1958 (11) TMI 34 - HC - Income Tax

Summary

Issues Involved:
1. Legality of the Income-tax Officer's order rectifying the assessment order.
2. Jurisdiction of the Income-tax Officer to charge penalty interest under section 18A(6).
3. Validity of the Commissioner's order modifying the Income-tax Officer's rectification order.
4. Whether the original order of the Income-tax Officer merged with the Commissioner's order.
5. Existence of an error of law apparent on the face of the record.

Issue-wise Detailed Analysis:

1. Legality of the Income-tax Officer's Order Rectifying the Assessment Order:
The petitioner challenged the legality of the Income-tax Officer's order, which rectified the original assessment order to include penalty interest under section 18A(6). The original assessment did not charge any penalty interest, but the Income-tax Officer later issued a notice of demand for Rs. 14,929-10-0, claiming it was a mistake not to charge the penalty interest initially. The rectification was made under section 35 on 4th October 1956, while the original assessment order was dated 31st March 1953. The petitioner argued that the rectification was made without jurisdiction and was an error apparent on the face of the record.

2. Jurisdiction of the Income-tax Officer to Charge Penalty Interest Under Section 18A(6):
The court examined whether the Income-tax Officer had the jurisdiction to charge penalty interest retrospectively under section 18A(6). The fifth proviso to section 18A(6), which was added retrospectively from 1st April 1952, allowed the Income-tax Officer discretion to reduce or waive interest. The court referred to a previous decision in Shantilal Rawji v. M. C. Nair, where it was held that the Income-tax Officer's failure to charge interest initially was an error apparent on the face of the record and could be rectified under section 35. However, the court also noted that the Income-tax Officer had no jurisdiction to pass the rectification order if it was assumed that he had decided to waive the interest initially.

3. Validity of the Commissioner's Order Modifying the Income-tax Officer's Rectification Order:
The Commissioner of Income-tax, upon revision, substantially dismissed the petitioner's application but modified the order to charge penal interest for a shorter period. The petitioner argued that the Commissioner should have held that the Income-tax Officer had no jurisdiction to pass the rectification order. The court agreed that if the Income-tax Officer's order was without jurisdiction, the Commissioner's order would also be erroneous and an error apparent on the face of the record.

4. Whether the Original Order of the Income-tax Officer Merged with the Commissioner's Order:
The petitioner contended that the original order of the Income-tax Officer did not merge with the Commissioner's order in revision. The court distinguished between an appeal and a revision, noting that in an appeal, the trial court's order merges with the appellate court's order, whereas in a revision, the revisional court's order modifies or sets aside the lower court's order without merging. However, the court emphasized that the effective and operative order, which must be quashed for relief, was the Commissioner's order.

5. Existence of an Error of Law Apparent on the Face of the Record:
The court considered whether there was an error of law apparent on the face of the record. It referred to the Supreme Court's decision in Hari Vishnu Kamath v. Syed Ahmad Ishaque, which clarified the principle of an error of law apparent on the face of the record. The court concluded that the Income-tax Officer's lack of jurisdiction to revise the order was a clear error apparent on the face of the record, and the Commissioner of Income-tax's failure to recognize this error constituted another error apparent on the face of the record.

Conclusion:
The court allowed the petition, issuing a writ of certiorari to quash the orders passed by the respondents under section 33A(2) and section 35. The respondents were directed to pay the costs of the petitioner. The court also noted that the costs incurred up to the stage of the amendment should be set off, resulting in neither party having to pay any costs in respect of the petition. The petition was thus allowed.