M.M.PARIKH INCOME TAX OFFICER, SPECIAL INVESTIGATION CIRCLE-B, AHMEDABAD vs. NAVANAGAR TRANSPORT & INDUSTRIES LTD. & ANR

CIVIL APPEAL No. 1082/1965Supreme Court[1967] 2 S.C.R. 3801 November 1966Bench: 3 JudgesAuthor: J.C. SHAH, V. RAMASWAMI, VISHISHTHA BHARGAVA12 pages
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What were the facts?

The Income-tax Officer (ITO) issued a notice to Navanagar Transport & Industries Ltd. (the assessee-company) for the assessment year 1957-58, proposing to make an order under Section 23A of the Indian Income-tax Act, 1922. The assessee-company applied to the Gujarat High Court for a writ to prevent the ITO from proceeding. The High Court ruled that an order under Section 23A, as amended by the Finance Act, 1955, was an 'order of assessment' to which the limitation period under Section 34(3) applied. Consequently, proceedings initiated after March 31, 1962, for the assessment year 1957-58, were deemed to be without jurisdiction. The ITO appealed this decision to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court held that Section 23A is not a charging section and an order made thereunder is not an 'order of assessment' to which the limitation period prescribed by Section 34(3) applies. The Court reasoned that Section 23A, before its amendment by the Finance Act, 1955, was procedural. Even after amendment, while it provided machinery for imposing liability for additional super-tax, it did not become a charging section. The charge to tax arises under Sections 3, 4, and 5. The title of Section 23A, "Power to assess companies to super-tax on undistributed income in certain cases," does not imply an 'order of assessment' in the context of Section 34(3). The Court noted that the Act contemplates various orders for payment of tax that are not 'orders of assessment'. The specific provisions regarding appeals under Section 30 and Section 31, which distinguish between an 'order of assessment' and an 'order under Section 23A', further supported this distinction. The appeal was allowed, and the High Court's petition was dismissed.

What were the issues?

1. Whether an order made under Section 23A of the Indian Income-tax Act, 1922, after its amendment by the Finance Act, 1955, is an 'order of assessment' to which the limitation period prescribed by Section 34(3) applies? Assessee's contention (as per High Court's reasoning): An order under Section 23A, post-amendment, is an 'order of assessment' and thus subject to the four-year limitation period from the end of the assessment year under Section 34(3). Therefore, proceedings initiated after March 31, 1962, for assessment year 1957-58 were time-barred. Revenue's contention (implied by appeal): An order under Section 23A is not an 'order of assessment' and therefore not subject to the limitation period under Section 34(3). The High Court erred in its interpretation.

Which sections of the Income-tax Act were involved?

Section 23A,Section 34(3),Section 3,Section 4,Section 5,Section 30,Section 31,Section 45

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M. M. PARIKH, I~COME-TAX OFFICER, SPECIAL INVESTIGATION CIRCLF.-B, AHMF.DABAD \', NAVA:\'AGAR TRANSPORT & INDl'STRIES LTD. & ANR.

November I, 1966 [J. C. SHAH, V. RA~tASWA~fl A V. BHARGAVA, JJ.j Indian lncon1e-ta:c Act (11 of 1922), s. 23A-Order t1nder-W/Je1/rer au "order of assessn1en('-Section 23A, whether a charging section- Limitation under s. 34(3) ff applies.

The appellant-Income-tax Officer issued a notice to the asscsscc- company to show cause why an order under s. 23A of the Inoidn Income- tax Act, 1922 should not be made for the assessment year 1957-58. The assessee applied to the High Court for a writ to restrain the appellant from giving effect to the notice. 'The High Court held that an order un- der s. 23A of the Act after its amendment by the Finance Act, 1955. '"'as an "order of assessment" to which the period of limitation prescribed bys. 34(3) applied and since such an order could not cc made after the expiration of four years from the end of the assessment ye.1r 195i-58 the proceedings initiared against the asse<:;see in respect of Lhc assessnil!nt year 1957-58 after March 31, 1962 was without juri iction. HELD : Section 23A is not a ch

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