C.I.T., WEST BENGAL II, CALCUTTA vs. M/S. ELECTRO HOUSE

CIVIL APPEAL No. 2376/1968Supreme Court[1972] 1 S.C.R. 58902 September 1971Bench: 2 JudgesAuthor: K.S. HEGDE, A.N. GROVER B5 pages
AI SummaryPartly Allowed

What were the facts?

The Commissioner of Income-tax (CIT) initiated proceedings under Section 33B of the Indian Income-tax Act, 1922, against M/s. Electro House for assessment years 1959-60 and 1960-61. The CIT believed that the Income-tax Officer's orders granting registration to the assessee firm and its renewal were erroneous and prejudicial to the revenue. A notice was issued to the assessee on July 18, 1962. The assessee firm was constituted on January 2, 1958, with Baidyanath Gorai holding a 40% share and his mother-in-law and son-in-law holding 30% each. The High Court, on reference, held the notice invalid and consequently ruled that the CIT lacked jurisdiction under Section 33B. The appeals were filed by the Revenue against this High Court decision.

What did the Supreme Court hold?

The Supreme Court held that Section 33B of the Income-tax Act, 1922, unlike Section 34, does not prescribe any specific notice to be given as a condition precedent for the assumption of jurisdiction by the Commissioner. The section only requires the Commissioner to give the assessee an opportunity of being heard before reaching his decision, not before commencing the enquiry. This is a principle of natural justice, and its breach may affect the legality of the order but not the Commissioner's jurisdiction. Therefore, the question of what the notice should have contained did not arise. The Court followed its earlier decision in Gita Devi Aggarwal v. Commissioner of Income-tax, West Bengal. The Supreme Court allowed the appeals, discharged the High Court's answer to the referred question, and answered that the notice issued did not contravene Section 33B and the Commissioner validly exercised his jurisdiction. The cases were remanded to the High Court for considering the remaining questions.

What were the issues?

1. Whether 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? (Mixed question of law and fact, concerning Section 33B). Assessee's Contentions: The High Court held that the notice issued was not valid and therefore the Commissioner had no jurisdiction to proceed with the enquiry. The assessee relied on this finding. Revenue's Contentions: The Revenue contended that Section 33B does not prescribe any specific notice as a condition precedent for assuming jurisdiction. The requirement is only to give an opportunity of being heard before reaching a decision. The Revenue argued that the High Court erred in holding the notice invalid and thereby affecting the Commissioner's jurisdiction. The Revenue cited Gita Devi Aggarwal v. C.I.T., West Bengal, 76 I.T.R. 496 (S.C.).

Which sections of the Income-tax Act were involved?

Section 33B,Section 34,Section 66(1),Section 66(2),Section 26A

AI-generated summary — verify with the full judgment below

A B c D E F G H C.I.T., WEST BENGAL II, CALCUTTA v. M/S. ELECTRO HOUSE September 2, 1971 (K. S. HEGDE AND A. N. GROVER, JJ.J 589 Income-tax Act (11 of 1922), s. 338--Whether juri iction of Com- 111issio11er depends on issue of proper notice to assessee, The Commissioner of Income-taJC found that the orders of the Income- tax Officer gr.;nting registration to the assessee firm and renewal of regis- tration for the next year were erroneous and prejudicial to the interests of ·revenue.

He therefore proceeded against the assessee under s. 33B of the Incomc~tax Act, 1922, after issuing noti~e to the assessee.

The High Court, on re'ference, held that the notice was not valid and that therefore, the Commissioner had no juri iction 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 juri iction to proceed under ii. 33B a notice is not a condition precedent. The section only requires th~ Commissioner to give nn opportunity to the assessee before reaching his decision and not before commencing the enquiry. The requirement is only a principle

The order continues below.

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