1961 (1) TMI 75 - HC - Income Tax

Summary

Issues Involved:
1. Refusal of registration of the firm for the assessment years 1952-53 and 1953-54.
2. Jurisdiction of the Income-tax Officer to revise his own orders.
3. Application of Section 35(1) and Section 35(5) of the Income-tax Act.
4. Validity of the rectification orders passed by the Income-tax Officer and confirmed by the Commissioner.

Issue-wise Detailed Analysis:

1. Refusal of registration of the firm for the assessment years 1952-53 and 1953-54:
The firm, consisting of partners Arulanandam and Murugan, applied for registration under Section 26A of the Income-tax Act for the assessment years 1952-53 and 1953-54. The Income-tax Officer refused registration, citing the same reasons as for the assessment year 1949-50. However, on June 21, 1955, the Appellate Assistant Commissioner granted registration for the assessment year 1949-50. Subsequently, on March 29, 1956, the Income-tax Officer passed orders granting renewal of registration for the assessment years 1952-53 and 1953-54, without notice to the firm or its partners. The firm withdrew its appeals against the refusal of registration for these years, leading to the dismissal of the appeals by the Appellate Assistant Commissioner.

2. Jurisdiction of the Income-tax Officer to revise his own orders:
The Income-tax Officer issued notices to Arulanandam on March 27, 1957, proposing rectification of his assessment orders for 1952-53 and 1953-54, altering his status to that of a non-resident and assessing him on the basis that the firm was a registered firm. The assessee objected, contending that the Income-tax Officer had no jurisdiction. The objections were overruled, and rectification orders were issued on June 23, 1958. The Commissioner rejected the revision applications against these orders on October 27, 1958.

3. Application of Section 35(1) and Section 35(5) of the Income-tax Act:
The court examined whether Section 35(5) could be invoked, which allows rectification to give effect to an order passed by the Appellate Assistant Commissioner. The court concluded that since the appeals were dismissed due to withdrawal, there was no order by the Appellate Assistant Commissioner directing registration. Therefore, Section 35(5) could not apply. The court also considered the applicability of Section 35(1), which allows rectification of mistakes apparent on the face of the record. The Income-tax Officer's orders on March 29, 1956, were not based on any apparent mistake but on the Appellate Assistant Commissioner's decision for 1949-50. Thus, the Income-tax Officer had no jurisdiction under Section 35(1) to revise his earlier orders.

4. Validity of the rectification orders passed by the Income-tax Officer and confirmed by the Commissioner:
The court held that the orders dated March 29, 1956, were without jurisdiction. Consequently, the rectification orders dated March 27, 1957, and confirmed by the Commissioner, were also without jurisdiction. The court stated that the petitioners were entitled to treat the orders dated March 29, 1956, as non est in law and to seek relief to set aside the rectification orders.

Conclusion:
The court concluded that the orders passed by the Income-tax Officer under Section 35(5) were without jurisdiction. Neither Section 35(5) nor Section 35(1) authorized the Income-tax Officer to rectify the assessment orders based on the registration granted on March 29, 1956. Therefore, the rule nisi was confirmed, and the rectification orders and the Commissioner's subsequent orders were set aside. The petitions were allowed with one set of counsel's fee of Rs. 250 to be apportioned equally between Arulanandam and Murugan.