1967 (1) TMI 6 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction under Sections 35(7) and 35(8) of the Indian Income-tax Act.
2. Delay in filing the petition.
3. Validity of rectification orders.
4. Issuance of notice of demand.

Issue-wise Detailed Analysis:

1. Jurisdiction under Sections 35(7) and 35(8) of the Indian Income-tax Act:

The petitioners challenged the orders made by the respondent under Sections 35(7) and 35(8) of the Indian Income-tax Act, asserting that the orders were without jurisdiction. The court examined whether the conditions necessary for the application of these sub-sections were satisfied. Section 35(8) allows for the recomputation of total income as a rectification of a mistake apparent from the record when a firm or company is reassessed under Section 34, and an order under Section 23A is subsequently made. The petitioners contended that the inclusion of deemed dividends in the assessment could only be done through Section 34 proceedings, not under Section 35. However, the court found that in cases where the Income-tax Officer had the information about the company's assessment under Section 23A and omitted to include it in the assessment due to oversight, the omission could be rectified under Section 35. The court concluded that the orders were not patently without jurisdiction.

2. Delay in Filing the Petition:

The petition was filed on 11th July 1964, challenging orders passed on 23rd February 1961 and 15th March 1961. The court noted a gross delay in filing the petition and emphasized that no explanation was provided by the petitioners for the delay. The petitioners argued that the delay should be condoned because the orders were patently without jurisdiction. The court referred to precedents, indicating that while a patent lack of jurisdiction might allow for delay to be overlooked, the present case did not fall into that category. The court found that the petitioners failed to provide a satisfactory explanation for the delay, and thus, the petition was liable to be rejected on this ground alone.

3. Validity of Rectification Orders:

The court examined the circumstances under which the rectification orders were made. For the assessment year 1950-51, the order dated 23rd February 1961 was made following directions from the Appellate Assistant Commissioner. The court found that the conditions for applying Section 35(8) were satisfied and that the rectification was justified. For the assessment year 1951-52, the original assessment failed to include the deemed dividend, which was an obvious mistake. The subsequent rectification under Section 35 was deemed appropriate. The court also addressed the petitioners' contention that Section 35(7) was incorrectly applied instead of Section 35(8). The court concluded that even if there was an error in applying the specific sub-section, it did not result in a patent lack of jurisdiction.

4. Issuance of Notice of Demand:

The petitioners argued that the notices of demand issued in January 1964 were illegal and without jurisdiction. The court noted that the notices were consequential to the orders passed under Sections 35(7) and 35(8). Since the court found that the orders were not without jurisdiction, the notices of demand were also valid. The court emphasized that the petitioners could not ignore the orders and wait until the notices of demand were issued to challenge them. The failure to challenge the orders promptly contributed to the rejection of the petition.

Conclusion:

The court dismissed the petition due to the gross delay in filing and found that the orders under Sections 35(7) and 35(8) were not patently without jurisdiction. The rule was discharged with costs.