TaxTMI 
TaxTMI 
1970 (4) TMI 44
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....aid section within 12 months from the end of the respective previous years. Two orders, both dated the 31st July, 1962, under section 23A, were passed by respondent No. 1 in respect of the aforesaid assessment years. In respect of the second year, after deducting the tax amounting to Rs. 51,435.45 due on the total income of Rs. 1,14,301 determined on regular assessment the distributable surplus was found to be Rs. 62,865.55. As the petitioner had only distributed Rs. 36,588 the deficiency was determined at Rs. 26,277.55 and the super-tax thereon at the rate of 37% was assessed at Rs. 9,722.49. The order in respect of the first year determined the distributable surplus at Rs. 71,073.20 and as dividend actually distributed was Rs. 43,735, the deficiency was declared to be Rs. 25,338 and the tax payable thereon, Rs. 9,375.43. The petitioner paid the aforesaid amount of tax assessed in the said two orders. By a notice purported to be under section 154/155 of the Income-tax Act, 1961, dated the 1st January, 1964, the respondent No. 1 required the petitioner to show cause why the order made under section 23A for the year 1960-61 should not be rectified as in that year the dividend actual....
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....ion 23A of the Act is a self-contained code and an order made thereunder is not an order of assessment and therefore there can be no rectification of such an order under section 35 except in the special case provided in sub-section (7) of that section; (2) that as the order under section 23A could only be made and was, in fact, made with the prior approval of the Inspecting Assistant Commissioner as provided in section 23A(8), the impugned orders of rectification should also have been made after such prior approval and further that this would have afforded the petitioner another opportunity of showing cause against the proposed orders. Mr. Roy Chowdhury has contended that section 23A is not a section providing for assessment. It is a section imposing additional tax or rather additional super-tax on certain companies for failure to declare a certain percentage of their profits as dividend. As section 35(1) confers jurisdiction on the Income-tax Officer to rectify an order of assessment or an order of refund the respondent=Income-tax Officer in the present case had no jurisdiction to make the impugned orders, and they should be quashed. I do not think that there is any substance in t....
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....ntil he has given the company concerned an opportunity of being heard. Section 35(1) which gives the Income-tax Officer jurisdiction to rectify mistakes apparent from the record is so far as material, as follows : " the Income-tax Officer may, at any time within four years from the date of any assessment order or refund order passed; by him on his own motion, rectify any mistake apparent from the record of .... assessment or refund as the case may be and shall within the like period rectify any such mistake which has been brought to his notice by an assessee. Provided that no such rectification shall be made having the effect of enhancing an assessment or reducing a refund unless .... the Income-tax Officer . . . has given notice to the assessee of his intention so to do and has allowed him a reasonable opportunity of being heard." Section 35(7), to which reference has been made by Mr. Roy Chowdhury, is as follows: " Where the assessment of a company in whose case an order under section 23A has been made is modified in appeal, revision or any other proceeding or the order under section 23A is cancelled or varied, and in consequence thereof it is necessary to recompute the ....
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.... has to determine whether the company is one to which the provisions of section 23A apply; he has also to determine whether the company has distributed within twelve months immediately following the expiry of the previous year the statutory percentage of the total income of the company as by the taxes and levies prescribed therein; he has also to determine whether, having regard to the loss incurred by the company in the earlier years or to the smallness of the profits made in the previous year, the payment of a dividend or a larger dividend than that declared would be unreasonable. It is after making these enquiries that the Income-tax Officer may make the order directing payment of additional super-tax at the rates prescribed. The process to be followed is not the process of assessment, but of determining whether the liability should be charged and imposed .... Section 23A, before it was amended by the Finance Act, 1955, was undoubtedly procedural .... Section 23A(1) after it was amended by the Finance Act, 1955, provides within itself machinery for imposition of liability to pay additional super-tax, but it has not on that account been made a charging section. A charge to tax....
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....because what was held there was that an omission in the assessment order to add the interest due under section 18A(8) would be a mistake apparent on the record which would attract section 35. In S. Sankappa v. Income-tax Officer, the question before the Supreme Court was whether rectification of the assessment of the partners under section 35 after the firm's status was changed from "unregistered" to "registered" in appeal was permissible. In that connection the Supreme Court again considered the scope and implication of the term "assessment" and referred to its previous decision in Abraham's case and Kalawati Devi v. Harlalka's case, and observed that though in some sections the word "assessment" of income is used only with reference to computation of income in other sections it has been more comprehensively used and includes all proceedings starting with the filing of the return or issue of notice and ending with the determination of the tax payable by the assessee. Parikh's case was relied on before the Supreme Court but the court distinguished it on the ground that that was a case dealing with an order under section 23A and had no bearing on the facts before their Lordships in ....