1966 (4) TMI 1 - HC - Income Tax

Income Tax officer has no jurisdiction to enquire into mixed question of fact and law in a provisional assessment u/s. 141 - assessment and demand notice based on such enquiry can be quashed by the High Court by issuing a writ

Issues Involved:
1. Provisional Assessment of Income Tax
2. Rebate Rate Determination
3. Jurisdiction of Income-tax Officer in Provisional Assessment
4. Interpretation of "Mineral Oil"
5. Relevance of Previous Year's Assessment
6. Claim of the Assessee on the Nature of Business
7. Procedural Requirements in Provisional Assessment

Detailed Analysis:

1. Provisional Assessment of Income Tax:
The petitioner, Burmah Shell Refineries Ltd., sought to quash the provisional assessment order dated 12th October 1965, made under Section 141 of the Indian Income-tax Act, 1961, which demanded a tax payment of Rs. 31,74,806.70. The petitioner argued that the provisional assessment should be rectified to grant a rebate of 35% instead of the 30% allowed.

2. Rebate Rate Determination:
The core issue was whether the petitioner was entitled to a rebate of 35% on income-tax, applicable to companies engaged in the manufacture or production of mineral oil, or 30%, applicable to other companies. The petitioner claimed it was engaged in the manufacture or production of mineral oil, and therefore entitled to the higher rebate.

3. Jurisdiction of Income-tax Officer in Provisional Assessment:
The court examined whether the Income-tax Officer had the jurisdiction to determine the nature of the petitioner's business during the provisional assessment. It was argued that the provisional assessment should be made on the basis of the return filed by the petitioner without delving into complex factual determinations.

4. Interpretation of "Mineral Oil":
The term "mineral oil" was not defined in the Act. Dictionaries and technical references indicated that "mineral oil" includes both crude oil and its refined products. The court noted that the expression "mineral oil" is wide enough to include both crude oil and the products obtained from it by refining.

5. Relevance of Previous Year's Assessment:
The court considered whether the assessment for the previous year (1964-65) was relevant. In the previous year, the petitioner had been provisionally assessed for surtax on the basis that it was engaged in the manufacture or production of mineral oil. The court held that while each assessment year is a separate unit, the previous year's assessment is not wholly irrelevant.

6. Claim of the Assessee on the Nature of Business:
The petitioner contended that it had consistently claimed to be engaged in the manufacture or production of mineral oil, a claim known to the Income-tax Officer. The court found that the Income-tax Officer was aware of this claim, as evidenced by the previous year's assessment proceedings and the petitioner's return for the current year.

7. Procedural Requirements in Provisional Assessment:
The court emphasized that provisional assessments are to be made in a summary manner based on the return and accompanying documents, without a detailed inquiry. The Income-tax Officer's role in provisional assessment is limited and does not extend to resolving complex factual disputes.

Conclusion:
The court concluded that the Income-tax Officer acted in excess of his jurisdiction by deciding the nature of the petitioner's business during the provisional assessment. The provisional assessment should have been made on the basis of the return filed by the petitioner, which claimed it was engaged in the manufacture or production of mineral oil. The petition was allowed, and the provisional assessment order and the notice of demand were quashed. The rule was made absolute with costs in favor of the petitioner.

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