1972 (5) TMI 12 - HC - Income Tax

Court rejects reference as incompetent, emphasizes correct rectification section, highlights notice substance over cited section.

Commissioner of Income-Tax Versus National Small Industries Corporation Limited.

The High Court rejected the reference as incompetent, emphasizing that rectification for the relevant assessment years should have been made under section ... Assessee is a public limited company - 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 - Whether on the facts and in the circumstances of the case, the rectification order could be passed only under section 35 of the IT Act, 1922, and not under section 154(1)(a) of the IT Act, 1961 Issues Involved:1. Validity of rectification under section 154 of the Income-tax Act, 1961.2. Applicability of section 35 of the Indian Income-tax Act, 1922, for rectification.3. Jurisdiction of the Income-tax Officer under the new and old Acts.4. Competency of the reference to the High Court.Detailed Analysis:1. Validity of Rectification under Section 154 of the Income-tax Act, 1961:The issue centers on whether rectification for the assessment years 1960-61 and 1961-62 could be made under section 154 of the new Act. The Tribunal held that rectification could only be made under section 35 of the old Act, not under section 154 of the new Act, relying on section 297(2)(a) of the Income-tax Act, 1961, and a precedent from the Andhra Pradesh High Court.2. Applicability of Section 35 of the Indian Income-tax Act, 1922, for Rectification:The Supreme Court in S. Sankappa v. Income-tax Officer established that the term 'assessment' includes all proceedings from filing the return to determining tax payable. Thus, rectification under section 35 of the old Act was deemed part of 'proceedings for assessment.' This interpretation implies that rectification for returns filed under the old Act should be governed by the old Act's provisions.3. Jurisdiction of the Income-tax Officer under the New and Old Acts:The Court considered whether the Income-tax Officer had jurisdiction to rectify under section 154 of the new Act. It was argued that if the power to rectify exists under any section, the validity of the order should be upheld regardless of the specific section cited. The Court agreed, stating that the substance of the notice, not the section number, determines its validity. Thus, a notice under section 154 of the new Act could be treated as one under section 35 of the old Act if it met all essential requirements.4. Competency of the Reference to the High Court:The High Court examined whether the reference was competent, given that the rectification should have been under section 35 of the old Act. Since an appeal against an order under section 35 is not provided, the Tribunal's order and subsequent reference to the High Court were deemed without jurisdiction. The Court concluded that the reference was incompetent and declined to answer the question, though it certified the case for appeal to the Supreme Court due to its general importance.Conclusion:The High Court rejected the reference as incompetent, emphasizing that rectification for the relevant assessment years should have been made under section 35 of the old Act, not section 154 of the new Act. The Court highlighted that the jurisdiction and validity of rectification depend on the substance of the notice rather than the specific section cited. The case was certified for appeal to the Supreme Court due to its general importance.