C.I.T CENTRAL, CALCUTTA vs. NATIONAL TAJ TRADERS

CIVIL APPEAL No. 171/1973Supreme Court[1980] 2 S.C.R. 26827 November 1979Bench: 2 JudgesAuthor: V.D. TULZAPURKAR, E.S. VENKATARAMIAH16 pages
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What were the facts?

For the accounting years ending March 31, 1957, and March 31, 1958, the Income Tax Officer (ITO) completed assessments for the respondent, National Taj Traders, as an unregistered firm with a total income of Rs. 7000/- and Rs. 7500/- respectively. On August 2, 1962, the Commissioner of Income Tax (CIT) issued a show cause notice under Section 33B of the Income Tax Act, 1922, proposing to cancel these assessments, deeming them erroneous and prejudicial to the revenue, and noting the ITO lacked territorial jurisdiction. The notice was served on August 3, 1962, with a hearing fixed for August 6, 1962. The CIT passed an ex-parte order on August 6, 1962, cancelling the assessments on grounds of minor partners, unreliable accounts, and lack of jurisdiction, directing the proper ITO to make fresh assessments. The assessee appealed to the Appellate Tribunal, which found the CIT's ex-parte order to be bad as objections were filed later on the same day the hearing was fixed. The Tribunal remanded the case for fresh disposal after giving the assessee an opportunity to be heard. The High Court, on reference, held the CIT's assumption of jurisdiction valid, the Tribunal's vacating of the order proper, but that the Tribunal erred in directing fresh assessment under Section 33B(1) as the two-year limitation under Section 33(2)(b) had expired.

What did the Supreme Court hold?

The Supreme Court held that the bar of limitation contained in sub-section (2)(b) of Section 33B applies to the Commissioner's power to pass revisional orders under sub-section (1) and is absolute. However, sub-section (4) confers very wide powers on the Appellate Tribunal when dealing with an appeal under Section 33B(3), similar to those under Section 33(1). The Tribunal has the authority to pass such orders as it thinks fit, which includes the power to set aside the order appealed against and direct a fresh assessment in light of its observations. The Court reasoned that a literal construction of sub-section (2)(b) imposing an absolute bar on the Commissioner's power should not lead to an absurd result where the Tribunal's appellate powers are rendered ineffective. The Court applied the principle of reading the statute as a whole to ensure a consistent enactment. Therefore, the Tribunal's order vacating the Commissioner's order and directing the Commissioner to make a fresh assessment after giving the assessee due opportunity was proper. The High Court's view that the limitation period barred the Tribunal from directing a fresh assessment was deemed incorrect. The appeal was allowed.

What were the issues?

1. Whether sub-section (2)(b) of Section 33B of the Income Tax Act, 1922, has the effect of attenuating or curtailing the appellate powers of the Tribunal under sub-section (4) thereof. Assessee's Contention: The judgment does not record specific contentions from the assessee regarding this issue. The Tribunal's decision to remand the case suggests it believed its appellate powers were not curtailed by the limitation period. Revenue's Contention: The revenue argued, and the High Court held, that the two-year limitation period prescribed under Section 33(2)(b) for the Commissioner to act under Section 33B(1) had expired, and this limitation was absolute, even affecting revisional orders made pursuant to a direction from an appellate authority. This implies the revenue contended that the Tribunal's power to direct fresh assessment was limited by this statutory bar.

Which sections of the Income-tax Act were involved?

Section 33B,Section 33(2)(b),Section 33(4),Section 33(1),Section 31

AI-generated summary — verify with the full judgment below

A c .D E .F G e 268 C.I.T. CEN1RAL, CALCUITA v. NATIONAL TAJ 1RADERS November 27, 1979 LV. D. TuLZAPURKAR AND E. S. VENKATARAMIAH, JJ.] Income Tax Act, 1922, Section 33B-Constructi'on of section 33B wit# parti-· cular bearing on the scope of the appellate powers of the Tribunal under sub- section 4 thereof and the effect ·of sub-section 2(b) on sub section (4)-... I ,, , t • • Whether sub section 2(b) of section 33B has the effect of attenuation or turtait~ ,. ing. the appellate por.;ers of the Tribunal under sub section 4. "f- in respect of the accounting years ending March 31, 1957 and March 195!~ respectively on the voluntary returns submitted by the respondent, the Income Tax Officer 'E' Ward District TI (1) Calcutta completed the assessment for these years (1957-58 and 1958-59) on total incomes of Rs. 7000/- and Rs. 7500/- respectively, the same having been made in the status of unregistered firm con- sisting of three partners, namely Asha Devi Vaid, Santosh Devi Vaid and Sugni Devi Vaid with equal shares. On August 2, 1962, the Commissioner of Income Tax issued notice to show cause why the said assessments should not be can~ celled under section 33B

The order continues below.

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