1972 (9) TMI 1 - SC - Income Tax

Rectification order made under section 35 - limitation - final order was, the one made by the Income-tax Officer consequent to the Commissioner s revisional order - time limit for passing rectification order in the case of the partners should be reckoned from the date of such consequential order - held that rectification under section 35(5) of the Act on March 16, 1965, is within time - assessee s appeal is dismissed

Summary

Issues: Appeal against the judgment of the Andhra Pradesh High Court regarding the order of the Income-tax Officer under section 35(5) of the Indian Income-tax Act, 1922. Two questions raised before the High Court: (1) Whether the proceedings under section 35 of the old Act are void ab initio due to the enactment of the Income-tax Act, 1961, and (2) Whether the rectification order under section 35 is barred by limitation.

Analysis:

The appellant, assessed as a Hindu joint family for the years 1949-50 and 1950-51, had an eight annas share in a firm at Bombay. The Income-tax Officer completed the assessment for 1950-51 subject to rectification under section 35 of the Act. The firm's assessment was revised by the Commissioner under section 33A(2) due to improper estimation. The matter was remanded to the Income-tax Officer for reassessment based on actual information from the assessee's books. However, the assessee failed to cooperate, leading to the Income-tax Officer's final estimate of the firm's income at Rs. 26 lakhs on January 29, 1963. Subsequently, the Income-tax Officer rectified the appellant's assessment under section 35(5) on March 16, 1965, including an income of Rs. 13 lakhs from the firm.

The High Court was approached challenging the validity of the rectification order on the grounds of limitation and the effect of the enactment of the Income-tax Act, 1961, on proceedings under the old Act. The first question regarding the impact of the new Act was abandoned, citing precedent. The High Court rejected the contention that the rectification order was time-barred under section 35.

Before the Supreme Court, the appellant argued that the final order for rectification should be dated August 31, 1955, the date of the Commissioner's order under section 33A(2). However, the Court clarified that the final order for rectification was the Income-tax Officer's estimate on January 29, 1963, following the Commissioner's directions. As the rectification under section 35(5) was done on March 16, 1965, within four years of the final order, the Court held the appeal to be without merit and dismissed it with costs.