1994 (2) TMI 29 - HC - Income Tax

Summary

Issues:
1. Interpretation of section 32A(4) of the Income-tax Act, 1961.
2. Validity of retrospective amendment affecting assessment.
3. Application of legal fiction in rectification under section 154 of the Act.

Analysis:
The judgment pertains to an application under section 256(2) of the Income-tax Act, 1961, filed by the Revenue to compel the Income-tax Appellate Tribunal to refer three questions of law to the High Court regarding investment allowance claimed by the assessee under section 32A(4) for the assessment year 1981-82. The Tribunal had allowed rectification under section 154 of the Act, which the Revenue opposed, leading to the current dispute. The Revenue contended that the refusal to grant the allowance was correct based on the law as it stood at the relevant time, despite subsequent retrospective amendments. However, the court disagreed with this contention, emphasizing that when the law is amended retrospectively, all proceedings must proceed as per the amended law, deeming the earlier order to be in contravention of the amended law, thus constituting an error apparent on the face of the record.

The judgment references a Supreme Court case, M. K. Venkatachalam, ITO v. Bombay Dyeing and Manufacturing Co. Ltd., to highlight the principle that rectification can be made for mistakes of law apparent from the record. The Supreme Court in that case emphasized that if a mistake of law is glaring and obvious, it can be rectified, especially in light of retrospective amendments. The court in the present case applied this reasoning, stating that the legal fiction of retrospective operation necessitates that the amended law be considered in assessing the validity of earlier orders. Consequently, the Tribunal was justified in declining to refer the questions to the High Court, and the petition by the Revenue was dismissed.

In conclusion, the judgment underscores the significance of applying amended laws retrospectively and rectifying mistakes of law apparent from the record. It establishes that when the law is amended with retrospective effect, all proceedings must adhere to the amended law, even if it contradicts earlier orders. The decision reaffirms the principle that rectification can be made for mistakes of law, especially when glaring and obvious, due to the legal fiction of retrospective operation.