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PETITIONER: L. HAZARI MAL KUTHIALA

       Vs.

RESPONDENT: THE INCOME-TAX OFFICER, SPECIAL CIRCLE, AMBALA CANTT.

DATE OF JUDGMENT: 27/09/1961

BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. DAS, S.K. GUPTA, K.C. DAS SHAH, J.C. AYYANGAR, N. RAJAGOPALA

CITATION:  1961 AIR  200            1961 SCR  (1) 892  CITATOR INFO :  D          1972 SC 182  (15)  RF         1975 SC2135  (3)  R          1976 SC2581  (12)  R          1983 SC 537  (5)  D          1988 SC2042  (4)

ACT:  Income-tax--Commissioner’s Power of transfer--Statutory pro-  vision  for  consulting  the Central  Board  of  Revenue--If  mandatory--Transfer     of    pending    and     non-pending  cases--Patiala  Income-tax Act of Samvat 2001 S. 5,  sub-ss.  (5), (7A), s. 34--Indian Income-tax Act, 1922 (II Of  1922),  s. 64(1).--Indian Finance Act, 1950 (26 of 1950), s. 13.

HEADNOTE:  The  appellant  firm  which carried on  business  as  forest  lessees and timber merchants in the former Kapurthala  State  was assessed to, and paid, income tax, for the account  year  1945-46 under the Income-tax law which was then in force  in  the  said State.  Subsequently Kapurthala  State  integrated  into what was known as Pepsu and the Patiala Income-tax Act,  2001,  was  made  applicable and, came  into  force  in  the  integrated State.  Later still the Indian Finance Act,  1950  (26  of 1930), applied the Indian Income-tax Act to  Part  B  States  which had emerged as a result of  political  changes  and s. 13 Of the Indian Finance Act repealed the  Income-tax  laws  obtaining in Part B States except for the purposes  of  levy  assessment and collection of income-tax and  Super-tax  relating  to the period mentioned therein.  On  November  4,  1953,  the  Commissioner  of  Income-tax,  Punjab  (i)  etc.  purporting  to act under s. 5, sub-ss. (5) and (7A)  of  the  Indian   Income-tax  Act  ordered  the  assessment  of   the  appellant firm to be done by the Income-tax Officer, Special  Circle,  Ambala and not by the Income-tax  Officer,  B-Ward,  Patiala,  who  would ordinarily be the  competent  assessing  authority for the firm under s. 64 Of the Indian  Income-tax  Act.   On  March 12, 1953, the Income-tax  Officer,  Special  Circle,  Ambala, issued a notice purporting to be under  the  Patiala Income-tax Act of Samvat 2001 to the appellant  firm

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for filing a return of its income and total world income  as  he  believed  that the income had been  underassessed.   The  appellant  then filed an application under Art. 226  of  the  Constitution  in  the High Court for writs  of  prohibition,  certiorari,   quo  warranto  etc.  against  the   Income-tax  Officer,  Special  Circle, Ambala, and the  Commissioner  of  Income-tax,  Punjab (i) etc. regarding the  reassessment  of  the  income of the firm for the account year  1945-46.   The  High  Court dismissed the said petition and this appeal  was  filed  on  a  certificate granted by the  High  Court.   The  contentions  of  the  appellant inter alia,  were  that  the  Income-tax   Officer,   Special  Circle,  Ambala,   had   no  jurisdiction to issue a notice under s. 34  893  of the Patiala Income-tax Act of Samvat 2001, and that  only  the  Income-tax Officer, B-Ward, Patiala, was the  competent  authority as he was the locally situated Income-tax  Officer  and would have jurisdiction under s. 64(1) of the Income-tax  Act.   The  transfer  of the case  by  the  Commissioner  of  Income-tax   by   his  order  of  November  4,   1954,   was  characterised as ultra vires and incompetent.  The  argument  that the words of s. 13 Of the Indian Finance Act, 1950, did  not  include  reassessment  was abandoned  in  view  of  the  decisions  of this Court in Lakshmana Shenoy v. The  Income-  tax  Officer, Ernakulam, [1959] S.C.R. 751.  It was  further  contended  that the Commissioner in acting under s. 5(5)  of  the  Patiala  Income-tax  Act was required  to  consult  the  Minister-in-Charge  whose  place was taken  by  the  Central  Board of Revenue under the Indian Finance Act, 1950.  Held,  that  although  the Commissioner  of  Income-tax  was  required to consult the Central Board of Revenue his failure  to do so did not render his order ineffective however  wrong  it  might  be from the administrative point  of  view.   The  provision  about consultation must be treated  as  directory  and the Commissioner’s power could not be questioned by  the  assessee  on  the ground of failure to consult  the  Central  Board of Revenue.  State  of  U.P. v. Manbodhan Lal Srivastava,  [1958]  S.C.R.  553, K. S. Srinivasan v. Union of India, [1958] S.C.R. 1295,  Montreal  Street Railway Company v. Normandin, L.R. 1917  A.  C.  170  and Biswanath Khemka v. The  King  Emperor,  (1945)  F.C.R. 99, followed.  The  Commissioner  while  transferring  the  case  may  have  referred to the Indian Income-tax Act and not to the Patiala  income-tax  Act  but  the exercise of  the  power  would  be  referable to a jurisdiction which conferred validity upon it  and not to a jurisdiction under which it would be nugatory.  Pitamber  Vajirshet v. Dhandu Navlapa, I.L.R. 12  Bom.  486,  followed.  A  case which was not pending at the time of transfer  could  not be transferred under sub-s. (7A) of S. 5 of the  Patiala  Act but it could be transferred from one Income-tax  Officer  to another under sub-s. (5) Of s. 5 of the Patiala Act which  was  kept alive for assessment and reassessment relating  to  previous  years.   Sub-s. (7A) makes special  provision  for  transfer  of  pending cases and is not  prejudicial  to  the  general powers granted by sub-s. (5).  Bidi Supply Co. v. Union of India, [1956] S.C.R. 267, refer-  red to.

JUDGMENT:  CIVIL APPELLATE, JURISDICTION: Civil Appeal No. 135 of 1958.  Appeal from the judgment and order dated

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    114  394  September  4, 1956, of the Punjab High Court in  Civil  Writ  Case No. 325 of 1965.  N. A. Palkhivala and J. B. Dadachanji, for the appellant.  C. K. Daphtary, Solicitor-General of India, K. N.  Rajagopal  Sastri and D. Gupta, for the respondents.  1960.   September  27.   The  Judgment  of  the  Court   was  delivered by  HIDAYATULLAH J.-The appellant firm, L. Hazarimal Kuthiala of  Kapurthala, moved the High Court of Punjab under Art. 226 of  the  Constitution for writs of prohibition, certiorari,  quo  warranto  etc.,  against  the  Income-tax  Officer,  Special  Circle,  Ambala and the Commissioner of  Income-tax,  Punjab  (1),  Himachal  Pradesh, Bilaspur and Simla  in  respect  of  reassessment of the income of the firm for the account year,  1945-1946.   The  High  Court dismissed  the  petition,  but  granted  a  certificate  under  Arts. 132  and  133  of  the  Constitution,  and  this  appeal  has  been  filed  on  that  certificate.  The  firm carried on business as forest lessees  and  timber  merchants  at  Dhilwan in the former Kapurthala  State.   In  that State, an Income-tax law was in force, and prior to the  integration  of the State, on April 10, 1947, the income  of  the  firm for the account year 1945-1946 (Samvat. 2002)  was  duly  assessed,  and the tax was also  paid.   Subsequently,  political  changes  took place, Kapurthala  integrated  into  what  was  known  as Pepsu, and the  Rajpramukh  issued  two  Ordinances  in Samvat. 2005, by which all laws in  force  in  Kapurthala  including  the  Income-tax  law  ceased  to   be  operative from August 20, 1948.  The two Ordinances  instead  applied  laws in force in the Patiala State to the  area  of  the  new  State which included Kapurthala, and  the  Patiala  Income-tax  Act,  2001, came into force.  Later  still,  the  Indian  Finance Act, 1950 (26 of 1950), applied  the  Indian  Income-tax Act to the Part B States, which had emerged as  a  result  of  political  changes.  Section 13  of  the  Indian  Finance Act, 1950, repealed the Income-tax laws obtaining in  the area of the Part B States except for the purposes  895  of levy, assessment and collection of income-tax and  super-  tax in respect of the period defined therein.  On  March 12, 1955, the Income-tax Officer, Special  Circle,  Ambala, issued a notice purporting to be under s. 34 of  the  Patiala Income-tax Act of Samvat. 2001 to the appellant firm  calling  upon  it to file a return of its income  and  total  world  income,  because he had reason to  believe  that  the  income  had  been  underassessed.   Previous  to  this,   on  November  4,  1953, the Commissioner of  Income-tax,  Punjab  (1), Himachal Pradesh, Bilaspur and Simla, purporting to act  under  s. 5, sub-ss. (5) and (7A) of the  Indian  Income-tax  Act, ordered that the assessment of the appellant firm would  be  done by the Income-tax Officer, Special  Circle,  Ambala  and  not  by the Income-tax Officer,  B-Ward,  Patiala,  who  ordinarily  would be the competent authority under s. 64  of  the Indian Income-tax Act to assess the appellant firm.  The  appellant firm raised objections, but failed, and then filed  the  petition  under Art. 226 of the  Constitution,  out  of  which the present appeal arises.  Numerous objections were taken in respect of the  competency  of  the proceedings before the taxing authorities, but  some  of them are no longer pressed.  An argument under Art. 14 of  the  Constitution has now been abandoned, though it  figured  at earlier stages of the present case.  A second point  that  the reassessment cannot be made under the Patiala In.  come-

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tax Act is not in dispute, because the respondents before us  stated that the reassessment, if any, would have to be  done  in accordance with the Kapurthala law, as it existed in  the  assessment  year (Samvat. 2002).  A third argument,  namely,  that the words of s. 13 of the Indian Finance Act, 1950, did  not  include reassessment, has also been abandoned, in  view  of  the decisions of this Court in Lakshmana Shenoy  v.  The  Income,-tax  Officer,  Ernakulam  (1)  and  The   Income-tax  officer,  Bangalore v. K. N. Guruswamy (2).  Only one  point  has  been pressed before us, and it is that  the  Income-Tax  Officer,  Special  Circle, Ambala, had  no  jurisdiction  to  issue a notice under s. 34, and  (1) [1959] S.C.R. 751.  (2) [1959] S.C.R. 785.  896  that  only the Income-tax Officer, B-Ward, Patiala, was  the  competent authority.  Reliance is placed in this  connection  upon  the  provisions of s. 64(1) of the  Indian  Income-tax  Act,  under  which the locally situated  Income-tax  Officer  would  have had jurisdiction in this case.  The transfer  of  the  case  by the Commissioner of Income-tax  by  his  order  dated November 4, 1953, is characterised as ultra vires  and  incompetent, and it is this argument alone to which we  need  address ourselves in this appeal.  The  Patiala  Income-tax  Act  contained  provisions  almost  similar to ss. 5(5) and 5(7A) of the Indian Income-tax  Act.  Sub-section  (5) differed in this that the  Commissioner  of  Income-tax  was required to consult  the  Minister-in-charge  before  taking  action  under that  sub-section.   The  only  substantial  difference in the latter sub-section  was  that  the  Explanation which was added to s. 5(7A) of  the  Indian  Income-tax Act as a result of the decision of this Court  in  Bidi Supply Co. v. Union of India (1) did not find place  in  the Patiala Act.  The Commissioner, when he transferred this  case, referred not to the Patiala Income-tax Act, but to the  Indian  Income-tax  Act,  and it is contended  that  if  the  Patiala  Income-tax  Act  was  in  force  for  purposes   of  reassessment,  action should have been taken under that  Act  and not the Indian Income-tax Act.  This argument,  however,  loses  point,  because  the  exercise of  a  power  will  be  referable  to a jurisdiction which confers validity upon  it  and  not to a jurisdiction under which it will be  nugatory.  This  principle is wellsettled.  See Pitamber  Vajirshet  v.  Dhandu Navlapa(2).  The   difficulty,   however,  does  not  end   there.    The  Commissioner, in acting under s. 5(5) of the Patiala Income-  tax Act, was required to consult the Minister-in-charge.  It  is contended that the Central Board of Revenue which,  under  the  Indian  Finance  Act,  1950, takes  the  place  of  the  Minister-in-charge was not consulted, and proof against  the  presumption  of  regularity of official acts is said  to  be  furnished  by  the fact that under the Indian  law  no  such  consultation  was  necessary, and the  Commissioner,  having  purported  (1) [1056] S.C.R. 267.    (2) I.L.R. 12 BOM. 486, 489.  897  to act under the Indian law, could not have felt the need of  consultation  with any higher authority.  This, perhaps,  is  correct.  If the Commissioner did not act under the  Patiala  law   at   all,  which  enjoined   consultation   with   the  Minister-in-charge  and  purported  to act  only  under  the  Indian  law,  his mind would not be drawn to  the  need  for  ’Consultation  with the Central Board of Revenue.  Even  so,  we  do  not think that the failure to  consult  the  Central  Board  of  Revenue  renders the order  of  the  Commissioner

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ineffective.   The  provision  about  consultation  must  be  treated  as  directory, on the principles accepted  by  this  Court in State of U. P. v. Manbodhan Lal Srivastava (1)  and  K. S. Srinivasan v. Union of India (2).  In the former case,  this  Court dealt with the provisions of Art. 320  3)(c)  of  the  Constitution, under which consultation with  the  Union  Public Service Commission was necessary.  This Court  relied  upon  the decision of the Privy Council in  Montreal  Street  Railway  Company v. Normandin (3), where it was observed  as  follows:                "........ The question whether provisions in a                statute  are directory or imperative has  very                frequently arisen in this country, but it  has                been  said  that no general rule can  be  laid                down, and that in every case the object of the                statute  must be looked at.  The cases on  the                subject will be found collected in Maxwell  on                Statutes,  5th Ed., p. 596 and  the  following                pages.   When  the  provisions  of  a  statute                relate to the performance of a public duty and                the  case is such that to hold null  and  void                acts  done in neglect of this duty would  work                serious general inconvenience, or injustice to                persons   who  have  no  control  over   those                entrusted with the duty, and at the same  time                would  not  promote  the main  object  of  the                Legislature, it has been the practice to  hold                such  provisions  to be  directory  only,  the                neglect of  them, though punishable,   not                affecting the validity of the acts done."  The principle of the Privy Council case was also applied  by  the  Federal Court in Biswanath Khemka v. The  King  Emperor  (4), and there, as pointed out by this  (1)  [1058] S.C. R. 533.  (3)  L.R. 1917 A.C. 170.  (2)  [1958] S.C.R. 1295, 1321.  (4)  [1945] F.C.R. 99.  898  Court,  the words of the provision were even  more  emphatic  and of a prohibitory character.  The essence of the rule  is  that   where  consultation  has  to  be  made   during   the  performance  of  a  public duty and an  omission  to  do  so  occurs,  the action cannot be regarded as  altogether  void,  and  the  direction  for  consultation  may  be  treated  as  directory  and  its  neglect, as of no  consequence  to  the  result.  In view of what has been  said in these cases, the.  failure  to  consult the Central Board of Revenue  does  not  destroy  the  effectiveness  of the  order  passed  by-  the  Commissioner,   however   wrong  it  might   be   from   the  administrative   point  of  view.   The  power  which,   the  Commissioner had, was entrusted to him, and there was only a  duty  to consult the Central Board of Revenue.  The  failure  to  conform to the duty did not rob the Commissioner of  the  power  which  he exercised, and the exercise  of  the  power  cannot,  therefore,  be questioned by the  assessee  OD  the  ground  of failure to consult the Central Board of  Revenue,  provision  regarding which must be regarded as  laying  down  administrative control and as being directory.  Learned counsel, however, contends that even if all this  be  decided  against him, he is still entitled to show that  the  transfer  of the case can only take place under sub-s.  (7A)  of  S.  5 and not under sub-s. (5).  According to  him,  the  former  subjection  deals with the  transfer  of  individual  cases, and that inasmuch as there was no pending case at the  time,  then, as was ruled by this Court in the  Bidi  Supply

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case  (1), the transfer could not be valid.  In the  absence  of  an  Explanation similar to the one added to  the  Indian  Income-tax  Act,  he  contends that a  case  which  was  not  pending,  could  not be transferred under sub-s.  (7A).   He  contends also that sub-s. (5) deals not with the transfer of  individual cases but with the distribution of work.  The  two sub-sections of S. 5 of the Patiala Income-tax  Act  read as follows:  "  (5) Income-tax officers shall perform their functions  in  respect  of  such persons or classes of persons or  of  such  incomes or classes of income or in respect of  (1) [1956] S.C.R. 267.  899  such  areas  as  the  Commissioner  of  Income-tax  may   in  consultation  with the Minister Incharge direct, and,  where  such  directions  have assigned to two  or  more  Income-tax  Officers, the same persons or classes of persons or the same  incomes or classes of income or the same area, in accordance  with any orders which the Commissioner of Income-tax may  in  consultation  with  the  Minister  Incharge  make  for   the  distribution  and allocation of work to be  performed.   The  Minister  Incharge  may, with the previous approval  of  the  ljlasi-Khas, by general or special order in writing,  direct  that  the powers conferred on the Income-tax Officer  by  or  under  this Act shall, in respect of any specified  case  or  class  of cases, be exercised by the Commissioner, and,  for  the  purposes  of any case in respect of  which  such  order  applies,  references  in  this  Act or  in  any  rules  made  hereunder  to the Income-tax Officer shall be deemed  to  be  references to the Commissioner.  (7A)  The Commissioner of  Income-tax may transfer any  case  from  one Income-tax Officer subordinate to him to  another,  and the Minister Incharge may transfer any case from any one  Income-tax Officer to another.  Such transfer may be made at  any stage of the proceedings, and shall not render necessary  the re-issue of any notice already issued by the  Income-tax  Officer from whom the case is transferred."  There  can  be  no doubt that sub-s.  (7A)  authorises  ,the  Commissioner to transfer individual cases.  The words "  any  case  from  one  Income-tax Officer subordinate  to  him  to  another  ", " such transfer may be made at any stage of  the  proceedings " etc., clearly indicate this.  Sub-section (7A)  is, however, not applicable here, because in respect of  the  cognate  sub-section  of the Indian Income-tax  Act  it  was  ruled  by this Court that it could apply to a  pending  case  only.   It was to overcome this lacuna that the  Explanation  was added by the Indian Parliament.  This amendment came  in  1956,  and  the  Patiala  Act  did  not  include  a  similar  Explanation,  because  prior to 1956 the  question  had  not  arisen.   There is one other difference between the  Patiala  Act and the Indian Act.  Whereas sub-s. (7A) was  introduced  in the Indian Act by an  900  amendment, the corresponding sub-section was enacted at  the  same time as the rest of the Patiala Act.  Now, it is quite clear that a case which was not pending  at  the  time of transfer could not be transferred under  sub-s.  (7A) of s. 5 of the Patiala Act.  The same reasoning must be  applied to that subsection, as it was applied to the  Indian  Act.   Learned  counsel referred us to an affidavit  by  the  Under  Secretary,  Central Board of Revenue,  reproduced  in  Pannalal  Binjraj  v. Union of India (1), which  stated  the  reason for the introduction of sub-s. (7A).  It is a  little  difficult to accept the affidavit as an aid to find out  the  intention  why  a particular law or amendment  was  enacted,

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more so where the affidavit concerns quite another Act of  a  different   legislature.   It  is,  however,  pertinent   to  remember  that  sub-s.  (7A) expressly  gave  the  power  to  transfer  pending cases, but said nothing about cases  which  were riot pending.  The power to transfer such cases  before  they came into being must, therefore, be found in some other  enactment.   The  Department  contends that  it  would  fall  within  sub-s. (5) of s. 5, and points out that  this  Court  was  not required to consider that sub-section, because  the  transfer of the cases dealt with in the Bidi Supply case (2)  was  by an authority not named in sub-s. (5)  and  therefore  the  transfer  in those instances could not be  held  to  be  under  that sub-section.  The Department contends  that  the  Commissioner  of Income-tax is mentioned both in sub-s.  (5)  and  sub-s. (7A) and could derive his power from one or  the  other or both.  The short question thus is whether an individual case  which  was not a pending case could be transferred from one Income-  tax  Officer  to  another under sub-s. (5) of s.  5  of  the  Patiala  Act,  which  was  kept  alive  for  assessment  and  reassessments  relating to previous assessment  years.   Mr.  Palkhivala  argues that the words of the sub-section "  such  persons or classes of persons or of such incomes or  classes  of  income  or  in respect of such areas "  denote,  by  the  plural employed, a dealing with a group rather than  (1) [1957] S.C.R. 233. 246.  (2) [1956] S.C.R. 267.  901  an individual case.  He further contends that if  individual  cases  were held to be included in sub-s. (5),  then  sub-s.  (7A)  would  be  unnecessary and  otiose.   He  argues  that  harmonious  construction  thus requires that  the  two  sub-  sections must be taken to cover different situations.  The last argument is hardly open after the decision of  this  Court  adverted  to already.  If pending  cases  alone  were  within sub-s. (7A), those cases which were not pending could  not be said to have been provided for, there.  There is thus  no overlapping at least in so far as cases not pending  were  concerned.   An  arrangement for their disposal would  be  a  subject of distribution of work and nothing much turns  upon  the  employment  of the plural number,  because  the  plural  includes the singular.  Indeed, a single case might well  be  in  a class separate from others.  Duplication of powers  is  sometimes  noticeable in statutes, and does not destroy  the  effectiveness  of the powers conferred.  Section 24  of  the  Civil Procedure Code dealing with transfers of cases and the  provisions  of  the  Letters Patent of the  High  Court  are  instances  in point.  If a particular action is valid  under  one  section,  it  cannot be rendered  invalid  because  the  identical  action can also be taken under  another  section,  and it makes no difference if the two empowering  provisions  are  in the same statute.  In any event, sub-s.  (7A)  would  cut down sub-s. (5) only to the extent the former  provides,  and  it has been held that it was confined to pending  cases  only.   Sub-section (5) was thus available for  cases  which  were not pending, and the case which was ’the subject-matter  of the Commissioner’s order was not a pending case.  Mr.  Palkhivala  contends  that sub-s.  (5)  merely  enables  distribution of work, and does not deal with transfers.  But  where  a  case is not pending, an order relating to  it  may  take  the  form  of  transfer  or  an  arrangement  for  its  disposal.   There  is nothing to prevent  the  Commissioner,  acting  under  sub-s. (5), to arrange that the  case  of  an  assessee  shall  be disposed of by a  particular  Income-tax  Officer.  The words of

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   115  902  sub-s.  (5) that " Income-tax Officers shall  perform  their  functions in respect of such persons as the Commissioner may  direct " only show that the Commissioner may direct that one  Income-tax Officer shall not and another Income-tax  Officer  shall,  perform  the functions in respect of such  and  such  person  or persons.  The plural including the singular,  the  order of the Commissioner was valid, because he arranged and  distributed work, and did not seek to transfer any case.  It  is, however, contended that this renders sub-s. (7A) otiose.  In our opinion, it does not.  Special provision for transfer  of pending cases is all that is provided there, and if  such  a  transfer takes place, the provisions of sub-s. (7A)  will  be  invoked.   Those provisions are to be read as  not  pre-  judicing  the general powers granted by sub-s. (5) and  vice  versa.  For  these reasons, the appeal fails, and will be  dismissed  with costs.           Appeal dismissed.