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TMI Blog1976 (4) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... icer levied the tax on the aggregate of interest from securities, Rs. 1,723, and other sources, Rs. 236, in all Rs. 1,959. The tax was worked out as follows : Rs. Income-tax on Rs. 1,959 at the rate applicable to Rs. 2,42,654, viz., 23,885 467.90 Add: Surcharge at 5% 23.40 Special surcharge 70.20 Proportionate additional surcharge on Rs. 1,959 186.48 ----------- 747.98 ---------- After adjusting the tax deducted at the source and the advance tax paid, he made a demand for the balance of tax due from the assessee. There was a change in the incumbent and the succeeding Income-tax Officer took proceedings under section 154 of the Income-tax Act of 1961. Under that provision, with a view to rectifying any mistake apparent from the record, the Income-tax Officer may amend any order of assessment or of refund or any other order passed by him. Such an amendment cannot be made after the expiry of four years from the date of the order sought to be amended. Within about two years from the assessment, the Income-tax Officer set in motion the proceedings under section 154. In his order of 12th August, 1965, he wrote as follows : " In the original assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a mistake which he proceeded to rectify according to what he considered to be correct. The Tribunal endeavoured to demonstrate in its order as to how the Income-tax Officer's working was justified. The result is that we get an insight into what the Income-tax Officer has done only from the order of the Tribunal. At the instance of the assessee, the following two questions have been referred : " (1) Whether, on the facts and in the circumstances of the case, the levy of tax of Rs. 12,792.90 as additional surcharge on the assessee is in accordance with law ? (2) Whether, on the facts and in the circumstances of the case, there was any error apparent from the record regarding levy of additional surcharge which could be rectified under section 154 of the Income-tax Act, 1961 ? " The learned counsel for the assessee submitted that the second question should have priority of consideration as in case he succeeds on that question, the consideration of the first question would not arise. He submitted that there was no error apparent from the record in the calculation of tax, which could have been rectified by the Income-tax Officer. He referred us to two decisions of the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains, if any, included therein ; and (b) the amount of tax (exclusive of additional surcharge) which would have been chargeable on such reduced total income if it had been the total income no part of which had been exempt from tax and on no portion of which deduction of tax had been admissable under any provisions of the Income-tax Act or this Act. " The present case comes under Paragraph A of Part I of the First Schedule to the Finance Act of. 1963. From the assessment order, it would be clear though the assssee's total income was Rs. 2,42,654 after deducting the exempted income under section 81(1)(c) and section 99(1)(v), there was only a balance of Rs. 1,959, which was liable to be assessed to income-tax as well as super-tax. The first Income-tax Officer levied the additional surcharge only on this Sum of Rs. 1,959. His successor, who initiated the rectification proceedings, considered that this additional surcharge should have been levied on the " residual income " of Rs. 1,39,029. The question raised is whether the levy of additional surcharge on the If "residual income" of Rs. 1,39,029 in this case was proper in the context of the exemption of Rs. 2,40,695. In effect, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Bombay High Court. The Bombay High Court held that the original assessments made on the firm were prima facie in accordance with law and that there was no obvious or patent mistake in those orders of assessment, which the Income-tax Officer was competent to rectify. In the appeal aganist the order of the High Court, the Supreme Court held construing section 17(1) of the Act of 1922 as follows-- See [1971] 82 ITR 50, 53 : " From what has been said above, it is clear that the question whether section 17(1) of the Indian Income-tax Act, 1922, was applicable to the case of the first respondent is not free from doubt. Therefore, the Income-tax Officer was not justified in thinking that on that question there can be no two opinions. It was not open to the Income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceeding under section 154 of the Income-tax Act, 1961. A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions." The Supreme Court observed that the Income-tax Officer was wholly wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contemplated therein. In other words, it was held that the surcharge was but an additional mode or rate for charging income-tax and the levy of additional surcharge on income exempt from income-tax was authorised by the provisions of the Finance Act, 1963. This decision would dispose of the first question if it were to be considered. However, we are now on the question as to whether the proceedings under section 154 were competent. At page 31 of the report it was observed--See [1975] 101 ITR 24 (SC) : " Granting that the word ' income-tax ' includes surcharges, it may be arguable that the exemption from the payment of income-tax under section 81(i)(a) of the 1961 Act would extend to surcharges. But the matter does not rest with what section 81(i)(a) says." The above passage goes to show that there was an arguable question before the Supreme Court. In the judgment, a decision of the Allahabad High Court in Allahabad District Co-operative Bank Ltd. v. Union of India [1972] 83 ITR 895 has also been noticed at page 35. That decision construing the identical provision of the Finance Act, 1963, was in favour of the assessee. But the Supreme Court pointed out that the said case was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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