T. S. Balaram, Income Tax Officer, Company Circle Iv, Bombay v. M/s. Volkart Brothers, Bombay

Judgment

The Judgment of the Court was delivered by Hegde, J.-This appeal by certi1icate arises f~on1 the decision of the High Court of Bombay in Misc. Petition No. 104 of 1968 on its file. That was a petition under_ Art. 226 :.of the Constitution. Therein the respondents challenged the validity of the orders of rectification made by the Incometax Officer. Company Circle, Bombay in the assessments of the respondents for the assessment years 1958-591 1960-61, 1961-62 acd 1962-63 under s. 154 of the Income-tax Act, 1961. Respondents Nos. 2 and 3 are the partners in the first respondent-firm. The first F, respondent-firm was duly registered under the Indian Income-tax Act 1922 a'5 well as under the Tncome-tax Act 1961. In the original assessments of the firm for the concerned assessment vears assessments were made on the salb rates prescribed under the respective Finance Acts applicable to registered Firms.

In the individual a~sessments of the partners for their respective share in the income of the finn was included and assessed at the maximum rates since their assessments were made in the status of non~resident. On· Febn1ary, . 1; 1965, the first respondent firm was served with notices dated January 29, 1965 by the Income-tax Officer in- ~ timating to it that in its assessments for the assessment years 1958-59, 1960-61 , 19()1-62 an.d 1962-63, there are mistakes apparent from the record 1 nasmuch as the fin11 SliPRE Ml~ COURT REJ>OIU'S ( 1972 J I S.C.R. had not been cl1arged at the maximum rates of incometax under s. 17( I) of the fndjan I nco me-tax Act, 192~ and therefore he proposes to rectify those assessments under s. 154 of the l nco me-tax Act, 1961. The. respondents in their reply to those notices denied that ther~ W~)S any 1nistc.J ke apparent or otherwise in those orders ol" R assessment. They disputed the I ncome~tgx Officer's authority to n1a.ke any correction.

The lncome~tax Officer did not accept the conte'ntion of the respondenh and assessed then1 by applying the provisions of s. l7(1) of t.he 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 vie\v that the ori~ina1 assessments made on th~ :respondents were prima .fiu1e in accordance with law and at any rate as the·re was no obvious or patent mistake-in those orders of assessn1ent, the Income-tax Officer was i.,ncotnpetent to pass the impugned orders. 0 The first question that we have to decide is wherner Oil the facts and in the circumstances of the case. Th~ Income·tax Officer was within his powers in making the in1pugned rectifications. He purported to make those rectifications under s. 154 of the Income-tax Act, 1961. That section to the extent material for our present purpose reads: "154 (l)

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 anv other order passed by him: The corresponding section in the Indian Income-tH\ G Act, 1922 is s. 35. We have now to see whether the Income-tax Officer was justified in opining that in the original orders of assessment, there was any apparent mistake. As seen ear~ lier in the origina! assess1nents of the firm for the relevant assesstnent years, the IncoJne-tax Officer adopted the slab rates applicable to regjstered firms. The ques~ tion for decision is whether the first respondent's finn T. S. BALARAM, I.T.O. \'. VOLK.-\R l BROS. (Hegc/(', l.) A ca1ne within the mischief of s. L7('1) of the Indian lncom·:~ tax Act. 1922.

Section 17(1) reads: n "Where a person is not resident in the taxable territories and is not a company, the tax, including su per~tax, payable by him or on his behalf on his total. income shall be an amount equal to -- (b) the income-tax which would be pa.yahlc on his total income at the maximum ra!e, plus (h) either the super-tax which would be payable on his total income at the rate of nineteen per cent. or the super-tax which would be payable on his total income if it were the total income of a person resident in the taxable territories whichever is ~rcater. .... ·· (Provisicn to the section is not relevant for our present purpose). Section 17(1) can apply to a •·person". The exprcs- ~ion "person~' is defined .in s. 2(9) of the Indian Income-· tax ct~ 1922 thus: '""person" includes a Hindu undivided family and a local authorhi'· Unless a firm can be considered as a ··person·~, s. I' 17(1) can not govern the assessment of the first respondent.. In the Income-tax Act. 1961 [s.

2(3l)]., the expression "person '' is defined differently. That definition reads: " "person" inc1udes- (i) an .individuaL (ii) a Hindu undivided fami.ly. (iii) a company, (iv) a firm. (v) an association of persons or a bcdy of individuals. whether mcorporated or not. {vj) a lccal authority and [ 1972] 1 S.C.R. (vii) every artificial juridicial person, not faJling within ai1y of the preceding sub clause5., It is a matter for consideration whether the definition contained in s. 2(31) of the Income-tax Act, 1961 is an an1endment of the law or is merely declaratory of the Iaw that was in force ear1ier. To pronounce upon this question, it may b.; necessary to examine various pro- \ !~ions in the Act as well as its scheme. Section 113 of the Income-tax Act, 1961 corresponded ro · ~. 17(1) of the Indian lncon1e-tax Act, 1922 but that c ~eclion has now been omitted with effect from April I, 1965 as a result of the Finance Act, 1965.

From what has b~en said above, it is dear that the question whether s. 17(1) -of the Indian Incmne-tax Act, t 922 was applicable to the case of the first respondent is not free fro1n doub~. Therefore the Incon1e-tax Officer was not justified in thinking tha! on that question there ..:an b~ no two opinions. It was not open to the Tnco1ne- I3\ Officer to go into the true scope of the relevant provisions of ~he Act in a procee~ing under s. 15·~ of the Income-tax Act, 1961. A mtstake apparent on the record 1nust be an obrious and patent !nistake and not ~on1ething whcih can b~ established by a long drav .. 'n pro- L:ess of reasoning on points on which there 1nay conceivably b~ two opinions. As seen earlier, the High Court of B:)!Ubay opined that the original assesstnents were in · ~1ccordance with law though in our opinion the High Court F was not justified in going into that question. Tn Satrwzaraycm Laxminatayan Hegde and ors. v. MilUkarjUJl Bhavanappa Tirumale(l) this Court while spelJing out the scope of the power of a High Court under Art. 226 of the Constitution ruled that an error which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions cannot b~ said to be an error apparent on the fa~e of the record . . -\ decision on a debatable point of Jaw is not a mistake apparent from the record-see Sidh,·amappa v. Cornmissioner of Income-tax.

Bmnbay(2). The power of the officers mentioned in s. 154 of the Income-tax Act, 1961 to correct "any tnistake apparent from the record'' is (1) [1960] 1 S.C.R. 890. (2) 21 I.T.R. 333. 1 T. S. BAL<\RAM, I.T.O. v. VOLKART BROS. (Hegde, J.) A undoubtedly not more· than thAt of the High Court to· entertain a writ petition on the basis of an "error apparent on the face of the record''. In this case it is not necessary for us to spell out the distinction between the expressions "error apparent on the face of the record'' and "mistake n apparent from the record". But suffice it to say that the Inoome -tax Officer was wholly wrong in holding that there was a mistake apparent from the record of the ass-· essments of the first respondent. For the reasons mentioned above we dismiss this appeal with costs. G.C. Appeal disntissed .. 0