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Issues involved:
The judgment addresses the issue of whether the Income-tax Officer was justified in cancelling the registration of an assessee-firm and subsequently modifying the order under section 154 of the Income-tax Act, 1961. Additionally, it considers whether the Appellate Tribunal was correct in its interpretation of the legality of the assessee-firm under section 11 of the Companies Act and its entitlement to registration under the Income-tax Act. Cancellation of Registration and Section 154 Modification: The Income-tax Officer cancelled the registration of the assessee-firm due to exceeding the permissible number of partners, leading to assessment as an unregistered firm. Subsequently, under section 154, the Officer modified the order to assess the firm as an association of persons. The Appellate Assistant Commissioner allowed appeals against these actions, emphasizing that section 154 only allows correction of apparent mistakes, not a change in opinion. The Tribunal upheld this view, leading to the reference question. Interpretation of Legality and Registration Entitlement: The controversy stemmed from the Income-tax Officer's orders cancelling the firm's registration, which were later set aside by the Income-tax Appellate Tribunal. The Tribunal referred questions to the High Court regarding the legality of the firm under section 11 of the Companies Act and its entitlement to registration under the Income-tax Act. The High Court answered these questions affirmatively in favor of the assessee, based on a previous decision in a related case. Conclusion: The High Court affirmed that under section 154 of the Act, rectification can only be made for mistakes apparent from the record, not for changing opinions or reviewing orders. As the Income-tax Officer's rectification was not based on an apparent mistake, the Tribunal was justified in dismissing the Department's appeals against the Appellate Assistant Commissioner's order. The judgment favored the assessee in this matter.
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