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1972 (7) TMI 9 - HC - Income TaxWhether an appeal lies against an order of rectification made by the Income-tax Officer under section 35, sub-section (1), of the Indian Income-tax Act, 1922
Issues Involved:
1. Whether an appeal lies against an order of rectification made by the Income-tax Officer under section 35, sub-section (1), of the Indian Income-tax Act, 1922. Issue-wise Detailed Analysis: 1. Appealability of Rectification Order under Section 35(1): The core issue was whether an appeal lies against an order of rectification made by the Income-tax Officer under section 35(1) of the Indian Income-tax Act, 1922. The court examined the language of section 30(1), which confers the right of appeal. Section 30(1) allows an assessee to appeal against various orders, including the amount of income assessed under section 23 or tax determined under section 23. The assessee argued that an order of rectification under section 35(1) essentially modifies the assessment under section 23, thereby making it appealable under section 30(1). The court rejected this argument, stating that the right of appeal is conferred against orders made under specific sections, and the rectification under section 35(1) is not an assessment under section 23 but an exercise of power under section 35(1). The court reasoned that the enhanced tax liability resulting from rectification owes its validity to section 35(1) and not section 23. Therefore, the rectified assessment cannot be considered an assessment under section 23 for the purposes of appeal under section 30(1). 2. Nature of Rectification Proceedings: The court referred to the Supreme Court decision in S. Sankappa v. Income-tax Officer, which clarified that rectification proceedings are part of the assessment process. However, the court emphasized that the source of power for rectification is section 35(1), not section 23. The rectified assessment is a result of the exercise of power under section 35(1), and therefore, no appeal lies against it under section 30(1). 3. Denial of Liability to be Assessed: The assessee also argued that challenging the rectification order amounts to denying liability to be assessed under the Act, thereby entitling them to appeal under section 30(1). The court disagreed, stating that denying liability to be assessed under the Act means denying liability to be charged with tax under any provision of the Act, not merely under a specific provision like section 35(1). The court held that the objection must be against the entire procedure of assessment under the Act, not just a part of it. 4. Supporting Case Law: The court cited several decisions to support its view. The Madras High Court in Commissioner of Income-tax v. Vellingiri Gouder and VR. C. RM. Adaikkappa Chettiar v. Commissioner of Income-tax had similarly held that no appeal lies against an order of rectification under section 35(1). The court also referred to the Privy Council decision in Commissioner of Income-tax v. Khemchand Ramdas, which interpreted "liability to be assessed under this Act" as "charged with tax under the Act," reinforcing the view that the denial must be against the entire assessment process. 5. Alternative Remedies: The court noted that if an order of rectification is made without fulfilling the conditions for the exercise of power under section 35(1), the assessee has the right to seek revision from the Commissioner under section 33A or approach the court under articles 226 or 227 of the Constitution. Furthermore, under the Income-tax Act of 1961, an express right of appeal is provided against an order of rectification under section 246(f). Conclusion: The court concluded that no appeal lies against an order of rectification made under section 35(1) of the Indian Income-tax Act, 1922. The answers to the questions referred were as follows: - In Income-tax Reference No. 65 of 1970, the answer was in the negative. - In Income-tax Reference No. 73 of 1970, the answer to question No. (2) was in the affirmative. - In Income-tax Reference No. 23 of 1971, the answer to question No. (2) was in the affirmative. The assessee was directed to pay the costs of each reference to the Commissioner.
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