1969 (10) TMI 2 - HC - Income Tax

Petitions relate to orders made by ITO under section 35 of the Indian Income-tax Act, 1922, to rectify the earlier orders

Summary

Issues:
1. Rectification of assessment orders under section 35 of the Indian Income-tax Act, 1922.
2. Scope of section 35 in the context of capital expenditure.
3. Lack of clarity in the Income-tax Officer's order regarding the establishment charges.

Analysis:
The judgment delivered by Justice Veeraswami pertains to petitions concerning the rectification of assessment orders for the years 1957-58 to 1959-60 under section 35 of the Indian Income-tax Act, 1922. The Income-tax Officer had rectified the earlier orders following a Supreme Court decision related to the nature of collections made by the assessee. The petitioner had objected to the applicability of section 35, citing a previous case, but the court did not uphold this objection. The main contention raised was regarding the scope of section 35, which had been defined in a previous case, T. S. Rajam v. Controller of Estate Duty. The court found that the Income-tax Officer was justified in invoking section 35 to rectify the orders based on the Supreme Court decision. The officer had to determine whether the establishment expenses, initially allowed as a deduction, constituted capital expenditure related to the capital recoveries.

Another issue raised by the petitioner was the lack of clarity in the Income-tax Officer's order regarding the establishment charges and their relation to capital expenditure. The court observed that this matter should have been examined in detail, and the petitioner could have provided relevant figures to clarify the situation. The court noted that the orders were vague on this point and lacked supporting materials for verification. Consequently, the court allowed the petitions and quashed the Income-tax Officer's orders, granting the officer the opportunity to reconsider the rectification after receiving necessary materials from the petitioner. The judgment emphasized the importance of clarity and detailed examination in such matters to ensure a fair decision-making process. The court also addressed the issue of limitation raised by the petitioner's counsel, stating that it would not be a concern in this case as the officer would be acting in compliance with the court's orders.