Patna High Court
Guru Prasad, Chhattu Ram And Chhattu Ram ... vs Commissioner Of Income-Tax on 14 May, 1985
Equivalent citations: [1986]158ITR278(PATNA)
JUDGMENT Nazir Ahmad, J.
1. All these six taxation cases are being disposed of by this consolidated order for the sake of convenience and also because they are interconnected in view of the order of the Income-tax Appellate Tribunal (hereinafter referred to as "the Tribunal").
2. Let us first take up Taxation Cases Nos. 17 of 1972 and 44 of 1975, as both relate to the same assessee, Guru Prasad.
3. The facts of the case may be briefly stated. The assessee, Guru Prasad, encashed high denomination notes of the value of Rs. 2,98,000 on January 19, 1946, from the Imperial Bank, Gaya. During the assessment proceedings, the assessee was asked to disclose the nature and source of the high denomination notes. The Income-tax Officer did not accept the explanation furnished by the assessee and the sum of Rs. 2,98,000 representing the value of Rs. 298 high denomination notes was assessed as secreted business income of the assessee for the assessment year 1947-48. A copy of the assessment order has been annexed and marked as annexure "A" forming part of the statement of the case in Taxation Case No. 17 of 1972, which shows that the assessee was assessed in the status of an individual.
4. Being aggrieved by the order of the Income-tax Officer, the assessee preferred an appeal before the Appellate Assistant Commissioner but the latter, relying on the findings of the Investigation Commission, confirmed the order. The assessee then filed second appeal being ITA No. 4976 of 1957-58 before the Calcutta Bench and the Tribunal relying on a decision of the Supreme Court in Basheshar Nath v. CIT [1959] 35 ITR 190, held that the order of the Appellate Assistant Commissioner based on the findings , of the Investigation Commission was not proper and the matter was referred back to the Appellate Assistant Commissioner for disposal on merits.
5. During the pendency of the appeal before the Appellate Assistant Commissioner, after the matter was referred back to him by the Tribunal, the assessee along with nine others entered into a settlement under Section 34(1B) of the Indian Income-tax Act, 1922 (hereinafter referred to as "the 1922 Act"), that the income, profits and gains amounting to Rs. 86,03,349 escaped assessment in their hands and it should be assessed to tax under Section 34(1A) of the 1922 Act. The sum of Rs. 2,98,000 pertaining to the assessee was also included in the sum of Rs. 86,03,349.
6. After the settlement, there was a further appeal to the Appellate Assistant Commissioner when it was contended before him that the sum of Rs. 2,98,000 should be assessed as income from other sources and not as business income of the assessee. It was also urged before him that the amount was not assessable in the assessment year 1947-48, but in the assessment year 1946-47. However, the Appellate Assistant Commissioner negatived both the contentions of the assessee and held that the amount is taxable in the assessment year 1947-48 and it can be assessed only as business income of the assessee in view of the terms and conditions of the settlement under Section 34(1B) of the 1922 Act entered into between the assessee and others on the one hand and the Central Board of Revenue on the other hand.
7. The Appellate Assistant Commissioner quoted the terms of the settlement and then came to a finding that as the amount of Rs. 2,98,000 of the assessee was clearly covered under the terms of the settlement referred to above, nothing was required to be done with regard to the proceeds of the encashment of high denomination notes to the tune of Rs. 4,69,000 including the amount of Rs. 2,98,000 of the assessee which was already assessed to tax in the assessment year 1947-48. The Appellate Assistant Commissioner held that it was not open to the assessee to agitate or reopen any issue which formed part of the settlement in view of Section 34(1B) of the 1922 Act. A copy of the order of the Appellate Assistant Commissioner has been annexed in Taxation Case No. 17 of 1972 and marked as annexure "B" forming part of the statement of the case.
8. The aforesaid facts are available from the statement of the case at pages 17 to 19 of the paper book in Taxation Case No. 17 of 1972.
9. It appears that as the Appellate Assistant Commissioner treated the amount of Rs. 2,98,000 as the business profit of the assessee, the assessee was also assessed thereon :
(a) to excess profits tax amounting to Rs. 43,666 under the Excess Profits Tax Act, 1940, and
(b) to business profits tax amounting to Rs. 24,750 under the Business Profits Tax Act, 1947.
10. In view of the provisions under Section 12( 1) of the Excess Profits Tax Act, 1940, and Section 10 of the Business Profits Tax Act, 1947, the excess profits tax and business profits tax payable was deducted in computing the total income assessable under the 1922 Act. This will be evident from the statement of facts at page 11 of the paper book in Taxation Case No. 44 of 1975.
11. The original assessment order of the Income-tax Officer which is annexure A in Taxation Case No. 17 of 1972 shows that he included various other incomes in the total income of the assessee including secreted profit of Rs. 2,98,000 and thus the total income was assessed at Rs. 3,13,759. Thus, it is evident that in the original assessment order dated December 30, 1949, the amounts of Rs. 43,666 and Rs. 24,750 relating to the excess profits tax and business profits tax were not allowed deduction at the time of the original assessment. Unfortunately, there are no materials in this case to show as to on what date the amount of Rs. 43,666 and Rs. 24,750 were allowed as deductions. The assessee filed an appeal being Appeal No. 56 of 1964-65 before the Appellate Assistant Commissioner on April 8, 1964, against the assessment order of the Income-tax Officer assessing the total income at Rs. 3,13,759 and the appeal was heard on October 20, 1967, and the order was also passed on the same date. This will be evident from annexure "B" in Taxation Case No. 17 of 1972. On this basis, it has been submitted that till April 8,1964, the deductions relating to the excess profits tax and business profits tax had not been allowed. However, this matter will be considered subsequently.
12. Against the order of the Appellate Assistant Commissioner dated October 20, 1967, I.T.A. No. 19095 of 1967-68 relating to the assessment year 1947-48 was filed by the assessee before the Tribunal. The Tribunal disposed of I.T.A. No. 19095 of 1967-68 along with BPTA No. 4 of 1967-68 (C.A.P. ended December 31, 1946) and EPTA No. 11 of 1967-68 (C.A.P. ended March 31, 1946) relating to the assessee, Guru Prasad. The Tribunal took up I.T.A. No. 19095 of 1967-68 first.
13. The Tribunal accepted the first contention of the assessee that the sum of Rs. 2,98,000 cannot be assessed as business income of the assessee but it should be assessed as income from other sources. The Tribunal rejected the second plea of the assessee that the amount is not assessable in the assessment year 1947-48, but in the assessment year 1946-47. The Tribunal also held while taking up the Business Profits Tax and Excess Profits Tax Appeals that in the income-tax appeal, it has already been held that the amount of Rs. 2,98,000 cannot be assessed as business income of the assessee, the liability for excess profits tax and business profits tax does not arise and that the main basis for excess profits tax liability and business profits tax liability of the assessee is the settlement order passed under Section 34(1B) of the 1922 Act. The income and the tax payable thereon are both quantified under the settlement order and the tax liability is limited to income-tax alone. The Tribunal held that there is nothing to indicate either in terms of the settlement or in the settlement order that the other consequential liabilities like the business profits tax and excess profits tax can also be imposed on the basis of the settlement order. The Tribunal took the view that if such consequential tax liabilities were also intended under the settlement order, there should have been a clear indication or reservation to this effect. The Tribunal held that a careful perusal of the settlement order suggests that there was full and final settlement of all tax liability and the tax liability was confined to income-tax alone and that such being the tenor of the settlement order, the Tribunal held that there was no scope for fastening the excess profits tax liability or business profits tax liability on the assessee. The Tribunal also took the view that when the settlement order fixes both the income and the tax payable thereon in full and final settlement and the matter has become final and conclusive under Section 34(1D) of the 1922 Act, the attempt to fasten the excess profits tax and the business profits tax liabilities over and above what has been settled under Section 34(1B) of the 1922 Act cannot be legally sustained and so the appeal of the assessee was allowed only to the extent that the amount of Rs. 2,98,000 is assessed as income from other sources and not as a business income but the claim of the assessee that this income should be assessed in the assessment year 1946-47 and not in the assessment year 1947-48 was rejected. However, the BPT Appeal No. 4 of 1967-68 and EPT Appeal No. 11 of 1967-68 filed by the Department were dismissed. The BPT Appeal No. 4 of 1967-68 and EPT Appeal No. 11 of 1967-68 had been filed against the order of the Appellate Assistant Commissioner who had held that the amount of Rs. 2,98,000 does not represent the income of the assessee from a business and, hence, there is no liability for payment of the business profits tax or excess profits tax. The consolidated order of the Tribunal in ITA No. 19095 of 1967-68 along with BPTA No. 4 of 1967-68 and EPTA No. 11 of 1967-68 dated November 30, 1970, has been annexed in Taxation Case No. 17 of 1972 and marked as annexure "C" forming part of the statement of the case.
14. In Taxation Case No. 17 of 1972, the Tribunal has referred the following question of law for the opinion of this court:
"Whether, on the facts and in the circumstances of the case, the sum of Rs. 2,93,000 encashed by the assessee from high denomination notes from the Imperial Bank, Gaya, on January 19, 1946, can be assessed in the assessment year 1947-48?"
15. In view of the order of the. Tribunal dated November 30, 1970, (annexure C) aforesaid, the Income-tax Officer rectified the assessment order for the assessment year 1947-48 under Section 155(3) of the Income-tax Act, 1961 (hereinafter referred to as "the 1961 Act"). The Income-tax Officer has clearly pointed that where as a result of the excess profits tax and business profits tax payable by the assessee having been modified in appeal, it is necessary to amend the total income chargeable to income-tax. The Income-tax Officer has also mentioned that notice under Section 155 of the 1961 Act was issued to the assessee to state whether he has any objection to the proposed amendment of the total income. The notice was duly served and received. This shows that the assessee had no objection to the proposed amendment. Accordingly, he rectified his order relating to the assessment year 1947-48 by which business profits tax and excess profits tax payable was withdrawn and revised demand notice and challan were ordered to be issued. The rectification order of the Income-tax Officer has been annexed and marked as annexure "A" forming part of the statement of the case in Taxation Case No. 44 of 1975.
16. The assessee appealed before the Appellate Assistant Commissioner. The appeal was filed on January 29, 1972, which goes to show that the rectification order must have been passed some time in December, 1971. The Appellate Assistant Commissioner disposed of the appeal on March 24, 1972. The Appellate Assistant Commissioner has held that the Income-tax Officer's order under Section 155(3) of the 1961 Act raised an additional income-tax demand. The Appellate Assistant Commissioner referred to the settlement made with regard to the sum of Rs. 2,98,000. He has also pointed out that the settlement was made by the Board under Section 34(1B) of the 1922 Act which quantified both the concealed income and the tax payable. The Appellate Assistant Commissioner has also pointed out that when the original assessment for the year 1947-48 was made, the Income-tax Officer also charged excess profits tax and business profits tax liabilities on the assessed income. The appellant contested that the amount of Rs. 2,98,000 did not constitute business income in his hands and, therefore, no excess profits tax or business profits tax could be fastened. The matter came up to the Tribunal and by the consolidated order dated November 30, 1970, in ITA No. 19095 of 1967-68 and BPTA No. 4 of 1967-68 and EPTA No. 11 of 1967-68, the Tribunal decided that on the amount of Rs. 2,98,000, excess profits tax and business profits tax liability do not arise. The Appellate Assistant Commissioner has pointed out that following that decision of the Tribunal that excess profits tax/business profits tax liability fixed on the appellant has been vacated, the Appellate Assistant Commissioner has mentioned that the settlement made under Section 34(1B) of the 1922 Act quantified the amount of tax now that business profits tax/excess profits tax has been removed. The Income-tax Officer has held that the assessee paid less tax than was decided in the settlement order. The Income-tax Officer, therefore, invoked the provisions of Section 155(3) of the 1961 Act and on that portion of the assessee's income from which liability of excess profits tax/business profits tax has been removed, the Income-tax Officer has charged income-tax. The assessee contended before the Appellate Assistant Commissioner that the Income-tax Officer could not do so because the settlement was made under Section 34(1B) of the 1922 Act which cannot be disturbed either by the assessee or by the Income-tax Officer as provided under Section 34(1D) of the 1922 Act. The Appellate Assistant Commissioner, interpreting the Tribunal's decision held that the Income-tax Officer had no jurisdiction to act under Section 155(3) of the 1961 Act and so the Appellate Assistant Commissioner cancelled the order of the Income-tax Officer. This order of the Appellate Assistant Commissioner has been annexed and marked annexure "B" forming part of the statement of the case in Taxation Case No. 44 of 1975.
17. Being aggrieved by the order of the Appellate Assistant Commissioner, the assessee appealed before the Tribunal being ITA No. 992 (Pat) of 1972-73 relating to the assessment year 1947-48. The Tribunal held that although the Income-tax Officer had passed an order under Section 155(3) of the 1961 Act, the order which was sought to be revised had been made under the provisions of the 1922 Act and that rectification of the assessment order under the provisions of the 1922 Act could have been done only under Section 35 of the 1922 Act. The Tribunal also found that the Income-tax Officer had similar powers to rectify the assessments under the provision of Section 35(6) of the 1922 Act. The Tribunal, therefore, held that the order of the Income-tax Officer should be deemed to be an order under Section 35(6) of the 1922 Act, although the Income-tax Officer passed an order under Section 155(3) of the 1961 Act.
18. It was also submitted before the Tribunal that an order under Section 35 of the 1922 Act was not appealable and, therefore, the appeal before the Appellate Assistant Commissioner was not a competent appeal. The Tribunal upheld the contention of the Department and held that the order of the Income-tax Officer has to be treated as an order under Section 35(6) of the 1922 Act and so there could be no competent appeal before the Appellate Assistant Commissioner and so the Tribunal held that the Appellate Assistant Commissioner exceeded his jurisdiction in deciding the matter and he should have merely held that there was no competent appeal before him. The Tribunal also considered the merits of the claim of the assessee.
19. The case of the Revenue was that the assessment for the assessment year 1947-48 had not been made under any settlement and the order which was being rectified by the Income-tax Officer had also not been made under any settlement. Thus, according to the Revenue, the order rectified was never a subject-matter of settlement and only because in a later settlement made in 1960, the amount of Rs. 2,98,000 was admitted by the assessee, it could not mean that the earlier assessment had become the subject-matter of settlement. The assessee relied on the provisions of Section 34(1D) of the 1922 Act and urged that the settlement was conclusive and there could be no rectification to increase the assessee's liability under the Income-tax Act, 1922. It was also argued on behalf of the assessee that the settlement had fixed the income under the Income-tax Act, 1961, and the liability under the same, but no liability had been fixed under the provisions of the Excess Profits Tax Act.
20. The Tribunal took the view that the order which has been passed on December 30, 1949, had not been the result of any settlement between the Department and the assessee and as the excess profits tax had been allowed as deduction and later on the excess profits tax liability had been modified and there was no liability for that tax, the original order deducting excess profits tax liability could be rectified under Section 35(6) of the 1922 Act which corresponds to the provision of Section 155(3) of the 1961 Act. According to the Tribunal, Rs. 2,98,000 had not been assessed as a result of settlement and merely because it was made a part of a total disclosure of Rs. 86,03,349 by a group of assessees, it cannot be held that the mistake in the order for the assessment year 1947-48 could not be rectified. According to the Tribunal, Section 34(1D) did not preclude the Income-tax Officer from rectifying an order particularly when it was not the subject of any settlement. The Tribunal further observed that in equity also the assessee had no case and no deduction could be allowed to the assessee in respect of the liability which was not in existence. A copy of the order of the Tribunal has been annexed and marked as annexure "B" forming part of the statement of the case in Taxation Case No. 44 of 1975. A copy of the settlement has also been annexed and marked as annexure "C" forming part of the statement of the case in Taxation No. 44 of 1975.
21. On the aforesaid facts, the Tribunal has referred the following questions of law in Taxation Case No. 44 of 1975 for the opinion of this court:
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that no competent appeal lay before the Appellate Assistant Commissioner against the order of the Income-tax Officer ?
(2) Whether in view of the finding of the Tribunal that there was no competent appeal before the Appellate Assistant Commissioner, the Tribunal was correct in entertaining the Departmental appeal and in setting aside the order of the Appellate Assistant Commissioner ?
(3) Whether, on the facts and in the circumstances of the case, Section 34(1D) of the Indian Income-tax Act, 1922, was a bar to the Revenue in rectifying the assessment order for the assessment year 1947-48 in the manner done by the Income-tax Officer ?"
22. It appears that the assessee had also suggested the following question to be referred as question No. (1):
"(1) Whether, on the facts and in the circumstances of the case, the order of the Income-tax Officer is an order under Section 35(6) of the old Act or Section 155(4) of the new Act ?"
23. The Tribunal held that question No. (1) suggested above is purely an academic question in view of the fact that the order which was to be rectified had admittedly been passed under the provisions of the 1922 Act and for this purpose the Tribunal relied on the Supreme Court decision in Sankappa v. 1TO [1968] 68 ITR 760, where it was held that rectification of an assessment or an order passed under the provisions of the old Act can be made only under the provisions of that Act itself and so the Tribunal refused to refer that question to this court.
24. In Taxation Case No. 44 of 1975, a supplementary statement of the case was called for, vide order of this court dated December 10, 1979, and the Tribunal has submitted a supplementary statement of the case on January 28, 1985. However, this supplementary statement of the case does not throw any light. It only gives quotation of paragraphs 15 and 16 as found at page 12 of the paper book in Taxation Case No. 44 of 1975. Hence, the supplementary statement of the case is not at all helpful for the decision of this case.
25. Now, it cannot be doubted that in both the taxation cases, a question arises as to whether they have to be guided by the settlement between the various assessees and the Central Board of Revenue. Under such circumstances, it is essential to refer to the settlement which is annexure "C" in Taxation Case No. 44 of 1975.
26. Annexure "C" in Taxation Case No. 44 of 1975, is at pages 3 to 6 of the paper book. The Central Board of Revenue, New Delhi, passed the order of settlement under Section 34(1B) of the 1922 Act on August 20, 1960, relating to the assessment years 1940-41 to 1947-48, in the names of the assessees. The names of Chattu Ram and Guru Prasad besides other assessees were included. The settlement order shows that notices were issued to all the assessees under Section 34(1)(a) of the 1922 Act in respect of the assessment years 1940-41 to 1947-48, and so the nine assessees applied to the Central Board of Revenue is accordance with Section 34(1B) of the 1922 Act to have the matter relating to their assessments for the said years settled on the following terms which were approved by the Central Government. The Central Board of Revenue ordered as follows:
"1. That the total amount of income of the assessees in respect of the years stated above assessable to tax under Section 34(1)(a) of the 1922 Act according to the said settlement is Rs. 86,03,349.
2. That the sum of money payable jointly and severally by the assessee in regard to the matter relating to the assessment in respect of the said amount is Rs. 6,78,109.
3. That after adjusting the sum of Rs. 2,28,158 already paid to the Government against the sum of money payable mentioned above, the balance that remains to be paid is Rs. 4,50,000.
4. That the said balance of sum shall be paid in the manner and according to the instalments stipulated in the annexure hereto. The firm's first instalment of Rs, 1,12,000 which was agreed to be paid on or before July 31, 1960, shall be paid by the assessee within 14 days of the receipt of this order."
27. Annexure "C" shows that it is agreed that on the materials available with the Income-tax Department, the income, profits and gains which have escaped assessment in the hands of the assessees, including Chattu Ram and Guru Prasad and others named therein as individuals and as an association of individuals during the accounting years relevant to the assessment years 1940-41 to 1947-48 is Rs. 86,03,349, and that after deducting from the abovesaid amount of Rs. 86,03,349, a sum of Rs. 25,64,742 representing the amount already assessed or disallowed in the course of the original assessment, the balance that remains to be taxed is Rs. 60,38,607. It was also agreed that having regard to the crippled financial condition of the assessees, the sum of money payable by them on the assessable income of Rs. 60,38,607 shall be limited to Rs. 6,78,108. It was alsoagreed that the sum of Rs. 2,28,108 already paid by the assessees shall be adjusted against the liability mentioned above. It was also agreed that after adjusting the sum of Rs. 2,28,108 against the liability mentioned above, the balance that remains to be paid is Rs. 4,50,000 which amount shall be paid by the assessees in the manner laid down in Clause 5 of the settlement. The assessee was also required to furnish such security which in the opinion of the Commissioner of Income-tax shall be deemed adequate. It was also agreed that in default of payment of any of the instalments on the due dates or in the event of breach of the undertaking, the entire sum then outstanding shall become payable with interest thereon at 6% per annum from the date of default or breach, as the case may be, until full payment. It was also agreed that in case any item of concealed income not considered and/or covered by the settlement comes to light in future, the Income-tax Department shall be free to tax the same and take such other action as may be necessary in accordance with law. It was also agreed that if any asset not mentioned in the affidavits of assets annexed thereto comes to light in future, the sum of money payable shall be enhanced to the extent of the value of such assets and further proceedings shall be taken against the assessee for making a wrong statement in the affidavits annexed thereto. All the assessees including Guru Prasad and Chattu Ram signed this agreement. Thus, the settlement clearly shows that in spite of the settlement, if some new facts come to light, then these facts have to be taken into consideration and the Income-tax Officer can take action accordingly. This will be evident from clauses 8 and 10 of the settlement at page 6 of the paper book.
28. Section 34(1B) of the 1922 Act clearly lays down that where any assessee to whom a notice has been issued under Clause (a) of Sub-section (1) or under Sub-section (1A) for any of the years ending on the 31st day of March of the years 1941 to 1948 inclusive applies to the Central Board of Revenue at any time within six months from the receipt of such notice or before the assessment or reassessment is made, whichever is earlier, to have the matters relating to the assessment settled, the Central Board of Revenue may, after considering the terms of settlement proposed and subject to the previous approval of the Central Government, accept the terms of such settlement, and, if it does so, shall make an order in accordance with the terms of such settlement specifying among other things the sum of money payable by the assessee.
29. Section 34(1D) of the 1922 Act lays down that any settlement arrived at under this section shall be conclusive as to the matters stated therein ; and no person, whose assessments have been so settled, shall be entitled to reopen in any proceeding for the recovery of any sum under this Act or in any subsequent assessment or reassessment proceeding relating to any tax chargeable under this Act or in any other proceeding whatsoever before any court or other authority any matter which forms part of such settlement.
30. As regards Taxation Case No. 17 of 1972, it cannot be doubted that annexure "C" in Taxation Case No. 44 of 1975 clearly mentions that it was agreed that out of Rs. 86,03,349, a sum of Rs. 25,64,742 representing the amount already assessed or disallowed in the course of the original assessment, the balance that remained to be taxed is Rs. 60,38,607. The settlement related to the assessment years 1940-41 to 1947-48.
31. Assessment was made in Taxation Case No. 17 of 1972 for the assessment year 1947-48 against the assessee in the status of an individual relating to the amount of Rs. 2,98,000. The assessee appealed before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner in annexure "B" in Taxation Case No. 17 of 1972 has pointed out that the amount of Rs. 25,64,472 included the amount of Rs. 4,69,000 relating to the amount of encashment of high denomination notes assessed to tax in the assessment year 1947-48 and this amount of Rs. 4,69,000 included Rs. 2,98,000 relating to high denomination notes encashed by the assessee, Guru Prasad. In view of this fact, the Appellate Assistant Commissioner held that the amount of Rs. 2,98,000 assessed in the assessment year 1947-48 was covered by the settlement, annexure "C", in Taxation Case No. 44 of 1975 and so, in view of Section 34(1D), the assessee was not entitled to assert that the amount should be assessed in the assessment year 1946-47 and not in the assessment year 1947-48.
32. Mr. K.N. Jain, on behalf of the assessee, relied on the case of Baladin Ram v. CIT [1969] 71 ITR 427 (SC), where it has been held while considering the income from undisclosed sources that it is now well settled that the only possible way in which the income from an undisclosed source can be assessed or reassessed is to make the assessment on the basis that the previous year for such an income would be the ordinary financial year under the 1922 Act. Their Lordships of the Supreme Court held that even under the provisions embodied in Section 68 of the 1961 Act, it is only when any amount is found credited in the books of the assessee for any previous year that the section will apply, and the amount so credited may be charged to tax as the income of that previous year, if the assessee offers no explanation or the explanation offered by him is not satisfactory and that if the undisclosed income was found to be from some unknown source or the amount represented some concealed income which is not credited in his books, the position would probably not be different from what was laid down when the 1922 Act was in force.
33. Mr. K.N. Jain, on behalf of the assessee, has submitted that as the assessment for the assessment year 1947-48 was completed on December 30, 1949, by which the amount of Rs. 2,98,000 was treated ultimately by the Tribunal as income from other sources on the basis of the encashment through high denomination notes, it should be assessed in the assessment year 1946-47 as the encashment was on January 19, 1946. Thus, the financial year for the amount of Rs. 2,98,000 will be the financial year 1945-46 and, on this basis, Mr. K.N. Jain submitted that the amount should have been assessed in the assessment year 1946-47 and not in the assessment year 1947-48.
34. On the other hand, Mr. B.P. Rajgarhia, for the Revenue, has submitted that the amount was covered by the settlement as will be evident from the order of the Appellate Assistant Commissioner, annexure "B", in Taxation Case No. 17 of 1972 and, according to the settlement, this amount was considered in the assessment year 1947-48, and so the assessee is now debarred from raising this plea.
35. The Income-tax Officer assessed the amount at Rs. 2,98,000 in the assessment year 1947-48 by the assessment order dated December 30, 1949. The Appellate Assistant Commissioner also held that this can be assessed only in the assessment year 1947-48 in view of the settlement. The Tribunal in I.T.A. No. 19095 of 1967-68 filed by the assessee also held that this amount of Rs. 2,98,000 was covered by the settlement under Section 34(1B) and so the assessee cannot take a plea that this should have been assessed in the assessment year 1946-47 in view of Section 34(1B) of the 1922 Act, and that the settlement order is final and conclusive for the assessee and so the plea of the assessee was rejected.
36. In view of the settlement, annexure "C", in Taxation Case No. 44 of 1975 and on the facts as mentioned by the Appellate Assistant Commissioner in annexure "B" in Taxation Case No. 17 of 1972, I hold that the Tribunal has rightly held that the amount of Rs. 2,98,000 was covered by the settlement and so the assessee is not entitled to assert now that the amount should have been assessed in the assessment year 1946-47 and not in the assessment year 1947-48. The assessee has taken this plea because if it is held that the amount is not assessable in the assessment year 1947-48, then the Department will not be able to assess the amount of Rs. 2,98,000 in the assessment year 1946-47, as it will be barred. I hold that in view of Section 34(1D) of the 1922 Act, the settlement is a bar for the assessee to raise the question that the amount of Rs. 2,98,000 should be assessed in the assessment year 1946-47. I, therefore, hold that the Tribunal was justified in holding that the sum of Rs. 2,98,000 encashed by the assessee from high denomination notes from the Imperial Bank, Gaya, on January 19, 1946, was assessable in the assessment year 1947-48. I, therefore, hold that the amount of Rs. 2,98,000 can be assessed in the assessment year 1947-48 in view of the bar under Section 34(1D) of the 1922 Act imposed on the assessee.
37. In view of my above discussions, I hold that the question referred in Taxation Case No. 17 of 1972 should be answered in the affirmative and in favour of the Revenue and against the assessee.
38. Now, I shall take up Taxation Case No. 44 of 1975. In this case, certain points arise for consideration. I have already pointed out above that the Income-tax Officer has made assessment for the assessment year 1947-48 against the assessee, Guru Prasad, in the status of an individual and in the original assessment dated December 30, 1949, no excess profits tax and business profits tax were deducted. It is not on the record as to on what date the excess profits tax and business profits tax were deducted from the total income of Rs. 3,13,759.
39. Mr, B. P. Rajgarhia, for the Revenue, has relied on annexure "B", the order of the Appellate Assistant Commissioner in Taxation Case No. 17 of 1972, which shows that this appeal was instituted on April 8, 1964, and the income assessed was shown as Rs. 3,13,759. On this basis, Mr. B. P. Rajgarhia, learned advocate for the Revenue, has submitted that till April 8, 1964, the excess profits tax and business profits tax had not been allowed. He has, therefore, submitted that if the excess profits tax and business profits tax were allowed after April 8, 1964, then the amount was not covered by the settlement and as the Income-tax Officer had allowed deduction of the excess profits tax and business profits tax after April 8, 1964, he withdrew the same by the rectification order, annexure "A", in Taxation Case No. 44 of 1975. The Income-tax Officer passed rectification order under Section 155(3) of the 1961 Act. This rectification order was passed in view of the fact that the Tribunal by order dated November 30, 1970, annexure "C" in Taxation Case No. 17 of 1972, disposed of ITA No. 19095 of 1967-68 along with BPTA No. 4 of 1967-68 and EPTA No. 11 of 1967-68, and while disposing of the assessee's appeal, the Tribunal held that the income of Rs. 2,98,000 was not the business income of the assessee and, on that basis, the Tribual in departmental appeals in BPTA No. 4 of 1967-68 and EPTA No. 11 of 1967-68 held that no excess profits tax or business profits tax can be charged on the income of Rs. 2,98,000 as it was income from other sources and not business income. The Tribunal, while passing order annexure "C" in Taxation Case No. 17 of 1972, considered the effect of the settlement and the Tribunal came to a finding that there is nothing in the settlement to indicate either in the terms of the settlement or in the settlement order that other consequential tax liability like excess profits tax or business profits tax can also be imposed on the basis of the settlement order. The Tribunal also held that if such consequential tax liabilities were also intended under the settlement order, there should have been clear indication of a reservation to that effect. The Tribunal also held that a careful perusal of the settlement order suggested that there was full and final settlement of all tax liability and the tax liability was confined to income-tax alone. On this basis, the Tribunal held that there was no scope for fastening the excess profits tax and business profits tax liability on the assessee. The Tribunal also held that when the settlement order fixes both the income and the tax payable thereon in full and final settlement and the matter has become final and conclusive under Section 34(1D) of the 1922 Act, the attempt to fasten the excess profits tax and business profits tax liabilities over and above than what has been settled under Section 34(1B) cannot be legally sustained and so the departmental appeals were dismissed. Thus, it is evident that the assessee in annexure "C" in Taxation Case No. 17 of 1972 claimed that no excess profits tax and business profits tax can be charged in view of the settlement and the Tribunal accepted the contention of the assessee and held that the settlement will not relate to the excess profits tax and business profits tax liability, although the Department asserted that this was covered by the settlement. Now, once the assessee had succeeded on that ground in BPTA No. 4 of 1967-68 and EPTA No. 11 of 1967-68, the assessee cannot now assert that excess profits tax and business profits tax liability allowed as deduction subsequent to the assessment cannot be withdrawn by the rectification order.
40. The first point which arises for consideration is whether the rectification is under Section 35(6) of the 1922 Act or it is a rectification under Section 155(3) of the 1961 Act. The Income-tax Officer has taken action for rectification under Section 155(3) of the 1961 Act.
41. On appeal against the order of rectification, the Appellate Assistant Commissioner held that the Income-tax Officer was not competent to pass a rectification order, as it was covered by the settlement under Section 34(1B) of the 1922 Act and so neither the Income-tax Officer nor the assessee could claim for disturbing the settlement and so the Appellate Assistant Commissioner cancelled the rectification order of the Income-tax Officer, as will be evident from annexure "B" in Taxation Case No. 44 of 1975.
42. When the matter went up in appeal before the Tribunal in ITA No. 992 (Pat) of 1972, the Tribunal took the view that as the assessment was made under the 1922 Act, the rectification should be under Section 35(6) of the 1922 Act and although the Income-tax Officer has made rectification under Section 155(3) of the 1961 Act, it should be deemed to be a rectification under Section 35(6) of the 1922 Act. The Tribunal has also taken the view that if rectification is taken under Section 35(6) of the 1922 Act, then no appeal can lie before the Appellate Assistant Commissioner and so the Appellate Assistant Commissioner should not have entertained the appeal. Let us now consider these two points first.
43. Section 155(3) of the 1961 Act lays down that where the excess profits tax or the business profits tax payable by an assessee has been modified in appeal, revision or any other proceeding, or where any excess profits tax has been assessed after the completion of the corresponding assessment for income-tax and in consequence thereof, it is necessary to amend the total income of the assessee chargeable to income-tax, the Income-tax Officer may make the necessary amendment and the provisions of Section 154 shall, so far as may be, apply thereto, the period of four years specified in Sub-section (7) of that section being reckoned from the date of the order making or modifying the assessment of such excess profits tax or business profits tax, as the case may be.
44. Section 35(6) of the 1922 Act lays down that where the excess profits tax or the business profits tax payable by an assessee has been modified in appeal, revision or any other proceeding, or where any excess profits tax or business profits tax has been assessed after the completion of the corresponding assessment for income-tax (whether before or after the commencement of the Indian Income-tax (Amendment) Act, 1953), and in consequence thereof, it is necessary to recompute the total income of the assessee chargeable to income-tax, such recomputation shall be deemed to be a rectification of a mistake apparent from the record within the meaning of this section and the provisions of Sub-section (1) shall apply accordingly, the period of four years referred to in that sub-section being computed from the date of the order making or modifying the assessment of such excess profits tax or business profits tax. Thus it appears that the provisions of Section 35(6) of the 1922 Act and Section 155(3) of the 1961Act are similar. The Tribunal has held that although the Income-tax Officer made rectification under Section 155(3)of the 1961 Act, it should be deemed to be a rectification under Section 35(6) of the 1922 Act. It has been held in the case of L. Hazari Mal Kuthiala v. ITO [1961] 41 ITR 12, by their Lordships of the Supreme Court that the exercise of a power would be referable to a jurisdiction which conferred validity upon it and not to a jurisdiction under which it would be nugatory; and the order of the Commissioner was not invalid merely because it was not made under the Patiala Act and that under Sub-section (5) of Section 5 of the 1922 Act, the Commissioner of Income-tax was required to consult the Minister-in-charge before taking action under that sub-section. The only substantial difference in the latter sub-section was that the Explanation which was added to Section 5(7A) of the Indian Income-tax Act as a result of the decision of the Supreme Court in Bidi Supply Co. v. Union of India [1956] 29 ITR 717, did not find place in the Patiala Act. Their Lordships also pointed out that the Commissioner, when he transferred the case, referred not to the Patiala Income-tax Act but to the Indian Income-tax Act and it is contended that if the Patiala Income-tax Act was in force for the purposes of reassessment, action should have been taken under that Act and not under the Indian Income-tax Act and, in this connection, it was observed that the exercise of powers will be referable to a jurisdiction which confers validity upon it and not to a jurisdiction under which it will be nugatory.
45. In the case of CIT v. Srikiskan Doss [1980] 125 ITR 730 (Delhi), it was held that the words "assessment or reassessment" in the first limb of section 35(5) of the 1922 Act are wide enough to include rectification and the Income-tax Officer is competent to rectify the assessment of a partner made under the 1922 Act by invoking the provisions of Section 35(5) to give effect to the consequences of an order of rectification passed under Section 154 of the 1961 Act in the case of the firm. It also appears from this decision that for the assessment year 1961-62, the original assessments of of the assessees, who were partners in a firm, were completed under Section 23(3) of the 1922 Act. Thereafter, the Income-tax Officer rectified a mistake in the firm's assessment for that year under Section 154 of the 1961 Act and as a result, the firm's income was enhanced. Pursuant to this, the Income-tax Officer issued notices under Section 155 of the 1961 Act, and passed orders rectifying the assessment of the partners. In those circumstances, the Delhi High Court held that though any rectification of the assessments of the assessees could be done only under the provisions of the 1922 Act, the Income-tax Officer had requisite authority to rectify the assessments under Section 35(5) of the 1922 Act and so the orders of rectification were not invalid merely because they were purportedly made under Section 155 of the 1961 Act and so the orders of rectification of the partners' assessments were in accordance with law. The Delhi High Court relied on the decision of the Supreme Court in the case of S. Sankappa v. ITO [1968] 68 ITR 760. The original assessments of the respondents in the case before the Supreme Court were completed under Section 23(3) of the 1922 Act on the basis of the returns processed under Section 297(2)(a) of the 1961 Act which requires the Income-tax Officer to complete the assessment of an assessee under the 1922 Act in cases where the return of income had been filed before the commencement of the 1961 Act and a question arose as to whether proceedings for rectification of an assessment would fall within the scope of this clause and the Supreme Court held that the words "proceedings for the assessment" used in the section had a very wide meaning and were comprehensive enough to include proceedings by way of revision or rectification of an assessment. Thus, in view of these decisions, it has to be held that if the original assessment was made under the 1922 Act, then rectification has to be made under 35(6) of the 1922 Act and although the Income-tax Officer treated the assessment as rectification under Section 155(3) of the 1961 Act, it has to be deemed that the Income-tax Officer made the rectification under Section 35(6) of the 1922 Act.
46. In the case of Kalawati Devi Harlalka v. C1T [1967] 66 ITR 680, which is a decision of their Lordships of the Supreme Court, assessments were made on February 7, 1961, on the appellant for the assessment years 1952-53 to 1960-61 under the 1922 Act and on January 24, 1963, after the repeal of that Act by the 1961 Act, the Commissioner issued a notice under Section 33B of the 1922 Act to revise those assessments and, in those circumstances, it was held that the Commissioner has jurisdiction to issue the notices under Section 33B of the 1922 Act, in view of Section 297(2) of the 1961 Act, and paragraph 4 of the Income-tax (Removal of Difficulties) Order, 1962. It was held by their Lordships of the Supreme Court that Section 297(2)(a) of the 1961 Act includes within its scope a proceeding under Section 33B of the 1922 Act. It was also held in this decision that the word "assessment" can bear a very comprehensive meaning and it can comprehend the whole procedure for ascertaining and imposing liability upon the taxpayer and there is nothing in the context of Section 297 of the 1961 Act which compels the court to give to the expression "procedure for the assessment " a narrower meaning and that the expression "proceedings for the assessment of that person" in Clause (a) of Section 297(2)(a) of the 1961 Act has a very comprehensive meaning and that Section 297 is meant to provide as far as possible for all contingencies which may arise out of the repeal of the 1922 Act and Section 6 of the General Clauses Act, 1897, would not apply because Section 297(2) of the 1961 Act evidences an intention to the contrary.
47. In the case of S. Sankappa v. ITO [1968] 68 ITR 760 (SC), which is a decision of the Supreme Court, some of the six appellants were partners in Firm A, some in Firm B and some in both the firms, and for the assessment years 1958-59, 1959-60 and 1960-61, the Income-tax Officer refused registration of the firms under Section 26A of the 1922 Act, treated them as unregistered, and made the assessments of the appellants (who were the partners) accordingly. The Appellate Assistant Commissioner allowed the appeals of the firms and, pursuant to his orders, the Income-tax Officer passed consolidated orders on December 20, 1966, revising the assessments of the firms for the three years on the basis that they were registered firms, recalculated the tax and allowed refund of the excess to the firms and also apportioned the income of the firms among the six appellants. On January 19, 1967, the Income-tax Officer issued notices under Section 155 of the 1961 Act to rectify the individual assessments of the six appellants. Thereupon, the appellants challenged the validity of these notices in writ petitions preferred to the Mysore High Court. It was contended before the High Court on behalf of the Income-tax Officer that the rectification proceedings could not be taken under Section 155 of the 1961 Act, because they related to assessment years when the 1922 Act was applicable so that the proceedings could be taken only under Section 35(5) of the 1922 Act, in view of the provisions of Section 297(2)(a) of the 1961 Act. It was then contended on behalf of the appellants, (i) that the proceedings for rectification under Section 35(5) of the 1922 Act were not "proceedings for assessment" within the meaning of Section 297(2)(a) of the 1961 Act and, therefore, the 1922 Act could not be resorted to; (ii) that the provisions of Section 35(5) of the 1922 Act were not attracted because there was no assessment or reassessment of the firms when the Income-tax Officer rectified the assessments of the firms under Section 35(1); and (iii) that before Section 35(5) could be applied, it should be found that the share of the partners included in their assessments was not correct. The High Court dismissed the writ petition and, in those circumstances, their Lordships of the Supreme Court held that the proceedings taken for rectification of the assessment to tax either under Section 35(1) or under Section 35(5) of the 1922 Act were proceedings for assessment and that the orders passed by the Income-tax Officer under Section 35(1) rectifying the firms' assessments were all orders altering assessment orders made in the proceedings for assessment of the firms, and under the notices, the Income-tax Officer was proposing to rectify the orders made for the computation of income and imposition of tax under the charging section in the case of individual partners and that Section 297(2)(a) of the 1961 Act, therefore, applied, and permitted the Income-tax Officer to proceed in accordance with the provisions of the 1922 Act and action could be taken under Section 35(5) of the 1922 Act on the basis of the rectification made in the assessments of the firms under Section 35(1) of the 1922 Act. Their Lordships of the Supreme Court also held that the orders passed by the Income-tax Officer on December 20, 1966, whereby he redetermined the tax payable by the firms, directed refund and apportioned the income of the firms between the various partners, were clearly orders in the proceedings for assessment and it was in order to give effect to these orders in the individual assessments of the partners that the notices were issued and the provisions of Section 35(5) were, therefore, attracted. It has also been held in this decision that when the assessments of the firms as unregistered firms were set aside, the individual partners ceased to be entitled to the benefit of Section 14(2)(a) and Section 16(1)(a) also became inapplicable and that what was required to be done was to add the income of each partner in his individual assessment and then impose tax on it in accordance with Section 23(5)(a)(ii) of the 1922 Act, and that this was a clear case where the inclusion of the share of the income of the partner in his individual assessment was not correct within the meaning of Section 35(5) of the 1922 Act. It has also been held in this decision that in the proceedings under the provisions of Section 35(1) or Section 35(5), what the Income-tax Officer does is to correct the errors in, or rectify, orders of assessment made by him, and orders making such corrections or rectification are, therefore, clearly part of the proceedings for assessment.
48. On the basis of the decisions in Kalawati Devi Harlalka's case [1967] 66 ITR 680 (SC) and in Sankappa's case [1968] 68 ITR 760 (SC), Mr. K.N. Jain has submitted that the order of rectification under section 35 of the 1922 Act is an order of assessment as by an order of rectification, the Income-tax Officer issued revised demand notice and challan and so the rectification order should be treated as an assessment and once it is held that the rectification order is an assessment, then an appeal lies to the Appellate Assistant Commissioner. Mr. K.N. Jain for the assessee also submitted that the Income-tax Officer was justified in rectifying the assessment order under Section 155(3) of the 1961 Act and not under Section 35(6) of the 1922 Act. He relied on the case of Imperial Chemical Industries Ltd, v. CIT [1979] 116 ITR 516, which is a decision of the Calcutta High Court. In this decision, it has been held that the expression "may" must normally be construed as an enabling provision unless the expression is coupled with certain duty to the donee of the power when it becomes obligatory for him to exercise the enabling power. In those circumstances, the expression "may" is construed to mean "must". The Calcutta High Court took the view that Parliament has deliberately used the expression "may" only in some sub-clauses of Section 297(2) of the 1961 Act and due significance and weight must be given to the choice of language by Parliament, and that in Clause (a) of Section 297(2) of the 1961 Act, though a power has been given to the Income-tax Officer to proceed under the provisions of the 1922 Act, there is no duty, as such, cast upon him in the sense that he must proceed only under the old Act and not under the new Act, if the situation in a particular case so warrants. It has also been held in this decision that there is no compelling obligation on the revenue authorities to proceed only under the old Act in case a return is filed under the old Act, and so the expression "may" in Section 297(2)(a) of the 1961 Act must be construed only as an enabling provision and it entitles the Income-tax Officer to resort to the 1922 Act, but where he chooses to proceed under the 1961 Act, his action is not illegal. It has also been held in this decision that where a return of income for the assessment year 1961-62 is filed before April 1, 1962, and the assessment is made under the 1961 Act, the rectification of the assessment under Section 154 of the 1961 Act is legal and it need not be treated as an action under Section 35 of the 1922 Act to confer validity and an appeal from such an order of rectification is competent. In this decision, reference was made to the decisions in Kalawati Devi Harlalka's case [1967] 66 ITR 680 (SC) and in Sankappa's case [1968] 68 ITR 760 (SC) and it was held that this point did not arise for consideration in those decisions. I find that this decision of the Calcutta High Court has not been approved by any other High Court.
49. I find that Section 297(2)(a) of the 1961 Act lays down that where a return of income has been filed before the commencement of this Act, by any person for any assessment year, proceedings for the assessment of that person for that year may be taken and continued as if this Act had not been passed. Section 297(2)(b) of the 1961 Act lays down that where a return of income is filed after the commencement of this Act otherwise than in pursuance of a notice under Section 34 of the repealed Act by any person for the assessment year ending on March 31, 1962, or any earlier year, the assessment of that person for that year shall be made in accordance with the procedure specified in this Act. On the basis of the use of the words "may" in Clause (a) and "shall" in Clause (b), the Calcutta High Court has made a distinction. On this basis, Mr. K.N. Jain has submitted that as rectification is a procedure of assessment, it has to be held that even on rectification under Section 35(6) of the 1922 Act, an appeal will lie before the Appellate Assistant Commissioner as it will amount to a proceeding in the assessment. However, he has conceded before us that if the rectification under Section 35 is a rectification simpliciter, no appeal will lie. But, in the present case, when the Income-tax Officer after making rectification issued a revised demand notice and challan, then it should be held that it is an assessment and so an appeal will lie to the Appellate Assistant Commissioner. It cannot be doubted that under Section 246(f) of the 1961 Act, an appeal lies from an order under Section 154 or Section 155 of the 1961 Act having the effect of enhancing the assessment or reducing a refund or an order refusing to allow the claim made by the assessee under either of these sections. However, it cannot be doubted that no appeal lies under Section 30 of the 1922 Act for rectification under Section 35 of the 1922 Act. It is due to this difficulty that Air. K. N. Jain argued that an appeal lies under Section 35 of the 1922 Act as it affects the assessment.
50. I find from the decision of Imperial Chemical Industries Ltd. v. CIT [1979] 116 ITR 516, that in the case before the Calcutta High Court, the assessment had been made under Section 143(3) of the 1961 Act, although it should have been made under Section 23 of the 1922 Act. However, before the Calcutta High Court, the point for consideration was whether rectification under Section 154 of the 1961 Act could be made by the Income-tax Officer for the assessment year 1961-62, for which return was filed in January, 1962, or whether rectification could be made under Section 35 of the 1922 Act, and in that connection distinction was made between the words "may" and "shall" in Clauses (a) and (b) of Section 297(2) of the 1961 Act.
51. In view of the Supreme Court decision, it cannot be doubted that rectification proceeding is a proceeding for assessment. It also cannot be doubted that if rectification is made under Section 35 of the 1922 Act, then no appeal lies to the Appellate Assistant Commissioner.
52. Mr. B.P. Rajgarhia has submitted that in [1979] 116 ITR 516 (Cal), the assessment had been made under Section 143(3) and rectification was made under Section 154 of the 1961 Act and so that decision will not be applicable in this case. He has also submitted that the assessment in the present case had been completed under the 1922 Act on December 30, 1949. In such circumstances, rectification has to be made under Section 35(6) of the 1922 Act and so there can be no right of appeal against the order of rectification under Section 35(6). He has also submitted that even the obiter dicta of the Supreme Court in Sankappa's case [1968] 68 ITR 760 (SC), is binding on the High Courts. It has been held in the case of M. Chockalingam and M. Meyyappan v. CIT [1963] 48 ITR (SC) 34, by their Lordships of the Supreme Court that addition of penal interest under Section 18A of the 1922 Act is enhancement of the assessment within the meaning of the proviso to Section 35(1) of the 1922 Act, and that the word " assessment " is used in the proviso not as an equivalent of the tax calculated at the rate specified in the Finance Act, but the total amount which the assessee is required to pay and that the proviso applies whenever the effect of the order of rectification is to touch the pocket of the assessee and that if the Income-tax Officer proceeds under Section 35 to rectify an assessment in which no penal interest for failure to pay advance tax was added and orders the levy of penal interest without sending any notice to the assessee, there will be a clear breach of principles of natural justice and the court will issue a writ of certiorari to quash the order made and that the authorities acting under the Income-tax Act, have to act judicially and one of the requirements of judicial action is to give a fair hearing to a person before deciding against him. Thus, in this case also, it has been held that the rectification proceeding under Section 35 is also an assessment. On this basis also, Mr. K. N. Jain has submitted that when rectification is an order of assessment, appeal will lie under Section 30 of the 1922 Act, even if it is held that it is rectification under Section 35 of the 1922 Act.
53. It cannot be doubted that in view of various decisions of the Supreme Court, it has to be held that the proceeding for rectification under Section 35 of the 1922 Act is also a proceeding for assessment within the meaning of Section 297(2)(a) of the 1961 Act. I have already pointed out in paragraph 43 that their Lordships of the Supreme Court in Kalawati Devi Harlalka's case [1967] 66 ITR 680, were considering whether a rectification proceeding is also covered by Section 297(2)(a) of the 1961 Act and taking various provisions of Section 297(2) into consideration, their Lordships held that Section 297 is meant to provide as far as possible for all contingencies which may arise out of the repeal of the 1922 Act and Section 6 of the General Clauses Act, 1897, would not apply because Section 297(2) of the 1961 Act evidences an intention to the contrary. This observation of their Lordships of the Supreme Court clearly shows that all the contingencies are covered under Section 297(2) of the 1961 Act. In [1968] 68 ITR 760, again their Lordships of the Supreme Court held that rectification under Section 35(5) of the 1922 Act was covered by Section 297(2)(a) of the 1961 Act. Thus, in view of the Supreme Court decisions, it has to be held that in a case covered by Section 297(2)(a) rectification has to be made under Section 35(6) of the 1922 Act. In view of the Supreme Court decisions and in view of the decisions of the various High Courts, it has also to be held that the rectification order should be deemed to be an order under Section 35(6) of the 1922 Act, although the Income-tax Officer has passed orders of rectification under Section 155(3) of the 1961 Act.
54. Mr. B.P. Rajgarhia, for the Revenue, has relied on the case of CIT v. Arunachalam Chettiar [1953] 23 ITR 180 (SC), where the assessee who was assessed to tax on certain foreign income on accrual and remittance basis appealed to the Appellate Tribunal against the disallowance of certain expenses by the income-tax authorities. The Tribunal allowed two items of expenses and partly allowed the appeal on August 20, 1943. When the matter came before the Income-tax Officer, he made a recomputation and included a certain sum as unassessed foreign income of the earlier years remitted to India during the year of account. The assessee appealed to the Appellate Assistant Commissioner against this inclusion but the Appellate Assistant Commissioner declined to admit the appeal on the ground that the assessee had no right of appeal under Section 30 because there had been no assessment under Section 23 and no notice of demand had been served on him under Section 29. The assessee then brought a miscellaneous application to the Appellate Tribunal which held that the finding of the Income-tax Officer that the sum was to be assessed as untaxed profits of earlier years remitted to India in the accounting year did not arise in the course of giving effect to the Tribunal's order and by its order dated February 20, 1946, cancelled that finding and directed the Officer to revise the computation and then a reference was made under Section 66(1) and a reference was also called for under Section 66(2) of the 1922 Act. The High Court held that both the references were incompetent and refused to answer the question referred which was upheld by their Lordships of the Supreme Court. This decision is not applicable to the facts of the case before us.
55. The Madras High Court in the case of CIT v. Vellingiri Gounder and Brothers [1953] 24 ITR 166, held on the basis of the decision in [1953] 23 ITR 180, that no appeal lay to the Appellate Assistant Commissioner against the order of the Income-tax Officer under Section 35 of the Income-tax Act and, therefore, no appeal lay to the Appellate Tribunal against the order of the Appellate Assistant Commissioner and so the order of the Appellate Tribunal was not an order under Section 33(4) of the 1922 Act and so the reference under Section 66(1) was incompetent. In this case, a rectification had been made under Section 35 of the 1922 Act.
56. Mr. B.P. Rajgarhia, for the Revenue, has relied on the case of Mandal Ginning and Pressing Co. Ltd. v. CIT [1973] 90 ITR 332 (Guj), where it has been held by the Gujarat High Court that it is a well settled rule of interpretation of statutes that, in order to arrive at the true meaning of a sentence or clause, it is not proper to interpret each word in the sentence or clause separately as if it stood alone and then to construe the sentence or clause by the separate meaning of each such word and that the sentence or clause should be looked at as a whole and a proper meaning should be arrived at. It has been further held in this decision that when an order of rectification is passed under Section 35(1), it undoubtedly rectifies the assessment under Section 23 and is a part of the procedure for ascertainment and imposition of tax liability, but the enhanced tax liability which results owes its validity to the exercise of powers under Section 35(1) and not to the exercise of power under Section 23 of the 1922 Act and that there is no mandate that when the Income-tax Officer rectifies an assessment under Section 35( 1), he must follow the procedure laid down in sections 22 and 23 as laid down in Section 34, nor is there any fiction created by the statute that when an assessment is rectified in exercise of the power conferred under Section 35(1), the rectified assessment shall be deemed to be an assessment under Section 23 or shall be treated as an assessment under Section 23. It has also been held in this decision that when Section 30(1) of the 1922 Act uses the words "any assessee...denying his liability to be assessed under this Act", the word "assessed" is used in a comprehensive sense to mean subjected to the whole procedure for ascertaining and imposing liability on the taxpayer and that there is nothing in Section 30(i) to indicate that a narrow meaning should be given to the word "assessed". On the contrary, it has also been held in this decision that the words" under this Act "clearly show that the reference here is to the whole procedure laid down in the Act for imposing liability on the taxpayer and that the denial of the liability to be assessed may be in respect of the whole income or any part of the income and that it may be based on any ground, whether of fact or law and it may be total denial of liability or denial of liability under the particular circumstances. It has also been held in this decision that the denial must be of the liability to be assessed under the Act and not merely under any particular provision of the Act. It has also been held that when an assessee claims that he is not liable to be proceeded against under Section 35(1). he is not denying his liability to be assessed under the Act and that his objection is only against a proceeding for assessment under the particular provision of the Act. It has also been held that a right of appeal is given under Section 30(1) against the various orders and each of the orders against which a right of appeal is conferred is described by reference to the source of power under which it is made and that an appeal lies from an assessment made under Section 23 of the 1922 Act, but the assessee has no right of appeal under Section 30(1) against an order of rectification made under Section 35(1) of the 1922 Act.
57. It has again been held by the Gujarat High Court relying on the Supreme Court decision in Sankappa v. 1TO [1968] 68 ITR 760 in the case of Minocha, ITO v. Income-tax Appellate Tribunal [1977] 106 ITR 691, that the proceedings taken for rectification under Section 35 of the 1922 Act were proceedings for assessment and Section 297(2)(a) of the 1961 Act, therefore, applied and permitted the Income-tax Officer to proceed in accordance with the provisions of the 1922 Act, It has also been held that so long as the return of income was filed before the commencement of the 1961 Act, proceedings for assessment of the assessee had to be taken and continued as if the 1961 Act had not been passed and that there is no right of appeal under Section 30(1) of the 1922 Act against an order of rectification made under Section 35(1) of the 1922 Act and, therefore, it was rightly held by the Tribunal by its first order that the appeal to the Appellate Assistant Commissioner was not competent.
58. It has again been held by the Bombay High Court in the case of CIT v. Jagdish Prasad Ramnath [1955] 27 ITR 192, that an order by the Appellate Assistant Commissioner holding that an appeal from an order of the Income-tax Officer imposing penal interest was incompetent is an order made under Section 31 of the 1922 Act and an appeal lies therefrom to the Appellate Tribunal. Similar view has been expressed by the Madras High Court in the case of CWT v. Vanavarayar [1980] 122 ITR 184.
59. Reliance was also placed by Mr. K. N. Jain, for the assessee, on the case of Commissioner of Commercial Taxes v. North Ramgarh Coal Company Private Ltd. [1974] 33 STC 469 (Pat), :where it was held that the power of review conferred on the Deputy Commissioner under Section 32 of the Bihar Sales Tax Act, 1959, is distinct from the appellate power conferred on him under Section 30 of the Act, and that if a review is allowed and any order passed in appeal is changed, then a revision would be competent before the Tribunal not from the order of review but from the fresh and substituted order passed in appeal and that when a review is dismissed, then the order rejecting the review remains an order, pure and simple, passed under Section 32 of the Act and by construction, it is not possible to treat such an order as an order passed, in effect and substance, under Section 30 of the Act, and, consequently, no revision lies to the Tribunal under Section 31 read with Section 34A of the Act from an order of the Deputy Commissioner under Section 32 of the Act refusing to review an appellate order passed by him under Section 30 of the Act. This is a case under the Bihar Sales Tax Act and this decision will not be helpful for deciding the points in dispute before us, as there are direct decisions under the 1922 Act which should be followed.
60. I find that in the Calcutta decision in Imperial Chemical Industries Ltd's case [1979] 116 ITR 516, the assessment order was passed under the 1961 Act and so it was held that the rectification order was passed under Section 154 was appealable. In the present case, admittedly, the assessment order was passed on December 30, 1949, and so the assessment order had been passed under the 1922 Act. Under such circumstances, the rectification order cannot be passed under Section 155(3) of the 1961 Act.
61. I find that excepting the Calcutta High Court, the other High Courts have held that when an assessment is made under the 1922 Act, then rectification can be made only under Section 35 of the 1922 Act and no appeal will lie against rectification under Section 35 of the 1922 Act. Under such circumstances, I hold that even if the Income-tax Officer passed the rectification order, vide annexure "A", under Section 155(3) of the 1961 Act, it has to be treated as a rectification under Section 35 of the 1922 Act and so it has to be held that no appeal can lie to the Appellate Assistant Commissioner against the order under Section 35 of the 1922 Act and so the appeal before the Appellate Assistant Commissioner was incompetent.
62. I also hold, in view of my discussions in paragraph 55 (see p. 303 supra) that an appeal could lie to the Tribunal against the order of the Appellate Assistant Commissioner who had disposed of the appeal on merits after taking into consideration the settlement order and so it was an order under Section 30 of the Act and so the Tribunal was competent to entertain the appeal.
63. The next question which arises for consideration in this case is whether, in view of the settlement order, the Income-tax Officer was justified in rectifying the assessment order by withdrawing the excess profits tax and business profits tax which had been allowed treating the amount of Rs. 2,98,000 as secreted business profits. I have already pointed out above that there are no materials before us to show as to on what date the excess profits tax and business profits tax were allowed. I have also pointed out above that the assessment order, annexure "A", in Taxation Case No. 17 of 1972 clearly shows that when the original assessment order was passed on December 30, 1949, the excess profits tax and business profits tax were not allowed as a deduction. I have also pointed out above that annexure "B" in Taxation Case No. 17 of 1972 shows that when the appeal was filed on April 8, 1964, the income assessed was shown as Rs. 3,13,759 and the tax demand was Rs. 94,049-11-0. Under such circumstances, the onus was on the assessee to show as to on what date the excess profits tax and business profits tax were allowed as deductions.
64. Mr. B.P. Rajgarhia has submitted on behalf of the Revenue that the excess profits tax and business profits tax had not been allowed till April 8, 1964. I have already pointed out above that annexure "C" in Taxation Case No. 44 of 1975 shows that the settlement order was passed on August 20, 1960, but if the excess profits tax and business profits tax were allowed after August 20, 1960, then the case will not be governed by the settlement and the Income-tax Officer will be justified in rectifying the assessment order by withdrawing the excess profits tax and business profits tax which had been allowed as a deduction as rectification order has been passed in December, 1971. However, Mr. K.N. Jain, for the assessee, has submitted that the excess profits tax and business profits tax payable was allowed as a deduction some time after December 30, 1949, when the original assessment order was passed and before August 20, 1960, when the settlement order was passed. On this basis, he has submitted that as the settlement was made under Section 34(1B) of the 1922 Act, the settlement is conclusive as to the matters stated therein under Section 34(1D) of the 1922 Act. However, Section 34(1D) of the 1922 Act lays down that any settlement arrived at shall be conclusive as to the matters stated therein ; and no person, whose assessments have been so settled, shall be entitled to reopen in any proceeding for the recovery of any sum under this Act or in any subsequent assessment or reassessment proceeding relating to any tax chargeable under this Act or any other proceeding whatsoever before any court or other authority or any matter which forms part of such settlement. This gives an impression that an assessee, whose assessments have been so settled, is not entitled to reopen the matter which goes to show that the bar under Section 34(1D) of the 1922 Act is against the assessee. This is also evident from annexure "C" in Taxation Case No. 44 of 1975, the settlement order dated August 20, 1960, which clearly lays down in Clause 8 that if any concealed income comes to light in future, the Income-tax Department shall be free to tax the same and take such other action as may be necessary in accordance with law. Clause 10 of the settlement order also shows that if any asset not mentioned in the affidavits of assets annexed hereto comes to light in future, the sum of money payable shall be enhanced to the extent of the value of such assets and further proceedings shall be taken against the assessee for making a wrong statement in the affidavit or affidavits. This clearly goes to show that the settlement had left open the facts which subsequently came to light.
65. I have already pointed out that by annexure "C" in Taxation Case No. 17 of 1972, the Tribunal disposed of BPTA No. 4 of 1967-68 and EPTA No. 11 of 1967-68, by order dated November 30, 1970, along with ITA No. 19095 of 1967-68. The Tribunal in ITA No. 19095 of 1967-68 for the first time held that the amount of Rs. 2,98,000 was not business income but it was income from other sources and on this basis, the Tribunal held that the excess profits tax and business profits tax also cannot be payable on the amount of Rs. 2,98,000. The Tribunal passed a consolidated order on November 30, 1970. The Department contended before the Tribunal that the excess profits tax and business profits tax liability is covered by the settlement order passed under Section 34(1B) of the 1922 Act and that the income and the tax payable thereon are both quantified under the settlement orders. On the other hand, the assessee contended that the tax liability is limited to the income-tax alone and that there is nothing to indicate either in the terms of settlement or in the settlement order that other consequential tax liability like excess profits tax and business profits tax can also be imposed on the basis of the settlement order. The Tribunal took the view that if such consequential tax liabilities were also intended under the settlement order, there should have been a clear indication or reservation to that effect. The Tribunal also held that a careful perusal of the settlement order suggests that there was full and final settlement of all tax liabilities and the tax liability was confined to the income-tax alone. The Tribunal, therefore, held that there was no scope for fastening the excess profits tax liability or business profits tax liability on the assessee and that when the settlement order fixes both the income and the tax payable thereon in full and final settlement and the matter has become final and conclusive under Section 34(1D) of the 1922 Act, the attempt to fasten the excess profits tax and business profits tax liability over and above what has been settled under Section 34(1B) of the 1922 Act cannot be legally sustained and so BPTA No. 4 of 1967-68 and EPTA No. 11 of 1968 filed by the Department were dismissed. In view of these decisions of the Tribunal in annexure "C" in Taxation Case No. 17 of 1972, now the assessee cannot argue having succeeded in the departmental appeals to say that the Income-tax Officer was not justified in rectifying the assessment order by withdrawing the excess profits tax and business profits tax allowed as a deduction previously.
66. The Tribunal also took the view in annexure "D" in Taxation Case No. 44 of 1975 in ITA No. 992 (Pat) of 1972-73 that the order of assessment passed on December 30, 1949, had not been the result of any settlement between the Department and the assessee and that when as a result of the order of the Tribunal, the excess profits tax and business profits tax liability was modified and there was no liability for those taxes, the original order deducting these liabilities was rectifiable under Section 35(6) of the 1922 Act. The Tribunal also held that it cannot be held that Rs. 2,98,000 was assessed in 1947-48 as a part of settlement and merely because it was made a part of the total disclosure of Rs. 86,03,349 by a group of assessees, it cannot be held that a mistake iu the order for the assessment year 1947-48 could not be rectified. The Tribunal also took the view that Section 34(1D) of the 1922 Act merely provides that any settlement under that section shall be conclusive as to the matters stated therein and the assessee cannot reopen any matter which forms part of the settlement and that it does not preclude the Income-tax Officer from rectifying an order particularly when it was not subject to a settlement. The Tribunal also took the view that on equity also, the assessee cannot be allowed a deduction in respect of the liability which is non-existent now.
67. Mr. K.N. Jain, for the assessee, has submitted that Section 34(1D) of the 1922 Act is a bar to considering the matters covered by the settlement and so the Income-tax Officer was not justified in rectifying the assessment order under Section 35(6) of the 1922 Act. On the other hand, Mr. B. P. Rajgarhia, for the Revenue, has submitted that the original assessment order did not grant a relief relating to the excess profits tax and business profits tax and that in the settlement order there was no mention about the excess profits tax and business profits tax liability and that the settlement related to the income and the income-tax payable on it. Mr. B. P. Rajgarhia has also submitted that there can be no estoppel against the law. He has submitted that the Tribunal in annexure " C " of Taxation Case No. 17 of 1972 was conscious of the settlement order and in spite of that the Tribunal held that as the amount of Rs. 2,98,000 is not business income but income from other sources, there can be no excess profits tax and business profits tax liability on this amount and it was only on this ground that the departmental appeals were dismissed. Once it is held that the amount of Rs. 2,98,000 is not business income but income from other sources, then it is natural that no excess profits tax and business profits tax will be payable. It is a subsequent development when the final order was passed by the Tribunal by annexure "C" dated November 30, 1970, in Taxation Case No. 17 of 1972.
68. If a matter is decided subsequent to the settlement on a question of law, then there can be no estoppel against the law and so even if there was a settlement order and even if it is held that the amount of Rs. 2,98,000 was covered by the settlement order, even then the settlement will not affect any legal aspect of the matter. It is a settled principle of law that there can be no estoppel or acquiescence against an Act of the Legislature and there can be no estoppel against a statute.
69. Mr. B.P. Rajgarhia has relied on the case of K. Ramdas Shenoy v. Chief Officers, Town Municipal Council, AIR 1974 SC 2177, where it has been held that the court declines to interfere for assistance of persons who seek its aid to relieve them against express statutory provisions.
70. In the present case, it cannot be doubted that when originally the income of Rs. 2,98,000 was treated as business income of the assessee, the Income-tax Officer allowed the excess profits tax and business profits tax liability as a deduction but when subsequently on November 30, 1970, the Tribunal held that the amount of Rs. 2,98,000 was not business income of the assessee but income from other sources and so the excess profits tax and business profits tax cannot be fastened against the assessee, then no liability existed in law under the Business Profits Tax Act, 1947, and the Excess Profits Tax Act, 1940, and so nothing remained to be allowed as a deduction. When no legal liability was there against the assessee, there could be no allowance of excess profits tax and business profits tax in the assessment of the assessee and so the Income-tax Officer was bound to withdraw a liability which did not exist in law and so rectification was justified.
71. It cannot be doubted that the Tribunal disposed of the appeal on merits also and so it has to be held that an appeal lay before the Tribunal as the Appellate Assistant Commissioner had disposed of the appeal on merits.
72. In view of my discussions above, I hold in Taxation Case No. 44 of 1975, that the Tribunal was correct upholding that no competent appeal lay before the Appellate Assistant Commissioner against the order of rectification of the Income-tax Officer as the rectification would have been deemed to be made under Section 35(6) of the 1922 Act, although the Income-tax Officer purported to make the rectification under Section 155(3) of the 1961 Act. I also hold that although the Tribunal held that no competent appeal lay before the Appellate Assistant Commissioner, the Tribunal was correct in entertaining the departmental appeal and in setting aside the order of the Appellate Assistant Commissioner. I also hold that the Tribunal was also justified in holding that Section 34(1D) of the 1922 Act was not a bar to the Revenue in rectifying the assessment order for the assessment year 1947-48 in the manner done by the Income-tax Officer. I may also point out that the rectification order has to be deemed to have been passed under Section 35(6) of the 1922 Act. The Tribunal was also justified in treating the reference as one under Section 66(1) of the 1922 Act. I, therefore, hold that this reference is under Section 66(1) of the 1922 Act.
73. Now, I shall take up Taxation Case No. 16 of 1972. In this case, the Income-tax Officer assessed the income of Rs. 1,27,000 as secreted profits of business along with other incomes and by his assessment order dated June 14, 1949, assessed the total income at Rs. 1,68,987 for the assessment year 1947-48, in the name of the assessee as individual, under Section 23(3) of the 1922 Act, vide assessment order dated June 14, 1949, This assessment order has been annexed and marked as annexure "A" forming part of the statement of the case.
74. On appeal before the Appellate Assistant Commissioner, it was asserted that the amount of Rs. 1,27,000 relating to the amount encashed relating to the high denomination notes should have been assessed in the assessment year l946-47and not in the assessment year 1947-48. The Appellate Assistant Commissioner held that the amount of Rs. 1,27,000 was the subject-matter of the settlement under Section 34(1B) of the 1922 Act and so the assessee cannot now raise the plea in view of Section 34(1D) of the 1922 Act that the amount should be assessed in the assessment year 1946-47.
75. The next point which was argued before the Appellate Assistant Commissioner was that the amount of Rs. 1,27,000 should not be assessed as business income but it should be assessed as income from other sources. The Appellate Assistant Commissioner held that in view of Section 34(1D), it has to be treated as business income of the assessee. The Appellate Assistant Commissioner, therefore, dismissed the appeal. The order of the Appellate Assistant Commissioner has been annexed and marked as annexure "B" forming part of the statement of the case.
76. The assessee appealed before the Tribunal and the Tribunal disposed of ITA No. 19095 of 1967-68, along with the departmental appeals being BPTA No. 3 of 1967-68 (CAP ended December 31, 1946) and EPTA No. 14 of 1967-68 (CAP ended March 31, 1946) by a consolidated order dated November 30, 1970. The assessee encashed high denomination notes of Rs. 1,27,000 in the financial year 1945-46 and so it was submitted before the Tribunal that the sum of Rs. 1,27,000 cannot be assessed as business income of the assessee and the amount is not assessable in the assessment year 1947-48 but it can be assessed only in the assessment year 1946-47. The Tribunal held that the income has to be assessed as income from other sources and not as business income and the Tribunal also held that the income which was assessed, was rightly assessed in the assessment year 1947-48. As regards the departmental appeal relating to BPTA No. 3 of 1967-68 and EPTA No. 14 of 1967-68, the Tribunal for the reasons mentioned in BPTA No. 4 of 1967-68 and EPTA No. 11 of 1967-68 held that there was no liability for the business profits tax and excess profits tax and dismissed the two departmental appeals. On these facts, the Tribunal has referred the following question of law for the opinion of this court "Whether, on the facts and in the circumstances of the case, the sum of Rs. 1,27,000 can be assessed in the assessment year 1947-48 ?"
77. A similar question has been referred for our opinion in Taxation Case No. 17 of 1972 and for detailed reasons mentioned in Taxation Case No. 17 of 1972, I hold that the sum of Rs. 1,27,000 can be assessed in the assessment year 1947-48. The question is, therefore, answered in the affirmative and against the assessee and in favour of the Revenue.
78. Now, I shall take up Taxation Cases Nos. 39 to 41 of 1976. In these cases, the Income-tax Officer passed rectification orders under Section 155(3) of the 1961 Act relating to the assessment years 1940-41, 1941-42 and 1942-43 by withdrawing the excess profits tax payable which was allowed as a deduction. The three rectification orders of the Income-tax Officer have been annexed and marked as annexures "A, A-1 and A-2" forming part of the statement of the case.
79. Three separate appeals were filed before the Appellate Assistant Commissioner relating to the assessment years 1940-41, 1941-42 and 1942-43. The Appellate Assistant Commissioner held that the matter was covered by a settlement under Section 34(1B) of the 1922 Act and so the Income-tax Officer could not make any rectification in view of Section 34(1D) of the 1922 Act. He, therefore, cancelled the rectification orders of the Income-tax Officer. The orders of the Appellate Assistant Commissioner for the assessment years 1940-41, 1941-42 and 1942-43 have been annexed and marked as annexures "B, B-1 and B-2" forming part of the statement of the case.
80. The assessee appealed before the Tribunal and the Tribunal disposed of the three appeals, namely, Income-tax Appeal Nos. 996, 997 and 998 (Pat) of 1972-73 by a consolidated order which has been annexed and marked as annexure "C" forming part of the statement of the case. The Tribunal following the decision in Income-tax Appeal No, 992 (Pat) of 1972, held that the orders of the Income-tax Officer were in effect under Section 35(6) of the 1922 Act and, therefore, although the Income-tax Officer passed rectification orders under Section 155(3) of the 1961 Act, relating to the assessment years 1940-41 to 1942-43, they were in effect orders under Section 35(6) of the 1922 Act and they were, therefore, not appealable before the Appellate Assistant Commissioner. The Tribunal further held that the assessment originally made had not been modified by the settlement and so the rectification orders were correctly passed. The Tribunal further observed that in equity also the assessee had no case as liability of excess profits tax had become non-existent. Thus, following the order in Income-tax Appeal No. 992 (Pat) of 1972, the Tribunal upheld the contention of the Department about the incompetence of the appeal before the Appellate Assistant Commissioner and also regarding the correctness of the order of the Income-tax Officer. The Tribunal, therefore, set aside the order of the Appellate Assistant Commissioner and allowed the departmental appeal.
81. In the reference application which is annexed and marked as annexure "F" forming part of the statement of the case, it has been pointed out that in the assessment year 1940-41, the assessee was assessed by order dated November 26, 1941, on a total income of Rs. 4,64,144 which included Rs. 3,91,300 as unproved cash credit which was treated as business profits and the assessee was assessed to excess profits tax amounting to Rs. 30,985 under the Excess Profits Tax Act, 1940, and as provided under Section 12(1) of the Excess Profits Tax Act, 1940, the excess profits tax payable was deducted in computing the total income assessable under the Income-tax Act. It was this amount of Rs. 30,985 which was withdrawn by the rectification order in the assessment year 1940-41. As regards the assessment year 1942-43, in the copy of the reference application which has been annexed and marked as annexure F-1 forming part of the statement of the case, it has been asserted that for the assessment year 1942-43, the assessee was assessed by an order dated November 26, 1949, on a total income of Rs. 14,29,894 which included Rs. 11,29,000 as unproved cash credit. The cash credit was treated as business profits and so the assessee was assessed to excess profits tax amounting to Rs. 7,03,115 under the Excess Profits Tax Act, 1940, and under Section 12(1) of this Act, the excess profits tax payable was deducted in computing the total income as assessable under the Income-tax Act which was withdrawn by rectification order.
82. As regards the assessment year 1941-42, the copy of the reference application has been annexed and marked as annexure "F-2" forming part of the statement of the case. It has been asserted in the application that for the assessment year 1941-42, the assessee was assessed by an order dated November 26, 1949, on a total income of Rs. 11,79,010 which included Rs. 6,92,900 as unproved cash credits which was treated as business profits and, accordingly, the assessee was also assessed to excess profits tax amounting to Rs. 4,51,706 under the Excess Profits Tax Act, 1940, and as provided under Section 12(1) of this Act, the excess profits tax payable was deducted in computing the total income assessable under the Income-tax Act and it was this amount which was withdrawn by the rectification order. On these facts, the Tribunal has referred the following questions of law for the opinion of this court:
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that no competent appeal lay before the Appellate Assistant Commissioner against the order of the Income-tax Officer ?
(2) Whether in view of the finding of the Tribunal that there were no competent appeals before the Appellate Assistant Commissioner, the Tribunal was correct in entertaining the departmental appeal and in setting aside the order of the Appellate Assistant Commissioner ?
(3) Whether, on the facts and in the circumstances of the case, Section 34(1D) of the Indian Income-tax Act, 1922, was a bar to the Revenue in rectifying the assessment order for the assessment years 1940-41, 1941-42 and 1942-43 in the manner done by the Income-tax Officer ?"
83. Similar questions have been referred in Taxation Case No. 44 of 1975 and for detailed reasons mentioned therein, I have already held that the Tribunal was correct in holding that no competent appeal lay before the Appellate Assistant Commissioner against the order of the Income-tax Officer and that the Tribunal was correct in entertaining the departmental appeal and setting aside the order of the Appellate Assistant Commissioner and that Section 34(1D) of the 1922 Act was not a bar to the Revenue in rectifying the assessment orders. The question in Taxation Cases Nos. 39 to 41 of 1976 is also answered accordingly.
84. In view of my above findings, I hold that the Tribunal was justified in upholding the assessments of the sums of Rs. 1,27,000 and Rs. 2,98,000 in Taxation Cases Nos. 16 and 17 of 1972, respectively, relating to the encashment of high denomination notes by the assessees to be assessable in the assessment year 1947-48, and hence I hold that the aforesaid amounts can be assessed in the assessment year 1947-48. The question in the aforesaid two taxation cases are, accordingly, answered in favour of the Department and against the assessee.
85. As regards the question referred in Taxation Cases Nos. 44 of 1975 and 39 to 41 of 1976, I hold that the Tribunal was correct in holding that no competent appeal lay before the Appellate Assistant Commissioner against the rectification orders of the Income-tax Officer and that the Tribunal was justified in entertaining the appeals and in setting aside the order of the Appellate Assistant Commissioner and that Section 34(1D) of the 1922 Act was not a bar to the Revenue in rectifying the assessments for the assessment year 1947-48 and also for the assessment years 1940-41, 1941-42 and 1942-43 in the manner done by the Income-tax Officer and so the questions are answered against the assessee and in favour of the Revenue. However, there will be no order as to costs.
Uday Sinha, J.
86. I agree.