RAJAGOPALA AYYANGAR, J. - The legality of an order of the Income-tax Officer refusing to rectify an assessment order passed by him in 1952 is the subject matter of this petition for the issue of a writ of certiorari to quash this order of refusal.
The assessee is a Hindu undivided family and was represented before the assessing authorities by Annamalai Chettiar who was the Karta of the family. For the assessment year 1951-52, the account year being that ended April 13, 1951, the assessee filed a return claiming that the Joint Hindu family was 'resident but not ordinarily resident' and was, therefore, taxable on remittances. The assessees return disclosed a loss in its money-lending business in India but there were profits from its business in Malays which were transmitted to India. On the basis of these remittances the assessee was taxed and the net tax due was ascertained at Rs. 4,151-4-0 in the year of assessment by an order passed on January 31, 1952. The Income-tax Officer stated 'the assessee being a resident but an ordinarily resident is assessable only on the remittances' and that was on the basis on which the assessment was completed. The facts in relation to the status of the assessee as 'not ordinarily resident' were set out in a note appended to the relevant return by reading thus :
Degree of residence : Sri Annamalai Chettiar, karta of the family was absent in Malacca during the years Sarwajith and Vikruthi. He left Kottaiyur on 5th Avani Vijaya and reached Malacca on 5th Puratasi Vijaya. He left Malacca on 23rd Adi Sarvathari and reached Kottaiyur in the first week of Avani Sarvathari. Again, the assessee left Kottaiyur for Malacca on January 29, 1950, and reached Malacca on February 15, 1950. He left Malacca on April 27, 1951, and reached Kottaiyur on May 9, 1951. He was completely absent in Malacca during the years Sarvajith and Vikruthi. He has, therefore, to be treated as 'not ordinarily resident' for the assessment of 1951-52 (it might be mentioned that for the previous years the assessee was treated as resident and was taxed accordingly). The tax demanded as a result of this assessment order was duly paid and nothing more was heard of this till 1955. On the 5th March, 1955, the assessee presented a petition to the Commissioner of Income-tax under section 33A(2) drawing his attention to the fact that the manager had been absent from India for the days set out in the note appended to the return for 1951-52 and that there had been a mistake committed assessment proceedings as well as by the Income-tax Officer, in treating the assessee as 'not ordinarily resident' and claimed that it should have been treated as 'nor resident' for the year. The Commissioner of Income-tax dismissed this petition on July 8, 1955, on two grounds, namely, (1) that the application to him was out of time being more than one year after the date of the assessment order and (2) that even on the merits no case had been made out since the entire control and management of the affairs of the family were not situated without the taxable territories in the assessment year. After receipt of the order of the Commissioner rejecting his petition, the assessee applied to the Income-tax Officer under section 35 to rectify the order of assessment dated January 31, 1952, on the basis that a mistake had crept into the order in the assessee being treated as 'not ordinarily resident'. The Officer declined to interfere for the reason that the matter had been agitated before the Commissioner and the prayer had been rejected by him. It is this order of the Income-tax Officer that is challenged as illegal in this writ petition.
Two grounds were urged by Mr. Narayanswami Iyer for the petitioner. The first was that the Income-tax Officer had not applied his mind to the question but had dismissed the assessees application merely because the Commissioner had rejected the petition under section 33A of the act.
I do not think there is much substance in this objection because I read the order of the Income-tax Officer as meaning that the Commissioner had expressed himself against the assessee on the merits and that he saw no reason to take a different view.
The second point urged was that the Income-tax Officer erred in holding that no mistake had been committed in treating the assessee as 'not ordinarily resident' within the meaning of section 4B(b) of the Income-tax Act, and that the Income-tax Officer should have held that on the facts set out in the note appended to the return filed for the assessment year 1951-52 the assessee had clearly made out that the Hindu undivided family whose assessment was then before the officer and was 'non-resident'. It is therefore necessary to set out the criteria laid down by the statute for determining the status of 'non resident' and 'nor ordinarily resident' in the case of Hindu families. Section 4A enacts (I will quote only the relevant words) :
'4A, for the Purposes of this act, - ...
(b) a Hindu undivided family, firm or other association of persons is resident in the taxable territories unless the control and management of its affairs is situated wholly without the taxable territories;'
and section 4B dealing with 'Ordinary residence' enacts :
'4B. For the purposes of this act -
(a) an individual is not ordinarily resident in the taxable territories in any year if he has not been resident in the taxable territories in nine out of the ten years preceding that year or if he has not during the seven years preceding that year been in the taxable territories for a period of, or for periods amounting in all to, more that two years;
(b) a Hindu undivided family is deemed to be ordinarily resident in the taxable territories if it manager is ordinarily resident in the taxable territories.'
In the light of these provisions it appears to be clear that the facts set out in the note appended to the return by the assessee made a claim only under section 4B(b) and not one under section 4A(b). It would be noticed that for the purpose of section 4A(b) the essential point is a s regards control being exercised throughout the year from outside the taxable territory and that no precise period of non-residence outside the taxable territory by the manager or other member of the family is predicated as a condition for the applicability of the provision. On the other hand, when one turns to section 4B definite periods of non-residence are specified in sub-section (a) in relation to individuals and the same are, so to speak, incorporated into the provision in relation to Hindu undivided families. These two sub-sections, section 4A(b) and section 4B(b) point to different criteria for the determination of the status defined by each of them and it is clear that the draftsman of the note appended to the return for 1951-52 clearly intended to invoke the provisions of only section 4B(b) and not of section 4A(b) and committed no mistake in stating in the return the status as in section 4B(b). It would also follow that the Income-tax Officer who passed the order on January 31, 1952, made no mistake either and that the assessment order discloses no mistake at all not to speak of a mistake apparent from the record which could be rectified under section 35 No doubt normally it is the Karta who has control of the business of a Hindu undivided family, but it does not follow as a matter of law that control was not exercised at any particular point of time by someone other than the karta. If in the note there had been any statement regarding the non-resident Karta having solely been in control of the business during 1951-52 the departmental authorities would have verified whether this was so and reached their own findings as to facts and the assessment would have proceeded on that basis. Those however are not the facts here and when the assessee raised no question as to control which is the sole consideration for determining the applicability of section 4A(b) he cannot now be heard to say that absence of control from out of the taxable territories should as a matter of law be inferred from the mere absence of the Karta during the accounting year. There might be some substance in the objection urged by learned counsel that the Income-tax Officer in effect arrived at a positive finding control had been exercised from within the taxable territories in the accounting year without the assessee being given an opportunity to make his representations in that regard, but as I am satisfied that there was no mistake apparent from the record in the order of assessment dated January 31, 1952, I consider that the impugned order rejecting the petition for rectification was the correct order to have been passed and I therefore decline to interfere.
In the result, the petition fails and is dismissed and the rule nisi discharged. The respondent is entitled to his costs. Counsels fee Rs. 100.