1958 (11) TMI 36 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the Commissioner's order under section 33B of the Income-tax Act.
2. Jurisdiction of the Commissioner to revise orders for assessment years prior to 1948-49.
3. Competence of the reference to the High Court under section 66(1).
4. Time limits for making assessments or reassessments under section 34.

Issue-wise Detailed Analysis:

1. Validity of the Commissioner's Order under Section 33B:
The Commissioner revised the Income-tax Officer's (ITO) order, which declared only a portion of the undistributed profits as dividends under section 23A. The Commissioner declared the entire undistributed profits as dividends. The Tribunal quashed this order, arguing that section 33B, enacted in 1948, could not be applied to assessment years before 1948-49. The High Court, however, held that section 33B, effective from March 30, 1948, allowed the Commissioner to revise any ITO order passed after this date, regardless of the assessment year. Thus, the Commissioner's order was valid.

2. Jurisdiction of the Commissioner to Revise Orders for Assessment Years Prior to 1948-49:
The Tribunal's view that section 33B could not be applied to assessment years before 1948-49 was based on a misinterpretation. The High Court clarified that section 33B could be applied to any order passed after March 30, 1948, irrespective of the assessment year. This interpretation was supported by other High Court decisions, including Calcutta Discount Co. Ltd. and Chotanagpur Banking Association cases, which confirmed that the Commissioner could revise orders made after the effective date of section 33B.

3. Competence of the Reference to the High Court under Section 66(1):
The respondent's counsel argued that the reference was incompetent because section 66(1) only allowed references for orders passed in appeals under section 33, which pertains to sections 28 and 31. However, the High Court overruled this objection, stating that section 33B(3) allows appeals to the Appellate Tribunal, and section 33(4) treats such appeals similarly to those under section 33(1). Thus, the reference to the High Court was competent.

4. Time Limits for Making Assessments or Reassessments under Section 34:
The respondent raised a new argument that the orders under section 23A and section 33B were infructuous because the time limits for assessments or reassessments under section 34 had expired. The High Court dismissed this argument, noting that the respondent had not raised this issue before the Tribunal or the income-tax authorities. Additionally, the High Court referred to the Bombay High Court's decision in Navinchandra Mafatlal's case, which held that the time limit for reassessment under section 34 starts from the date of the order under section 23A. Therefore, the time limits under section 34 did not invalidate the Commissioner's order.

Conclusion:
The High Court concluded that the Commissioner's order under section 33B was valid and within jurisdiction, the reference to the High Court was competent, and the time limits for reassessments under section 34 did not affect the validity of the orders. The question referred was answered in the affirmative, in favor of the Department and against the respondent.