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1972 Supreme(P&H) 105
PUNJAB & HARYANA HIGH COURT
R.S.Narula and Rajendra Nath Mittal JJ.
Commissioner Of Income-tax
Versus
Satnam Transport Co.(P.) Ltd.
Income tax Reference No. 41 of 1971,
Decided On : APRIL 19, 1972
The rectification of an assessment for development rebate granted under the 1922 Act can be made under Section 155(5) of the 1961 Act, if the machinery or plant was installed after December 31, 1957.
Headnote:
INCOME TAX - RECTIFICATION OF ASSESSMENT - DEVELOPMENT REBATE - SALE OF BUS BEFORE EXPIRY OF STATUTORY PERIOD - RECTIFICATION UNDER SECTION 155(5) OF THE INCOME TAX ACT, 1961 - VALIDITY - JURISDICTION OF INCOME TAX OFFICER.
Fact of the Case:
The assessee-company, a transporter, was granted development rebate under Section 10(2)(vi) of the Indian Income-tax Act, 1922 (1922 Act) for a bus acquired in the assessment year 1959-60. Subsequently, the bus was sold before the expiry of the statutory period of eight years. The Income-tax Officer issued a notice of rectification and withdrew the development rebate under Section 155 of the Income-tax Act, 1961 (1961 Act). The assessee challenged the rectification, contending that it could only be made under the 1922 Act, as the original assessment was made under that Act.
Finding of the Court:
The Income-tax Appellate Tribunal and the Appellate Assistant Commissioner held that the rectification was invalid as it was made under the 1961 Act, rather than the 1922 Act.
Issues: Whether the Income-tax Appellate Tribunal was correct in confirming the order of the Appellate Assistant Commissioner of Income-tax cancelling the order made by the Income-tax Officer rectifying the order of assessment made on June 23, 1960, for the assessment year 1959-60 ?
Ratio Decidendi: The court held that the rectification of the assessment was valid and could be made under Section 155(5) of the 1961 Act, even though the original assessment was made under the 1922 Act. The court interpreted Section 155(5) to mean that any development rebate granted under the 1922 Act could be rectified under the 1961 Act, if the machinery or plant was installed after December 31, 1957. The court also held that even if Section 35(2) of the 1922 Act was applicable, the rectification would still be valid, as the Income-tax Officer had the jurisdiction to make the rectification under that provision. The court relied on the principle that a wrong reference to the power under which an order is made does not per se vitiate the order if there is some other power under which the order could lawfully be made.
Final Decision: The court answered the question referred to it in the negative, in favor of the revenue. The order of the Income-tax Officer rectifying the assessment was upheld.
Rajendra Nath Mittal, J.
1. The facts which have given rise to this Income-tax Reference No. 41 of 1971 are as follows:
The assessee-company carries on business as transporters and ply buses. In the assessment year 1959-60, the assessment of the company was completed under Section 23(3) of the Indian Income-tax Act, 1922 (hereinafter referred to as "the 1922 Act"). An amount of Rs. 9,187 was allowed as development rebate to the assessee under Clause (vi) of Sub-section (2) of Section 10 of 1922 Act, regarding bus No. PNR 1601. Subsequently, the assessee sold the bus before the expiry of the statutory period of eight years. The Income-tax Officer issued a notice of rectification and withdrew the development rebate under Section 155 of the Income-tax Act, 1961 (hereinafter referred to as "the 1961 Act"). The assessee filed an appeal before the Appellate Assistant Commissioner who reversed the order of the Income-tax Officer holding that, since the original assessment was made under the old Act, the rectification could also be made under the same Act and as an order of rectification had been made under the 1961 Act, therefore, it was bad. An appeal was taken by the revenue to the Income-tax Tribunal which also confirmed the order of the Appellate Assistant Commissioner. The Commissioner of Income-tax requested the Tribunal for making reference of this matter to the High Court and the Tribunal referred the following question to this court: "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in confirming the order of the Appellate Assistant Commissioner of Income-tax cancelling the order made by the Income-tax Officer dated March 7, 1968, rectifying the order of assessment made on June 23, 1960, for the assessment year 1959-60 ?"
2. The relevant assessment year in the present case is 1959-60. The learned counsel for the revenue has submitted that the Income-tax Tribunal and the Appellate Assistant Commissioner have not properly interpreted Sub-section (5) of Section 155 of the 1961 Act. He further submits that the rectification of the order by which the development rebate had been given can be made under Sub-section (5) of Section 155 of the new Act. It will be advantageous to notice Sub-section (5) of Section 155 of the 1961 Act:
"Where an allowance by way of development rebate has been made wholly or partly to an assessee in respect of a ship, machinery or plant installed after the 31st December, 1957, in any assessment year under Section 33 or under the corresponding provisions of the Indian Income-tax Act, 1922, and subsequently- (i) at any time before the expiry of eight years from the end of the previous year in which the ship was acquired or the machinery or plant was installed, the ship, machinery or plant is sold or otherwise transferred by the assessee to any person other than the Government, a local authority, a corporation established by a Central, State or Provincial Act or a Government company as defined in Section 617 of the Companies Act, 1956, or in connection with any amalgamation or succession referred to in Sub-section (3) or Sub-section (4) of Section 33; or
(ii) at any time before the expiry of the eight years referred to in Sub-section (3) of Section 34, the assessee utilises the amount credited to the reserve account under Clause (a) of that sub-section,-- (a) for distribution by way of dividends or profits; or
(b) for remittance outside India as profits or for the creation of any asset outside India ; or
(c) for any other purpose which is not a purpose of the business of the undertaking;
the development rebate originally allowed shall be deemed to have been wrongly allowed, and the Income-tax Officer may, notwithstanding anything contained in this Act, recompute the total income of the assessee, for the relevant previous year and make the necessary amendment; and the provisions of Section 154 shall, so far as may be, apply thereto, the period o
