1966 (11) TMI 4 - HC - Income Tax

IT Act of 1922 - IT Act of1961 - proceedings for enhancement of the petitioner s assessment, including the notice dated April 23, 1966, issued under s. 251(2) of the Act of 1961 are without jurisdiction

Summary

Issues:
1. Jurisdiction of Appellate Assistant Commissioner to enhance assessment under the Income-tax Act of 1961.
2. Application of the Income-tax Act of 1961 to assessment proceedings initiated under the Act of 1922.
3. Validity of notice issued under section 251(2) of the Income-tax Act of 1961 for enhancing assessment.

Analysis:

The judgment pertains to a partnership firm engaged in the footwear business that filed its income tax return for the assessment year 1960-61. The Income-tax Officer issued an assessment order under section 23(3) of the Income-tax Act, 1922. Subsequently, the Appellate Assistant Commissioner initiated proceedings to enhance the assessment, leading to a notice dated April 23, 1966, under section 251(2) of the Income-tax Act of 1961. The petitioner challenged the jurisdiction of the Appellate Assistant Commissioner to enhance the assessment.

The key contention revolved around the applicability of the provisions of the Income-tax Act of 1961 to the assessment proceedings initiated under the Act of 1922. The judgment clarified that since the return was filed before the commencement of the Act of 1961, proceedings for assessment were required to be conducted as if the new Act had not been passed, as per section 297(2)(a) of the Act of 1961. Therefore, the assessment order made under the Act of 1922 was to be considered valid.

Moreover, the judgment highlighted the Central Government's Income-tax (Removal of Difficulties) Order, 1962, which mandated that appeal proceedings in respect of orders under the repealed Act were to be conducted as if the new Act had not been passed. This meant that the appeal filed by the petitioner was to be disposed of in accordance with the provisions of the Act of 1922, including any proceedings initiated by the Appellate Assistant Commissioner for enhancing the assessment.

The judgment emphasized that the jurisdiction to enhance the assessment stemmed from section 31(3)(a) of the Act of 1922. It was noted that the Appellate Assistant Commissioner could not rely on the provisions of the Act of 1961, specifically section 251(a), to enhance the assessment. As a result, the notice issued under section 251(2) of the Act of 1961 for enhancing the assessment was deemed to be without jurisdiction.

Consequently, the petition was allowed, and the proceedings for enhancing the assessment, along with the notice dated April 23, 1966, were quashed. The petitioner was awarded costs, with the judgment emphasizing that the proceedings for enhancement were without jurisdiction primarily due to the inapplicability of the Act of 1961 to the assessment proceedings initiated under the Act of 1922.