Hardayal Hardy, C.J.
(1) The assessed is a public limited company. The assessment years relevant to the case are 1960-61 and 1961-62 for which the accounting periods are the financial years ending with the 31st of March 1960 and the 31st of March 1961.
(2) The returns of income for the respective years were filed on the 16th of January 1961 and the 30th of September, 1961 i.e. to say that these returns were filed prior to the commencement of the Income-tax Act, 1961 hereafter to be referred to as the new Act. The assessments were however made after the commencement of the new Act, namely, on the 8th of November, 1962 and on the 28th of November. 1962 respectively. Both these assessments were made under Section 23(3) of the Indian Income-tax Act, 1922 hereafter referred to as the old Act.
(3) As there was a revision under Section 33B of the old Act for the assessment year 1959-60 by the Commissioner of Income-tax, the Income-tax Officer considered it necessary to rectify the assessment orders passed in respect of the later two assessment years viz. 1960-61 and 1961-62 which are now in question. He accordingly issued a notice under Section 154 of the new Act, calling for objections, if any. , from the assessed. After due formalities the assessments were rectified under Section 154 of the new Act.
(4) The assessed preferred appeals before the Appellate Assistant Commissioner and a preliminary objection was taken against the validity of the rectification made under Section 154. The assesseds case before the Appellate Assistant Commissioner was that for the assessment years in question the rectification, if any, could be made only under S. 35 of the old Act and not under Section 154 of the new Act. The Appellate Assistant Commissioner accepted the assessed's case and held that the provisions of Section 154 were not applicable for the purposes of rectification in respect of the assessment years in question.
(5) The Department was dis-satisfied with that order and filed an appeal before the Income-tax Appellate Tribunal. It was urged on behalf of the department that Section 154(l)(a) of the new Act had been so framed that it enabled the Income-tax Officer to rectify 'any order of assessment' be it an order of assessment made under the old Act or an assessment made under the new Act under the said provision. The Tribunal negatived the contention relying upon the provisions of S. 297(2)(a) of the Income-tax Act, 1961 and also a decision of the High Court of Andhra Pradesh in the case of Uppala Peda Venkataramanish v. First Addl. I.T.O. : 53ITR11(AP) interpreting the meaning of the expression 'proceedings for the assessment'. The Tribunal held that the proceedings for rectification in respect of matters relating to the assessment years in question could only be made under S. 35 of the old Act and not under Section 154 of the new Act. The Department's appeals were accordingly dismissed.
(6) On these facts the under-mentioned question of law was referred to this Court at the instance of the Commissioner of Income-tax :-
'WHETHERon the facts and in the circumstances of the case, the rectification order could be passed only under Section 35 of the Income-tax Act, 1922 and not under Section 154(l)(a) of the Income-tax Act, 1961.'
(7) The question of rectification is now settled by a decision of the Supreme Court in S. Sankappa and others v. Income-tax Officer, Central Circle Ii : 68ITR760(SC) . The jurisdiction of the revenue authorities to rectify in a case where returns have been filed under the old Act, flows first from the old Act and secondly, from the provisions contained in clause (a) of Section 297(2). The clause reads :-
'NOTWITHSTANDINGthe repeal of the Indian Income-tax Act, 1922 (hereinafter referred to as the repealed Act):- (a) Where a return of income has been filed before the commencement of this Act (the new Act) by any person for any assessment year, the proceedings for the assessment of that person for that year may be taken and continued as if this Act had not been passed.'
(8) In the Supreme Court it was contended that the proceedings for rectification under Section 35 of the old Act, could not be held to be 'proceedings for assessment' within the meaning of that expression occurring in Section 297(2)(a) of the new Act. The Supreme Court did not accept the contention and said that the word 'assessment' was used in the Income-tax Act, in a number of provisions in a comprehensive sense and included all proceedings starting with the filing of the return or issue of notice and ending with determination of the tax payable by the assessed. On that ratio the Supreme Court held that the proceedings for rectification of assessment of tax under section 35 of the Act were proceedings of 'assessment.'
(9) It will be seen that in the case of S. Sankappa the notices for rectification were issued under Section 154 of the new Act and no contention was advanced about the validity of the notices under the new Act. The Supreme Court also did not strike down the notices which were issued in that case when the authority of the revenue to rectify the assessment was impeached.
(10) In I.T.R. No. 45 of 1968 : Commissioner of Income-tax v. Metal and Mineral Corporation (P) Limited this very question was involved. The counsel for the Revenue had then conceded that the case was governed by the decision in S. Sankappa's case. We decided the case accordingly. When the present case came before us, counsel for the Revenue submitted that after the coming into force of the new Act the Tribunal had given several decisions following Sankappa's case. The decision in Sankappa's case was however distinguished by some High Courts. He may thereforee be allowed to re-argue the point. We made it clear that the judgment in I.T.R. No. 45 of 1968 had already been delivered; but the case would not be treated as a precedent and that the parties could address us in full.
(11) The first case to which Shri Sharma drew our attention is a decision of Madras High Court in Vr. Cr. Rm. Adaikappa Chettiar v. Commissioner of Income-tax, Madras : 78ITR285(Mad) . The first question raised in that case was : 'Whether in the facts and in the circumstances of the case, the order of the Income-tax Officer dated February 7, 1963 is illegal as being outside the scope of Section 154 of the Income- tax Act, 1961.'
(12) The order made in that case was admittedly passed by the Income- tax Officer under Section 154 of the new Act. It was urged by the assessed's counsel that the proper provision to be invoked in that case was Section 35 of the old Act and not Section 154 of the new Act.. In the present case also the assessed had contended before the Appellate Assistant kCommissioner that the rectification if any, could be made only under Section 35 of the old Act and not under Section 154 of the new Act. This contention was accepted. But when the case came up before the Tribunal it was urged on behalf of the Income-tax Department that Section 154 applied to the case. The Tribunal negatived this contention. So the question in the case before the Madras High Court and also in the case before us was one of conflict between the two provisions of law. The question of jurisdiction of the Income-tax Officer to proceed under ction 154 of the new Act was not expressly raised but before the Appellate Assistant Commissioner the assessed had raised the objection as to the competence and jurisdiction of the Income-tax Officer to proceed under Section 154 of the new Act.
(13) In Commissioner of Income-lax v. Scindia Steam Navigation Co. Ltd. : 42ITR589(SC) the Supreme Court summed up at page 612 of the report the position while construing the scope of the power contained in Section 66(1) of the old Act :-
(1)When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order.
(2)When a question of law is raised before the Tribunal but the Tribunal fails , deal with it, it must be deemed to have been dealt with by it and is, thereforee, one arising out of its. order.
(3)When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order.
(4)When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings. given by it.
(14) According to their Lordships, it is only a question that has been raised before and decided by the Tribunal that could be held to arises out of this order but they went on to add :
'SECTION66(1) speaks of a question of law that arises out of the order of the Tribunal. Now a question of law might be a simple one, having its impact on the point, or it may be a complex one, trenching over an area with approaches leading to different points therein. Such a question might involve more than one aspect, requiring to be tackled from different standpoints. All that section 66(1) requires is that the question of law which is referred to the court for decision and which the court is to decide must be the question which was in issue before the Tribunal. Where the question itself was under issue, there is no further limitation imposed by the section that the reference should be limited to those aspects of the question which had been argued before the Tribunal. It will be an over-refinement of the position to hold that each aspect of a question is itself a distinct question for the purpose of section 66(1) of the Act.'
(15) So even if the question of jurisdiction was not expressly raised, it cannot be said that there is any further limitation imposed by the section that the reference should be limited to these aspects of the question which had been argued before the Tribunal. In this view of the matter, although the question in the present case is differently worded the question of jurisdiction can still be allowed to be raised before us.
(16) Shri Sharina appearing for the Revenue further argued that if the exercise of power is referable to a jurisdiction which confers validity upon it and not to a jurisdiction under which it would be nugatory, the mere use of sections of the statute will not make any difference. An order may be passed under a wrong section of law but if there is a section which confers validity to that order its validity has to be determined by reference to that section. In this connection our attention was invited to a decision of the Supreme Court in L. Hazari Mal Kuthiala v. Income-tax Officer, Special Circle, Amhala : 41ITR12(SC) where an order of the Commissioner of Income-tax passed under Sections 5(5) and 5(7A) of the old Act. was attacked as ultra virus 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. The Supreme Court up-held the order treating the same as one passed under the provisions of Section 5(5) of the Patiala Income-tax Act.
(17) The single Judge of Calcutta High Court in Indra Co. Limited v. Income-tax Officer, Central Circle 78 Itr 400 dealt with a case where a notice was issued by the Income-tax Officer under Section 154 of the new Act. An application under Article 226 of the Constitution for quashing the notice was filed but meanwhile an appeal from an order of assessment was decided by the Appellate Assistant Commissioner. It was held that where the assessment order had been the subject of an appeal the Income-tax Officer will not have jurisdiction to rectify such an order because section 35 of the old Act does not empower him to rectify the order of the Appellate Assistant Commissioner.
(18) The case of Hazari Mal Kuthiala v. Income-tax, Special Circle, Ambala was relied upon by a Division Bench of the Punjab High Court in Commissioner of Income-tax, Patiala v. Hargopal Bhalla & Sons . There an assessment was made under Section 143(3) of the new Act when a return had been tiled by the assessed on March 31, 1962 before the new Act came into force. Later on, the assessed filed a revised return on November 15. 1962. According to the provisions of Section 297(2)(a) of the new Act. the assessment had to be made under Section 23(3) of the old Act. The Tribunal set aside the assessment on the ground that it had not been made under the appropriate provision of law. The High Court held that the order passed by the Income-tax Officer under Section 143(3) of the new Act should have been passed under Section 23(3) of the old Act and could not be declared to be without jurisdiction and void in law.
(19) Shri Sharma thereforee submitted that since the provisions of Section 154 of the new Act are substantially the same as those contained in Section 35 of the old Act, the impugned order cannot be questioned as being outside the scope of Section 35 of the old Act. If the order is thereforee treated as having been passed under the provisions of Section 35 of the old Act, there is no appeal provided against an order under that section to the Appellate Assistant Commissioner nor is there any appeal before the Income-tax Appellate Tribunal. When an order is thereforee made by the Tribunal the order will be without jurisdiction and consequently there will be no reference to this Court. The remedy of the parties may probably be by means of a petition under Article 226 of the Constitution but by no means by a reference.
(20) Shri B.N. Kirpal, counsel for the assessed, however submitted that it is not open to us to treat the order purported to have been passed by the Income-tax Officer under Section 154 of the new Act as one under Section 35 of the old Act, that the Income-tax Officer invoking the powers conferred on him under the provisions of the new Act in respect of the assessment years in question, will be acting without jurisdiction and that any such order passed by him cannot be validated by treating the same as one passed under the old Act. According to him, the powers under the repealed enactment cannot be deemed to have been exercised when the officer purports to exercise the power conferred on him under the new Act.
(21) We are not prepared to say that the mere fact that the notice issued under Section 154 of the new Act instead of Section 35 of the old Act would take away the Income-tax Officer's jurisdiction to rectify the assessment. We are in entire agreement with the Madras High Court in Adaikappa Chattiar's case that if the notice issued by the Income-tax Officer purporting to be under Section 154 of the new Act is treated :as one under section 35 of the old Act. it cannot be considered to be defective or invalid and the validity of the notice does not depend upon the number of section referred to therein. The validity of the notice will depend upon its substance and it was not disputed that the notice issued in this case by the Income-tax Officer prior to the rectification, contained all the essential requirements mentioned in Section 35. In view of the language of S. 297(2)(a) the rectification order could be passed only under Section 35 of the old Act and not under Section 154 of the new Act.
(22) Shri Kirpal however based himself on a decision of the Supreme Court in Keshav Mills Co. Limited v. Commissioner of Income-tax, Bombay North : 56ITR365(SC) and submitted that when the matter goes to the High Court it has to be dealt with in the light of evidence which has been already brought on record. If the statement of the case does not refer to the relevant and material facts which are already on the record the High Court may call for a supplementary statement under Section 66(4) but the power of the High Court can be exercised only in respect of material and evidence which has already been brought on record. He also referred to another decision of the Supreme Court in C.P. Sarathy Mudaliar v. Commissioner of Income-tax, Andhra Pradesh : 62ITR576(SC) and submitted that the High Court inexercise of advisory jurisdiction under Section 66 of the old Act does not sit in appeal over the judgment of the Tribunal. If the High Court finds that material facts are not stated in the statement of the case or the Tribunal has not stated its conclusion on material facts, the High Court may call upon the Tribunal to submit a supplementary statement of case under Section 66(4).
(23) He also referred to another decision of the Supreme Court in Kusumhen D. Mahadevia v. Commissioner of Income-tax, Bombay City : 39ITR540(SC) None of these cases however appears to have any bearing on the question before us. It is not as if the question was not before the Tribunal nor is it a case where a different question is being answered by the High Court which does not arise out of the order of the Tribunal. In all essential respects the question is still one which was before the Tribunal and was decided by it. We thereforee do not see any reason why we should call for a supplementary statement of case or that we should not decide the question that has been referred to us.
(24) Shri Kirpal sought to distinguish the cases cited by Shri Sharma. The case of Adaikappa Chettair was distinguished on the ground that the Madras High Court had refused to answer the question. According to Mr. Kirpal, when a question is referred to the High Court it has to be answered and he sought to derive support from the decision in Keshav Mills case in 56 Itr 365.
(25) The Single Judge decision in the case of Indra Co. Limited : 80ITR400(Cal) was distinguished on the ground that that was a case under Article 226 of the Constitution. The case decided by the Punjab and Haryana High Court in 82 Itr 243 was distinguished on the ground that the case did not relate to rectification.
(26) We are not convinced that the High Court is bound to answer a reference even when it comes to the conclusion that the reference is not competent. One of the earliest cases in which the Supreme Court took the view that the High Court could decline to entertain the reference is contained in a decision of that Court in Commissioner of Income-fax, Madras v. Mtt. S. Ar. Arunachalam Chettiar : 23ITR180(SC) . That was no doubt a case in which a question was referred to the High Court on the basis of a miscellaneous application before the Tribunal and since the jurisdiction of the Tribunal and of the High Court is conditional upon there being an order of Tribunal which may be said to be under Section 33(4) of the old Act, there was no order that could be said to be an order under that section and as such no question of law could be said to arise out of an order of the Tribunal. The High Court could thereforee decline to entertain the reference.
(27) In the present case since the rectification order could be passed only under Section 35 of the old Act and application of Section 154 of the new Act was not called for there could be no appeal before the Appellate Assistant Commissioner, nor could there be an appeal before the Appellate Tribunal. The only remedy of the assessed was by way of revision under Section 33B of the old Act and if there was no appeal before the Appellate Tribunal, the Tribunal could not state the case for the opinion of this Court.
(28) It is no doubt an intriguing situation. The appeal before the Tribunal was filed by the Income-tax Department and it is also the Department that asked for a reference of the question of law to this Court, and it is now the department itself that wants us to decline to answer the question. The stand taken by the Income-tax Department before the Appellate Tribunal was that a rectification order could be passed under Section 154 of the new Act and if the department was wrong and there is no estoppel against the statute, it cannot be prevented from urging what the actual position in law is.
(29) In the circumstances, we have to reject the reference as incompetent and we decline to answer the question raised before us: but there will be no order as to costs.
(30) The question raised before us being of general importance the case is certified as fit one for appeal to the Supreme Court.