1. ' B.P. JEEVAN REDDY, J.---These appeals are preferred against the judgment of the Patna High Court dismissing the writ petitions filed by the two assessees herein, Chhathu Ram and Darshan Ram.
2. The assessm ent year concerned is 1942-43. Both of them were assessed in the status of individuals under section 23(3) of the Indian Income Tax Act, 1922, by an order, dated March 14, 1945 Chhathu Ram was assessed on a total income of Rs,4,54,431 which included a sum of Rs,1,92,000 being the cash credit in his personal account in the books of Messrs Chhathu Ram Horilram Ltd. Darshan Ram was assessed on a total income of Rs,4,12,576 which included a sum of Rs,1,52,000 being the cash credit in his personal account in the books of the aforesaid company. On the basis of the said income, an assessm ent was made on them under the provisions of the Excess Profits Tax Act. The excess profits tax payable was determined at Rs,97,000 and Rs,53,620 respectively. As provided by section 12(1) of the Excess Profits Tax Act, the tax payable thereunder was deducted in computing the total income assessable under the Income Tax Act, 1961. Both the assessees filed appeals. The Appellate Assistant Commissioner confirmed the assessment except with respect to the aforesaid additions on account of cash credits. He remanded the matter to the Income-tax Officer for further consideration. After the remand, the Income-tax Officer passed fresh orders, again including the said amounts in the income of the respective assessees. Appeals were again preferred to the Appellate Assistant Commissioner.
3. ' While the appeals aforesaid were pending before the Appellate Assistant Commissioner, notices were served upon the assessees under section 34(1-A) of the 1922 Act for the assessment years 1940-41 to 1947-48 (subsections (1-A) to (1-D) were introduced in the year 1954). After receiving the said notices, both the assessees applied to the Central Board of Revenue for settlement under subsection (1-B) of section 34. On the basis of the said applications orders were passed on August 20, 1960, accepting the settlement offered.
4. ' The appeals filed by the assessees (against the orders of the Income Tax Officer adding the aforementioned cash credits in their income) were dismissed by the Appellate Assistant Commissioner. (It is not necessary to notice the reasons for his orders for the purpose of these appeals).
5. ' The assessees had also filed appeals under the Excess Profits Tax Act. They were allowed by the Appellate Assistant Commissioner on October 20, 1967. The Revenue filed appeals before the Tribunal against the orders of the Appellate Assistant Commissioner under the Excess Profits Tax Act. They were dismissed on November 30, 1970. The Tribunal's orders became final. In the light of these orders and purporting to give effect to them, the Income-tax Officer passed orders rectifying the assessm ent orders made under the Income Tax Act, relating to the assessment year 1942-43.
6. By these rectification orders, the Income-tax Officer withdrew the deduction allowed earlier by him on account of excess profits tax. Against this order, the assessee filed appeals which were allowed by the Appellate Assistant Commissioner holding that, in view of the settlement aforesaid, it is not open either to the Revenue or to the assessee to disturb the finality of the tax liability. The Revenue went up in appeal to the Tribunal which set aside the orders of the Appellate Assistant Commissioner. The Tribunal held that the orders of rectification purporting 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 if so, no appeal lay against such orders. Subsection (6) of section 35 read as follows: "(6) Where the excess profits tax or the business profits tax payable by an assessee has been modified in appeal, revision or any other proceedings, or where any excess profits tax or business profits tax has been assesseed after the completion of the corresponding assessment for income- tax (whether before or after the commencement of the Indian Income-tax (Amendment) Act, 1953), and in consequence thereof it is necessary to recompute the total income of the assessee chargeable to income-tax such recompilation shall be deemed to be a rectification of a mistake apparent from the record within the meaning of this section, and the provisions of subsection (1) shall apply accordingly, the period of four years referred to in that subsection being computed from the date of the order making or modifying the assessment of such excess profits tax or business profits tax. Erplanation.---For the purposes of subsection (6), where the assessee is a firm, the provisions of subsection (5) shall also apply as they apply to the rectification of the assessm ent of the partners of the firm."
7. ' It was, accordingly, held that the orders of the Appellate Assistant Commissioner were without jurisdiction. The assessees filed writ petitions in the Patna High Court against the orders of the Tribunal but they withdrew them with a view to move the Tribunal under section 256(1) of the Income Tax Act, 1961. They filed their applications accordingly which were treated by the Tribunal as applications made under section 66(1) of the 1922 Act. The Tribunal found that the said applications were barred by limitation and accordingly dismissed the same. It is then that the assessees filed the writ petitions in the Patna High Court from which these appeals arise. In these writ petitions, the assessees not only prayed for quashing the orders of the Tribunal but also asked for quashing the orders of rectification made by the Income-tax Officer.
8. ' The High Court dismissed the writ petitions on the following reasoning by virtue of section 297 of the 1961 Act, all the proceedings including the proceedings for rectification relating to the assessm ent year 1942-43 must be deemed to have been taken under the 1922 Act. Under the said Act, the Tribunal had no power to condone the delay in filing an application under section 66(1) as held in S. Sankappa v. ITO (1968) 68 ITR 760 (SC). The Tribunal is not a Court and, therefore, the provisions of the Limitation Act, 1963, do not apply to the proceedings before the Tribunal. The dismissal of the applications under section 66(1) was, therefore, proper. The provision contained in subsection (3) of section 66 does not also empower the High Court to condone the delay in filing the application under subsection (1). So far as the merits are concerned, the orders of settlement did not, in the facts and circumstances of this case, preclude the Income-tax Officer from passing the impugned order of rectification. The bar contained in section 34(1-D) of the 1922 Act was conclusive only in respect of the matters to which the settlement extended. The amount or the issue which is the subject-matter of the rectification proceedings, was never the subject-matter of settlement.
9. ' We are of the opinion that the High Court was right in holding that the settlement order did not preclude the Income-tax Officer from passing the aforesaid order of rectification. Subsection (1-D) of section 34 declares that any settlement arrived at under the said section "shall be conclusive as to the matters stated therein". It further declare that "no person whose assessments have been so settled shall be entitled to reopen in any proceeding for the recovery of any sum under this Act or in any subsequent assessm ent or reassessment proceeding relating to any tax chargeable under this Act or in any other proceeding whatsoever before any Court or other authority any matter which forms part of such settlement". It may be remembered that the assessees had applied to the Central Board of Revenue for settlement under subsection (1-B) after receiving the notices under subsection (1-A) of section 34. And it was on the/basis of such application that the Central Board had made an order of settlement. Subsections (1-A) and (1-B) of section 34 constitute parts of one scheme which would be evident from a reading of the two subsections. They read as follows: "(1-A) If, in the case of any assessee, the Income-tax Officer has reason to believe--
(i) that income, profits or gains chargeable to income-tax have escaped assessment for any year in respect of which the relevant previous year falls wholly or partly within the period beginning on the 1st day of September, 1939, and ending on 31st day of March, 1946; and . that the income, profits and gains which have so escaped assessment for any such year or years amount, or are likely to amount, to one lakh of rupees or more; ' he may, notwithstanding that the period of eight years or, as the case may be, four years specified in subsection (1) has expired in respect thereof, serve on the assessee, or, if the assessee is a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under subsection (2) of section 22, and may proceed to assess or reassess the income, profits or gains of the assessee for all or any of the years referred to in clause (i), and thereupon the provisions of this Act (excepting those contained in clauses (i) and (iii) of the proviso to subsection (1) and in subsections (2) and (3) of this section) shall, so far as may be, apply accordingly: ' Provided that the Income Tax Officer shall not issue a notice under this subsection unless he has recorded his reasons for doing so, and the Central Board of Revenue is satisfied on such reasons recorded that it is a fit case for the issue of such notice: ' Provided further that no such notice shall be issued after the 31st day of March, 1956.
10. (1-B) Where any assessee to whom a notice has been issued under clause (a) of subsection (1) or under subsection (1-A) for any of the years ending on the 31st day of March of the years 1941 to 1948, inclusive applies to the Central Board of Revenue at any time within six months from the receipt of such notice or before the assessment or reassessment is made, whichever is earlier, to have the matters, relating to his assessment settled, the Central Board of Revenue may, after considering the terms of settlement proposed and subject to the previous approval of the Central Government, accept the terms of such settlement and, if it does so, shall make an order in accordance with the terms of such settlement specifying among other things the sum of money payable by the assessee."
11. ' The deduction allowed in the original assessment proceedings on account of the excess profits tax was not the subject-matter of either the notice issued under subsection (1-A) of section 34 or of the order of settlement made under subsection (1-B). The appeals under the Excess Profits Tax Act were allowed by the Appellate Assistant Commissioner subsequent to the acceptance of settlement under section 34(1-B). 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 preened by the assessee under the Excess Profits Tax Act, by virtue of which no excess profits tax was payable by the assessees. We are unable to see how the bar contained in subsection (1-D) of section 34 comes into play in the above circumstances. Once the liability of the assessee under the 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.
12. ' In this view of the matter, it is not necessary to consider any other question in these appeals. The appeals, accordingly, fail and are dismissed. No costs. l Anneals Nos. 3928 and 3929 of 1991 ' The facts in these appeals are identical to those in the above appeals. Only the assessee and the assessm ent years are different. Both counsel for the assessee and the Revenue stated that these appeals will be governed by the judgment in the aforesaid two appeals. Following the judgment therein, these appeals are also dismissed. No costs.