K. Parameswaran Pillai vs Additional Income Tax Officer Quilon

Varadaraja Iyengar, J.—These two petitions are filed by the same Petitioner under Article 226 of the Constitution and call in question two separate but similar orders of the common Respondent the Income Tax Officer, Qulin. The question is whether the Income Tax Authority acted in excess of jurisdiction when he purported by these orders to rectify, on ground of allured mistake, two original orders already passed, assessing the Petitioner to Income Tax for the consecutive years 1124 M. E. and 1951-52. We. will take up these petitions in their order.

O. P. No. 119 of 1955. The Petitioner is a merchant in Quito. He carries on two lines of business activity, one being in tobacco, wholesale and retail, and the other in cashew kernels, manufacture and export.

His assessment to income-lax for the year 1124 was made by order dated 30-5-1953 under the Travancore Income Tax Act, 1121. This order is filed as Ext. A and it shows that his total income was made up under three heads as follows:

Property Rs. 16,420 Business Rs. 93,245 Other sources Rs. 666 _______________ Total Rs. 110,331

This total income was adjusted and set off against the larger loss of Rs. 131, 878 of the previous year i.1123 M. E., which has been allowed to be carried over to the next year along with an unabsorbed depreciation of Rs. 13,728-11-0. The net loss for the year 1124 M. E. was on this basis ascertained to be Rs. 21,547 and there was accordingly no levy and collection of tax for that year.

The rectification proceedings were, one after the other, taken by the Respondent with reference to Ext. A, order u/s 48 of the Travancore Income Tax Act corresponding to Section 35 of the Indian Act. By the first order filed in the case as Ext. B he cancelled the adjustment and set off as regards two of the heads of income viz., property and other sources as shown above and made their total of Rs. 17,086 available for assessment to Income Tax. The -explanation was given that the previous year''s loss was under business which could not legitimately be adjusted against net income from property and other sources. Anyhow the Petitioner did not object and? we are not concerned further with this order.

By the second Rectification proceedings which are filed in the case as Ext. C, the Respondent sprig; up the business income of Rs. 93,245 as shown above into its two component parts of tobacco income and cashew income and then took out the tobacco income of Rs. 40,067-9-0 as-unavailable for adjustment and set off against the previous year loss which had arisen from the cashew business only Adding this tobacco income to the income from property and other sources, the total income was estimated at Rs. 57,153 and made available for assessment to Income Tax and super tax. This is the order.'' which forms the subject of controversy in this Original Petition.

The explanation for die action so taken was that tobacco and cashew were quite different commodities and has not been considered the same business in the assessment order. The income had been separately computed but in noting down the figures under business the fact that the previous year''s; loss under cashew exceeded the profits from cashewa during the order of account had simply escaped notice.

The Petitioner to whom notice had been issued in connection with the proposed rectification under Ext. C, took objection mainly on the ground] that his dealings in tobacco and cashew were parta of the same business and it has also been treated as such in the past years by the department. Further the question whether his trading activities in several commodities constituted the same business or distinct businesses was a question of fact on which J a decision should be deemed to have been already taken when the assessment was made and assuming there was a mistake about the matter it was not apparent from the records of the assessment and there'' was accordingly no jurisdiction to proceed u/s 48 of the Travancore Income Tax Act. These objections are again pressed before us.

Mr. Rama Iyer, learned Counsel for the Respondent Income Tax Authority referred to the assessment order of the previous year 1123 to show, that the loss carried over arose for the first time during that year and from cashew business only and that therefore; there was no question of any previous practice in the department by which the total business income for purpose of assessment was ascertained without distinction as to how the loss was sustained whether in the one or in the other business carried on by tire Assessee. According to hun, separate computation had been made of the income of the respective businesses tobacco and cashew they should be taken to be separate so that the arising in respect of the one could not be carried3 forward or set off in respect of the other.

I do not think I am called upon in these proceedings to decide as to whether the Respondent Income Tax Officer was right or wrong in coming'' to '' a conclusion that the business activities of the cautioner herein in tobacco and cashew in fact constructed distinct business and not same business'' with 5 in the meaning of Section 24 Clause (2) of the Indian Income Tax Act. The question, in my opinion, is only in whether it was open to him after set off, of loss carried over, had been once allowed, to reconsider the question and give, effect to the fresh conclusion as if the proceedings were one of rectification of mistake. I am inclined to hold that the matter involved is not a case of correction of mistake evident or apparent on the face of the record of assessment within the meaning of Section 35 but amounts to a revision and re-assessment not contemplated by that section.

The question of same or independent business is even normally one of some complexity. It is a question of fact depending for its answer on a consideration of several facts and circumstances. As observed by Viswanadia Sastri, J. in K.S.S. Soundarapandia Nadar and Bros. Vs. Commissioner of Income Tax,

An individual or a firm or a company may carry on more than one business at the same time: Commr. of Income Tax v. A. L. 11. 11. Brothers Devakothai, ILK 52 Mad 29: AIR 28 Mad 1229 ) (FB) (B); SOUTH INDIAN INDUSTRIALS, LTD. Vs. COMMISSIONER OF INCOME TAX, MADRAS., and AIR 1930 133 (Privy Council) Consequently, the fact of common ownership or proprietorship of the business concerns is not a criterion for determining whether business activities of. individuals, firms or companies constitute a single business: MESSRS. HIRALAL KALYANMAL AND ANOTHER Vs. RE., . On the other hand, the fact that different lines of business are pursued or different commodities are bought and sold by a single person, firm or company does not necessarily mean that there are different businesses. There as multiple stores like Wool-worth''s and Selfridges�s in England or Spencers in Madras which deal in different and dissimilar lines of goods, but yet the business is one and the same. If two lines of business belong to the- same person and are connected with the same trade, the one being ancillary or subsidiary to the other, if they are owned, controller and financed in common, if the staff employed and the place of business are the same and if common accounts are kept, it may readily be inferred that the two lines of business are really part of the same business. Observations to this effect are found in the decided cases. But it is not to be assumed that all these features must be present in every case or that the absence of one or more of them is fatal to the claim that the different lines of business are really parts of the same business.

Again, the jurisdiction to correct by way of rectification u/s 35 of the Indian Act is limited. It deals only with errors apparent on the face of the records which can be corrected at any stage. As observed by Gentle, C. J., that section does not enable an order to be reversed by revision or by review but permits only some error which is apparent on the record to be corrected. See COMMISSIONER OF Income Tax, MADRAS Vs. O. RM. M. SM. SV. SEVUGAN., . See also- CHOWDHARY MITHOO MISSAR Vs. COMMISSIONER OF Income Tax, U. P. AND C. P., where it was held that the section cannot cover a case where a re-assessment has been made by discovery of new facts. Mr. Rama Iyer, learned Counsel, referred to K. Govindan Vs. Commissioner of Income Tax, Madras., But that case dealt only with the question whether and when a reference to the High Court would lie on a finding, by the tribunal that two businesses were separate or otherwise for purpose of Section 24 (2). Reference in this connection may also be made to Sidhramappa Andannappa Manvi Vs. Commissioner of Income Tax, Bombay, , where the question arose as to whether after rectification u/s 35, it was competent to the Income Tax autliority to pass consequential order. Learned Judges say:

Now the power is undoubtedly a limited power; it is not a power of revision or review, but it is limited to correcting only those mistakes which are apparent on the record. A mistake must be patent on the record it must not be a mistake which can be discovered by a process of elucidation, or argument or debate. The mistake being patent on the record, rectification must be limited to correcting that mistake only without any further argument or debate. The rectification must follow as a necessary logical consequence of the mistake being found on the record (see p. 340 (of 1TH : (at p. 288 of AIR).

It is clear therefore that the Respondent, Income Tax authority was obviously having a revision and re-assessment in the guise of a rectification proceeding and such an order cannot stand.

I therefore issue writ of certiorari quashing the order of rectification dated 29-4-1955 filed in the case as Ext. C and passed u/s 48 of the Travancore Income Tax Act by the Respondent Income Tax Officer, Quilon. The Respondent will pay the costs of the Petitioner. Advocate''s fee Rs. 100/-.

O. P. No. 120 of 1955. This application relates to the Income Tax assessment for 1.95.1-52. The assessment was on 30-1-1954 under the Indian Income Tax Act. It computed the income as follows:

Property Rs. 14,826 Business: Tobacco 23,161 Cashew 50,153 73,314 Other sources 2,067 Total income Rs. 90,207 Less adjusted loss 59,706 Balance income 30,501

The Respondent Addl. Income Tax Officer, Quilon, purported by Ext. B order dated 30-4-1955 to rectify alleged mistake in the computation of the income under business in the assessment as above. This was done by setting off the loss of the previous year which had been allowed to be carried forward against the cashew income alone for the year, the income from to bacon being added on to the income from property and other sources for purpose of assessment.

The question arising in this case is similar to that which I have already decided in the connected case. Applying the same principle it has to be held that the Respondent, Income Tax Officer exceeded his jurisdiction in taking proceedings u/s 35 of the Income Tax Act. The order of rectification dated 29-4-1955 and filed in the case as Ext. B and passed u/s 35 of the Income Tax Act cannot be sustained and is therefore quashed. The Respondent will pay the costs of the Petitioner. Advocate''s fee Rs. 100/-