http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4  

PETITIONER: C.I.T., WEST BENGAL II, CALCUTTA

       Vs.

RESPONDENT: M/S.  ELECTRO HOUSE

DATE OF JUDGMENT02/09/1971

BENCH:

ACT: Income-tax Act (11 of 1922), s. 33B-Whether jurisdiction  of Commissioner depends on issue of proper notice to assessee.

HEADNOTE: The Commissioner of Income-tax found that the orders of  the Income-tax  Officer  granting registration to  the  assessee firm  and  renewal of registration for the  next  year  were erroneous  and prejudicial to the interests of revenue.   He therefore proceeded against the assessee under s. 33B of the Income-tax Act, 1922, after issuing notice to the assessee. The  High Court, on reference, held that the notice was  not valid   and   that  therefore,  the  Commissioner   had   no jurisdiction to proceed with the enquiry. Allowing the appeal to this Court, HELD  :  Section  33B,  unlike s. 34 of  the  Act  does  not prescribe  any  notice to be given.  For the  assumption  of jurisdiction  to  proceed  under s. 33B a notice  is  not  a condition   precedent.   The  section  only   requires   the Commissioner  to give an opportunity to the assessee  before reaching his decision and not before commencing the enquiry. The requirement is only a principle of natural justice,  and its  breach may affect the legality of the order,  but  does not affect the jurisdiction of the Commissioner.  Therefore, the question as to what the notice given in the present case should have contained did not arise at it]. [592 C-H] Gita  Devi  Aggarwal  v.  C.I.T.,  West  Bengal,  76  I.T.R. 496(S.C.), followed.

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos.  2376  to 2379 of 1968 and 1168 to 1471 of 1971. Appeals by certificate/special leave from the judgments  and orders  dated  May  2, 1968 of the Calcutta  High  Court  in Incometax Reference Nos. 63, 112 and 113 of 1965. Jagadish  Swarup,  Solicitor-General, A. N.  Kirpal,  R.  N. Sachthey  and  B. D. Sharma, for the appellant (in  all  the appeals). S.T.  Desai and D. N. Mukherjee, for the  respondent  (in all the appeals). The Judgment of the Court was delivered by Hegde, J. Civil Appeals Nos. 1168-1171 of 71 are by  special leave  and  Civil  Appeals  Nos.  2376-2379  of  68  are  by certificate.   These appeals arise from the decision of  the Calcutta  High  Court in certain tax references.   In  those references  the High Court was considering the one  question referred  to it by the Tribunal under section 66(1)  of  the Indian  Income-tax  Act, 1922 (in brief ’the Act’)  and  two

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 4  

other questions referred to it by the Tribunal in accordance with the directions given by that 590 Court  under section 66 (2) of the Act.  The High Court  has only  answered the question referred to it by  the  Tribunal under  section 66(1) of the Act and it has not answered  the other  two  questions as being  unnecessary.   The  question referred under section 66(i) is :               "Whether on the facts and in the circumstances               of the case, the notice issued under,  section               33B of the Indian Income-tax Act, 1922 met the               requirements  of  the  law  and  whether   the               Commissioner  of Income-tax validly  exercised               jurisdiction  under section 33B of the  Indian               Income-tax Act, 1922 ? The  facts  of the case lie within a  narrow  compass.   The ,concerned  assessment  years are 1959-60 and  1960-61,  the corresponding  accounting years having ended on December  31 of  each  of  the years 1958 and 1959.   The  assessee  M/s. Electro House claimed to be a firm constituted under a  deed of partnership dated January 2, 1958.  The business of  that firm  was started by Baidyanath Gorai sometimes in the  year 1949  and up to the assessment year 1958-59 he was  assessed as  the  sole  proprietor thereof.  On January  2,  1958  he purported to enter into a partnership with his mother-in-law and son-in-law.  Under that partnership he had 40% share and his  mother-in-law and son-in-law had 30% share each in  the profits  and  losses of the firm.   The  Income-tax  Officer accorded  registration of the partnership in question  under section  26 A of the Act for the two assessment  years  with which  we are concerned in these appeals.  The  Commissioner of Income-tax, West Bengal, however appears to have found on an  examination  of  the records that  the  orders  .of  the Income-tax  Officer  granting registration to  the  assessee firm  for  the  assessment  year  1959-60  and  renewal   of registration for the assessment year 1960-61 were  erroneous and  prejudicial  to  the  interests  of  the  revenue.   He therefore  proceeded against the assessee under section  33B of the Act.  Before doing so, he issued a notice to the firm on July 18, 1962 which reads thus                           "From                                   Shri F. H. Vallibhoy                                   Commissioner   of   Income               Tax,                                    West Bengal.                                     To                            M/s.  Electro House                                          G. T. Road,                                          Asansol.                                         Gentlemen,               591               SUB.-Income Tax, Assessment-1959-60 and  1960-               61 M/s.  Etectro House-Registration u/s 26A of               the  Income Tax  Act-Wrongly  granted-Proposal               u/s  33B  to  cancel  orders  u/s   26A-notice               regarding:- On  a  perusal of the orders u/s 26A passed  by  Income  Tax Officer,  "A"  Ward Asansol on 5th October.  1960  and  25th February, 1961 for the assessment year", 1959-60 and 1960-61 respectively in the above case and the connected records,  I consider that the said orders are erroneous and  prejudicial to  revenue, inasmuch as registration u/s 26A of Income  Tax Act  1922,  for the assessment year 1959-60 and  renewal  of registration u/s 26A of the said Act for the assessment year 1960-61  should  not have been granted as  there  are  prima

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 4  

facie  reasons  and  grounds to hold  that  the  partnership brought  into  existence by the partnership deed  dated  2nd January, 1958 is not a genuine one. 1,  therefore, propose to cancel the orders u/s 26A  of  the Income-tax  Act, 1922 for the assessment years  1959-60  and 1960-61  under powers vested in me under section 33B of  the Income,  Tax Act 1922, unless you show cause why the  orders should not be so cancelled. I am prepared to hear your objections, if any, at 11 A.M. on 3rd August, 1962 at my office as noted above. Objections  in writing,  if any submitted on or before the above date  will also be duly considered.                Yours faithfully,            Sd./- F. H. Vallibhoy,       Commissioner of Income Tax                 West Bengal." The question for consideration is whether this notice is  an invalid  notice  and consequently the  Commissioner  had  no jurisdiction  to  proceed under section 33B.   The  Tribunal came  to the conclusion that the notice issued was  not  one required  to be issued by the Act and hence its validity  or invalidity   did   not  affect  the  jurisdiction   of   the Commissioner.  It also held that it was a valid notice.  But the,  High Court differing from the conclusions  reached  by the Tribunal opined that the notice issued was not valid and therefore  the Commissioner had no jurisdiction  to  proceed with the enquiry.  In that view it thought it unnecessary to consider the remaining questions. 592               Section 33B (1) reads :               "The Commissioner may call for and examine the               record of any proceeding under this Act and if               he considers that any order passed therein  by               the Income-tax officer is erroneous in so  far               as  it is prejudicial to the interests of  the               revenue, he may, after giving the assessee  an               opportunity of being heard and after making or               causing  to be made such enquiry as  he  deems               necessary,  pass  such order thereon  as  ’the               circumstances  of the case justify,  including               an   order   enhancing   or   modifying    the               assessment,  or canceling the  assessment  and               directing a fresh assessment." This section unlike section 34 does not prescribe any notice to  be given.  It only requires the Commissioner to give  an opportunity  to  the assessee of being heard.   The  section does  not speak of any notice.  It is unfortunate  that  the High  Court  failed  to notice the  difference  in  language between   section  33B  and  34.  For  the   assumption   of jurisdiction  to  proceed  under section 34  the  notice  as prescribed in that section is a condition precedent.  But no such notice   is  contemplated  by  section   33B.    The jurisdiction  of the Commissioner to proceed  under  section 33B  is  not dependent on the fulfillment of  any  condition precedent.   All that he is required to do  before  reaching his decision and not before commencing the enquiry, he  must give the assessee an opportunity of being heard and make  or cause  to  make such enquiry as he deems  necessary.   Those requirements have nothing to do with the jurisdiction of the Commissioner.   They  pertain  to  the  region  of   natural justice.   Breach of the principles of natural  justice  may affect  the  legality of the order made but  that  does  not affect the jurisdiction of the Commissioner.  At present  we are  not called upon to consider whether the order made  by the Commissioner is vitiated because of the contravention of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 4  

any  of  the principles of natural justice.   The  scope  of these  appeals is very narrow.  All that we have to  see  is whether  before assuming jurisdiction the  Commissioner  was required  to issue a notice and if he was so  required  what that  notice  should  have contained ? Our  answer  to  that question  has already been made clear.  In our  judgment  no notice was required to be issued by the Commissioner  before assuming   jurisdiction  to  proceed  under   section   33B. Therefore the question what that notice should contain  does not arise for consideration.  It is not necessary nor proper for  us  in this case to consider as to the  nature  of  the enquiry to be held under section 33B.  Therefore we  refrain from spelling out what principles of ,natural justice should be observed in an enquiry under section 33B.  This Court  in Gita Devi Aggarwal v. Commissioner of Income-tax, West 593 Bengal  and  others(1) ruled that section 33B  does  not  in express terms require anotice to be served on the assessee as  in the case of section 34. Section 33B  merely  requires that an opportunity of being heardshould  be given  to  the assessee and the stringent requirement ofservice      of notice  under section 34 cannot, therefore, be applied to  a proceeding under section 33B. For the reasons mentioned above, we allow Civil Appeal  Nos. 1168 to 1171 of 7112 discharge the answer given by the  High Court  to  the  question set out  earlier  and  answer  that question as follows The  notice  issued did not contravene section 33B  and  the Commissioner   validly  exercised  his  jurisdiction   under section  33B.  But as the High Court has not considered  the other questions referred to it, these cases will now go back to the High Court for considering those questions. Civil Appeals Nos. 2376 to 2379 of 68 are dismissed as being not maintainable, as the certificates on the basis of  which those  appeals  were  brought  to  this  Court  are  not  in accordance with law.  But in those appeals there will be  no order as to costs. V.P.S.               C.A. No;. 1168-1171/71 allowed.                      C.A. Nos. 2376-2379/68 dismissed. (1) 76 I.T.R. p. 496. 4-L3Sup.C.I./72 594