Case: M.K. Venkatachalam, Income Tax Officer &amp; Another Vs. Bombay Dyeing &amp; Manufacturing Company Limited

S. 7, sub-s. (2) and S. 30, sub-s. (2), such a power of revision has not been conferred on him in the matter of giving effect to the other amendments made in the Amendment Act. Even so, we do not think it would be legitimate or reasonable to hold that the provisions of S. 7(2) and S. 30(2) lead to the inference that the retrospective operation of the other provisions of the Amendment Act is not intended to affect concluded assessments in any manner whatever. In this connection, it would be pertinent to remember that the power to revise which has been conferred on the Income-tax Officer by S. 7(2) and S. 30(2) of the Amendment Act is distinct and independent of the power to rectify mistakes which the Income-tax Officer can exercise under S. 35 of the Act.6. It is in the light of this position that the extent of the Income-tax Officers power under S. 35 to rectify mistakes apparent from the record must be determined; and in doing so, the scope and effect of the expression"mistake apparent from the record" has to be ascertained. At the time when the Income-tax Officer applied his mind to the question of rectifying the alleged mistake, there can be no doubt that he had to read the principal Act as containing the inserted proviso as from 1-4-1952. If that be the true position then the order which he made giving credit to the respondent for Rs. 50,603-15-0 is plainly and obviously inconsistent with a specific and clear provision of the statute and that must inevitably be treated as a mistake of law apparent from the record.If a mistake of fact apparent from the record of the assessment order can be rectified under S. 35, we see no reason why a mistake of law which is glaring and obvious cannot be similarly rectified. Prima facie it may appear some-what strange that an order which was good and valid when it was made should be treated as patently invalid and wrong by virtue of the retrospective operation of the Amendment Act. But such a result is necessarily involved in the legal fiction about the retrospective operation of the Amendment Act.If, as a result of the said fiction we must read the subsequently inserted proviso as forming part of S. 18A(5) of the principal Act as from 1-4-1952, the conclusion is inescapable that the order in question is inconsistent with the provisions of the said proviso and must be deemed to suffer from a mistake apparent from the record. That is why we think that the Income-tax Officer was justified in the present case in exercising his power under S. 35 and rectifying the said mistakes, Incidentally we may mention that in Meka Venkatappayya v. Additional Income-tax Officer, Bapatla, 1957-32 ITR 274 : (AIR 1958 Andh Pra 683) (D) the High Court of Andhra has taken the same view.7. In this connection it would be useful to refer to the decision of the Privy Council in the Commissioner of Income-tax, Bombay Presidency and Aden v. Khemchand Ramdas, 1938-6 ITR 414 : (AIR 1938 PC 175 ) (E). In Khemchands case, the assessees were registered as a firm and they were assessed under S. 23(4) on an income of Rs. 1,25,000 at the maximum rate. Being a registered firm no super-tax was levied. A notice of demand was also made before March 1927. On February 13, 1928, the Commissioner, in exercise of his power under S. 33, cancelled the order registering the assessee as a firm and directed the Income-tax Officer to take necessary action. The Income-tax Officer accordingly assessed the firm to super-tax on May 4, 1929. The Privy Council held that the assessment made on January 17, 1927, was final both in respect of the income-tax and super-tax. The fresh action taken by the Income-tax Officer on May 4, 1929, was out of time though it had been taken in pursuance of the directions of the Commissioner and that the order of May 4, 1929, was one which the Income-tax Officer had no power to make. One of the points raised before the Privy Council was whether, under the relevant circumstances the Income-tax Officer had power to make the impugned order in view of the provisions of Ss. 34 and 35 of the Act. The Privy Council dealt with this question on the footing that the Commissioners order cancelling the registration had been properly made. On this basis Their Lordships thought that it was unnecessary to consider whether the case would attract the provisions of S. 34 "inasmuch as in Their Lordships opinion the case clearly would have fallen within the provisions of S. 35 had the Income-tax Officer exercised his powers under the Section within one year from the date on which the earlier demand was served upon the respondents." The judgment shows that Their Lordships took the view that "looking at the record of the assessments made upon the respondents as it stood after the cancellation of the respondents registration and the order effecting the cancellation would have formed part of the record - it would be apparent that a mistake had been made in stating that no super-tax was leviable. This decision clearly shows that the subsequent cancellation of the assessees registration was held by Their Lordships of the Privy Council to form part of the record retrospectively in the light of the said subsequent event, and the order was deemed to suffer from a mistake apparent from the record so as to justify the exercise of the rectification powers under S. 35 of the Act. It is because Their Lordships thought that S. 35 would have been clearly applicable that they did not decide the question as to whether S. 34 could also have been invoked. This decision lends considerable support to the view which we are disposed to take about the true meaning and scope of the expression "the mistake apparent from the record" occurring in S. 35.

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

Explanation:
1[ds]Thus, there can be no doubt that the effect of the retrospective operation of the Amendment Act is that the proviso inserted by the said Section in S.(5) of the Act would, for all legal purposes, have to be deemed to have been included in the Act as from April 1,same argument is put in another form by contending that the finality of the order passed by ther cannot be impaired by the retrospective operation of the relevantour opinion, this argument does not really help the respondents case because the order passed by theOfficer under S.cannot be said to be final in the literal sense of the word. This order was and continued to be liable to be modified under S. 35 of the Act. What theOfficer has purported to do in the present case is not to revise his order in the light of the retrospective amendment made by S. 13 of the Amendment Act alone, but to exercise his power under S. 35 of the Act; and so the question which falls to be considered in the present appeal centres round the construction of the expression "mistake apparent from the record" used in S. 35.That is why we think the principle of the finality of the orders or the sanctity of the existing rights cannot be effectively invoked by the respondent in the present case.5.The respondent then urged that the Amendment Act should not be given greater retrospective operation that its language and its general scheme render necessary. This contention is based on the provisions of S. 3,, S. 7,) and S. 30,(2) of the Amendment Act. Where the Amendment Act intended that its provisions should affect even concluded orders of assessment it is expressly so provided. Since S. 13 does not specifically authorise the reopening of concluded assessment it should be held that its retrospective operation is not intended to cover such concluded assessments. That in brief is the argument.We are, however, not satisfied that this argument is wellother words, a distinction can be drawn between these two provisions of the Amendment Act and the rest in respect of the power which theOfficer can purport to exercise to give effect to the amendments made by the Amendment Act.Whereas, in respect of the amendments made by S. 7 and S. 30 of the Amendment Act, theOfficer can and must revise his earlier orders covered by S. 7,) and S. 30,(2), such a power of revision has not been conferred on him in the matter of giving effect to the other amendments made in the Amendment Act. Even so, we do not think it would be legitimate or reasonable to hold that the provisions of S. 7(2) and S. 30(2) lead to the inference that the retrospective operation of the other provisions of the Amendment Act is not intended to affect concluded assessments in any manner whatever. In this connection, it would be pertinent to remember that the power to revise which has been conferred on theOfficer by S. 7(2) and S. 30(2) of the Amendment Act is distinct and independent of the power to rectify mistakes which theOfficer can exercise under S. 35 of the Act.In this connection it would be useful to refer to the decision of the Privy Council in the Commissioner ofBombay Presidency and Aden v. Khemchand Ramdas,ITR 414 : (AIR 1938 PC 175  )judgment shows that Their Lordships took the view that "looking at the record of the assessments made upon the respondents as it stood after the cancellation of the respondents registration and the order effecting the cancellation would have formed part of the recordit would be apparent that a mistake had been made in stating that nowas leviable. This decision clearly shows that the subsequent cancellation of the assessees registration was held by Their Lordships of the Privy Council to form part of the record retrospectively in the light of the said subsequent event, and the order was deemed to suffer from a mistake apparent from the record so as to justify the exercise of the rectification powers under S. 35 of the Act. It is because Their Lordships thought that S. 35 would have been clearly applicable that they did not decide the question as to whether S. 34 could also have been invoked. This decision lends considerable support to the view which we are disposed to take about the true meaning and scope of the expression "the mistake apparent from the record" occurring in S. 35.