1971 PLP 717 (PTD)

A. N. RAY, J.‑

The question referred to this Court is as follows: "Whether, on the facts and in the circumstances of the case, the order refusing renewal of registration under section 26‑A is legal and valid?" The case relates to the assessment year 1947‑

48. The assessee applied for renewal of registration under section 26‑A of the Indian Income‑tax Act, 1922. In default of compliance with the notice for production of books of accounts for the relevant assessment year, the assessee was assessed under section 23(4) for the year in question. The Income‑tax Officer thereafter refused to renew registration to the assessee, under section 26‑A of the Income‑tax Act, saying that the account books for the year in question not having been produced, it was not possible for him to verify whether the profits had been distributed in accordance with the terms of the partnership deed. The order of the Income‑tax Officer was passed under section 23(4)/26‑A of the Indian Income‑tax Act, 1922. An appeal was preferred against the Income‑tax Officer's order to the Appellate Assistant Commissioner. It was urged before him that the renewal of registration having been refused on the ground that the assessment had been made under section 23(4) of the Act, it was incumbent on the Lacome‑tax Officer to give prior notice to the assessee as required by the proviso to section 23(4). The Appellate Assistant Commissioner, however, held that under the proviso to section 23(4) notices were necessary only when the Income‑tax Officer wanted to cancel registration already granted and not while refusing to renew registration. The Appellate Tribunal upheld the order of the Appellate Assistant Commissioner. Counsel on behalf of the assessee contended that the provisions contained in section 23(4) of the Income‑tax Act confer powers on the income‑tax authorities to make an assessment to the best judgment and in the case of a firm to refuse to register it or to cancel the registration. It was said on behalf of the assessee that the power to refuse renewal of registration of a firm was a quasi‑judicial act and, therefore, opportunity was to be given to the assessee to be heard and notice also was to be given to the assessee before the income‑tax authorities refused renewal of registration of a firm. Counsel on behalf of the assessee relied on the decision of toe Supreme Court ins the case of Dwarka Math v. Income‑tax Officer, Special Circle, D‑ Ward, Kanpur (1) in support of the proposition that the income‑tax authorities in making an assessment are judicial or quasi judicial authorities and, therefore, they should not pass any order without giving notice to the assessee and without hearing the assessee. In Dwarka Nath's case the Supreme Court had to consider the provisions of section 33‑A of the Income‑tax Act. Those provisions relate to the Commis sioner making revision of orders passed under the Act by any authority subordinate to the Commissioner. The Supreme Court said that the power under section 33‑A(2) was judicial and the nature of the jurisdiction and the rights contained in that section made it implicit in revisional jurisdiction that the revising authority shall give an opportunity to the parties affected to put forward their case. Counsel for the assessee also relied on the decision of the Supreme Court in M. Chockalingam and another v. Commissioner of Income‑tax ((1963) 48 I T R 34 (S C)) in support of the similar contention that the income‑tax authorities in making assessment were bound to heat assessees and, therefore, the income‑tax authorities should have given opportunity to the assessee to be heard before the income. tax authorities made an order refusing to renew registration. M. Chockalingam's case turned on the provisions of section 35 of the Income‑tax Act which contemplate notice as well as opportunity being given to the assessee. There is an observa tion at page 41 of the report to the effect that it is more so in the case where the proviso to section 35 itself makes it incumbent upon the Income‑tax Officer to give notice. Counsel for the assessee extracted the words "more so" and contended that it would indicate that in all cases the income‑tax authorities would be bound to give notice. The question, in the present case, is whether, on the facts and circumstances, the order refusing renewal of registration is legal and valid. It was never contended that the assessee was not given any opportunity to be heard. The only contention which had been advanced before the Appellate Tribunal was that notice should have been given to the assessee. That contention was based on the provision of section 23 of the Income‑tax Act. Counsel for the assessee contended that the proviso to section 23(4) of the Indian Income‑tax Act contemplates notice in case of cancellation of registration and that the issue of notice was implicit in the case of refusal to renew registration. An argument was also advanced on behalf of the assessee that the order made by the Income‑tax Officer was really under section 26‑A. I am unable to accept that contention because the order was really passed under section 23(4). In the present case notices were issued under section 22(4) of the Income‑tax Act calling upon the assessee to produce books. The provisions contained in section 23(4) of the Income‑tax Act contemplate best judgment where the assessee fails to comply with the terms of the notice issued under subsection (4). Therefore, it is apparent that notice was given to the assessee to produce books. The assessee failed to produce books. The power to make the best judgment was attracted. The other power explicit is refusal of registration of a firm. A distinction has been made by the Act between cancellation of registration of a firm and refusal to register a firm. 'The proviso speaks of notice in the case of cancellation. When the Act makes such a distinction between cancellation and refusal to register and the Act further speaks of notice in one case and does not speak of notice in the other case any construction of such a provision that a notice is implicit would be to enlarge the scope contained (sic) to the provisions of the Act. Counsel for the revenue relied on the decision of the Patna High Court in Mahabir Glass Manufacturing Co. v. Commissioner of Income‑tax ((1960) 39 I T R 421), The question in that case was whether, on the facts and circumstances of the case, the Income‑tax Officer was justified in refusing to grant renewal of the registration under section 26‑A of the Indian Income‑tax Act. 'The assessee in that case failed to comply with a notice under section 23(2) of the Act requiring the assessee to attend and produce evidence in support of the return. The Income‑tax Officer thereupon exercised his power under section 23(4) and refused the applica tion for renewal of registration under section 26‑A. The Bench decision in that case observed as follows in. regard to subsection (4) of section 23 of the Act: "It is manifest from the language of this subsection that the Income‑tax Officer has the power to make the assessment to the best of his judgment and also to refuse to register a firm in case the assessee‑firm fails to comply with all the terms of the notice issued under section 23(2). There are two distinct powers granted to the Income‑tax Officer under this subsection. He may refuse to register the firm, or he may cancel the registration of the firm which is already registered. The proviso, however, makes it clear that in the case of cancellation of registration the Income‑tax Officer is bound to issue a notice to the firm intimating his intention to cancel its registration. The proviso, therefore, applies to a case where there is cancellation of registration. In the case of refusal to register there is no provision in the section that there should be any issue of notice. In our opinion the principle of the maxim, expressio unius est exclusio alterius applies to this case, and applying this principle, we hold that in the case of refusal to register a firm there is no duty imposed on the Income‑tax Officer to give notice to the assessee intimating his intention to refuse the application for renewal of registration. We, therefore, reject the argument of learned counsel for the assessee on this point." The other observation in the Patna Bench decision is that there is no principle of law that the party adversely affected should be heard at each and every stage of the administrative process. There is no such general requirement in the principle of audi alteram partem. On the other hand, the principle is satisfied if the party adversely affected is given sufficient opportunity to know the case he was to meet and to answer that case at some stage of the administrative proceeding, and not at all stages. In the present case it is manifest, as provisions o f the Act indicate, that if the assessee fails to comply with the requirements of the Act, particularly the notice under section 22 or section 24, the powers attracted by the Income‑tax Officer are those enumerated in subsection (4) of section

23. The consequences were well known and that is why counsel for the revenue was right in contending that it was never argued at any stage that the assessee suffered any prejudice by lack of any opportunity having been given or notice not having been given. Counsel for the revenue also relied on a Bench decision in the case of Sahdeo Vijaya Kumar v. Commissioner of Income tax ((1961) 42 I T R 182), where it was held that it was not incumbent on the Income‑tax Officer to give notice of his intention to refuse, under the proviso to section 23(4) of the Income‑tax Act, a claim for registration or renewal of registration. The Bench decision of the Rajasthan High Court is also an authority for the proposition that the refusal to renew registration is not a deprivation of property. These two Bench decisions, Sahdeo Vijaya Kumar v. Commissioner of Income‑tax and Mahabir Glass Manufacturing Co. v. Commissioner of Income‑tax ((1960) 39 I T R 421), indicate that the case of cancellation of registration contemplated in section 23(4) is dealt with specifically in the proviso to that section whereas the case of refusal of registration or refusal of renewal of registration is to be found in the powers enumerated in subsection (4) of section 2 3 and that power is attracted by special limbs of subsection (4) of section

23. No separate notice is envisaged in the case of refusal to register or refusal to renew a registration contemplated in subsection (4). For these reasons I am of opinion that there is no merit and substance in the contentions advanced on behalf of the assessee. The facts and circumstances of the present case indicate that the assessee did not produce books that the assessee was called upon to do so. The authorities, in the facts and circumstances of the case, refused the renewal of registration and that is one of the powers conferred on the revenue authorities. The question is, therefore, answered in the affirmative. The revenue is entitled to costs. D. BASU, J.‑

I agree.