# COMMISSIONER OF INCOME TAX, U.P v. GURBUX RAI HARBUX RAI

- **Citation:** [1972] 1 S.C.R. 357
- **Court:** Supreme Court of India
- **Decided:** 1971-08-24
- **Case number:** Civil Appeals Nos. 1225 and 1226 of 1967
- **Bench:** K. S. Hegde, Rover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-income-tax-u-p-v-gurbux-rai-harbux-rai-5363
- **Pages:** 11

## Headnote

Excess Profits T~x Act, 1940, ss. JOA and J5-Scope of.
357
"-
Section 10~ of the 'Excess Profits Act, 1940, deals \vi th
transactiOns _
deyigned to avoid or reduce liability to excess profits tax and
emgN-.vcrs
the .Excess Profits Tax Officer to n1ake appropriate adjustments as respects
liability t~xcess profits tax.
But before any action can be taken uJ?,Qer
, the section, there should be pending a proceeding for assessment or reassessment of excess- Profits tax. Under s. 15, if in consequence of definite
jnformation .\Vhich has come into his possession,~ the Excess Profits Tax
OffiCer discovers that the profits of any chargCable accounting "period have
escaped assessment, he Q1ay serve a notice on the as!'essee and proceed to
assess the profits liable to excess profits tax.
_ ""' __
Jn the present case, the Appellate Assistant Commissioner, in appeal
from the Income-tax Officer order, stated that there was a partial partition
in the family of one of the partners of the a'ssessee.
On the basis of that
order, the Excess Profits Tax Officer started proceedings under s. lOA. He
issued notices to the assessee under both' ss. 15 and lOA on the same day,
but the notice under s. 15 was ordered to be issued first.
After considering the reply of the assessee the Excess Profits Tax Officer passed an
order under s. 15 moOifying· the original assessment.
On the questions :
( J) whether the Excess Profits Tax Officer was
competent to apply the provisions of s. 1 OA- and n1ake the re\.ised assessment under s. 15, and (2) whether there was ·any definite inforn1ation by
virtue of which the Excess Profits Tax Officer was competent to re-open the
original assessment.
HELD :
( 1) Though the notices under ss. 15 and !OA were issued
on the same date, the requirement.:; of la\V were satisfied,
because, the
Excess Profits Tax Officer had initiated pro:cedings under s.
15,
before
issuing notice under s. lOA by ordering the notice under s. 15 to be issued
first.
The asscssee also did not take any
objection in his
reply to
the
notice under s. lOA· that the notice under s. 15 had not been issued before
the notice under s. JOA was issued. p65 F; 366 B-CJ
(2) The information... wttich came into the
possession of the Excess
Profits Tax Officer of partial -partition having been effected was relevant
for th:! purpose o[ s. 15 and once he had initiated proceedings under that
section, he \\'as competent~~nd had jurisdiction to examine for the purpose
of s. lOA 'vhether partial partition had been
effected for· avoidance or
reduction of liability to excess profits. [367 B-C]
(a) The Appellate Assistant Commissloncr in the proceedings relating
to the assessn1cnt of income tax of the asscssce had stated the fact of
partial partition which waS certainly infonnation
whiah came into
the
possession of the Excess Profits Tax Officer.
It \vas information received·
fron1 the decision of superior authorities and not a mere change of opinion
by himself. [3 66 F-GJ
358
SUPREME COURT REPORTS
[ l 9 721 I S.C.R.
(b) lbe proceedings before the Appellate Assistant
Commissioner
related only to assessment of income tax. Therefore, it could not be said,
that because he did not consider whether the object of the partition was
to reduce liability to excess profits, there was no escapement for purposes
of excess profits tax. [367 Al
Bansilal v. C./. T., M.P., 70 I.T.R. 74 (S. C.) and Asm. Controller
of Estates Duty, Hyderabad v. H.E.H. Nizam of Hyderabad, 72 I. T.R.
376(S.C. I, applied.

## Text

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COMMISSIONER OF INCOME TAX, U.P.
v.
GURBUX RAI HARBUX RAI
August 24, 1971
(K. S. HEGDE AND A. N. 0,ROVER, JJ.J
Excess Profits T~x Act, 1940, ss. JOA and J5-Scope of.
357
"-
Section 10~ of the 'Excess Profits Act, 1940, deals \vi th
transactiOns _
deyigned to avoid or reduce liability to excess profits tax and
emgN-.vcrs
the .Excess Profits Tax Officer to n1ake appropriate adjustments as respects
liability t~xcess profits tax.
But before any action can be taken uJ?,Qer
, the section, there should be pending a proceeding for assessment or reassessment of excess- Profits tax. Under s. 15, if in consequence of definite
jnformation .\Vhich has come into his possession,~ the Excess Profits Tax
OffiCer discovers that the profits of any chargCable accounting "period have
escaped assessment, he Q1ay serve a notice on the as!'essee and proceed to
assess the profits liable to excess profits tax.
_ ""' __
Jn the present case, the Appellate Assistant Commissioner, in appeal
from the Income-tax Officer order, stated that there was a partial partition
in the family of one of the partners of the a'ssessee.
On the basis of that
order, the Excess Profits Tax Officer started proceedings under s. lOA. He
issued notices to the assessee under both' ss. 15 and lOA on the same day,
but the notice under s. 15 was ordered to be issued first.
After considering the reply of the assessee the Excess Profits Tax Officer passed an
order under s. 15 moOifying· the original assessment.
On the questions :
( J) whether the Excess Profits Tax Officer was
competent to apply the provisions of s. 1 OA- and n1ake the re\.ised assessment under s. 15, and (2) whether there was ·any definite inforn1ation by
virtue of which the Excess Profits Tax Officer was competent to re-open the
original assessment.
HELD :
( 1) Though the notices under ss. 15 and !OA were issued
on the same date, the requirement.:; of la\V were satisfied,
because, the
Excess Profits Tax Officer had initiated pro:cedings under s.
15,
before
issuing notice under s. lOA by ordering the notice under s. 15 to be issued
first.
The asscssee also did not take any
objection in his
reply to
the
notice under s. lOA· that the notice under s. 15 had not been issued before
the notice under s. JOA was issued. p65 F; 366 B-CJ
(2) The information... wttich came into the
possession of the Excess
Profits Tax Officer of partial -partition having been effected was relevant
for th:! purpose o[ s. 15 and once he had initiated proceedings under that
section, he \\'as competent~~nd had jurisdiction to examine for the purpose
of s. lOA 'vhether partial partition had been
effected for· avoidance or
reduction of liability to excess profits. [367 B-C]
(a) The Appellate Assistant Commissloncr in the proceedings relating
to the assessn1cnt of income tax of the asscssce had stated the fact of
partial partition which waS certainly infonnation
whiah came into
the
possession of the Excess Profits Tax Officer.
It \vas information received·
fron1 the decision of superior authorities and not a mere change of opinion
by himself. [3 66 F-GJ
358
SUPREME COURT REPORTS
[ l 9 721 I S.C.R.
(b) lbe proceedings before the Appellate Assistant
Commissioner
related only to assessment of income tax. Therefore, it could not be said,
that because he did not consider whether the object of the partition was
to reduce liability to excess profits, there was no escapement for purposes
of excess profits tax. [367 Al
Bansilal v. C./. T., M.P., 70 I.T.R. 74 (S. C.) and Asm. Controller
of Estates Duty, Hyderabad v. H.E.H. Nizam of Hyderabad, 72 I. T.R.
376(S.C. I, applied.
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1225
and 1226 of 1967.
Appeals from the judgment and decree dated May 22, 1964 of
the Allahabad High Court in Income-tax Reference No. 189 of
A
B
1953.
c
S. T. Desai, R. N. Sachthey and B. D. Sharma, for the appellant (i,n both the appeals).
M. C. Chagla and A. N. Goyal, for the respondent (in both
the appeals).
The Judgment of the Court was delivered by
Shah, C. J.
Gurbux Rai Harbux
Rai-hereinafter called
'the assessee'-is a registered firm carrying on a business in piece
goods and commission agents. It has its head office at Kanpur
and a branch office at Farrukhabad.
During the chargeable
accounting periods July 4, 1943 to June 21, 1944 and June 22,
1944 to July 10, 1945 Gurbux Rai and Harbux Rai (each representing his joint family) were the two partners of the assessees
with equal shares in the profit and loss. In proceedings for assessment of tax under the Excess Profits for Act 1940 for the two
chargeable accounting
periods the assessee
informed the Tax
Officer that the joint family of Gurbux Rai had been dissolved and
there was a reconstitution of the business of the partnership with
, effect from July 4, 1943. According to the assessee the constitution of the firm after partition was that in the firm at Kanpur the
former two partners were interested, their share being equal, but
in the business of the firm at Farrukhabad there were three partners-Harbux Rai with -/8/- share, Chameli Devi with -/4/- share
and Gopaldas with -/4/- share.
In assessing tax under the Indian Income-tax Act, 1922 for
the assessment year 1944-45 relevant to the account year ending
June 21, 1944 the Income-tax Officer held that the case set up by
the assessee that there was partition amongst the members of the
family of Gurbux Rai could not be accepted. In the view of the
Income-tax Officer, an attempt was made "to avoid proper incidence of taxation as an after-thought to create evidence for camouflaging the Farrukhabad business as a separate unit of assessment".
The Income-tax Officer directed that the income be assessed as
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C.I.T. V. GURBUX RA! HARBUX RA! (Shah, C.J.)
359·
the income of the assessee and not as the income of a separate·
firm.
The excess profits tax assessment being consequential upon
the income-tax assessment, the Excess Profits Tax Officer assessed
the entire income of the two businesses
at Kanpur and at
farrukhabad, in the hands of 'the assessee firm.
Against the order passed by the Income Tax Officer the assessee
appealed to the Appellate Assistant Commissioner who by his order·
dated October 10, 1947 observed :
". . . . that partial partition in respect of movable
pruperty of Gurbux Rai v·as effected on a date somewhere near Asadh Samvat '2000, from which date Farrukhabad was conducted by a separate firm consisting
of Harbux Rai, Mst. Chameli and Gopaldas".
Pursuant to this order the Income-tax Offio~r modified the assess-·
ment with resP.ect to the Income-tax assessment of the assessee for
the assessment years 1944-45 and 1945-46. The Excess Profits
Tax Officer however started proceedings under s. 10-A by notice
dated February 6, 1951 calling upon the assessee to show cause
why appropriate adjustments should not be made in the assessment,
and passed orders in that behalf for both the chargeable accounting periods holding that the main purpose of the partial partition
of the family business of Gurbux Rai was avoidance of excess
profits tax liability.
By order dated February 21, 1951 passed
under s. 15 of the Excess Profits Tax Act the Excess Profits Tax
Officer modified the original excess profits tax assessment. In the
revised assessment in pursuance of orders under s. !0-A he included
the income of the branch shop at Farrukhabad in the total income
of the assessee for purposes of excess profits··-tax assessment. The
as~essee appealed against the order of additional assessment contending that the Excess Profits Tax Officer was not competent to
re-open the case under s. 15 as he had no definite information
coming into his possession to enable him to discover that the profits
of the chargeable accounting period had escaped m;~essment. The
assessee contended that all the materials in the case were before
the Excess Profits Tax Officer at the time of his original assessment and no new information came into his possession thereafter.
The assessee also contended that the Excess Profits Tax Officer was
not competent to pass any order under s. 10-A merely to make an
adjustment in ;;1e revised assessment under s. 15. The Income-tax
Appellate Tribunal held that the Excess Profits Tax Officer had
received definite information regarding the state of the. law in pursuance of the appellate order of the Appellate Assistant Commissioner who had held that the family of Gurbux Rai was partially partitioned.
The Tribunal also held that the Excess Profits
Tax Officer was competent to pass an order under s. I 0-A, of the
Excess Profits Tax Act.
360
SUPREME COURT REPORTS
[1972] 1 s.c.R.
The Tribunal thereafter referred the following questions to the
A
High Court of Allahabad under s. 21 of the Excess Profits Act
read with s. 66 ( l) of the Income-tax Act, 1922 :
" ( 1 ) Whether on the facts and in the circumstances
of tqis case there was any definite information
within the meaning of s. 15 by virtue of which
B
the Excess Profits Tax Officer was competent to
re-open the excess profits tax assessments ?
( 2) Whether in the circumstances of this case, the
Excess Profits Tax Officer was
competent to
apply the provisions of s. 10-A and make necessary adjustments in pursuance thereto in the rec
vised assessment under s. 15 ?"
The High Comt of Allahabad held that since the Excess Profits
Tax Oflicer purported to re-open the assessment under s. 15 of
the Excess Profits Tax Act "only because of the order of the Appellate Assistant Commissioner of Income-tax holding that the Farrukhabad business was no longer the business of the assessee and
D
that the family of Gurbux Rai had partitioned its movable property, all of which proceeded upon material which was already
initially before the Excess Profits Tax Officer and to which he had
applied his mind when he made the original assessment, it was not
a case where the Excess Profits Tax Officer can be said to have
discovered", in consequence of definite information which had come
E
into his possession, that profits chargeable to exo~ss profits tax had
escaped assessmenJ.
The High Court accordingly answered the
first question in the negative.
The High Court then observed that if the Excess Profits Tax
Officer was not competent to take proceedings under s. 15 of the
Excess Profits Tax Act, it was not open to him to apply the proF
visions of s. 10 in the proceedings upon re-opening the assessment under s. 15, for, in the view of the High Court an order
under s. IO-A may be passed only where the Excess Profits Tax
Officer is seized of juri'sdiction in a petnding assessment proceeding.
As the proceedings initiated by the Excess
Profits
Tax
Officer under s. 15 were void, he had no power to make an order
G
under s. 10-A of the Act. The High Court accordingly answered
the sccMd question also in the negative.
Against the order passed by the High Court, these two
appeals are preferred.
A parallel proceedin~ which had come before this Courf in
Civil Appeals
Nos. 741-743 of 1966 Gurbu.r Rai Harbux Rai
v. The Commissioner of Income-tax, U.P. decided on AuQust 2,
1968 may also be referred to. It may be recalled that the Excess
H
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C.I.T. v. GURBUX RA! HARBUX RAI (Shah, C.J.)
361
A Profits Tax Officer at Kanpur had served a notice under s. 10-A
of the Excess Profits Tax Act requiring the assessee
to show
cause why appropriate adjustments as respects liability to excess
profits tax should not~e made so as to counteract the avoidance
or reduction of liability to excess profits tax by converting the
business in the name of Pussulal Jangalal-the Farrukhabad firm
B -into a separate business.
The contention of the assessee that
the! disruption of the family was a genuine and bona fide transaction was rejected by the Excess Profits Tax Officer.
The
case was then taken to the Income-tax Appellate Tribunal. The
Tribunal confirmed the order of the Excess Profits Tax Officer.
But at the instance of the assessee the Tribunal referred the fo]-
C lowing question to the High Court of Allahabad :
"Whether on the facts and circumstances of this
case, the tra.nsaction in question was one which could
be avoided under s. 10-A of the Excess Profits Tax
Act?"
D The High Court by order dated July 31, 1969 answered
the
question in the affirmative.
Against the order passed by the
High Court no further proceedings has been taken by the assessee challengi•ng the conclusion •of the High Court and that order
has become final.
E
The High Court has held in the judgment under appeal that
action taken under s. 15 of the Excess Profits Tax Act was not
competent and on that account the Excess Profits Tax Officer
had no: jurisdiction in the matter.
But in the judgment of the
High Court in Income-tax Reference No. 118 of 1962 decided
on July 31, 1969 no question of jurisdiction arose. The Court
had only answered the question whether the 1ransaction of parF
tial partition was one which could be avoided under
s. 10-A
of the Excess Profits Tax Act. The decision of the High Court
(which had become final) about the authority of the Excess Profits
Tax Offio~r to take action taken under s. 10-A does not affect the
maintainability of the present appeal.
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Section 10-A of >the Excess Profits Tax Act, insofar as it i&
relevant, provides :
" ( 1 ) Where the Excess Profits Tax Officer is of
opinion that the main purpose for which any transaction .
. was .
. effected .
was the avoidance or reduction of liability to excess profits tax, he may, .
.
.
make such adjustments as respects liability to excess
profits tax as he considers appropriate so as to counter-
362
SUPREME COURT REPORTS
[I~ 72] I S.C.R.
act the avoidance or reduction of liability
to excess
profits tax which would otherwise be effected by the
transaction .
Section 15, insofar as it is relevant provides :
"If i;n consequence of definite information
which
has come into his possession, the Excess
Profits Tax
Officer discovers that profits of any chargeable accounting period chargeable to excess profits tax have escaped
assessment, or have been under-assessed, or have been
the subject of excessive relief, he may at any time serve
on the person liable to such tax a notice containing
all or any of the requirements which may be included
in a notice under section l 3. and
may
proceed
to
assess or reassess the amount of such profits liable to
excess profi'ts tax .
"
"The High Court in the judgment under appeal held that
proceeding under s. 10-A may be
commenced only if there be a
valid proceeding under the Excess Profits Tax which was pendi,ng for assessment or re-assessment of excess profits which
had
'escaped assessment and not otherwise.
In our opinion the High
Court was right in so holding.
S. 10-A does not contemplate
an i1ndependcnt proceeding.
Section 10-A merely confers power
upon the Excess Profits Tax Officer to make adjustments with
respect to liability to excess profits tax : it confers power which
the Excess Profits Tax Officer may exercise in the course of the
·original assessment or in the course of re-assessment.
It is necessary therefore to determi,ne whether an order was
made under s. 10-A in a pending proceeding for assessment of
Excess Profits tax.
But the question whether there was a pendA
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ing proceeding under s. 15 in the course of which an order unde,r
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s. 10-A could b.e made cannot be ascertained on 1he materials
:available before us.
The High Court had deoided that the proceeding under s. 15 was not valid, because there was no definite
information with the Excess Profits Tax Officer and
on
that
account proceeding under s. I 0-A was not valid.
It has been
·assumed that there was a pending proceeding under s. 15 in the
G
course of which an order under s. I 0-A was made. Expression of
that opinion of the High Court is challenged.
We are of 'the
view that in the interests of justice, it is necessary that a supplementary statement of the case should be called for on the question whether there was a,ny proceeding pending under s. 15. On
the question whether the proceeding under section 15 if pending
was valid, we express no opinion at this stage.
H
We direct the Tribunal to submit a supplemen1ary
statement of the case on the question whether the proceeding under
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C.l.T. v. GURBUX RA! HARBUX RA! (Shah, C.J.)
363
s. 10-A was started in the course of assessment or re-assessment
proceeding commenced under s. 15.
The supplementary statem~nt to be submitted •to this Court within three months from the
date on which the papers reach the Tribunal.
At this stage we
express no opinion on the question whether the High Court wa>
right in holding that the proceeding under s. 15 was not competent.
[The following judgment w.as
delivered aft.~r the Tribunal submitted the supplementary statement as directed.]
GrnYcr, J.
In these appeals this Court by an order dated
C
January 21, 1971 directed the Income tax Appellate Tribunal to
submit a supplementary statement of the case on the question
whether the proceedings under s. I 0-A were started in the course
of assessment or reassessment proceedings commenced under s. 15
of the Excess Profits Tax Act 1940, hereinafter called the "Act".
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The facts set out in the supplementary statement of the case
may be recapitulated. M/ s. Gurbux Rai Harbux Rai hereinafter
referred to as the "assessee" is a registered firm
carrying on
business in piece goods. During the chargeable accounting period
July 4, 1943 to June 21, 1944 and June 22, 1944 to July 10,
1945 Gurbux Rai and Harbux Rai (each representing his joint
family) were the two partners of the ass.~ssee with equal fhares.
In the proceedings for assessment of tax under the Act for the
above two chargeable accounting periods the assessee informed the
Tax Officer that the joint family of Gurbux Rai had been partitioned and there had been a reconstitution of the business of
partnership with effect from July 4, 1943.
According to the
assessee the constitution of the firm after the partition was that
in the firm at Kanpur the former two partners were interested,
their share being equal but in the business
of the
firm
at
Farrukhabad there were three partners, namely, Harbux Rai .with
a share of 8 annas. Mst. Chameli Devi with a share of 4 annas
and Gopal Das with a share of 4 annas.
Jn assessing tax under
the Indian Income Tax Act, 1922 for the assessment year 1944-45
corresponding to the accounting year from October 19, 1942 to
October 7, 1943 the Income Tax Officer held that the partition
set up by Gurbux Rai could not be accepted as the same had been
made to avoid proper incidence of taxation.
He,
therefore,
assessed the income as that of the assessee and not as the income
of a separate firm.
The excess profits tax being consequential
upon the income tax assessment, the Excess Profits Tax Officer
assessed the entire income of the two businesses at Kanpur and
Farrukhabad in the hands of the assessee.
Against the order
passed by the Income Tax Officer in the income tax assessment
364
SUPREME COURT REPORTS
[ l972J I S.C.R.
the assessee appealed to the Assistant Commissioner. On October
A
10, 1947, that Officer held that only partial partition had been
effected in the joint family of Gurbux Rai.
This is what he
held:-
" ...... that partial partition in respect of movable
property of Gurbux Rai was effected on a date someB
where near Asadh Samwat at 2000, from which date
Farrukhabad business was conducted by a separate firm
consisting of Harbux Rai, Mst. Chameli and
Gopal
Das."
The income tax assessments were consequently modified for the
two assessment years 1944-45 and 1945-46. The Excess Profits
C
Tax Officer also started proceedings under s. 10-A of the Act
by serving a notice dated February 3, 1951 on the assessee. The
notice required the assessee to show cause why proper adjustment
should not be made on the footing that the main purpose of the
partial partition of the family of Gurbux Rai was th·~ avoidance of
'the excess profits tax liability. By an order dated February 21, 1951
D
passed under s. 15 of the Act the Excess Profits Tax Officer
modified the original assessment for both the chargeable accounting periods. In the revised assessment he included the income of
the branch shop at Farrukhabad in the total income of the assessee
for the purpose of assessment of Excess Profits tax.
The assessee went up in appeal against the orders of the Excess
Profits Tax Officer to the Appellate
Assistant Commissioner.
These appeals were dismissed. The Appellate Tribunal confirtn&I
the order of the departmental authorities. Thereafter the Tribunal
referred the following two questions of law to the Allahabad High
Court under s. 21 of the Act read with s. 66 ( 1 ) of the Income
Tax Act, 1922.
( 1) "Whether on the facts and in the circumstances
of this case there was any definite information
within the meaning of s. 15 by virtue of which
the Excess Profits Tax Officer was competent to
reopen the excess profits tax assessments ?
(2) Whether in the circumstances of this case, the
Excess P'.~fits Tax Officer was competent to apply
the prov1s10ns of s. 10-A and make necessary
adjustments in pursuance thereto in the revised
assessment under s. 15."
The High Court answered both the questions in the negative.
. Pursuant to ou~ previous order dated January 21, 1971 the
'J'.nbunal has. ~ubm1tted the necessary material to enable us to
give our dec1S1on.
It has stated that the notices under s. 15 of
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365
the Act were issued for boh the chargeable accounting periods
and they were served on the assessee on February
3, 1951.
According to these notices the assessee was called upon to show
cause why provisions of s. lOA of the Act should not be invoked.
The assessee submitted a written reply objecting to the applicability of s. 10-A.
The Excess Profits Tax
Officer
obtained
approval of the Inspecting Assistant Commissioner and passed an
order under s. lOA on February 21, 1951.
According to the
Tribunal the proceedings under s. 15 were pending for both the
chargeable accounting periods when the proceedings under s. lOA
of the Act were started by the Excess Profits Tax Officer. It has
been added th'at the notices under s. 15 and under s. 10 were
issued on the same date, namely, February 3, 1951 but from the
order-sheet it was clear that notice under s. 15 was iswed first
and the notice under s. 1 OA was issued thereafter.
It is abundantly clear from the annexures to the supplementary
statement of the case that on February 3, 1951 the assessee's
counsel and K. S. Kalra and Gurbux Rai were present before the
Excess Profits Tax Officer.
Receipt of a notice alleged to have
been issued under s. 1 OA of the Act previously was denied by
them. The Tax Officer proceeded to record the following order :
"Issue notice u/ s 15 requiring the return to
be
filed within 60 days of the date of service.
Sd. E.P.T.O.
Also issue notice u/ s lOA as per draft.
Sd. E.P.T.O."
The order-sheet further shows that on February 15, 1951 reply
to the notice was received along with the return and it was
F directed that the same be placed on the record.
It is common
ground that no objection was taken in this reply that the notice
under s. 15 had not been issued before the notice under s. l OA
was issued.
Section 15 of the Act provides that if in consequence of
definite information which has come into the possession the Excess
G
Profits Tax Officer he discovers that profits of any chargeable
accounting period have escaped assessment, etc., he may at any
lime serve a notice containing all or any of the requirements which
may be inclucfod in a notice under s. 13 and may proceed to assess
or reassess the amount of such profits liable '10 excess profits tax.
The power so conferred can be exercised in the course of the
H
original assessment or reassessment.
It is essential, according to
the law laid .down by this Court, that before any action can be
taken or an order made under s. 1 OA there should be a proceeding which should be pending for assessment or reassessment of
5-L1340Sup Cl/71
366
SUPREME COURT REPORTS
[1972] l S.C.R.
excess profits tax. In other words in the present case before the
provisions of s. lOA could be applied the Tax Officer was bound
to initiate proceedings under s. 15. According to
what the
Tribunal has said in the supplementary statement of the case the
proceedings under s. J5 had been commenced before action was
taken under s. JOA.
We have already referred to the orders
which were made on February 3, J 951. It is true that the orders
to issue notices under s. J 5 and s. JOA were made at the same
time but the notice under s. 15 was ordered to be issued first.
Thus the Tax Officer had initiated proceedings under s. 15 before
the no1ice was issued under s. JOA and it would be a mere hypertechnicality to say that simply because the notice under s. 15 and
the notice under s. lOA were issued on the same date the requirements of the Jaw were not satisfied. The finding of the Tribunal
also is to the effect, as noticed before, that proceedings under s.
15 were pending when the proceedings under s. JOA were taken.
The second question, therefore, had to be answered against the
assessee and in favour of the Revenue.
On the first question the submission of Mr. M. C. Chagla
for the assessee is that there was no definite information which
had come into possession of the Tax Officer from which it could
be said that he had discovered that profits of the relevant chargeable accounting period had ~scaped assessment.
We are unable
to agree. The Appellate Assistant Commissioner had made an
order on October 10, 1947 in the proceedings relating to
the
assessment of income tax of the assessee that there had been only
a partial partition in respect of the movable property (business)
of Gurbux Rai. That was certainly an information which came
into the possession of the Excess Profits Tax Officer not because
of any change of opinion by himself but because of the decision
of the Appellate Assistant Commissioner in the income tax proceedings. This Court has consistantly held 1that the Income Tax
Officer would have jurisdiction to initiate proceedings under s. 34
(1 )(b) of the Income Tax Act, 1922, which is in pari materia
with s. 15 of the Act if he acted on information received from
the decision of the superior authorities or the court even in the
assessment proceedings. (See R. B. Bansi/al Abirchand Firm v.
Commissioner of Income Tax, M.P.(') and Assistant Controller
of Estate Duty, Hyderabad v. Nawab Sir Osman Ali Khan Bahadur, H.E.H. The Nizam of Hyderabad & Others. (2 ) It has next
been urged that the alleged object of having a partial partition,
namely, of. reducing the liability to excess profits ax had never
been exammed by the Appellate Assistant Commissioner in the
Income tax proceedings and therefore it could :wt be said that
there had been escapement of income as a result of information
(!) 70 !.T.R. 74.
(2) 72 J,T.R.
376
A
B
c
D
E
F
G
H
A
B
•
c
C.I.T. v. GURBUX RA! HARBUX RA! (Shah, C.J.)
367
derived from his order.
The Appellate Assistant Commissionerapparently did not go into that question because the proceedings
before him related to assessment of income tax.
Section lOA
of the Act is a special provision which deals with the transactions
designed to avoid or reduce liability to excess profits tax.
The
information which came into possession of the Excess Profits Tax
Officer of partial partition having been effected was relevant for
the purpose of s. 15 and once he had initiated proceedings under
that section he was perfectly competent and had jurisdiction to.
examine for the purpose of s. lOA whether partial partition had
been effected for avoidance or reduction of liability to excess
profits tax.
The first question, therefore, should
have
been
answered against the assessee and in favour of the Revenue.
The appeals succeed and are allowed with costs. The answers
to both the questions are returned in favour of the Revenue. One
hearing fee.
V.P.S.
Appeals allowed ..