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PETITIONER: T. S. BALARAM, INCOME TAX OFFICER,COMPANY CIRCLE IV, BOMBAY

       Vs.

RESPONDENT: M/S.  VOLKART BROTHERS, BOMBAY

DATE OF JUDGMENT05/08/1971

BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N.

CITATION:  1971 AIR 2204            1972 SCR  (1)  30

ACT: Income  tax  Act,  1961, s. 154-Mistake  apparent  from  the record must he a patent mistake on which there can be no two opinions-Whether s. 17(1) of Income-tax Act, 1922 applied to firms  is  not  a  question on which there  can  be  no  two opinions.

HEADNOTE: The respondent firm was duly registered under the Income-tax Act,  1922  as  well as the Income tax Act,  1961.   In  the original  assessments  of the firm for  the  years  1958-59, 1960-61,  1961-62 and 1962-63 assessments were made  on  the slab  rates  prescribed under the  respective  Finance  Acts applicable  to registered firms.  In the individual  assess- ments of the partners, their respective shares in the income of the firm were included and assessed at the maximum  rates since  their  assessment,,;  were  made  in  the  status  of nonresident.   On February 1, 1965 the respondent  firm  was served with notices dated January 29, 1965 by the Income-tax Officer  intimating  to it that in its assessments  for  the four years in question there were mistakes apparent from the record  inasmuch  as the firm had not been  charged  at  the maximum  rates of tax under s. 17(1) of the Income tax  Act, 1922  and  that  therefore  he  proposed  to  rectify  those assessments  under  s.  154 of the  Income  tax  Act,  1961. Thereafter  the Income-tax Officer assessed  the  respondent firm by applying the provisions of s. 17(1) of the 1922 Act. The respondent challenged the validity of She said orders in a  writ  petition under Art. 226 of the  Constitution.   The High Court held that there was no obvious and patent mistake in  the original assessment orders and therefore the  Income tax  Officer was not competent to pass the  impugned  orders under s. 154.  In appeal by certificate, HELD: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. [34E] The applicability of s. 17(1) to the respondent would depend an  the  decision  of the question whether  a  firm  can  be considered as a ’person’ within the meaning of that section. The term ’person’ was defined in the 1922 Act as including a Hindu  Undivided Family and a local authority.  In the  1961 Act the definition has been expanded and includes firm.   It

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is  a  matter for consideration whether the  new  definition contained  in  s.. 2(31) of the Income-tax Act, 1961  is  an amendment  of  the law or is merely declaratory of  the  law that was in force earlier.  To pronounce upon this  question it may be necessary to examine various provisions in the Act as  well  as  its scheme.  The Income-tax  Officer  it)  the present case was not justified in thinking that there  could be no two 31 opinions  about  the  applicability of s.  17(1)  .  He  was therefore  wholly wrong in holding that there was a  mistake apparent   from  the  record  of  the  assessments  of   the respondent. [33F-34D] Satyanarayan Laxminarayan Hegde & Ors. v. Milikarjiun Bhava- nappa  Thirumale,  [1960] 1 S.C.R. 890 and  Sidhrainappa  v. Commissioner  of Income-tax, Bombay, 21 T.I.R. 333  referred to

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1170  of 1968. Appeal  from  the judgement and order dated February  3,  6, 1967 of the Bombay High Court in Misc.  Petition No. 104  of 1965. S.Mitra  J. Ramamurthi, R. N. Sachthey and B.  D.  Sharma for the Appellant. M.   C. Chagla, N.A. Palkhivala, Bhuvanesh Kumari, J.  B. Dadachanji  and  Ravinder Narain for  the  respondent.   The Judgment of the Court was delivered by Hegde,  J.-This  appeal  by  certificate  arises  from   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  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 of  the  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 under  the Income-tax Act 1961. In the original  assessments of  the firm for the concerned assessment years  assessments were made on the salb 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 since their assessments were made in  the status  of non-resident.  On February, 11, 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 32 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  of the 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 Officer’s authority  to  make  any correction.   The  Income-tax  Officer did  not  accept  the contention of the respondents and assessed them by  applying

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the provisions of S. 17(i) 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. The first question that we have to decide is whether oil the facts and in the circumstances of the ’case.  The Income-tax Officer  was  within  his ’powers  in  making  the  impugned 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 (1) 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  corresponding  section in the Indian  Income-tax 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  ass- essment, there was any apparent mistake.  As seen earlier in the  original  assessments  of the  firm  for  the  relevant assessment  years, the Income-tax Officer adopted  the  slab rates  applicable  to registered firms.   The  question  for decision is whether the first respondent’s firm 33 came within the mischief of S. 17(1) of the Indian  Income-- tax Act, 1922.  Section 17(1) reads:               "Where a person is not resident in the taxable               territories  and  is not a company,  the  tax,               including super-tax, payable by him or on  his               behalf on his total in come shall be an amount               equal to               (a)   the income-tax which would be payable on               his total income at the maximum rate, plus               (b)   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               greater....". (Provision to the section is not               relevant for our present purpose). Section  17(1)  can  apply to a  "person".   The  expression "Person" is defined in s. 2(9) of the Indian Income-tax Act, 1922 thus: "  "Person"  includes a Hindu undivided family and  a  local authority". Unless  a  firm can be considered as a  "Person",  S.  17(1) cannot govern the assessment of the first respondent. In the Income-tax  Act,  1961 [S. 2(31)].,  the  expression  person is defined differently.  That definition reads:                      "person" includes- (i)  an individual, (ii) a Hindu undivided family, (iii)     a company, (iv) a firm, (v)  an  association  of persons or a body  of  individuals, whether incorporated or not,  (vi)     a local authority and 34 (vii)     every  artificial juridicial person,  not  falling

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within any of the preceding sub clauses., It  is  a matter for consideration  whether  the  definition contained  in  S. 2(31) of the Income-tax Act,  1961  is  an ,amendment  of the law or is merely declaratory of  the  law that  was  in  force,  earlier.   To  pronounce  upon   this question, it may be necessary to examine various  provisions in the Act as well as its scheme. Section  113 of the Income-tax Act, 1961 corresponded to  S. 17(1)  of the Indian Income-tax Act, 1922 but  that  section has  now  been omitted with effect from April 1, 1965  as  a result of the Finance Act, 1965. From what has been said above, it is clear that the question whether  S.  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 S. 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.  As seen  earlier,  the  High Court of Bombay opined that the original assessments were in accordance with law though in our opinion the High Court was not justified in going into that question.  In  Satyanarayan Laxminarayan  Hegde  and  ors.  v.  Millikarjun   Bhavanappa Tirumale(1)  this Court while Spelling 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 be said to be  an  error apparent  on  the  face  of the record.   A  decision  on  a debatable  point of law is not a mistake apparent  from  the record-see  Sidhamappa  v..  Commissioner-  of   Income-tax, Bombay(2).  The power of the officers mentioned in S. 154 of the  Income-tax Act, 1961 to correct "any  mistake  apparent from the record" is (1) [1960] 1 S.C.R. 890. (2) 21 I.T.R. 333. 35 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 66 error apparent on the face of the record" and "mistake  apparent from the record".  But suffice it to  say that  the  Income tax Officer was wholly wrong  in  holding that  there  was a mistake apparent from the record  of  the assessments of the first respondent. For the reasons mentioned above we dismiss this appeal  with costs. G.C.                               Appeal dismissed. 36