1998 (9) TMI 60 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Surtax Officer in passing rectification orders for the assessment years 1970-71 and 1972-73.
2. Validity of the rectification orders passed for the assessment years 1970-71 and 1972-73.

Summary:

Issue 1: Jurisdiction of the Surtax Officer in Passing Rectification Orders

The Tribunal was justified in holding that the Surtax Officer (STO) was within his jurisdiction in passing the rectification orders for the assessment years 1970-71 and 1972-73. The STO noticed mistakes in the original assessment orders where proposed dividends were not deducted from the general reserves as required by rule 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964. It was held that this omission was a mistake of law apparent from the record, justifying rectification under section 13 of the Act.

Issue 2: Validity of the Rectification Orders

The Tribunal upheld the validity of the rectification orders. For the assessment year 1970-71, the STO rectified the mistake by deducting the proposed dividend of Rs. 16,38,000 from the general reserve as on April 1, 1969, although the correct figure should have been Rs. 29,25,000. For the assessment year 1972-73, the STO deducted Rs. 40,04,000 instead of the correct figure of Rs. 39,00,000 from the general reserve as on April 1, 1971. The assessee did not challenge these figures before the Tribunal, and thus the Tribunal was not required to address the correctness of these amounts. The Tribunal's decision was based on the contentions raised before it, which focused on whether there was a debatable point and whether the proposed dividend should form part of the general reserve.

The court held that the STO had jurisdiction to rectify the mistake but committed an irregularity by deducting incorrect figures. The assessee cannot challenge the rectification orders on the grounds of these errors in the amounts since they did not raise this issue before the Tribunal.

Conclusion:

1. The STO was within his jurisdiction in passing the rectification orders but committed an irregularity by taking wrong figures of deduction.
2. The Tribunal was right in upholding the validity of the rectification orders based on the grounds raised before it, and the assessee cannot now challenge the errors in the rectification orders regarding the amounts deducted.