1973 (10) TMI 18 - HC - Income Tax

Issues Involved:

1. Jurisdiction of the Tribunal to rectify its order.
2. Competency and maintainability of the appeal before the Appellate Assistant Commissioner.
3. Delay and laches in filing the special civil application.
4. Application of section 35 of the Indian Income-tax Act, 1922, versus section 155 of the Income-tax Act, 1961.
5. Alternative remedy under Articles 226 and 227 of the Constitution of India.

Detailed Analysis:

1. Jurisdiction of the Tribunal to Rectify its Order:

The primary issue was whether the Tribunal had the jurisdiction to rectify its order dated March 5, 1970, under section 254(2) of the Income-tax Act, 1961. The Tribunal relied on the Supreme Court decision in *M. M. Parikh, Income-tax Officer v. Navanagar Transport and Industries Ltd.* [1967] 63 ITR 663 (SC) to set aside its earlier order. However, the High Court held that the Tribunal's action was based on a debatable point of law, which does not constitute a "mistake apparent from the record." The High Court emphasized that a mistake apparent from the record must be an "obvious and patent mistake," not one that requires a detailed reasoning process. Consequently, the Tribunal acted without jurisdiction in rectifying its order.

2. Competency and Maintainability of the Appeal before the Appellate Assistant Commissioner:

The Tribunal initially upheld a preliminary objection that the appeal before the Appellate Assistant Commissioner was not competent, as the order of the Income-tax Officer was under section 35 of the 1922 Act, which did not allow for an appeal. The High Court supported this view, referencing the Division Bench decision in *Mandal Ginning and Pressing Co. Ltd. v. Commissioner of Income-tax* [1973] 90 ITR 332 (Guj), which held that an assessee has no right to appeal against an order of rectification made under section 35(1) of the 1922 Act.

3. Delay and Laches in Filing the Special Civil Application:

The second respondent-firm argued that there was a delay and laches on the part of the revenue in filing the special civil application. The High Court rejected this contention, stating that the delay from August 26, 1970, to December 17, 1970, did not prejudice the second respondent-firm. The Court noted that the firm had no reason to seek a reference to the High Court as long as the order of August 26, 1970, stood in its favor.

4. Application of Section 35 of the Indian Income-tax Act, 1922, Versus Section 155 of the Income-tax Act, 1961:

The High Court analyzed whether the proceedings for the withdrawal of development rebate should be governed by section 35 of the 1922 Act or section 155 of the 1961 Act. Citing the Supreme Court decision in *S. Sankappa v. Income-tax Officer, Central Circle II* [1968] 68 ITR 760 (SC), the Court concluded that since the returns were filed before the commencement of the 1961 Act, the proceedings should be governed by section 35 of the 1922 Act. The Court dismissed the applicability of section 34(3)(b) of the 1961 Act, reinforcing that the recomputation of development rebate should be done under the 1922 Act.

5. Alternative Remedy under Articles 226 and 227 of the Constitution of India:

The second respondent-firm contended that the department should have pursued an alternative remedy by way of a reference against the Tribunal's rectification order. The High Court dismissed this objection, stating that when a Tribunal acts without jurisdiction, the question of alternative remedy does not arise. The Court emphasized that an order passed without jurisdiction is "non est" (not existing in law), and thus, the High Court can quash such an order under Articles 226 and 227.

Conclusion:

The High Court allowed the special civil application, quashing the Tribunal's order dated August 26, 1970, and restoring the Tribunal's original order dated March 5, 1970. The second respondent-firm was ordered to pay the costs of the special civil application to the petitioner.

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