TMI Blog1970 (4) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... "the Act"), in respect, inter alia, of the aforesaid two assessment years as the company had not declared 100% of its distributable surplus in terms of the aforesaid section within 12 months from the end of the respective previous years. Two orders, both dated the 31st July, 1962, under section 23A, were passed by respondent No. 1 in respect of the aforesaid assessment years. In respect of the second year, after deducting the tax amounting to Rs. 51,435.45 due on the total income of Rs. 1,14,301 determined on regular assessment the distributable surplus was found to be Rs. 62,865.55. As the petitioner had only distributed Rs. 36,588 the deficiency was determined at Rs. 26,277.55 and the super-tax thereon at the rate of 37% was assessed at Rs. 9,722.49. The order in respect of the first year determined the distributable surplus at Rs. 71,073.20 and as dividend actually distributed was Rs. 43,735, the deficiency was declared to be Rs. 25,338 and the tax payable thereon, Rs. 9,375.43. The petitioner paid the aforesaid amount of tax assessed in the said two orders. By a notice purported to be under section 154/155 of the Income-tax Act, 1961, dated the 1st January, 1964, the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner, contended that the two impugned orders under section 35 are without jurisdiction and he based his submissions on two grounds only, namely, (1) that section 23A of the Act is a self-contained code and an order made thereunder is not an order of assessment and therefore there can be no rectification of such an order under section 35 except in the special case provided in sub-section (7) of that section; (2) that as the order under section 23A could only be made and was, in fact, made with the prior approval of the Inspecting Assistant Commissioner as provided in section 23A(8), the impugned orders of rectification should also have been made after such prior approval and further that this would have afforded the petitioner another opportunity of showing cause against the proposed orders. Mr. Roy Chowdhury has contended that section 23A is not a section providing for assessment. It is a section imposing additional tax or rather additional super-tax on certain companies for failure to declare a certain percentage of their profits as dividend. As section 35(1) confers jurisdiction on the Income-tax Officer to rectify an order of assessment or an order of refund the respondent=I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous approval of the Inspecting Assistant Commissioner of Income-tax has been obtained, and the Inspecting Assistant Commissioner shall not give his approval until he has given the company concerned an opportunity of being heard. Section 35(1) which gives the Income-tax Officer jurisdiction to rectify mistakes apparent from the record is so far as material, as follows : " the Income-tax Officer may, at any time within four years from the date of any assessment order or refund order passed; by him on his own motion, rectify any mistake apparent from the record of .... assessment or refund as the case may be and shall within the like period rectify any such mistake which has been brought to his notice by an assessee. Provided that no such rectification shall be made having the effect of enhancing an assessment or reducing a refund unless .... the Income-tax Officer . . . has given notice to the assessee of his intention so to do and has allowed him a reasonable opportunity of being heard." Section 35(7), to which reference has been made by Mr. Roy Chowdhury, is as follows: " Where the assessment of a company in whose case an order under section 23A has been made is modified in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act; it lies in and arises out of the order of the Income-tax Officer. Before imposing liability for additional super-tax, the Income-tax Officer has to determine whether the company is one to which the provisions of section 23A apply; he has also to determine whether the company has distributed within twelve months immediately following the expiry of the previous year the statutory percentage of the total income of the company as by the taxes and levies prescribed therein; he has also to determine whether, having regard to the loss incurred by the company in the earlier years or to the smallness of the profits made in the previous year, the payment of a dividend or a larger dividend than that declared would be unreasonable. It is after making these enquiries that the Income-tax Officer may make the order directing payment of additional super-tax at the rates prescribed. The process to be followed is not the process of assessment, but of determining whether the liability should be charged and imposed .... Section 23A, before it was amended by the Finance Act, 1955, was undoubtedly procedural .... Section 23A(1) after it was amended by the Finance Act, 1955, provides withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord of the assessment or refund. The mistake need not be in the assessment as such. I do not think that decision has very much bearing on this case, because what was held there was that an omission in the assessment order to add the interest due under section 18A(8) would be a mistake apparent on the record which would attract section 35. In S. Sankappa v. Income-tax Officer, the question before the Supreme Court was whether rectification of the assessment of the partners under section 35 after the firm's status was changed from "unregistered" to "registered" in appeal was permissible. In that connection the Supreme Court again considered the scope and implication of the term "assessment" and referred to its previous decision in Abraham's case and Kalawati Devi v. Harlalka's case, and observed that though in some sections the word "assessment" of income is used only with reference to computation of income in other sections it has been more comprehensively used and includes all proceedings starting with the filing of the return or issue of notice and ending with the determination of the tax payable by the assessee. Parikh's case was relied on before the Supreme Court but the court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficulty in the way of that interpretation is the period of limitation prescribed in that very sub-section, namely, that he may make such rectification at any time within four years from the date of any assessment order. There is no dispute that so far as orders under section 23A are concerned there is no period of limitation and such an order can be passed by the Income-tax Officer at any time. The Supreme Court in Parikh's case had remarked on the fact that no appeal under section 30 is provided for from an order under section 23A. It would, therefore, be clear that what is contemplated by the record of the assessment or refund is the actual assessment proceedings culminating in the order of assessment or actual refund proceeding culminating in an order of refund which would give the starting point of limitation for the exercise by the Income-tax Officer of the powers under section 35(1). From the decisions cited and from the provisions of the sections, it appears to me that the procedure laid down under section 23A is intended to be a procedure entirely different from the procedure for the regular assessment and what section 35 contemplates is rectification of any order made in t ..... 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