- (1.) THIS is a writ petition under article 226 of the Constitution directed against the orders dated the 17th July, 1962, under section 35 of the Income-tax Act, 1922 (hereinafter referred to as the Act), withdrawing the super-tax rebate under clause I (c) to the second proviso to paragraph D of Part II of the First Schedule of the Finance Act of 1958.
(2.) THE material facts leading up this petition are these : THE petitioner is a company duly registered with effect from the 31st December, 1953. THE relevant assessment years are 1958-59 and 1959-60. For the assessment year 1956-57, when there was a similar provision regarding the rebate of super-tax, the then Income-tax Officer did not make any reduction in the rebate of super-tax on account of excess dividends beyond six per cent of the paid up capital. For the assessment year 1957-58, the same Income-tax Officer reduced the amount of super-tax in terms of the Finance Act of 1957, the relevant provision whereof was in the same terms as that contained in the Finance Act of 1956. For the relevant assessment years 1958-59 and 1959-60 it was claimed by the petitioners before the Income-tax Officer, on the basis of the decision of the Bombay High Court in Khatau Makanji Spinning and Weaving Co. Ltd. v. Commissioner of Income-tax and the decision of the Supreme Court condensed in Taxation of August, 1960, (since reported in 40 ITR 189), that the provisions of the Finance Act of 1958-59 in regard to the reduction of super-tax rebate was on par with the provision of clause (ii) of the proviso to paragraph B of Part I of the First Schedule to the Indian Finance Act of 1951 whereby an additional income-tax was charged in respect of dividends distributed in excess of Rs. 0-9-0 in the rupees. THE assessment order passed by the said officer for the assessment year 1958-59 contained no discussion on this point as to whether the relevant provisions of the Finance Acts of 1958-59 are in pari material or analogous to the aforesaid provisions of the Indian Finance Acts of 1951. THE orders passed are silent and it was for this reason that the petitioners were obliged to state that they considered that the view put forward by them before the then Income-tax Officer was accepted by him and therefore no super-tax rebate was directed to be reduced because of excess dividends having been declared. Subsequently, another Income-tax Officer who had succeeded the Income-tax Officer who made the original assessments for 1958-59 and 1959-60 issued two notices for the relevant years of assessment dated the 26th March, 1962, under section 35 of the Act. These notices were as follows : It appears that in the calculation of super-tax payable by you the dividends declared by you over and above six per cent. of the share capital for which necessary reduction in the super-tax rebate should have been made has not been properly done due to which the super-tax payable by you has been charged less. It is a mistake apparent from the record and I wish to rectify it under section 35. Please let me know your objections, if any, by March 31, 1962. These notices were served on the 27th of March, 1962, and an application was made for extension of time for filing objections and time was given up to the 7th of April, 1962. Prior to the expiry of this time, on the 5th of April, 1962, the petitioners submitted their objections. The main objections were (1) that no withdrawal of super-tax rebate was made in the assessment for 1956-57 and therefore no rectification was called for; (2) that the Supreme Court in the Case Commissioner of Income-tax v. Khatau Makanji Spinning & Weaving Co. Ltd., had upheld the view of the Bombay High Court that the provision in the Finance Act of 1951 in respect of additional income-tax on account of excess dividend was ultra vires and the provisions of the Finance Acts of 1958 and 1959 were analogous to the provision in the Finance Act of 1951 and, therefore, the super-tax rebate could not have been withdrawal and (3) that the matter was a controversial one which could not be decided under section 35 of the Income-tax Act, a provision which deprived the petitioner of its right of appeal. These objections were overruled holding that the decision of the Supreme Court was not relevant to the point at issue here as the two provisions were not at all analogous and that the error committed was an error apparent on the record and, therefore, the provisions of section 35 of the Income-tax Act, 1922, were clearly attracted. The Income-tax Officer, therefore, by his two orders dated the 17th July, 1962, withdrew the super-tax rebate to the extent of Rs. 10,737 and Rs. 24,173 for the assessment years 1959-60 and 1958-59 respectively.
(3.) TO complete the narration of facts the petitioner had appealed against the order of assessment for the assessment year 1959-60 to the Appellate Assistant Commissioner who had partly allowed the appeal. As a result a refund became due to the petitioners in the sum of Rs. 23,989.05. A refund voucher was however issued on the 3rd of April, 1962, for Rs. 13,252.05 only; the refund, therefore, was short by Rs. 10,737 which was the precise amount subsequently reduced under the section 35 order passed by the Income-tax Officer for the assessment year 1959-60. On the basis of the said refund voucher the petitioner contends that the Income-tax Officer had already made up his mind on the 3rd April, 1962, and therefore, the notice issued to him on the 26th of March, 1962, under section 35 of the Act was merely a farce and as such no effective opportunity as required by section 35 can be said to have been given to it. It is also contended in this writ petition that the provisions of section 35 of the Act are not attracted and the correct section under which action ought to have been taken was section 34 of the Act.;