1960 (12) TMI 14 - SC - Income Tax

Whether section 35 of the Act was a provision for rectification of mistakes apparent on the record and in the opinion of the High Court it was a mistake analogous to Order XLVII, rule 1, of the Code of Civil Procedure for grant of review on the ground of mistake or error apparent on the face of the record ? Held that - The learned judges of the High Court seem to have fallen into an error in equating the language and scope of section 35 of the Act with that of Order XLVII, rule 1, Civil Procedure Code. The language of the two is different because according to section 35 of the Act which provides for rectification of mistakes the power is given to the various income-tax authorities within four years from the date of any assessment passed by them to rectify any mistake apparent from the record and in the Civil Procedure Code the words are an error apparent on the face of the record and the two provisions do not mean the same thing. The restrictive operation of the power of review under Order XLVII, rule 1, Civil Procedure Code, is not applicable in the case of section 35 of the Act and, in our opinion, it cannot be said that the order of the Income-tax Officer in regard to the assessment in dispute was without jurisdiction. Appeal allowed.

Summary

Issues: Applicability of section 35 of the Indian Income-tax Act; Jurisdiction of the Income-tax Officer to impose additional tax and penal interest.

Analysis:
The Supreme Court heard an appeal regarding the applicability of section 35 of the Indian Income-tax Act. The case involved a limited company that owned a spinning mill and had filed its return without considering the amount allowable under section 15C of the Act. The Income-tax Officer rectified an error in the assessment, imposing additional tax and penal interest under section 18A. The company challenged these orders in the High Court, arguing that section 35 did not apply and that the additional tax and penal interest were unjust. The High Court held that the Income-tax Officer lacked jurisdiction to make the orders as the errors were not apparent on the face of the record, especially regarding the complex question of the Finance Act's proviso (ii) of Part B. The High Court also deemed the imposition of penal interest under section 18A(8) as without jurisdiction.

The Supreme Court disagreed with the High Court's interpretation, emphasizing that section 35 allows rectification of mistakes apparent from the record within four years of assessment. The Court cited previous cases to illustrate that errors of fact or law, including misapplications of law, can be corrected under section 35. The Court clarified that the restrictive scope of review under the Civil Procedure Code does not apply to section 35. Regarding penal interest under section 18A(8), the Court noted that it is a mandatory provision requiring the Income-tax Officer to calculate and add interest to the tax as determined in the assessment.

The respondent's counsel raised the question of the applicability of proviso (ii) of Part B of the Finance Act, citing previous judgments. However, the Court distinguished those cases based on differing facts and held that the High Court's decision was erroneous. Consequently, the Supreme Court allowed the appeal, setting aside the High Court's judgment and order, and awarded costs to the appellant.