1967 (8) TMI 29 - HC - Income Tax

ITO applied rate of 18% of profit instead of 10% - Petition under articles 226 and 227 of the Constitution of India, praying for (i) writ, order or direction in the nature of mandamus or otherwise directing the respondents to revise the assessment order or directing the respondents to refund - held that there must be an order passed by a competent authority by virtue of his statutory powers to the effect that refund was due to the assessee

Summary

Issues Involved
1. Revision of the assessment order for the assessment year 1944-45.
2. Entitlement to a refund of Rs. 15,224 plus interest since 1945.
3. Jurisdiction of the Income-tax Officer to revise the assessment order under section 35 of the Indian Income-tax Act, 1922.
4. Applicability of the doctrine of merger in tax assessment appeals.
5. Issuance of a writ of mandamus to compel the Income-tax Officer to revise the assessment order.

Issue-wise Detailed Analysis

1. Revision of the Assessment Order for the Assessment Year 1944-45
The petitioner sought a writ directing the respondents to revise the assessment order for the year 1944-45 based on the findings in the assessment order of February 1954. The petitioner argued that the Income-tax Officer should have revised the original assessment to reflect the profits determined in the 1954 assessment, which apportioned Rs. 1,818 as profits for the 1944-45 assessment year instead of the Rs. 44,214 initially assessed.

2. Entitlement to a Refund of Rs. 15,224 Plus Interest Since 1945
The petitioner claimed entitlement to a refund of approximately Rs. 20,000, which included Rs. 16,000 as income-tax and Rs. 4,000 as excess profits tax. The Excess Profits Tax Officer refunded Rs. 4,049 in November 1954, but the petitioner received a notice under section 22(4) of the Income-tax Act instead of the income-tax refund, leading to the present writ petition.

3. Jurisdiction of the Income-tax Officer to Revise the Assessment Order Under Section 35
The petitioner argued that the Income-tax Officer was obligated to revise the assessment order under section 35 of the Indian Income-tax Act, 1922, following the February 1954 assessment. The respondents countered that the assessment order dated January 25, 1945, had been the subject of appeals and thus could not be revised by the Income-tax Officer due to the doctrine of merger and the express provisions of section 35(1) and (2), which limit the rectification period to four years.

4. Applicability of the Doctrine of Merger in Tax Assessment Appeals
The court discussed the doctrine of merger, which holds that once an assessment order is appealed, the final order of the appellate authority supersedes the original order. The court noted that the issues of total receipts and the rate applied for arriving at the profits were the subject of appeals before the Appellate Assistant Commissioner and the Tribunal. Therefore, the original order had merged into the appellate orders, and any rectification would have to be made by the Tribunal.

5. Issuance of a Writ of Mandamus to Compel the Income-tax Officer to Revise the Assessment Order
The petitioner argued that the power to rectify under section 35 is a power coupled with a duty, thus justifying a writ of mandamus. The court, however, held that a writ of mandamus could not be issued because the statute did not impose an obligation on the Income-tax Officer to revise the order, especially after the period prescribed for rectification had expired. Additionally, the court found that the petitioner could not claim a refund without an order from a competent authority declaring the refund due.

Conclusion
The court dismissed the writ petition, holding that:
1. The Income-tax Officer could not be compelled to revise the assessment order for 1944-45 under section 35 due to the merger of the original order into the appellate orders.
2. The petitioner was not entitled to a writ of mandamus for the refund as there was no statutory order declaring the refund due.
3. The petition was dismissed with no order as to costs.