COMMISSIONER OF INCOME TAX Vs. SANDVIK ASIA LIMITED

JUDGEMENT

(1.) THIS is an application under s. 18 of the Companies (Profits) Surtax Act, 1964, read with s. 256(2) of the I.T. Act, 1961, by the CIT for an order directing the Income -tax Appellate Tribunal to state a case and refer to this High Court the following four questions : '(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that reassessment proceedings under section 8(b) of the Companies (Profits) Surtax Act, 1964, were not valid and in holding that the Appeallate Assistant Commissioner was justified in annulling the reassessment order made by the Income -tax Officer ? (2) Whether, On the facts and in the circumstances of the case, the Tribunal was right in law in holding that the mere nothing of the Income -tax Officer on the letter dated December 3, 1970, stating that the proceedings were already dropped could not be considered as an order to terminate the proceedings and further holding that the reassessment proceedings were not valid ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Income -tax Officer could not invoke rule 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, in order to effect a proportionate reduction in the assessee - company's capital having regard to the deduction allowed to it under section 80 -I of the Income -tax Act, 1961, in the computation of its total income ? (4) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that thi reduction of Rs. 17,75,166 in the assessment reopened under section 8(b) of the companies (Protifs) Surtax Act, 1964, was not in accordance with law and in holding that rule 4 of the Second Schedule to the said Act is not applicable to the case ?'

(2.) THE brief facts necessary for an understanding of this matter are that the respondents filed their returns under the Companies (Profits) Surtax Act, 1964, with the ITO for the assessment years 1968 -69 and 1969 -70 on December 3,1970, showing no amount payable by way of surtax by them. These returns were forwarded by the respondents along with a covering letter bearing the same date. Thereafter, the ITO issued a notice under s. 8(b) of the said Act for reopening the assessment made. Returns were filed by the respondents in pursuance of the said notice, once again showing that no amount of surtax was payable by them. Thereafter, the ITO passed an order of reassessment under s. 6(2) read with s. 8(b) of the said Act by which he held that deductions under s. 80 -I of the I.T. Act, 1961, from gross total income allowed to the respondents were in respect of amounts not liable to be included in their total income as computed under the said Act and that, therefore, r. 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, was applicable and the capital computation had to be reduced accordingly. The respondents filed an appeal against the said order. One of the grounds taken in the appeal by the respondents was that the ITO had no jurisdiction to reopen the assessment inasmuch as the assessment proceedings, pursuant to the returns filed by the respondents, had not been concluded and were pending. The respondents further objected to the disallowance of the said deductions. Both these objections were allowed by the AAC. There was another contention raised by the respondents with respect to dividends, which was disallowed by the AAC and with which we are not concerned in this application. Against the order of the AAC, the department unsuccessfully went in appeal to the Tribunal. The department thereafter applied to the Tribunal to state the case to this court and refer to it the four questions set our above. This application was rejected by the Tribunal. Thereafter, the petitioner has approached this High Court.

(3.) MR . Joshi, learned counsel for the petitioner, has, however, referred us to two decisions of the Supreme Court and a decision of the Madras High Court in which it was held that the assessment proceedings in question were concluded by certain notings made by the ITO. In our opinion, none of those cases have any relevance to the facts before us. These notings are, as will be seen presently, different from the nothing in the case before us. In the present application, the proceedings are not bing dropped not the assessment being concluded or closed by the noting in question. This nothing expressly refers to the proceedings having been already dropped, that is, dropped prior to the date of the nothing. If that was so, there would be an order or a nothing to that effect in the order sheet. None has been produced, and the Tribunal was, therefore, right in coming to the conclusion that there was no such order concluding the proceedings.