COMMISSIONER OF INCOME-TAX, MYSORE vs. SEGU BUCHIAH SETTY

CIVIL APPEAL No. 235/1967Supreme Court[1971] 1 S.C.R. 35223 April 1970Bench: 3 JudgesAuthor: J.C. SHAH, K.S. HEGDE, A.N. GROVER COMMISSIONER OF INCOME5 pages
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What were the facts?

The assessee failed to comply with notices issued under Section 22(2) of the Income-tax Act, 1922, for assessment years 1953-54 and 1954-55. Subsequently, notices under Section 22(4) were also not complied with. Consequently, the Income-tax Officer made a best judgment assessment under Section 23(4). The assessee applied under Section 27 to reopen the assessment. The Income-tax Officer found sufficient cause for non-compliance with Section 22(4) notices but not for Section 22(2) notices, thus declining to reopen. This was upheld by the Appellate Assistant Commissioner and the Tribunal. However, the High Court ruled in favour of the assessee. The Revenue appealed to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court held that the High Court's view could not be sustained. The clear import of Section 23(4) is that upon committing any of the mentioned defaults, the Income-tax Officer is bound to make a best judgment assessment. Section 27 empowers the Income-tax Officer to cancel the assessment when sufficient cause is shown, but such cause must be demonstrated for each individual default. Therefore, if an assessee defaults by not filing a return under Section 22(2) and also fails to comply with a notice under Section 22(4), they must show sufficient cause for non-compliance with both provisions. Merely showing cause for one default is insufficient to warrant cancellation of the assessment. The Court cited the Bombay High Court's decision in Chiranjilal Tibrewala v. Commissioner of Income-tax, Bombay City II, which held similarly. The judgment of the High Court was set aside, and the question was answered against the assessee.

What were the issues?

1. Whether, when an assessee commits multiple defaults, namely, failure to comply with a notice under Section 22(2) and also failure to comply with a notice under Section 22(4), can the assessment made under Section 23(4) be cancelled under Section 27 by showing sufficient cause for only one of the defaults? Assessee's contention (as per High Court's favorable answer): The provisions of Section 27 are disjunctive, meaning compliance with any one of the grounds for cancellation is sufficient. Therefore, if there was sufficient cause for non-compliance with the notice under Section 22(4), the assessment should be cancelled, even if there was no sufficient cause for non-compliance with the notice under Section 22(2). Revenue's contention (as per Supreme Court's decision): Sufficient cause must be shown for each default for the assessment to be cancelled under Section 27. The Legislature could not have intended for an assessee to escape a best judgment assessment by showing cause for only one of multiple defaults.

Which sections of the Income-tax Act were involved?

Section 22(2),Section 22(4),Section 23(4),Section 27

AI-generated summary — verify with the full judgment below

352 COMMISSIONER OF INCOME-TAX, MYSORE A v. SEGU BUCHIAH SETTY April 23, 1970 [J. C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.] B • Income-tax Aci ( 11 of 1922},~ .. ,22, ],3 and 27-Non-compUance with notices under s . . 22(2) and s. 22:(4 )-Besi judgment· assessme11r under s. 23(4)-Sufjicient cause for non-compliance shown only with respect notices under s. ·22(4)-/f assessment can be re-opened under s. 27. . .

Notices. undet s. 22(2) of the Income-tax Act, 1922, were not com- c plied with by the respondent (assessee) and the Income-tax Officer issued notices under 's. 22(4) .. Sin·ce they were also· not complied with the · Income.tax ·amcer !flade a best judgment assessment under s. 23 ( 4).

Thereupon, the assessee applied under s. 27 for reopening the assessment.

The ~ncome-tai< Officer found that there was sufficient caute 'for non- compliance wiih the notices under s. 22(4), but, as there was no sufficient .cause for non-compnance with the notices under s. 22(2), he declined to D reopen the assessment.

The order was confirmed in appeal and by the )· Tribunal.

But the High Court held in favour of the assessee.

In appeal to this Court, HELD: Und

The order continues below.

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