TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Join Channel
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) Whether notices issued under section 35(9) of the Indian Income-tax Act, 1922 were invalid for want of independent satisfaction by the Income-tax Officer and for acting on instructions of the Commissioner; (ii) Whether rectification under section 35(9) was permissible where the company had allegedly not paid income-tax within three years after the relevant financial year; (iii) Whether rectification proceedings under the repealed Act could continue after the commencement of the Income-tax Act, 1961 by virtue of section 297(2)(a); (iv) Whether the Income-tax Officer could invoke rectification in respect of the two cases in which the original assessment orders had merged in the appellate orders of the Appellate Assistant Commissioner.
Issue (i): Whether notices issued under section 35(9) of the Indian Income-tax Act, 1922 were invalid for want of independent satisfaction by the Income-tax Officer and for acting on instructions of the Commissioner.
Analysis: The rectification power under section 35 was quasi-judicial in nature and had to be exercised by the Income-tax Officer on his own assessment of the record. A notice issued merely because of superior instructions would be invalid, but where the notice itself showed that the officer applied his mind and identified the apparent mistake, the requirement of independent satisfaction was met. On the facts, the notices in the thirteen cases reflected the officer's own satisfaction, while one notice expressly showed that it was issued in accordance with the Commissioner's instructions.
Conclusion: The notices were valid in the thirteen petitions, but the notice in Writ Petition No. 133 of 1963 was invalid and liable to be set aside.
Issue (ii): Whether rectification under section 35(9) was permissible where the company had allegedly not paid income-tax within three years after the relevant financial year.
Analysis: The statutory precondition for section 35(9) was that the company had not paid the income-tax payable on the profits out of which the dividend was declared within three years after the relevant financial year. The pleadings did not establish payment within that period, and payment of amounts to the State Government in lieu of taxes was not treated as equivalent discharge of the statutory tax liability.
Conclusion: The challenge on this ground failed and the rectification could not be invalidated on the footing that the tax had been paid within the statutory period.
Issue (iii): Whether rectification proceedings under the repealed Act could continue after the commencement of the Income-tax Act, 1961 by virtue of section 297(2)(a).
Analysis: Assessment and allied proceedings relating to returns filed before the commencement of the 1961 Act continued to be governed by the repealed Act under section 297(2)(a). Rectification proceedings under section 35 of the 1922 Act were therefore maintainable for the relevant assessment years, notwithstanding repeal, because the old Act was preserved for such pending and antecedent assessments.
Conclusion: The proceedings under section 35 of the Indian Income-tax Act, 1922 were maintainable.
Issue (iv): Whether the Income-tax Officer could invoke rectification in respect of the two cases in which the original assessment orders had merged in the appellate orders of the Appellate Assistant Commissioner.
Analysis: Once the assessee had carried the matter in appeal and the Appellate Assistant Commissioner had decided the question of grossing up and tax credit, the original assessment order merged in the appellate order on that point. Rectification could not be used to reopen or nullify the appellate decision, because the Income-tax Officer had no jurisdiction to amend an issue already considered and decided in appeal.
Conclusion: In the two appealed matters, the rectification orders were without jurisdiction.
Final Conclusion: The writ petitions succeeded only in part, with relief granted in the two matters affected by the doctrine of merger and the remaining petitions dismissed.
Ratio Decidendi: Rectification under section 35(9) of the Indian Income-tax Act, 1922 requires the Income-tax Officer's own quasi-judicial satisfaction, continues to be available for pre-1961 assessments preserved by section 297(2)(a) of the Income-tax Act, 1961, and cannot be used to reopen a matter already concluded in appeal because the assessment merges in the appellate order on the issue decided.
TaxTMI 
