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TMI Blog1986 (5) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... .99% had suffered full tax. The Income-tax Officer while assessing the assessee grossed up the dividend on the said basis. The above assessment was reopened under section 34 of the Act of 1922 and an order of reassessment was passed on September 27, 1962. The Income-tax Officer recomputed the income of the assessee holding that the percentage of the taxable profit of the Indian company to the total sum out of which dividends had been declared was 58.27% and that the grossing factor was 11.804. Dividend received by the assessee was grossed up accordingly. Aggrieved by the reassessment, the assessee went up in appeal to the Appellate Assistant Commissioner and thereafter to the Income-tax Appellate Tribunal. By its order dated November 3, 1966, the Tribunal set aside the order of reassessment and directed the Income-tax Officer to recompute the income of the assessee oil the basis that no part of the dividends declared by the Indian company came out of the earlier year's profit and that the dividends had been declared out of the balance of profits after charging further depreciation. It was held that the Income-tax Officer was not right in adding the amounts of such further depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in view of the provisions of section 297(2)(d)(i) of the Income-tax Act, 1961. The proceedings having been taken under section 35 of the Act of 1922, it was contended that no appeal lay from the same before the Appellate Assistant Commissioner who had erred in entertaining the appeal. It was further urged that though an error was committed by the Appellate Assistant Commissioner in his order, the same, however, remained an appealable order and that the Tribunal was competent to adjudicate upon the issue. The Tribunal was invited to hold that the Appellate Assistant Commissioner was not competent to entertain the appeal. Submissions on behalf of the Revenue were also made on the merits of the appeal. It was contended that as the Tribunal by its order dated November 3, 1966, had set aside the order under section 34 of the Indian Income-tax Act, 1922, the Income-tax Officer was free to recompute the grossing factor according to law. In making the subsequent assessment on June 29, 1967, the Income-tax Officer erred in not increasing the sum out of which dividends had been declared by the brought forward losses of the earlier years which in effect had not borne tax in so far as they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at as the assessments were made under section 34 of the Act of 1922, the subsequent proceedings should have been taken under the earlier Act of 1922, in view of the provisions of section 297(2)(d)(i) of the Act of 1961. Accordingly, it was held that no competent appeal lay before the Tribunal. On the other issues, the Tribunal held that it was highly debatable whether the loss brought forward could be fitted into either of the limbs of the proviso to section 16(2) of the Act of 1922. The Tribunal also held that the mistake, if any, had occurred in the original order passed in 1959 under section 23(3) of the Act of 1922 and also in the order passed in 1962 under section 34 of the Act of 1922. The Tribunal held that the rectification was barred by limitation. On an application of the Revenue under section 256(1) of the Income-tax Act, 1961, the following question has been referred as a question of law arising out of the order of the Tribunal for the opinion of this court: " Whether, on the facts and in the circumstances of the case and in view of the Tribunal's finding that the order purported to have been passed under section 154 of the new Act should be held as having been pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the Income-tax Officer must be held to be still under section 23 of the Indian Income-tax Act, 1922, for assessing the total income of the assessee and determining the sum payable on the basis of the return already filed by him. (c) S. Sankappa v. ITO [1968] 68 ITR 760 (SC). This decision of the Supreme Court was cited for the proposition that proceedings taken for rectification of assessment under section 35 of the Indian Income-tax Act, 1922, were proceedings for assessment and orders passed by the Income-tax Officer under the said section and all notices issued thereunder were for computation and charging of tax. Under section 297(2)(a) of the Act of 1961, the Income-tax Officer would be entitled to proceed under section 35 of the Act of 1922 even after the repeal thereof. (d) Maheswari Devi jute Mills Limited v. CIT [1968] 68 ITR 437 (All). This decision of a Division Bench of the Allahabad High Court was cited for the following observations (at p. 449): " In any event, in view of the decision of the Supreme Court in Mela Ram's case [1956] 29 ITR 607, the position must be taken to be settled that an appeal is no less an appeal because it is irregular or incompetent and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Officer under section 154 of the Income-tax Act, 1961. It was held by a Division Bench of the Delhi High Court that though the rectification could be made only under the provisions of the Act of 1922, the same was not invalid merely because it was made under section 155 of the Act of 1961. It would be a case of wrong labelling. (i) Guru Prasad v. CIT [1986] 158 ITR 278 (Pat). In this case, it was held by a Division Bench of the Patna High Court that an order of rectification made under section 154 of the Act of 1961 must be deemed to have been made under section 35 of the earlier Act of 1922 inasmuch as the original orders of assessment for the assessment years 1940-41 to 1942-43 had been made under the provisions of the earlier Act. It was further held that from such an order of rectification, no appeal lay before the Appellate Assistant Commissioner. But the Tribunal was correct in entertaining the departmental appeal from the order of the Appellate Assistant Commissioner and in setting aside the same though the Tribunal held that no competent appeal lay before the Appellate Assistant Commissioner. The learned advocate for the assessee contended on the other hand that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt held that an appeal lay from an order of rectification in view of the widely worded provision of section 62(1)(b) of the Estate Duty Act, 1953. (c) CED v. Jayantilal Keshav Mehta (Late) [1979] 117 ITR 51. In this case, a Division Bench of the Gujarat High Court, following the Kerala High Court in Venkitraman's case [1978] 115 ITR 222, held that an appeal lay to the Appellate Controller against the order of the Assistant Controller of Estate Duty of rectification under section 62(1)(b) of the Estate Duty Act 1953. (d) H. H. Maharaja Martand Singh Ju Deo v. Commissioner of Expenditure Tax [1983] 140 ITR 786 (MP). In this case, a Division Bench of the Madhya Pradesh High Court considered the Expenditure Tax Act, 1957, and, in particular, section 21 thereof providing for appeals against the orders passed under the said Act. In the instant case, admittedly, the original order of assessment was made under section 23 of the Indian Income-tax Act, 1922, and thereafter an order was passed under section 34 of the Act of 1922 by way of reassessment. The reassessment was set aside and a fresh order was passed pursuant to the directions of the Tribunal on June 29, 1967, when the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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