1927 (1) TMI 3 - HC - Income Tax

Summary

Issues:
1. Interpretation of legal limitation preventing the Commissioner from passing an order under S. 33 of the Indian Income-tax Act resulting in an enhanced demand.

Analysis:
The judgment pertains to a reference under S. 61(1) of the Indian Income-tax Act regarding the legality of the Commissioner's order under S. 33 dated the 15th December 1925, leading to an increased tax demand. The Commissioner rectified a mistake in the assessment reducing the assessable income but calculated the tax at a higher rate, resulting in an enhanced demand. The Commissioner contended that the review proceedings initiated within one year of the demand date exempted the order from the one-year limitation period under S. 35. However, the High Court opined that the Commissioner's powers under S. 33 are subject to the same restrictions as an income-tax officer under S. 35, which limits rectification prejudicial to the assessee to one year from the demand date. The Court emphasized that the phrase "subject to the provisions of this Act" in S. 33 restricts the Commissioner from passing orders prejudicial to the assessee without time limits.

The Court further highlighted that even under S. 34, allowing re-assessment within one year for escaped or under-assessed income, the time restriction applies. It concluded that the Commissioner exceeded his authority by rectifying the mistake prejudicial to the assessee after the one-year limitation period, emphasizing that unlimited power to alter assessments would be against legislative intent. The Court clarified that the assessee's petition under S. 33 did not cover the rectification issue, thus not affecting the limitation period. Consequently, the Court held that the rectification made by the Commissioner after the one-year limit was not authorized by law.

In the final order, the Court returned the case to the Commissioner without a cost order due to the absence of the assessee during the proceedings. The judgment establishes the boundaries of the Commissioner's powers under S. 33 in rectifying mistakes prejudicial to the assessee, emphasizing adherence to the statutory limitation period for such rectifications, in line with the overarching principles of the Income-tax Act.