MALAIYA BROTHERS vs COMMISSIONER OF Income Tax.

N. D. OJHA C.J. - The Income Tax Appellate Tribunal, Jabalpur Bench, Jabalpur, has referred the following question to this court for its opinion u/s 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") :

"Whether, on the facts and in the circumstances of the case, the Income Tax Officer had jurisdiction to pass assessment orders on January 31, 1977, u/s 143(3) of the Income Tax Act, when earlier he had passed assessment orders on April 6, 1976, after passing of the appellate orders by the Appellate Assistant Commissioner on February 19, 1976 ?"

The proceedings relate to the assessment years 1971-72 and 1972-73. The assessee had claimed certain deductions in respect of loss pertaining to its Satna Branch styled as M/s. Shrenik Oil Mills. The amount of loss claimed by the assessee was disallowed by the Income Tax Officer. On appeal, however, the Appellate Assistant Commissioner set aside the order of the Income Tax Officer on this point and directed him to record a fresh finding with regard to the amount of loss claimed by the assessee. It appears that the order of remand was somehow misconstrued by the Income Tax Officer and in place of determining the quantum of loss actually incurred by the assessee, the Income Tax Officer proceeded to allow the entire amount of loss claimed by the assessee. On the mistake being discovered, the Income Tax Officer issued a notice to the assessee requiring the assessee that he liked to have further information and for this purpose the assessee was required to attend his office and produce such documents and other evidence on which reliance was sought to be placed. A copy of this notice has been attached as annexure "E" to the statement of the case. In pursuance of the notice so issued, a representative of the assessee appeared with the account books and the matter was discussed by the Income Tax Officer with the said representative. Thereafter, he determined the actual amount of loss incurred by the assessee for the two assessment years pertaining to its Satna Branch styled as M/s. Shrenik Oil Mills. The determination so made was challenged by the assessee in appeal before the Appellate Assistant Commissioner and thereafter before the Tribunal in appeal and in second appeal, respectively. This challenge, however, failed on the finding that what the Income Tax Officer had done by the subsequent order was just to comply with the requirement of the order of remand passed by the Appellate Assistant Commissioner earlier. At the instance of the assessee, however, the aforesaid question was referred to this court.

It has been urged by learned counsel for the assessee that once the Income Tax Officer had passed a fresh order in pursuance of the order of remand, he became functus officio and he could have revised his order only after recourse to procedure contemplated by sections 147 and 148 of the Act and since, in the instant case, the aforesaid procedure was not followed, the subsequent order was invalid. In reply, it was urged by learned Counsel for the Department that the subsequent order was passed by the Income Tax Officer not in a proceeding under sections 147 and 148 of the Act but u/s 154 thereof. According to him, as has been found by the Tribunal, the Income Tax Officer had, in passing the subsequent order, only complied with the order of remand passed by the Appellate Assistant Commissioner which he had failed to do. At the first instance, it was a clear case of a mistake apparent on the face of the record and the subsequent order was, therefore, justified u/s 154. TO this stand taken by learned counsel for the Department, it was urged by learned counsel for the assessee that the order cannot be justified even u/s 154 of the Act inasmuch as the notice which was issued to the assessee and a copy whereof has been attached as annexure "E" to the statement of the case, does not indicate that any mistake apparent on the face of the record was sought to be corrected. On the other hand, the said notice purported to reconsider the matter of assessment. In our opinion, undue significance does not deserve to be placed, in the instant case, on the form of the notice. What was to be done by the Income Tax Officer in pursuance of the order of remand was known to the assessee, namely, determination of the amount of loss. By the subsequent order, it is apparent that this determination, which was made by the Income Tax Officer, was of the amount of loss and was done after discussing the matter with the representative of the assessee.

While dealing with a case u/s 35(2) of the Indian Income Tax Act, 1922, it was held by the Supreme Court in Maharana Mills (Private) Ltd. Vs. Income Tax Officer, Porbandar, , that the object of the provision as to notice in the second sub-section of section 35 is that no order should be passed to the detriment of an assessee without affording him an opportunity but it cannot be said that the rule is so rigid that if, as a matter of fact, the assessee knows of the proceedings and the matter has been discussed with him then, an adverse order would be invalid merely because no notice u/s 63 was given. In the instant case, as seen above, reasonable opportunity was afforded to the assessee by the Income Tax Officer and the subsequent order was passed only after discussing the matter with the representative of the assessee.

In the result, our answer to the question referred to us is in the affirmative, against the assessee and in favour of the Department. In the circumstances of the case, there shall, however, be no order as to costs.