1982 (4) TMI 21 - HC - Income Tax

Summary

Issues:
Jurisdiction under section 154 of the Income-tax Act, 1961, or section 35 of the Indian Income-tax Act, 1922, to rectify a mistake apparent from the record pertaining to an order passed under section 23A of the Indian Income-tax Act, 1922.

Analysis:
The case involved a reference under section 256(1) of the Income-tax Act, 1961, concerning the assessment year 1960-61. The issue revolved around the jurisdiction of the Income-tax Officer (ITO) to rectify a mistake apparent on the record in an order passed under section 23A of the Indian Income-tax Act, 1922. The ITO had raised additional super-tax liability through a rectification order under section 154 of the Income-tax Act, 1961. The assessee contended that the rectification was without jurisdiction as it should have been done under section 35 of the Indian Income-tax Act, 1922, given the assessment year predated the Income-tax Act, 1961.

The Appellate Assistant Commissioner (AAC) rejected the assessee's objections, leading to an appeal to the Tribunal. The Tribunal held that the provisions of the Indian Income-tax Act, 1922, were applicable due to section 297(2)(e) of the Income-tax Act, 1961. It concluded that section 35 of the Indian Income-tax Act, 1922, did not empower the ITO to rectify an order passed under section 23A of that Act, setting aside the rectification order.

The Tribunal's decision was challenged, posing the question of whether the ITO had jurisdiction under section 154 of the Income-tax Act, 1961, or section 35 of the Indian Income-tax Act, 1922, to rectify the mistake in the order dated 10th March, 1961. The Commissioner argued that the ITO could rectify the order under section 35 of the Indian Income-tax Act, 1922, even if the reference in the order was to section 154 of the Income-tax Act, 1961. Citing precedent, the Commissioner contended that rectifying an error in an order under section 23A fell within the ambit of section 35(1) of the Indian Income-tax Act, 1922.

The High Court concurred with the Commissioner's stance, emphasizing that referencing the wrong section in the rectification order did not affect its validity as long as the ITO had the power to rectify the mistake. The Court referenced a previous decision by the Gujarat High Court, supporting the notion that a wrong reference to the power used for an order did not invalidate it if there was a legitimate power under which the order could be made. Despite the absence of the assessee's counsel during the proceedings, the Court ruled against the assessee, affirming the validity of the rectification order and directing the assessee to pay the costs of the reference.