Case: Commissioner of Income Tax, Kanpur Vs. J. K. Commercial Corporation Limited

is correct. By a deeming provision sub-section (5) gives powers to the Income-tax Officer to make a consequential correction in the assessment of a partner of a firm on the modification of the assessment of the income of the firm. Similarly, by a deeming provision engrafted in sub-section (7) on the modification of an order under section 23A in relation to the assessment of a company in appeal or revision, power has been given to the Income-tax Officer to make rectification in the computation of the total income of the shareholders as if it is a mistake apparent from the record within the meaning of section 35 making the provisions of sub-section (1) applicable to such a caseSome difficulty is presented, as we shall presently show, in view of Parikhs case from the provision of a time limit of 4 years provided in section 35(1) for the exercise of the power by the Income-tax Officer for the rectification of the mistakes apparent from the record of assessment, the starting point of the period being "date of any assessment order". In Parikhs case, this court was concerned with the interpretation of the expression "order of assessment" occurring in sub-section (3) of section 34 of the Act. In that connection, Shah J., as he then was, delivering the judgment on behalf of a Division Bench of this court, said at page 670 of 63 ITR."In each of these cases there is computation of income, determination of tax payable and procedure is prescribed for imposing liability upon the taxpayer. But still these are not orders of assessment within the meaning of section 23. The salient feature of these and other orders is that the liability to pay tax arises not from the charge created by statute, but from the order of the Income-tax Officer." 5. On the above principle an order under section 23A was held to be outside the purview of limitation provided in section 34 of the Act, as in the opinion of the court it was not an order of assessment. Doubt about the correctness of the view taken in the above case has been expressed during the course of hearing. We need not say anything about that as we constitute a Bench of equal strength. But we are clear and definite in our mind that the ratio of Parikhs case is neither applicable nor should be extended to cover the expression "assessment order" occurring in section 35(1) of the Act. In the context the said expression would include an order made under section 23A also, as such an order undoubtedly forms part of the record of assessment. Mr. Gupte, learned counsel for the respondents, in his usual fairness conceded, and rightly, that the power of rectification of mistake conferred on the Income-tax Officer under section 35(1) of the Act cannot be confined within the very narrow limit of an order of assessment made under section 23 only. Counsel submitted that it does embrace some other kinds of order relating to assessment. Having conceded so far, Mr. Gupte endeavoured in vain to take an order made under section 23A of the Act outside the purview of the power of the Income-tax Officer for rectification of mistakesIn Sankappas case, as we have said above, the same Bench which decided Parikhs case, after stating on the basis of certain earlier authorities that the word "assessment " under certain circumstances in a given context has a more comprehensive meaning, finally said at page 764 of 68 ITR thus:"It is clear that, when proceedings are taken for rectification of assessment to tax either under section 35(1) or section 35(5) of the Act of 1922, those proceedings must be held to be proceedings for assessment. In proceeding under those provisions, what the Income-tax Officer does is to correct errors in, or rectify orders of, assessment made by him, and orders making such corrections or rectifications are, therefore, clearly part of the proceedings for assessment." 6. The High Court in the judgment under appeal has extracted the above passage from Sankappas case, but allowed itself to be misled by it. Correctly appreciated, the passage means that what the Income-tax Officer does in a proceeding under section 35(1) is to correct errors in assessment or rectify orders of assessment made by him. Either of such orders is a part of the proceeding of assessment. In our considered opinion correcting an apparent error in an order made under section 23A of the Act is rectifying a mistake in the record of assessment and clearly falls within the ambit of the power conferred upon the Income-tax Officer under section 35(1) of the Act. 7. Although in the appeals before us we are concerned with the Income-tax Act of 1922 only, in passing we may make reference to the corresponding provisions in the Income-tax Act of 1961. Corresponding to section 23A of the 1922 Act is section 104 in the 1961 Act. Section 154(1) of the latter Act corresponds to section 35(1) of the former Act. Clause (a) of section 154(1) says"With a view to rectifying any mistake apparent from the record-"(a) the Income-tax Officer may amend any order of assessment or of refund or any other order passed by him... " 8. The provision so made is very precise and definite giving power to the Income-tax Officer to amend any other order passed by him apart from the order of assessment or refund. The language of section 35(1) of the 1922 Act, perhaps, is not wide enough conferring power on the Income-tax Officer to amend any order passed by him under the Act and may not be at par with the wide powers conferred on him under section 154(1)(a) of the 1961 Act. Yet it is not too narrow to cover only the order of assessment or of refund in a very restricted or limited sense. It is wide enough to take within its sweep some other orders made under the Act including an order under section 23A. 9.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]On the above principle an order under section 23A was held to be outside the purview of limitation provided in section 34 of the Act, as in the opinion of the court it was not an order of assessment. Doubt about the correctness of the view taken in the above case has been expressed during the course of hearing. We need not say anything about that as we constitute a Bench of equal strength. But we are clear and definite in our mind that the ratio of Parikhs case is neither applicable nor should be extended to cover the expression "assessment order" occurring in section 35(1) of the Act. In the context the said expression would include an order made under section 23A also, as such an order undoubtedly forms part of the record of assessment. Mr. Gupte, learned counsel for the respondents, in his usual fairness conceded, and rightly, that the power of rectification of mistake conferred on the Income-tax Officer under section 35(1) of the Act cannot be confined within the very narrow limit of an order of assessment made under section 23 only. Counsel submitted that it does embrace some other kinds of order relating to assessmentThe High Court in the judgment under appeal has extracted the above passage from Sankappas case, but allowed itself to be misled by it. Correctly appreciated, the passage means that what the Income-tax Officer does in a proceeding under section 35(1) is to correct errors in assessment or rectify orders of assessment made by him. Either of such orders is a part of the proceeding of assessment. In our considered opinion correcting an apparent error in an order made under section 23A of the Act is rectifying a mistake in the record of assessment and clearly falls within the ambit of the power conferred upon the Income-tax Officer under section 35(1) of the ActAlthough in the appeals before us we are concerned with the Income-tax Act of 1922 only, in passing we may make reference to the corresponding provisions in the Income-tax Act of 1961. Corresponding to section 23A of the 1922 Act is section 104 in the 1961 Act. Section 154(1) of the latter Act corresponds to section 35(1) of the former Act. Clause (a) of section 154(1) says"With a view to rectifying any mistake apparent from the record-(a) the Income-tax Officer may amend any order of assessment or of refund or any other order passed by him... "The provision so made is very precise and definite giving power to the Income-tax Officer to amend any other order passed by him apart from the order of assessment or refund. The language of section 35(1) of the 1922 Act, perhaps, is not wide enough conferring power on the Income-tax Officer to amend any order passed by him under the Act and may not be at par with the wide powers conferred on him under section 154(1)(a) of the 1961 Act. Yet it is not too narrow to cover only the order of assessment or of refund in a very restricted or limited sense. It is wide enough to take within its sweep some other orders made under the Act including an order under section 23A.