1966 PLP 643 (PTD)

Indian Income-tax Act (XI of 1922), S. 64 (3), second and third provisos-Place of assessment-Letter challenging jurisdiction of officer posted before time but reaching officer beyond time

Officer rejecting objection as barred by time-Whether should refer to Commissioner-[Sri Popsing Rice Mills v. Commissioner of Income-tax (1949) 17 I T R 420 dissented from]. The Income-tax Officer served a notice on the petitioners under section 34 of the Indian Income-tax Act asking them to submit a return by February 17, 1956. Time for submitting the return was extended finally up to March 29, 1956. The petitioners sent a letter to the Officer on March 27, challenging his jurisdiction but the letter reached the Officer on March

31. The Income-tax Officer refused to entertain the objection and held that he was not bound to refer the matter to the Commissioner under the third proviso to section 64 (3): Held, (i) that as the post office was the agent of the petitioners and not the Officer, and the letter reached the Officer on March 31, the jurisdiction of the Officer was called in question on March 31, when the objection was communicated to him; the objection 'was- therefore beyond time under the second proviso of section 64 (3); (ii) that it was only when the Income-tax Officer considered the objection of an assessee on the merits and did not agree with his contentions that he was bound to refer the matter to the Commissioner under the third proviso to section 64 (3); if he came to the conclusion that the objection taken by the assessee was barred by limitation, there was no obligation on his part to refer anything to the Commissioner at all. Sri Popsing Rice Mills v. Commissioner of Income-tax 1949 17 I T R 420 dissented from. Motilal Hiralal v. Commissioner of Income-tax (1951) 19 1 T R 96; Khushi Ram Raghunath Sahai v. Commissioner of Income-tax (1953) 24 I T R 170; Commercial and Industrial Bank Ltd. v. Commissioner of Income-tax (1953) 26 I T R 612 and Nagappa Chettiar v. Commissioner of Income-tax (1954) 26 I T R 741 fol. JUDGMENT CHAGLA, C. J.-Respondent No. 1 served a notice upon the petitioner under section 34 of the Indian Income-tax Act dated January 5, 1956. The notice was served on January 13, 1956. By this notice the petitioners were asked to submit their return by February 17, 1956. The petitioners ask: d for extension of time and the final application for extension was made by them on March 15, 1956, and the time was extended up to March 29, 1956. On March 27, 1956 the petitioners wrote to respondent No. 1 challenging his jurisdiction to issue a notice or to assess them and this letter reached respondent No. 1 on March 31, 1956. Respondent No. 1 refused to entertain the application of the petitioners with regard to his jurisdiction on the ground that the jurisdiction was challenged beyond time, and on that the petitioners have come before us on this petition. Section 64 (1) of the Income-tax Act lays down which Income-tax officer has to assess a particular assessee, and subsection (3) of section 64 provides "Where any question arises under this section as to the place of assessment, such question shall be determined by the Commissioner, or, where the question is between places in more States than one, by the Commissioners concerned or, if they are not in agreement, by the Central Board of Revenue: Provided that, before any such question is determined, the assessee shall have had an opportunity of representing his views :" There is a second proviso to this subsection (3) and that is to the effect: "Provided further that??.if he has not made such a return (the place of assessment) shall not be called in question after the expiry of the time allowed by the notice under sub section (2) of section 22 or under section 34 for the making of a return." And the view taken by the Income-tax Officer was that as his jurisdiction was called in question after the expiry of the time allowed by the notice under section 34, he was not bound to refer the matter to the Commissioner under the third proviso. The first contention urged by Mr. Palkhivala is that inasmuch as time for making the return was extended he could call the jurisdiction of the Income-tax Officer in question up to the extended time and that the Income-tax Officer was in error when he took the view that limitation for this purpose ran out on February 17, 1956, when the time mentioned in the notice expired. In our opinion, it is unnecessary to consider this question because the view we take is that even if Mr. Palkhivala's contention is sound, the objection to the jurisdiction has been taken beyond time. Admittedly, the letter of the petitioners challenging the jurisdiction of the Income-tax Officer reached him on March 31, 1956, two days beyond the extended time, and in order to get over this difficulty Mr. Palkhivala has contended that the relevant date for this purpose is not March 31, 1956, but March 27, 1956, i.e., the date when the petitioner's letter to the Income-tax Officer was posted, and a rather curious argument is advanced that inasmuch as the letter was put in the course of transmission on March 27, 1956, and as the letter was beyond recall by the petitioners, the jurisdiction must be deemed to have been challenged on March 27, 1956, and not on March 31, 1956: In our opinion, 'that contention is entirely untenable. It is not suggested and it cannot be suggested that the post office was constituted the agent of the Income-tax Officer. If that had been done, then undoubtedly the posting of the letter by the petitioners on 27th March 1956, would have been the delivery of the letter to the agent of respondent No.

1. In this case the post office was the agent of the petitioners and not of respondent No.

1. The trite position, therefore, is that the petitioners having delivered the letter to their agent, their agent failed to deliver the letter to respondent No. 1 in time. We are not in the realm of contract and we do not understand the significance of the argument that the letter was put in the course of transmission. What has got to be done under the second proviso to section 64 (3) is to call in question the jurisdiction of the Income-tax Officer, and the jurisdiction is not called in question till the objection is communicated to the Income-tax Officer, and inasmuch as that communication did not take place on 27th March 1956 the jurisdiction was not called in question. Mr. Palkhivala has relied on a judgment of the Orissa High Court reported in Sri Popsing Rice Mill v. Commissioner of Income-tax ((1949) 17 I T R 420). The Orissa High Court was considering the period of limitation for the purpose of section 66(1) and the High Court read the words "require. by application made to the Appellate Tribunal" to mean sending an application to the Registrar or other authorised officer by registered post, and they held that for the purpose of compliance with the condition in the enactment, it was enough that the applicant put the application into such a machinery for transmission and the time occupied in transmission of the application should not be computed as part of the period of limitation of sixty days. With very great respect, we are unable to accept this decision as correct. The High Court has read section 66 (1) in the light of rule 7 of the Income-tax Appellate Tribunal Rules, Sub-rule (1) of rule 7 provides that a memorandum of appeal to the Tribunal may be sent by registered post to the address' of the Registrar or to such officer authorised by him. Now, if this rule stood by itself it would be possible to argue that by reason of this rule the Tribunal had constituted the post office its agent. But sub-rule (2) makes it clear that: "A memorandum of appeal sent by post under sub-rule (1) shall be deemed to have been presented to the Registrar or to the officer authorised by the Registrar, on the day on which it is received in the office of the Tribunal at Bombay, or, as the case may be, in the office of such officer." Now, the High Court of Orissa ignores sub-rule (2) and construes section 66 (1) in the light of rule 7 (1). It is difficult to understand how, when the rule in terms provides that the application will be deemed to be received when the postal communication has been received by the Tribunal, it could be said that the application is duly made when the application is put in the course of transmission. We find that this view of the Orissa High Court has not been accepted by the other High Courts before whom this question came for consideration. The Nagpur High Court in Motilal Hiralal v. Commissioner of Income-tax ((1950) 19 I T R 96), the Punjab High Court in Khushi Ram Raghunath Sahai v. Commissioner of Income-tax ((1953) 24 I T R 170), the Hyderabad High Court in Commercial and Industrial Bank Ltd. v. Commissioner of Income-tax ((1954) 26 I T R 612), and the Madras High Court in Pl. Sp. Nk. Nagappa Chettiar v. Commissioner of Income-tax ((1954) 26 1 T R 741) have all taken the contrary view, and, with respect, we prefer the view taken by these other High Courts to the view taken by the Orissa High Court. Therefore, in our opinion, inasmuch as the objection to the jurisdiction raised by the petitioners was not communicated to respondent No. 1 till 31st March 1956, in any view of the case the objection was taken beyond time. It is then urged by Mr. Palkhivala that it was incumbent v. upon the Income-tax Officer to refer the question of limitation S. G to the Commissioner. Now, the third proviso to section 64 (3) Cha is in the following terms: "Provided further that if the place of assessment is called in question by an assessee the Income-tax Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under this subsection before assessment is made." Therefore, it is only when the Income-tax Officer considers the objection of the assessee on merits and does not agree with the contention put forward by the assessee that he must refer the question to .the Commissioner, and what is referred to the Commissioner is the determination, again, on merits. Therefore, it is clear that if the Income-tax Officer comes to the conclusion that the objection taken by the assessee is barred by limitation, there is no obligation upon him .to refer anything to the Commissioner at all; indeed there is nothing to refer to the Commissioner. It is only when an objection is validly taken and there is an objection which the Income-tax Officer can himself consider that the question of reference to the Commissioner arises. But when the objection is dismissed in limine, then no question of the Income-tax Officer considering it on merits arises, much less the question of the Income-tax Officer referring it to the Commissioner arises. The third contention raised by Mr. Palkhivala is that the decision of the Income-tax Officer is vitiated by failure, to observe the rules of natural justice, and what is said is that before holding that the objection of the petitioners was barred by limitation no opportunity was given to the petitioners to be heard. In the first place, reference is made to the first proviso to section 64(3) which says: "Provided that, before any such question is determined, the assessee shall have had an opportunity of representing his views." ?This proviso cannot help the assessee because it is clear that that proviso refers to the determination of the question on merits and what it provides is that before the Commissioner decides the question on merits he must hear the assessee. But what is urged by Mr. Palkhivala is that apart from any specific provision in section 64, it is clearly implicit in every provision of the law which provides for the passing of a judicial or a quasi judicial order that the person who passes this order must hear the party affected by the order that he proposes to pass. Mr. Palkhivala is right that that is the ordinary rule of natural justice that before a Court or a Tribunal or an authority exercising judicial functions passes an order which prejudicially affects a party, the Court, Tribunal or authority must hear the party in his defence and give him an opportunity to show cause against the order that it proposes to pass. In our opinion, it is unnecessary to decide whether in this particular case the order that the income-tax Officer passed was a judicial or a quasi-judicial order, and whether, even if it was a judicial or a quasi judicial order, it was incumbent upon the Income-tax Officer to hear the petitioners, on the question of limitation because in our opinion, it is clear that even the Income-tax Officer did not hear the petitioners no prejudice was caused to them. Assuming we took the view that the Income-tax Officer was in error is not hearing the petitioners, the most that we can do on this petition is to direct the Income-tax Officer to hear the petitioners and all that the petitioners could urge before him would be the question of law as to whether their objection was barred by limitation or not. Now, that very question has been urged and urged at some length by Mr. Palkhivala before us. So that we have had an opportunity of hearing the petitioners and being satisfied that the Income-tax Officer was right in coming to the conclusion that the objection raised by them was barred by limitation. As no useful purpose would be served even if we were to take the view for which Mr. Palkhivala contends, in our opinion, it is unnecessary to decide this question on this petition. The result is that the petition fails and must be dismissed with costs. Petition dismissed.