was not one for determination by a court or any appellate authority, and therefore it overruled the appellant’s first contention. Having concluded that the objection concerned the place of assessment, the Tribunal declared itself incompetent to entertain the issue. Following this determination, the appellant applied for a reference under section 66(1) of the Income-Tax Act, seeking the referral of five questions. Two of those questions concerned jurisdiction: (1) whether the Income-Tax Officer (Non-Companies Income-Tax cum Excess Profits Tax, District Calcutta) possessed jurisdiction to make the assessment; and (2) whether the Income-Tax Appellate Tribunal was correct in holding, under the circumstances, that it lacked jurisdiction to assess the competence of the Income-Tax Officer in making the assessment. The factual annexure attached to the appellant’s grounds of appeal stated that the accounts had been produced before the Income-Tax Officer in Calcutta under protest, because the officer’s jurisdiction was being contested. In response, the Commissioner, citing the Wallace Brothers case, observed that the assessment record did not reveal any objection by the assessee to the officer’s jurisdiction, and that, had such an objection been raised, the matter would have been referred by the Income-Tax Officer to the Commissioner as required by law.

The Court observed that the assessment file did not contain any record showing that the assessee had ever protested the jurisdiction of the Income-tax Officer. The Court noted that, had the assessee raised such an objection, the law required the Income-tax Officer to forward the matter to the Commissioner for a decision. Consequently, the application filed under section 66(1) of the Income-tax Act was dismissed because the question of jurisdiction could not arise from the Tribunal’s order. In reaching this conclusion, the Court relied upon the precedents set in Wallace Brothers’ case and in Seth Kanhaiyalal v. Commissioner of Income-tax. The appellant then approached the High Court under section 66(2) of the Act, seeking to have two specific questions—whether the Income-tax Officer of the Calcutta district (Non-Companies Income-tax cum Excess Profits Tax) possessed jurisdiction to make the assessment, and whether the Income-tax Appellate Tribunal was correct in holding that it lacked jurisdiction to determine the officer’s competence—referred for decision, together with several additional queries. The High Court rejected this application on 23 July 1954. No appeal has been lodged in the Supreme Court against the High Court’s order, although an appeal has been filed against the order of the Income-tax Appellate Tribunal. Representing the Revenue, a preliminary objection was raised that, because no appeal was made against the High Court’s decree, that decree had become final and therefore the Supreme Court should not entertain the appeal against the Tribunal’s order. The Revenue’s argument drew upon the observations in Venkatarama and the decision in Govinda Rajulu Mudaliar v. Commissioner of Income-tax, specifically the passage at page 810 which addresses the limits on revisiting Tribunal decisions once a final High Court judgment exists.

The Court quoted the passage from Govinda Rajulu Mudaliar, explaining that the present appeal targeted the Tribunal’s decision itself. While it is true that the Supreme Court, in Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax, West Bengal, has recognized that an appeal may be filed under article 136 of the Constitution against a Tribunal decision, the Court held that the appellant in the present case had already pursued the matter before the High Court and obtained a final adverse order. Accordingly, the appellant could not now challenge the Tribunal’s decision on grounds that could have been raised in the earlier appeal to the High Court. Moreover, all the points raised before the Supreme Court had already been submitted in the reference made under section 66(2) of the Income-tax Act, and therefore those grounds were unavailable to the appellant. Although counsel for the appellant relied on Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax for the scope of article 136 appeals as defined by the Chief Justice, the Court concluded that it was unnecessary to examine that issue further because, in its opinion, the appeal lacked substantive merit.

In this case the appellant relied on two separate grounds to support his appeal. The first ground contended that his place of business was Lalmonirhat and, according to sections 64(1) and 64(2) of the Income-Tax Act, he should have been assessed by the Income-Tax Officer who exercised jurisdiction over that area. The second ground asserted that the assessment made by the Income-Tax Officer of Calcutta amounted to an illegal assumption of jurisdiction and that, consequently, the assessment order ought to be set aside. To resolve these issues the Court examined the overall scheme of the Act, focusing particularly on the provisions that dealt with jurisdiction, namely sections 5 and 64. Section 5 was titled “Income-tax authorities” while section 64 bore the heading “Place of assessment”. Under section 23(3) an assessment was to be made by an Income-Tax Officer. An aggrieved person could file an appeal against an assessment order or against the liability to be assessed under section 30 to the Appellate Assistant Commissioner, and could further appeal to the Income-Tax Appellate Tribunal under section 33. The Tribunal, in turn, could refer the matter to the High Court under section 66(1); if the Tribunal failed to make such a reference, the High Court could, on an application under section 66(2), direct that a reference be made.

Section 64 dealt specifically with the “Place of assessment”. Sub-section (1) required that the assessee be assessed by the Income-Tax Officer of the area in which the assessee carried on his business. Sub-section (2) provided that in all other cases the assessee should be assessed by the Income-Tax Officer of the area in which he resided. Applying these two sub-sections, the Court observed that because the appellant carried on his business at Lalmonirhat, the appropriate officer for his assessment was the Income-Tax Officer of Rangpur, the jurisdiction covering Lalmonirhat. Sub-section (3) of the same section stipulated that any dispute as to the proper place of assessment was to be determined by the Commissioner of Income-Tax or, as the case might require, by the Central Board of Revenue. The first proviso to sub-section (3) mandated that before the question could be decided, the assessee must be given an opportunity to present his views. The second proviso barred the assessee from challenging the place of assessment if he had filed a return in response to a notice under sub-section (1) of section 22, expressly stating his principal place of business, or if he had failed to file such a return and the prescribed time had elapsed. The third proviso further required that, should the assessee dispute the place of assessment, the Income-Tax Officer, if satisfied with the correctness of the claim, was to refer the matter for determination under this sub-section before a final assessment could be made.

The Court explained that, according to section 64(3), a question concerning the place of assessment may be raised only when the assessee files an objection and the Income-Tax Officer harbours any doubt about the issue. Once such a doubt is expressed, the authority to determine the correct place of assessment rests exclusively with either the Commissioner of Income Tax or the Central Board of Revenue; the statute makes no provision for any other body to decide the matter. The appellant had asserted that he had submitted his accounts to the Income-Tax Officer at Calcutta while protesting. However, the assessment file contained no record of such a protest, a point that the Commissioner of Income Tax highlighted in his reply dated 3 March 1953, which was later presented before the Income-Tax Appellate Tribunal and reproduced in the judgment. Had the appellant truly raised an objection at that stage, the Income-Tax Officer would have been obligated under section 64(3) to refer the question to the Commissioner for a decision. This referral never occurred because the alleged objection was not made before the Income-Tax Officer in Calcutta, as required by the statutory procedure.

Nevertheless, counsel for the appellant argued that the assessment was made by an officer who lacked any jurisdiction to do so, thereby constituting an illegal assumption of authority. The appellant further contended that if the Central Board of Revenue intended to move the assessment proceedings from the Income-Tax Officer in Rangpur to the Income-Tax Officer in Calcutta, it could have exercised such power only by issuing an order under section 5(7A), not under section 5(2) of the Act. To support this position, the counsel cited Taylor v. Taylor (1), which held that when the statute prescribes a particular mode for exercising a power, that mode must be followed and no alternative may be employed. The counsel also relied on Nazir Ahmad v. The King Emperor (2) and maintained that the present circumstances did not fall within the scope of section 5(2). Section 5(7A) expressly empowers the Central Board of Revenue to transfer any case from one Income-Tax Officer to another at any stage of the proceedings, and such a transfer does not require re-issuance of a notice under section 22(2) if a notice had already been served by the officer from whom the case is transferred. The explanatory provision clarifies that the term “case” refers to all proceedings pending on the date of transfer as well as any proceedings that may be initiated after the transfer, thereby encompassing the entire spectrum of actions under the Act.

Section 5(2) of the Income-Tax Act empowers the Central Government to appoint as many Commissioners of Income-Tax as it deems necessary, and requires each appointed Commissioner to carry out his functions with respect to particular geographical areas, persons, classes of persons, specific incomes, classes of incomes, or distinct cases or classes of cases as directed by the Central Board of Revenue. The statutory wording states: “The Central Government may appoint as many Commissioners of Income-Tax as it thinks fit and they shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of incomes or of such cases or classes of cases as the Central Board of Revenue may direct.” In the matter presently before the Court, the jurisdiction of Bengal comprised more than one Commissioner of Income-Tax, and the Central Board of Revenue exercised the authority granted by subsection (2) to allocate certain matters, including the appellant’s case, to the Commissioner of Income-Tax (Central) situated in Calcutta for the performance of his statutory duties. This allocation was undertaken pursuant to the power expressly conferred upon the Board by subsection (2) of section 5, and the decision as to which Income-Tax Officer would handle the particular case was left to the discretion of the designated Commissioner. Moreover, subsection 7A of section 5 additionally authorises the Central Board of Revenue to transfer any case from one Income-Tax Officer to another at any stage of the proceedings. The Court observed that subsection 7A does not modify, diminish, or curtail the authority given under subsection (2); rather, the two provisions are complementary and operate in separate, non-overlapping spheres. Subsection (2) establishes the framework for assigning Commissioners to specific areas, persons, incomes, or cases, while subsection 7A provides a mechanism for moving cases between officers when necessary.

The parties argued that subsection 7A, being a special provision, necessarily excluded the operation of subsection (2). The Court rejected this contention, explaining that the two subsections are not mutually exclusive because they address distinct aspects of the Board’s functions. Consequently, the exercise of power by the Central Board of Revenue in the present case could not be characterised as illegal. The order in question did not involve a direct transfer of the appellant’s case from the Income-Tax Officer in Rangpur to the Income-Tax Officer in Calcutta; instead, it directed the Commissioner of Income-Tax (Central) at Calcutta to exercise his functions over a group of cases that included the appellant’s matter, an action squarely within the ambit of section 5(2) rather than section 5(7A). Reference was made to the decision in Pannalal Binjraj v. Union of India (1), wherein the constitutional validity of subsection 7A was examined. That earlier case concluded that subsection 7A represented a measure of administrative convenience, was constitutionally valid, and did not infringe the fundamental rights guaranteed under Article 14 or Article 19(1)(g). The Court further noted that the Pannalal Binjraj judgment contained no observations contradicting the view that subsections (2) and (7A) operate in separate domains, and therefore affirmed the legitimacy of the Board’s assignment of the appellant’s case under subsection (2).

It was observed that the issue raised in the earlier case concerned the claim that sub-section 7A granted powers of transfer that were arbitrary, uncontrolled, discriminatory and violative of Article 14, and that it imposed an unreasonable restriction on the right to carry on trade or business in breach of Article 19(1)(g). Counsel referred to Bidi Supply Co. v. Union of India, but it was pointed out that that decision did not address the matter presently before the Court. The essential question to be answered, therefore, was whether the Income-Tax Officer of Calcutta possessed the authority to make the assessment in the appellant’s case. The argument that the Income-Tax Officer of Calcutta had illegally assumed jurisdiction was deemed to be without merit. The Court noted that if the Central Board of Revenue had the power to direct the Commissioner of Income-Tax (Central), Calcutta, to perform his functions with respect to several cases, including the appellant’s, as authorized by section 5(2) of the Act and as reflected in the order dated 29 November 1946, then that order could not be challenged and the power of the Calcutta Income-Tax Officer to make the assessment remained valid. After an order issued by the Central Board of Revenue under section 5(2), the provisions of sub-sections (1) and (2) of section 64 ceased to apply because of sub-section (5A) of section 64, which states that the provisions of sub-sections (1) and (2) shall not apply and shall be deemed never to have applied to any assessee on whom an assessment or reassessment is being made in a case where a Commissioner of Income-Tax appointed without reference to area under sub-section (2) of section 5 is exercising the functions of a Commissioner of Income-Tax. Consequently, no objection could be taken on the ground of sub-sections (1) and (2) of section 64.

Counsel for the appellant relied on a judgment of the Bombay High Court in Dayaldas Kushiram v. Commissioner of Income-Tax (Central) (1), where it was held that section 64 was intended to ensure that, as far as possible, an assessee should be assessed locally, that is, by the Income-Tax Officer of the area in which the assessee conducts business, and that there must be a reasonable relationship between the location of the assessment and the place where the assessee carries on business or resides, subject to the exigencies of the case. In that precedent, the assessee carried on business in C Ward and the proper officer under section 64 to assess him was the Income-Tax Officer of that ward. The Court noted that the enactment of section 5(2) created a Commissioner of Income-Tax (Central) without reference to any specific area. As a result, the case of the assessee whose notice had been served but who had not yet been assessed was assigned to the Commissioner of Income-Tax (Central), who then designated an Income-Tax Officer for the assessment of the assessee.

In the case under consideration, the Central Commissioner of Income-tax had appointed an Income-tax Officer to conduct the assessment of the petitioner. The petitioner subsequently filed an application under section 45 of the Specific Relief Act, as reported in the 1939 volume of the Indian Tax Reporter, seeking an order directing both the Central Commissioner and the appointed Income-tax Officer to refrain from proceeding with the assessment on the ground that the Officer lacked jurisdiction under section 64 of the Income-tax Act. The tribunal held that the Income-tax Officer who was assigned to the case was not the Officer belonging to the geographical area where the petitioner conducted his business. Furthermore, the tribunal observed that despite the insertion of section 5(2) into the Act, the assessment remained without jurisdiction because section 64 had not been amended to reflect the new provision. Consequently, the judgment led to the promulgation of Ordinance IX of 1939, which was later incorporated into the statute as subsection 5 of section 64. After the Ordinance came into force, the petitioner Dayaldas Kushiram was again assessed by the same Income-tax Officer, and after his appeals to the Central Commissioner and to the Appellate Tribunal were dismissed, he filed an application under section 66(1) raising three specific questions. The first question asked whether the order of the Commissioner determining the place of assessment could be appealed to the Income-tax Appellate Tribunal. The second question inquired whether the Tribunal possessed the authority to entertain an appeal concerning the place of assessment even in the absence of a formal order of the Commissioner. The third question sought to determine whether the issue of the place of assessment constituted a question of law arising from the Tribunal’s order. The tribunal answered that the Commissioner’s order was made under section 5(2) rather than under section 64(3), and because the Ordinance operated retrospectively, none of the three questions arose, and the assessment made by the Income-tax Officer was valid. The Ordinance, according to the decision, cured the defect of all orders issued before its enactment as far as they related to the petitioner. Justice Beaumont, the Chief Justice, expressed that the Income-tax Act does not prescribe the place of assessment; rather, it is the responsibility of the assessing officer, and consequently there is no statutory right to appeal an order of the Commissioner concerning the place of assessment, only an appeal against the assessment order of the Income-tax Officer. Counsel for the petitioner also cited the Allahabad High Court decision in Dina Nath Hem Raj v. Commissioner of Income-tax, where the court held that an assessment made by an Officer at Kanpur for a taxpayer carrying on business in Calcutta was beyond jurisdiction because the Officer failed to comply with section 64(3). In the present matter, however, no argument was raised challenging the jurisdiction of the Income-tax Officer who made the assessment.

The assessment in this matter had been made by the Income-tax Officer, and the order that followed was issued by the Central Board of Revenue under section 5(2) of the Income-Tax Act. Consequently, section 64(5) of the Act became operative, rendering subsections (1) and (2) of section 64 inoperative. The Court also referred to the decision in Seth Kanhaiyalal v. Commissioner of Income-tax for further guidance. The next question that arose for the Court was whether an objection concerning the place of assessment – specifically the objection raised by the Income-tax Officer of Calcutta – could be taken up on appeal to the Appellate Assistant Commissioner and thereafter before the Appellate Tribunal. The Court held that such an objection could not be pursued on appeal. The statutory scheme, as set out in the Act, does not contemplate any right of appeal against an objection to the place of assessment. Under section 64(3) of the Act, any question of the place of assessment, when it arises, is to be decided solely by the Commissioner. Because that decision is made under section 64(3), it cannot become a ground of appeal under section 30, which authorises appeals against assessments and a specific list of other orders, but does not provide for appeals against orders made under section 64(3). Likewise, appeals under section 33 to the Appellate Tribunal do not contain any provision for challenging the question of the place of assessment. The Court then cited the judgment in Wallace Brothers’ case, where Justice Spens, after referring to section 64(3) and its proviso, observed that the provisions indicate that the matter is one of administrative convenience rather than a question of jurisdiction, and it is not a matter for adjudication by the courts. This observation confirmed the Court’s view that the legislative framework does not allow an objection to the place of assessment to be raised on appeal after the assessment has been made. The Court noted that, in the present proceedings, the objection was not even raised before the Appellate Income-tax Officer; it was raised only before the Appellate Tribunal. The Court further observed that nothing in the Bidi Supply case undermines the authority of the Federal Court’s decision in Wallace Brothers’ case. The Bidi Supply case, the Court pointed out, dealt with the validity of section 5(7A). Accordingly, the question of the place of assessment does not arise from the order of the Income-tax Appellate Tribunal, and therefore no question of law could be referred to the higher court, nor could the High Court make any order under section 66(2). In the Court’s opinion, the High Court correctly dismissed the appellant’s application that sought a declaration under section 66(2) of the Act. Consequently, the appeals were dismissed with costs, and, given the circumstances, only a single set of costs was ordered. The appeals were thus dismissed.

The judgment recorded a citation presented as I.T.R. 39. This reference appeared among the authorities that the Court noted while formulating its opinion. The Court reproduced the citation exactly as I.T.R. 39, without providing any additional description or elaboration of its content within the judgment. By listing this reference, the Court indicated that it had taken the material identified by I.T.R. 39 into account in the course of its analysis. The citation formed part of the textual record of sources consulted, and its presence was noted before the Court proceeded to address the matters before it. No further detail regarding the nature, subject matter, or specific relevance of I.T.R. 39 was supplied in the judgment, and the Court’s discussion continued without expanding on the substance of that particular reference.