TMI Blog1970 (5) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... orated under the English Companies Act with an authorised capital of pound 100 divided into 100 shares of pound 1 each of which only two shares were issued as fully paid-up and held by Venesta Foils Ltd. On the 20th April, 1961, at an extraordinary general meeting of Foil Centre, resolutions were passed changing the name of that company to India Foils Ltd. and also increasing the authorised capital by a further sum of pound 900 devided into 900 shares of pound 1 each. By an agreement dated the 30th November, 1961, Venesta agreed to transfer all its immovable properties, factories, plants, machinery and other movable and immovable assets in India to the petitioner, India Foils Ltd., the present petitioner, at the value shown in the books of Venesta while the petitioner undertook to meet all the liabilities of Venesta incurred on account of its Indian business including a loan of pound 204,328 due by Venesta to Messrs. Reynolds T. I. Aluminium Ltd. It was further agreed that after setting off the liabilities from the aforesaid book value of the assets the residue of the consideration for the said sale would be paid and satisfied by the issue to Venesta or its nominees of 998 shares o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assets acquired by the petitioner are far in excess of the consideration paid as the book value of the assets transferred is much more than the consideration paid. Therefore, assets for the acquisition of which no consideration has been paid by the petitioner are not entitled to depreciation as their cost of acquisition is nil. In asmuch as the depreciation of assets of which cost of acquisition is nil has been allowed by mistake, there is a mistake apparent from the record. " It is now well-settled that either under section 35 of the Income-tax Act, 1922, or under section 154 of the 1961 Act, the jurisdiction of the Income-tax Officer to rectify any mistake in any assessment order or refund order must be confined to a mistake which is apparent from the record. The courts in this country including the Supreme Court has had to consider what is meant by the expression " apparent from the record " as used in these sections and it is now well-settled that the mistake contemplated is not one which is to be discovered as a result of an argument or on which two opposite views might be possible. It must be an error which is apparent and in regard to which no argument is called for. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets transferred in excess of the par value of the shares issued would be regarded as premium for the purpose of our system of law. It is to be noticed that it was nowhere suggested in that case that by issuing shares whose par value was much below the value of the assets acquired the assessee-company was acquiring the assets not at the value declared in the instruments of transfer but at the par value of the shares. In any event Dr. Pal is certainly justified in his contention that the question when assets are transferred in consideration of fully paid-up shares the question whether the actual consideration paid would be only the par value of the shares is an intricate question which cannot be decided off-hand. Mr. S. C. Sen, the learned counsel for the department, contended that the question of ascertaining the actual cost was always a question of fact and the Income-tax Officer is entitled to determine such actual cost according to his own valuation and for this proposition he relied on a recent decision of this court in the case of Jogta Coal Co. Ltd. v. Commissioner of Income-tax. But, in that case what was held by this court was that the Income-tax Officer was not bound to ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various decisions cited by Dr. Pal ...... The Income-tax Officer cannot assume jurisdiction to decide such a question in the guise of a procedure for rectification of a mistake apparent in his order. " I would have rest content to rely on my aforesaid decision and made this rule absolute but for certain arguments advanced by Mr. S. C. Sen in furtherance of the argument of Mr. D. K. Sen as recorded in my aforesaid judgment. Mr. Sen pointed out that under section 154(3) the Income-tax Officer is only required to give a notice to the assessee of his intention to rectify and/or amend an order which would have the effect of enhancing an assessment or reducing a refund. Such a notice is not a statutory notice but is merely intended to give the assessee an opportunity of being heard before any order is passed to his detriment. As the Income-tax Officer's jurisdiction does not depend on such a notice, no writ could be issued for quashing a notice under section 154 and as such the present proceedings are misconceived. In support of his contention Mr. Sen referred me to a decision of the Supreme Court in Maharana Mills (Private) Ltd. v. Income-tax Officer, Porbandar, where in respect of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of rectification of an error under section 35. The point that is troubling me in this case is the way the prayers have been framed and the reliefs have been asked for in the petition. Prayers (a) and (b) are for writs in the nature of mandamus and certiorari for quashing and/or cancelling the notice under section 154. Mere quashing or cancelling the notice may not be enough, but as Dr. Pal pointed out in prayer (c) there is a prayer for a writ of prohibition requiring the respondents to forbear from giving any effect to or taking any steps whatsoever in pursuance of the impugned notice under section 154, and such a writ would be sufficient in this case. Considering all the circumstances I see no reason to change the opinion which I expressed in Narsingdas Bangur's case. I would, therefore, hold that the respondent-Income-tax Officer had no jurisdiction to issue the impugned notice under section 154 purporting to correct an alleged error apparent on the records. The rule would, therefore, be made absolute and a writ of prohibition would issue commanding the respondents to forbear from proceeding any further with the impugned notice and with any proceedings connected therewith. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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