1970 (11) TMI 14 - HC - Income Tax

Change of law - Act of 1922 - Act of 1961 - return filed prior to commencement of IT ACT 1961 - validity of penalty proceedings

Summary

Issues:
1. Validity of assessment order under appropriate provision of law.
2. Validity of penalty proceedings and order.

Analysis:
The High Court was tasked with determining the legality of an assessment order and penalty proceedings referred by the Income-tax Appellate Tribunal. The assessment year in question was 1961-62, with the assessee initially declaring an income of Rs. 63,576, later revised to Rs. 71,137. The Income-tax Officer assessed under section 143(3) of the 1961 Act instead of section 23(3) of the 1922 Act, as required by section 297(2)(a) of the 1961 Act. The Tribunal set aside the assessment as not made under the appropriate provision of law. Additionally, a penalty of Rs. 31,000 was imposed for concealed income of Rs. 37,025, which the Tribunal also canceled due to the void assessment order.

The petitioner contended that the assessment order should have been considered under section 23(3) of the 1922 Act, not void under section 143(3) of the 1961 Act. Citing a Supreme Court judgment, it was argued that an order should be valid under a jurisdiction conferring validity, not void under a different provision. Precedents from the Madras High Court were referenced to support this argument, emphasizing that jurisdiction does not depend on the provision quoted but on the Tribunal's actual powers. The High Court concurred with this reasoning, holding that the assessment order under section 143(3) of the 1961 Act should be deemed under section 23(3) of the 1922 Act, as both provisions address assessment, albeit with slight language differences.

In conclusion, the High Court found the Tribunal's decision erroneous in law and answered both referred questions in the negative, favoring the revenue and against the assessee. The Court's decision was based on the alignment of provisions in both Acts and the principle that a valid order should not be invalidated solely due to a misquoted provision. The judgment emphasized the substance of the power exercised over the technicality of the provision cited, ultimately upholding the validity of the assessment order and rejecting the cancellation of the penalty.