COMMISSIONER OF INCOME-TAX VS RAMAKRISHNA SONS LTD.
2001 P T D 520
[239 I T R 148]
[Madras High Court (India)]
Before R. Jayasimha Babu and N. V. Balasubramanian, JJ
COMMISSIONER OF INCOME-TAX
Versus
V. RAMAKRISHNA SONS LTD.
Tax Cases Nos.898, 899 and 900 of 1984 (Reference Nos.794 to 796 of 1984), decided on 30/03/1998.
Income-tax---
----Rectification of mistakes---Company---Additional tax on undistributed profits---Rectification under S.155(7) of order passed under S.104---I.A.C.'s approval not required---Indian Income Tax Act, 1961, Ss.104 & 155(7).
The approval of the Inspecting Assistant Commissioner is required only for the proposal to levy the additional tax under section 104 of the Income Tax Act, 1961, and not for the rectification under section 155(7) of the order made after seeking such approval. The legislative intention was clear that before proposing to levy the additional tax the responsible senior officer, who is empowered to do so, should apply his mind as to whether the proposal to levy additional tax be proceeded with. After an order under section 104 has been properly made, corrections of errors which may have crept in that order, would not require the approval of the Inspecting Assistant Commissioner. Moreover, the order to be made under section 155(7) is only a consequential order, the re-computation having become necessary by reason of any other proceeding under the Act.
C.V. Rajan for the Commissioner.
B. Raviraja for the Assessee.
JUDGMENT
R. JAYASIMHA BABU, J.---These references relate to the assessment year 1974-75. Reference have been made at the instance of the Revenue and also at the instance of the assessee.
The questions referred at the instance of the Department are:
"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling the order passed by the Income-tax Officer under section 154(1A) on November 3, 1978, to rectify the mistake in the calculation of additional Income-tax under section 104?
(2) Whether the Appellate Tribunal's view that there was merger of the order of the Income-tax Officer passed under section 104 with the order of the Appellate Assistant Commissioner and, therefore, no rectification under section 154 was possible is sustainable in law especially when the points on which the appeal preferred and the rectification made are entirely different?"
The questions referred at the instance of the assessee are:
"(1) Whether the Income-tax Appellate Tribunal is right in holding that the order of the Income-tax Officer under sections 154 and 155(7) of the Income-tax Act did not require the approval of the Inspecting Assistant Commissioner of Income-tax?
(2) Whether the Income-tax Appellate Tribunal- was right in holding that the income-tax Officer in his order made under subsection (7) of section 155 of the Income-tax Act, could rectify a mistake made in the original order, which had nothing to do with any subsequent proceedings under the Act?".
The assessee, V. Ramakrishna Sons Ltd., is a company in which the public are not substantially interested. Its distributable income for the assessment year 1974-75 was higher than the amount actually distributed. The Income-tax Officer, therefore, initiated proceedings under section 104 of the Income-tax Act and levied additional tax of Rs.3,20,171 on March 25, 1977. In that order, the Income-tax Officer had calculated the tax on only 90 per cent instead of 100 percent. of the distributable income. In appeal at the instance of the assessee that order was affirmed on December 31, 1977, by the Appellate Assistant Commissioner. Subsequently, the Income-tax Officer discovered his mistake in calculation and issued a notice to the assessee under section 154 of the Act proposing to correct the mistake in the assessment order made on March 25, 1977. The assessee objected and claimed that the order of the Income-tax Officer had merged in the order in appeal. Overruling that objection; a rectification order `was passed on November 3, 1978, and additional tax of Rs.45,467 was demanded. The on appeal to the Commissioner against that order was rejected on March 11, 1980, on the ground that part of the assessment order which was rectified had not been the subject-matter of the earlier appeal to the Appellate Assistant Commissioner. The Tribunal on further appeal accepted the assessee's arguments and set aside rectification order, dated November 3, 1978.
On March 10, 1979, the Income-tax Officer in exercise of his powers under section 155(7) of the Act revised the assessment order under section 104 originally passed on March 25, 1977, as rectified on November 3, 1978, in view of the fact that the principal assessment order on the company's income for the year had been revised on March 10, 1978, and that order necessitated an upward revision of the amount of distributable income. The amount of distributable profit as revised was Rs.10,90,649 as against the sum of Rs.9,89,275 shown in the rectified order, dated November 3, 1978. The assessee did not dispute the correctness of the figure of Rs.10,90,649. Nevertheless, the assessee appealed to the Commissioner on the ground that a second rectification was impermissible. That appeal was rejected and the rejection affirmed in further appeal by the Tribunal.
The question raised at the instance of the Revenue would arise for consideration only if the first order of rectification made by the Income-tax Officer on November 3, 1978, is required to be considered. That order stood superseded by the further order made by the Income-tax Officer on March 10, 1979, under section 155(7) of the Income-tax Act, which order for the reasons which we will presently set out, is a lawful order. As to whether the earlier order of rectification is or is not valid, in the circumstances of the case, is a question which does not require any further consideration. - We do not deem it necessary to consider those questions referred to us at the instance of the Revenue, and decline to answer the same.
As regards the question referred at the instance of the assessee, the questions have to be answered against the assessee, and in favour of the Department. Section 155(7) of the Act reads as under:
"Section 155(7): Where, as a result of any proceeding under this Act, in the assessment-for any year, of a company in whose case an order under section 104, has been made for that year, it is necessary to recompute the distributable income of that company, the Income-tax Officer may proceed to recompute the distributable income and determine the tax payable on the basis of such re-computation and 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 subsection (7) of that section being reckoned from the date of the final order passed in the case of the company in respect of that proceeding."
The approval of the Inspecting Assistant Commissioner is required only for the proposal to levy the additional tax under section .104 of the Income-tax Act and not for the rectification under section 155(7) of the order made after seeking such approval. We cannot read into section 155(7) of the Income-tax Act any additional requirements which are not stipulated therein. The legislative intention was clear that before proposing to levy the additional tax, the responsible senior officer, who is empowered to do so, should apply his mind as to whether the proposal to levy additional tax be proceeded with. After an order under section 104 has been properly made, corrections of errors which may have crept in that order, would not require the approval of the Inspecting Assistant Commissioner. Moreover, the order to be made under section 155(7) is only a consequential order, the recomputation having become necessary by reason of any other proceeding under the Act. We, must also observe here that the second question referred to us is wrongly worded as the reference made to subsequent proceedings in that question is wholly inapposite. The rectification under section 104 of the Income-tax Act had admittedly become necessary by reason of the original order of assessment having been rectified. The second question is, therefore, reframed by omitting the words, "which had nothing to do with any subsequent proceedings under the Act."
We, therefore, hold that the order passed under section 155(7) of the Income-tax Act is not one which requires approval of the Inspecting Assistant Commissioner. The Revenue shall be entitled to costs in the sum of Rs.1,500 (rupees one thousand and five hundred only).
M.B.A./204/FC?????????????????????????????????????????????????????????????????????????????????? Order accordingly.