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TMI Blog1955 (10) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... er, 1951. The assessment order is dated 22nd February, 1953, and is filed as Exhibit A. The net assessable income was fixed at ₹ 1,43,083. There were two rectifications of this order, one on 25th January, 1954, and the other on 13th August, 1954. The first rectification was on the basis that additional income-tax on excess dividends as contemplated in the schedule to the Indian Finance Act of 1952 was omitted to be levied. The excess dividend was in the result fixed at ₹ 4,68,001 and the additional income-tax levied thereon at the rate of 1 anna in the rupee amounted to ₹ 29,250-1-0. The second rectification proceeded on the basis that the additional income-tax should have been levied at the rate of 5 annas in the rupee instead of 1 anna. The second rectification also took in the levy of penal interest under section 18A(8). The net result of the rectification orders was the enhancement of income-tax levied on the petitioner by an amount of ₹ 1,46,250-5-0. 3. The question is raised in these proceedings that the Income-tax Officer had no jurisdiction in the circumstances whatever to invoke and that repeatedly the provisions of section 35 of the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jor portion of the total of ₹ 4,72,415 declared as dividend. Additional income-tax at 1 anna in the rupee amounting to ₹ 29,250-1-0 was thereupon levied and directed to be paid on or before 20th February, 1954. 4. The second rectification took place under Exhibit C order passed by the first respondent on 13th August, 1954. That order proceeded on the basis that in the rectification proceedings carried out under Exhibit B the tax was by mistake levied at the rate of 1 anna instead of five annas in the rupee. The excess tax due was calculated as ₹ 1,17,000-4-0. Occasion was also taken during these proceedings to levy penal interest under section 18A(8) on ₹ 1,68,111-6-0 being the 80 per cent of the total amount of income-tax as worked out by the two rectifications aforementioned, calculated at 4 per cent. and for the period 1st April, 1952, to 22nd February, 1953, i.e., the date of the original assessment. This penal interest amounted to ₹ 6,066-8-0. The total demand newly levied thus came to ₹ 1,23,066-12-0 and this amount was directed to be paid on or before 20th September, 1954. 5. As the rectifications had the effect of enhancing the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 as per the directors' report, but he said there were other questions of fact which were not admitted but which were required to be ascertained for the proper application of the relevant provisions of the Finance Act and further that the interpretation placed upon those provisions of the Finance Act by the assessee was the correct one. He pressed that this Court was not called upon to decide finally one way or the other either as to the exact factual setting or the real scope of the relevant provisions in the Finance Act but only to decide whether section 35 was properly invoked by the first respondent Income-tax authority, in the circumstances and at that stage. 9. We will now proceed to examine the provisions of the Finance Act relied on by the Department for the exercise of their jurisdiction under section 35 of the Income-tax Act. The Finance Act (XXIX of 1952) which governed the instant assessment did no bring about any change in the financial structure that existed in the previous year. We have therefore to refer to the provisions of the Finance Act (XXIII of 1951) as suitably modified with reference to section 2 of the Finance Act (XXIX of 1952). Part 1 of the First ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous year as would be just sufficient to cover the amount of the excess dividend and as have not likewise been taken into account to cover an excess dividend of a preceding year; (ii) such portion of the excess dividend as is deemed to be out of the undistributed profits of each of the said years shall be deemed to have borne tax,- (a) if an order has been made under sub-section (i) of section 23A of the Income-tax Act, in respect of the undistributed profits of that year, at the rate of five annas in the rupee, and (b) in respect of any other year, at the rate applicable to the total income of the company, for that year reduced by the rate at which rebate if any was allowed on the undistributed profits. 10. The proviso in item B of Part I of the First Schedule of the Finance Act referred to above is certainly not quite simple. But it seems clear that the legislature was anxious that companies should not act in any spendthrift manner and should plough back their profits into the industry. Therefore an incentive, as it were, was held out to the companies not to distribute all the profits they had made to the shareholders and such incentive took the form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax, Madras v. O.RM.M.SM.SV. Sevugan [1948] 16 I.T.R. 59 at 66. , the section has only limited application and cannot enable the income-tax authorities to revise or review an order generally. The mistake to be rectified should be one which is apparent from the record, so much so, an error in law or a wrong procedure adopted in the assessment proceedings would not be a mistake within the meaning of the section. The clear analogy to this section is the provision in Order 47, rule I, of the Code of Civil Procedure for grant of review on the ground of mistake or error apparent on the face of the record , i.e., an evident error which does not require any extraneous matter to show it incorrectness. The error may be one of fact but is not limited to matters of fact and include also errors of law. But the law must be definite and capable of ascertainment. an erroneous view of law on a debatable point or a wrong exposition of the law or a wrong application of the law or a failure to apply the appropriate law cannot be considered a mistake or error apparent on the face of the record. see Chitaley, civil Procedure Code, Volume III, pp. 3549-50, 5th edition. The Applicability or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our judgment be said to be a matter arising in the exercise of a jurisdiction under section 35 at least in the case in question. It is difficult in any event to appreciate the stand taken by the Department that the anticipation of the assessee should extend to liability to pay tax on excess dividends within the meaning of the proviso to the Finance Act, a matter which the learned Officer was himself unable to judge at the first blush even after full scrutiny of all the records. It seems to us that the excess taxation by scrutiny of all the resorted to at the second stage in the rectification proceedings was a total abuse of process and not justifiable to any the least extent. 14. We are clear that the proceedings for rectification taken by the first respondent Income-tax Officer and filed in the case Exhibits B and C are lacking in jurisdiction and cannot stand. The orders in revision passed by the second respondent filed in the case as Exhibits F and G confirming the rectification orders as above are also unsustainable. We therefore grant a writ of certiorari quashing the above-said proceedings as prayed for. The petitioner will get his costs from the respondents; advocate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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