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TMI Blog1976 (11) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner by order dated October 16, 1967, whereby the assessment order was set aside with a direction to the Income-tax Officer "to complete the fresh assessment from the return stage". Being dissatisfied with the order, the petitioner filed a second appeal before the Income-tax Appellate Tribunal, but this appeal was subsequently withdrawn. In obedience to the direction given by the Appellate Assistant Commissioner, the Income-tax Officer commenced assessment proceedings against the petitioner. In these proceedings a number of objections were taken including the objection to the legality and validity of the proceedings on the ground that a period of four years during which the assessment could be made had expired. It was also canvassed before the Income-tax Officer that the direction contained in the order of the Appellate Assistant Commissioner that a fresh assessment be made from the return stage was illegal and beyond his jurisdiction. These objections not having found favour with the Income-tax Officer, this writ petition was filed with a prayer that the order of the Appellate Assistant Commissioner directing the Income-tax Officer to complete the fresh assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x at source from salary and dividends. By virtue of sub-section (7) of section 23B the quantum of tax computed under the provisional assessment is deemed to have been paid towards the regular assessment and is liable to be adjusted. In case the amount paid towards provisional assessment exceeds the amount payable under the regular assessment the excess amount is to be refunded to the assessee. Except for this limited purpose the provisional assessment is a distinct proceeding. It is described as a provisional assessment only for the purpose of indicating that it is provisional as to the amount of the tax payable and that it does not preclude a regular assessment determining the tax liability finally. The provisional assessment does not merge in a final assessment. If the regular assessment is void and, therefore, non est, the amount paid towards provisional assessment continues to bear that character and cannot be deemed to have been paid towards the regular assessment. A regular assessment, which is without jurisdiction, is a nullity and does not exist in the eye of law. In such a situation the provisions of sub-section (7) of section 23B are not attracted as no regular assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplexity as we first thought. Pursuant to a notice issued by the Income-tax Officer under section 22(2) of the Indian Income-tax Act, 1922, the petitioner (assessee) submitted his return of income for the assessment year 1960-61 on December 20, 1960. On December 23, 1960, the Income-tax Officer made provisional assessment under section 23B of the Act and on the basis of the provisional assessment, he raised a demand on the petitioner for payment of provisional tax of Rs. 50,808. Thereafter, the Income-tax Officer also issued a notice under section 23(2) of the Act. The Income-tax Act, 1961, came into force with effect from April 1, 1962. The assessment of the petitioner for the year 1960-61 was completed by the Income-tax Officer on March 24, 1965. He purported to complete the assessment under section 143(3) of the 1961 Act. The assessee preferred an appeal to the Appellate Assistant Commissioner under section 246 of the 1961 Act. One of the grounds urged by the petitioner before the Appellate Assistant Commissioner was that the Income-tax Officer should have completed the assessment under the provisions of the Indian Income-tax Act, 1922, and not under the provisions of the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Commissioner was passed on October 16, 1967. The petitioner preferred an appeal to the Income-tax Appellate Tribunal on December 4,1967, but withdrew the same subsequently. Consequent upon the direction issued by the Appellate Assistant Commissioner, the Income-tax Officer issued a fresh notice under section 23(2) of the 1922 Act on January 12, 1968. On January 17, 1968, the assessee submitted written objections claiming that no assessment was permissible as the period of four years prescribed by section 34(3) of the Act had elapsed. As the Income-tax Officer was going ahead with the assessment despite his objections, the petitioner filed Civil Writ Petition No. 546 of 1968 challenging the notice issued to him on January 12, 1968. On February 27, 1968, the Income-tax Officer purporting to act under section 240 of the 1961 Act, granted a refund of tax of Rs. 97,055, making adjustments against demands of tax for later years. Subsequently, he issued a notice seeking to rectify the order for refund of tax on the ground that it had been wrongly allowed to the extent of Rs. 55,242. The assessee submitted his objections and, finally, the Income-tax Officer passed order dated June 5, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He submitted that the expression "finding" and "direction" in the second proviso to section 34(3) meant, respectively, a finding necessary for giving relief to the assessee and a finding which the appellate or revisional authority was empowered to give under section 31, 33, 33A, 33B, 66 or 66A. He invited our attention to the decision of the Supreme Court in Income-tax Officer v. Murlidhar Bhagwandas [1964] 52 ITR 335 (SC). That was a case in which the assessee preferred an appeal to the Appellate Assistant Commissioner against his assessment for the year 1949-50. The Appellate Assistant Commissioner took the view that certain interest income was received by the assessee not in the relevant accounting year but in the previous accounting year. He, therefore, directed the deletion of that part of the income from the assessment for the year 1949-50 and the inclusion of it in the assessment for the year 1948-49. Pursuant to the direction, the Income-tax Officer initiated reassessment proceedings under section 34(1) of the 1922 Act in respect of the assessment year 1948-49. The Supreme Court held that the finding and the direction which the Appellate Assistant Commissioner was competent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to another purporting to be under sections 5(5) and 5(7A) of the Indian Income-tax Act when it ought to have been under section 5 of the Patiala Income-tax Act was void on that account. The Supreme Court said: "This argument, however, loses point, because the exercise of a power will be referable to a jurisdiction which confers validity upon it and not to a jurisdiction under which it will be nugatory. This principle is well-settled." In Kandaswami v. Commissioner of Income-tax [1963] 49 ITR 344, 349 (Mad), the Madras High Court stated the position thus: "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." In Laxmi Industries and Cold Storage Co. (Pvt.) Ltd. v. Income-tax Officer [1971] 79 ITR 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of the old Act. The Appellate Assistant Commissioner could well have declared the assessment valid but he chose to set aside the assessment because of the technical defect and gave the direction already mentioned. He was competent to give such a direction under section 251(1)(a) of the 1961 Act as well as under section 31(3)(b) of the 1922 Act. Both the provisions enabled the Appellate Assistant Commissioner to set aside the assessment and direct the Income-tax Officer to make a fresh assessment. If the assessment made by the Income-tax Officer was entirely without jurisdiction and was a nullity, the Appellate Assistant Commissioner could not give a direction to make a fresh assessment after the expiry of the period of limitation but where the assessment made by the Income-tax Officer was not entirely without jurisdiction but suffered from a mere technical defect, the Appellate Assistant Commissioner, in the exercise of his jurisdiction, could direct the Income-tax Officer to make a fresh assessment notwithstanding the expiry of the four year period of limitation. In such an event, the fresh assessment would be saved by the provisions of section 150 of the new Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at contemplates that the assessment proceedings themselves had been validly initiated and it was set aside only for the reason that a proper enquiry had not been made by the Income-tax Officer, that is to say, the Income-tax Officer had been seized of jurisdiction in the matter and only the final order made by him was defective for some reason or other. But, in a proceeding for reopening an assessment and making a reassessment under section 34, the Income-tax Officer acquires jurisdiction in a particular manner and it is not open to the appellate authority to make a direction which would have the effect of conferring jurisdiction in a case where such jurisdiction has not been properly acquired by the Income-tax Officer." In the case before us, the Income-tax Officer had validly acquired jurisdiction by the issue of a notice under section 22(2) of the 1922 Act and by the submission of a return by the assessee under the provisions of that Act. He went wrong in completing the assessment under the provisions of the new Act. There was no question of the Income-tax Officer having commenced the proceedings without jurisdiction or the Appellate Assistant Commissioner conferring jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uppan and his sons on the other. Karuppan filed returns in his individual capacity while Muthukaruppan and his sons filed separate returns as Hindu undivided family. The Income-tax Officer rejected the claim of partition and treating Karuppan's returns as returns of the original Hindu undivided family, assessed the family as before the assessments relating to the returns filed by Muthukaruppan and his sons were closed with the endorsement "no assessment". In the appeals filed by Karuppan, the Appellate Assistant Commissioner upheld the partition. Thereafter, the Income-tax Officer issued notices under section 34 to the Hindu undivided family consisting of Muthukaruppan and his two minor sons and completed the assessments. On those facts, the Supreme Court held that the Hindu undivided family consisting of Muthukaruppan and his sons had submitted voluntary returns and that there was no disposal of those returns. It was, therefore, held that the proceedings under section 34 were illegal. We do not see how this case is of any assistance to the assessee. All that was decided in that case was that voluntary returns submitted by the assessee not having been disposed of, there was no occa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned judges expressed the view that the question referred to them was based on the invalidity of the assessment and, therefore, the revenue could not contend that the assessment was valid. The learned judges appeared to equate "invalid" with "void" and "without jurisdiction". We are unable to agree with this view. An assessment might be declared invalid or defective for several reasons. The question to be considered was, whether the assessment was without jurisdiction and void or whether it was merely irregular. The learned judges did not consider the question whether an assessment made by invoking a wrong provision of law was altogether void merely on that ground, though the assessment was capable of being sustained under the correct provision of law. Where an assessment is found to be defective because of being made under an incorrect provision of law, the assessment would not be without jurisdiction and void. In such a case, it would be open to the appellate authority to confirm the assessment by reference to the appropriate provision of law or set aside the assessment and direct the Income-tax Officer to make a fresh assessment with reference to the correct provision of la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nery devised to recover the tax that might ultimately be assessed and found payable by the assessee on the completion of the assessment proceedings. If no tax became payable in the regular assessment proceedings, any provisional tax paid by the assessee was bound to be refunded. According to him the provisional assessment died with the regular assessment when the latter was set aside. In any case, it was argued that there was no apparent error such as could attract the provisions of section 35 of the 1922 Act or section 154 of the 1961 Act. The Income-tax Officer ordered the refund of the provisional tax paid by the assessee as he was under the impression that by doing so he would be giving effect to the order of the Appellate Assistant Commissioner setting aside the regular assessment. Later, he thought that the refund had been wrongly ordered as the Appellate Assistant Commissioner never directed the refund of the provisional tax or set aside the provisional assessment. The question for consideration is whether the first impression or the second thought of the Income-tax Officer was correct. The further question for consideration is whether the first impression of the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act, 1961, authorises the Income-tax Officer to make a provisional assessment of the income of the assessee on the basis of the return made under section 139 and the accounts and documents, if any, accompanying the return. The assessment so made is summary and is based only on the return and the accounts and documents filed by the assessee. The Income-tax Officer is not bound to make any enquiry before making a provisional assessment; he is not bound even to give to the assessee any notice of his intention to make a provisional assessment nor to hear the assessee. He may, if he desires, call upon the assessee to elucidate the return or the entries posted in the accounts and documents, but he is not obliged to do so. Section 141 has been enacted with the object of expediting collection of tax on the basis of the return made by the assessee ...... The provisional assessment does not bind the assessee nor the department: the quantum of tax computed and the levy thereof are not binding upon the assessee and the revenue. Tax paid pursuant to provisional assessment is liable to be adjusted in the light of the final order in the regular assessment. An appeal against the order is expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee would be without remedy. It would be open to the assessee to ask this court for a mandamus to direct the Income-tax Officer to complete the assessment. It would perhaps be open to the assessee to file an application before the Income-tax Officer under section 48 of the 1922 Act seeking a refund of the excess amount paid by him. He would then have to establish that the tax paid by him exceeded the amount with which he was properly chargeable under the Act. Chargeability to income-tax arises as soon as the income is earned. The quantification of the tax is postponed till the assessment is made. Where quantification of the tax payable is not done through a regular assessment, it would perhaps be open to the assessee to insist upon the determination of the tax to which he was properly chargeable under the Act and claim a refund of the excess, if any, paid by him. Perhaps, a suit also would not be barred. Whether a suit is filed or an application under section 48 is filed, the assessee would have to, as already indicated, establish that the provisional tax paid by him exceeded the amount with which he was properly chargeable under the Act. Shri Gupta urged that, in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in rectification proceedings under section 35 of the Act. It was held that the principle of the finality of orders could not be invoked by the assessee. They held that the mistake was "glaring and obvious" and it could, therefore, be rectified under section 35 of the 1922 Act. It would be seen from this decision of the Supreme Court that if a mistake was "glaring and obvious", it would be a mistake apparent from the record notwithstanding the complexity of the issues involved. The basic principle is thus clear. A mistake apparent from the record means an "obvious and patent" or a "glaring and obvious" mistake. Hotly debatable issues are excluded. Hardly debatable issues are included. The issues may be complicated, yet the mistake may be simple. It is a mistake apparent from the record. The test is not the complexity of the issues but the simplicity of the mistake. In the present case the refund was the result of confusing the provisional assessment with the regular assessment. Because the regular assessment was set aside, the provisional tax was refunded. It could not be done. It was a patent mistake. The Income-tax Officer rightly rectified the mistake. In the result both th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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