Skip to content


V. S. Arulanandam and Another Vs. Income-tax Officer, Tuticorin, and Another. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberWrit Petitions Nos. 953 to 956 of 1958
Reported in[1961]42ITR229(Mad)
AppellantV. S. Arulanandam and Another
Respondentincome-tax Officer, Tuticorin, and Another.
Excerpt:
- .....and 1953-54 was also wrong. the appeals, it should be remembered, preferred against the income-tax officers orders were still pending on march 29, 1956. they were withdrawn and dismissed only subsequently, on july 5, 1956. what section 35(1) authorised the income-tax officer to do was to rectify a mistake did was to set aside his previous orders refusing the registration for the assessment years 1952-53 and 1953-54 and issue revised orders. independent of section 35, the income-tax officer could not claim any revisional jurisdiction to revise his own orders. it should be noticed that the income-tax officer himself did not purport to exercise any power under section 35(1) in directing registration of the firm in supersession of his earlier orders. we have also pointed out that no notices.....
Judgment:

RAJAGOPALAN, J. - Arulanandam and Murugan were partners of a firm. Arulanandam resided in Ceylon while Murugan was a resident of Tuticorin, where the firm carried on its business. The firm applied for registration in the assessment year 1949-50, but that was refused by the Income-tax Officer. Against that order of refusal to register the firm, the assessee preferred an appeal to the Appellate Assistant Commissioner. That appeal was eventually disposed of on June 21, 1955. The appeal was allowed and registration was granted under section 26A of the Income-tax Act.

Pending disposal of the appeal with reference to the assessment year 1949-50, the Income-tax Officer completed the assessments for 1952-53 and 1953-54 also. We may notice that the firm did not ask for registration in 1950-51. It applied for registration in 1951-50 but that was also refused. It applied for registration in 1951-52 but that was also refused. Registration was refused for 1952-53 and 1953-54 and the unregistered firm was assessed on its income. As Arulanandam had no separate income apart from his share income of the partnership, no assessment was levied on him in the assessment years 1952-53 and 1953-54. Those assessment orders on Arulanandam were completed on February 24, 1955, and in both the years his status was determined as 'resident' and 'ordinarily resident', though he had himself claimed that his status was that of a non-resident.

In refusing registration for the two assessment years 1952-53 and 1953-54, what the Income-tax Officer recorded was :

'In connection with the 1949-50 assessment, similar application was made but registration was refused for the reasons stated in the order under section 26A of the Act passed in that year. There are no fresh facts now, and the position remains the same. For the reasons stated therein, I am unable to allow registration applied for.'

Subsequent to the the termination of these proceedings, as we have pointed out earlier, on June 21, 1955, the appeal preferred by the firm with reference to the assessment year 1949-50 was allowed by the Appellate Assistant Commissioner and registration was granted.

On March 29, 1956, the Income-tax Officer passed orders afresh with reference to each of the assessment years 1952-53 and 1953-54 in identical terms :

'The partners have applied for the renewal of registration of the firm in the prescribed form and within the prescribed time. The renewal will therefore be sanctioned in the light of the Appellate Assistant Commissioners order dated June 21, 1955, granting registration to the firm for 1949-50.'

These orders, it was common ground, were passed without notice either to the firm or to the partners that constituted that firm. When these orders were passed the appeals the firm had preferred against the orders passed under section 26A with reference to the assessment years 1952-53 and 1953-54 were still pending.

On July 5, 1956, the firm, represented by one of its partners, Murugan, wrote to the Appellate Assistant Commissioner :

'We have the honour to state that we are not pressing the appeals filed by us against the orders under section 26A for the assessment years 1952-53 and 1953-54.'

On the same day, the Appellate Assistant Commissioner dismissed the appeals. The relevant portion of the order of the Appellate Assistant Commissioner ran :

'As the Income-tax Officer himself has modified the original orders on March 29, 1956, the appellant desired to withdraw those appeals. I am not quite sure whether the Income-tax Officer was competent to revise his own orders but on the facts of the case, the appellant is entitled to registration. To regularise the cases, I hold that the appellant is entitled for registration under section 26A. But as there is now no necessity to modify the revised orders of the Income-tax Officer, whatever may be the circumstances under which they were passed, and as the appellant has withdrawn these appeals in view of those orders, I treat these appeals in view of those orders, I treat these appeals as having been dismissed.'

It should be noted that ex facie that the request of the firm dated July 5, 1956, to withdraw the appeals, there was no indication that they were withdrawing those appeals because the Income-tax Officer had purported to grant registration for those two assessment years on March 29, 1956. In fact, the letter did not explain why the firm withdrew the appeals.

After the dismissal of the appeals preferred by the firm, the Income-tax Officer issued notices to Arulanandam on March 27, 1957. These notices purported to be under section 35 of the Indian Income-tax Act and they called upon Arulanandam to show cause why the orders of assessment passed on him for 1952-53 and 1953-54 should not be rectified. The rectification was with reference to two points : (1) the Income-tax Officer proposed to alter the status of Arulanandam as that of a non-resident, and (2) the Income-tax Officer proposed to assessees Arulanandam on his share income of the firm on the basis that the firm was a registered firm. The assessee objected to the rectification proposed by the Income-tax Officer had no jurisdiction. The objections were overruled. On June 23, 1958, the Income-tax Officer issued orders purporting to be under section 35(5) of the Income-tax Act. The assessee was assessed on his share income on the basis that the firm was a registered firm. The assessees status was also altered to that of a non-resident.

Between March 27, 1957, when notice was issued of Arulanandam, and June 23, 1958, when the orders were passed under section 35(5) of the Act of July 15, 1957, the Income-tax Officer recorded with reference to the assessments of the unregistered firm for the assessment years 1952-53 and 1953-54 that no demand would be made on the basis of those assessments. In effect, those assessments were treated as nonest. It should be remembered that the Income-tax Officer had decided to rectify the assessments of the individual partners, Murugan and Arulanandam, on the basis that the firm was a registered firm.

Against the orders dated June 23, 1958, Arulanandam moved the Commissioner in revision. Those applications were rejected on October 27, 1958, by the Commissioner.

We have set out above the details with reference to Arulanandam. Except that the status of the other partner, Murugan, was never in issue, what happened to Arulanandam happened to Murugan also. The original assessments of Murugan were also rectified under section 35(5) of the Act by the Income-tax Officer. His applications to the Commissioner also failed.

Arulanandam preferred Writ Petitions Nos. 953 and 954 of 1958 and Murugan, Writ Petitions Nos. 955 and 956 of 1958. With reference to each of the assessment years 1952-53 and 1953-54, the relief asked for was a writ of certiorari to set aside the orders passed under section 35(5) by the Income-tax Officer, and the further orders of the Commissioner, in effect, confirming those orders of the Income-tax Officer.

While the notice dated March 27, 1957, did not specify whether action was proposed under section 35(1) or 35(5) of the Act, but merely specified section 35, the ultimate orders of rectification passed on June 23, 1958, purported to be under section 35(5) of the Act. In disposing of the applications preferred to him, the Commissioner pointed out that while the orders could be confirmed under section 35(5), alternatively they could also be upheld on the application of section 35(1) of the Act.

It should be easier to dispose of the contention of the learned counsel for the petitioners that section 35(5) can have no application to the facts of this case. Section 35(5) could be invoked to give effect to any order passed under section 31 of the Act by the Appellate Assistant Commissioner. With reference to the two assessment years in question, 1952-53 and 1953-54, what happened was the firm withdrew the appeals and the appeals were dismissed. On appeal, the Assistant Commissioner, it should be remembered, specifically recorded '.... as the appellant has withdrawn has withdrawn these appeals....I treat these appeals as having been dismissed.' No doubt, the Appellate Assistant Commissioner also observed that these appeals had been withdrawn in view of the orders passed by the Income-tax Officer. But we have pointed out that ex facie the letter of withdrawal no reasons were assigned and there was no reference to the orders of the Income-tax Officer. Even if that had been the ground on which the firm withdrew these appeals, that would not really affect the determination of the maid questions at issue or alter the position that the appeals preferred by the assessee were in form and in substance dismissed by the Appellate Assistant Commissioner. There was no question of the Appellate Assistant Commissioner directing registration of the firm under section 26A. He pointed out that the registration had already been granted by the Income-tax Officer. The Assistant Commissioner was inclined to doubt whether the Income-tax Officer had jurisdiction to grant registration in the circumstance under which he purported to grant the registration. But the Appellate Assistant Commissioner could not regularise that grant by the Income-tax Officer by granting that registration while dismissing the appeals as having been withdrawn. Thus, neither in form nor in substance did the Appellate Assistant Commissioner grant registration with reference to these assessment years, though he recorded his view that the appellant was entitled to registration. Thus, the only basis for treating the firm as a registered firm was the order of the Income-tax Officer dated March 29, 1956, and not the order of the Appellate Assistant Commissioner. Since the order of the Appellate Assistant Commissioner dated July 5, 1956, was not the basis for the rectification proposed by the Income-tax Officer, section 35(5) could not apply at all.

Learned counsel for the Department, however, wanted us to construe the order of the Appellate Assistant Commissioner dated July 5, 1956 as in effect granting registration, so that what the Income-tax Officer subsequently did could be brought within the scope of section 35(5) of the Act. We have already set out above our reasons for the conclusion that what in form and in substance the Assistant Commissioner did was to dismiss the appeals. He did not himself grant any registration. He purported to regularise what the Income-tax Officer did. Whether the Income-tax Officer had or had no jurisdiction - we shall presently consider that point - the Appellate Assistant Commissioner was not invested with any power by section 31 of the Act to 'regularise' what the Income-tax Officer had done independent of the disposal of the appeal.

The next question is whether section 35(1) empowered the Income-tax Officer to direct the registration on March 29, 1956 having earlier refused registration of the firm. No doubt, the original refusal of the Income-tax Officer to register the firm was on the ground that he had refused registration in the assessment year 1949-50 and the conditions remained the same. It is also true that subsequently the Income-tax Officers order under section 26A with reference to the assessment year 1949-50 was set aside by the Appellate Assistant Commissioner and registration was granted. Therefore, with reference to the assessment year 1949-50, the view taken by the Income-tax Officer was held to be erroneous by the Appellate Assistant Commissioner. That did not necessarily mean that the view taken by the Income-tax Officer with reference to the assessment years 1952-53 and 1953-54 was also wrong. The appeals, it should be remembered, preferred against the Income-tax Officers orders were still pending on March 29, 1956. They were withdrawn and dismissed only subsequently, on July 5, 1956. What section 35(1) authorised the Income-tax Officer to do was to rectify a mistake did was to set aside his previous orders refusing the registration for the assessment years 1952-53 and 1953-54 and issue revised orders. Independent of section 35, the Income-tax Officer could not claim any revisional jurisdiction to revise his own orders. It should be noticed that the Income-tax Officer himself did not purport to exercise any power under section 35(1) in directing registration of the firm in supersession of his earlier orders. We have also pointed out that no notices were issued either to the firm or to the partners before the orders dated March 29, 1956 were passed. Incidentally it should be noted that the grant of registration has affected detrimentally Arulanandam and has increased his tax liability. The Income-tax Officer himself did not purport to act under section 35(1) of the Act when he passed the orders dated March 29, 1956. The learned counsel for the Department urged us to consider whether the order dated March 29, 1956, could be viewed as passed under section 35(1). As we said, independent of section 35(1) the Income-tax Officer could not claim any jurisdiction to revise his earlier orders. What section 35(1) authorised him to do was to rectify mistakes apparent on the face of the record of his orders of assessment for the relevant assessment the record of his orders of assessment for the relevant assessment years. What the Income-tax Officer did was to revise his earlier orders of assessment that is in effect set them aside and substitute orders granting registration not because of any mistake apparent on the face of the record but because his view taken in the assessment proceedings for 1949-50 had been pronounced to the erroneous by the Appellate Assistant Commissioner. The soundness or otherwise of the decision with reference to 1952-53 and 1953-54 could have been corrected on appeal on the same grounds by the Appellate Assistant Commissioner. But on the ground that registration for 1949-50 had been allowed, the Income-tax Officer was not entitled to revise the earlier orders by invoking the powers vested in him by section 35(1) of the Act.

The contention of the learned counsel for the assessee that the Income-tax Officer had no jurisdiction to pass orders dated March 29, 1956, is therefore well founded.

The basis for the order of rectification dated March 27,1957, was that while the original assessments of Arulanandam and Murugan were on the basis that the firm was unregistered, the firm was in fact registered, the registration having been granted by the Income-tax Officer on March 29, 1956. If the orders dated March 29, 1956, were without jurisdiction - and we have already held them to be so-there could be no basis for any rectification under section 35(1) of the Act.

Learned counsel for the Department urged that the petitioner was not entitled to any relief in this case, because he had not specifically asked for any writ of certiorari to set aside the orders dated March 29, 1956. Failure to ask in these or in other proceedings for a writ of certiorari to set aside the order dated March 29, 1956 in no way bars the grant of the relief the petitioners have asked for to set aside the orders passed under section 35 and confirmed by the Commissioner. The petitioners were entitled to treat the orders dated March 29, 1956, passed without jurisdiction as non est in law. Even independent of that, the petitioners were entitled to show in these proceedings that the orders passed under section 35, and subsequently confirmed by the Commissioner having been based upon the orders dated March 29,1956, which were themselves passed without jurisdiction were liable to be set aside by the issue of a writ of certiorari.

In our opinion, the orders passed by the Income-tax Officer purporting to be under section 35(5) were without jurisdiction. Neither section 35(5) nor section 35(1) authorised the Income-tax Officer to rectify the orders of assessment originally passed with reference to the share income of Arulanandam and Murugan. Once again we have to point out that the basis of the rectification was that subsequent to the original orders of assessment the firm had been treated as a registered firm and that view was based on the order dated March 29, 1956 which were themselves passed without jurisdiction. That is why we state that section 35(1) could not apply, and we have explained earlier that section 35(5) could not apply at all.

In each of these cases, the rule nisi will be confirmed and the orders of the Income-tax Officer purporting to be under section 35(5) of the Act and the further orders of the Commissioner will stand set aside. One set of counsels fee will be allowed for all these four petitions to be apportioned equally between Arulanandam and Murugan. Counsels fee Rs. 250.

Petition allowed.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //