1963 (12) TMI 5 - SUPREME COURT

Whether, upon the facts found by the Tribunal, the Income-tax Officer had in this case jurisdiction to proceed to make adjustment in terms of rule 3(b) of the Schedule to the Indian Income-tax Act ?

Is there a general right to correct the errors in the accounts of an insurance company when assessing the income-tax ?

Held that:- Quite clearly the adjustment made in the present case by the Income-tax Officer was not of the variety mentioned in the proviso. He does not say that he made the adjustment because he found that any rate of interest was inconsistent with the valuation of securities or other assets. The adjustment made by him had nothing to do with any rate of interest. It was made only because he thought that the securities had been undervalued. This he had no power to do under the proviso. This again is not in dispute. The result, therefore, is that we find nothing in the rules justifying the adjustment made by the Income-tax Officer in the present cases.

The High Court, as may have been noticed, held that the proviso to rule 3(b) was not intended to cover cases like the present. It would appear, therefore, that the High Court thought that the Income-tax Officer had no power under the rule to make the adjustment. It however none the less answered the question in the affirmative. Obviously, what was meant was that the Income-tax Officer had the power, quite apart from the rule, to make all adjustments to prevent evasion of tax. The High Court in fact expressly said that the rule did not deprive the Income-tax Officer of the power to do this. It is clear that the High Court had travelled beyond the question. No objection having been taken at the Bar to this procedure, we have dealt with the matter from this point of view also. The question framed has to be answered in the negative. Appeal allowed.