1968 (11) TMI 37 - HC - Income Tax

Whether the notice under section 154 of the Income-tax Act, 1961, is invalid and deprives the revenue authorities of jurisdiction under section 35 - mistake being apparent from the record was rectified under section 35 after obtaining no objection from the authorised representative of the assessee-firm - appeal by assessee fail

Issues Involved:
1. Validity of notice under section 154 of the Income-tax Act, 1961.
2. Jurisdiction of revenue authorities under section 35 of the Income-tax Act, 1922.
3. Rectification of mistakes apparent from the record.
4. Authority of revenue to rectify based on records of another entity (Searsole Coal Company Ltd.).

Detailed Analysis:

1. Validity of Notice under Section 154 of the Income-tax Act, 1961:
The appellant contended that the notice under section 154 of the Income-tax Act, 1961, was invalid because the assessment was under the Income-tax Act, 1922. According to the appellant, only a notice under the 1922 Act would confer jurisdiction for rectification under section 35 of the same Act. However, the court referred to section 297 of the 1961 Act, which allows assessment proceedings under the 1922 Act to continue as if the 1961 Act had not been passed. The court cited the Supreme Court case of S. Sankappa v. Income-tax Officer, Bangalore, which held that rectification proceedings are part of "assessment" and thus can be continued under the 1922 Act even if the notice was issued under the 1961 Act. Therefore, the notice under section 154 of the 1961 Act did not invalidate the rectification proceedings under the 1922 Act.

2. Jurisdiction of Revenue Authorities under Section 35 of the Income-tax Act, 1922:
The appellant argued that the revenue authorities lacked jurisdiction to rectify under section 35 of the 1922 Act based on a notice issued under section 154 of the 1961 Act. The court, however, clarified that jurisdiction to rectify mistakes flows from the provisions of the 1922 Act and is preserved by section 297(2) of the 1961 Act. The court emphasized that the Supreme Court in Kalawati Devi Harlalka v. Commissioner of Income-tax supported the view that jurisdiction for rectification under the 1922 Act remains intact despite the repeal of the Act. The court concluded that the notice under section 154 of the 1961 Act was a procedural irregularity that did not affect the jurisdiction of the revenue authorities.

3. Rectification of Mistakes Apparent from the Record:
The appellant contended that there was no mistake apparent from the record that warranted rectification. The court referred to the Supreme Court's decision in Maharana Mills (Private) Ltd. v. Income-tax Officer, Porbandar, which held that a mistake apparent from the record can be rectified if the assessee is given reasonable opportunity to be heard. The court noted that the appellant was given notice, had discussions with the revenue authorities, and did not object to the proceedings. The court found that the rectification was based on mistakes apparent from the record, specifically the failure to include certain commission income and share investment profits in the original assessment.

4. Authority of Revenue to Rectify Based on Records of Another Entity:
The appellant argued that the rectification was based on records of Searsole Coal Company Ltd. and not confined to the appellant's records. The court held that the appellant should have raised this specific contention before the revenue authorities. The court also noted that the appellant's authorized representative had no objection to the rectification. The court concluded that the rectification was valid as it was based on mistakes apparent from the record, which included all proceedings on which the original assessment order was passed.

Conclusion:
The court dismissed all contentions raised by the appellant, holding that the notice under section 154 of the 1961 Act did not invalidate the rectification under section 35 of the 1922 Act. The jurisdiction of the revenue authorities was upheld, and the rectification of mistakes apparent from the record was found to be valid. The appeal was dismissed, with each party bearing its own costs.

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