1970 (5) TMI 12 - HC - Income Tax

When a return is filed before Act of 1961 whether reassessment u/s 143 of Income-tax Act 1961 is valid - extraordinary jurisdiction of HC not required

Issues Involved:
1. Jurisdiction of the Income-tax Officer under the Income-tax Act, 1961, versus the Indian Income-tax Act, 1922.
2. Validity of the assessment order made under the wrong Act.
3. Adequate opportunity for the petitioner to explain cash credits.
4. Availability of alternative remedies and the appropriateness of invoking Article 226 of the Constitution.

Detailed Analysis:

1. Jurisdiction of the Income-tax Officer:
The primary issue was whether the Income-tax Officer had the jurisdiction to proceed under the Income-tax Act, 1961, instead of the Indian Income-tax Act, 1922. The petitioner contended that the Income-tax Officer should have applied the Act of 1922, as the return related to the assessment year 1961-62 and was filed before the Act of 1961 came into force. The court noted that the Income-tax Officer was invested with the jurisdiction to proceed under either Act depending on the case specifics, as determined by section 297 of the Act of 1961. The court held that the Income-tax Officer was obliged to apply the Act of 1922, as if the Act of 1961 did not exist, because the return was filed before the new Act came into force.

2. Validity of the Assessment Order:
The petitioner argued that the assessment order made under the Act of 1961 was a nullity and could not be saved by referring it to the Act of 1922. The court, however, held that the principle established by the Supreme Court in L. Hazari Mal Kuthiala v. Income-tax Officer applied. This principle states that the exercise of a power will be referable to a jurisdiction that confers validity upon it, even if the wrong section is cited. The court concluded that the assessment order, although made under the Act of 1961, must be attributed to the jurisdiction vested in the Income-tax Officer under the Act of 1922.

3. Adequate Opportunity to Explain Cash Credits:
The petitioner claimed that the Income-tax Officer had not provided sufficient opportunity to explain the cash credits. The Appellate Assistant Commissioner allowed the appeal on this ground, setting aside the assessment and directing the Income-tax Officer to frame a fresh assessment after providing a proper opportunity to the petitioner. The Tribunal upheld this decision, agreeing that the Income-tax Officer should have proceeded under the Act of 1922 but treated the assessment as valid under that Act.

4. Alternative Remedies and Article 226:
The court considered whether the petitioner should be heard on the merits given the availability of alternative remedies. The petitioner had already moved an application before the Tribunal for a reference to the High Court, which was pending. The court noted that while the existence of an alternative remedy does not necessarily oust the jurisdiction of the High Court under Article 226, it is a sound exercise of discretion to refuse to interfere when an alternative remedy has been pursued. The court dismissed the petition on this ground, emphasizing that the petitioner should continue with the alternative legal remedy already in progress.

Conclusion:
The court dismissed the writ petition with costs, holding that the assessment order, although made under the Act of 1961, must be attributed to the jurisdiction under the Act of 1922. The Appellate Assistant Commissioner's order of remand was deemed intra vires, and the petitioner was advised to pursue the alternative remedy already initiated.

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