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H.H. Maharaja Martand Singh Ju Deo Vs. Commissioner of Expenditure-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 358 of 1978
Judge
Reported in(1982)28CTR(MP)50; [1983]140ITR786(MP)
ActsExpenditure Tax Act, 1957 - Sections 21, 21(1), 21(2) and 31; Income Tax Act, 1922 - Sections 23, 27, 30(1), 35 and 35(1); Estate Duty Act, 1953 - Sections 62(1)
AppellantH.H. Maharaja Martand Singh Ju Deo
RespondentCommissioner of Expenditure-tax
Appellant AdvocateH.S. Shrivastava, Adv.
Respondent AdvocateB.K. Rawat, Adv.
Excerpt:
.....words of wider amplitude 'liability to the amount of estate duty payable' used in the latter expression. 20. accordingly, we are of the opinion that the aac as well as the appellate tribunal erred in holding/that no appeal lies under section 21(1) of the expenditure-tax act, 1957, against an order of rectification made under section 31 of that act......assessed under this act' was also repelled on the ground that the clause refers to denial of total liability or liability to tax under particular circumstances which does not include a case of mere rectification. however, it is significant that the words 'under this act' occurring in this clause were construed to mean 'under any provision of the act'. this other clause corresponds to clause(c) of sub-section (1) of section 21 of the expenditure-tax act, with which we are not concerned in the present case, as the assessee relies only on clauses (a) and (b), for which the relevant reasoning given in the gujarat decision has already been considered.15. thus, the reasons on which a rectification order was held to be not appealable under section 30(1) of the indian i.t. act, 1922, in the.....
Judgment:

J.S. Verma, J.

1. This reference at the instance of the assessee has been made under Section 25(1) of the Expenditure-tax Act, 1957, for the opinion of this court on the following question of law, namely :

'Whether an appeal lies under Section 21 of the Expenditure-tax Act against an order of rectification passed under Section 31 thereof?'

2. For the assessment years 1964-65 and 1965-66, the assessee filed returns claiming certain permissible deductions under the Expenditure-tax Act, 1957. The Expenditure-tax Officer, Satna, passed assessment orders and allowed deductions which were in excess of the amount claimed by the assessee in the returns filed for those years. Thereafter, the Expenditure-tax Officer issued notice to the assessee under the proviso to Section 31 of the Act to show cause why the amount of deduction given for these two years be not reduced and the mistake rectified. The assessee gave his reply contending that the deductions given were justified on the basis of the decision of the Appellate Tribunal. The Expenditure-tax Officer, however, passed a composite order of rectification under Section 31 of the Act. The effect of the order was to increase the amount of taxable expenditure determined resulting in enhancement of the amount of expenditure-tax determined as payable by the assessee for both years.

3. The assessee preferred appeals to the AAC under Section 21 of the Act against the rectification which had the effect of enhancing the amount of expenditure-tax determined as payable by the assessee. These appeals were dismissed by the AAC on the ground that no appeal lay under Section 21 of the Act against an order of rectification made under Section 31 thereof (annexs. C and C-1). The assessee then preferred appeals to the Appellate Tribunal under Section 22 of the Act. These appeals have been dismissed by the Tribunal's composite order (annex. E) dated January 13, 1978, upholding the view taken by the AAC that no appeal under Section 21 of the Act lies against an order of rectification made under Section 31 of the Act. The Tribunal has taken the view that Section 31(1) and Section 35 of the Indian I.T. Act, 1922, are in pari materia with Section 21(1) and Section 31 of the Expenditure-taxAct, 1957, and, therefore, the view taken by the Gujarat High Court in Mantel Ginning & Pressing Co. Ltd. v. CIT : [1973]90ITR332(Guj) , is equally applicable for taking the same view under the Expenditure-tax Act.

4. The assessee being aggrieved by the Tribunal's decision, applied for a reference to be made under Section 25(1) of the Act and a consolidated reference for both the assessment years has, accordingly, been made by the Tribunal referring the above-quoted question of law for the opinion of this court.

5. Shri H. S. Shrivastava, learned counsel for the assessee, contended that Clauses (a) and (b) of Sub-section (1) of Section 21 of the Expenditure-tax Act, 1957, being differently worded, are not in pan materia with the corresponding part of Section 30(1) of the Indian I.T. Act, 1922, on account of which the Gujarat decision relied on by the Tribunal is clearly distinguishable. Learned counsel contended that the language used in Section 21(1)(a) and (b) of the Expenditure-tax Act is wide enough to permit an appeal under Section 21(1)(a) and/or (b) against an order of rectification made under Section 31 of the Act. In reply, Shri B. K. Rawat, learned counsel for the Revenue, supported the Tribunal's view on the reason given by the Tribunal.

6. Section 21 of the Expenditure-tax Act, 1957, is as under ;

'21. Appeal to the Appellate Assistant Commissitncr from orders of Expenditure-tax Officers.-

(1) Any person-

(a) objecting to the amount of his taxable expenditure determined under this Act; or

(b) objecting to the amount of expenditure-tax determined as payable by him under this Act; or

(c) denying his liability, to be assessed under this Act; or

(d) objecting to any penalty imposed by the Expenditure-tax Officer under Section 17; or

(e) objecting to any order of the Expenditure-tax Officer under Sub-section (2) of Section 19 ; or

(f) objecting to any penalty imposed by the Expenditure-tax Officer under the provisions of Sub-section (1) of Section 46 of the Income-tax Act as applied under Section 30 for the purpose of Expenditure-tax ;

may appeal to the Appellate Assistant Commissioner against the assessment or order, as the case may be, in the prescribed form and verified in the prescribed manner.

(2) An appeal shall be presented within thirty days of the receipt of the notice of demand relating to the assessment or penalty objected to, or the date on which any order objected to is communicated to him, but the Appellate Assistant Commissioner may admit an appeal after the expiration of the period aforesaid if he is satisfied that the appellant had sufficient cause for not presenting the appeal within that period.'

7. The relevant part of Section 30(1) of the Indian I.T. Act, 1922, is as under :

'30. Appeal against assessment under this Act.--(1) Any assesses 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 oj 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 (2) of Section 26 or. Section 28 made by an Income-tax Officer, or objecting to any penalty imposed by an Income-tax Officer under Sub-section (6) of Section 44E or Sub-section (5) of Section 44F or Sub-section (1) of Section 46, or objecting to a refusal of an Income-tax Officer to allow a claim to a refund under Section 48, 49 or 49F, or to the amount of the refund allowed by the Income-tax Officer under any of those sections, and any assessee, being a company, objecting to an order made by an Income-tax Officer under Sub-section (1) of Section 23A, may appeal to the Appellate Assistant Commissioner against the assessment or against such refusal or order...' (Underlining* by us)

8. Section 31 of the Expenditure-tax Act is similar to Section 35(1) of the Indian I.T. Act, 1922, for the purpose of this case and they need not be quoted. Both these sections give the power to make a rectification in the assessment order already passed.

9. The three portions underlined* by us in Section 30(1) of the Indian I.T. Act, 1922, correspond to Clauses (a), (b) and fc) of Sub-section (1) of Section 21 of the Expenditure-tax Act and it is only these portions of the two provisions which are really material for this case. There is no dispute that no appeal lay under Section 30(1) of the Indian I.T. Act, 1922, against an order of rectification made under Section 35(1) thereof even though under the I.T. Act, 1961, such an appeal has been expressly provided. The question, therefore, is whether the first two portions underlined* by us in Section 30(1) of the Indian I.T. Act, 1922, are in pari materia with Clauses (a) and (b) of Sub-section (1) of Section 21 of the Expenditure-tax Act to take the same view under the latter enactment.

10. It is settled that there is no inherent right of appeal, that the right of appeal is a creature of the statute and the same has to be expressly conferred to enable its exercise. The real question, therefore, is whether Section 21(1) confers any right of appeal against an order of rectification made under Section 31 of the Expenditure-tax Act.

11. A perusal of the corresponding Section 30(1) of the Indian I.T. Act, 1922, reveals that the appeal provided thereunder is against orders made under specific sections of the I.T. Act, which are expressly mentioned therein.One category of such appealable orders is described as an order assessing income or determining the amount of tax under Section 23 or Section 27. Another appealable order, in which no particular section is referred, is the one in relation to the assessee's objection 'denying his liability to be assessed under this Act'. It is mainly these two types of appealable orders mentioned in Section 30(1) of the I.T. Act, which have been construed as not including within their ambit an order of rectification made under Section 35(1) of the I.T. Act.

12. The scheme of Section 21 of the Expenditure-tax Act does not appear to be similar. Clause (c) of Sub-section (1) of Section 21 of the Expenditure-tax Act, no doubt, corresponds to one type of order in Section 30(1) of the I.T. Act, already indicated. Similarly, Clauses (d), (e) and (f) of Sub-section (1) of Section 21 refer to specific sections under which the appealable order is made. The assesses, in the present case, however, relies on Clauses (a) and (b) of Sub-section (1) of Section 21, the ambit of which is not circumscribed by reference to any particular section as the source of power for making the order. Clause (a) refers to any order determining the amount of taxable expenditure 'under this Act' while Clause (b) refers to an order determining the amount of expenditure-tax payable by the assessee 'under this Act', The words 'under this Act' must ordinarily mean 'under any provision of this Act'. Without anything more to restrict the operation of Clauses (a) and (b), it must be held that any order made 'under any provision of this Act' determining the amount of taxable expenditure or the amount of expenditure-tax payable by the assessee would be appealable under Clauses (a) and (b) of Sub-section (1) of Section 21. Accordingly, an order of rectification made under Section 31 of the Expenditure-tax Act being an order under a provision of the Act and having the effect of increasing the amount of taxable expenditure determined and enhancing the amount of expenditure-tax determined as payable by the assessee, would be an appealable order under these clauses. These Clauses (a) and (b) do not limit an appeal against only the assessment order initially made prior to its rectincation, as does Section. 30(1) of the Indian I.T. Act, 1922, which provides for an appeal only against assessment of income or determination of the amount of tax under Section 23 or Section 27 of that Act, omitting the mention of Section 35 throughout in Section 30(1) of the I.T. Act. It has, therefore, to be seen whether there is anything else in Section 21 of the Expenditure-tax Act to circumscribe the operation of Clauses (a) and (b) of Sub-section (1) of Section 21 to provide for an appeal only against an assessment order and not an order of rectification made under Section 31 of the Act. In our opinion, the indication given by Section 21 itself leads to the contrary conclusion that there was no intention of the Legislature to limit the wide scope of Clauses (a) and (b) of Sub-section (1) so as to deny an appeal against an order of rectification made under Section 31 of the Act.

13. At the end of Sub-section (1) of Section 21, the expression used is 'may appeal to the Appellate Assistant Commissioner against the assessment or order'. This indicates that an appeal is provided not merely against the assessment but also against any order falling within the ambit of any of the Clauses (a) to (f) in Sub-section (1). Sub-section (2) also gives an indication in this behalf. It prescribes the period for appeal and the starting point of limitation is 'receipt of the notice of demand relating to the assessment or penalty objected to or the date on which any order objected to is communicated'. The use of the expression 'any order objected to' signifies that an appeal is provided not merely against assessment or penalty but also 'any order objected to', provided, of course, it falls within the ambit of any of the Clauses fa) to (f) in Sub-section (1). There is thus nothing in Section 21 of the Expenditure-tax Act, no other provision of the Act being relied on by the Revenue in support of its contention, to suggest that Clauses (a) and (b) of Sub-section (1) of Section 21 are to be restricted in their application by circumscribing the wide ambit of their ordinary meaning. This analysis of Section 21 of the Expenditure-tax Act, and a further comparison of the same with Section 30(1) of the Indian I.T. Act, 1922, clearly show that Clauses (a) and (b) of Sub-section (1) of Section 21 are wider in amplitude than the corresponding parts of Section 30(1) of the Indian I.T. Act, 1922 and, therefore, the decisions construing the latter provision are not decisive of the question before us.

14. It may now be useful to refer to the decision in Mandal Ginning & PrcssingCo. Ltd. v. CIT : [1973]90ITR332(Guj) . That too was a case in which a similar question arose with reference to the provisions of the Indian I.T. Act, 1922. The question was whether an appeal would lie under Section 30(1) against an order of rectification made under Section 35(1) of the Indian I.T. Act, 1922. The assessee in that case claimed the right of appeal under Section 30(1) of the Indian I.T. Act, 1922, by placing reliance on two clauses therein, which were : ' any assessee objecting to the amount of income assessed under Section 23.....or the amount of tax determinedunder Section 23.....' and 'any assessee denying his liability to be assessedunder this Act'. The Gujarat High Court repelled the contention based on the first of these two clauses which corresponds to Clauses (a) and (b) of Sub-section (1) of Section 21 of the Expenditure-tax Act, for several reasons. One reason was 'that the legislature did not intend to confer a right of appeal against the amount of income assessed or the amount of tax determined without reference to the section under which the assessment or determination may have been made'. It was pointed out that the right of appeal was conferred only in respect of such determination made in exercise of the power conferred under Section 23 and it could not be doubted that the exercise of the power under Section 35(1) of making rectification was a different source of power enhancing the tax liability earlier determined under Section 23 of theIndian I.T. Act. For this reason, it was pointed out that an appeal was provided only against the assessment made under Section 23 and not the rectification made thereafter under Section 35(1). It was held that the right of appeal being expressly confined to the order of assessment made under Section 23 and no such right being conferred against an order of rectification made under Section 35(1), which was a different source of power, no appeal lay against the rectification order made under Section 35(1). That decision was, therefore, given only in view of the restricted right of appeal confined to an assessment made under Section 23 by virtue of the contents of Section 30(1) of the Indian I.T. Act, 1922, even though it was pointed out, referring to a decision of the Supreme Court, that the words 'assessment made' have a comprehensive meaning to comprehend the detailed procedure for ascertaining and imposing liability upon the taxpayer, including a proceeding for rectification of tax. Reliance, in that case, on the other clause 'any assessee denying his liability to be assessed under this Act' was also repelled on the ground that the clause refers to denial of total liability or liability to tax under particular circumstances which does not include a case of mere rectification. However, it is significant that the words 'under this Act' occurring in this clause were construed to mean 'under any provision of the Act'. This other clause corresponds to Clause(c) of Sub-section (1) of Section 21 of the Expenditure-tax Act, with which we are not concerned in the present case, as the assessee relies only on Clauses (a) and (b), for which the relevant reasoning given in the Gujarat decision has already been considered.

15. Thus, the reasons on which a rectification order was held to be not appealable under Section 30(1) of the Indian I.T. Act, 1922, in the Gujarat decision, instead of supporting the Revenue, strengthen the contention of the assessee. It is clear that the reasons which compelled the Gujarat High Court to take that view are not present in this case. In fact, those reasons also indicate that but for the restricted right of appeal confined to assessment made under the specified provisions, which do not include Section 35(1) of the Indian I.T. Act, the right of appeal claimed by the assessee against an order of rectification would not have been refused.

16. Section 61 of the E.D. Act, 1953, gives a similar power to rectify mistakes and the question arose whether such an order of rectification was appealable under Section 62 of that Act. It was held that an appeal lay against an order of rectification by virtue of Section 62(1)(b) of that Act, which reads as under :

'62. Appeal against orders of Controller.--(1) Any person--...

(b) denying his liability to the amount of estate duty payable in respect of any property,

may, within thirty days of the date of the receipt of the notice of demand under Section 73, appeal to the Appellate Controller in the prescribed form which shall be verified in the prescribed manner :... '

17. The Kerala High Court in CED v. P.E. Venkitraman [1978] 115 ITR 222 took the view that an appeal against an order of rectification made under Section 61 of the E.D. Act lies under Section 62(1)(b) inasmuch as 'the said clause is widely worded and if as a result of the rectification order passed, the accountable person was denying his liability to the estate duty which he was called upon to pay, that is sufficient to attract the right of appeal conferred by Section 62(1)(b)'. It is significant that the Gujarat High Courtitself in a subsequent decision in CED v. Late Jayantilal Keshav Mehta : [1979]117ITR51(Guj) , distinguished its earlier decision in Mandal Ginning & Pressing Co. Ltd. v. CIT : [1973]90ITR332(Guj) , and following the Kerala view, has held that an order of rectification made under Section 61 of the E.D. Act is appealable by virtue of Section 62(1)(b) of that Act. It was pointed out that the restricted right of appeal given ins, 30(1) of the Indian I.T. Act, 1922 by reference to specific sections under which the order was made, is totally different from the wide wordings of Section 62(1)(b) of the E.D. Act and it was also pointed out that the wordings used in Section 62(1)(b) are not 'denying his liability to be assessed to estate duty' but 'denying his liability to the amount of estate duty payable in respect of any property'. The distinction in these two expressions clearly is on account of the words 'liability to be assessed to estate duty' in the former as compared to the words of wider amplitude 'liability to the amount of estate duty payable' used in the latter expression. The obvious difference in the two expressions is that in the former the assessee denies total liability or liability to tax under particular circumstances, while in the latter the dispute is only to the quantum of tax and not to the liability to be taxed.

18. We are, with respect, in agreement with this later Gujarat decision pointing out the distinguishing features in the earlier Gujarat case, which, as we have earlier pointed out, are implicit in the reasons given in the earlier decision itself. In our opinion, Clauses (a) and (b) of Sub-section (1) of Section 21 of the Expenditure-tax Act, 1957, are much wider in amplitude than Section 30(1) of the Indian I.T. Act, 1922, to permit an appeal against an order of rectification made under Section 31 of the Expenditure-tax Act. We are also of the opinion that Section 21(1)(b) of the Expenditure-tax Act is as wide in its scope as Section 62(1)(b) of the E.D. Act, 1953, and, therefore, following the Kerala and the later Gujarat decisions construing Section 62(1)(b) of the E.D. Act, we hold that an appeal lies under Section 21(1)(b) of the Expenditure-tax Act against an order of rectification made under Section 31 thereof. We may also add that Section 21(1)(a) also enables such an appeal since the order of rectification has the result of enhancing the amount of taxable expenditure,determined under this Act. We are, therefore, of the view that both Clauses (a) and (b) of Sub-section (1) of Section 21 permit an appeal against an order of rectification made under Section 31 of the Act, which has the result of enhancing the taxable expenditure determined under this Act and consequently the amount of expenditure-tax determined as payable by the assesseeunder this Act.

19. Learned counsel for the Revenue also referred to two Madras decisions CIT v. Vellingiri Gounder : [1953]24ITR166(Mad) and Adaikkappa Chettiar v. CIT : [1970]78ITR285(Mad) which are relief on in Mandal Ginning & Pressing Co. Ltd. v. CIT : [1973]90ITR332(Guj) as taking the same view, although without giving detailed reasons. No separate discussion of these Madras cases is necessary since they also relate to Section 30(1) of the Indian I.T. Act, 1922, under which an appeal was held to be not maintainable against a rectification order made under Section 35(1) of that Act. The reasons given by us for distinguishing the Gujarat decision in : [1973]90ITR332(Guj) , equally apply to the Madras decisions.

20. Accordingly, we are of the opinion that the AAC as well as the Appellate Tribunal erred in holding/that no appeal lies under Section 21(1) of the Expenditure-tax Act, 1957, against an order of rectification made under Section 31 of that Act. Consequently, the aforesaid question referred is answered in the affirmative and in favour of the assessee as under :

'An appeal lies under Section 21 of the Expenditure-tax Act, 1957, against an order of rectification passed under Section 31 thereof.'

21. Parties shall bear their own costs of this reference.


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