1957 (4) TMI 77 - HC - Income Tax

Summary

Issues Involved:

1. Applicability of Section 35(5) of the Income-tax Act to assessments completed before 1st April, 1952.
2. Jurisdiction of the Income-tax Officer to rectify assessments under Section 35(1) and Section 35(5).
3. Limitation period for rectifying assessments under Section 35(1) and Section 35(5).
4. Validity of the rectification orders dated 27th March, 1954, by the Income-tax Officer.
5. Consequence of the Commissioner's order dated 30th September, 1955, on the rectification orders and relief granted for the assessment year 1948-49.

Detailed Analysis:

1. Applicability of Section 35(5) of the Income-tax Act to assessments completed before 1st April, 1952:

The principal contention of the learned counsel for the assessee was that the provisions of section 35(5) could not be applied to any assessment completed before 1st April, 1952. The court agreed with this contention, stating that Section 35(5) was not declaratory of a pre-existing law and authorized a new class of mistakes to be rectified. The court emphasized that neither in express terms nor by necessary intendment did section 35(5) apply to assessments completed before 1st April, 1952.

2. Jurisdiction of the Income-tax Officer to rectify assessments under Section 35(1) and Section 35(5):

The court noted that the Income-tax Officer had jurisdiction to exercise the powers vested in him by section 35(1) as well as those vested in him by section 35(5) on 4th May, 1953, and thereafter. However, the court also pointed out that the power to rectify what it referred to as "fictional" mistakes was vested in the Income-tax Officer on 1st April, 1952, and that section 35(5) conferred a power independent of those for the exercise of which section 34 and section 35(1) provided.

3. Limitation period for rectifying assessments under Section 35(1) and Section 35(5):

The relevant portion of section 35(1) stated that the Income-tax Officer may rectify any mistake apparent from the record within four years from the date of any assessment order. Section 35(5) directed that the period of four years referred to in section 35(1) should be computed from the date of the final order passed in the case of the firm. The court clarified that the period of limitation prescribed by section 35(1) was independent of section 35(5) and that the powers under section 35(5) could be invoked independently of section 35(1).

4. Validity of the rectification orders dated 27th March, 1954, by the Income-tax Officer:

The court concluded that the rectification ordered on 27th March, 1954, fell outside the period of four years from the original assessment date of 20th February, 1950, as prescribed by section 35(1). The court further stated that section 35(5) could not apply because the assessment in this case had been completed long before 1st April, 1952, when a fresh power to rectify assessments was conferred on the Income-tax Officer. Therefore, on 27th March, 1954, the Income-tax Officer had no jurisdiction to rectify the assessments of the assessee for the assessment years 1946-47 and 1947-48.

5. Consequence of the Commissioner's order dated 30th September, 1955, on the rectification orders and relief granted for the assessment year 1948-49:

The court noted that the order of the Commissioner dated 30th September, 1955, confirmed the rectification ordered by the Income-tax Officer for the assessment years 1946-47 and 1947-48 and directed rectification of the assessment for 1948-49, under which the petitioner would be entitled to a considerable amount of relief. The court agreed with the learned counsel for the Department that the petitioner should not be permitted to retain the benefit accruing from the order dated 30th September, 1955, while avoiding the liability imposed by that order. Consequently, the court set aside the entire order of the Commissioner dated 30th September, 1955, and the orders of the Income-tax Officer in relation to the assessment years 1946-47 and 1947-48.

Conclusion:

The petition was allowed, and the rule was made absolute. The entire order of the Commissioner dated 30th September, 1955, and the orders of the Income-tax Officer in relation to the assessment years 1946-47 and 1947-48 were set aside. No costs were awarded.