# St.:PRElllE corRT REPORTS [196i J R. S. A. C. KASI I YER v. THE COMMISSIONER OF l:\"CO:\IE-TAX, MYSORE, TRAVANCORE-COCHI~ AND COORG, BANGALORE

- **Citation:** [1961] 1 S.C.R. 466
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Bench:** S. K. Das, M. Hidayatullah, K. c. DAS GUPTA, J. c. SHAH, K. l{AJAGOPALA AYYANGAR
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/st-prellle-corrt-reports-196i-j-r-s-a-c-kasi-i-yer-v-the-commissioner-of-l-co-2180
- **Pages:** 9

## Headnote

Income-tax-Merger of Travancore-Cochin State with Indian
Union-Government of I11dia's pw:er to direct assessment or reassessme11t proceedi!lgs-Trava11core Income-lax I<egulatio11 VII I of
1096 M. E.-Travancorc Taxation on ltzcome (Investigation Commission) Act, II24 M. E. s. 8, sub-ss. (2), (4), (5), (6i-Opium and
RevenuelLa!l's (Extension of Application) Act (33 of r950), ss. 2, 3,
3(c).
The State of Travancore-Cochin merged with Indian Cuion
on March 7, r949, but the Travancore Income-tax Regulation,
VIII of rog6 (Malayalam Era) and the Travancore Taxathn on
Income (Investigation Commission) Act, 1124 (Malayalam Era),
continued to apply to that area not withstanding the merger.
On August 6, r949, the Travancore-Cochin Government
passed an order referring the case of the appellants to the commission conf:itituted under the 'fravancore ·raxation on Income
(Investigation Commission) Act, u24
~I. E.
The investigation
commission held by its report that the appellants had made a
secret profit in the accounting year 1u8 M. E., which was not
included in the income-tax return submitted by the appellants
earlier. The Travancore-Cochifl Government accepted the report and directed recovery of the tax due by its order dated
February 14, r950.
The Income-tax Officer without holding any
fresh assessment pro<:cedings, issued a demand notice.
The Cnion Legislature enacted the Opium and Revenue
Laws (Extension of Application) Act (33 of r950) providing for
extension of certain opium and revenue laws to certain parts of
India.
In exercise of the authority under s. 8(2) of the said
Travancore Investigation Act, read withs. 3, cl. (c), of the Opium
and Revenue Laws (Extensi6n of Application) Act, the Go\•ernment of India, on Octoucr 25, 1951, directed that appropriate
assessn1ent proce:edings under the ·rravancore Income-tax Act
be taken agamst the appellants with a view to as.0ess or reassess the concealed income which ha<l escaped assessment. ·rhe
Commissioner of Income-tax withdrew the earlier notice of
demand and thereafter the Income-tax Officer after reassessment proceedings directed the appellants to pay income-tax and
super-tax on the concea1ed income.
The said orders of the Government of India and of the
1 S.C.R .. SUPREME COURT REPORTS
467
Income-tax Officer were questioned by the appellants and the
zgoo
matter was referred by the Commissioner of Income-tax to .the
High Court. The High Court held that the orders in question
R. s. A. c.
were valid orders. The appellant appealed with Special leave.
Kasi Iyer
Held, that the Government of India had the powers under ·
v. . .
s .. 3(c) of the Opium and Revenue Laws (Extension of Applica-The Commissioner
tion) Act, 1950, to direct proceedings for assessment or reassess01 lHconie-tax,
ment ·nuder the Travancore Income-tax Regulation after Myso'" T~avan
consideration of the report made by the Travancore Investigacore-Cochin &-
tion Commission.
Coorg, Bangalore
The order passed by the Government of India on February
14, 1950, was not inconsistent with the order passed by the
Travancore-Cocbin Government. Liability to pay income-tax
would arise only on an effective order of assessment. No such
order having been passed by the Income-tax Officer in the
instant case, there could be no doubt as to the competency of
the· Government of India to direct proceedings for assessment.
There is nothing in s. 8(2) of the Travancore Taxation on Income
(Investigation Commission) Act which states that action may be
taken thereunder only once, and if an unauthorised direction is
given thereunder there is nothing which prevents rectification
of that order.
By sub-s. (4) of s. 8 of the Travancore Taxation on Income
(Investigation Commission) Act the findings by the Investigation
Commission are final in all assessment or reassessment proceedings. Section 8(2) of the Act removed the bar of limitation
which arose bys. 25 of the Income-tax Act. Consequently, it
was competent to the Income-tax Officer to reopen the asse

## Text

September r.
466
St.:PRElllE corRT REPORTS
[196i J
R. S. A. C. KASI I YER
v.
THE COMMISSIONER OF l:\"CO:\IE-TAX,
MYSORE, TRAVANCORE-COCHI~
AND COORG, BANGALORE.
(S. K. DAS, M. HIDAYATULLAH, K. c. DAS GUPTA,
J. c. SHAH AND K. l{AJAGOPALA AYYANGAR, JJ.)
Income-tax-Merger of Travancore-Cochin State with Indian
Union-Government of I11dia's pw:er to direct assessment or reassessme11t proceedi!lgs-Trava11core Income-lax I<egulatio11 VII I of
1096 M. E.-Travancorc Taxation on ltzcome (Investigation Commission) Act, II24 M. E. s. 8, sub-ss. (2), (4), (5), (6i-Opium and
RevenuelLa!l's (Extension of Application) Act (33 of r950), ss. 2, 3,
3(c).
The State of Travancore-Cochin merged with Indian Cuion
on March 7, r949, but the Travancore Income-tax Regulation,
VIII of rog6 (Malayalam Era) and the Travancore Taxathn on
Income (Investigation Commission) Act, 1124 (Malayalam Era),
continued to apply to that area not withstanding the merger.
On August 6, r949, the Travancore-Cochin Government
passed an order referring the case of the appellants to the commission conf:itituted under the 'fravancore ·raxation on Income
(Investigation Commission) Act, u24
~I. E.
The investigation
commission held by its report that the appellants had made a
secret profit in the accounting year 1u8 M. E., which was not
included in the income-tax return submitted by the appellants
earlier. The Travancore-Cochifl Government accepted the report and directed recovery of the tax due by its order dated
February 14, r950.
The Income-tax Officer without holding any
fresh assessment pro<:cedings, issued a demand notice.
The Cnion Legislature enacted the Opium and Revenue
Laws (Extension of Application) Act (33 of r950) providing for
extension of certain opium and revenue laws to certain parts of
India.
In exercise of the authority under s. 8(2) of the said
Travancore Investigation Act, read withs. 3, cl. (c), of the Opium
and Revenue Laws (Extensi6n of Application) Act, the Go\•ernment of India, on Octoucr 25, 1951, directed that appropriate
assessn1ent proce:edings under the ·rravancore Income-tax Act
be taken agamst the appellants with a view to as.0ess or reassess the concealed income which ha<l escaped assessment. ·rhe
Commissioner of Income-tax withdrew the earlier notice of
demand and thereafter the Income-tax Officer after reassessment proceedings directed the appellants to pay income-tax and
super-tax on the concea1ed income.
The said orders of the Government of India and of the
1 S.C.R .. SUPREME COURT REPORTS
467
Income-tax Officer were questioned by the appellants and the
zgoo
matter was referred by the Commissioner of Income-tax to .the
High Court. The High Court held that the orders in question
R. s. A. c.
were valid orders. The appellant appealed with Special leave.
Kasi Iyer
Held, that the Government of India had the powers under ·
v. . .
s .. 3(c) of the Opium and Revenue Laws (Extension of Applica-The Commissioner
tion) Act, 1950, to direct proceedings for assessment or reassess01 lHconie-tax,
ment ·nuder the Travancore Income-tax Regulation after Myso'" T~avan
consideration of the report made by the Travancore Investigacore-Cochin &-
tion Commission.
Coorg, Bangalore
The order passed by the Government of India on February
14, 1950, was not inconsistent with the order passed by the
Travancore-Cocbin Government. Liability to pay income-tax
would arise only on an effective order of assessment. No such
order having been passed by the Income-tax Officer in the
instant case, there could be no doubt as to the competency of
the· Government of India to direct proceedings for assessment.
There is nothing in s. 8(2) of the Travancore Taxation on Income
(Investigation Commission) Act which states that action may be
taken thereunder only once, and if an unauthorised direction is
given thereunder there is nothing which prevents rectification
of that order.
By sub-s. (4) of s. 8 of the Travancore Taxation on Income
(Investigation Commission) Act the findings by the Investigation
Commission are final in all assessment or reassessment proceedings. Section 8(2) of the Act removed the bar of limitation
which arose bys. 25 of the Income-tax Act. Consequently, it
was competent to the Income-tax Officer to reopen the assessment
proceedings notwithstanding any lapse of time and the previous
order of assessinent did not operate as a bar to such reassessment.
C1v1L APPELLATE
JURISDICTION: Civil
Appeal
No. 304/56.
Appeal by special leave from the judgment and
order dated.July 19, 1954, of the former TravancoreCochin High Court in Income-tax Reference No. 5 of
1952.
A. V. Viswanatha Sastri, R. Ganapathy Iyer and
G. Gopalakrishnan, for the appellant.
, K. N. Rajagopal Sastri and D. Gupta, for the
respondent.
1960. September 1. The Judgment of the Court
was delivered by
SHAH J.-The Commissioner of Income Tax for
Mysore, Travanoore Cochin and Coorg at Bangalore
6o
•
-Shah].
468
SUPREME COURT REPORTS
[1961)
z96o
referred under s. 8(5) of the Travancore Taxation on
Income (Investigation Commission) Act, 1124 (Mala-
~.:; ~Y;;
ya.lam Era.)-hereinafter referred to as the Investiga.-
v.
tion Act read withs. 113 of tho Travancore Income
Tlit Commissionu Tax Regulation, 1096 (lllalayalam Era.)-hereina.fter
of Incom•-t•x. _ referr~d to as the Income Tax Act, the following quesMysm, T'.aian- tions to the High Court of Travancore-Cochin:
Ccon-CBochsn 1"°
( l) Whether on the facts and in the circumstances
oorg,
anga ore
f h
h
'd
b ,.
l
_
o t e case, t ere was any evt once
e.ore t ie comShah J.
mission to come to the conclusion to which it ca.me in
its report?
.(2) On the facts and in the circumstances of the
case was. the order C. :No. 76 (1)
I.T/51 dated
25-10-1951 of the Government of India. passed under
the provisions of s. 8(2) of the Tra.va.ncore Taxation
on Income (Investigation Commission) Act read with
s. 3 of the Opium and Revenue Laws (Extension of
Application) Act of 1950, a. legal and valid order?
(3) Whether on the facts and in the circumstances
of the case, the order passed by the Income Tax Officer in pursuance of the directions of the Government
under.a. 8(2) of the Tra.vancore Taxation on Income
(Investigation Commission) Act, 1124, was a legal and
valid order ?
The High Court answered the three questions in
the affirmative. Against the order of the High Court
answering the reference, this appeal has been preferred with special leave.
The facts which gave rise to the reference a.re briefly
, these. The appellants are a firm of merchants carrying
on business in yarn in the Districts of Triva.ndrum and
Na.gercoil in the Tra.va.ncore-Cochin State. For the
accounting year 11181\1. E. (August 17, 1942 to August
16, 1943), the a.ppella.nts submitted a. return under the
Income Tax Act showing a. net return of Rs. 4, 78,5945-0 as assessable income, and they were assessed to income.tax and super tax by the Income Tax Officer on
that return. In 1124 M. E., the Legislature of Tra.va.ncore enacted the Investigation Act conferring authority
upon the Government Qf Tra.vancore to cons~itut~ a.
commission to be ca.lied an Income Tax In vestige. hon
Commission to investigate and report on all matters
!
1 S.C.R. SUPREME COURT REPORTS
469
relating to taxation on income, with particular referI960
ence to the extent to which the existing law relating
1
R. S. A. C.
to, and procedure for, the assessment and col ection
I<asi Iyer
of such taxation . was inadequate to prevent evasion
v"
thereof and to investigate in accordance with the pro- The Commissioner
visions of the Act in oases referred on or before Feb0! Income-tax,
,
d
Th' G
Mysore, Travanruary 16, 1950, to 1t un er s. 5.
e overnment was
core-Cochin &
authorised after consideration of the report to direct coorg, Bangalore
that proceedings be taken under the various Acts
-
·
including the Income Tax Act, in respect of any period
Shah J.
commencing after August·l6, 1939. By sub-s. (4) of
s. 8, all assessment or reassessment proceedings taken
in pursuance of the direction under sub-s. (2), the findings recorded by the Commis8ion on the case or on the
points refe.rred to it were, subject to the provisions of
sub-ss. (5) and (6) to be final. Sub-section (5) of s. 8
provided for a reference to the High Court on any
question of law arising out of any order made by the
Commission.
The State of Travancore-Cochin merged with the
Indian Union on March 7, 1949, but the Income Tax
Act anc;l the Investigation Act continued to apply to
that area notwithstanding the merger. On August 6,
1949, the Government of Travancore.Cochin passed
an order referring the case of the appellants to the
Commission for investigation and report urider s. 5 of
the Investigation Act. On the evidence led before it,
the Commission held by its report dated February 1,
1950, that the appellants had in the accounting year
1118 M. E. made a secret profit of Rs. 1,31,750 which
was not included in the earlier assessment. The Commission th•m proceeded to compute the tax payable by
the appellants and found that the amount of tax pay·
able by the appellants on their true income was
Rs. 1,35,736-8-0 and that they were liable to pay that
amount subject to credit for the tax already paid.
The Government of Travancore-Cochin by ord\ir dated
February 14, 1950, accepted the report of th.e Commission and directed that .immediate sj;aps be taken to
recover, under the Income Tax Act, from the appellants the tax due according to the findings recorded by
the Commission.
Pursuant to this direction, the
470
SCPRE~IE COCRT HEPORTS
[I96l]
r96o
Income Tax Officer, without holding any fresh assessment proceedings, issued on March 15, 1950, a demand
R. s. A. c.
.
d
2
f h
I
'I
h
Kasi Iya
notice un er s. 4
o t e
ncome
'ax Act for t c
v.
additional tax imposed on the appellants according
The Comm'"'°"" to the findings of the Commission and called upon the
of Inco•'."''"'· appellants to pay Rs. 13,337-13-0 as additional tax.
JJysorcr, ;'""'.,"' The Union Legislature enacted on April 17, 1950, the
core0
' "" ~ 0 ·
d R
1·
(E t
·
f A
1 ·
. )
Coorg, Ba>1galu"
pmm an
evenue ,aws
x ens10n o
pp 1ca.t1un
__
Act providing for the extenRion of certain opium and
Shat. ;.
revenue laws to certain part8 of India. By s. 2 of that
Act, amongst others, the Taxation on Income (Investigation Commission) Act, XX X of 1947 (enacted by
the Central Legislature) and all rules and orders made
thereunder which were in force immediately before
the commencement of Act XXX of 1950, were extended to the rest of India except the State of Jammu and
Kashmir, but bys. 3, in so far as it is material, it was
provided that,
" If immediately before the commencement of this
Act there is in force in any part B State other than
Jammu and Kashmir any law (xx xx) corresponding
to the Taxation on Income (Investigation Commission) Act., 1947 (XXX of 1947), that law shall continue to remain in force with the following modifications,
(a) all cases reforrerl to or pending before the
State Commission (by whatev1•r name called) in respect of matter~ relating to taxation on income other
than agricultural income, shall stand transferred to
the Central Commission for disposal:
Provided ..................................................... .
(b) .............................................................. .
(bb) ........................................................... ..
(c) Any rcferenc" i11 the State law, by whatever
form of words, to the State Governm1mt or tho State
Commission shall, in relation to income other than
a<>ricultiiral income, be construed as a reference to the
C~ntral Government or the Central Commission, as
the ca.so may ho;".
Purporting to exercise authority under s. 8(2) of the
Investigation Act read with s. 3, cl. (c), of the Opium
and Revenue Laws (Extension of Application) Act,
1 S.C.R. SUPREME COURT REPORTS
471
1950, the Government of India, on October 25, 1951,
'9 60
directed that appropriate assessment
proceedings
under the Income Tax Act be taken against the appel-
~i;;; Aiy:;
!ants with a view to assess or reasses the concealed
v.
income of Rs. i,31,750 which had escaped assessment. The Commissioner
On January 1 1952 the Commissioner of Income Tax
0! Income-tax,
withdrew the 'not. ic; of demand dated March 15, 1950, Mysore''
1
1
'
00
~'.'-
d h
,
core- oc 1·tn
<.'..>"'
an
t ereafter the Income Tax Ofhcer commenced Coorg, Bangalore
reassessment proceedings against the appellants and
__
by his order dated March 29, 1952, directed the appelShah J.
!ants to pay income-tax and super tax on the concealed income.
At the instance of the appellants, a reference was
made to the High Court of Tra van core-Cochin under
s. 8(5) of the Investigation Act and the three questions
set out hereinbefore were referred to that court. In
the view of the High Court, there was evidence on
which the Commission could arrive at the conclusion
recorded by it. Evidently, the High Court was incompetent, in answering the question, to enter upon a
review of the evidence in exercise of its advisory
jurisdiction ; and Mr. Viswanatha Sastri on behalf of
the appellants has fairly not attempted to _challenge
the answer recorded by the High Court on the first
question.
The Government of India had, on a consideration of
the report of the Commission, directed on October 25,
1951, that assessment proceedings be started against
the appellants. Section 8(2) of the Investigation Act,
in so far as it is material, reads as follows :
" After considering the report, our Govemment
shall by order in writing direct that such proceedings
as they think fit under the Travancore Income Tax
Act, VIII of 1096 ...... shall be taken against the person
to whose case the report relates in respect of the
income of any period commencing after the last day
of Karkadagom, 1124 (August 16, 1939) and upon
such a direction being given, such proceedings may be
taken and completed under the appropriate law notwithstanding the restrictions contained in s. 25 of the
Travancore Income Tax Act, VIII of 1960 ...... and
notwithstanding any lapse of time or any decision to
'
472
SUPREi\IE COURT REPORTS
[1961]
r96o
a different effect given in the case by any Income Tax
authority or Income Tax Appellate Tribunal".
R. S. A. C.
Kasi Iy"
By s. 3 of the Opium and Revenue Laws (Ext~nsion of
v.
Application) Act, XXXIII of 1950, the Investigation
The {:<>•1>•11ssio"" Act continued to remain in force with the modification
01 Income·tax, that reference in the State law to the State GovernMys°'c'·
1
h·rnv~•- ment was in relation to income other than agricultural
coreoc ui ,,,..
.
Cooeg, Ban•aloee income, to be construed as a reference to the Central
0
Government. Whatever authority could be exercised
Shah J.
bv the Travancore-Cochin Goverument before the
e;1aetment of the Opium and Hevenue Laws (Extension of Application) Act, 1950, could therefore,
since the application of that Act, be exercised by the
Central Government, and the latter Government could
direct in respect of a case that proceedings for reassessment be commenced against a tax payer. The case of
the appellants was referred to the Investigation Commission by the Travancore-Cochin Government and
report was made to that Government by the Commission, and the authority of the Government of Travancore.Cochin to take action on the report having been
conferred upon the Central Government by s. 3(c) of
the Opium and Hcvenue Laws (Extension of Application) Act, the Central Government was prima facie
competent to direct that proceedings under the Income
-
Tax Act as may be justifiable be tak.-11 against the
appellants.
But .M.r. Viswanatha Sastri appearing on
behalf of the appellants contests that view on two
grounds:
(1) that the Central Government ma.y direct proceedings to be taken under the Income Tax Act only
if the report wa.s ma.do by a commission appointed
under the Taxation on Incomo (Investigation Commission) Act, XXX of 1947, and not on a rerort ma.de
by a commission appointed by tho Travancore-Cochin
State under the Investigation Act, and
(/!) that the Travancore-Cochin Government having
once ta.ken action directing recovery of the tax due, it
was not competent to the Central Government under
s. 8(2) of the Investigation Act again to take any
action on the report.
1 S.C.R. SUPREME COURT REPORTS
473
In our view, there is no force in either of these conr960
tentions. The expression "the report " in s. 8(2) refers
to the report made under s. 8(1) by the members of
~;.:;AI;.~;
the Commission appointed by the Travancore·Cochin
v.
Government under the Investigation Act and on a Tile Commissioner
consideration of that report, the Government of' India
0! Income-tax,
has· since the enactment of the Opium and Revenue Mysore, TravanL ' (E
·
f A
l"
· ) A t 1950
t
core-Cochin 6aWS.
xtens10n 0
pp 1cat1on
C ,
, power
·O Coorg Bangalore
direct that proceedings for assessment or re.assessment
· __
he taken under the Income Tax Act.
On the plain
Shah J.
language used by the Legislature in s. 3( c) of the
Opium and Revenue Laws (Extension of Application)
Act, 1950, the contention raised on behalf of the appellants is unsustainable.
By order dated February 14, 1950, the Government.
of Travancore-Cochin had accepted the report of the
Commission and had directed the Boa.rd of Revenue
to take necessary action for reeovery of the amount of
tax due from the appellants, and pursuant to that
direction, without holding proceedings for assessment
or reassessment, a demand notice was issued by the
Income Tax Officer. The order passed by the Government of India on October 25, 1951, is not in any way
inconsistent with the order dated :February 14, 1950.
Both the orders direct that steps be taken for recovery
of the amount of income tax due from.the appellants.
But, if as appears evident from s. 8(4) of the Investigation Act, liability to pay income-tax could arise only
on an effective order of assessment, the Income Tax
Officer not having assessed the income before the
demand notice was issued, the Government of India
was, in our judgment, competent to direct that proceedings be ta.ken for assessing the liability of the
appellants to pay tax consistently with the provisions
of the Income Tax Act. The order passed by the
Government of India on October 25, 1951, may therefore be regarded as effectuating the earlier order passed
by the Travancore-Cochin Government on February
14, 1!)50. In any event, there is nothing in s. 8(2)
which justifies the contention that action may be
taken thereunder only .once.
If an unauthorised
4i4
8UPRE:\fE COURT REPORTS
[ 1961]
i96o
direction is given under s. 8(2), there is not.bing in that
provision which prevents rectification of that ordn.
~(;~, ~>~~
By sub-s. (4) of s. 8 of the ln\'cstiga.tion Act, the
"·
findi11gH recorded by the Commission in cases or points
Thr Cnmmi"''"" referred t-0 theri1 are macle final in all aRsessment or
0/ /llcowHo·., reassessment proceedings. The Act has, by sub-s. (2) of
"1-'"".'· Jrnvau- s. 8 remored.the bar of limitation which arose by
CO>t·Corh•• &
2
f I I
T
A
1
I
•
c00 , 1., nangalvi(' ~.
5 o t le ncorue
~~ ct. twas con1petcnt t- icre0
... _
fore to the Income I ax Officer to reopen the assess.
"""" 1.
ment proceedings not w ithslll.nding any lapse of time
and the prev ions order of assessment did not opPrate
as a bar to such reassessment.
The High Court was
therefore in our judgment right in recording its
answers on the three questions submitted by the Commissioner of Income Tax. In that view, the appPal
fails and is dismissed with costs.
Appeal dismissed.
THE BHOPAL SUGAI{ INDUSTRIE8 LTD.
v.
THE J'.'iCOME-TAX. OFFICEH, BHOPAL
(8. K. DAS, j\f. HIDAYATULLAH, K. c. DAS GUPTA,
J. c. SHAil ANO N. RAJAOOPALA AYYANOAR, J.J.)
[)irrcfion.< by superior Tribtmals-If could be refused lo be
carried 011t-J>ri11ci'plrs (if adn1inistrafion of justice.
The Income-tax Appellate Tribunal in the exercise of its
appellate jurisdiction gave certain directions to the respo1•dent.
an Income-tax Officer, in connection \\'ith the ascertainment of
the market value of sugarcane grown by the appellant at their
farm and use<l by them for the manufacture of sugar. Th~ appellant asked the Income-tax Officer to give effect to the said order
and directions of the Tribunal but was informed that no relief
coul<l be given. Thus the Income-tax Officer failed to carry out
the directions of the Tribunal.
Held, that the refusal to carry out the directions which a
superior Tribunal had given in exercise of its appellate powers
was in effect a denial of justice and was furthermore destructive