9911796707
TMI Blog1964 (11) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... to the shareholders. As this amount exceeded the total income as reduced by seven annas in the rupee and a donation of Rs. 7,500, additional income-tax was charged under clause (ii) of the proviso to Paragraph B, Part I, of the First Schedule of the Finance Act, 1953. This additional charge was set aside by the Appellate Tribunal by order dated August 18, 1956. The Income-tax Officer then addressed a letter dated November 12, 1956, to the company intimating that he proposed to rectify the assessment of the year 1952-53 in exercise of the powers under section 35(10) of the Income-tax Act, and to withdraw the rebate, because in his view the company in distributing Rs. 11,68,000 as dividend had utilised the undistributed profits of the previous year held admissible to rebate. The company contended, inter alia, that it was not true that the dividend or any part thereof came out of the undistributed profits of the assessment year 1952-53. By his letter dated February 21, 1958, the Income-tax Officer informed the company that " on a study of the figures of the assessment year 1953-54 ", it was disclosed that the net book profits amounted to Rs. 31,03,760 out of which Rs. 12,37,533 wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income of the company, that the provisions of section 35(10) which had been added by section 19 of the Finance Act, 1956, had no application to the company's case, because the Act was not retrospective and orders which had become final and conclusive before the first April, 1956, were not covered by that provision and could not be rectified thereunder. The company also contended that the amount of Rs. 11,68,000 paid as dividend did not come out of the profits of the assessment year 1952-53 and that there were large profits available in other years out of which the dividend was in fact paid. The petition was rejected by the High Court. Before the High Court the questions that the statute was ultra vires as infringing the constitutional provisions set out in the petition, that it travelled beyond the ambit of section 3 of the Income-tax Act and that section 35(10) was inapplicable to the order rectified because it had no retrospective operation were not pressed. The primary question argued before the High Court was that the order passed under section 35(10) withdrawing the rebate granted in the previous year was not liable to be withdrawn as Rs. 11,68,000 declared as dividend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall recompute the tax payable by the company by reducing the rebate originally allowed, as if the recomputation is a rectification of a mistake apparent from the record within the meaning of this section and the provisions of sub-section (1) shall apply accordingly, the period of four years specified therein being reckoned from the end of the financial year in which the amount on which rebate of income-tax was allowed as aforesaid was availed of by the company wholly or partly for declaring dividends." There is no dispute that in the assessment year 1952-53 the company obtained rebate on the amount of undistributed profits under clause (i) of the proviso to Paragraph B of Part I of the First Schedule to the Finance Act, 1951. The Income-tax Officer decided that the net available profits for distribution by the company in the account year 1952 were only Rs. 3,16,227 and without drawing upon the undistributed profits for which rebate was given in the account year 1951, the company could not distribute Rs. 11,68,000 as dividend. The assessment order made by the Income-tax officer for the year 1953-54 (account year being 1952) was, it appears, not before the High Court, but copies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks by depreciating the value of the closing stock and was not in truth profit of the year 1951, for which on the undistributed profits rebate was given. The argument is that the company attempted in the year 1950 to reduce its profits by undervaluing its closing stock by Rs. 9,80,162 and that amount which was reflected in the account of 1951 must be regarded as profit of the year 1950, and as no rebate was received in respect of that profit, section 35(10) has no application. But from the assessment order relating to the account year 1950 it is clear that the amount of Rs. 9,80,162 was in fact added by the Income-tax Officer and the total income was computed on that footing. In the assessment to tax of the income of the account year 1951, readjustment was made in the Stock valuations, both opening and closing. The opening stock was valued as at the figure at which the closing stock was valued for the year 1950 and for that purpose an adjustment of Rs. 9,80,162 was made, and the closing stock was depreciated by Rs. 12,37,533, and the difference was taken into account in computing the profits of that year. In this state of accounts, it is difficult to accept without full examination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e particular case, the court was satisfied that before passing an order under section 35(10) no investigation into disputed questions of fact is necessary, it would be the duty of the court if it is otherwise satisfied that the order is erroneous or unjust on the face of the record, to grant relief in a petition under article 226 of the Constitution, and if the High Court did that, no grievance can be raised against the order. In this case, however, the High Court has declined to exercise its discretion on the ground that disputed questions of fact arose which it would not be justified in considering in a petition under article 226 of the Constitution. There is again no ground for holding without full investigation that any injustice patent or otherwise has resulted. It is true that the Income-tax Act provides no appeal against the order passed under section 35(10). But that cannot by itself be a ground for ordering the High Court to entertain a petition which, in the exercise of its discretion, the High Court has declined to entertain. It may be noticed that a party aggrieved by an order under section 35(10) is not without a remedy. An application under section 33-A(2) to the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
