B.P.Jeevan Reddy, C.J. - (1.) The Income-tax Appellate Tribunal has stated the following question under Section 256(1) of the Income-tax Act, 1961 : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the provisions of Section 155 (3) of the Income-tax Act, 1961, were not applicable to the facts of this case and hence the Income-tax Officer was not competent to rectify the assessments under that section by withdrawing the deduction of excess profits tax liability allowed earlier even when the excess profits tax proceedings were quashed by the court ?"
(2.) The assessee is an Hindu undivided family. The income-tax assessments of the assessee for assessment years 1944-45 to 1947-48 were completed in March, 1953. The excess profits tax payable by the assessee for each of these years was allowed as a deduction while computing the total income of the respective years. Subsequently, notices were issued under Section 13(1) of the Excess Profits Tax Act, 1940, to the assessee with respect to the said four assessment years, the validity whereof was questioned by the assessee on the ground that the Hindu undivided family having got disrupted on October 1, 1951, proceedings for assessment of the excess profit tax cannot be initiated against it. The said contention was upheld by this court and an appeal preferred by the Department to the Supreme Court was dismissed on August 28, 1972 (ITO v. Ram Prasad [1972] 86 ITR 145). After the decision of the Supreme Court, the assessee called upon the Department to refund the amount paid by it on account of excess profits tax during the said years. It is then that the Income-tax Officer initiated proceedings for rectifying the income-tax assessment orders for the said years under Section 154 read with Section 155(3). The assessee objected to the rectification, but its objections were overruled and the assessment orders were revised, withdrawing the deduction granted on account of the excess profits tax. An appeal to the Appellate Assistant Commissioner was dismissed. The matter was then carried by the assessee to the Tribunal. The Tribunal held that, on its language, Sub-section (3) of Section 155 is not attracted and is not applicable to the facts of the case and, therefore, the orders of rectification are bad. The Revenue thereupon applied for and obtained this reference.
(3.) Section 155(3) reads as follows : "Where the excess profits tax or the business profits tax payable by an assessee has been modified in appeal, revision or any other proceeding, or where any excess profits tax has been assessed after the completion of the corresponding assessment for income-tax and in consequence thereof, it is necessary to amend the total income of the assessee chargeable to income-tax, the Assessing Officer may make the necessary amendment and the provisions of Section 154 shall, so far as may be, apply thereto, the period of four years specified in Sub-section (7) of that section being reckoned from the date of the order making or modifying the assessment of such excess profits tax or business profits tax, as the case may be. Explanation.--For the purposes of this sub-section, where the assessee is a firm the provisions of Sub-section (1) shall also apply as they apply to the amendment of the assessment of the partners of the firm.";