1985 (5) TMI 20 - HC - Income Tax

Summary

Issues Involved:
1. Whether the sum of Rs. 2,98,000 encashed by the assessee can be assessed in the assessment year 1947-48.
2. Whether the rectification order by the Income-tax Officer was valid under section 35(6) of the 1922 Act or section 155(3) of the 1961 Act.
3. Whether the Tribunal was correct in holding that no competent appeal lay before the Appellate Assistant Commissioner against the rectification order.
4. Whether section 34(1D) of the 1922 Act barred the Revenue from rectifying the assessment order.

Detailed Analysis:

1. Assessment of Rs. 2,98,000 in the Assessment Year 1947-48:
The Tribunal and the High Court examined whether the sum of Rs. 2,98,000 encashed by the assessee from high denomination notes on January 19, 1946, should be assessed in the assessment year 1947-48. The Tribunal held that the amount was covered by a settlement under section 34(1B) of the 1922 Act, and thus, the assessee could not claim it should be assessed in the assessment year 1946-47. The High Court affirmed this view, stating that the settlement was conclusive under section 34(1D) and barred the assessee from reopening the issue. Consequently, the sum of Rs. 2,98,000 was rightly assessable in the assessment year 1947-48.

2. Validity of Rectification Order:
The rectification order by the Income-tax Officer was initially passed under section 155(3) of the 1961 Act. However, the Tribunal and the High Court held that since the original assessment was made under the 1922 Act, the rectification should be deemed to have been made under section 35(6) of the 1922 Act. The High Court relied on precedents, including Supreme Court decisions, to conclude that rectification proceedings are part of the assessment process and should follow the provisions of the Act under which the original assessment was made.

3. Competency of Appeal Before the Appellate Assistant Commissioner:
The Tribunal held that no competent appeal lay before the Appellate Assistant Commissioner against the rectification order, as it should be deemed to have been made under section 35(6) of the 1922 Act, which does not allow for an appeal. The High Court upheld this view, stating that the rectification order, although purportedly made under section 155(3) of the 1961 Act, should be treated as an order under section 35(6) of the 1922 Act, and thus, no appeal was competent before the Appellate Assistant Commissioner.

4. Bar Under Section 34(1D) of the 1922 Act:
The Tribunal and the High Court examined whether section 34(1D) of the 1922 Act barred the Revenue from rectifying the assessment order. The High Court held that section 34(1D) barred the assessee from reopening matters settled under section 34(1B), but it did not preclude the Income-tax Officer from rectifying an order, especially when it was not the subject of any settlement. The High Court noted that the settlement order allowed for future adjustments if new facts came to light, and thus, the rectification by the Income-tax Officer was justified.

Conclusion:
The High Court concluded that the sum of Rs. 2,98,000 was rightly assessable in the assessment year 1947-48 and upheld the Tribunal's view that no competent appeal lay before the Appellate Assistant Commissioner against the rectification order. The rectification was validly deemed to have been made under section 35(6) of the 1922 Act, and section 34(1D) did not bar the Revenue from making such rectifications. The questions referred in the taxation cases were answered in favor of the Revenue and against the assessee.