1976 (8) TMI 5 - SC - Income Tax

As the appeal succeeds on a preliminary ground we do not feel it necessary to express any opinion on the question as to whether or not the Appellate Tribunal under the Excess Profits Tax Act has statutory or inherent power to review and rectify mistakes in its orders - revenue s appeal is allowed

Issues Involved:
1. Assessment of excess profits tax without adjustments for capital variations.
2. Failure of the Tribunal to consider and record a finding on ground No. 1.
3. Applicability of section 35 of the Indian Income-tax Act, 1922, to the Tribunal's orders under the Excess Profits Tax Act.
4. Jurisdiction of the High Court under article 226 of the Constitution in tax matters.

Detailed Analysis:

1. Assessment of Excess Profits Tax Without Adjustments for Capital Variations:
The assessee, M/s S. B. Singhar Singh and Sons, was assessed to excess profits tax for the accounting periods ending March 31, 1945, and March 31, 1946. The Excess Profits Tax Officer did not make adjustments for capital variations, citing the inability to ascertain these variations accurately due to incomplete accounts. The Appellate Assistant Commissioner upheld this decision, stating that no exact figures or computations were provided by the assessee. The Tribunal also did not grant any relief on this ground, and the assessee's subsequent applications for rectification and review were dismissed.

2. Failure of the Tribunal to Consider and Record a Finding on Ground No. 1:
The assessee argued that the Tribunal failed to consider ground No. 1, which related to adjustments in standard profits due to capital variations. The High Court held that it was the duty of the Tribunal to record a finding on this ground and that the Tribunal should have reviewed its orders when the mistake was brought to its notice. However, the Supreme Court found that the assessee did not provide a complete statement of accounts showing variations in capital and inferred that ground No. 1 was likely not argued before the Tribunal. The Supreme Court concluded that the High Court unjustifiably interfered in the Tribunal's orders.

3. Applicability of Section 35 of the Indian Income-tax Act, 1922:
The High Court ruled that section 35, which provides a four-year limitation for rectification of mistakes, did not apply to the Tribunal's orders under the Excess Profits Tax Act. The Tribunal had refused to treat the assessee's application for rectification as it was time-barred. The Supreme Court did not express an opinion on whether the Tribunal had the statutory or inherent power to review and rectify mistakes in its orders, as the appeal was decided on other grounds.

4. Jurisdiction of the High Court Under Article 226 of the Constitution:
The Supreme Court emphasized that the High Court should exercise its extraordinary jurisdiction under article 226 only in cases of infringement of fundamental rights or where taxing authorities assume jurisdiction they do not possess. The Supreme Court found that the High Court assumed jurisdiction based on an incorrect assumption that the Tribunal arbitrarily refused to consider ground No. 1. The Supreme Court held that this was not a fit case for the High Court to exercise its special jurisdiction under article 226 and allowed the appeal on this preliminary ground.

Conclusion:
The Supreme Court allowed the appeal and dismissed the writ petition, concluding that the High Court should not have interfered with the Tribunal's orders. The assessee was ordered to pay the costs of the appellant. The Supreme Court did not address the broader question of the Tribunal's power to review and rectify its orders.

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