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TMI Blog1969 (11) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... d the connected case, the assessee is Manickavasagam (Private) Ltd., Madurai. In fact, the present proceedings, at any rate, covering T.C. No. 152 of 1961, are set before us on an order of remand made by the Supreme Court in Sundaram Co. (P.) Ltd. v. Commissioner of Income-tax. The said case was disposed of by the Supreme Court on April 25, 1967, and this was an appeal from the judgment and order of this court dated August 9, 1963, in T.C. No. 152 of 1961. This decision is reported as Commissioner of Income-tax v. Sundaram Co. Pvt. Ltd. After this court decided in Commissioner of Income-tax v. Sundaram Co. P. Ltd. and before the judgment was given by the Supreme Court as above, the Tribunal, pursuant to the directions of this court, in the said case, decided the appeals before it on January 20, 1964, out of which T.C. Nos. 14 to 16 and 21 of 1965 arise. We shall presently refer to the questions referred to us for our decision in the latter batch of cases. In Sundaram Co. P. Ltd. v. Commissioner of Income-tax, and in Commissioner of Income-tax v. Sundaram Co. (P.) Ltd., the relevant facts have been noticed in extenso. In so far as they are necessary for us, we are excerpti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice and contended that the proceedings commenced by the Income-tax Officer were unauthorised, because the income of the company had not been the subject of "excessive relief" within the meaning of section 34(1)(b), and that actual distribution of dividends already deemed to have been distributed in accordance with the orders passed under section 23A cannot be taken into consideration for the purpose of reducing the rebate of super-tax admissible under proviso 2 to Paragraph D of the Finance Act, 1956. The Income-tax Officer rejected the contentions and ordered that the rebate of supertax to the extent of Rs. 80,978 be withdrawn. In the appeal to the Appellate Assistant Commissioner it was held that, in the circumstances of the case, assessment could be reopened under section 34(1)(b) on the ground that the income had been made the subject of "excessive relief", but only Rs. 77,600 and not the whole amount of Rs. 3,54,716, which was deemed to be distributed under orders passed under section 23A, could be taken into consideration as dividend distributed by the company during the previous year relevant to the assessment year 1956-57. There was a further appeal, not at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount the rival contentions or the reasons or grounds put forward either by the department or by the assessee. In this view, questions Nos. 1 and 2 were answered against the department and in favour of the assessee. Regarding the third question, the Supreme Court felt that the question was defective and reframed it as follows : "Whether the Income-tax Officer was, in the circumstances of the case, competent to initiate the proceeding under section 34(1)(b) of the Indian Income-tax Act for bringing to tax excessive rebate granted to the assessee ?" Repelling the contention of the counsel for the assessee that the expression "too low a rate" used in section 34(1)(b) must, having regard to the context in which the expression is used, be regarded as the fraction which determines tax liability of the assessee, the Supreme Court said : "The assumption that the expression 'rate' has been used in section 34(1) as meaning a fraction of total income is, in our judgment, not warranted. By the use of the expression 'rate' in the context in which it occurs, undoubtedly a relation between the taxable income and the tax charged is intended, but the relation need not be of the nature of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, and the case must be remanded to the High Court to determine whether the proceedings were validly initiated on the notice issued against the company. The notice which was served upon the company is not included in the paper book prepared for use in this court. The notice must of necessity be part of the record of the Income-tax Officer, even if it be not on the record of the Tribunal. It will be open to the High Court, in determining the contention raised by the company, to call for a supplementary statement of the case relating to the form and contents of the notice and the validity thereof, from the Tribunal. After receiving the supplementary statement, if any, the High Court will proceed to dispose of the third question in the light of the reasons set out by us in this judgment." In the light of the above, this court called for a fresh statement of the case but the Tribunal, without adverting to the validity of the notice issued by the Income-tax Officer, sent the notice to enable the court to decide the third question, as reframed by the Supreme Court. It has, therefore, become necessary for us to render an answer to the question involved. We have seen the notice issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to initiate and act generally under it is indisputable ? We think not. The methodology adopted and availed of by the Income-tax Officer is not in pursuance of any law or a statutory mandate. The form of the notice which the Supreme Court has asked us to consider and adjudicate upon its validity, is not one which is prescribed under law, nor is it one of the requirements of section 34(1)(b). It appears to be the product of administrative guidance. Before issuing the letter, the Income-tax Officer has to be satisfied subjectively about the information on record which would prompt him to act under section 34(1)(b). He has to be judiciously satisfied about it. Closely following such a subjective satisfaction of the Income-tax Officer is the objective act of the issuance of the notice as envisaged in the section. Whilst the Income-tax Officer acts objectively and follows up an administrative, though age-long, rule by issuing a letter of the kind under review, it may happen that an error may creep in its issuance. If the form of the letter or its text which has no legal basis or the issuance of which depends on no legal authority, contains a mistake, it does not go into the root of the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of the situations, erroneously, mistakenly or inadvertently referred to in the notice coined and issued by him. The notice is self-active and its effect cannot be sloped down by a form adopted by the Income-tax Officer on his own. In R. P. Kandaswami v. Commissioner of Income-tax this court after referring to the observations of the Supreme Court in Hazari Mal Kuthiala v. Income-tax Officer, said : "It is now well-settled that the jurisdiction of any Tribunal does not depend upon the wrong provisions of law upon which the Tribunal might have purported to act, but upon the question whether the Tribunal had jurisdiction on a proper view of the functions and powers with which it is clothed under the law or the statute creating it. In other words, the Tribunal will not lose its jurisdiction which it undoubtedly has in a particular case because of its having misquoted the provision of law under which it exercised the jurisdiction. Undoubtedly, the Income-tax Officer had the jurisdiction to act under section 34(1)(b), because it is not argued that it was a colourable exercise of power. So he was competent to initiate the proceedings under section 34(1)(b) of the Act for bringing t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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