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Issues:
1. Whether reserves for redemption of debentures and bad debts can be considered as reserves or provisions for the purpose of surtax assessment. 2. Whether the Income-tax Officer had jurisdiction to rectify the assessment order under section 13 of the Companies (Profits) Surtax Act, 1964. Analysis: The judgment pertains to an application under section 256(2) of the Income-tax Act, 1961, regarding the treatment of reserves for redemption of debentures and bad debts in the assessment of surtax for the year 1969-70. The Income-tax Officer initially considered these amounts as reserves but later sought to rectify the assessment under section 13 of the Companies (Profits) Surtax Act, 1964, arguing that they were provisions for meeting liabilities. The Commissioner of Income-tax (Appeals) affirmed this view, stating that the reserves were intended to create funds for known future liabilities. However, the Income-tax Appellate Tribunal held that the amounts were indeed reserves and not provisions, concluding that there was no mistake apparent on the record to justify rectification under section 13. The Tribunal relied on a Karnataka High Court decision and the Supreme Court's observation in Metal Box Company of India Ltd. v. Their Workmen regarding the distinction between reserves and provisions. The Supreme Court's decision in CIT v. Standard Vacuum Oil Co. was also cited to highlight the common practice of companies setting aside funds as reserves for various purposes. The Tribunal concluded that the Income-tax Officer's change of opinion did not constitute a mistake apparent on the record, as the matter was debatable and not a clear error of law. Ultimately, the Tribunal dismissed the reference application, emphasizing that the Income-tax Officer lacked jurisdiction to rectify the assessment based solely on a change of opinion regarding the nature of the reserves. The judgment underscores the importance of distinguishing between reserves and provisions in financial assessments and highlights that rectification under section 13 should be based on clear errors of law, not differing interpretations of accounting practices.
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