COMMISSIONER OF INCOME-TAX, ANDHRA PRADESH versus M/S. BHIKAJI DADABHAI & CO.

Citation: [1961] 3 S.C.R. 923 · Decided: 22-02-1961 · Supreme Court of India · Bench: J.L. KAPUR · Disposal: Appeal(s) allowed

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Judgment (excerpt)

... 
3S.C.R. 
SUPREME COURT REPORTS 
COMMISSIONER OF INCOME-TAX, 
ANDHRA PRADESH 
v. 
M/S. BHIKAJI DADABHAI & CO. 
923 
(J. L. KAPUR, M. HrnAYATULLAH and J. C. SHAH, JJ.) 
Income-tax-Assessment 
proceedings 
pending-Hyderabad 
Inc
1
odme-tax Act repealed-Penalty, whether. an additional tax-If 
'· .. t 
cou 
be imposed-Appellate Assistant Commissioner-Jurisdiction--
l 
Assessment, meaning of-Hyderabad Income-tax Act, s. 40-Indian 
Income-tax Act, r922 (XI of r922)-Finance Act, r950 (XXV of 
I950), s, IJ. 
The Income-tax Officer found that the respondents' books of 
accounts were unreliable and after assessing income for Fasli 
year 1357, corresponding to the year 1946-47, issued notice to the 
respondents on December 22, 1949, under s. 40 of the Hyderabad 
Income-tax Act to show cause why penalty should not be levied 
in addition to the tax and by an order dated October 31, 1951, 
directed payment of the said penalty. The State of Hyderabad 
merged with the Indian Union during the pendency of the pro-
ceedings before the Income-tax Officer and by s. 13 ot the Finance 
Act, 1950, the Hyderabad Income-tax Act ceased to have effect 
from April I, 1950, but the operation of that Act in respect of 
levy, assessment and collection of income-tax and super-tax in 
,respect of periods prior thereto for which liability to income-tax 
could not be imposed under the Indian Income-tax Act, was 
saved. The question was whether (a) the Income-tax Officer had 
power on October 31, 1951, to impose a penalty under s. 40(1) of 
the Hyderabad Income-tax Act and (b) whether the assessee had 
a right to appeal against the order of the Income-tax Officer 
imposing penalty and whether the Appellate Assistant Commis-
sioner had jurisdiction to hear appeals or whether his order was a 
nullity. 
Held, that the power of the Income-tax Officer to impose a 
penalty under s. 40(1) of the Hyderabad Income-tax Act in 
respect of the year preceding the date of the repeal of the 
Hyderabad Income-tax Act was not lost because by s. 13 of the 
Finance Act, 1950, for the operation by the Hyderabad Income-
tax Act in respect of levy, assessment and collection of income ... tax 
and super-tax in respect of periods prior to April, r95r, for which 
liability to income-tax could not be imposed under the Indian 
Income~tax Act, was ~aved and so the proceedings for imposing 
the penalty could be continued after the enactment of s. 13(1) of 
the Indian Finance A~t. 1950. 
Held, that the appeal against the order of the Income-tax 
Officer on the ground that he was not competent to pass the order 
did lie to the Appellate Assistant Commissioner, whose jurisdic-
tion was not made conditional upon the competence of the 
~ [~ 
Commissioner of 
Inconie~ta:r, 
A ndhra Pradesh 
v· 
M /s, Bhikaji 
Dadabhai & Co. 
Shah .f. 
924 
SUPREME COURT REPORTS 
[1961] 
Income-tax Officer to pass the orders made appealable; as a 
court of appeal he had jurisdiction to determine the soundness of 
the conclusions of the Income-tax Officer both on the question of 
fact and law and even as to his jurisdiction to pass the order 
appealed from, and his order was not a nullity. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 
434 of 1960. 
Appeal by special leave from the judgment and 
order dated October 4, 1956, of the Hyderabad High 
Court in I.T.R. No. 116/5 of 1954-55. 
K. N. Rajagopal Sastri and D. Gupta, for the appel-
lant. 
A. V. Viswa11atha 8astri, S. N. Andley, J.B. Dada-
chanji, Rameshwar Nath and P. L. Vohra, for the res-
pondents. 
1961. February 22. The Judgment of the Coul't 
was delivered by 
SHAH, J.-M/s. Bhikaji Dadabhai & Co.-herein-
after called the assessees-owned an oil mill at Kham-
mamath in the area of the former State of Hyderabad. 
For the year of assessment Fasli 1357 (October l, 
1946, to September 30, 1947), the assessees returned 
an income. of Rs. 50,384/-. The Income-tax Officer 
found that the books of account maintained by the 
assessees were unreliable and by his order dated 
· February IO, 1950, he assessed their total iricoine at 
Rs. 1,63,131/-. The Income-tax Officer had, before 
finalising the assessment, issued on December 22, 1949, 
a notice to the assessees under s. 40 of the Hyderabad 
Income-tax Act requiring them to show cause why 
penalty should not be imposed upon them and by 
order dated October 31, 1951, directed the assessees to 
pay by way of penalty Rs. 42,000/- in addition to the 
tax. This order was confirmed in appeal by the 
Appella

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