TMI Blog1961 (2) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... resident, as against his claim that he was a nonresident. There was, however, no assessment of tax, and it was treated as a case of no demand , because his share of the income of the. firm had already been assessed along with the rest of the income of the unregistered firm. The petitioner himself did not pursue the matter further. The firm appealed against the refusal to grant registration, as it had appealed with reference to the previous years also. The Appellate Assistant Commissioner allowed the appeal for 1949-50. The appeal with reference to 1951-52 also was allowed on August 21, 1955, though the appellant was absent at the hearing. The relevant portion of the appellate judgment in relation to the assessment year 1951-52 ran: The application for registration was refused for the same reasons as in 1949-50. But the assessment of 1949-50 came for appeal, and I have decided that appeal allowing the appellant's claim for registration. This appeal also is allowed and the order of the Income-tax Officer refusing registration is set aside. On September 29, 1955, the Income-tax Officer purported to rectify under section 35 of the Act the order of the petitioner's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure that the court limited the interim stay to three weeks. As the period of four years within which rectification could be effected under section 35 would run out on February 24, 1959, the respondent applied to this court for permission to complete the proceedings. On December 16, 1959, this court ordered: The interim stay ordered was only for three weeks from December 8, 1958. The department will be at liberty to take further proceedings in the matter. There will be stay only as regards the taking of coercive steps to enforce collection. Without any further notice to the petitioner, the Income-tax Officer passed an order on February 19, 1959, purporting to be under section 35 of the Act. After pointing out that registration had been granted to the firm, the Income-tax Officer recorded: In the assessment order dated February 25, 1955, under section 23(1) the status of the assessee was by mistake shown as resident and ordinarily resident. This is a mistake apparent from the records, After referring to the notice issued under section 35 on November 18, 1958, and to the grant of time till December 15, 1958, to file objections, the Income-tax Officer recorded: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is true that the stay was limited to three weeks, and even after that ceased on December 29, 1958, the petitioner did not file his objections or seek further time from the Income-tax Officer. But then, it should be fairly obvious that both the department and the petitioner fell into the same error, that the stay continued and that that misapprehension was cleared up only on February 16, 1959. The assumption in the order dated February 19, 1959, that the High Court vacated the stay on February 16, 1959, is not strictly accurate. The High Court pointed out in effect that the stay ordered on December 8, 1958, had ceased to operate by efflux of time. After February 16, 1959, the Income-tax Officer had only about a week within which he could complete the proceedings under section 35. But what does stand out is that within that week the petitioner was not given any opportunity to show cause against the proposed rectification. The earlier opportunity he had been given to prefer his objections before December 15, 1958, had ceased to be effective when the interim stay was ordered on December 8, 1958. In the peculiar circumstances of this case we have to hold that the petitioner did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re addressed. The respondent relied at one stage on section 35(5) of the Act. It should be obvious that the petitioner's case did not come within the scope of section 35(5). There was no reassessment of the income of the firm; nor was there an appeal against the assessment of the firm. The only appeal of the firm was against the order of the Income-tax Officer refusing registration under section 26A. In fact the finality of the assessment of the firm dated November 11, 1954, was left untouched all through, an aspect to which we shall have to advert again. The contention of the learned counsel for the petitioner was that the petitioner's case did not come within the scope of section 35(1) either. The order of assessment on February 24, 1955, ran: Business: (share income). The assessee's share of income in the unregistered firm of M/s. Murugan Arulanandam and Co., Tuticorin, as determined in the firm's file is ₹ 7,218 (taxed). The assessee had no other income. Declared 'no demand' for 1951-52. If in fact it was a registered firm, to describe it as an unregistered firm and to proceed with the petitioner's assessment on that bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was why that income was not assessed to tax. It was a registered firm. That the registration was granted subsequent to February 24, 1955, did not make it any the less a registered firm. The description that it was an unregistered firm therefore constituted a mistake apparent on the face of the order of assessment itself. We, therefore, refrain from examining the question whether there is an apparent conflict between the views expressed by this court of what constitutes the record for purposes of section 35(1) in Habibullah v. Income-tax Officer, V Circle, Madras [1957] 32 ITR 369 (Mad.), and the views of the Andhra High Court in Lakshminarayana Chetty v. AdditionalIncome-tax Officer, Nellore [1956] 29 ITR 419 (AP). See also the decision of the Supreme Court in Maharana Mills ( Private) Ltd. v. Income-tax Officer, Porbandar [1959] 36 ITR 350 (SC). The learned counsel contended that the petitioner's was at the worst a case of under-assessment or non-assessment, and that the assessment could have been only reopened under section 34 of the Act. The further submission was that section 34(1) and section 35(1) were mutually exclusive, and that what came within the scope of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut then it would also be a case of mistake apparent on the face of the record of the petitioner's assessment. We have already held that the requirements of section 35(1) were satisfied in this case. It is no doubt true that the application of section 34 would have been more favourable to the petitioner. Apart from the slightly shorter period within which action would have been permissible under section 34(i)( b), such a reassessment would have given the petitioner a right of appeal. The learned counsel contended that, if action under section 34(i)( b) and under section 35(1) were alternatives open to the department, the petitioner was entitled as of right to be dealt with under the more favourable procedure, that under section 34(i)( b). The learned counsel relied on the observation of Chagla C.J. in Thakkar v. Commissioner of Income-tax [1955] 27 ITR 658 , 663 (Bom.): It would still be open to the assessee to contend that by adopting one mode of assessment rather than another a prejudice has been caused to him or that he has been deprived of some right to which he would have been entitled if the unregistered firm had been assessed first or that the burden of taxation h ..... 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