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Issues:
1. Interpretation of provisions under the Income-tax Act, 1961 and the Indian Income-tax Act, 1922 regarding rectification of assessments. 2. Application of section 155(4) of the Income-tax Act, 1961 to assessments completed under the Indian Income-tax Act, 1922. 3. Consideration of the retrospective effect of the Income-tax Act, 1961 on assessments under the Indian Income-tax Act, 1922. Analysis: The High Court of Delhi considered a case involving the interpretation of provisions under the Income-tax Act, 1961 and the Indian Income-tax Act, 1922 regarding the rectification of assessments for the years 1950-51 and 1951-52. The central question was whether the rectification of mistakes in assessments completed under the 1922 Act could be carried out under the provisions of section 155(4) of the 1961 Act. The assessee, a private limited company engaged in manufacturing and selling paints and colours, had filed loss returns for the assessment year 1949-50, which were allowed to be carried forward for future years. Subsequently, due to a police complaint in the late sixties, a best judgment assessment was made for the assessment year 1949-50, resulting in a change in the assessed income. This change impacted the assessments for the following years, 1950-51 and 1951-52, where carried forward losses were adjusted against the income. The Income-tax Officer initiated rectification proceedings under section 155 of the 1961 Act, leading to revised assessments for the years in question. The matter was appealed before the Appellate Assistant Commissioner and then to the Tribunal. The Tribunal held that the provisions of section 35 of the 1922 Act allowed for rectification in such cases, and section 155(4) of the 1961 Act could be considered an elaboration of the powers under section 35. However, the High Court disagreed with this interpretation. The Court analyzed the relevant provisions of both Acts, highlighting that the power of rectification under section 35 of the 1922 Act did not extend to cases where changes in one assessment year necessitated adjustments in subsequent years. Additionally, the Court noted that section 297(2)(a) of the 1961 Act mandated that proceedings under the old Act should be continued as if the new Act had not been passed, precluding the application of section 155(4) to assessments under the 1922 Act. Citing precedent, the Court emphasized that retrospective operation of statutes should not affect acquired rights or revive lost remedies. Despite recognizing the unfortunate situation where the carried forward loss had been allowed to be adjusted against subsequent incomes, the Court held in favor of the assessee, ruling against the Department. The Court declined to award costs, allowing each party to bear their own costs. In conclusion, the High Court ruled against the application of section 155(4) of the 1961 Act to assessments completed under the 1922 Act, emphasizing the need to uphold acquired rights and statutory limitations on retrospective application of laws.
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