TMI Blog1976 (6) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 1962-63, the relevant previous year being the financial year 1961-62. The assessee belongs to Gujarat and before he settled down in Gujarat, he was practising as an auditor at Nairobi in East Africa. He returned to India in the year of account relevant to the assessment year 1962-63, and settled at Vallabh Vidyanagar, Anand, Kaira District. The assessment year 1962-63 was the first year of assessment of the assessee and he filed his return of income disclosing " nil " income in the status of " resident " for the said assessment year. During the course of assessment proceedings, the Income-tax Officer noticed that the assessee had started construction of an immovable property at Anand in the year 1958 which was completed by the end of the financial year 1961-62. As the Income-tax Officer was not satisfied with the explanation of the assessee regarding the source of the funds with which the said property was constructed, he included a sum of Rs. 16,640 as the assessee's income from other sources. The other income assessed was Rs. 13 earned by way of interest and thus the total income assessed came to Rs. 16,653. By an order dated December 16, 1965, the Income-tax Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62-63 was concerned on the ground that the assessment for that year was already completed when the declaration under section 113, sub-section (5), was sought to be made by the assessee. The Inspecting Assistant Commissioner with whom the power of approval of such declaration lay under section 113 refused to consider the assessee's prayer that the option may also be made applicable to assessment year 1962-63. The assessee was aggrieved by the order passed by the Income-tax Officer under section 154 and before the Appellate Assistant Commissioner he contended that the Income-tax Officer had erred in not taking into consideration the declaration under section 113, sub-section (5), of the Act for the purpose of determining the rate of tax in the status of " resident but not ordinarily resident ". The Appellate Assistant Commissioner upheld the assessee's claim that the declaration under section 113, sub-section (5), of the Act was effective for the assessment year 1962-63 also. In the view taken by the Appellate Assistant Commissioner, the assessment order dated December 16, 1965, passed by the Income-tax Officer was in the status of " resident and ordinarily resident " and the order i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into account for any purpose of assessment. Prior to its deletion in 1965, section 113 provided for tax in case of non-residents and persons not ordinarily resident. It may be pointed out that under section 2, sub-section (30), of the Act of 1961, " non-resident " means a person who is not a " resident ", and includes a person who is not ordinarily resident within the meaning of sub-section (6) of section 6. Under sub-section (1) of section 113, where a person is a non-resident and is not a company, the tax payable by him or on his behalf, on his total income was to be an amount equal to the income-tax which would be payable on his total income at the maximum rate, plus either the super-tax which would be payable on his total income at the rate of nineteen per cent. or the super-tax which would be payable on his total income if it were the total income of a resident, whichever was greater. Under sub-section (3), any non-resident other than a company, might, on or before the 30th day of June of the assessment year in which he first became assessable as a non-resident, by notice in writing to the Income-tax Officer, declare (such declaration being final and being applicable to all as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent assessment years. It is the last portion about the effect of the declaration that is in controversy before us. In view of the facts which we have set out above, the question that we have to decide is, whether assessment for assessment year 1962-63 can be said to have been pending on the date when the assessee applied on November 11, 1966, for making the declaration. It is not in dispute that for years subsequent to assessment year 1962-63, that is, for assessment year 1963-64 onwards, the benefit of this declaration was given to the assessee. It is only the question of assessment year 1962-63 which is in dispute between the assessee and the revenue. The Inspecting Assistant Commissioner held by his order dated January 25, 1968, that the delay was not condoned for assessment year 1962-63 and the delay was condoned for 1963-64 and the assessments for 1963-64 and 1964-65 might be made at world income rates. That is shown by annexure " C " to this reference. The Appellate Assistant Commissioner relied upon the decision of the Supreme Court in S. Sankappa v. Income-tax Officer [1968] 68 ITR 760 (SC) and took the view that the declaration filed on November 11, 1966, ought to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es is to correct errors in, or rectify orders of assessment made by him, and orders making such corrections or rectifications are, therefore, clearly part of the proceedings for assessment." In view of this decision of the Supreme Court it is obvious that rectification proceedings are proceedings for assessment and are part of the proceedings for assessment. Section 154 of the Act of 1961 substantially reproduces the provisions of section 35(1) of the Act of 1922 and whatever has been said by the Supreme Court in S. Sankappa's case [1968] 68 ITR 760 (SC) relating to rectification proceedings under section 35(1) of the Act of 1922 will apply to rectification proceedings under section 154 of the Act of 1961. In K. L. Varadarajan v. Commissioner of Income-tax [1975] 98 ITR 182 (SC) the Supreme Court was concerned with a declaration under section 17(1) and reassessment proceedings under section 34 of the Act of 1922. As already pointed out above, section 113 of the Act of 1961 reproduces the provisions of section 17(1) of the Act of 1922. At page 185 of the report, Khanna J., delivering the judgment of the Supreme Court, observed : In appeal before us, Mr. Desai on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after'. The words of the second proviso to section 17(1) reproduced above make it clear that the declaration would be operative not only for the assessment for the year in which the declaration is made if such assessment had not been completed before such declaration, but also for all assessments to be made thereafter. The words ' all assessments thereafter ', in our opinion, signify not only assessments for the subsequent years but would also cover assessments for the earlier years in case the assessments for those earlier years are being made subsequent to the filing of the declaration. The words ' all assessments thereafter ' have a wide amplitude and we see no cogent reason for not giving them their natural meaning or for restricting their scope. Those words would include within their ambit all-assessments made subsequent to the filing of the declaration and it would be wrong to so construe them as if the legislature had used the words 'all assessments for the subsequent years'. " It may be pointed out that under section 113 of the Act of 1961 the legislature departed from the phraseology of the second proviso to section 17(1) when it enacted sub-section (5) of section 113 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar provisions in the other sub-sections of section 155 dealing with different situations. There is a time-limit provided in each of these cases, within which power to rectify the assessment must be exercised by the Income-tax Officer. We are not referring here to the powers of appeal and revision since these powers are necessary concomitants of every judicial or quasi-judicial adjudication and the assessment made by the Income-tax Officer can always be interfered with in appeal or revision. But, it may be pointed out that in appeal and revision also, time-limits are provided in the relevant sections. These sections are all enabling sections which permit disturbance of the finality of an assessment at various stages under different conditions and within different time-limits. Each section is an independent section with its own distinctive conditions and its own particular time-limit and if the conditions are satisfied and action is taken within the time-limit, it opens the door for interfering with the finality of the assessment. It may be that a particular door provided by a section for penetrating the finality of an assessment is closed because the conditions of entry through t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assessee was entitled to appeal against the order of rectification to the Appellate Assistant Commissioner on the footing that in such a case, the assessee would be objecting to the amount of income assessed under section 23 or the amount of tax determined under section 23. Bhagwati C.J. observed--See [1973] 90 ITR 332, 336 (Guj) : " The words ' under section 23 ' must therefore, be given due effect in interpreting this clause. These words in the context in which they occur can mean ' by virtue of ' or ' in exercise of the power conferred under section 23 '. If assessment of income or determination of tax has taken place under any other provision of the Act, it would not attract the right of appeal, unless of course it falls within any other clause of section 30, sub-section (1). The decision of the Supreme Court in S. Sankappa's case [1968] 68 ITR 760 (SC) was considered by the Division Bench and it was held : " ... a proceeding for rectification of an assessment under section 23 is a proceeding for assessment; it is part of the procedure for ascertainment and imposition of tax liability on the assessee. When an assessment made under section 23 is rectified by an or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular case was as to which was the final order passed in the case of the firm within the meaning of section 35, sub-section (5). In that case against the original order of assessment of the Income-tax Officer, an appeal was taken to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner considered only some of the items and gave his decision at the appellate stage only regarding those items. This High Court held in Karsandas Bhagwandas Patel's case [1975] 98 ITR 255, 265 (Guj) : " That part of the order of assessment which relates to items not forming the subject-matter of the appellate order is left untouched and does not merge in the order of the Appellate Assistant Commissioner. " Therefore, a mistake in that part of the order of assessment which was not the subject-matter of appeal before the Appellate Assistant Commissioner and had been left untouched can be rectified by the Income-tax Officer under section 35 of the Act of 1922 and if the order of assessment was rectified in the case of a firm, to give effect to the result of the rectification in the assessment of the individual partners of the firm, the provisions of section 35(5) of the Act of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeding can by any possibility be taken. That I think is the meaning of the word ' pending ' ....... A cause is said to be pending in a court of justice when any proceeding can be taken in it. That is the test." Mr. Patel for the assessee also relied upon the decision of the Calcutta High Court in Radha Ballav Poddar v. Motilal Chanda Sarkar AIR 1951 Cal 569. There it was held that the word " pending " in section 5 of the West Bengal Premises Rent Control (Temporary Provisions) (Amendment) Act, 1950, should be liberally construed so as to include a case such as the one where although no actual appeal was pending when the Amending Act came into force an appeal was subsequently filed within limitation and, consequently, the appeal was to be disposed of on the basis that the law in force at the time when the decree was passed was the law as it stood amended by the Amending Act. In our opinion, this decision of the Calcutta High Court is not of much assistance to us in deciding the question before us. However, in the light of the observations of Jessel M. R. which have been approved by the Supreme Court in Asgarali Nazarali's case AIR 1957 SC 503, it can safely be said that a matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax and was not approved by him, was not correct. The real test to be applied was whether on the date on which the declaration was made the assessment for assessment year 1962-63 was pending and as we have pointed out, in view of the liberal interpretation put on the word " pending ", particularly to avoid anomaly and absurdity, assessment for assessment year 1962-63 can be said to be " pending " on the date of the declaration. It may be pointed out that the words in bracket " if such assessment had not been completed before such declaration ", occurring in section 113, sub-section (5), refer to the assessment for the year in which the declaration is made, that is, in 1966. As pointed out earlier, section 113 was deleted from the statute book with effect from April 1, 1965, by the Finance Act, 1965. Therefore, there was no question of the declaration having effect on assessment for assessment year 1967-68. The real question is whether the declaration will affect any assessment pending on the date of such declaration. In our opinion, the Tribunal erred in law in not considering whether the assessment for assessment year 1962-63 was pending on the date of the declaration instead of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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