# COMMISSIONER OF INCOME-TAX, MYSORE v. SEGU BUCHIAH SETTY

- **Citation:** [1971] 1 S.C.R. 352
- **Court:** Supreme Court of India
- **Decided:** 1970-04-23
- **Case number:** CIVIL APPELLATE JURISDICTIOI<: Civil Appeals Nos. 235 and 236 of 1967
- **Bench:** J. C. Shah, K. S. Hegde, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-income-tax-mysore-v-segu-buchiah-setty-5044
- **Pages:** 5

## Headnote

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 comc
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 noncompliance 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: Under s. 23(4) on the
assessee committing any of the
defaults mentioned therein. namely, failure to make a return as reQuired
'
by a notice under s. 22(2) or a revised return under s. 22(3) or non·
compliance with the terms of a notice under s. 22( 4) or failure to comE
'
ply with the. terms of a notice under s. 23(2). 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 has to be shown for each default. Therefore, if the assessce
makes default by not filing a return pursuant to a notice under s. 22(2) and
also does not complv with a notice under s. 22(.t') he must show sufficient
cause for non-compliance with both the provisions. The Legislature could
F
not have intended that in case of multiple defaults,
for
each
one of
which an ex parte best judgment assessment has to be made, the assessee
can ask for cancellation of the assessment by merely showing cause
for
one of such defaults. [355 D-H]
Chiranji/al Tihrewala v. Commissioner of Income-tax. Bombay City ll,
59 J.T.R. 42, approved.
lf!
CIVIL APPELLATE JURISDICTIOI<: Civil Appeals Nos. 235 and
236 of 1967.
G
Appeals from the judgment arid order dated March 21. 1966
of the Mysore High Court in Income-tax Referred Case No. 19
Of 1964.
laKadish Swarup, Solicitoi: General, G. C. Sharma and B. D.
H
Sharma, for the appellant (in both the appeals).
R. Gopalakrishnan, for the respondent (in both the appeals).
r..1.T. v. s. B. SETTY (Grover,!.}
353
A
The Judgment of the cdurt was delivered by
B
c
D
E
F
G
H
Grover, J.
These appeals by certificate arise out of a common
judgment of the Mysore High Court in references made with regard
to the assessments relating to the assessment years 1953-54 and.
1954-55.
For the assessment year 1953-54 the assessee was served with
a notice under s. 22 ( 2) of the Income tax Act 1922, hereinafter
called the "Act", on March 5, 1954. A similar notice was served
in respect of the assessment year 1954-55 on June 5, 1954. The
assessee failed to file any return in compliance with the notices.
Thereupon he was served with notices under s. 22 ( 4) for both the
assessment years and was required to produce accounts on specified dates. None appeared on any one of those dates but applications were submitted praying for adjournment on certain grounds.
The Incom~ tax Officer was not satisfied with the .reasons given
for seeking adjournments and he proceeded to make the assessment under s. 23 ( 4) of the Act. The assessee moved the Income
Tax Officer under s. 27 to reopen the assessments on the grounds
given in the applications filed in that behalf. The Income Tax
Officer appeared to be satisfied that there was sufficient cause for
non-complianc.~ with the notices issued under s. 22 ( 4) of the Act
but he was of the view that the assessee had been a babitual defaulter inasmuch as he had not submitted the return under s. 22(2)

## Text

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 comc
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 noncompliance 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: Under s. 23(4) on the
assessee committing any of the
defaults mentioned therein. namely, failure to make a return as reQuired
'
by a notice under s. 22(2) or a revised return under s. 22(3) or non·
compliance with the terms of a notice under s. 22( 4) or failure to comE
'
ply with the. terms of a notice under s. 23(2). 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 has to be shown for each default. Therefore, if the assessce
makes default by not filing a return pursuant to a notice under s. 22(2) and
also does not complv with a notice under s. 22(.t') he must show sufficient
cause for non-compliance with both the provisions. The Legislature could
F
not have intended that in case of multiple defaults,
for
each
one of
which an ex parte best judgment assessment has to be made, the assessee
can ask for cancellation of the assessment by merely showing cause
for
one of such defaults. [355 D-H]
Chiranji/al Tihrewala v. Commissioner of Income-tax. Bombay City ll,
59 J.T.R. 42, approved.
lf!
CIVIL APPELLATE JURISDICTIOI<: Civil Appeals Nos. 235 and
236 of 1967.
G
Appeals from the judgment arid order dated March 21. 1966
of the Mysore High Court in Income-tax Referred Case No. 19
Of 1964.
laKadish Swarup, Solicitoi: General, G. C. Sharma and B. D.
H
Sharma, for the appellant (in both the appeals).
R. Gopalakrishnan, for the respondent (in both the appeals).
r..1.T. v. s. B. SETTY (Grover,!.}
353
A
The Judgment of the cdurt was delivered by
B
c
D
E
F
G
H
Grover, J.
These appeals by certificate arise out of a common
judgment of the Mysore High Court in references made with regard
to the assessments relating to the assessment years 1953-54 and.
1954-55.
For the assessment year 1953-54 the assessee was served with
a notice under s. 22 ( 2) of the Income tax Act 1922, hereinafter
called the "Act", on March 5, 1954. A similar notice was served
in respect of the assessment year 1954-55 on June 5, 1954. The
assessee failed to file any return in compliance with the notices.
Thereupon he was served with notices under s. 22 ( 4) for both the
assessment years and was required to produce accounts on specified dates. None appeared on any one of those dates but applications were submitted praying for adjournment on certain grounds.
The Incom~ tax Officer was not satisfied with the .reasons given
for seeking adjournments and he proceeded to make the assessment under s. 23 ( 4) of the Act. The assessee moved the Income
Tax Officer under s. 27 to reopen the assessments on the grounds
given in the applications filed in that behalf. The Income Tax
Officer appeared to be satisfied that there was sufficient cause for
non-complianc.~ with the notices issued under s. 22 ( 4) of the Act
but he was of the view that the assessee had been a babitual defaulter inasmuch as he had not submitted the return under s. 22(2)
even for several preceding years for which the assessments had to
be completed under s. 23 ( 4) of the Act. He declined to reopen
the assessment under s. 27.
Appeals to the Appellate Assistant
Commissioner w.~re filed.
According to the Appellate Assistant
Commissioner sufficient cause for non-compliance with one of the
statutory notices i.e. the notice under s. 22( 4) could not constitute
sufficient cause for non-compliance with any other statutory notice
(in this case the notice under s. 22 ( 2)). The appellate tribunal
dismissed the appeals filed by the assessee upholding the view of
the departmental authoriti.~s.
On the tribunal having declined to refer the questions of law
which were sought to be referred the High Court directed the Tribunal to state a case and refer the following questions of law :
"Whether the Income Tax Offic.~r having recorded
a finding that there was sufficient cause for non-compliance with the notice issued under Section 22 ( 4), was
not bound to cancel the asse~sment made under Sec.
23 ( 4) and to proceed to malre a fresh assessment ev.~n
though there was no sufficient cause for .iion-compliance
with the notice under Sec. 22(2) ?"
354
SUPREME COURT.REPORTS
( 1971] l S.C.R.
The High Court ahswered the quesuon in favour of the assessee.
Section 27 of the Act is in the following terms :
S. 27. "Cancellation of assessment when cause is
shown.-Where an as~.essee within one month from the
service of a notice of demand issued as hereinafter provided, satisfies the Income Tax Officer that he was pre-·
vented by sufficient cause from making the return required by section 22, or that he did not receive the notice
issued under sub-section ( 4) of section 22, or sub-section
(2) of~ion 23, or that he had not a reasonable
cpportunity to comply, or wa~ prevented by sufficient
cause from complying with· the terms of the last mentioned notices, the Income Tax Officer shall cancel the
assessment and proceed to. make a fresh assessment in
accordance with the provisions of section 2 3."
Section 22 provides for return of income. Sub-section (1) relates
to a general notice to be given each year by the Income Tax Officer
lzy publication in the press or in the
pres~ribed manner. Subsection (2) relates to an individual notice.
According to sub-s.
A
c
D
( 4) the Income Tax Officer· may serve on any person who has
made a return under sub-s. ( 1) or upon whom a notice has been
served under sub-s. (2) a notice requiring him on a date to be .E
specified to produce or cause to be produced such account or documents as the Income Tax Officer may require or to furnish in writing and verified in the prescribed manner in such form and on
such points or matters as may be required for the purpose of thesection including, with the previous approval of the Commissioner,
a staiement of assets and liabilities not included in the accounts.
Under s. 23 if the Income tax Officer is satisfied without requiri:rg
the presence of the assessee or the production by him of any evidence that a return made under s. 22 is correct and complete he
has to assess the total income of the asses see ..on the basis of thereturn filed by him [sub. s. ( 1) ]. If he is not so satisfied he-must
serve a notice requiring the person who has made the return toattend ,at his office or to produce or cause to be produ(:ed any evidence on which such person may /rely in support of his return
[sub. s. (2)]. Under sub-s. (3) the Income tax Officer after hear·
ing snch evidence as may be produced by the person making theret(lm in response to the notice issued under sub-s. (2) or such·
other evidence as the Income tax Officer may require to be produced on specified points has to assess the total income of the1Ssessee.
It is provided by sub-s. ( 4) :
''If a11y person fails to make the return required by
any notice given under sub-section (2) of section 22 and
F
G
H
A
B
c
D
E
'
G
H
c.I.T. v. s. B. SETTY (Grover, J.)
·has not maae a return or a revised return under subsection ( 3) of the same section or falls to comply with
all the terms of a notice issued under sub-section ( 4) of
the same section or, having made a return, fails to comply with all the terms of a notice issued under sub-section
( 2) of this section, the Income Tax Officer shall make
the assessment to the best of his judgment and determine
the sum payable by the assess.ee on the basis of such
assessment ........ "
355,
Ttie High Court considered that the provisions of s. 27 were
not cumulative but disjunctive and so the assessee cobld claim
cancellation of the assessment on one of the grounds on · which
such. cancellation could be sought under the section. According
to the High Court it followed that even if there was no sufficient
cause for non-compiiance with a notice issued under s. 22 (2) so
long as there was sufficient reason for non-compliance with the
notice issued under s. 22 ( 4) the assessee could. ask for the cancel- ·
lation of the assessment.
In our judgment the view of the High
Court cannot be sustained. The clear import of s. 23 ( 4) is that
on committing any one of the defaults mentione.d therein the In·
come tax Officer is bound to make .the assessment to the best of
his judgment.
In other words if a persollJails to make the return
required by a notice under s. 22 (2) and he has further not made
a return or a revised return under sub-s. ( 3) of the same section
the Income tax Officer must make an assessment under section
23 ( 4 ). Similarly if that iJerson fails to comply with all the terms
of the notice issued under s. 22 ( 4) or if he fails• to comply with an ·
the terms of the notice issued under s. 23(3) the Income tax
Officer must proceed to make an assessment to the best of his
judgment. Section 27 emi)owers the Incoine tax Officer to cancel
the assessment when sufficient cause is shown but .such cause .has
to be shown for each default. For the sake of illustration, if an
assessee makes a default under .s .. 22(2) by not filing a return
pursuant to a notice received under that sect,ion and he also does
not comply with the notice under s. 22(4) he must show sufficient
cause for non-compliance with both the proviSions and he cannot
ge; the assessment cancelled merely by showing good cause for
one of the two defaults.
Alth!Jugh the word "or" which is disjunctive is used In section 27 it has to be read in a reasonable and
harmonious wav and in conjunction withs. 23.(4). It is· incon-.
ceivable that the legislature coQld ever intended that in• aise of
multip
1.~ defaults for each one of which an ex-parte. best judgment
assessment has to be made the assessee can ask for cancellation of
the assessment 'Jy merely showin,I! cause for one of such defaults.
In our opinion the Bombay High Court in Chiranjilal Tibrewala v
356
SUPREME COURT REPORTS
[ 1971] l S.C.R.
·The Commissioner of Income tax, Bombay City ll( 1) was right in
. holding that in circumstances similar to the present case the
. assessee cannot ask for cancellation under s. 27 of an asse>sment
made under s. 23 ( 4). In this view of the matter the judgment of
the High Court has to be set aside, and the question has to be
.answered against the assessee and in favour of the appellant.
The appenls are accordingly allowed with costs.
On.~ hearing
fee.
V.P.S.
Appeals allowed.
(I) 591.T.R. 42.
A
ll