THE INCOME-TAX OFFICER, ALWAYE vs. THE ASOK TEXTILES LTD., ALWAYE

CIVIL APPEAL No. 311/1959Supreme Court[1961] 3 S.C.R. 23613 December 1960Bench: 3 JudgesAuthor: J.L. KAPUR, M. HIDAYATULLAH, J.C. SHAH7 pages
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What did the Supreme Court hold?

The Supreme Court held that the language and scope of Section 35 of the Indian Income-tax Act, 1922, cannot be equated with Order 47, Rule 1 of the Code of Civil Procedure. The ITO can examine the record and rectify errors of law and fact, and the restrictive operation of review powers under CPC does not apply to Section 35. The Court found that the initial oversight regarding the additional tax and the subsequent correction of the rate constituted mistakes apparent from the record, allowing the ITO to act under Section 35. Regarding penal interest, the Court held that Section 18A(8) is mandatory, requiring the ITO to calculate and add the interest to the assessment. Therefore, the High Court's decision was erroneous. The appeal was allowed, and the High Court's judgment and order were set aside.

What were the facts?

The Income-Tax Officer (ITO) initially determined the net assessable income of The Asok Textiles Ltd. for assessment year 1952-53. The company declared a dividend which attracted additional income-tax under the Finance Act, 1952, a fact overlooked by the ITO. The ITO rectified this omission under Section 35 of the Indian Income-tax Act, 1922, imposing additional tax at one anna in the rupee. Subsequently, the ITO discovered this rate was incorrect and should have been five annas in the rupee. He rectified this again by an order dated August 12, 1954. This same order also rectified the omission to impose penal interest under Section 18A(8) due to the company's short advance tax deposit. The company's revision to the Commissioner was dismissed, leading to a writ petition in the High Court, which quashed the ITO's orders.

What were the issues?

1. Whether the Income-Tax Officer had the jurisdiction to rectify the assessment under Section 35 of the Indian Income-tax Act, 1922, considering the High Court's view that the error was not 'apparent on the record' and analogous to review under the Code of Civil Procedure. 2. Whether the imposition of penal interest under Section 18A(8) of the Act was within the ITO's jurisdiction. Assessee's Arguments (as understood from the High Court's decision and the appeal): The assessee contended that Section 35 of the Act did not apply, and on merits, the additional tax could not be imposed. The High Court agreed, holding that the necessary foundation for Section 35 was not laid and the penal interest levy was without jurisdiction. Revenue's Arguments: The revenue (Income-Tax Officer) argued that Section 35 of the Act is broader than Order 47, Rule 1 of the Code of Civil Procedure and allows rectification of errors of law and fact. They also contended that Section 18A(8) is mandatory and requires the imposition of penal interest.

Which sections of the Income-tax Act were involved?

Section 35,Section 18A(8),Section 2,Section 15C,Section 18A(3),Section 18A(5)

AI-generated summary — verify with the full judgment below

..... 236 SUPREME COURT REPORTS [1961] ,960 folders. That was the finding made by the authority on an earlier occasion when Punamchand and Vishnuc Sh•i Ambic• Mills prasad had moved the authority under s. 15 of the <;o.~-Lld.

Act. The learned Attorney-General has strenuously Slri s. B. Bhatt contended that it is unfair to give the same pay to the b Anoth" three workmen who &re doing the work of cut.lookers . - only for a part of the time· and were substantially .<i•1•ndragadAa• J. doing the work of bleach-folders; that, however, has no relevance in determining the present dispute. The only point which calls for decision is whether or not the work done by the three respondents takes them within the category of cut.-lookers specified under cl. 5, and as wc have already pointed out, on an earlier occasion the authority has found in favour of two of the three respondents when it held that they were fol- ders doing cut-looking. If the said finding amounts to res judic.ata it is in favour of the two respondents and not in favour of the appella.nt; that is why the learned Attorney-General did not seriously dispute the correctness of the decision of the High Court

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