1985 (5) TMI 48 - HC - Income Tax

Summary

Issues:
- Interpretation of provisions of s. 13(1)(c)/13(2)(a) of the Income Tax Act, 1961
- Application of s. 154 for rectification of apparent legal mistake
- Jurisdiction of assessing officer in charging tax on specific income

Analysis:

The judgment pertains to an application under s. 256(2) of the Income Tax Act, 1961, by the Commissioner of Income-tax, Jodhpur, seeking direction to the Income-tax Appellate Tribunal to refer specific questions for the court's opinion. The primary issue revolves around the interpretation of provisions of s. 13(1)(c)/13(2)(a) of the Act concerning the taxability of income of a trust. The assessing officer found that the trust had advanced loans to a company at inadequate interest, leading to the applicability of s. 13(2)(a) and consequently, denial of exemptions under ss. 11 and 12 of the Act.

The crux of the matter lies in the assessing officer's rectification order under s. 154 of the Act, contending that the previous assessment had an apparent legal mistake in not taxing the entire income of the trust. The Commissioner of Income-tax (Appeals) held that the assessing officer's order exceeded jurisdiction and was not a glaring mistake. The Tribunal upheld this view, emphasizing that the mistake was not obvious or legal, thereby dismissing the appeal.

The court delved into various precedents to establish the rectifiability of such mistakes under s. 154 of the Act. Citing cases like M. K. Venkatachalam v. Bombay Dyeing and Mfg. Co. Ltd., it was argued that omissions to charge tax on the entire income are rectifiable errors. High Court judgments from different regions were also referenced to support the applicability of s. 154 in cases of similar oversights by assessing officers.

Ultimately, the court allowed the application under s. 256(2) of the Act, directing the Tribunal to refer a specific question regarding the assessing officer's failure to deny exemptions despite the applicability of s. 13(1)(c)/13(2)(a) provisions. The judgment underscores the rectifiability of apparent legal mistakes in tax assessments under s. 154 of the Income Tax Act, 1961, based on established legal principles and precedents.