1967 (1) TMI 22 - HC - Income Tax

Application For Rectification - Share Income - whether, Commissioner rightly declined to interfere with order of Income-tax Officer

Summary

Issues: Assessment of minor's income for additional surcharge under the Income-tax Act, 1922; Rectification of mistake under section 35 of the Income-tax Act, 1922; Power of the court to compel rectification beyond the prescribed time limit.

Assessment of Minor's Income: The petitioner, assessed for the year 1958-59, had his minor son's income from two partnership firms included in his total income and taxed under section 16(3) of the Income-tax Act, 1922. An additional surcharge at 15% was levied on this income, treated as unearned income under the Finance Act, 1958. However, subsequent judicial decisions clarified that the minor's income was only liable to a 5% surcharge, not 15%.

Rectification of Mistake: The petitioner sought rectification of this mistake under section 35 of the Income-tax Act, 1922. The First Income-tax Officer and the Commissioner of Income-tax declined to revise the assessment order, citing it as final and out of time for rectification. The court analyzed the power of rectification under section 35, emphasizing that the mistake should be apparent from the record. Referring to relevant case laws, the court noted that the mistake in this case was rectifiable under section 35 as it was based on a wrong view of the law.

Compelling Rectification Beyond Time Limit: The Revenue argued that no mandamus could compel rectification beyond the period allowed for rectification under section 35. However, the court referred to a case under the Madras Agricultural Income-tax Act where a direction for rectification was given even after the expiration of the limitation period. The court discussed the language of section 35 and opined that it does not necessarily impose a limitation on the court's power to compel rectification beyond the prescribed time limit. Ultimately, the court allowed one writ petition to quash the incorrect assessment order regarding the minor's income, leading to the cancellation of both the First Income-tax Officer's and the Commissioner of Income-tax's orders, while dismissing another petition.

In conclusion, the court's judgment rectified the incorrect assessment of the minor's income for additional surcharge, clarified the scope of rectification under section 35, and discussed the court's power to compel rectification beyond the prescribed time limit under the Income-tax Act, 1922.