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Commissioner of Income-tax Vs. Hargopal Bhalla and Sons - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference No. 17 of 1969
Judge
Reported in[1971]82ITR243(P& H)
ActsIncome Tax Act, 1922 - Sections 23(3); Income Tax Act, 1961 - Sections 143(3), 271(1) and 297(2)
AppellantCommissioner of Income-tax
RespondentHargopal Bhalla and Sons
Appellant Advocate D.N. Awasthy and; B.S. Gupta, Advs.
Respondent AdvocateNemo
Cases ReferredVr. C. Rm. Adaikkappa Chettiar v. Commissioner of Income
Excerpt:
.....of jurisdiction under article 226, a writ appeal will lie. but, no writ appeal will lie against a judgment/order/decree passed by a single judge in exercising powers of superintendence under article 227 of the constitution. - 37,025. the assessee finally filed appeals before the income-tax appellate tribunal against the order of assessment as well as the order of penalty and both the appeals of the assessee were accepted. strong reliance is placed in support of this submission on a judgment of their lordships of the supreme court in hazari mal kuthiala v......of the 1922 act and could not be declared to be without jurisdiction and void in law. the provisions of section 23(3) of the 1922 act are in part materia with the provisions of section 143(3) of the 1961 act and deal with the same subject-matter, that is, assessment. there is a slight difference in the language, but the purport of the provisions in both the acts is the same. the order of the income-tax officer passed under section 143(3) of the 1961 act could, therefore, be legitimately held to have been passed in exercise of the powers vested in the income-tax officer under section 23(3) of the 1922 act. we are, therefore, of the opinion that the decision of the appellate tribunal was wrong in law. accordingly, we answer the questions referred to us in the negative, that is, in.....
Judgment:

B.R. Tuli, J.

1. The following questions of law have been referred to this court for opinion by the Income-tax Appellate Tribunal, Delhi Bench 'C'

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the assessment order passed by the Income-tax Officer ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law to hold that the penalty proceedings were invalid and cancel the order of penalty passed by the Inspecting Assistant Commissioner of Income-tax ?'

2. The assessment year in question is 1961-62 for which a return declaring an income of Rs. 63,576 was filed by the assessee on March 31, 1962, before the Income-tax Act, 1961, came into force. Later on, the assessee filed a revised return on November 15, 1962, declaring its income as Rs. 71,137. The Income-tax Officer made the assessment under Section 143(3) of the 1961 Act instead of under Section 23(3) of the Income-tax Act, 1922, Admittedly, according to the provisions of Section 297(2)(a) of the 1961 Act, the assessment had to be made under Section 23(3) of the 1922 Act. The Income-tax Appellate Tribunal has set aside the assessment on the ground that it has not been made under the appropriate provision of law. The Income-tax Officer had added an income of Rs. 37,025 to the return filed by the assessee as its income from undisclosed sources and after notice to the assessee. the Inspecting Assistant Commissioner imposed a penalty of Rs. 31,000 on the assessee on the ground that it had concealed income of Rs. 37,025. The assessee finally filed appeals before the Income-tax Appellate Tribunal against the order of assessment as well as the order of penalty and both the appeals of the assessee were accepted. The Income-tax Appellate Tribunal held that the assessment order passed by the Income-tax Officer could not be assumed to have been passed under Section 23 of the Income-tax Act, 1922, and, therefore, the assessment order passed by him was without jurisdiction and void in law. On that ground, the assessment order was set aside. In the appeal relating to penalty, it was held that the expression 'any proceeding under the Act' in Section 271(1)(c) of the 1961 Act, referred to a valid proceeding and, since the proceedings for assessment were void in law, no penalty could be imposed. The Commissioner of Income-tax, being dissatisfied with those orders of the Tribunal, asked for the reference of the two questions, set out above, for opinion to this court.

3. The submission of the learned counsel for the petitioner is that the order of assessment should have been considered to have been passed under Section 23(3) of the Income-tax Act, 1922, and should not have been held to be void in law having been passed under Section 143(3) of the 1961 Act. Strong reliance is placed in support of this submission on a judgment of their Lordships of the Supreme Court in Hazari Mal Kuthiala v. Income-tax Officer, Special Circle, Ambala Cantt., [1961] 41 I.T.R. 12, [1961] 1 S.C.R. 892 (S.C), wherein an order of the Commissioner of Income-tax passed under Sections 5(5) and 5(7A) of the Indian Income-tax Act, 1922, was attacked as ultra vires and incompetent for the reason that the correct provision to be invoked for the assessment in question was Section 5(5) of the Patiala Income-tax Act. Their Lordships upheld the order treating the same as one passed under Section 5(5) of the Patiala Income-tax Act, observing :

'The exercise of a power would be referable to a jurisdiction which conferred validity upon it and not to a jurisdiction under which it would be nugatory.'

4. This judgment was followed by a Division Bench of the Madras High Court in R. P. Kandaswami v. Commissioner of Income-tax, [1963] 49 I.T.R. 344 (Mad.), wherein it was pointed out :

'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 provisions of law under which it exercised the jurisdiction.'

5. Recently this matter again came up for consideration before a Division Bench of the Madras High Court in Vr. C. Rm. Adaikkappa Chettiar v. Commissioner of Income-tax, [1970] 78 I.T.R. 285 (Mad.), and, following the judgments referred to above, it was held that the order passed under Section 154 of the new Act was valid although it should have been passed under Section 35 of the 1922 Act. The order was not held to be invalid or void in law because of the wrong quotation of the Section under which it was passed. The learned judges observed as under :

'A wrong reference to the power under which an order is made does not per se vitiate the order if there is some other power under which the order could lawfully be made. The validity of the impugned order has to be tested by reference to the question whether the Income-tax Officer had any power at all to make an order of this nature. If the power is otherwise established, the fact that the source of power has been incorrectly described would not make the order invalid. As there is no difference in the nature and content of the power whether it is exercised under Section 35 of the old Act or under Section 154 of the new Act, the order of rectification cannot, therefore, be assailed on the ground that it has been made in exercise of power which did not exist.'

6. We respectfully agree with the observations of the learned judges of the Madras High Court and hold that the order passed by the Income-tax Officer under Section 143(3) of the 1961 Act should have been considered to have been passed under Section 23(3) of the 1922 Act and could not be declared to be without jurisdiction and void in law. The provisions of Section 23(3) of the 1922 Act are in part materia with the provisions of Section 143(3) of the 1961 Act and deal with the same subject-matter, that is, assessment. There is a slight difference in the language, but the purport of the provisions in both the Acts is the same. The order of the Income-tax Officer passed under Section 143(3) of the 1961 Act could, therefore, be legitimately held to have been passed in exercise of the powers vested in the Income-tax Officer under Section 23(3) of the 1922 Act. We are, therefore, of the opinion that the decision of the Appellate Tribunal was wrong in law. Accordingly, we answer the questions referred to us in the negative, that is, in favour of the revenue and against the assessee. There is no order as to costs as there is no representation on behalf of the respondents.


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