JUDGMENT Mukerji, J.
1. This is a reference under Section 88, Civil Procedure Code, made by a Division Bench of this Court in a matter arising under the Income Tax Act of 1922. Notice was served on Lachhman Das Babu Earn a firm with their headquarters at Cawnpore and branches in other places, under Section 22(2), Income Tax Act, to make a return of their income. After certain proceedings, which it is unnecessary to detail, a combined notice was sent to the firm on 11th August, 1917, in the form known as form B, drafted apparently under the authority of the Board of Revenue but not incorporated in any way in the Income Tax Act. This so-called combined notice purports to be a notice under Section 22(4) and also under Section 23(2) of the Act. The nature of the notice that can be issued under these sections is clear on the face of the sections themselves and we need not detail it.
2. After many postponements and the receipt of many reports and the examination of certain accounts, next on 22nd February, 1928, the Income-tax Officer felt that he had reason to ask for further particulars in regard to the purchase of a house, and issued what we are told was a notice under Section 23(3) asking for particulars in regard to this house. In the statement of the case made by the Income-tax Officer this notice is referred to as having been one under Section 23(2), but that is apparently a misprint, and this notice of 22nd February 1928, was presumably a notice asking for evidence on "specified points" in accordance with Sub-section (3) Section 23. On the same date 22nd February, he issued another notice under Section 22(4) calling for certain Cawnpore headquarters accounts. On 14th March 1928, one Sheo Nath was examined on oath, and this appears, to be the only occasion on which any "evidence" was heard. On 30th March, after certain reports had been received, the Income-tax Officer asked for further accounts. The representative of the firm asked for a further reference to the Calcutta branch, but this was refused as the day, 30th March, was the last day but one for the close of the financial year, and the Income-tax Officer proceeded to a summary assessment, purporting to act under Section 23(4). Upon the assessee appealing to the Assistant Commissioner it was held that no light of appeal owing to the fact that the assessment had been made and properly made under Section 23(4). The assessee thereupon required the income-tax Officer to refer the case to this Court on certain points stated. A number of those points came up for consideration before a Bench of this Court consisting of Mukerji, J., and Niamatullah, J. On one point the learned Judges have differed, and the matter has come up before the present Bench of three Judges on the reference. The point referred to us is stated by the learned Judges as follows:
Has an Income-tax Officer jurisdiction to Issue a notice under Section 22(4) after the commencement of an inquiry under Section 23(3).
3. We have had some difficulty in ascertaining the facts on the basis of which we are asked to decide this question. The following appears in the statement of the Income-tax Officer at p. 3:
The assessees now desire that I should make a reference to the Honourable High Court on the following points of law (Appendix B)(as propounded by them:)
(a) Whether the notice issued under Section 22(4) on 22nd February 1928, was legally valid inasmuch as, it was issued after the commencement of proceedings under Section 23(3), late.
4. It does not appear, however, that we have to consider the effect of the notice on 22nd February, 1928, at all. The notice under Section 22(4), which we have really to consider, is referred to at p. 8 of the Income tax Officer's statement, at para. 20, point 9. It is referred to us as follows:
The assessees clearly failed to comply with the notice under Section 22 (4), issued on 11th August, 1927, calling for the production of their Calcutta accounts. This default justifies the assessment under Section 23(4).
5. The Assistant Commissioner also said in his order dated 15th June, 1928, which is printed as Appendix D to the Income-tax Officer's statement of the case "and there was the failure to produce the Calcutta accounts for which a notice was issued on 11th August 1927."
6. These circumstances clearly reduce the assessment to one under Section 23(4).
7. A consideration of the facts chronologically set out at the commencement of this judgment will show that no inquiry under Section 23(3) commenced until the date of 14th March 1928, when the evidence of the one witness Sheo Nath was heard on oath. It is manifest, therefore, that neither the notice issued on 11th August, 1927, nor that issued on 22nd February, 1928, was issued after the commencement of the inquiry under Section 23(3). The question, therefore, which has been referred to us doss not appear to us to arise on the facts of the case. We may add that Mr. Bajpai, the Government Advocate, who has represented the case here for the Grown has had the advantage of the presence of the Income-tax Officer in Court assisting him in the case, and Mr. Bajpai himself, after having consulted the Income-tax Officer agrees that no inquiry under Section 23(3) can be said to have commenced until 14th March, 1928, Even if it could be said to have commenced on 22nd February, 1928, the date on which a notice was issued under Section 23(3) to produce evidence as regards the specified point of the purchase of a house a point which we have not to decide it is manifest that the notice under Section 22(4) of 11th August, 1927, was long prior to that date.
8. We, therefore, direct that this cage be returned to the Bench that referred it to us, with the expression of our opinion that the point referred to us does not on the facts of the case arise.
JUDGMENT.
9. By an order of this Bench, dated 22nd February, 1929, we directed that the matter in difference between the Judges composing this Bench might be referred to a single Judge or a Bench of three Judges. The Honourable the Chief Justice was pleased to appoint a Bench of three Judges. The matter was considered by the learned Judges to whom the matter in difference between us was referred. The learned Judges came to the conclusion that in the circumstances of the case, the question referred to, namely, question No. 1 of the nine questions referred to the High Court by the Commissioner of Income-tax did not arise. This Bench thought that the learned Judges who expressed the opinion quoted above were not authorited under the provision of law under which the reference was made, to say that the question did not arise. This Bench accordingly addressed the learned Chief Justice again proposing that the said question No. 1 might again be referred to other Judges. The learned Chief Justice thereupon called a meeting if the Judges of the Court and the Majority of the Judges decide that it was open to the three Judges, to whom the question had been referred, to say that the question did lot at all arise and that such opinion would be binding on the Division Bench which referred the question.
10. The matter was again placed before us. We have heard the Counsel for the parties. Dr. Katju has argued that on the judgment delivered by the three learned Judges mentioned above, the answer to question No. 9 as recorded by us previously should be reconsidered. He has argued and in my opinion quite correctly that question No. 9 and question No. 1 are not identical. Question No. 1 is:
Has an Income-tax Officer jurisdiction to issue a notice under Section 22(4) after the commencement of enquiry under Section 23(3). Question No. 9 runs as follows:
In the circumstances of this case, was the assessment rightly made under Section 23(4).
11. Question No. 1 is a pure question of law and on this point my brother Niamatullah, J. and I are at a difference. Dr. Katju argues that in spite of this difference, we ought to say in answer to question No. 9 that having regard to the facts of the present case, the assessment was not rightly made under Section 23(4).
12. Let us examine the contention of Dr. Katju. He has pointed out that when the Income-tax Officer at Cawnpore started his enquiry, he asked for the account books from all the places of business from the assessee, namely, from Cawnpore, from Bombay and from Calcutta, The Bombay and Cawnpore accounts were produced but the Calcutta accounts were not produced before the Officer at Cawnpore. The Income-tax Officer at Cawnpore iesued a notice, on 11th August 1927, which was a combined notice under Section 23(2) and 22(4) of the Income-Tax Act, to produce the Calcutta accounts on 15th August. To this order the assessee demurred and requested the Income tax Officer at Cawnpore not to press his order but to allow them to produce their accounts before the Income-tax Officer at Calcutta. To this request the Officer at Cawnpore acceded and wrote to the Officer in Calcutta as follows: see page 9 Appendix A:
It is, therefore, the Calcutta shop account which is the most important. I would request you to examine these books again and obtain copies.... I would have taken all this trouble on myself, but the assessee is unwilling to show the Calcutta shop accounts to me. The case is important and requires your personal attention, I have fixed the case for 6th March 1928, and shall be extremely obliged to have your reply before that date.
13. This letter was written as late as on 24th February, 1928, and evidently after some other correspondence had passed, Dr. Katju urges, and in my opinion rightly, that by agreeing to accept the report of the Income-tax Officer, Calcutta, provided same was satisfactory, the Officer in Cawnpore, waived, so to say, the effect of his order dated 11th August 1927. That order, argues Dr. Katju, could not be revived after seven months in March 1928, and could not be made the basis of an order under Section 23(4), Income Tax Act, namely, an assessment "to the best of the judgment.
14. It will be remembered that there were two notices issued against the assessee, both purporting to be combined notices under Section 22(4) and Section 23(3), one was dated 11th August, 1927, and the other was dated 22nd February, 1928. It was on account of the failure to comply with both these notices, that the Income-tax Officer purported to act under Section 23(4), Income Tax Act. When the assessees questioned the propriety of this assessment "to the best of judgment" they questioned the validity of the notice of 22nd February, 1928: see point (a) at page 3 of the statement of the case. The learned Commissioner is required by law to give his own opinion on tae points referred to the High Court for its opinion. In answering question 9 see page 8 of the statement of the case, the learned Commissioner did not rely on the notice issued on 22nd February, 1928, but relied on the notice of 11th August, 1927, only. For this reason the Bench consisting of three learned Judges of this Court expressed the opinion that the notice of 22nd February, 1928, might very well be ignored. The learned Judges then considered the circumstances under which the notice of 11th August, 1927, had been issued and came to the conclusion that it had been issued before any enquiry was started From this finding of fact it followed that the question of law on which there was a difference of opinion between myself and my learned brother did not arise. Dr. Katju has argued that if we are bound by the opinion of those three learned Judges, as the majority of the Judges of the Court have held in an English meeting, we must ignore the notice of 22nd February, 1928, as being a document of no relevancy in the case.
15. In my opinion, this view contended for, ought to be accepted and for the reasons already given, Further, However, there is good reason why the notice of 22nd February, 1928 should be ignored as waived or as being never intended to be operative I have already pointed out that the letter addressed by the Income-tax Officer of Cawnpore to the Income-tax Officer at Calcutta is dated 21th February, 1928: see Appendix A, and was, therefore, written two days after the notice dated 22nd February, 1928, had been issued. From the portion of the letter quoted above it will be seen that the Income tax Officer at Cawnpore was perfectly willing to accept the report of the Calcutta Officer and it was not his intention to enforce either the notice of 11th August, 1927 or that of 22nd February, 1928.
16. Whether we accept the opinion of the Full Bench or whether we decide on our own initiative, there can be no doubt that both the combined notices had been waived so to say, and it would be extremely unfair on the part of the Income-tax Officer to turn round and say without giving the assesses a fresh opportunity to produce the books, that their failure on previous occasions to produce accounts subjected them to the penalty of having a best judgment assessment made against them.
17. In view of this fresh argument and in view of the opinion expressed by the Full Bench, I am clearly of opinion that the answer to question No. 9 should be in the negative.
18. In my point out that this answer entirely makes it unnecessary to return any answer to question No. 1 and as already stated in the opinion of the Full Bench, question No. 1 does not arise.
19. I would, therefore, direct that, in substitution of my answer to question No. 9 as recorded f on 22nd February, 1929, the detailed answer which is also in the negative recorded above be returned to the Commissioner of Income-tax.
20. I note that Mr. Bajpai, the learned Government Advocate, has argued in Court for 4 1/2days and that he is entitled to a fee of Rs. 1,100. He should get this fee from the Government. As regards the costs of this reference, I would direct that the Government should pay the costs of the assessees.
Niamatullah, J.
21. In my order of 22nd February 1929,1 answered question No. 9 in the affirmative, because, in my view, disregard of a notice under Section 23(2) of the Income Tax Act entitles the Income-tax Officer to proceed under Section 23(4) and if he does so, the assessee has no right of appeal. Whether the income-tax Officer could do so under the circumstances of the present case depended on the effect of two notices issued by him (1) on 11th August, 1927, and (2) on 22nd February, 1928. It had been contended on behalf of the assessees that the first notice had been waived. I did not deal with this argument, because if it be accepted with regard to the first, the second notice, which, in my opinion, cannot be said to have been waived as the result of a letter, dated 24th February, 1822, could not be got over. I would have respectfully differed from my learned colleague on this part of the case, had the question been open to discussion; but the view taken by the Full Bench as regards the second notice relieves me of the responsibility of dealing with it. The Full Bench have placed their own construction on the statement of facts submitted by the Income-Tax Commissioner, according to which the effect of the notice, dated 22nd February, 1928, is not to be considered. They observed, after considering the statement of the case, that:
It does not appear, however, that we have to consider the effect of the notice on 22nd February, 1928, at all.
22. As regards the first notice they ruled that it was issued before the commencement of the enquiry, in which case, according to the view both of my brother Mukerji, J, and myself, the Income Tax Officer had jurisdiction to proceed under Section 23(4), unless he is otherwise debarred from taking that course. On receipt of the finding of the Full Bench, the assessees pressed for the consideration of the question that the first notice (of 11th August, 1927) had been waived. The second notice of 22nd February, 1928) being ignored, as we must ignore in view of the ruling of the Full Bench, I must now consider the effect of the former. I have had the advantage of reading the judgment of my learned colleague, and find myself in agreement with him in holding that, under the circumstances of the case stated by him, it was waived with the result that it loses its legal effect altogether.
23. In accordance with the view expressed by the Full Bench and for the reasons stated above, I have to answer question No. 9 in the negative, which I accordingly do.
24. Let the following answers to the questions put by the Commissioner, Income Tax, be returned as the answers of the Court Along with the answers will be sent copies of all the judgments of the Judges forming this Bench and to which 2 the question No. 1 was referred for an answer.
25. Question No. 1--In the view expressed by the Bench of three Judges, this question does not arise.