TMI Blog1966 (4) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... ays for issuance of a writ in the nature of mandamus or other writ or direction directing the first respondent to rectify the provisional assessment by granting to the petitioner rebate of income-tax at the rate of 35 per cent. instead of 30 per cent. actually allowed by him. And lastly, the petitioner prays for issuance of a writ or order restraining and prohibiting the respondents, their officers, servants and agents from taking any steps or proceedings in enforcement or implementation of the first respondent's provisional assessment order of 12th October, 1965, and the notice of demand issued pursuant thereto. Facts in brief are : The petitioner is carrying on business of refining crude oil. We are here concerned with the assessment year 1965-66, the relevant accounting period being the calendar year 1964, ending with 31st December, 1964. It would be necessary to state the previous history as to the assessment for the earlier year 1964-65, inasmuch as some arguments have been advanced before us on the basis of the said assessment. The relevant accounting period for the assessment year 1964-65 was the calendar year 1963, ending with 31st December, 1963. The petitioner filed its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 15th February, 1965, the first respondent rectified the provisional assessment order for the assessment year 1964-65 under the Surtax Act on the footing that the rates applicable to the petitioner-company were the rates applicable to a company doing the business of manufacture and production of mineral oil. After rectifying the order, the first respondent demanded from the company payment of additional surtax amounting to Rs. 3,93,478. Thereafter, the petitioner again by its letter of 4th March, 1965, requested the first respondent to rectify the provisional assessment order under section 141 of the Act and to grant to the petitioner rebate of 35 per cent. on the basis that the petitioner was a company engaged in the business of manufacture or production of mineral oil. By his reply dated 3rd July, 1965, the first respondent refused to rectify the order. In other words, for the year 1964-65, the petitioner-company has been provisionally assessed to income-tax on the footing that the petitioner was not a company doing business of manufacture or production of mineral oil, while the provisional assessment under the Surtax Act was made on the footing that the petitioner was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Finance Act, 1965, provides : " Subject to the provisions of sub-sections (2), (3), (4) and (5), for the assessment year commencing on the 1st day of April, 1965, income-tax shall be charged at the rates specified in Part I of the First Schedule.... " Part I of the First Schedule is divided into various sub-paragraphs, and we are concerned with paragraph F. The material part thereof reads : " In the case of every company, other than the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956),-- Rate of income-tax on the whole of the total income .....80 per cent. Provided that a rebate shall be allowed in the case of such companies on such income at such rate or rates as are specified hereunder :-- --------------------------------------------------------------------------------------------------------------------------------------------------- Income on which Rate of rebate is to be rebate allowed --------------------------------------------------------------------------------------------------------------------------------------------------- I. In the case of a company which--... (b) is such a company as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xceed the statutory deduction, at the rate or rates specified in the Third Schedule. " " Chargeable profits " has been defined by sub-section (5) of section 2 as follows : " 'Chargeable profits' means the total income of an assessee computed under the Income-tax Act, 1961 (43 of 1961), for any previous year or years, as the case may be, and adjusted in accordance with the provisions of the First Schedule. " The material part of the First Schedule is in the following terms : " Rules for computing the chargeable Profits In computing the chargeable profits of a previous year, the total income computed for that year under the Income-tax Act shall be adjusted as follows : 1. Income, profits and gains and other sums falling within the following clauses shall be excluded.... 2. The balance of the total income arrived at after making the exclusions mentioned in rule 1 shall be reduced by-- (i) the amount of income-tax and super-tax payable by the company in respect of its total income under the provisions of the Income-tax Act after making allowance for any relief, rebate or deduction in respect of income-tax and super-tax to which the company may be entitled under the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture or production of mineral oil, nor has the first respondent denied that the petitioner-company had claimed that it was a company engaged in the manufacture or production of mineral oil. Thus, according to the Advocate-General, the admitted position was that the petitioner was a company engaged in the business of manufacture or production of mineral oil. The Income-tax Officer was therefore in error in granting rebate only at 30 per cent. and not at 35 per cent. Mr. Joshi, learned counsel for the revenue, on the other hand, contends that the petitioner is not a company engaged in the manufacture or production of mineral oil. On the other hand, the petitioner is a company doing business of refining crude oil. It is the argument of Mr. Joshi that the expression " mineral oil " means crude oil and not its products. Crude oil is supplied to the petitioner. The petitioner is not either manufacturing or producing crude oil. Crude oil is imported from abroad or is brought from Ankleshwar. The petitioner only by refining the crude oil manufactures the products from the crude oil. The business of the petitioner-company therefore is not either the manufacture or the production of crude o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve a right of second appeal before the Income-tax Tribunal, and it is only ultimately when the facts are finally found by the Tribunal that the matter would be coming before this court in a reference in accordance with the procedure which has been prescribed by the Income-tax Act. We have at this stage to see whether the matter is abundantly clear one way or the other. The expression " mineral oil " has not been defined anywhere in the Act. In Webster's Third New International Dictionary (volume II, page 1438), the meaning of " mineral oil " has been given as : " Mineral oil,n. : a liquid product of mineral origin that is within the viscosity limits recognised for oils (as petroleum, shale oil, or any oil obtained from them by refining), esp. liquid petroleum--compare Hydrocarbon oil, Paraffin oil. " In Oxford English Dictionary, edited by Murray (volume 6, page 467), the meaning of " mineral oil " is given as : " Mineral oil--a general name for petroleum and the various oils distilled from it. " In Petroleum Dictionary by Lalia Phipps Boone (page 199), the meaning is : " Mineral oil " 1. Crude petroleum and its products. 2. Liquid petroleum. In the Illustrate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ality and quantity of the deposits of pools vary almost as widely as the localities in which they are found. " The same dictionary also gives so many other names by which petroleum is referred to, such as black gold, black gold of Transylvania, blackjack, black oil, etc. Reading the aforesaid definition of " crude oil " it is apparent that petroleum as it comes from the ground is generally understood or generally referred to as crude oil and the expression " mineral oil " is wide enough to include not only the crude oil but also any oil obtained from it by refining, or any products secured from the crude oil. We have already stated that the combined effect of the various provisions of the Act to which we have already made reference is that if the company is engaged in doing the business of manufacture or production of mineral oil, then it is entitled to 35 per cent. rebate. We have referred to the meaning given to the terms " mineral oil " and " crude oil " in the aforesaid dictionaries, which indicate that the crude oil means petroleum in its raw form as it comes from the ground, and the expression " mineral oil " is wide enough to include both petroleum as well as the produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat contention it would be completely rendering the word " manufacture " redundant. The rebate is allowable to a company that does the business either of manufacture or production of mineral oil. Prima facie " manufacture of mineral oil " could mean mineral oil produced by refining process from crude oil. Both crude oil as well as products produced from it have its origin in or have its basic substance as mineral oil. It has also been argued by Mr. Joshi that wide words used in the statute have to be under stood in the limited sense in order to give effect to the true intention of the legislature. According to Mr. Joshi, the concession provided by the aforesaid relevant provisions of the Act are concessions provided for those companies which produce the raw material of which India is in need, and therefore the meaning of the word " mineral oil " will have to be construed as confined to the crude oil. He read to us certain passages in support of his contention that the words of the statute have not to be construed in the abstract but in the context of the intention of the legislature. He referred us to Maxwell and certain observations in Bradlaugh v. Clarke, as well as certain obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as engaged in that business and there has been no denial on the part of the Income-tax Officer about that position. Mr. Joshi, on the other hand, contends that it may be that in the earlier year, i.e., in the assessment year 1964-65, the petitioner-company might have claimed that it was engaged in that business and the claim might have been accepted by the Income-tax Officer for the purposes of surtax. But the assessment proceedings both for income-tax and surtax for the earlier years are wholly irrelevant in considering the question for the assessment year 1965-66. Those proceedings are to be completely ignored and no reference thereto could be made. As regards the assessment proceedings for the year 1965-66, neither in the return nor the documents accompanying it, the petitioner-company had made any such claim. It is only after the assessment proceedings were complete that in the letter for rectification written by the petitioner-company to the Income-tax Officer on the 21st October, 1965, the petitioner-company had made that claim. Mr. Joshi further argued that there was clearly a denial of the averments in the first respondent's affidavit in reply. We have already referred to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle of res judicata is not applicable to decisions of income-tax authorities. An assessment for a particular year is final and conclusive between the parties only in relation to the assessment for that year and the decisions given in an assessment for an earlier year are not binding either on the assessee or the department in a subsequent year. But this rule is subject to limitations, for there should be finality and certainty in all litigations including litigation arising out of the Income-tax Act and an earlier decision on the same question cannot be reopened if that decision is not arbitrary or perverse, if it had been arrived at after due inquiry, if no fresh facts are placed before the Tribunal giving the later decision, and if the Tribunal giving the earlier decision has taken into consideration all material evidence..... " The view of this court thus had been that though the Income-tax Officer is not bound by the rule of res judicata or estoppel on record, he can reopen a question previously decided only if fresh facts come to light which on investigation would entitle the officer to come to a conclusion different from the conclusion previously reached or if the ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revious year (i) for a period of 180 days or more, (ii) for a period of less than 180 days but more than thirty days or (iii) for a period of thirty days or less than thirty days, respectively. " This brings us to Part I of Appendix I to the said rules. We are here concerned with Class III-Machinery and Plant. Clause (ii) under this class relates to the special rates to be applied to the whole of the machinery and plant used in certain concerns, and then follows the detailed list of certain concerns. Clause (iii) provides : " (iii) Special rates to be applied Rate to other machinery and plant ........................ (1) Machine tools :-- (2) Mineral oil concerns (N.E.S.A.) :--... Refineries-- (a) Boilers 10 (b) Prime movers 10 (c) Process plant 12 ................................................... Except for the following items :-- (1) Below ground 100 (2) Above ground... (d) Distribution-- (1) Returnable packages Nil (2) Kerbside pumps including underground tanks and fittings 15. " The aforesaid various provisions clearly indicate that depreciation at a special rate provided in Part I of Appendix I annexed to the rules is allowable for certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of the petitioner's claim that it was a company engaged in the manufacture or production of mineral oil. " The affidavit in reply has been filed by the first respondent. It appears that by the time the reply was filed, the first respondent, Mr. G. B Chand, had become the Appellate Assistant Commissioner. It is not in dispute that Mr. G. B. Chand was the Income-tax Officer who had made the provisional assessment orders of the petitioner-company both for income-tax and surtax for the earlier year, viz., 1964-65, as well as the present impugned income-tax order of the year 1965-66. In paragraph 8 of the affidavit the first respondent avers : " With reference to ground (b) of paragraph 12 of the said petition, I deny the correctness of the contentions and submissions therein made.... I submit that in making the provisional assessment under the said section 141, the assessment of tax has to be made in accordance with and subject to the provisions of the Act and that it is open to the Income-tax Officer to scrutinise the return and the statements of account and documents accompanying the return and to see whether any claim made by the assessee is admissible in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It provides : " (4) A firm may be assessed under sub-section (1) as an unregistered firm, except in the following cases, where it shall be assessed as a registered firm... (b) where no regular assessment has been made on the firm for any assessment year preceding the assessment year for which the provisional assessment is to be made, and the firm has, before the expiry of the period laid down in Chapter XVI-B filed its application for registration, or declaration as aforesaid, for the assessment year for which the provisional assessment is to be made. " Sub-sections (5) to (7) provide : " (5) After a regular assessment has been made, any amount paid or deemed to have been paid towards the provisional assessment made under sub-section (1) shall be deemed to have been paid towards the regular assessment ; and where the amount paid or deemed to have been paid towards the provisional assessment exceeds the amount payable under the regular assessment, the excess shall be refunded to the assessee. (6) Nothing done or suffered by reason or in consequence of any provisional assessment made under this section shall prejudice the determination, on the merits, of any issue which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een produced by the assessee, the Income-tax Officer should after making an inquiry complete the assessment. It may be stated in this connection that section 144 empowers the Income-tax Officer to issue a notice to the assessee requiring him to produce various documents including accounts, etc., for the purposes of making an inquiry. Now, cases may arise where a person, though liable to pay tax, does not choose to file a return. A person who has filed a return and who has been asked to produce his account books and/or documents or other evidence in support of his return may fail to produce those accounts or documents or evidence. Sub-section (2) of section 139 empowers the Income-tax Officer to call upon a person to file his return if the Income-tax Officer is of opinion that the income earned by that person would be one assessable to tax, and the person on whom the notice is served is required to file his return. Section 144 empowers the Income-tax Officer to make an assessment to the best of his judgment and determine the amount of tax payable by an assessee in cases where a person who has been called upon to file a return fails to file a return, and where a person who has filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f manufacture and production of mineral oil. The Income-tax Officer was well aware of its claim and had no jurisdiction to decide that matter. He also read to us certain observations from the speeches of Viscount Haldane, Viscount Cave and Lord Dunedin in Dawsons Limited v. Bonnin, wherein the learned Law Lords have considered the meaning of the word " basis " occurring in an insurance contract. Mr. Joshi, on the other hand, referring us to the provisions of section 4 of the Act, contends that both the provisional assessment as well as the final assessment has to be made by the Income-tax Officer " in accordance with and subject to the provisions of the Act. " The Income-tax Officer no doubt has been directed to make the provisional assessment on the basis of the return and that only means that the income shown by the assessee from his business has to be taken as the income of the assessee and on that basis proceed to decide whether the claim made by the assessee as to the deductions or as to the rate of tax applicable could be upheld or rejected. The Income-tax Officer has jurisdiction in making the provisional assessment to decide the rates of tax applicable to the income returne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a summary manner. It would be convenient at this stage to see what is the import of the expression "assessment" occurring in section 141. That expression has been understood in different senses in different contexts. But, having regard to the object of section 141, there can hardly be any doubt that the expression " assessment " used in section 141 means (a) determination of total income, and (b) determination or quantification of tax payable thereon ; and the Act directs that these two processes have to be made on the basis of the return filed and in a summary manner. Determination of the total income of a business of an assessee would in the first instance involve the true and correct amount of income which the assessee has derived from the various sources of income which he has. In the next instance it would involve the determination of the amount of various allowances or deductions to which the assessee is entitled in accordance with law from the said amount of income derived from the various sources, for instance, deductions on account of depreciation on building, plant, machinery and furniture used in the business or set off of carried forward losses of the business permis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been the contention of the assessee-company that it had claimed to be so engaged in its return itself by claiming depreciation as a mineral oil concern. Not only that, but according to the assessee-company, it had been consistently claiming to be so engaged even since the earlier years and the Income-tax Officer was well aware of the claim made by the assessee-company. We have already referred to these contentions and also have recorded our finding that the Income-tax Officer knew that the assessee-company had been claiming that it was, engaged in the business of manufacture and production of mineral oil. The assessee-company had not only claimed that it was engaged in the manufacture and production of mineral oil, but even otherwise the Income-tax Officer knew that such was the assessee-company's claim. In these circumstances, the provisional assessment being on the basis of the return and in a summary manner, in our opinion, the Income-tax Officer acted in excess of his jurisdiction to determine this mixed question of fact and law at this stage. We have already pointed out that the determination of this question, if there be any dispute about it, would involve an elaborate inquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sial nature of the question which he had to decide. The question which he was deciding was a mixed question of law and fact and that decision was being taken or was required to be taken ex parte in the absence of the assessee-company and without the assessee-company having any opportunity to lead evidence in support of its case. It is in these circumstances that, in our opinion, the provisional assessment should have been on the footing that the assessee-company was engaged in the business of manufacture or production of mineral oil, and in proceeding to decide this question the Income-tax Officer acted in excess of his jurisdiction conferred on him by section 141 of the Act. To appreciate the correct import of the observations, on which reliance has been placed by Mr. Joshi, made in Jaipur Udyog Ltd. v. Commissioner of Income-tax, it would be necessary to state a few facts. The assessee-company had submitted its return and in its returns it was claiming to carry forward a certain loss. It was an admitted position that the amount of loss which the assessee-company was carrying forward in its return was not the one determined by the Income-tax Officer in any assessment. The Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are unable to hold that the petitioners are entitled to the benefit of carry-forward losses of previous years merely because they have shown such losses in the returns. It cannot be said that the Income-tax Officer is not acting on the basis of the return, the accounts and documents accompanying it for the purposes of making the provisional assessments merely because he is applying the relevant provisions of the Act to the uncontroverted facts found in the return or the documents accompanying it. " It would be noticed that the learned judges were considering the question as to the construction of sub-section (2) of section 141. We are here not concerned with that question. It is indeed true that there are observations that it is open to the Income-tax Officer to apply the law to the facts found in the return. But those observations have to be read in the context of that case and I think the observations read as a whole make the position abundantly clear that it is open to the Income-tax Officer to consider the apposite provision of law applicable to the uncontrovertible facts of the case. The basic fact, which was necessary to be established for the purposes of determination o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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