1959 (4) TMI 7 - SC - Income Tax

Whether the order made under section 35 of the Act be quashed and an injunction issued restraining the Income-tax Officer from recovering the assessed tax? Held that - If, for instance, the Income-tax Officer had found that in the assessment year 1952-53 there was an apparent arithmetical mistake in the account of the written down value of the properties which resulted in a corresponding mistake in the assessment of the year in controversy could he not take the corrected figure for the purposes of the assessment and could it be said that the mistake was not apparent from the record. A fortiori if he discovered that the very basis of the different assessments was erroneous because of an initial mistake in determining the written down value could it be said that this would not be a mistake apparent from the record. And if in order to determine the correct written down value the Income-tax Officer makes correct calculations, can it be said that that is not rectifying a mistake apparent from the record but is de hors it. Appeal dismissed.

Issues Involved:
1. Notice under Section 35(2) of the Income-tax Act.
2. Basis for rectification of written down value.
3. Apparent mistake from the record.
4. Jurisdiction under Article 226 of the Constitution.
5. Adequate and efficacious remedy under ordinary law.

Detailed Analysis:

1. Notice under Section 35(2) of the Income-tax Act:
The appellant contended that no written notice was given by the Income-tax Officer (ITO) as required under Section 35(2) of the Act. The ITO's affidavit revealed that the correctness of the depreciation figures was discussed with the appellant's secretary, and the appellant was informed that the depreciation would be recalculated after rectifying mistakes. Although no written notice was given, the appellant was provided with the calculations and relevant rules for determining depreciation. The court held that the rule regarding notice is not so rigid that an adverse order would be invalid merely because no written notice was given, provided the assessee had a reasonable opportunity to be heard.

2. Basis for Rectification of Written Down Value:
The appellant argued that the rectification of the written down value should not have been done under Section 35 but rather under Section 34, which specifically refers to excessive depreciation. The ITO recalculated the written down values based on the Saurashtra Income-tax Ordinance and the Indian Income-tax Act. The court noted that the written down values were calculated for the year 1943-44 and should have been consistently applied in subsequent years, even after the Ordinance was replaced by the Act. The court also referenced the Taxation Laws (Part B States) Removal of Difficulties Order, 1950, which provided for the computation of aggregate depreciation allowance and written down values.

3. Apparent Mistake from the Record:
The appellant contended that there was no mistake apparent from the record. The court held that the term "apparent from the record" includes all proceedings on which the assessment order is based. The ITO is entitled to examine the entire record and applicable law to ascertain any errors. The court referenced the Privy Council's decision in Commissioner of Income-tax v. Khemchand Ramdas, which held that Section 35 is applicable for rectifying mistakes apparent from the record. The court also cited Venkatachalam v. Bombay Dyeing and Manufacturing Co. Ltd., where it was held that a mistake of law apparent from the record can be rectified under Section 35.

4. Jurisdiction under Article 226 of the Constitution:
The High Court dismissed the appellant's petition under Articles 226 and 227, stating that the remedy under Article 226 is discretionary and not available when an adequate and efficacious remedy exists under ordinary law. The court referenced Rashid & Son v. Income-tax Investigation Commission, where it was held that the High Court has the discretion to refuse a writ if an adequate remedy is available elsewhere.

5. Adequate and Efficacious Remedy under Ordinary Law:
The High Court noted that the appellant could have gone in revision to the Commissioner under Section 33A of the Act. The court emphasized that the order determining the depreciation amount was not final and could be redetermined in subsequent assessment years. The court referenced Karnani Industrial Bank v. Commissioner of Income-tax, where it was held that the ITO is not bound by the written down value of the previous year and can determine the actual cost and depreciation anew.

Conclusion:
The Supreme Court dismissed the appeal, holding that the ITO acted within his jurisdiction under Section 35 to rectify mistakes apparent from the record. The appellant had been given a reasonable opportunity to be heard, and the recalculations were valid. The court affirmed that the remedy under Article 226 is discretionary and not available when an adequate remedy exists under ordinary law. The appeal was dismissed with costs.

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