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Commissioner of Income-tax Vs. Marikar Motors Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference No. 70 of 1975
Judge
Reported in[1978]111ITR36(Ker)
ActsCompanies (Profits) Surtax Act, 1964 - Sections 13 and 14; Income Tax Act, 1961 - Sections 254; Taxation Law (Amendment) Act, 1970 - Sections 73
AppellantCommissioner of Income-tax
RespondentMarikar Motors Ltd.
Appellant Advocate P.K. Ravindranatha Menon, Adv.
Respondent Advocate S.A. Nagendran and; N.N.D. Pillai, Advs.
Cases ReferredOfficer v. T.S. Devinatha Nadar
Excerpt:
.....13 not permissible with respect to order of tribunal given prior to 01.04.1971 - right of action passed by tribunal under section 254 granted by act of 1970 with effect from 01.04.1971 - such right is to recompute chargeable profits determined in assessment - not permissible to get such rights on orders passed prior to 01.04.1971 on ground that period of 4 years for taking action from date of order had not expired when amendment came into force - held, action under section 14 read with section 13 not permissible with respect to order of tribunal given prior to 01.04.1971. - - this may well be so, but, in our opinion, this would not enable the revenue to get at orders passed by the tribunal prior to the date on which the right of action under section 14 itself was conferred on the..........concerned in this reference, the order of the tribunal was passed on august 22, 1970. after the tribunal passed the said order, the surtax officer, acting under the provisions of section 14 of the companies (profits) surtax act, 1964, read with section 13 thereof, proceeded to take action by way of recomputation of the assessment and amendment of the assessment order. sections 13 and 14 of the said tax act are as follows :'13. (1) with a view to rectifying any mistake apparent from the record, the commissioner, the income-tax officer, the appellate assistant commissioner and the appellate tribunal may, of his, or its, own motion or on an application by the assessee in this behalf, amend any order passed byhim or it in any proceeding under this act, within four years of the date on.....
Judgment:

Gopalan Nambiyar, C.J.

1. The assessee, M/s. Marikar Motors Ltd., Trivandrum, is a company registered under the Indian Companies Act. In respect of the assessment years 1964-65, 1966-67 and 1967-68 it was assessed to income-tax. The orders of assessment were carried up in appeal and in further appeal to the Income-tax Appellate Tribunal. In respect of the latter two years, viz., 1966-67 and 1967-68, the orders of the Appellate Tribunal were passed after April 1, 1971, viz., on November 30, 1971. (The significance of the date April 1, 1971, will presently appear). But, for the assessment year 1964-65, with which we are concerned in this reference, the order of the Tribunal was passed on August 22, 1970. After the Tribunal passed the said order, the Surtax Officer, acting under the provisions of Section 14 of the Companies (Profits) Surtax Act, 1964, read with Section 13 thereof, proceeded to take action by way of recomputation of the assessment and amendment of the assessment order. Sections 13 and 14 of the said tax Act are as follows :

'13. (1) With a view to rectifying any mistake apparent from the record, the Commissioner, the Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal may, of his, or its, own motion or on an application by the assessee in this behalf, amend any order passed byhim or it in any proceeding under this Act, within four years of the date on which such order was passed.

(2) An amendment which has the effect of enhancing the assessment or reducing a refund or otherwise increasing the liability of the assessee shall not be made under this section unless the authority concerned has given notice to the assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard.

(3) Where an amendment is made under this section, the order shall be passed in writing by the authority concerned.

(4) Subject to the other provisions of this Act, where any such amendment has the effect of reducing the assessment, the Income-tax Officer shall make any refund which may be due to such assessee.

(5) Where any such amendment has the effect of enhancing the assessment or reducing the refund already made, the Income-tax Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable.'

'14. Where, as a result of any order made under Section 154, 155, 250, 254, 260, 262, 263 or 264 of the Income-tax Act, it is necessary to recompute the chargeable profits determined in any assessment under this Act, the Income-tax Officer may proceed to recompute the chargeable profits, and determine the surtax payable or refundable on the basis of such recomputation and make the necessary amendment and the provisions of Section 13 shall, so far as may be, apply thereto, the period of four years specified in Sub-section (1) of that section, being reckoned from the date of the order passed under the aforesaid sections of the Income-tax Act.' Section 254 (and a few of the other sections which it is unnecessary to notice) was introduced into Section 14 by Section 73 of the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971. The question which, therefore, falls for determination in this reference is whether, in respect of an order of the Income-tax Appellate Tribunal, passed prior to April 1, 1971, when alone an order of the Income-tax Appellate Tribunal under Section 254 was brought within the purview of Section 14, the right of action under that section and the consequential provision under Section 13 of the Surtax Act would be attracted on the ground that the period of 4 years from the date of the order for taking action had not expired when the Amendment Act came into force. The question of law referred for our determination is : 'Whether the Tribunal was right in holding that the Income-tax Officer cannot invoke Section 14 of the Companies (Profits) Surtax Act, 1964, as amended with effect from April 1, 1971, by Section 73 of the Taxation Laws (Amendment) Act, 1970, to recompute chargeable profits in a case where the order under Section 254 of the Income-tax Act, 1961, as a resultof which order it became necessary to recompute the chargeable profits, is passed prior to April 1971 ?'

2. The Tribunal was of the opinion that action under Section 14 read with Section 13 of the Surtax Act was not permissible or possible with respect to an order of the Appellate Tribunal given prior to April 1, 1971. It referred the question of law for determination and opinion by this court.

3. We think the Tribunal was right in its view. On the terms of Section 14 itself there are a few things which stand out clear : First, that the right of action with respect to an order passed by the Appellate Tribunal under Section 254 of the Act was itself granted for the first time only by the Taxation Laws (Amendment) Act of 1970 with effect from April 1, 1971. Next, the right conferred is only to recompute the chargeable profits determined in any assessment under the Surtax Act; and, third, that the said right of recomputation springs from any order, inter alia, under Section 254 of the Income-tax Act. Subject to these, the Income-tax Officer is to recompute the chargeable profits and determine the surtax payable and take consequential action by way of amendment under Section 13 of the Surtax Act. The period within which action has to be taken is 4 years from the date of the order passed--in this case--by the Tribunal under Section 254 of the Act. It appears to us, on principle and to the extent to which we can gather from the provisions of the section, that the right itself vis-a-vis an order of the Tribunal, having been conferred upon the officer only on and from April 1, 1971, it would not be permissible or possible to get at orders passed prior to that date, on the mere ground that, since the period of 4 years for taking action from the date of the order had not expired when the amendment came into force, the right could operate even on orders passed prior to the conferment of the right. To so hold would enable the officer to compute all orders passed on and from April 2, 1967, and subject them to recomputation under Section 14 and the consequential amendment under Section 13 of the Act. Such, we think, was not the result either intended or provided for by the amendment effected by the Taxation Laws (Amendment) Act, 1970.

4. Counsel for the revenue cited to us the decision of the Andhra Pradesh High Court in Mrs. Freny Rashid Chenai v. Assistant Controller of Estate Duty : [1973]90ITR31(AP) and of the Supreme Court in Mahendra Mills Ltd. v. P.B. Desai, Appellate Assistant Commissioner of Income-tax : [1975]99ITR135(SC) . The former of these decisions has no application to the facts of this case. The only question which there arose was whether the award passed by the Assistant Controller, which was modified on reference by the Civil Court, would entitle the Estate Duty Officer to treat the Civil Court's order as part of 'record' for the purpose of Section 61 of the Estate DutyAct. It was held that it could be so treated as part of the 'record'. The complicating feature in this case of the power itself having been conferred only on and from a certain date, and of the officer seeking to rectify the order passed on an anterior date, did not arise for consideration and was not dealt with in the judgment.

5. In the next decision in Mahendra Mills Ltd. v. P.B. Desai, Appellate Assistant Commissioner of Income-tax : [1975]99ITR135(SC) the concept of the term 'record' with respect to Section 35(1) of the Indian Income-tax Act, 1922, was expounded in a comprehensive sense so as to include not merely the order, but all proceedings on which the assessment is based. By reference to this decision, counsel for the revenue argued that there was a right of amendment under Section 13 of the Act with respect to any order passed by the Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal, with regard to 'any mistake apparent from the record'. The 'record' within the meaning of this section, would, the argument ran, include an order passed by these authorities under the Income-tax Act, as the surtax had to be levied on the income computed under the Income-tax Act. This may well be so, but, in our opinion, this would not enable the revenue to get at orders passed by the Tribunal prior to the date on which the right of action under Section 14 itself was conferred on the authorities. Therefore, the decision relied on by counsel for the revenue is unhelpful.

6. More appropriate, and to the point, appear to be the decisions of the Supreme Court in Income-tax Officer v. T.S. Devinatha Nadar : [1968]68ITR252(SC) and Commissioner of Income-tax v. K.S. Rashid : [1972]85ITR118(SC) . These were concerned with the familiar controversy which had occasioned great divergence of judicial opinion in regard to the scope and ambit of the provisions of Section 35(5) of the Indian Income-tax Act, 1922. We do not propose to deal with the history or the background of the controversy, as that is, by now, a matter of familiar knowledge. But we would extract the following passage from the majority judgment in the earlier of these decisions--See : [1968]68ITR252(SC) :

'After giving very anxious consideration to the views expressed by the learned judge, we still hold that by sub-section (5) of Section 35 the legislature intended that rectification should be made on the finding as to the incorrectness of the assessment of the firm' after the provision was introduced in the statute book, viz., 1st April, 3952. There would have been nothing unjust or inequitable in the legislature directing that rectification of the assessment of the partner should always follow the assessment or reassessment of the firm made finally. On the other hand, we think rectification of the partner's assessment should logically follow the reassessment or modification of the firm's assessment. Otherwise, there would bean unaccounted for divergence between a person's assessment as an individual and his assessment as a partner of a firm. But the legislature, in our opinion, did not intend to disturb completed assessment of partners except within the period of time indicated earlier in this judgment and unless the finding as to the incorrectness of the firm's assessment was made after the terminus a quo above mentioned.'

7. (The learned judge, to whose views the court gave its anxious and respectful consideration is Hidayatullah J. and the reference was to the views expressed by the learned judge in an earlier pronouncement of the Supreme Court in Habibullah's case : [1962]44ITR809(SC) ). It appears to us that the principle of the above decision bears similarity to the point that we have to tackle in this reference. That principle was affirmed and re-stated in the later decision of the Supreme Court in Commissioner of Income-tax v. K.S. Rashid : [1972]85ITR118(SC) .

8. Both on the construction of the section and in the light of the principle of the judicial decisions noticed supra, we are of the opinion that the view taken by the Tribunal was correct. We answer the question of law referred in the affirmative, that is, in favour of the assessee and against the department. We make no order as to costs.


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