1976 (9) TMI 1 - SC - Income Tax

Language of section 35(1) is not wide enough conferring power on the Income-tax Officer to amend any order passed by him under the Act and may not be at par with the wide powers conferred on him under section 154(1)(a) of the 1961 Act. Yet it is not too narrow to cover only the order of assessment or of refund in a very restricted or limited sense. It is wide enough to take within its sweep some other orders made under the Act including an order under section 23A - revenue s appeal allowed

Issues Involved:
1. Jurisdiction and competency of the Income-tax Officer under section 35(1) of the Indian Income-tax Act, 1922, to rectify mistakes in orders passed under section 23A.
2. Interpretation of the term "assessment" and its implications for rectification under section 35(1).
3. Applicability of the limitation period for rectification under section 35(1).

Issue-Wise Detailed Analysis:

1. Jurisdiction and Competency of the Income-tax Officer under Section 35(1):
The primary issue was whether the Income-tax Officer had the jurisdiction and competency to rectify mistakes in his previous orders under section 23A of the Indian Income-tax Act, 1922. The High Court had allowed writ petitions challenging the rectification orders, relying on the decisions in M. M. Parikh, Income-tax Officer v. Navanagar Transport and Industries Ltd., and S. Sankappa v. Income-tax Officer. However, the Supreme Court found that the High Court incorrectly applied these precedents. The Supreme Court clarified that the Income-tax Officer indeed had the jurisdiction and competency to rectify mistakes under section 35(1) in orders passed under section 23A, as such orders are part of the assessment proceedings and can be considered supplementary assessment orders.

2. Interpretation of the Term "Assessment":
The Supreme Court delved into the interpretation of the term "assessment" as used in the Indian Income-tax Act. Citing the Privy Council's decision in Commissioner of Income-tax v. Khemchand Ramdas, the Court explained that "assessment" can mean the computation of income, determination of the amount of tax payable, or the entire procedure for imposing liability on the taxpayer. This comprehensive interpretation was supported by previous decisions, including C. A. Abraham v. Income-tax Officer, Kottayam, and Kalawati Devi Harlalka v. Commissioner of Income-tax. The Court emphasized that an order under section 23A, although not literally an assessment order, is part of the assessment proceedings and can be rectified under section 35(1).

3. Applicability of the Limitation Period for Rectification:
The Supreme Court addressed the applicability of the limitation period for rectification under section 35(1). The Court noted that the term "assessment order" in section 35(1) includes orders made under section 23A, as these are part of the assessment record. The Court distinguished the case from Parikh's case, where the term "order of assessment" was interpreted narrowly for the purposes of section 34. The Court clarified that the limitation period for rectification under section 35(1) starts from the date of the assessment order, which includes orders under section 23A.

The Court also referred to the corresponding provisions in the Income-tax Act, 1961, specifically section 154(1), which explicitly allows the rectification of any order passed by the Income-tax Officer. Although the language of section 35(1) of the 1922 Act is not as broad, the Court held that it is sufficiently wide to include orders under section 23A.

Conclusion:
The Supreme Court concluded that the Income-tax Officer had the authority to rectify mistakes in orders passed under section 23A of the Indian Income-tax Act, 1922, under section 35(1). The Court set aside the judgment of the High Court and dismissed the writ petitions filed by the respondent companies. The appeals by the revenue were allowed, and the respondent companies were ordered to pay costs in the Supreme Court.

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