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High Court Of Delhi
COMMISSIONER OF INCOME TAX - Appellant
Versus
NATIONAL SMALL INDUSTRIES CORPORATION LIMITED - Respondent
I.T.R. 56 of 1968
Decided On : 05/12/1972
INCOME TAX - RECTIFICATION - JURISDICTION - INCOME-TAX ACT, 1922, SECTION 35 - INCOME-TAX ACT, 1961, SECTION 154 - WHETHER RECTIFICATION ORDER COULD BE PASSED ONLY UNDER SECTION 35 OF THE INCOME-TAX ACT, 1922 AND NOT UNDER SECTION 154 (1) (A) OF THE INCOME-TAX ACT, 1961.
Fact of the Case:
The assessee filed returns of income for the assessment years 1960-61 and 1961-62 before the commencement of the Income-tax Act, 1961. The assessments were made after the commencement of the new Act under Section 23 (3) of the Indian Income-tax Act, 1922. The Income-tax Officer issued a notice under Section 154 of the new Act for rectification of the assessment orders. The assessee objected to the validity of the rectification under Section 154, contending that it could only be made under Section 35 of the old Act. The Appellate Assistant Commissioner accepted the assessee's contention and held that Section 154 was not applicable. The Income-tax Appellate Tribunal upheld the decision of the Appellate Assistant Commissioner.
Finding of the Court:
The Court held that the rectification order could be passed only under Section 35 of the Income-tax Act, 1922 and not under Section 154 (1) (a) of the Income-tax Act, 1961. The Court relied on the decision of the Supreme Court in S. Sankappa and others v. Income-tax Officer, Central Circle II (68 ITR 760), which held that the proceedings for rectification of assessment of tax under section 35 of the Act were proceedings of "assessment."
Issues: Whether the rectification order could be passed only under Section 35 of the Income-tax Act, 1922 and not under Section 154 (1) (a) of the Income-tax Act, 1961.
Ratio Decidendi: The Court held that the rectification order could be passed only under Section 35 of the Income-tax Act, 1922 and not under Section 154 (1) (a) of the Income-tax Act, 1961, because: * Section 297 (2) (a) of the Income-tax Act, 1961 provides that where a return of income has been filed before the commencement of the new Act, the proceedings for the assessment of that person for that year may be taken and continued as if the new Act had not been passed. * The Supreme Court in S. Sankappa and others v. Income-tax Officer, Central Circle II (68 ITR 760) held that the proceedings for rectification of assessment of tax under section 35 of the Act were proceedings of "assessment."
Final Decision: The Court declined to answer the question raised before it as incompetent and rejected the reference.
( 1 ) THE assessee is a public limited company. The assessment years relevant to the case are 1960-61 and 1961-62 for which the accounting periods are the financial years ending with the 31st of March 1960 and the 31st of March 1961.
( 2 ) THE returns of income for the respective years were filed on the 16th of January 1961 and the 30th of September, 1961 i. e. to say that these returns were filed prior to the commencement of the Income-tax Act, 1961 hereafter to be referred to as the new Act. The assessments were however made after the commencement of the new Act, namely, on the 8th of November, 1962 and on the 28th of November. 1962 respectively. Both these assessments were made under Section 23 (3) of the Indian Income-tax Act, 1922 hereafter referred to as the old Act.
( 3 ) AS there was a revision under Section 33b of the old Act for the assessment year 1959-60 by the Commissioner of Income-tax, the Income-tax Officer considered it necessary to rectify the assessment orders passed in respect of the later two assessment years viz. 1960-61 and 1961-62 which are now in question. He accordingly issued a notice under Section 154 of the new Act, calling for objections, if any. , from the assessee. After due formalities the assessments were rectified under Section 154 of the new Act.
( 4 ) THE assessee preferred appeals before the Appellate Assistant Commissioner and a preliminary objection was taken against the validity of the rectification made under Section 154. The assessees case before the Appellate Assistant Commissioner was that for the assessment years in question the rectification, if any, could be made only under S. 35 of the old Act and not under Section 154 of the new Act. The Appellate Assistant Commissioner accepted the assessee s case and held that the provisions of Section 154 were not applicable for the purposes of rectification in respect of the assessment years in question.
( 5 ) THE Department was dis-satisfied with that order and filed an appeal before the Income-tax Appellate Tribunal. It was urged on behalf of the department that Section 154 (l) (a) of the new Act had been so framed that it enabled the Income-tax Officer to rectify "any order of assessment" be it an order of assessment made under the old Act or an assessment made under the new Act under the said provision. The Tribunal negatived the contention relying upon the provisions of S. 297 (2) (a) of the Income-tax Act, 1961 and also a decision of the High Court of Andhra Pradesh in the case of Uppala Peda Venkataramanish v. First Addl. I. T. O. (53 ITR 11) interpreting the meaning of the expression "proceedings for the assessment". The Tribunal held that the proceedings for rectification in respect of matters relating to the assessment years in question could only be made under S. 35 of the old Act and not under Section 154 of the new Act. The Department s appeals were accordingly dismissed.
( 6 ) ON these facts the under-mentioned question of law was referred to this Court at the instance of the Commissioner of Income-tax :-
"whether on the facts and in the circumstances of the case, the rectification order could be passed only under Section 35 of the Income-tax Act, 1922 and not under Section 154 (l) (a) of the Income-tax Act, 1961. "
( 7 ) THE question of rectification is now settled by a decision of the Supreme Court in S. Sankappa and others v. Income-tax Officer, Central Circle II (68 ITR 760 ). The jurisdiction of the revenue authorities to rectify in a case where returns have been filed under the old Act, flows first from the old Act and secondly, from the provisions contained in clause (a) of Section 297 (2 ). The clause reads :-
"notwithstanding the repeal of the Indian Income-tax Act, 1922 (hereinafter referred to as the repealed Act):- (a) Where a return of income has been filed before the commencement of this Act (the new Act) by any person for any assessment year, the proceedings for the assessment of that person f
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