1969 (11) TMI 12 - HC - Income Tax

Whether the Commissioner of Income-tax U.P. was competent to cancel a previous order passed by him allowing interest on excess income-tax paid by an assessee - the Commissioner had at no stage passed any order in revision under section 263 or 264 of the new Act - so the Commissioner had no power to rectify any mistake under cl. (c) of sub-s. (1) of section 154 of the new Act

Summary

Issues:
1. Competence of Commissioner of Income-tax to cancel previous order allowing interest on excess income-tax paid.
2. Applicability of Indian Income-tax Act, 1922, or Income-tax Act, 1961, to the case.
3. Jurisdiction of Commissioner to rectify mistakes under section 154 of the new Act.
4. Validity of orders passed by the Income-tax Officer based on the Commissioner's decision.
5. Prematurity of the writ petition.

Analysis:
1. The primary issue in this case was the competence of the Commissioner of Income-tax, U.P., to cancel a previous order allowing interest on excess income-tax paid by an assessee. The petitioner, an assessee, challenged the cancellation of the order and subsequent demand for refund in a writ petition under article 226 of the Constitution.

2. An important aspect of the case was the determination of whether the case was governed by the Indian Income-tax Act, 1922, or the Income-tax Act, 1961. The petitioner argued that the matter related to the assessment year 1947-48, falling under the old Act, while the department contended that the refund issue was governed by the new Act, which came into force on April 1, 1962.

3. The jurisdictional question arose concerning the Commissioner's power to rectify mistakes under section 154 of the new Act. The Commissioner had purportedly passed an order under section 154, but it was argued that he had no authority to rectify the previous order dated April 8, 1965, as he had not passed any revision order under sections 263 or 264 of the new Act.

4. The validity of the orders passed by the Income-tax Officer, Faizabad, based on the Commissioner's decision was also scrutinized. The Income-tax Officer's orders were found to lack independent assessment and were merely following the Commissioner's directive, leading to questions about the legality of the actions taken.

5. Finally, the issue of prematurity of the writ petition was raised by the opposite party, contending that the petition was premature as the High Court's decision had not been communicated to the Appellate Tribunal. However, the petitioner demonstrated that the impending action against them necessitated immediate judicial intervention, justifying the timeliness of the petition.

In conclusion, the High Court allowed the petition, quashing the orders passed by the Commissioner of Income-tax, U.P., and the Income-tax Officer, Faizabad, based on the Commissioner's decision, citing jurisdictional errors and lack of legal basis for the actions taken.