1964 (3) TMI 82 - HC - Income Tax

Summary

Issues Involved:

1. Jurisdiction of the Income-tax Officer under Section 35 of the Indian Income-tax Act, 1922.
2. Interpretation of the term "mistake apparent from the record."
3. Application of the Finance Acts of 1956 and 1957 regarding the computation and reduction of rebate on super-tax.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Income-tax Officer under Section 35 of the Indian Income-tax Act, 1922:

The petitioner, a public limited company, sought to quash an order made by the Income-tax Officer under Section 35 of the Indian Income-tax Act, 1922. The petitioner contended that the order dated January 29, 1963, was without jurisdiction as it did not involve a "mistake apparent from the record." The Income-tax Officer had rectified the assessment for the year 1957-58 by withdrawing a rebate amount of Rs. 78,894.50 based on excess dividends declared in the previous year relevant to the assessment year 1956-57.

2. Interpretation of the term "mistake apparent from the record":

The court examined the scope of Section 35, which allows rectification of a mistake apparent from the record. The term "mistake apparent from the record" has been interpreted in previous judgments to mean a mistake that is glaring, obvious, or self-evident, not requiring elaborate argument or debate. The court cited several cases, including Walchand Nagar Industries Ltd. v. V. S. Gaitonde and M. Subbaraja Mudaliar v. Commissioner of Income-tax, to emphasize that a mistake requiring a complicated process of investigation or argument does not qualify as a "mistake apparent from the record."

3. Application of the Finance Acts of 1956 and 1957 regarding the computation and reduction of rebate on super-tax:

The court analyzed the relevant provisions of the Finance Acts of 1956 and 1957, which govern the computation of super-tax and the conditions under which rebates could be reduced. The Finance Act of 1956 provided for a rebate reduction if dividends in excess of 6% of the paid-up capital were declared. The Finance Act of 1957 extended this scheme, including provisions for carrying forward unabsorbed reductions in rebate.

The petitioner argued that no rebate reduction should apply for the assessment year 1956-57 as the total income was nil, and thus, no super-tax was calculated. Consequently, there was no rebate to reduce. The Income-tax Officer, however, contended that the excess dividends declared in the previous year should have been considered for rebate reduction in the assessment year 1957-58.

The court found that the issue was debatable and not self-evident, thereby not qualifying as a "mistake apparent from the record." The court concluded that the Income-tax Officer acted without jurisdiction in making the rectification order under Section 35.

Conclusion:

The court allowed the petition, making the rule absolute with costs. The impugned order dated January 29, 1963, and the demand notice were quashed. The court noted that the Income-tax Officer's reasoning for rectification was not supported by the counsel for the revenue, further emphasizing the lack of jurisdiction under Section 35 for the rectification made.