1970 (4) TMI 36 - HC - Income Tax

Assessment was wrongly made under Income-tax Act, 1961 instead of Indian Income-tax Act, 1922 - assessment order cannot be held to be invalid merely because of insertion of wrong sections in the order as well as in the notices

Summary

Issues Involved:
1. Validity of the assessment order dated November 25, 1965, under the new Act for the assessment year 1961-62.
2. Validity of the rectification order dated December 26, 1967.
3. Compliance with principles of natural justice in the rectification order.
4. Validity of the notice under section 148 of the new Act.
5. Jurisdiction of the Income-tax Officer to issue the impugned orders.

Detailed Analysis:

1. Validity of the Assessment Order Dated November 25, 1965:
The petitioner challenged the assessment order dated November 25, 1965, arguing that the provisions of the new Act could not be invoked for the assessment year 1961-62. Both parties admitted that the provisions of the old Act were applicable. The court held that the assessment orders could be referred to the jurisdiction under the old Act, despite the wrong sections being initially inserted and later rectified. The Supreme Court's decision in Hazari Mal Kuthiala v. Income-tax Officer was cited, establishing that the exercise of power would be referable to a jurisdiction conferring validity upon it. Therefore, the assessment order was not invalid merely because of the wrong sections cited.

2. Validity of the Rectification Order Dated December 26, 1967:
The petitioner contended that the rectification order was invalid as it attempted to rectify an already invalid order. The court held that even without the rectification, the orders could be treated as those passed under the old Act. The rectification only substituted certain sections without materially affecting the orders. The court concluded that the rectification order was valid.

3. Compliance with Principles of Natural Justice:
The petitioner argued that the rectification order violated the principles of natural justice. The court found that no prejudice was caused to the petitioner by the rectification order, as it did not affect the orders materially. Therefore, there was no violation of natural justice.

4. Validity of the Notice Under Section 148:
The petitioner argued that the conditions precedent for issuing the notice under section 148 were lacking. The court examined the order dated January 17, 1967, which indicated that the Income-tax Officer had received information about the assessee's undisclosed income. The court concluded that the Income-tax Officer had the necessary jurisdiction to issue the notice under section 148, as he had reason to believe that income chargeable to tax had escaped assessment.

5. Jurisdiction of the Income-tax Officer:
The court addressed the preliminary objection raised by the department's counsel, who argued that the application under article 226 was not maintainable due to the alternative remedy of appeal. The court overruled this objection, stating that the petitioner was questioning the jurisdiction of the Income-tax Officer to make the impugned orders. The court found that the Income-tax Officer had the jurisdiction under the old Act, and the assessment orders were valid despite the initial wrong sections cited.

Conclusion:
All the contentions of the petitioner failed. The application was dismissed, and the rule was discharged. The stay order was vacated, with no order as to costs.