CHHATHU RAM AND ORS. ETC. ETC. versus COMMISSIONER OF INCOME TAX, BIHAR, PATNA AND ORS.

Citation: [1993] 2 S.C.R. 179 · Decided: 03-03-1993 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Dismissed

Judgment (excerpt)

-
CHHATHU RAM AND ORS. ETC. ETC. 
A 
v. 
COMMISSIONER OF INCOME TAX, BIHAR, PATNA AND ORS. 
MARCH 3, 1993 
(B.P. JEEVAN REDDY AND N. VENKATACHALA, JJ.) 
B 
Indian Income Tax Ac4 1922: 
Sections 34(1A), (JB), (JD), 35(6)-Settlenuml-74.ssessment years 
194().41to1947-48-0ffer of settlement of escaped'incom~rder ai:cepting C 
settlement passed-Subsequent appellate order from excess profits tax assess-
ment passed holding no excess profit-tax was leviable in respect of assessment 
year 1942- 41-i?.ectificacion withdrawing deduction of excess profits tax al-
lowed earlier-Whether barred by settlement. 
The appellants-assessees were assessed as individuals under Section D 
23(3) of the Indian Income Tax Act, 1922, for the assessment year 1942-43. 
The incomes assessed included the cash credits in their personal accounts 
in the books of a company. On the basis of the said incomes, an assess-
ment order was made under the provisions of the Excess Profits Tax Act, 
and the tax so determined was deducted in computing the total income E 
assessable under the Income Tax Ac!. 
While the assessees' appeals against the inclusion of the cash credits 
were pending before the Appellate Assistant Commissioner, notices were 
served on the assessees under Section 34(1A) of the Act for the assessment 
years 1940-41 to 1947-48. The assessees applied to the Central Board of F 
Revenue for settlement under sub-section (18) and this was accepted. 
Subsequently the appeals were dismissed by the Appellate Assistant Com· 
missioner. 
Thereafter, consequent on the dismissal of the Revenue's appeals G 
against the Appellate Assistant Commissioner's order allowing the 
assessees' appeals under the E.P.T. Act and the Tribunal's order becoming 
final, the Income Tax Officer, passed order under Section 35(6) rectifying 
the assessment order under the Income Tax Act, relating to assessment 
year 1942-43, and withdrew the deduction allowed earlier by him on ac· 
count of the Excess Profit Tax. 
H 
179 
A 
B 
180 
SUPREME COURT REPORTS 
[1993] 2 S.C.R. 
On appeal by the assessees, the Appellate Assistant Commissioner 
held that in view of the settlement, it was not open either to the Revenue 
or to .the assessee to disturb the finality of the tax liability. However, the 
Tribunal held that the orders of rectification purported to have been 
passed under Section 155(3) of the Income Tax Act, 1961 were really orders 
passed under Section 35(6) of the 1922 Act and hence no appeal could lay 
against such order and that the Appellate Assistant Commissioner's or-
ders were without jurisdiction. 
The assessees' applications under Section 256(1) of the Income Tax 
Act, 1961, were treated by the Tribunal as applications under Section 66(1) 
C 
of the 1922 Act, and dismissed as barred by limitation. 
The assessees' writ petitions for quashing not only the orders of the 
Tribunal but also the rectification made by the Income Tax Officer were 
~ 
dismissed by the High Court. 
D 
Dismissing the appeals, preferred by the assessees, this Court, 
E 
F 
HELD : 1.1. The High Court was right in holding that the settlement 
order did not preclude the Income Tax Officer from passing the order of 
rectification. [184D] 
1.2. The deduction allowed in the original assessment proceedings 
on account of the Excess Profits Tax was not the subject mailer of either 
the notice issued under sub-section (lA) of Section 34 or of the order of 
settlement made under sub-section (18) of the Indian Income Tax Act, 
1922. The appeals under the E.P.T. Act were allowed by the A.A.C. sub-. 
sequent to the acceptance of settlement under Section 34(18). The question 
of withdrawing the deduction granted earlier on account of the Excess 
Profits Tax arose only after the Appellate Assistant Commissioner allowed 
the appeals preferred by the assessee under the E.P.T. Act, by virtue nf 
which no Excess Profits Tax was payable by the assessees. In these cir-
G cumstances, the bar contained in sub-section (lD) of Section 34 does not 
come into play. Once the liability of the assessees under Excess Profits Tax 
Act was held to be nil, the deduction given earlier had to be withdrawn and 
it was accordingly withdrawn under Section 35(6) of the Act. [1868-C] 
1.3. In these circumstances, it is not necessary to decide whether no 
H appeal could lie from the order of rectification under Section 35(6) and 
-~ ........ 
-
-
CHHAHIU RAM v. C.I.T. B!HAR [JEEVAN REDDY. J.] 
181 
~-
whether the Appellate Tribuna

Excerpt shown. Read the full judgment & AI analysis in Lexace.