K.L.Roy, J. - (1.) This is an application under Article 226 of the Constitution challenging the validity of a notice issued by the respondent-Income-tax Officer, under Section 148 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). The petitioner is a company incorporated under the Indian Companies Act having its registered office at B-4, Gillander House, Calcutta. It used to carry on business as colliery owners. By an indenture of sale executed and registered on the 28th September, 1957, the petitioner sold its collieries to M/s. Bhowra Kankanee Collieries Ltd. with effect from 1st January, 1955, for a total consideration of Rs. 62 lakhs with a abatement of Rs. 5 lakhs on account of the retrenchment compensation liability of the vendor taken over by the purchaser. The petitioner-company went into voluntary liquidation on the 26th June, 1958, and the present petition has been filed on behalf of the petitioner-company by the liquidators. The company's accounting year ended on the 30th September, in each year. The petitioner-company's assessment for 1956-57 was completed by the then Income-tax Officer, Ward-A, District II, Calcutta, on the 29th December, 1960, and after considering the aforesaid conveyance of sale, the said Income-tax Officer purported to include the excess of the sale price over the written down value of the assets in the total income of the petitioner under the proviso to Section 10(2)(vii) of the Income-tax Act, 1922. The petitioner preferred an appeal against the aforesaid assessment order to the Appellate Assistant Commissioner, but did not challenge the inclusion of the said profits under Section 10(2)(vii). The petitioner's assessment for the assessment year 1958-59, for which the corresponding accounting year ended on the 30th September, 1947, was completed by the same Income-tax Officer on the 28th February, 1961. In the order of the said assessment it was recorded as follows : "The company sold all its collieries to M/s. Bhowra Kankanee Collieries Ltd., 5, Royal Exchange Place, Calcutta, vide indenture dated September 28, 1957, with effect from January 1, 1955. Copy of the indenture is on record. After the sale of collieries till its voluntary liquidation on June 26, 1958, the company has been deriving income only from interest and dividends. There was absolutely no business during the year of account nor in subsequent years. That coal business has been discontinued from January 1, 1955, is further established from the report of the auditors on the balance-sheet for the account year ending September 30, 1956, where it is clearly written. As the company has ceased to carry on business, no distinction has been made between capital and revenue reserves and the accumulated losses have been set off against them. This has also been accepted by the company as would be seen from the report of the directors to shareholders from the year ending September 30, 1956, which is as under. "The company ceased to trade after the transfer of its properties to Bhowra Kankanee Collieries Ltd. on January 1, 1955."
(2.) Accordingly, for this year the assessment was made only on the interest on securities and dividend income of the petitioner and expenses debited to the head "Loss on working" were disallowed.
(3.) In respect of the assessment year 1956-57 the petitioner went on further appeal to the Appellate Tribunal and at the time of the hearing the petitioner asked for and obtained leave to urge a fresh ground of appeal, namely, that the profits under the aforesaid proviso to Section 10(2)(vii) amounting to Rs. 2,21,057 in respect of the immovable properties could not be included in the income for the assessment year 1956-57, as the sale of the immovable properties was not completed till the registration of the conveyance of sale. In view of the decision of the Supreme Court in Commissioner of Income-tax v. Bhurangya Coal Co., the Tribunal accepted the contention of the assessee and directed the Income-tax Officer to exclude from the total income of the appellant for the assessment year 1956-57, the amount of the profits under Section 10(2)(vii) consequent upon the sale of the immovable properties. The Tribunal also observed in its aforesaid order that such profits were liable to be included in the total income of the appellant in the assessment year 1958-59. This order was made on the 21st July, 1965. Subsequently, by an order under Section 35 of the Income-tax Act, 1922, the Tribunal purported to rectify its aforesaid order by deleting the words "liable to be included in the total income of the appellant in the assessment year 1958-59" in paragraph 9 of the said order following the decision of the Supreme Court in Income-tax Officer, A-Ward, Sitapur v. Murlidhar Bhagwan Das .;