1985 (7) TMI 41 - HC - Income Tax

Summary

Issues: Assessment under section 23A of the Indian Income-tax Act, 1922; Legality of multiple orders under section 23A; Interpretation of powers of the Income-tax Officer under section 23A.

Analysis:

The case involved an assessment under section 23A of the Indian Income-tax Act, 1922, for the year 1961-62. The assessee appealed to the Appellate Assistant Commissioner and then to the Tribunal, resulting in a reduction of the total income. However, during the pendency of the appeal before the Tribunal, the Income-tax Officer passed an order raising a demand for additional super-tax due to the failure of the assessee to distribute the statutory percentage of dividends.

The Appellate Assistant Commissioner vacated the order under section 23A, but the Revenue appealed to the Tribunal. The Tribunal, in April 1968, further reduced the taxable income of the assessee. Subsequently, the Income-tax Officer reopened the assessment of the assessee for the year.

There were multiple orders passed under section 23A by the Income-tax Officer, leading to a question of the legality of such actions. The Tribunal referred the question of law to the High Court regarding the cancellation of the second order passed under section 23A in 1972. The High Court relied on a previous decision and concluded that the Income-tax Officer does not have the power to act more than once under section 23A. The Court emphasized that section 23A is a penal provision and does not provide for multiple orders by the Income-tax Officer. It was held that if an order under section 23A is prejudicial to the Revenue, it can only be rectified by the Commissioner of Income-tax under section 33B.

In line with the precedent, the High Court answered the question in favor of the assessee, stating that the Income-tax Officer does not have the authority to issue multiple orders under section 23A. The judgment highlighted the absence of provisions in section 23A for initiating subsequent proceedings and clarified that the power to rectify prejudicial orders lies with the Commissioner of Income-tax under section 33B. The Court ruled in favor of the assessee, emphasizing the limited powers of the Income-tax Officer under section 23A.