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Apeejay Structural Works (P.) Vs. Inspecting Assistant - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Kolkata
Decided On
Judge
Reported in(1984)10ITD542(Kol.)
AppellantApeejay Structural Works (P.)
Respondentinspecting Assistant
Excerpt:
.....giving the assessees opportunity of being heard, passed the impugned orders.3. the contention of learned counsel for the assessees is two-fold-first, that the assessment orders having been passed by the iac and not by the ito were not subject to the revisional jurisdiction of the commissioner and secondly, on the dates when the assessment orders were passed they were quite legal and valid according to the then existing law. under the colour of retrospective operation of section 80aa, the learned counsel argued that already completed assessment could not be opened and at any rate such act of the commissioner was beyond his jurisdiction.4. the learned departmental representative, on the other hand, while opposing the appeals fully supported the impugned orders of the commissioner.5. it.....
Judgment:
1. In these three appeals-two by Apeejay Structural Works (P.) Ltd. for the assessment years 1977-78 and 1978-79 and one by Asian Signal Industry (P.) Ltd. for the assessment year 1978-79-against the order of the Commissioner of even date 8-1-1982 under Section 263 of the Income-tax Act, 1961 ('the Act'), common issues are involved and, therefore, they are disposed of by this common order.

2. Assessments of income of Apeejay Structural Works (P.) Ltd. for both the years were framed by the IAC on 31-1-1980 and that of Asian Signal Industry (P.) Ltd. for the year 1978-79 was also framed by the same officer on 30-1-1980. Thereafter, the Finance (No. 2) Act, 1980 came into force and by that Act Section 80AA of the Act was inserted in the Act with retrospective effect from 1-4-1968. According to Section 80AA, net amount and not the gross amount of the dividends is allowed to be deducted under Section 80M of the Act. Since there was no such provision at the time of framing the assessments in question, the IAC had allowed deduction of gross amount of dividends. With the coming into force of Section 80AA with retrospective effect, the Commissioner considered that the said assessments were erroneous insofar as they were prejudicial to the interests of the revenue and, therefore, he, after giving the assessees opportunity of being heard, passed the impugned orders.

3. The contention of learned counsel for the assessees is two-fold-first, that the assessment orders having been passed by the IAC and not by the ITO were not subject to the revisional jurisdiction of the Commissioner and secondly, on the dates when the assessment orders were passed they were quite legal and valid according to the then existing law. Under the colour of retrospective operation of Section 80AA, the learned counsel argued that already completed assessment could not be opened and at any rate such act of the Commissioner was beyond his jurisdiction.

4. The learned departmental representative, on the other hand, while opposing the appeals fully supported the impugned orders of the Commissioner.

5. It is to be noticed that the Commissioner is authorised by Section 125A(1) of the Act to direct all or any of the powers or functions of the ITO to be performed by the IAC and by virtue of that direction, the IAC acted as the ITO and framed the assessment. Line of argument of the learned counsel for the assessee is that it is only an order of the ITO as such and not of any other officer though performing powers and functions of the ITO, which can be revised by the Commissioner. If we put it in other words, the contention of the learned counsel is that 'the ITO' is a persona designata and, therefore, any officer filling character of the ITO cannot be included therein. The learned counsel compared Sections 263 and 264 of the Act and argued that if the intention of the Legislature was to clothe the Commissioner with the power to revise the order passed by any authority subordinate to him, instead of the words 'the ITO', the words 'an authority subordinate to him' as used in Section 264 would have been used in Section 263.

According to the learned counsel, the general provisions contained in Section 125A(4) that the references to the ITO shall be construed as the references to the IAC, cannot be extended to Section 263 of the Act.

6. In support of his contention, the learned counsel placed reliance upon Gopal Das Gupta v. Union of India [1971] 80 ITR 200 (Cal.), Ramlal Kishore Lal v. CIT [1972] 84 ITR 138 (All.) and Jeewanlal (1929) Ltd. v. Addl. CIT [1977] 108 ITR 407 (Cal.).

7. We find no merit in the arguments of the learned counsel. For better appreciation of the matter, Sub-section (4) of Section 125A, which was inserted by amendment, is reproduced below : (4) Where an order is made under Sub-section (1) and the Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer in relation to any area, or persons or classes of persons, or incomes or classes of income, or cases or classes of cases, references in this Act or in any rule made thereunder to the Income-tax Officer shall be construed as references to the Inspecting Assistant Commissioner and any provision of this Act requiring approval or sanction of the Inspecting Assistant Commissioner shall not apply.

It is plain from the above sub-section that where the IAC exercises the powers or performs the functions of an ITO, he shall be taken as an ITO for all the provisions of the Act and the rules made thereunder.

Section 263 cannot be taken as an exception to the said provisions contained in Section 125A(4). Section 125A(4) is so comprehensive that it was not at all necessary to make consequential amendment of Section 263 to the effect that the ITO shall also include any other officer exercising powers or performing functions of an ITO. In Section 263, 'the ITO' cannot, therefore, be read in seclusion as to limit its meaning to persona designata. Like investiture of powers of the ITO upon the IAC there was creation of post of the Additional Commissioner by making amendment in Sections 116 and 130 of the Act. While interpreting those sections in context with powers of the Commissioner under Section 263, the Hon'ble Delhi High Court in National Agricultural Co-operative Marketing Federation Ltd. v. CBDT [1972] 84 ITR 376 held that the word 'Commissioner' in Section 263 was not persona designata and included the Additional Commissioner. On the same analogy to Section 125A(4) apart, the words, 'the ITO' in Section 263 cannot be taken as persona designata. The IAC is though superior in rank to the ITO but the assessment order passed by him is nonetheless not placed on better footing inasmuch as, that similar to the assessment order passed by the ITO an appeal is provided from the assessment order passed by the IAC-vide Section 246(2) of the Act.

8. Much insistence cannot be made to read the words 'the ITO' in Section 263 within the limited sense. It has to be read with Section 125A which, according to the rule of construction, is to be construed in a way which does not result in its misfiring or in denying its efficacy-vide Principles of Statutory Interpretation by G.P. Singh, Third edition, page 214. For the purpose of relevant interpretation, it is not proper to compare Section 263 with Section 264. Section 264 has a wider scope and it deals with the cases of relief to the assessee whereas Section 263 has a narrower scope. It is, therefore, futile to argue that like the words 'an authority subordinate to the Commissioner' used in Section 264, comprehensive words should have been used in Section 263 in place of the words 'the ITO'.

9. The cases cited by the learned counsel for the assessee are of no assistance to him. Gopal Das Gupta's case (supra) has been decided with reference to construction of Section 135 read with Section 131 of the Act which had quite a different bearing. The powers of the ITO conferred upon the Director of Inspection by Section 135 were limited to the making of enquiries and, therefore, all the powers conferred upon the ITO under Section 131 were not taken as conferred upon the Director of Inspection in that case. In the cases of Ramlal Kishore Lal (supra) and Jeewanlal (1929) Ltd. (supra), the acts of the IAC and the AAC as such and not in the capacity of the ITO were under consideration and, therefore, none of the two cases have any relevance to the instant issue.

10. In view of the foregoing discussions, we hold that the Commissioner had jurisdiction under Section 263 to revise assessment order passed by the IAC functioning as the ITO under Section 125A.11. In support of his next argument, namely, that retrospective operation of the newly inserted Section 80AA cannot be extended to the extent of reopening of the assessment already completed long before, the learned counsel placed reliance upon CIT v. General Electric Co. of India Ltd. [1978] 112 ITR 246 (Cal.). The said case pertains to the question as to rectification of a mistake apparent from the record and in that context the Hon'ble Calcutta High Court answered that a mistake found in the order in view of the amending Act later coming into force and having retrospective effect cannot be taken as mistake apparent from the record. Such is not the case here. We are considering the case under Section 263. The case of IAC v. V.M. Ravi Namboodiripad AIR 1974 SC 1369 is the complete answer to the arguments made by the learned counsel for the assessee. It is advantageous to refer the following excerpts from the said judgment of the Hon'ble Supreme Court : ...Dealing with the scope of Section 35 of the Indian Income-tax Act, 1922, Gajendragadkar, J. as he then was, speaking for the Court observed : It is in the light of this position that the extent of the Income-tax Officer's power under Section 35 to rectify mistakes apparent from the record must be determined ; and in doing so, the scope and effect of the expression 'mistake apparent from the record' has to be ascertained. At the time when the Income-tax Officer applied his mind to the question of rectifying the alleged mistake, there can be no doubt that he had to read the principal Act as containing the inserted proviso as from April 1, 1952. If that be the true position then the order which he made giving credit to the respondent for Rs. 50,603-15-0 is plainly and obviously inconsistent with a specific and clear provision of the statute and that must inevitably be treated as a mistake of law apparent from the record.

If a mistake of fact apparent from the record of the assessment order can be rectified under Section 35, we see no reason why a mistake of law which is glaring and obvious cannot be similarly rectified. Prima facie it may appear somewhat strange that an order which was good and valid when it was made should be treated as patently invalid and wrong by virtue of the retrospective operation of the Amendment Act. But such a result is necessarily involved in the legal fiction about the retrospective operation of the Amendment Act. If, as a result of the said fiction we must read the subsequently inserted proviso as forming part of Section 18A(5) of the principal Act as from April 1, 1952, the conclusion is inescapable that the order in question is inconsistent with the provisions of the said proviso and must be deemed to suffer from a mistake apparent from the record. That is why we think that the Income-tax Officer was justified in the present case in exercising his power under Section 35 and rectifying the said mistakes'. (p.

1371) 12. We, therefore, find no merit in the contentions of the assessee that the assessments already completed could not be reopened in view of the amending Act.

13. In view of the foregoing discussions, the appeals fail. However, we may observe that validity of retrospective effect of Section 80AA is under consideration before the Hon'ble Supreme Court. The ITO is, therefore, directed to give effect to the decision of the Supreme Court in this connection if and when he gets the same and in the meantime he shall finalise the assessments.


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