K.L. Roy, J.
1. This application under Article 226 of the Constitution raises a short but an important question of interpretation of the relevant provisions of the Income-tax Act which is not entirely free from doubt, The petitioner is the Bharat Agencies Ltd., a company incorporated under the Indian Companies Act, which was assessed to income-tax for the assessment years 1960-61 and 1961-62 by the respondent No, 1 on dates which are not apparent either from the orders themselves or from the petition. By notices dated the 22nd March, 1962, and 24th March, 1963, respectively, the respondent No. 1 intimated to the petitioner his intention of applying the provisions of Section 23A of the Income-tax Act, 1922 (hereinafter referred to as 'the Act'), in respect, inter alia, of the aforesaid two assessment years as the company had not declared 100% of its distributable surplus in terms of the aforesaid section within 12 months from the end of the respective previous years. Two orders, both dated the 31st July, 1962, under Section 23A, were passed by respondent No. 1 in respect of the aforesaid assessment years. In respect of the second year, after deducting the tax amounting to Rs. 51,435.45 due on the total income of Rs, 1,14,301 determined on regular assessment, the distributable surplus was found to be Rs. 62,865.55. As the petitioner had only distributed Rs. 36,588 the deficiency was determined at Rs. 26,277.55 and the super-tax thereon at the rate of 37% was assessed at Rs. 9,722.49. The order in respect of the first year determined the distributable surplus at Rs. 71,073.20 and as dividend actually distributed was Rs. 43,735, the deficiency was declared to be Rs. 25,338 and the tax payable thereon, Rs. 9,375.43. The petitioner paid the aforesaid amount of tax assessed in the said two orders. By a notice purported to be under Section 154/155 of the Income-tax Act, 1961, dated the 1st January, 1964, the respondent No. 1 required the petitioner to show cause why the order made under Section 23A for the year 1960-61 should not be rectified as in that year the dividend actually declared and allowed to be deducted was subsequently found to have been declared more than 12 months from the end of the accounting year and as such the deduction had been wrongly allowed. Apparently, the respondent No. 1 was advised that the provision of Section 155 of the 1961 Act was not applicable in thiscase and on 30th July, 1964, and 12th April, 1966, two notices purported to be under Section 35 of the Act were served on the petitioner requiring it to show cause why the aforesaid orders under Section 23A should not be rectified and additional super-tax should not be charged on the entire distributable surplus of Rs. 71,073 20 and Rs. 62,865.55, respectively, for the aforesaid two years. Thereafter, two orders, purported to be made under Section 35 of the Act, rectifying the said two orders under Section 23A and levying additional super-tax of Rs. 26,27.01 and Rs. 23,260.24, respectively, on the petitioner were passed on the 13th April, 1966, by the respondent No. 1. The petitioner went up in revision to the Commissioner of Income-tax, West Bengal III, being respondent No. 4 herein, under Section 33A of the Act against the aforesaid two orders of rectification, and the respondent No. 4 by his order dated the 20th April. 1968, rejected the application for revision for the assessment year 1960-61. It is stated in the petition that the revision application in respect of the assessment year 1961-62 is still pending before respondent No. 4. The respondent No. 2 thereafter issued two certificates, both dated the 15th March, 1968, for realisation of the two sums of Rs, 16,221.58 and Rs. 13,537-75 respectively being the alleged sums due as additional super-tax under the aforesaid two rectification orders after giving the petitioner credit for the tax already paid. The respondent No. 5, being the Tax Recovery Officer, made a demand on the petitioner for payment of the aforesaid two amounts in respect of the said two certificates on 22nd March, 1968. Thereafter, the petitioner through its attorneys, sent a letter demanding justice to the respondents on the 31st May, 1968, and this application was moved and the rule obtained on the 6th June, 1968.
2. Mr. Roy Chowdhury, the learned counsel for the petitioner, contended that the two impugned orders under Section 35 are without jurisdiction and he based his submissions on two grounds only, namely, (1) that Section 23A of the Act is a self-contained code and an order made thereunder is not an order of assessment and therefore there can be no rectification of such on order under Section 35 except in the special case proved in Sub-section (7) of that section ; (2) that as the order under Section 23A could only be made and was, in fact, made with the prior approval of the Inspecting Assistant Commissioner as provided in Section 23A (8), the impugned orders of rectification should also have been made after such prior approval and further that this would have afforded the petitioner another opportunity of showing cause against the proposed orders. Mr. Roy Chowdhury has contended that Section 23A is not a section providing for assessment. It is a section imposing additional tax or rather additional super-tax on certain companies for failure to declare a certain percentage of their profits as dividend. As Section 35(1) confers jurisdiction on the Income-tax Officer torectify an error apparent from an order of assessment or an order of refund the respondent-Income-tax Officer in the present case had no jurisdiction to make the impugned orders, and they should be quashed. I do not think that there is any substance in the second contention raised by Mr. Roy Chowdhury and the learned counsel did not press that contention any further.
3. Before I deal with the submissions of the learned counsel, it would be necessary to set out the relevant provisions of the Act of 1922 which are admittedly applicable to the instant case. Prior to its amendment by the Finance Act, 1955, Section 23A provided that if certain companies designated therein had not distributed a certain percentage of its distributable surplus as dividends the Income-tax Officer would be entitled to make a declaration that such a dividend had been declared and proportionate shares of such deemed dividend would be included in the individual assessment of the shareholders of these companies. After its amendment in 1956 the relevant provisions of Section 23A(1) are as follows :
'Where the Income-tax Officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any company within the twelve months immediately following the expiry of that previous year are less than the statutory percentage of the total income of the company of that previous year as reduced by--(then follows certain deductions),
the Income-tax Officer shall, unless he is satisfied (then follows certain considerations), make an order in writing that the company shall, apart from the sum determined as payable by it on the basis of the assessments under Section 23, be liable to pay super-tax at the rate of fifty per cent. in the case of a company whose business consists wholly or mainly in the dealing in or holding of investments, and at the rate of thirty-seven per cent. in the case of any other company on the undistributed balance of the total income of the previous year . . . .'
It is to be noticed that the percentages mentioned above have been changed from year to year by the relevant Finance Acts and during the years under consideration the percentage for distribution in the case of companies like the petitioner were hundred per cent as its accumulated profits and reserves exceeded its paid up capital and the cost of its fixed assets. Section 23A(8) provides that no order shall be made by the Income-tax Officer under Sub-section (1) unless the previous approval of the Inspecting Assistant Commissioner of Income-tax has been obtained, and the Inspecting Assistant Commissioner shall not give his approval until he has given the company concerned an opportunity of being heard. Section 35(1) which gives the Income-tax Officer jurisdiction to rectify mistakes apparent from the record is, so far as material, as follows :
'the Income-tax Officer may, at any time within four years from the date of any assessment order or refund order passed by him on his own motion, rectify any mistake apparent from the record of ... assessment or refund as the case may be and shall within the like period rectify any such mistake which has been brought to his notice by an assessee. Provided that no such rectification shall be made haying the effect of enhancing an assessement or reducing a 'refund unless . . . the Income-tax Officer .... has given notice to the assessee of his intention so to do and has allowed him a reasonable opportunity of being heard.'
Section 35(7), to which reference has been made by Mr. Roy Chowdhury, is as follows :
'Where the assessment of a company in whose case an order under Section 23A has been made is modified in appeal, revision or any other proceeding or the order under Section 23A is cancelled or varied, and in consequence there of it is necessary to recompute the total income of the shareholders, such recomputation shall be deemed to be a rectification of a mistake apparent from the record with the meaning of this section, and the provisions of Sub-section (1) shall apply thereto accordingly, the period of four years refered to in that Sub-section being computed from the date of the final order passed in the case of the company'
The Supreme Court in M.M. Parikh, Income-tax, Officer v. Navanagar Transport and Industries Ltd., : [1967]63ITR663(SC) had occasion to consider the question whether an order made under Section 23A is an order of assessment. It held that an order made under Section 23A, as amended in 1955 and 1957, made by the Income-tax Officer directing payment of additional super-tax is not an order of assessment within the meaning of Section 34(3) of the Act and to such an order the period of limitation prescribed under Section 34(3) did not apply. It would be instructive to quote the observations of the Supreme Court pointing out the difference between an order under Section 23A and an assessment order, namely :
'There is undoubtedly a hearing before liability is imposed for payment of additional super-tax ; there is declaration of liability and the liability is determined in the manner prescribed by the section. That there is, as was argued before this court, a considerable parallel between Sections 23 and 23A' will not justify the assumption that what is done by an order under Section 23A as amended is assessment of tax liability. There is, however, a vital difference between the assessment of tax under Section 23 and imposition of liability under Section 23A. Tax liability quantified by an order under Section 23 is a charge statutorily imposed by Sections 3 and 4 of the Act. It is true that the statutory liability is, till the last day of the year of account, ambulatory, but the charge is still a statutory charge on income. The function of the Income-tax Officer is to compute the taxable income and to crystallise the charge on the taxable income, Under Section 23A there is no statutory charge in respect of additional super-tax and the liability is imposed by the order of the Income-tax Officer. Source of the liability to pay additional super-tax is not in Sections 3 and 4 of the Act ; it lies in and arises out of the order of the income-tax Officer. Before imposing liability for additional super-tax, the Income-tax Officer has to determine whether the company is one to which the provisions of Section 23A apply; he has also to determine whether the company has distributed within twelve months immediately following the expiry of the previous year the statutory percentage of the total income of the, company as reduced by the taxes and levies prescribed therein; he has also to determine whether, having regard to the loss incurred by the company in the earlier years or to the smallness. of the profits made in the previous year, the payment of a dividend or a larger dividend than that declared would be unreasonable. It is after making these enquiries that the Income-tax Officer may make the order directing payment of additional super-tax at the rates prescribed. The process to be followed is not the process of assessment, but of determining whether the liability should be charged and imposed ....
Section 23A, before it was amended by the Finance Act, 1955, was undoubtedly procedural.... Section 23A(1) after it was amended by the Finance Act, 1955, provides within itself machinery for imposition of liability to pay additional super-tax, but it has not on that account been made a charging section. A charge to tax arises under Section 3, 4 and 55 of the Act for payment of income-tax and super-tax and not under Section 23A.'
Mr. Chowdhury, the learned counsel for the department, did not contest the proposition that an order under Section 23A could not be described as an order of assessment. His submission was that Section 35(1) permitted the Income-tax Officer to rectify any mistake apparent from the record of the assessment and an order made under Section 23A would certainly form part of :the record of assessment of the petitioner-company. If that be so, then, the respondent No. 1 would have jurisdiction to issue notices for rectification of the orders under Section 23A and also pass orders of rectification. Mr. Chowdhury referred me to the well-known decision of the Supreme Court in Abraham's case, where the scope and extent of the meaning to be given to the expression 'assessment' as used in the sections in Chapter IV of the Act were considered, The court observed that that expression was not used merely in the sense of computation of income and there was no ground, for holding that it had, been used in, Section 44 to indicated only the liability to computation of the income under Section 23 and not to the application of the procedure for declaration and imposition of tax liability and the machinery for enforcement thereof. There is a reference in the judgment to Section 23A as dealing with the power to assess individual members of certain companies which was based on the section before its amendment and is not really applicable in the present context. Undoubtedly the word 'assessment' is used in the Income-tax Act with a very wide connotation and that is well recognized. Mr. Chowdhury next referred me to a decision of the Madras High Court in Sockalingam Chettiar v. Income-tax Officer, [1959] 36 I.T.R. 451 (Mad.) where the contention raised was that the interest levied under Section 18A(8) was not a part of the assessment and as such an order imposing such interest could not be rectified under Section 35. It was pointed out by the court that under Section 35 what was rectified was a mistake, any mistake which had been brought to the notice of the Income-tax Officer and that all that the provision required was that the mistake was apparent in the record of the assessment or refund. The mistake need not be in the assessment as such. I do not think that decision has very much bearing on this case, because what was held there was that an omission in the assessment order to add the interest due under Section 18A(8) would be a mistake apparent on the record which would attract Section 35. In S. Sankappa v. Income-tax Officer, : [1968]68ITR760(SC) the question before the Supreme Court was whether rectification of the assessment of the partners under Section 35 after the firm's status was changed from 'unregistered' to 'registered' in appeal was permissible. In that connection the Supreme Court again considered the scope and implication of the term. 'assessment' and referred to its previous decision in Abraham's case, : [1961]41ITR425(SC) and Kalawati Devi v. Harlalka's case, : [1967]66ITR680(SC) and observed that though in some sections the word 'assessment' of income is used only with reference to computation of income in other sections it has been more comprehensively used and includes all proceedings starting with the filing of the return or issue of notice and ending with the determination of the tax payable by the assessee. Parikh's case was relied on before the Supreme Court but the court distinguished it on the ground that that was dealing with an order under Section 23A and had no bearing on the facts before their Lordships in the present case. Mr. Chowdhury, in his fairness, drew my attention to a very recent decision of the Allahabad High Court in J.K. Commercial Corporation Ltd, v. Income-tax Officer, [1969] 73 I.T.R. 464 (All.) where the contention of Mr. Roy Chowdhury, viz., that the Income-tax Officer has no jurisdiction to rectify under Section 35 an order passed by him under Section 23A has been upheld. The basis of that decision as it appears from the report at page 466 is an observation of the Supreme Court in Sankappa's case that:
'The salient feature of these and other orders is that the liability to pay tax arises not from the charge created by statute, but from the order of the Income-tax Officer.'
The learned judges of the Allahabad High Court inferred that the above statement incorporates a categorical statement by the Supreme Court that an order under Section 35 of the Act must be an order where the charge is created by the statute and not by an order made by the Income-tax Officer.
4. The Supreme Court was obviously referring to orders under Sections 18A, 23A, etc., and distinguishing such orders from orders made under the sections levying or determining the charge of tax as provided by the charging sections. I do not see how it could be said that the Supreme Court has categorically held that Section 35 would be applicable only to an order where the charge is created by the statute. In the ultimate analysis the charge must be under the statute though it may not be under the charging sections. Unless the statute provides for the charge, it cannot be enforced. In the case of Section 23A the statute empowers the Income-tax Officer to pass an order creating the charge. With respect, the reasons for the aforesaid decision of the Allahabad High Court do not seem to me to be cogent.
5. I am, however, left with the problem as to whether a mistake in an order under Section 23A would be a mistake apparent from the record of assessment. This would involve construing what is meant by the record of the assessment. If it is held that anything found in the file of assessment constitutes and forms part of the record of assessment, undoubtedly an order under Section 23A, which would form part of such a file, would also be part of such record. But the difficulty in the way of that interpretation is the period of limitation prescribed in that very sub-section, namely, that he may make such rectification at any time within four years from the date of any assessment order. There is no dispute that so far as orders under Section 23A are concerned there is no period of limitation and such an order can be passed by the Income-tax Officer at any time. The Supreme Court in Parikh's case had remarked on the fact that no appeal under Section 30 is provided for from an order under Section 23A. It would, therefore, be clear that what is contemplated by the record of the assessment or refund is the actual assessment proceedings culminating in the order of assessment or actual refund proceeding culminating in an order of refund which would give the starting point of limitation for the exercise by the Income-tax Officer of the powers under Section 35(1). From the decisions cited andfrom the provisions of the sections, it appears to me that the procedurelaid down under Section 23A is intended to be a procedure entirely differentfrom the procedure for the regular assessment and what Section 35 contemplates is rectification of any order made in the proceedings of the regularassessment and not in the proceedings under Section 23A. Mr. Chowdhuryhas drawn my attention to Section 154 of the Income-tax Act, 1961, wherepower has been given. to the Income-tax Officer to rectify or amend anyorder of assessment or refund or any other order passed by him. Thewidth of the last part of this section would bring in all the orders passedby the Income-tax Officer including an order under Section 23A. Unfortunately, this provision was not there in the 1922 Act.Considering all the circumstances, I am of the opinion that the petitioner's contention that the respondent-Income-tax Officer had no jurisdiction under Section 35 to rectify his order under Section 23A must be upheld.The rule is, therefore, made absolute. The impugned orders of rectificationas well as the impugned certificate proceedings would be quashed. Therewill be no order as to costs. Operation of the order would be stayed forsix weeks. Security to continue for six weeks.