1972 (4) TMI 24 - HC - Income Tax

Development rebate - assessee filed an appeal before the Appellate Assistant Commissioner who reversed the order of the Income-tax Officer holding that, since the original assessment was made under the old Act, the rectification could also be made under the same Act and as an order of rectification had been made under the 1961 Act, therefore, it was bad - Whether Tribunal was correct in confirming the order of the Appellate Assistant Commissioner of Income-tax cancelling the order made by the Income-tax Officer dated March 7, 1968, rectifying the order of assessment made on June 23, 1960, for the assessment year 1959-60

Summary

Issues Involved:
1. Validity of rectification under section 155(5) of the Income-tax Act, 1961 for an assessment originally made under the Indian Income-tax Act, 1922.
2. Impact of citing the wrong section on the validity of the rectification order.

Detailed Analysis:

1. Validity of Rectification under Section 155(5) of the Income-tax Act, 1961:
The primary issue was whether the rectification of an order made under the Indian Income-tax Act, 1922 (the "1922 Act") could be validly performed under section 155(5) of the Income-tax Act, 1961 (the "1961 Act"). The assessee-company had originally been allowed a development rebate under the 1922 Act, which was later withdrawn by the Income-tax Officer under the 1961 Act after the sale of the bus within the statutory period.

The court examined subsection (5) of section 155 of the 1961 Act, which allows for rectification of development rebate granted under the 1922 Act if the machinery was installed after December 31, 1957. The court noted the specific phrase "under the corresponding provisions of the Indian Income-tax Act, 1922" and the overriding clause "notwithstanding anything contained in this Act." These phrases indicated that rectification under the 1961 Act was permissible even for assessments originally made under the 1922 Act.

The court found merit in the revenue's argument that the rectification could indeed be made under section 155(5) of the 1961 Act, as the development rebate had been allowed under the corresponding provisions of the 1922 Act. Therefore, the rectification by the Income-tax Officer was deemed correct and in accordance with the law.

2. Impact of Citing the Wrong Section on the Validity of the Rectification Order:
The revenue also argued that even if the rectification should have been made under the 1922 Act, the order would still be valid as citing the wrong section does not invalidate an order if the officer had jurisdiction to make it. The court referred to several precedents to support this view:

- L. Hazari Mal Kuthiala v. Income-tax Officer, Special Circle, Ambala Cantt: The Supreme Court held that the exercise of power is valid if it is referable to a jurisdiction that confers validity upon it, even if the wrong section is cited.
- P. M. Bharucha & Co. v. G. S. Venkatesan, Income-tax Officer: The Gujarat High Court observed that a wrong reference to the power under which an order is made does not invalidate the order if there is another power under which the order could lawfully be made.
- Giridharilal Jhajharia v. Commissioner of Income-tax: The Calcutta High Court held that issuing a notice under the wrong section does not deprive the officer of jurisdiction if the rectification could be made under another valid section.
- Vr. C. Rm. Adaikkappa Chettiar v. Commissioner of Income-tax, Bidyut Prova Raha v. Income-tax Officer, and Indra Co. Ltd. v. Income-tax Officer: Similar observations were made by the Madras, Assam and Nagaland, and Calcutta High Courts respectively.

The court also noted its own precedent in Commissioner of Income-tax v. Hargopal Bhalla & Sons, where it was held that the validity of an order depends on whether the officer had the power to make it, not on the specific section cited.

The court concluded that the rectification order dated March 7, 1968, was valid even though the wrong section was cited, as the Income-tax Officer had jurisdiction to pass the order.

Conclusion:
The court answered the referred question in the negative, in favor of the revenue, holding that the rectification under section 155(5) of the 1961 Act was valid and that citing the wrong section did not invalidate the order. The parties were directed to bear their own costs.