Skip to content


Commissioner of Income-tax, Poona-i Vs. Sandvik Asia Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Application No.23 of 1978
Judge
Reported in[1980]122ITR988(Bom); [1979]4TAXMAN352(Bom)
ActsIncome Tax Act, 1961 - Sections 256(2)
AppellantCommissioner of Income-tax, Poona-i
RespondentSandvik Asia Ltd.
Appellant AdvocateR.J. Joshi, Adv.
Respondent AdvocateS.E. Dastur, Adv.
Excerpt:
direct taxation - reopening of assessment - sections 256 (2) of income tax act, 1961 and sections 6 (2) and 8 (b) of companies (profits) surtax act, 1964 - respondents filed returns under 1964 act showing no amount payable by way of surtax - income tax officer (ito) reopened assessment under sections 6 (2) read with 8 (b) - ito had made certain notings to the effect that proceedings had been dropped - record pertaining droppings of proceedings were not produced before tribunal - ito had no jurisdiction to reopen assessment in event of department failing to produce records. - - against the order of the aac, the department unsuccessfully went in appeal to the tribunal. this decision cannot be said to be good law in view of the subsequent decision of the supreme court in cit v......: 'mr. kulkarni, we have already dropped the two proceedings. kindly keep in surtax file.' the tribunal held that this note showed that the proceedings had been dropped earlier. the tribunal further found that no order dropping the proceedings had been brought on the record. accordingly, the tribunal held that the assessment proceedings pursuant to the returns filed by the petitioner were pending and were not concluded an during the pendency of these proceedings no notice of reassessment could issue. in arriving at this conclusion, the tribunal relied upon the decision of the supreme court in cit v. m. k. k. r. muthukaruppan chettiar : [1970]78itr69(sc) . in that case, the ito had made a note stating' no assessment'. he thereafter issued a notice to reopen the assessments. the.....
Judgment:

Madon J.

1. This is an application under s. 18 of the Companies (Profits) Surtax Act, 1964, read with s. 256(2) of the I.T. Act, 1961, by the CIT for an order directing the Income-tax Appellate Tribunal to state a case and refer to this High Court the following four questions :

'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that reassessment proceedings under section 8(b) of the Companies (Profits) Surtax Act, 1964, were not valid and in holding that the Appeallate Assistant Commissioner was justified in annulling the reassessment order made by the Income-tax Officer

(2) Whether, On the facts and in the circumstances of the case, the Tribunal was right in law in holding that the mere nothing of the Income-tax Officer on the letter dated December 3, 1970, stating that the proceedings were already dropped could not be considered as an order to terminate the proceedings and further holding that the reassessment proceedings were not valid

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Income-tax Officer could not invoke rule 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, in order to effect a proportionate reduction in the assessee- company's capital having regard to the deduction allowed to it under section 80-I of the Income-tax Act, 1961, in the computation of its total income

(4) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that thi reduction of Rs. 17,75,166 in the assessment reopened under section 8(b) of the companies (Protifs) Surtax Act, 1964, was not in accordance with law and in holding that rule 4 of the Second Schedule to the said Act is not applicable to the case ?'

2. The brief facts necessary for an understanding of this matter are that the respondents filed their returns under the Companies (Profits) Surtax Act, 1964, with the ITO for the assessment years 1968-69 and 1969-70 on December 3,1970, showing no amount payable by way of surtax by them. These returns were forwarded by the respondents along with a covering letter bearing the same date. Thereafter, the ITO issued a notice under s. 8(b) of the said Act for reopening the assessment made. Returns were filed by the respondents in pursuance of the said notice, once again showing that no amount of surtax was payable by them. Thereafter, the ITO passed an order of reassessment under s. 6(2) read with s. 8(b) of the said Act by which he held that deductions under s. 80-I of the I.T. Act, 1961, from gross total income allowed to the respondents were in respect of amounts not liable to be included in their total income as computed under the said Act and that, therefore, r. 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, was applicable and the capital computation had to be reduced accordingly. The respondents filed an appeal against the said order. One of the grounds taken in the appeal by the respondents was that the ITO had no jurisdiction to reopen the assessment inasmuch as the assessment proceedings, pursuant to the returns filed by the respondents, had not been concluded and were pending. The respondents further objected to the disallowance of the said deductions. Both these objections were allowed by the AAC. There was another contention raised by the respondents with respect to dividends, which was disallowed by the AAC and with which we are not concerned in this application. Against the order of the AAC, the department unsuccessfully went in appeal to the Tribunal. The department thereafter applied to the Tribunal to state the case to this court and refer to it the four questions set our above. This application was rejected by the Tribunal. Thereafter, the petitioner has approached this High Court.

3. In order to show that the ITO had jurisdiction to reopen the assessment what was relied upon by the department was a note made by the ITO on the covering letter dated December 3, 1970, to the said returns. That note stated : 'Mr. Kulkarni, we have already dropped the two proceedings. Kindly keep in surtax file.' The Tribunal held that this note showed that the proceedings had been dropped earlier. The Tribunal further found that no order dropping the proceedings had been brought on the record. Accordingly, the Tribunal held that the assessment proceedings pursuant to the returns filed by the petitioner were pending and were not concluded an during the pendency of these proceedings no notice of reassessment could issue. In arriving at this conclusion, the Tribunal relied upon the decision of the Supreme Court in CIT v. M. K. K. R. Muthukaruppan Chettiar : [1970]78ITR69(SC) . In that case, the ITO had made a note stating' no assessment'. He thereafter issued a notice to reopen the assessments. The Supreme Court, following its earlier decision in the Estate of late A.M. K. M. Karuppan Chettiar v. CIT : [1969]72ITR403(SC) , held that a notice under s. 34 of the Indian I.T. Act, 1922, could not be issued unless the returns which had been filed were disposed of. The Supreme Court further held that the principle applied to the case before it as the material facts were not different.

4. Mr. Joshi, learned counsel for the petitioner, has, however, referred us to two decisions of the Supreme Court and a decision of the Madras High Court in which it was held that the assessment proceedings in question were concluded by certain notings made by the ITO. In our opinion, none of those cases have any relevance to the facts before us. These notings are, as will be seen presently, different from the nothing in the case before us. In the present application, the proceedings are not bing dropped not the assessment being concluded or closed by the noting in question. This nothing expressly refers to the proceedings having been already dropped, that is, dropped prior to the date of the nothing. If that was so, there would be an order or a nothing to that effect in the order sheet. None has been produced, and the Tribunal was, therefore, right in coming to the conclusion that there was no such order concluding the proceedings.

5. Turning now to the cases relied upon by Mr. Joshi in Esthuri Aswathiah v. ITO : [1961]41ITR539(SC) , the nothing was 'no proceeding'. The Supreme Court held that on the facts the order 'no proceeding' meant that the ITO accepted the return submitted by the appellant. In V. S. Sivalingam Chettiar v. CIT : [1966]62ITR678(Mad) , the noting again was 'N.A.', that is, 'no assessment'. The Madras High Court held that the note 'N. A.' of the ITO was intended to close the returns. This decision cannot be said to be good law in view of the subsequent decision of the Supreme Court in CIT v. M. K.K. R. Muthukaruppan Chettiar : [1970]78ITR69(SC) , referred to earlier, in which the nothing 'no assessment' was held not to conclude the assessment proceedings. In CIT v. Bindhu Bhusan Sarkar [1966] 63 ITR 278, the nothing was (p. 281) :

'Mr. K. B., constituted attorney, appears and submits that the old return already submitted may be treated to be submitted in response to notice under section 34(1)(a) (of the Indian Income-tax Act, 1922). The income should be taken in the assessment of the military contact income for which there is another file. The case is, therefore, filed.'

6. It is thus clear that in each of the Supreme Court cases relied upon by Mr. Joshi the order on the being nothing operated in prasenti. Here in the case before us the case is not closed not the proceedings dropped by this nothing. This nothing referees to a fact which has already taken place earlier, namely, the dropping of proceedings. There is no order or nothing at all to substantiate this statement of the ITO in the nothing in question. It is somewhat surprising that had in fact the proceedings been closed by an order or nothing, such a nothing should not have been produced before AAC or the Tribunal. The answers to questions Nos. 1 and 2, which the petitioner applies for being referred to his High Court, turns purely upon the construction of the above nothing. The construction is so plain and obvious that it would be as waste of time ask to Tribunal to state the case and refer questions Nos. 1 and 2 to us.

7. If the ITO had no jurisdiction to reopen the assessment, questions Nos. 3 and 4, on which the petitioner wants a reference, would not arise and become academic, because these are questions which relate to the merits of the assessment. However, we may point out that these two questions have already been answered against the department by this High Court in Commr. of Surtax v. Ballarpur Industries Ltd. : [1979]116ITR528(Bom) .

8. In the result, this application fails and is dismissed and the rule is discharged with costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //