Case: P.C. Doshi Vs. 7Th Income Tax Officer, C-I Ward, Bombay

either proper to or at the time of the issue of the notice of demand. The petitioner had requested the authorities to supply to him the order of assessment on the basis of which the notice of demand was issued but he was never supplied with the same. It was in these circumstances that this court took the view that, although the writ petitioner, the delay could not be put against him so as to disentitle him to the relief inasmuch as the notice of demand being a nullity, in the circumstances of the case he could ignore the same and wait until some effective action was taken against him, which really affected his interest. The case does not, in our opinion, lay down a general rule that delay is immaterial where the order sought to be quashed is alleged to be without jurisdiction and the petitioner is entitled to wait until further steps in execution of the order are taken by this court was that, on the facts and circumstances, of the case, the delay was excusable and was not such as to entail the rejection of the writ petition in limine. ( 15 ) IN the present case the orders under sections 35 (7) and 35 (8), which really and effectively affected the interest of the petitioners, were passed as early as in February and March, 1961. The further proceedings were consequential proceedings, which were bound to follow in pursuance of the said order. Although it was the petitioners allegation were substantiated by him and the orders quashed, he could not afford to ignore them and treat them as nullities. It was, therefore, necessary for the petitioners to challenge those orders on a writ petition when they were made and the question as to whether they have sought their remedy without any delay has got to be considered with reference to the point of time when the orders were passed and gave a cause of action to the petitioners to complain about them. The contention urged by the learned counsel for the petitioners, therefore, that, since the petition does not suffer from any gross delay when issued, cannot help him in explaining the delay on his part in challenging the orders which really affect the petitioners interest and which were passed as long back as in 1961. ( 16 ) THE third contention of Mr. Trivedi is that after the order were passed he had sought to get them set aside by way of making applications for rectification and the time taken by him in the said rectification proceedings should be excluded in considering the question of delay. Now, in respect of the order relating to the assessment for the assessment year 1951-52, which was made on the 15th March, 1961, the petitioners appears to have made an application for rectification of the same nearly two years thereafter on the 16th of January, 1963. This application was entertained by the respondent in so far as it really and truly related to a mistake apparent on the face of the order and the rectification was allowed. What had happened was that in the order a double addition of the deemed dividend. He deleted the excess part which had been inadvertently added and rectified the order on the 1st September, 1963. On that date at any rate it was clear to the petitioners that their remedy to persuade the Income-tax Officer to delete the entire inclusion of the deemed dividend had failed. Even thereafter the present application, which is made on the 11th July, 1964, is filed after a period of nearly ten months and there is no explanation whatever offered as to why it had not been made earlier. The writ petition so far as it relates to the order made under section 35 (7) relating to the assessment orders for the assessment year 1951-52 still suffers from gross delay. As to the order made under section 35 (8) relating to the assessment for the year 1950-51, which was made on the 23rd February, 1961, an application for rectification appears to have been made on the 18th January, 1963, and the same has been turned down on the 24th April, 1964. In our opinion, this application was a futile application and could not be regarded as any step taken by the petitioners to have their grievance remedied. The order made under section 35 (8) was made by the respondent on the assumption that he had the jurisdiction to pass the same. It did not suffer from any error apparent on the face of the cord as did the order made for the other assessment year, which had inadvertently included an excess amount as the deemed dividend of the assessee. It was, therefore, impossible for the respondent to entertain the application that the order which he had made on his interpretation of the provisions of law, which gave him jurisdiction to make it, suffered from a patent lack of jurisdiction so as to constitute an error apparent on the face of the record. The petitioners, in our opinion, therefore, cannot get themselves excused on the basic of a futile remedy attempted to have been sought by them, which, it may be pointed out, was also after a lapse of nearly two years after the order complained of was made. It appears to us that this application for rectification of the order made after a period of two years was nothing more than an attempt on her part to save the objection of delay to a writ application which may thereafter be made to the court complaining against the original order. ( 17 ) ALL the three arguments, which have been advanced by Mr. Trivedi for the purpose of getting out of the initial difficulty in his way created by the gross delay in the filing of the present writ petition, fail. As we have already pointed out, the petitioners in their application have given no explanation whatsoever for the delay.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]The only course available to thex Officer to include the said divided is by having recourse to proceedings under section 34. Where there is no such inclusion either in the original assessment or in the reassessment of the assessee under section 34, a reassessment of the company and the consequent order under section 23a against the company will not permit the application of section 35 (8) for the purpose of adjusting the assessment of ther on the basis of a mistake apparent from the record.( 12 ) IT is difficult, in the first place, to agree with the submission, at any rate to the whole extent. Secondly, it is difficult to see whether the submission that is advanced can apply to the case. The original assessment which was made on the assessee is not produced before us. Whether in the said original assessment any share of the deemed divided of the company was included or not is not known. It is also not known whether at the time when the assessees assessment was made, an order under section 23a was or was not made against the company. In the absence of proper facts being placed before the court, it is difficult to see whether the submission made by the learned counsel, even if it is substantial, can have application to the present case. Moreover, the argument of the learned counsel that the only way to include the deemed dividend under section 23a in the assessment of the assessee is by having recourse to sections is not correct. Thus, for instance, where even before the assessees assessment is completed there is an order made under section 23a upon the company and thex Officer dealing with the assessees assessment is aware of the same, there is no difficulty in his way in including the deemed dividend of the assessee in the original assessment itself. It is not necessary in such a case that he must first complete the assessment and thereafter reopen it under section 34 for the purpose of inclusion of the deemed divided. It is no doubt true that when at the date of the assessment of the assessee the order under section 23a is not made upon the company or that, even if such an order is made, thex Officer assessing the assessee the assessee is not aware of the same and, subsequently, after the competition of the assessees assessment, he becomes aware of the same or the order is thereafter made, he may have to have recourse to section 34 and reopen the assessment of the assessee on the basis of the subsequent information. In a case, however, where thex Officer has the information about the companys assessment under section 23a and of the share of the deemed divided of the assessee and through inadvertance, oversight or negligence, he omits to include it in the original assessment and realises his mistake, which is obvious and apparent, subsequently, there should, in our opinion, be no difficulty in his way to treat the said omission as a mistake apparent from the record and rectify it under section 35. The argument of the learned counsel, therefore, that in every case recourse must be had to section 34 for the purpose of including the deemed dividend in the assessees assessment does not appear to sustainable. Secondly, in cases falling within the purview of section 35 (8), computation or recomputation of the total income of a partner of the firm is permitted treating the computation or recomputation as a mistake apparent from the record without having recourse to sections or without being hampered by thet prescribed therein. Now one of the cases falling within the purview of section 35 (8) would be, when the firm was originally assessed there was no order under section 23a passed on it, but on subsequent proceedings initiated under section 34 (1) against the firm, it was reassessed and an order section 23a came to be made against it. In such a case, there being no order under section 23a against the firm in the original assessment, there would be no inclusion of any deemed divided in the individual assessment of the partner and the computation of the total income of the partner will obviously not contain any such inclusion. As a result of the order made under section 23a passed on the firm on its reassessment under section 34 (1), recomputation of the total income of the partner will be necessary in order to include therein his share of the deemed dividend. Such a recomputation thex Officer may be able to make by reopening the assessment of the partner under section 34 (1) (b), but it may as well happen that when the order under section 23a comes to be passed against the firm in its reassessment proceedings, the time to reopen the partners assessment under section 34 (1) (b) may have already lapsed. Mr. Trivedi argues that if section 34 (1) (b) proceedings cannot be availed of, thex Officer has no other power to bring the said income to tax. We do not agree with him. It appears to us that thex Officer can also avail of the provisions of section 35 (8) in such a case and recompute the total income of the partner, treating the computation as a mistake apparent from the record within four years of the computation as a mistake apparent from the record within four years of the date of the order under section 23a against the firm and the provision of section 35 (8) is intended to apply to such cases. It seems to us, therefore, that the order passed by thex Officer against the petitioners under section 35 (8) is not without jurisdiction. At any rate, we have no doubt whatsoever that the order under section 35 (8) relating to the assessment for the assessment year1 is not patently without jurisdiction so as to entitle the petitioners to have it quashed on a writ petition irrespective of any delay on their part in approaching the court( 13 ) COMING now to the order passed in relation to the assessment for the assessment year, it would be event from the facts, which we have already narrated, that on the 31st December, 1965, when thex Officer completed the original assessment of the assessee for the said assessment year, he had the information about the section 23a order passed against the company according to which the assessees share of the deemed divided was Rs. 31,568. With that information in his possession, his failure to include the same in the assessees total income could not be regarded as anything else except an obvious or patent mistake through over sing or inadvertence or negligence or lack of mind to the facts on record. It appears that within a short time of making the assessment order he realised his mistake and sought to correct it by an order made under section 35. This order, which he made on the 5th March, 1956, and which was complained of by the assessee in the appeals, which he preferred against the orders of assessment, came to be ultimately deleted by an order of the Appellate Assistant Commissioner on remand to him of the case from the Appellate Tribunal. Thereafter, when in the proceedings initiated under section 34 against the company, a revised order under section 23a read with section 35 (7) came to be passed against the company, the respondent sought to invoke the aid of section 35 (7) for the purpose of giving effect to the said order by rectifying the assessment of the assessee. It is contended by Mr. Trivedi that section 35 (7) was not clearly applicable since that section applies where the order under section 23a is modified in appeal, revision or any other proceeding and not in cases where the company is assessed or reassessed as a result of proceedings initiated under section 34. Mr. Trivedi argues that since in the present case the company was reassessed as a result of proceedings initiated under section 34, the provision applicable was section 35 (8) and not section 35 (7) and consequently the order, which purports to have been passed under section 35 (7), is illegal and without jurisdiction. Here again, we must state, in the first place, that the proper material necessary for the purpose of appreciation of the point has not been put before us by the petitioners. What has been produced as exhibit H purports to be an order made under section 23a read with section 35 (7) and not an order section 23a read with section 34, nor an order under section 23a read with section 35 (8 ). In the body of the order it is stated that in view of the reopening of the assessment under section 34 for the assessment year, the total income of the company is enhanced and the net deemed dividend under section 23a is also revised as specified therein. It would thus be seen that the reopening of the assessment of the company under section 34 resulted not in the passing of an order section 23a as a consequence of the reassessment as contemplated under section 35 (8) but only a revision of the order already passed. Now, section 35 (7) applies to case where the order under section 23a is modified in appeal, revision or any other proceeding or the order is cancelled or varied. The order which is produced before us is a revised order which appears to have been properly passed under section 23a read with section 35 (7) as it is described to be, although the initial reopening of the proceedings might have been on the basis of section 34. It also appears to us that if, as a result of the revision of the order under section 23a made on the company, whether as a result of proceedings under section 34 or by way of appeal or revision, an adjustment was necessary to be made in the assessees assessment, it could be made under section 35 (7) and the action of the respondent in proceeding to make the assessment could not be said to be without jurisdiction. Moreover, even if it were assumed that the proper provision to which he should have had recourse wasn (7), it would make no material difference to the assessees case. Mr. Trivedi has argued that section 35 (8) could not have been resorted to by the officer, although the order under section 23a against the company was revised as a result of the proceedings instituted under section 34 because, if the said section was to be applicable, its operation was only confined to the adjustment required to be made on the difference between the original share of deemed dividend and the revised share of the deemed dividend in accordance with the revised order of the company. In cases falling under section 35 (8), says the learned counsel, the jurisdiction of thex Officer is only confined to recompute the total income and determine the sum payable on the basis of such recomputation as if the recomputation is the rectification of a mistake apparent the total income and determine the sum payable on the basis of such recomputation as if the recomputation is the rectification of a mistake apparent on the face of the record. In other words, argues the learned counsel, what can be deemed to be a mistake apparent on the face of the record. In order words, argues the learned counsel, what relates to the adjustment in consequence of the difference between the original and the recomputed share of the assessee. In the present case thex Officer has made the adjustment including the whole of the deemed dividend as determined by the revised order inasmuch as the original or the unrevised share of the deemed dividend was not included in the assessees original assessment, the purported addition thereof to the assessment having been found to be erroneous and deleted in accordance with the Appellate Assistant Commissioners order. Here again, we may state that it is not as if the original share of the deemed dividend was never included in the assessees income. Although in the original assessment thex Officer had overlooked to include it, he had tried to do it by a subsequent rectification order, which he had made. Unfortunately, however, the said order came to be set aside by the Appellate Assistant Commissioner on the provision of section 35. If the inclusion made in the original assessment had not been wrongly deleted, there was no difficulty of the nature pointed out by Mr. Trivedi in applying the provisions of section 35 (8) to the case. Even otherwise it does not appear to us quite clear that section 35 (8) could not be invoked. The argument of the learned counsel that the recomputation must be combined only to the difference does not appear to us to be invincible. What the section speaks of is the recomputation of the total income of the assessee and the expression total income may permit the addition of the entire amount since the total income is the income on which the tax is liable to be paid. At any rate, the argument advanced by the learned counsel does not convince that there is an error apparent on the face of the record, which would make us ignore the effect of the delay on the part of the petitioners in coming to this court on the present writ application. We cannot, therefore, accept Mr. Trivedis contention that we should overlook the delay in the filing the present petition on the strength of the principles laid own in the cases to which he has made a referenceNow, in that case a notice of demand was served on the petitioner on the 29th March, 1956, intimating to him that a sum of Rs.0 had been determined as payable by him and calling upon him to make the said payment. No order of assessment, however, in pursuance of which the said notice of demand was purported to have been issued was supplied to the petitioner either before or at the time of the said notice of demand. The petitioner made repeated requests to thex Officer to furnish to him the said assessment order and ultimately on the 7th May, 1959, he was informed that the assessment order was not traceable. The department thereafter started the recovery proceedings by issuing a certificate under section 46 (1) of the Indianx Act and on the 16th of August, 1960, prohibitory order came to be issued in the said recovery proceedings. The petitioner requested the authorities to withdraw the said proceedings on the ground that they were patently illegal and without jurisdiction and, since his request was not heeded to, he made the writ petition on the 12th November, 1960, praying for a writ to quash the notice of demand and the recovery proceedings and for directions restraining the respondents from taking any further action in pursuance of the said notice of demand. Now the notice of demand, which could only follow on a proper and legal assessment order having been made in accordance with law, was patently illegal and without jurisdiction inasmuch as no order of assessment had been made or served on the petitioner either proper to or at the time of the issue of the notice of demand. The petitioner had requested the authorities to supply to him the order of assessment on the basis of which the notice of demand was issued but he was never supplied with the same. It was in these circumstances that this court took the view that, although the writ petitioner, the delay could not be put against him so as to disentitle him to the relief inasmuch as the notice of demand being a nullity, in the circumstances of the case he could ignore the same and wait until some effective action was taken against him, which really affected his interest. The case does not, in our opinion, lay down a general rule that delay is immaterial where the order sought to be quashed is alleged to be without jurisdiction and the petitioner is entitled to wait until further steps in execution of the order are taken by this court was that, on the facts and circumstances, of the case, the delay was excusable and was not such as to entail the rejection of the writ petition in limine( 15 ) IN the present case the orders under sections 35 (7) and 35 (8), which really and effectively affected the interest of the petitioners, were passed as early as in February and March, 1961. The further proceedings were consequential proceedings, which were bound to follow in pursuance of the said order. Although it was the petitioners allegation were substantiated by him and the orders quashed, he could not afford to ignore them and treat them as nullities. It was, therefore, necessary for the petitioners to challenge those orders on a writ petition when they were made and the question as to whether they have sought their remedy without any delay has got to be considered with reference to the point of time when the orders were passed and gave a cause of action to the petitioners to complain about them. The contention urged by the learned counsel for the petitioners, therefore, that, since the petition does not suffer from any gross delay when issued, cannot help him in explaining the delay on his part in challenging the orders which really affect the petitioners interest and which were passed as long back as in 1961.( 16 ) THE third contention of Mr. Trivedi is that after the order were passed he had sought to get them set aside by way of making applications for rectification and the time taken by him in the said rectification proceedings should be excluded in considering the question of delay. Now, in respect of the order relating to the assessment for the assessment year, which was made on the 15th March, 1961, the petitioners appears to have made an application for rectification of the same nearly two years thereafter on the 16th of January, 1963. This application was entertained by the respondent in so far as it really and truly related to a mistake apparent on the face of the order and the rectification was allowed. What had happened was that in the order a double addition of the deemed dividend. He deleted the excess part which had been inadvertently added and rectified the order on the 1st September, 1963. On that date at any rate it was clear to the petitioners that their remedy to persuade thex Officer to delete the entire inclusion of the deemed dividend had failed. Even thereafter the present application, which is made on the 11th July, 1964, is filed after a period of nearly ten months and there is no explanation whatever offered as to why it had not been made earlier. The writ petition so far as it relates to the order made under section 35 (7) relating to the assessment orders for the assessment year2 still suffers from gross delay. As to the order made under section 35 (8) relating to the assessment for the year, which was made on the 23rd February, 1961, an application for rectification appears to have been made on the 18th January, 1963, and the same has been turned down on the 24th April, 1964. In our opinion, this application was a futile application and could not be regarded as any step taken by the petitioners to have their grievance remedied. The order made under section 35 (8) was made by the respondent on the assumption that he had the jurisdiction to pass the same. It did not suffer from any error apparent on the face of the cord as did the order made for the other assessment year, which had inadvertently included an excess amount as the deemed dividend of the assessee. It was, therefore, impossible for the respondent to entertain the application that the order which he had made on his interpretation of the provisions of law, which gave him jurisdiction to make it, suffered from a patent lack of jurisdiction so as to constitute an error apparent on the face of the record. The petitioners, in our opinion, therefore, cannot get themselves excused on the basic of a futile remedy attempted to have been sought by them, which, it may be pointed out, was also after a lapse of nearly two years after the order complained of was made. It appears to us that this application for rectification of the order made after a period of two years was nothing more than an attempt on her part to save the objection of delay to a writ application which may thereafter be made to the court complaining against the original order( 17 ) ALL the three arguments, which have been advanced by Mr. Trivedi for the purpose of getting out of the initial difficulty in his way created by the gross delay in the filing of the present writ petition, fail. As we have already pointed out, the petitioners in their application have given no explanation whatsoever for the delay.