1965 (9) TMI 10 - HC - Income Tax

ITO had jurisdiction to proceed both under s. 34 and s. 35 of the 1922 Act & chose to proceed under the latter section. It cannot be said that he had no jurisdiction to proceed u/s 35 of the Act merely because he had also the jurisdiction to proceed u/s 34 - ITO undoubtedly had the power to rectify the error u/s 154 of the 1961 Act and, even if the proceedings were initiated by a notice under section 35 of the 1922 Act, it can no longer be said that the order made u/s 154 of the 1961 Act was bad

Issues:
1. Application for a certificate under article 133(1)(a) and (b) of the Constitution.
2. Whether the Income-tax Officer could look into the records of the assessee of other years for the purpose of making out the case of a mistake apparent on the face of the records.
3. Whether the mistake contemplated by section 35 of the 1922 Act must be glaring, obvious, and self-evident.
4. Whether sections 34 and 35 of the 1922 Act are mutually exclusive.
5. Whether the impugned order was made under section 154 of the Income-tax Act, 1961, and its retrospective application.
6. Whether a notice issued under section 33B of the 1922 Act for revising assessments completed before the 1961 Act came into operation is valid.
7. Whether there are substantial questions of law involved in the appeal.
8. Prayer for a certificate under article 133(1)(c) of the Constitution.

Analysis:

1. The application sought a certificate under article 133(1)(a) and (b) or alternatively under article 133(1)(c) of the Constitution. The petitioner contested the rectification of an assessment order for the assessment year 1958-59. The Income-tax Officer rectified the assessment order by adding back a sum of Rs. 13,37,370, which was held to have been distributed as dividends. The petitioner argued against invoking section 35 of the 1922 Act, claiming no apparent error on record. The High Court affirmed the decision, requiring the petitioner to establish substantial questions of law for an appeal to the Supreme Court.

2. The first issue was whether the Income-tax Officer could consider records of other years to establish a mistake apparent on the face of the records under section 35 of the 1922 Act. The Court cited precedents indicating that such cross-year examination was permissible, based on Supreme Court judgments. The Court concluded that this was not a substantial question of law.

3. The next issue concerned the nature of mistakes under section 35, whether they must be glaring and obvious. The petitioner argued that the error should be self-evident, but the Court found no scope for debate in this case due to clear discrepancies in dividend declarations. The Court held that the existence of a mistake was apparent on the records.

4. The Court addressed the question of whether sections 34 and 35 of the 1922 Act are mutually exclusive. It was determined that the Income-tax Officer had jurisdiction under both sections and choosing to proceed under section 35 did not negate the authority to act under section 34. The Court ruled that this was not a substantial question of law.

5. The issue of the retrospective application of section 154 of the Income-tax Act, 1961, was raised. The Court held that procedural law amendments have retrospective effect. The rectification under section 154 was deemed valid even though initiated under section 35 of the 1922 Act, as the new procedural law applied to pending cases.

6. The Court considered a precedent regarding the validity of notices issued under section 33B of the 1922 Act after the 1961 Act came into operation. The petitioner argued that a different view was taken in a previous case, suggesting a substantial question of law. However, the Court distinguished the cases and concluded that no substantial question of law existed.

7. The Court evaluated whether there were substantial questions of law involved in the appeal. The petitioner failed to demonstrate significant legal issues warranting an appeal to the Supreme Court, leading to the dismissal of the application.

8. Lastly, the Court rejected the prayer for a certificate under article 133(1)(c) of the Constitution, as the petitioner did not present arguments justifying the case's significance for appeal to the Supreme Court. The application was dismissed with costs.

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