HARNAM SINGH, J. – This is an application under Section 66(2) of the Income-tax Act, 1922, hereinafter referred to as the Act, asking the Court to direct the Income-tax Appellate Tribunal to state the case and refer for decision to this Court the questions set out hereunder :-
(1) Whether the notice under Section 34 of the Income-tax Act issued on the 26th of June, 1945, is valid in law ?
(2) Whether the salary, which was on account of bad condition of the company given up, can be taken into account for the purpose of calculating the rates ?
Briefly summarised, the material facts are these. On 26th June, 1945, the Income-tax Officer, Ward F, New Delhi, gave notice under Section 34 of the Act to Messrs. T. N. Swami and Company, hereinafter referred to as the assessee, in connection with the 1941-42 assessment. Investigation followed and on 26th March 1946, the Income-tax Officer demanded from the assessee income-tax on an income of Rs. 4,21,118. From the order passed by the Income-tax Officer, the assessee went up on appeal was partially allowed and the assessment modified. From the order passed by the Appellate Assistant Commissioner, the assessee appealed under Section 33 of the Act. In the proceedings under Section 33 of the Act, the assessee raised tow points for the consideration of the Tribunal. Firstly, it was said that action under Section 34 of the Act was not valid and, secondly, that inasmuch as the assessee did not receive the sums of Rs. 18,000 and Rs. 24,000 on account of the remuneration, the sum of Rs. 42,000 made up of those two items, could not be regarded as the income of the assessee for the purpose of calculating the rates.
For the proper application of Section 34 of the Act, as it existed before it was amended by Act XLVIII of 1948, two condition have to be satisfied. Firstly, on the date on which the Income-tax Officer puts Section 34 into operation there had to being possession of the Income-tax Officer “definite information”, and secondly, the “discovery” contemplated by section 34 must be the result of that information. In these proceedings it is said that when issuing notice under Section 34 of the Act, the Income-tax Officer did not possess “definite information” as is required by Section 34. The objection that the Income-tax Officer was not possessed of “definite information” as is required by Section 34 was not raised before the Income-tax Officer. On appeal under Section 30(1) of the Act, the objection under Section 34 of the Act was neither raised in the memorandum of appeal nor urged at the hearing. For the first time it was mentioned in the appeal under Section 33 of the Act that action under Section 34 of the Act was not valid. Clearly, the question whether the Income-tax Officer had “definite information” from which he had “discovered” before he took action under Section 34, that income had escaped assessment, is a question of fact. It was open to the assessee to agitated before the Commissioner that the requirements of Section 34 of the Act were not satisfied. This was not done. In the proceedings under Section 33 of the Act was not valid. Dealing with this objection the Income-tax Appellate Tribunal said :-
“It is quite evident from the record that the Income-tax Officer before he issued the notice under Section 34 had ample definite information leading to the discovery that income for this year had escaped assessment. The assessee as is to be seen from the assessment record was assessed for 1938-39 under the head “salaries”, “business” and “other sources”. In 1939-40 he was assessed on “salaries”, “business” and “other sources” and for the assessment year 1940-41 assessment was made on “salaries”, “securities”, “commission” and “other sources.” The 1940-41 assessment was completed on 31st March, 1942. The appeal to the Appellate Assistant Commissioner was decided on 5th January, 1943. Notice under Section 34 was issued to the assessee on 26th June, 1945. The assessee continued to carry on the same business in the following year and the Income-tax Officer was aware of the assessment for the preceding years. In our view there is no substance whatsoever in the contention that section 34 had not been rightly invoked.”
In my judgment, the assessee having failed to object to the validity of proceedings under Section 34 of the Act before the Income-tax Officer and on appeal before the Appellate Assistant Commissioner, could not urge in appeal under Section 33 of the Act that action under Section 34 of the Act was not validly taken. In any case, on the facts found by the Tribunal I have no doubt that the requirements of section 34 of the Act are fully satisfied.
In these proceedings the assessee asks the Court to require the Tribunal to refer for decision to this court the question whether the sum of Rs. 42,000 could be taken into account for purpose of calculating the rates. The assessee applied to the Tribunal under Section 66(1) of the Act. In that application the assessee did not urge that the sum of Rs. 42,000 could not iv law be taken into account for the purpose of calculating the rates. That being so, I apprehend, that no application lies under Section 66(2) of the Act for requiring the Tribunal to refer the question for decision to this Court.
Mr. Puri however, urges that in an application under Section 66(1) of the Act it is sufficient to state that the Tribunal may refer to the High Court questions of law arising out of the order of the Tribunal. In other words, Mr. Puri maintains that it is not for the assessee to formulate the questions of law and state those questions of law in the application. I do not accept the argument raised. Rule 22-A of the Indian Income-tax Rules, 1922 gives the form of application under sub-section (1) of Section 66 of the Act. Paras Nos. 4 and 5 of the application prescribed by the rules read :-
“4. That the following questions of law arise out of the order of the Tribunal.
(5) That the applicant, therefore, requires under sub-section (1) of section 66 of the aforesaid Act that a statement of the case be drawn up and the questions of law numbered………………. out of the questions of law referred to in paragraph 4 above be referred to the High Court.”
Section 59(5) of the Act enacts that rules made under Section 59 shall have effect as if enacted in the Act. Now, questions of law arising out of the order of the Tribunal are to be set forth in para. No. 4 of the Reference application and in para. 5 of that application the applicant had to set forth which out of the questions of law arising out of the order of the Tribunal are to be referred to the High Court for decision. From a perusal of Form R (T) – From of section 66(1) Reference Application -it is plain that it was the duty of the assessee to set forth in the application the question of law arising out of the order of the Tribunal which the assessee required under sub-section (1) of Section 66 of the Act to be referred to the High Court. Clearly, an application under section 66(1) of the Act should specify the questions of law which the applicant considers ought to be referred for decision to the High Court. Directions under Section 66(2) of the Act are in the nature of “mandamus” and as a general rule such directions will not be issued unless the Tribunal has known what it was that the Tribunal was required to do, so that the Tribunal had the opportunity of considering whether or not the Tribunal should comply. In other words, it must be shown by evidence that there was a distinct demand of that which the party seeking the directions desires to enforce, and that such a demand was met by a refusal.
For the reasons given above, I think that the assessee having failed to ask the Tribunal to refer question No. 2 to the High Court cannot apply to the High Court to call upon the Tribunal to state a case raising that question.
No other point was raised in these proceedings. For the foregoing reasons, I dismiss Civil Miscellaneous No. 279 of 1949 with costs. Counsels fee in these proceedings is assessed at Rs. 100.
KHOSLA, J. – I agree.