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1971 (4) TMI 12 - HC - Income TaxApplication under article 226 of the Constitution challenging the rectification proceedings under section 154 - mistake proposed to be rectified was dependent on the question whether machinery used for production of safety razor blades could be part of iron and steel industry - such issue require interpretation of term other machinery and plant - so it is not mistake apparent on record
Issues:
Challenge to rectification proceedings under section 154 of the Income-tax Act, 1961. Detailed Analysis: The petitioner, a company engaged in manufacturing and selling various products, challenged rectification proceedings under section 154 of the Income-tax Act, 1961, for the assessment year 1963-64. The petitioner claimed it had disclosed all necessary facts during assessment proceedings and had been allowed depreciation at a special rate of 10 per cent. for machinery used in manufacturing safety razor blades. However, the Income-tax Officer proposed rectification, stating that the depreciation should have been at the general rate of 7 per cent. The petitioner contended that the proceedings were without jurisdiction as the interpretation of the relevant rules was required to determine the correct rate of depreciation. The court considered whether the proposed rectification was a mistake apparent from the record, as required by section 154 of the Act. The court analyzed the provisions of Appendix I of the Income-tax Rules, which specify rates of depreciation for different industries. The mistake proposed to be rectified depended on whether the machinery for manufacturing safety razor blades fell under the category of "Iron & Steel Industry," which allowed a special rate of depreciation at 10 per cent. The court noted that interpreting the term "other machinery and plant" under this category required both factual investigation and legal interpretation. Referring to relevant case law, the court emphasized that a mistake apparent from the record should be glaring, obvious, or self-evident, not requiring a lengthy process of reasoning or interpretation. The court held that the mistake in this case was not apparent but required interpretation and investigation, making it unsuitable for rectification under section 154. It rejected the respondent's argument that the petitioner's application was premature, stating that when a proceeding is without jurisdiction based on undisputed facts, the aggrieved party can challenge it at an early stage. The court quashed the rectification proceedings and restrained the respondents from taking further steps based on the notice issued. The judgment emphasized that section 154 cannot be invoked when no mistake apparent from the record exists, ensuring that rectification powers are limited to clear and evident errors. In conclusion, the court ruled in favor of the petitioner, holding that the rectification proceedings were without jurisdiction due to the absence of a mistake apparent from the record. The judgment highlighted the importance of clear and self-evident errors for invoking rectification powers under the Income-tax Act, ensuring that such proceedings are based on indisputable mistakes rather than requiring extensive interpretation or investigation.
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