Pre-commencement assessment rectification can stand under the repealed law despite wrong statutory reference

Rectification proceedings relating to a pre-commencement assessment were treated as part of the assessment process and could be sustained under the repealed Income-tax Act, 1922, where the return or assessment fell within the saving rule in section 297(2)(a) of the 1961 Act. The Court applied the principle that an action is supported by the jurisdiction that lawfully authorises it, and a wrong reference to the source of power does not invalidate the proceeding if valid authority otherwise exists. The demand and recovery steps were therefore held not vitiated for want of jurisdiction, and the challenge to the notices failed.

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Issues: Whether rectification proceedings and consequential demand and recovery steps in relation to an assessment year governed by the repealed Act could validly be initiated under the new Act, or whether they had to be traced to the old Act.

Analysis: The original assessment of the petitioner had been made under the Indian Income-tax Act, 1922. Proceedings for rectification were treated as part of assessment, and section 297(2)(a) of the Income-tax Act, 1961 required such proceedings, where the return had been filed before the commencement of the new Act, to be taken and continued as if the new Act had not been passed. The Court also held that the assessment of the firm, though made after the commencement of the new Act, was in substance an assessment relating to a period to which the old Act applied, and section 35(5) of the old Act was not excluded merely because the procedural route under the new Act had been used. The Court applied the principle that an is sustained by the jurisdiction which confers validity upon it, and a wrong reference to the source of power does not by itself invalidate the action where lawful power otherwise exists.

Conclusion: The rectification, demand, and recovery proceedings were held to be sustainable and not vitiated for want of jurisdiction.

Final Conclusion: The challenge to the notices and recovery measures failed, and the application was dismissed.

Ratio Decidendi: Where a pre-commencement assessment is involved, rectification proceedings are part of the assessment process and may be sustained by reference to the valid jurisdiction available under the repealed Act, notwithstanding that the notice or order incorrectly invokes the new Act.

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