1978 (2) TMI 68 - HC - Income Tax

Companies Profits Surtax, Income Tax, Mistake Apparent From Record, Rectification Of Mistakes

Summary

Issues Involved:
1. Validity of the ITO's action under Section 13 of the Companies Profits (Surtax) Act, 1964.
2. Whether there was a mistake apparent from the record.
3. Timeliness of the ITO's action under Section 13.
4. Applicability of Section 14 of the Companies Profits (Surtax) Act, 1964, as amended by the Taxation Laws (Amendment) Act, 1970.

Detailed Analysis:

Issue 1: Validity of the ITO's Action under Section 13 of the Companies Profits (Surtax) Act, 1964
The primary issue was whether the ITO's action in rectifying his order passed in September 1968 under Section 13 of the Surtax Act was justified both in law and equity. The Tribunal had upheld the ITO's action, and the High Court was tasked with determining the correctness of this decision.

Issue 2: Whether There Was a Mistake Apparent from the Record
The assessee argued that the order under Section 13 was bad in law because there was no mistake apparent from the record. The court examined the relevant provisions of the Surtax Act and the Income-tax Act. The ITO had initially allowed additional tax liability arising from the income-tax assessment under Section 147 to be deducted from the chargeable profits. However, after the AAC canceled the order under Section 147, the ITO modified the Surtax order to reflect this change. The court noted that Section 13 allows for rectification of any mistake apparent from the record, and the AAC's order formed part of the surtax assessment records.

Issue 3: Timeliness of the ITO's Action under Section 13
The assessee contended that the order under Section 13 was barred by limitation. Section 13(1) specifies that rectification must occur within four years of the original order. The original order was passed in September 1968, and the rectification occurred in April 1971, which was within the four-year limit. Therefore, the court found that the ITO's action was timely.

Issue 4: Applicability of Section 14 of the Companies Profits (Surtax) Act, 1964, as Amended by the Taxation Laws (Amendment) Act, 1970
The assessee argued that the ITO could not invoke Section 14, as amended with effect from April 1, 1971, to recompute chargeable profits based on an order passed prior to this date. The court noted that Section 14 was introduced to address recomputation of chargeable profits following orders under specific sections of the Income-tax Act. However, the court found that the ITO had acted under Section 13 to rectify a mistake apparent from the record, not under Section 14. The court held that the records of income-tax assessment and surtax assessment are closely connected and integral to each other, thus justifying the ITO's action under Section 13.

Conclusion
The High Court concluded that the ITO had the jurisdiction and authority under Section 13 of the Companies Profits (Surtax) Act, 1964, to rectify the order passed in September 1968. The court answered the question in the affirmative and in favor of the revenue, holding that the ITO's action was justified both in law and equity. Each party was ordered to bear its own costs.