COMMISSIONER OF INCOME TAX, KANPUR vs. M/S. J. K. COMMERCIAL CORPORATION LTD. ETC.

CIVIL APPEAL No. 1580/1971Supreme Court[1977] 1 S.C.R. 51203 September 1976Bench: 3 JudgesAuthor: HANS RAJ KHANNA, N.L. UNTWALIA, JASWANT SINGH A COMMISSIONER OF7 pages
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What were the facts?

The Income Tax Officer (ITO) passed assessment orders under Section 23(3) of the Income Tax Act, 1922, for assessment years 1955-56 and 1956-57. Subsequently, the ITO issued orders under Section 23A of the Act on January 21, 1957, demanding additional super-tax from the respondent companies, J.K. Commercial Corporation Ltd. and J.K. Synthetics Ltd., on their undistributed profits. In November 1959, the ITO issued notices under Section 35(1) to rectify mistakes in the Section 23A orders, increasing the additional super-tax payable. The respondent companies objected, arguing the ITO lacked the power to rectify orders under Section 23A. The ITO overruled these objections and proceeded with the rectification. The Commissioner of Income Tax dismissed the companies' revision applications. The High Court, relying on previous Supreme Court judgments, quashed the orders of the ITO and the Commissioner, leading to these appeals by the Revenue.

What did the Supreme Court hold?

The Supreme Court held that the Income Tax Officer had the jurisdiction and competency to rectify mistakes under Section 35(1) of the Income Tax Act, 1922, in his previous orders passed under Section 23A. The Court reasoned that while the language of Section 35(1) might not be as broad as Section 154(1)(a) of the 1961 Act, it is not so narrow as to be confined only to assessment or refund orders in a restricted sense. The term 'assessment' can bear a comprehensive meaning, and an order under Section 23A, though not strictly an 'order of assessment' in the same vein as under Section 23, is part of the assessment proceedings and can be considered a supplementary assessment order. The Court distinguished the present case from M. M. Parikh's case, stating that the ratio of that case, which dealt with Section 34 of the Act, was not applicable to the interpretation of 'Assessment Order' in Section 35(1). The Court also clarified that the High Court had misunderstood Sankappa's case. The rectification of an apparent error in an order under Section 23A falls within the ambit of the power conferred by Section 35(1). The appeals were allowed, and the High Court's judgment was set aside.

What were the issues?

1. Whether the Income Tax Officer has the power under Section 35(1) of the Income Tax Act, 1922, to rectify an order passed under Section 23A of the Act. Assessee's contentions: The assessee argued that the ITO had no power to rectify orders passed under Section 23A of the Act. They relied on the High Court's decision which was based on M. M. Parikh v. Navanagar Transport & Industries Ltd. [1967] 63 ITR 663 and Sankappa v. I.T.O. Bangalore, (1968) 68 ITR 760. Revenue's contentions: The Revenue contended that the ITO had the jurisdiction and competency to rectify mistakes under Section 35(1) in his previous orders under Section 23A. They argued that the expression 'assessment order' in Section 35(1) is wide enough to include orders under Section 23A, as such orders form part of the assessment proceedings.

Which sections of the Income-tax Act were involved?

Section 23A,Section 35(1),Section 23,Section 24,Section 30,Section 34,Section 154(1)(a)

AI-generated summary — verify with the full judgment below

512 A COMMISSIONER OF INCOME TAX, KANPUR v. M/S. J. K. COMMERCIAL CORPORATION LTD. ETC.

September 3, 1976 B [H. R. KHANNA, N. L. UNTWALIA AND JAswANT SINGH, JJ.] c D E F G H Income Tax Act (11 of 1922), ss. 23A and 35(1)-Whether income tax o{fi- · cer has power under s. 35 ( 1) to rectify an order passed under s. 23A.

Section 23A, Income Tax Act, 1922, confers power on the Income Tax Offi~r to assess Companies to super-tax on their undistributed income in certam cases. · In the present case, subsequent to the passing of the orders of asscssmen~, the Income Tax Officer passed orders under s. 23A of the Income Ta.x Act, 1922, asking the respondent-companies to pay certain amounts of additional super-tax on the undistributed profit. Thereafter, under s. 35 (I), over-ruling !he objections of the respondents that he had no power to r~ctify any mistake 1Il an order under s. 23A of the Act, he rectified some mistakes and increased the amounts of additional super-tax payable by the respondents. The respon- dents' revision applications were dismissed by the Commissioner, but the High Court quashed the orders, relying on M. M. Parikh v. Navanagar Transport & Indus

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