Case: T. S. Balaram, Income Tax Officer,Company Circle Iv, Bombay Vs. M/S. Volkart Brothers, Bombay

Therein the respondents challenged the validity of the orders of rectification made by the Income-tax Officer, Company Circle, Bombay in the assessments of the respondents for the assessment years 1958-59, 1960-61, 1961-62 and 1962-63 under S, 154 ofthe Income-tax Act, 1961. Respondents Nos. 2 and 3 are the partners in the first respondent firm. The first respondent firm was duly registered under the Indian Income-tax Act, 1922 as well as underthe Income-tax Act, 1961. In the original assessments of the firm for the concerned assessment years, assessments were made on the slab rates prescribed under the respective Finance Acts applicable to registered firms. In the individual assessments of the partners for their respective share in the income of the firm was included and assessed at the maximum rates of income since their assessments were made in the status of non-resident. On February 1, 1965, the first respondent firm was served with notices dated January 29, 1965 by the Income-tax Officer intimating to it that in its assessments for the assessment years 1958-59, 1960-61, 1961-62 and 1962-63, there are mistakes apparent from the record inasmuch as the firm had not been charged at the maximum rates of income-tax under S. 17 (1) of the Indian Income-tax Act, 1922 and therefore he proposes to rectify those assessments under S. 154 ofthe Income-tax Act, 1961. The respondents in their reply to those notices denied that there was any mistake apparent or otherwise in those orders of assessment. They disputed the Income-tax Officers authority to make any correction. The Income-tax Officer did not accept the contention of the respondents and assessed them by applying the provisions of S. 17 (1) of the 1922 Act. The respondents challenged the validity of the orders rectifying the assessments, before the High Court of Bombay as mentioned earlier. The High Court took the view that the original assessments made on the respondents were prima facie in accordance with law and at any rate as there was no obvious or patent mistake in those orders of assessment, the Income-tax Officer was incompetent to pass the impugned orders.

Reasoning: 8. From what has been said above, it is clear thatthequestionr S. 17 (i) oftheIndianIncome-tax Act,1922was applicable tothecase ofthefirst respondent is not free from doubt. ThereforetheIncome-tax Officer was not justified in thinking that on thatquestione can be no two opinions. It was not open totheIncome-tax Officer to go intothetrue scope oftherelevant provisions oftheAct in a proceeding under section 154 oftheIncome-tax Act,1961. A mistake apparent ontherecord must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on whiche may conceivably be two opinions. As seen earlier,theHigh Court of Bombay opined thattheoriginal assessments were in accordance with law though in our opiniontheHigh Court was not justified in going into thatn Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale, (1960) 1 S. C. R. 890=(AIR 1960 S. C. 137) this Court while spelling outthescope ofthepower of a High Court under Art. 226 oftheConstitution ruled that an error which has to be established by a long drawn process of reasoning on points wheree may conceivably be two opinions cannot be said to be an error apparent ontheface oftherecord. A decision on a debatable point of law is not a mistake apparent fromtherecord- see Sidhramappa v. Commr. of Income-tax, Bombay, (1952) 21 ITR 333 = (AIR 1952 Bom 287  ).The power oftheofficers mentioned in S. 154 oftheIncome-tax Act,1961 to correct "any mistake apparent fromtherecord" is undoubtedly not more than that oftheHigh Court to entertain a writ petition onthebasis of an "error apparent ontheface oftherecord". In this case it is not necessary for us to spell outthedistinction betweentheexpressions "error apparent ontheface oftherecord" and "mistake apparent fromtherecord". But suffice it to say thattheIncome-tax Officer was wholly wrong in holding thate was a mistake apparent fromtherecord oftheassessments ofthefirst respondent.