R. S. A. C. Kasi Iyer v. The Commissioner Of Income Tax, Mysore, Travancore-Cochin And Coorg, Bangalore

September r. 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 re-assessme11t proceedi!lgs-Trava11core Income-lax I<egulatio11 VII I of 1096 M. E.-Travancorc Taxation on ltzcome (Investigation Com-mission) 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 com-mission 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 re-port 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\•ern-ment 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.[0]ess or re-assess 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 reassess-ment 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 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 reassess-01 lHconie-tax, ment ·nuder the Travancore Income-tax Regulation after Myso'" T~avan­consideration of the report made by the Travancore Investiga-core-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. 1961 (1) SCR 466-474 (