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Commissioner of Income-tax, Delhi, New Delhi Vs. Rajinder Nath and ors. - Court Judgment

LegalCrystal Citation
Overruled ByRajinder Nath and Ors. Vs. C.I.T., Delhi
SubjectDirect Taxation
CourtDelhi High Court
Decided On
Case NumberIncome Tax Reference Appeal Nos. 22, 25 and 26 of 1970
Judge
Reported inILR1972Delhi312; [1972]85ITR296(Delhi)
ActsIncome tax Act, 1961 - Sections 147 and 153(3)(2)
AppellantCommissioner of Income-tax, Delhi, New Delhi
RespondentRajinder Nath and ors.
Advocates: G.C. Sharma,; V. Kumaria,; B.R. Dewan,;
Cases ReferredIn Bidyut Proha Raha v. Income
Excerpt:
(i) income tax act (1961) - section 153 (3) (ii)--'any person'--expression covers partner of a firm--appeal against assessment of a firm--appellate order containing directions for proceedings against partners--reassessment in compliance thereof--validity of--limitation.; where in an appeal against certain assessment of a firm, he appellate commissioner gave directions to the income tax officer for taking assessment proceedings against the partners :; that it is a well settled law that a person sought to be taxed in pursuance to a direction given by the appellate or revisional authority as contemplated by sub-section (3)(ii) of section 153 of the 1961 act, should not be a stranger to the assessment proceedings in respect of the firm or an association or a hindu undivided family. the.....prithvi raj, j. (1) -since common questions of law pertaining to the assessment years 1955-56 and 1956-57 have been referred by the tribunal in these income tax references, they are being disposed of by this common judgment. the qusestions of law referred are:- (1) whether on the facts and in the circumstances of the case, the appellate tribunal was legally justified in holding that the provisions of section 147(a) of the income-tax act, 1961, were not applicable to the case for the assessment years 1955-56 and 1956-57 respectively (2) whether on the facts and in the circumstances of the case the tribunal was justified in holding that the appellate assistant commissioner in appeals before him could not convert the provisions of section 147(a) into those of section 153(3)(ii) of the.....
Judgment:
Prithvi Raj, J.

(1) -SINCE common questions of law pertaining to the assessment years 1955-56 and 1956-57 have been referred by the Tribunal in these Income Tax References, they are being disposed of by this common judgment. The qusestions of law referred are:-

(1) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was legally justified in holding that the provisions of section 147(a) of the Income-tax Act, 1961, were not applicable to the case for the assessment years 1955-56 and 1956-57 respectively (2) Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the Appellate Assistant Commissioner in appeals before him could not convert the provisions of section 147(a) into those of section 153(3)(ii) of the Income-tax Act, 1961 and that provisions of section 153(3)(ii) of the Act were not applicable to the instant case.

(2) References relate to the assessment years 1955-56 and 1956-57 relevant to the previous years ending on 24th March, 1955 and 11th May, 1956 respectively. The Income-tax Officer completed the assessment for the two years on 28th January, 1960, and 9th March, 1961, respectively. The assessed filed substituted returns of income for the above said two years and showed l/3rd share from M/s Faqir Chand Raghunath Dass and also showed income from house properties. The assessed claimed that l/4th share of income of property at Sunder Nagar was not liable to tax for the said assessment years as the house was completed in September, 1954. However, in the assessment year 1956-57, the assessed declared l/4th share of income from house property at Sunder Nagar and l/4th share from Golf Link property but claimed exemption from tax on the income from the property for both these years. The Income-tax Officer while framing the original assessment for 1955-56 held that income from Sunder Nagar was exempt from tax as it was completed in 1954 while for the assessment year 1956-57 the Income-tax Officer held that the assessed had derived l/4th share in the income from both the properties, i. e., at Sunder Nagar and Golf Link. The assessed was a partner in firm M/s Faqir Chand Raghunath Dass and cost of construction of the properties was considered in the assessments of the said firm. The Income-tax Officer found from the record of M/s Faqir Chand Ranghunath Dass for the assessment year 1955-56 that two plots of land Nos. 92 and 94 at Sundar Nagar were acquired in the name of L. Sham Nath.Kartaof the erstwhile Hindu undivided family which carried on business before the partnership firm of M/s Faquir Chand Raghunath Dass was formed. The price of the land was paid out of the accounts of Hindu undivided family. A partial partition of the Hindu undivided family took place on 18th March, 1956, and the business was carried on by the partnership firm consisting of Shamnath and his sons Rajinder Nath and Ramchandar Nath. The third son Surinder Nath being a minor was admitted to the benefits of the partnership. By registered deed dated 18th March, 1950, the plots of land valuing Rs. l,46,672.00 were divided amongst Sham Nath and his sons. Fresh partnership deeds dated 10th May, 1950 and 27th March, 1952, were executed but Surinder Nath was not made a partner in the firm M/s. Faqir Chand Raghunath Dass nor he was admitted to the benefits of the partnership. A sum of Rs. 98,418.00 was debited by the partnership firm to the building account of the firm towards the cost of construction of the building at Sunder Nagar. Before the Income-tax Officer when he was dealing with the assessment of the firm for the year 1955-56 it was contended on behalf of the partnership firm that addition of the above amount in the case of the firm should not have been made as the building was constructed by the partners and not by the firm. The precise contention, thereforee, was that the amount of cost of construction of the building should be assessed in the hands of co-oweners.

(3) The above contention was negatived by the Income-tax Officer whoaddedasumofRs.80,000.00as concealed income of the firm on account of under-statement of the cost of construction of the building. The firm for the assessment year 1956-57 debited a sum of Rs. 99,148.00 in the building account of the firm as cost of construction of the property at Golf Link. The valuation report made by one Brij Mohan Lal, dated 20th January, 1961, was not accepted by the Income-tax Officer and for under-statement of the cost of construction the said officer added a sum of Rs. 35,000.00 towards the income from undis- closed sources to the partnership firm.

(4) Being dis-satisfied with the order of the Income-tax Officer the firm filed an appeal before the Appellate Assistant Commissioner who for the ..assessment year 1955-56 held that although the plots of land at Sunder Nagar had not been actually divided by metes and bounds at the time of partial partition of the Hindu undivided family yet l/4th of the total value was debited to the account of each member of the disrupted family. The appellate Assistant Commissioner also held that when the construction of the building was started funds were advanced by the New Delhi Branch of the partnership firm and debits in the books of account in the New Delhi Branch of the firm were transferred to the head office account and l/4th share of the total expeneses were debited to the account of each of the co-owners. The Appellate Assistant Commissioner, thereforee, held that the firm was not owner of the property of Sunder Nagar. Besides, he found that one of the co-owners was not a partner of the firm. Accordingly, a sum of Rs. 80,000.00 for the assessment year 1955-56 was deleted. The Appellate Assistant Commissioner, however, remarked that the Income-tax Officer was at liberty to assess the excess if found in the hands of the co-owners. Likewise, the Appellate Assistant Commissioner deleted a sum of Rs. 35,000.00 as income from undisclosed sources of the partnership firm for the assessment year 1956-57.

(5) On this the Income-tax Officer took action under section 147(a) of the Income Tax Act, 1961, (hereinafter referred to as the 1961 Act') against the assessed-respondents for the assessment years 1955-56 and 1956-57.

(6) Returns showing income from property and share income from the firm M/s Faqir Chand Raghunath Dass were filed by the asseasee who challenged the validity of the proceedings under section 147(a) of the 1961 Act taking up the plea that the facts about the investment in the building had already been revealed by them to the Income-tax Officer. The Income-tax Officer came to the conclusion that the cost of construction at Rs. 98,418.00 for the property at Sundar Nagar was under-stated, and he added a sum of Rs. 80,000.00 to the cost of construction and thereby included l/4th share of the said amount, i.e., Rs. 20,000 towards the income of the assessed from undisclosed sources in respect of the assessment year 1955-56. Likewise the Income-tax Officer added a sum of Rs. 64,000.00 to the cost of construction of Golf Link property. Thus l/4th share of the said amount being Rs. 16,000.00 was added towards the income of the assessed from undisclosed sources for the assessment year 1956-57.

(7) The assessed challenged the order of the Income-tax Officer in appeal before the Appellate Assistant Commissioner urging that the provisions of section 147(a) of the 1961 Act were not applicable as according to him there was no concealment in respect of the facts which were felly and truly brought to the notice of the Income-tax Officer.

(8) The Appellate Assistant Commissioner took the view that the provisions of section 147(a) of the 1961 Act were not applicable but the assessment could be made under section 153(3)(ii) of the 1961 Act on the ground that the three partners of firm M/s Faqir Chand Raghunath Dass could be covered under the term 'any person' contemplated by sub-clause (ii) of sub-section (3) of section 153 of the 1961 Act. Besides, the quantum of addition to income from undisclosed sources was revised by the Appellate Assistant Commissioner for both the assessment years.

(9) The assessed challenged the order in appeal before the Appellate Tribunal and four contentions were raised before the Tribunal, namely, (i) that the Income-tax Officer on receiving information from the appellate order could assess to tax the escaped incomes of the assessed under section 147(b) of the 1961 Act only; (ii) that the Appellate Assistant Commissioner could not convert the proceedings taken under section 147(a) of the 1961 Act in to one vnder section 153(3)(ii) of the said Act. Accordingly it was contended that the Appellate Assistant Commissioner exercised a jurisdiction which did not vest in him in law. The third contention was that a registered firm is a distinct assessable unit and as such its partners are to be treated as third persons. That being so, the proviso to section 153(3)(ii) of the 1961 Act could not be attracted and lastly it was contended that the expression 'direction' must amount to mean the direction which the Original Appellate Assistant Commissioner gave in his appellate order under section 31 of the Indian Income-tax Act, 1922 (hereinafter referred to as the '1922 Act') and that the words 'in consequence of' and 'to give effect to' could not enlarge the scope of a finding or direction under section 153(3)(ii) of the Act of 1961. The contentions raised by the assessed were controverter by the Revenue.

(10) The Tribunal, however, held that the assessed was not a stranger and was a person connected with the assessment of the firm. The Tribunal further held that provisions of section 147(a) of the 1961 Act were not applicable to the facts of the case but the provisions of section 147(b) of the said. Act were applicable and that the provisions of section 153(3)(ii) of 1961 Act were not applicable as no opportunity was afforded to the assessed of being heard by the Appellate Assistant Commissioner; that the Appellate Assistant Commissioner had no jurisdiction to convert or alter the assessment made by the Income-tax Officer under section 147(a) of the 1961 Act to an assessment under section 153(3)(ii) of the said Act. Lastly, the Tribunal held that the remarks and observations made by the Appellate Assistant Commissioner in case of the assessment of the firm could not be regarded as a finding within the meaning of section 153(3)(ii) of the 1961 Act. In the result, the Tribunal found itself unable to sustain the assessments framed by the Revenue against the assessed and as such it cancelled the assessment order. It was in these circumstances that the two questions of law, stated above, are referred by the Tribunal for the opinion of this Court.

(11) Since the questions referred and the points involved as also the two assessment years are common to the three References before us, the learned counsel for the parties agreed to argue Income Tax Reference No. 22 of 1970. The Commissioner of Income-tax, Delhi, New Delhi v. Shri Rajinder Nath, Delhi, and the counsel further submitted that the decision in the other References would be governed in the light of decision given in Income Tax Reference No. 22 of 1970.

(12) Mr. N. D. Karkhanis appearing for the respondent-assessed vehemently contended that could the assessment which the Income-tax Officer purported to make under section 147(a) of the 1961 Act be sustained under section 153(3)(ii) of the said Act, as was sought to be done by the Appellate Assistant Commissioner of Income-tax. Section 153(3)(ii) lifts the ban of limitation imposed by sub-sections (1) and (2) of section 153 and lays down in clear terms that there shall be no bar of limitation where the assessment, re-assessment or recomputation is made on an assessed or any person in consequence of or to give effect to any finding or direction contained in an order under sections 250, 254, 260, 262, 263 and 264 (or in an order of any Court in a proceeding otherwise than by way of appeal or reference under the Act). Now the point to be seen is whether the assessment made by Income-tax Officer can be upheld as being under section 153(3)(ii) of the 1961 Act. Besides, we have to see what was the finding of the original Appellate Assistant Commissioner who dealt with the assessments of the firm and whether that finding was necessary for the disposal of the appeal of the firm and that the finding was in respect of the persons intimately connected with the firm. While dealing with the assessment for the year 1956-57 in appeal, the Appellate Assistant Commissioner held that the building did not belong to the firm and that each of the partners of the firm, no doubt, owned I/4th share but the fourth co-sharer was not a partner of the firm and that the amounts advanced by the firm would not make the firm owner of the property. In that view of the matter the excess cost of construction over the amounts advanced by the firm was held to be not assessable as income of the firm. The amount of Rs. 35,000.00 was not treated as income but unexplained value of the construction invested by the firm which was not duly explained. Such an amount is to be treated as income of the previous year and, thereforee, the Appellate Assistant Commissioner observed that the Income-tax Officer was free to take suitable action to assess the unexplained amount, if any, in the hands of the co-owners. To the same effect was the finding of the Appellate Assistant Commissioner while dealing with the assessment of the firm for the year 1955-56 and it was held that the firm was not the owner of the property at Sunder Nagar. In that view of the matter the excess of the cost of construction amounting to Rs. 80,000.00 over the amounts spent per books of accounts was held to be not assessable as income of the firm but that amount of Rs. 80,000.00 being the excess amount of the cost of construction was treated as income from undisclosed sources and it was in that view of the matter that the Appellate Assistant Commissioner observed that the Income-tax Officer was free to take action to assess the excess, if any, in the hands of the co-owners. Now what has to be examined is whether such a finding was necessary for the disposal of the appeals of the firm for the years 1955-56 and 1956-57. It cannot be disputed that it was necessary to give a finding as to who was the owner of the buildings. Accordingly, the Appellate Assistant Commissioner had given a positive finding that the buildings do not belong to the firm. This was a necessary finding to be given to grant relief to the firm. By way of a corollary it was held that the buildings belonged to the co-owners which necessitated that a direction be given to the Income-tax Officer that he was free to take action to assess the excess amount of the cost of construction, if any, in the hands of the co-owners.

(13) Their Lordships of the Supreme Court in Income-tax Officer 'A' Ward, Sitapur v. MurlidharBhagwan Dass : [1964]52ITR335(SC) held that a 'finding' could be only that which was necessary for the disposal of an appeal in respect of an assessment of a particular year and that the appellate or revisional authority may hold that the Income shown by the assessed was not the income for the relevant year and thereby exclude that income from the assessment of the year under appeal or revision, although the appellate or revisional authority may incidentally find that the income belongs to another year but that is not a finding necessary for the disposal of the appeal or the revision, as the case may be, in respect of the year of assessment in question. In this connection the Court (majority judgment of Sinha, C. J' Subha Rao and Rajagopala Ayyangar JJ. was delivered by Subha Rao J. Raghubar Dayal and Mudholkar JJ. contra.) observed as follows at page 345:-

'..............that the finding is a finding necessary for giving relief in respect of the assessment of the year in question and the direction is a direction which the appellate or revisional authority, as the case may be, is empowered to give under the Sections mentioned therein.'

Their Lordships also held that the expression 'any person' in the setting in which the said expression appears must be confined to mean a person intimately connected with the assessments of the year under appeal

(14) In DaffadarBhagatSingh and Sons v. Income-tax Officer-A-Ward Ferozepur : [1969]71ITR417(SC) , the Supreme Court held that where a finding was necessary for deciding the appeal before the appellate or revisional authority it cannot be said that the finding was arrived at incidentally and once a finding was given which was necessary for the disposal of the appeal the second proviso to section 34(3) of 1922 Act was attracted and the bar of limitation lifted in making an order of assessment or reassessment in consequence of an order to give effect to any finding or direction made by the superior authority.

(15) Following Income-tax-Officer A-Ward, Sitapur v. Mwlidhar Bhagwan Dass (Supra) (1), Madras High Court in Commissioner of Income-tax Madras v. Govindan Chettiar : [1971]79ITR60(Mad) , held that a 'finding' is the conclusion which the Tribunal has necessarily to reach so as to dispose of the appeal before it for giving relief in respect of the assessment year in question, but every step or reason or observation incidental to a finding cannot be mistaken for the finding itself.

(16) In Dhiraj Mal v. Commissioner of Income-tax, U.P., Lucknow : [1971]79ITR242(All) I, Allahabad High Court following Income-tax A-Ward, Sitapur V. MurlidharBhagwanDass(Supra)(1) held that if assessment of a Hindu Unidivided Family is set aside in appeal, the Tribunal may give a direction for taking proceedings against a member of the family. It was further held that the proceedings could not be called in question en the short ground that Dhiraj Mal and the Undivided Hindu Family arc different entities for tax purposes but in order that the limitation may be saved under the second proviso to section 34(3) of the Act (Income-tax Act, 1922) there must be a finding or direction of the appellate or revisional Court as contemplated by the said proviso.

(17) It cannot be disputed that the findings of the Appellate Assistant Commissioner in the appeals of the firm that the buildings were not the building of the firm were necessary for giving the relief to the effect that the excess amounts of the costs of construction of the two buildings could not be assessed as income of the firm, and the Appellate Assistant Commissioner rightly deleted the said amounts. A question, thereforee, would arise whether it was open to the Appellate Assistant Commissioner to give a direction that the Income-tax Officer may take action to assess the excess, if any, in the hands of the co-owners and treat the said excess amounts as income of the co-owners for the previous year from undisclosed sources. There can be no denying the fact that the partners of the firm are intimately connected with the firm and are covered by the expression 'any person' occurring in subsection(3)(ii) of section 153 of the 1961 Act. It is a well settled principle of law that a person sought to be taxed in pursuance to a direction given by the appellate or revisional authority as contemplated by sub-section (3)(ii) of section 153 of the 1961 Act, should not be a stranger be the assessment proceedings in respect of the firm or an association or a Hindu Undivided Family. Partners of the firm are not strangers to the firm and were, thereforee, party to the proceedings in the assessment of the Firm, M/s Faquir Chand Raghunath Dass. The very word 'firm' suggests that the partners are intimately connected with it. It cannot be denied that the income of the individual partners went into the income of the firm for the two assessment years, i.e., 1955-56 and 1956-57 which was the subjectmatter of dispute before the Appellate Assistant Commissioner who heard the appeals against the assessment of the firm.

(18) In Commissioner of Income-fax Punjab v. S. Raghbir Singh Trust the Punjab High Court while considering the expression 'any person' held that such a person may be one who would be liable to be assessed for the whole or part of the income that went into the assessment of the year under appeal or revision and who is intimately connected with the assessment of the year under appeal.

(19) In Commissioner of Income-fax Andhra Pradesh v. Ghanta Bapaniah and others : [1969]74ITR605(AP) the assesseds were co-parceners with Karta of a Hindu Undivided Family. During the course of assessment of the Karta of the family for 1953-54 it was claimed that a partition of the family had taken place on 1st January, 1952, and an order under section 25-A of the 1922 Act was requested. Each coparcener filed his individual return also for the years 1953-54 and 1954-55 under section 22(1) on 31st March, 1954 and 21st December, 1954 respectively. The Income-tax Officer rejected the claim of the Hindu Undivided Family to record the partition. In appeal the Tribunal and on further remand the Appellate Assistant Commissioner held that there was partial partition in respect of the bus service only and a direction was issued to the Income-tax Officer to consider the same in the individual assessments of the coparceners in respect of the buses plied by each. On receipt of this direction the Income-tax Officer without issuing any notice under section 34 completed the assessment of the co-partners of 2nd February, 1962, under section 31 and the second proviso to section of 34(3) of 1922 Act. The assessed raised two contentions, viz., (i) the assessment was barred by limitation and the second proviso to section 34(3) was not applicable on the ground that the Appellate Assistant Commissioner was not entitled to give the direction he gave. On appeal the Tribunal accepted the contention of the assessed. The High Court relying on decisions in Murlidhar Bhagwan Dass's case (Supra)(1) and Daffadar Bhagat Singh's case (supra)(2) held that second proviso to section 34(3) was attracted inasmuch as the assessed could not be regarded as strangers to the proceedings of the Karta of the Hindu Undivided Family in which direction was given to assess the coparceners and the assessments were held within time.

(20) In D. R. Dliaimate v. Coinniissioiiei' of Income-tax M.P. Nagpla', ami Bhandara 43, I.T.R. 253 the Bombay High Court observed that. the assessment of a partner in a registered firm cannot be completely divorced from the assessment ofthe lirm of which he is a partner and the two assessments are not in two different water tight compartments, rather the two assessments are complementary to one another. It was further held that the assessment of a registered firm is in a way preliminary step in the matter of assessment of its partners and forms part of their assessment.

(21) Now let us examine the position in the References before us. Four partners of the firm filed their individual returns. In the books of account of the firm cost of construction of the two buildings is debited equally to each partner. That being so. the Appellate Assistant Commissioner was within his right to give a direction to the Income-tax Officer at the time he dealt with the appeal of the firm as to whether the excess amounts involved in the construction of the two buildings were undisclosed investments of the partners or whether the said amounts could be treated as explained one. The assesseds who are partners of the firm cannot be held to be not intimately connected with the firm. It has also to be held that their income went into the income of the firm for the two assessment years in question. The assessed was, thereforee, covered by experession 'any person' and the Income-tax Officer is competent to make an assessment, re-assessment or re-computation on the co-owners of the buildings in giving effect to the direction that the Appellate Assistant Commissioner gave while disposing of the appeals of the firm. If that is so the bar of limitation would belifted in pursuance of the provisions of sub-section (3)(ii) of section 153 of the 1961 Act.

(22) The next point to be considered is whether the assessment which was sought to be made under section 147 could be sustained as if it was an assessment under section 153. In this respect the learned counsel for the respondent laid great stress on the fact that the Income-tax Officer in his order had treated the assessment under section 147(a) of the 1961 Act but the Appellate Assistant Commissioner took the view that action under section 147(a) would not be warranted in the circumstances of the case. Having taken the correct view the Appellate Assistant Commissioner fell into error by holding that the assessment could be sustained under section 153 of the 1961 Act, corresponding to second proviso to section 34(3) of the 1922 Act. It was further contended that the Income-tax Officer is stated to have taken action under section 147(a) of the 1961 Act whereas the Appellate Assistant Commissioner took the view that action under the said section was not warranted in the circumstances of the case. That being so, the provisions of section 147(b) were alone applicable to the facts of the case and the Department having conceded that the provisions of section 147(a) were not applicable, it was not open to them to rely upon the provisions of section 147(a) and it was further contended that it was not open to the department to take mutual contradictory position.

(23) We are of the opinion that the contention is not well-founded. Section 147 of the 1961 Act is an enabling provision which empowers the Income-tax Officer to bring to tax incomes which have escaped assessment either on account of the failure of the assessed to disclose fully and truly all material facts necessary for his assessment for the relevant year or the Income-tax Officer in consequence of the information in his possession has reason to believe that income chargeable to tax has escaped assessment for any assessment year. That being so. it is not necessary that notice under section 147 of 1961 Act should state under which of the clauses, whether under clause (a) or clause (b) the same is issued. The main notice to be issued in a case under section 147 is a notice under section 139(2), and section 148 read with section 147 merely authorises the issue of such a notice. [See Kantaniani Venkatanarayan and Son v. First Additional Income-tax Officer : [1967]63ITR638(SC) Deep Chand Daga v. Income-tax Officer C-Ward, Raipuiand another, 77, I.T.R. 66 Anne Nagendram and Bomma Reddi Venkayya and Company v. Commissioner of Income-tax, AndhraPradesh. : [1967]66ITR46(AP) Sowdagar Ahmad Khan v. Commissioner of income-tax. Nellore 66, I.T.R. 55. The point to be considered is whether assessment can be defeated or rendered invalid if it can be sustained under any other provision of the Act. However, this aspect of the matter need not further detain us as in view of our discussion above we are of the opinion that the assessment can be sustained under section 153(3)(ii) of the 1961 Act.

(24) Another contention of the learned counsel for the respondent may also be noted and that is that the Tribunal has given no finding in respect of the question whether all the material and primary facts had been disclosed by the assessed or not. That being so, it was urged that this Court would decline to answer a question which has not been specifically referred and at the most this Court can order the Tribunal to state a supplementary statement of the case which possibly would not be done in view of the question having been abandoned by the Department. The learned counsel for the respondent relied on Commissioner of Income-Tax, West Bengal (II) v. Smt. Anusuya Devi : [1968]68ITR750(SC) . B. F. Varghese (no. 1) v. Commissioner of Agricultural Income-Tax, Kerala State, : [1969]72ITR724(Ker) . Pullangode Rubber and Produce Co.; Ltd., v. Commissioner of Agricultural Income-Tax. Kerala State : [1970]76ITR7(SC) and vehemently urged that when no finding had been given by the Tribunal that the assessed has not furnished fully and truly all the material facts then how does the question arise out of and under the Reference and if the question does not arise, this Court will be answering a question on which the parties are not at issue.

(25) In view of our observations above that the assessment can be sustained under section 153(3)(ii) of the 1961 Act, we do not consider that question No. 1 requires to be answered and the foregoing contention of the learned counsel for the respondent is not of much con. sequence.

(26) It is a well settled principle of law that the exercise of a power would be referable to a jurisdiction which confers validity upon it and merely because the Income-tax Officer while proceeding to assess the assessed, has quoted a wrong section, the assessment cannot be rendered invalid if it can be supported under section 153(3)(ii) of the 1961 Act.

(27) In Bidyut Proha Rafia v. Income-Tax Officer, A-Ward Digboi and others , the assessment order was passed on 25th November, 1965, under section 144 of 1961 Act-forthe assessment year 1961-62. The mistake was rectified by an order dated 26th December relevant year or the Income-tax Officer in consequence of the information in his possession has reason to believe that income chargeable to tax has escaped assessment for any assessment year. That being so. it is not necessary that notice under section 147 of 1961 Act should state tinder which of the clauses, whether under clause (a) or clause (b) the same is issued. The main notice to be issued in a case under section 147 is a notice under section 139(2), and section 148 read with section 147 merely authorises the issue of such a notice. [See Kantaniani Venkatanarayan and Son v. First Additional Income-tax Officer, : [1967]63ITR638(SC) Deep Chand Daga v. Income-tax Officer C-Ward, Raipuiand another, : [1970]77ITR661(MP) Anne Nagendram and Bomma Reddi Venkayya and Company v. Commissioner of Income-tax, AndhraPradesh. : [1967]66ITR46(AP) Sowdagar Ahmad Khan v. Commissioner of income-tax. Nellore, 66, I.T.R. 55. The point to be considered is whether assessment can be defeated or rendered invalid if it can be sustained under any other provision of the Act. However, this aspect of the matter need not further detain us as in view of our discussion above we are of the opinion that the assessment can be sustained under section 153(3)(ii) of the 1961 Act.

(28) Another contention of the learned counsel for the respondent may also be noted and that is that the Tribunal has given no finding in respect of the question whether all the material and primary facts had been disclosed by the assessed or not. That being so, it was urged that this Court would decline to answer a question which has not been specifically referred and at the most this Court can order the Tribunal to state a supplementary statement of the case which possibly would not be done in view of the question having been abandoned by the Department. The learned counsel for the respondent relied on Commissioner of Income-Tax, West Bengal (II) v. Smt. Anusuya Devi : [1968]68ITR750(SC) . B. F. Varghese (no. 1) v. Commissioner of Agricultural Income-Tax, Kerala State, : [1969]72ITR724(Ker) .Pullangode Rubber and Produce Co.; Ltd., v. Commissioner of Agricultural Income-Tax. Kerala State : [1970]76ITR7(SC) and vehemently urged that when no finding had been given by the Tribunal that the assessed has not furnished fully and truly all the material facts then how does the question arise out of and under the Reference and if the question does not arise, this Court will be answering a question on which the parties are not at issue.

(29) In view of our observations above that the assessment can be sustained under section 153(3)(ii) of the 1961 Act, we do not consider that question No. 1 requires to be answered and the foregoing contention of the learned counsel for the respondent is not of much con. sequence.

(30) It is a well settled principle of law that the exercise of a power would be referable to a jurisdiction which confers validity upon it and merely because the Income-tax Officer while proceeding to assess the assessed, has quoted a wrong section, the assessment cannot be rendered invalid if it can be supported under section 153(3)(ii) of the 1961 Act.

(31) In Bidyut Proha Raha v. Income-Tax Officer, A-Ward Digboi and others , the assessment order was passed on 25th November, 1965, under section 144 of 1961 Act-forthe assessment year 1961-62. The mistake was rectified by an order dated 26th December 1967, and the notice of demand dated 29th December, 1967, was issued under section 29 of the 1922 Act. The rectification order did not alter the quantum of assessment but only substituted sections of the 1922 Act. A contention was raised that the order of the Income-tax Officer was liable to be quashed for not having correctly described the section under which the order was passed. It was held by the Court that since the Income-tax Officer had the power both under the 1922 Act and 1961 Act, the exercise of the power of assessment could be referred lo his jurisdiction which he had under the 1922 Act although wrong sections were initially inserted in the proceedings and later rectified, It was accordingly held that the order of assessment in the case could not be held to be invalid merely because of the insertions of wrong sections in the order as well as in the notices.

(32) For the reasons stated above we are of the opinion that provisions of section 153(3)(ii) of the 1961 Act are applicable to the instant case. Question No. 2, referred to us, is answered accordingly. In this view of the matter, question No. 1 becomes redundant. The Department 'will have its costs which are assessed at Rs. 300.00 in all the three References.


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