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Issues:
Validity of notice under section 154 of the Income-tax Act for the assessment year 1964-65. Analysis: The appeal was against a judgment and order dated August 25 and 28, 1972, where the respondent sought to quash a notice dated July 28, 1971, issued under section 154 of the Income-tax Act, 1961. The respondent, an existing company, was assessed by the Income-tax Officer for the assessment year 1964-65 as a company in which the public was substantially interested. The respondent was later informed of a perceived error in the shareholding structure, leading to the issuance of the notice under section 154. The appellant argued that more than 50% of the total voting power of the respondent was held by a few individuals, and the respondent was not wholly engaged in manufacturing or processing goods as required by the Act. The appellant contended that the notice was justified based on the records available, and the respondent needed to prove otherwise. The main issue revolved around whether there were sufficient materials on record to justify the issuance of the notice under section 154. The appellant argued that the shareholding structure indicated a potential error, necessitating the notice. The appellant relied on previous court decisions to support the contention that the Income-tax Officer had the jurisdiction to issue such a notice if there was an error apparent from the record. On the other hand, the respondent argued that there was no error on the face of the record, citing legal precedents emphasizing that a mistake apparent on the record must be obvious and patent, not debatable points of law. The respondent contended that the Income-tax Officer lacked jurisdiction to issue the notice if no such error existed. The court examined various decisions cited by both parties to determine the scope of jurisdiction under section 154 of the Act. It was concluded that the error must be apparent from the record, and in this case, the shareholding information provided prima facie evidence of a potential error. The court emphasized that the notice did not amount to a final order against the assessee but provided an opportunity to contest the perceived error. Additionally, the court addressed the timing of the shareholding information submission, ultimately ruling in favor of the appellant due to the lack of evidence supporting the respondent's claim. The judgment and order under appeal were set aside, and the rule was discharged, with each party bearing its own costs. The operation of the order was stayed for six weeks. In a separate judgment by Justice Janah, agreement with the decision was expressed, concluding the analysis of the case.
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