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TMI Blog1972 (7) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... n 23 and thereafter, on discovering a mistake apparent from the record of the assessment, the Income-tax Officer makes an order of rectification under section 35, sub-section (1), is the order of rectification appealable under section 30, sub-section (1)? The right of appeal against an order made by the Income-tax Officer is conferred under section 30, sub-section (1), and the determination of the question before us must, therefore, turn primarily on the language of that provision. Section 30, sub-section (1), so far as material for the present purpose, reads as follows : "30. (1) Any assessee objecting to the amount of income assessed under section 23 or section 27, or the amount of loss computed under section 24 or the amount of tax determined under section 23 or section 27, or denying his liability to be assessed under this Act, or objecting to the cancellation by an Income-tax Officer of the registration of a firm under sub-section (4) of section 23 or to a refusal to register a firm under sub-section (4) of section 23 or section 26A, or to make a fresh assessment under section 27, or objecting to any order under sub-section (2) of section 25 or section 25A or sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessment made under section 23 is challenged in appeal, what the assessee does in substance is to object to the rectified amount of income assessed or tax determined under section 23 and the assessee would, therefore, fall within the clause "any assessee objecting to the amount of income assessed under section 23 ..... or the amount of tax determined under section 23" and would be entitled to appeal against the order of rectification. This argument is certainly an ingenious argument and at first blush, it might appear to be attractive but on closer scrutiny it will be apparent that it is defective in many respects and cannot be accepted. Our reasons for saying so are as follows : It is clear, on a plain reading of section 30, sub-section (1), that a right of appeal is given by that sub-section against various orders and each of the orders againt which a right of appeal is conferred is described by reference to the source of the power under which it is made. The clause on which reliance has been placed on behalf of the assessee is in the same strain. It confers a right of appeal against the amount of income assessed or the amount of tax determined under section 23. It is ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it comprehended the whole procedure for ascertaining and imposing liability upon the taxpayer and it included a proceeding for rectification of tax. The Supreme Court observed : "......... when proceedings are taken for rectification of assessment to tax either under section 35(1) or section 35(5) of the Act of 1922, those proceedings must be held to be proceedings for assessment. In proceeding under those provisions, what the Income-tax Officer does is to correct errors in or rectify orders of assessment made by him, and orders making such corrections or rectifications are, therefore, clearly part of the proceedings for assessment." This decision was followed by a Division Bench of this court in P. M. Bharucha and Co. v. G. S. Venkatesan, Income-tax Officer. It would, therefore, appear that a proceeding for rectification of an assessment under section 23 is a proceeding for assessment ; it is part of the procedure for ascertainment and imposition of tax liability on the assessee. When an assessment made under section 23 is rectified by an order of rectification, what was a wrong quantification of tax liability is rectified and a corrected quantification of tax liability is su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e find in section 34 nor is there any fiction created by the statute that when an assessment is rectified in exercise of the power conferred under section 35, sub-section (1), the rectified assessment shall be deemed to be an assessment under section 23 or shall be treated as an assessment under section 23. We may also examine the question from a slightly different angle. Let us ask ourselves the question : when an assessee wants to prefer an appeal against an order of rectification, what is it that he is really aggrieved against ? What is the substance of the objection of the assessee ? Does he object to the assessment of income under section 23 or against the enhanced assessment made by the order of rectification ? The answer is clear. The assessee is obviously aggrieved by the enhanced assessment which is the result of exercise of power under section 35, sub-section (1), and not under section 23. His objection is, therefore, not against the amount of income assessed under section 23, but against the enhanced assessment made by the Income-tax Officer in exercise of the power conferred under section 35, sub-section (1). This objection he is not entitled to agitate by way of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (1), no appeal lies against it under section 30, sub-section (1). The two decisions of the Madras High Court to which we have referred cannot, therefore, with great respect to the learned judges who decided them, be justified on the ground on which they seem to have proceeded and we cannot derive much strength from them. But even so it is heartening to find that the Madras High Court too has taken the same view in these two decisions which we are taking in the present case. Before we part with this point, we must refer to one decision of the Privy Council on which the strongest reliance was placed by Mr. J. P. Shah, learned advocate appearing on behalf of the assessee in Income-tax Reference No. 65 of 1970. That is the decision in Commissioner of Income-tax v. Khemchand Ramdas. This decision is frequently cited in courts to show that the word "assessment" has different meanings according to the context in which it is used, but here in the present case, Mr. J. P. Shah relied upon it in order to support his contention that an appeal lies against an order of rectification under section 35, sub-section (1). We do not think this decision lends any support to the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Officer was challenged on the ground that the order was one under section 23, sub-section (4), and, therefore, by reason of the proviso to section 30, sub-section (1), no appeal lay against the order of the Income-tax Officer. The Privy Council negatived this challenge to the competency of the appeal and held that the order of the Income-tax Officer could not be said to be an order made under section 23, sub-section (4), and the appeal was, therefore, not barred under the proviso to section 30, sub-section (1), and, since the assessee denied his liability to be charged to super-tax, he was entitled to prefer an appeal against the order of the Income-tax Officer levying super-tax upon him. This, and nothing more than this, was decided by the Privy Council in this case. We do not find anything in this decision which goes to show that the order of the Income-tax Officer was treated by the Privy Council as one made under section 35 and an appeal was held to be maintainable against it on the basis that it was an order under section 35. This decision, therefore, does not compel us to take a different view from the one we are taking. That takes us to the next question whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Privy Council or the Supreme Court which have interpreted these words, such interpretation would bind us, whatever be our own view as to the true meaning of these words. But, before we go to the decisions it would be helpful if we consider for ourselves what these words mean according to their plain natural connotation. Now it is a well-settled rule of interpretation that, in order to arrive at the true meaning of a sentence or clause, it is not proper to interpret each word in the sentence or clause separately as if it stood alone and then to construe the sentence or clause by the separate meaning of each such word. We must look at the sentence or clause as a whole and arrive at a proper meaning. The context and the collocation may give a meaning to the words different from that which they might bear in a different context or collocation. Here the words are "any assessee .... denying his liability to be assessed under this Act." The word "assessment", it is well-known, has different meanings according to the context in which it is used. It may mean sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the whole procedure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t" came up for consideration before the Privy Council in this case and the Privy Council gave the following interpretation : "Having regard to section 58(1) of the Act, the provisions contained in section 30(1) giving a right to appeal to the Assistant Commissioner in the case of an assessee denying his liability to be 'assessed under the Act', which must mean in that context 'charged with tax under the Act' is as applicable to super-tax as it is to ordinary income-tax." This interpretation given by the Privy Council is bining upon us, unless we find anything said in any decision of the Supreme Court which has the effect of overriding this interpretation. It was contended on behalf of the assessee that the decision of the Supreme Court in Commissioner of Income-tax v. Kanpur Coal Syndicate, does override this interpretation given by the Privy Council. We shall presently consider that decision, but, 'for the time being, it is sufficient to state that we do not think there is anything in that decision which suggests that a contrary interpretation was accepted by the Supreme Court. This interpretation given by the Privy Council clearly shows that the words "assessed under this Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is whether the said option is given only to the Income-tax Officer and is denied to the Appellate Assistant Commissioner and the Appellate Tribunal. Under the Act the Income-tax Officer, after following the procedure prescribed, makes the assessment under section 23 of the Act. Doubtless, in making the assessment at the first instance he has to exercise the option whether he should assess the association of persons or the members thereof individually. It is not because that any section of the Act confers an exclusive power on him to do so, but because it is part of the process of assessment ; that is to say, he has to ascertain who is the person liable to be assessed for the tax. If he seeks to assess an association of persons as an assessable entity, the said entity can object to the assessment, inter alia, on the ground that, in the circumstances of the case, the assessment should be made on the members of the association individually. The Income-tax Officer may reject its contention and may assess the total income of the association as such and impose the tax on it. Under section 30 an assessee objecting to the amount of income assessed under section 23 or the amount of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any provision of the Act in respect of the income received by the assessee as an association of persons. The assessee denied his liability to tax under the provisions of the Act by saying that the option should be exercised in such a manner that the members of the association of persons are charged to tax and not the assessee as an association of persons. The Supreme Court applied the same test which we have discussed above and on an application of that test, the Supreme Court said that the assessee denied his liability to tax under the particular circumstances and was, therefore, entitled to appeal. We do not, in the circumstances, find anything in this decision of the Supreme Court which militates against the view we are taking. On the contrary, it supports what we have said in regard to the true meaning of the words "liability to be assessed under this Act". It is also significant to note that the Supreme Court has used the words "liability to tax under the particular circumstances" which is the same thing as liability to be charged with tax under the particular circumstances ; that is precisely the same thing which we find (sic) by the Privy Council in Khemchand Ramdas's case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l this interpretation of the words "assessed under this Act" placed by the Bombay High Court would be binding upon us. The decision of the Bombay High Court in Gokuldas v. Kikabhai Abdulali also does not help the assessee. The Division Bench of the Bombay High Court pointed out in that case that where the Income-tax Officer determines who the partners are and what are their shares, an appeal against this part of the order would lie under section 30 at the instance of anyone who denies his liability to be a partner. Obviously, when a person is sought to be assessed as a partner in respect of income which is alleged to have been accrued to him from the firm and he claims that he is not a partner, he would be denying his liability to be assessed under the Act in respect of the income which is sought to be taxed in his hands as a partner and, therefore, an appeal would lie at his instance against the order determining that he is a partner and seeking to assess him as such. The last decision to which we must refer is the decision of the Punjab High Court in Gobi Lal v. Commissioner of Income-tax. It is no doubt true that a Division Bench of the Punjab High Court held in this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the circumstances of the case, appeals lay to the Appellate Assistant Commissioner against the orders of rectification dated September 15, 1964, and January 22, 1966 ?" Our answer to this question referred to us for our opinion is in the negative. So far as Income-tax Reference No. 73 of 1970 is concerned, two questions have been referred to us for our opinion. Question No (1) has not been pressed on behalf of the assessee and it is, therefore, not necessary to answer it. Question No. (2) is in the following terms : "(2) If the answer to the above question is in the affirmative, whether on the facts and in the circumstances of the case the Tribunal was correct in holding that no appeal lay before the Appellate Assistant Commissioner against the order of the Income-tax Officer rectifying the assessment ?" The answer to this question will be in the affirmative. There are three questions referred to us for our opinion in Income-tax Reference No. 23 of 1971. Questions Nos. (1) and (3) are not pressed on behalf of the assessee and we need not, therefore, answer them. So far as question No. (2) is concerned, it is in the same terms as question No. (2) in Income-tax Referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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