TMI Blog1978 (7) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... certain common facts and questions of law arising in all these petitions. The petitioner is a public limited company carrying on business as manufacturers of rayon grade pulp, staple fibre, rayon plant and machinery and other chemical plants, man-made fibre fabrics, textiles, etc. The petitioner is assessed in the status of a company under the I.T. Act, 1961, hereinafter called the I.T. Act. For the relevant assessment years, the petitioner was assessed to surtax under the provisions of the Surtax Act by respondent No. 1. After the orders of assessment were passed by respondent No. 1 in respect of the relevant assessment years, respondent No. 1 issued, in exercise of the powers conferred by s. 13 of the Surtax Act, the impugned notices to the petitioner, with a view to rectify mistakes apparent on the face of the record. Section 13 of the Surtax Act reads as under: " 13. Rectification of mistakes.--(1) With a view to rectifying any mistake apparent from the record, the Commissioner, the Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal may, of his or its own motion or on an application by the assessee in this behalf, amend any order passed by him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 v. Mallikarjun Bhavanappa Tirumale, AIR 1960 SC 137, this court while spelling out the scope of the power of a High Court under article 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 Sidhramappa Andannappa Manvi v. Commissioner of Income-tax [1952] 21 ITR 333 (Bom). The power of the officers mentioned in section 154 of the Income-tax Act, 1961, to correct 'any mistake apparent from the record ' is 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 reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 973, on net chargeable profits at Rs. 98,87,015. The capital was computed at Rs. 22,40,12,672. Under rule 4 to the Second Schedule of the Companies (Profits) Surtax Act, part of the income, profits and gains which are not includible in its total income as computed under the Income-tax Act, its capital shall be the sum ascertained in accordance with rules 1, 2 and 3 diminished by an amount which bears to that sum the same proportion as the amount of the aforesaid income, profits and gains bears to the total amount of its income, profits and gains. This year the proportionate capital of deductions u/s. 80J should have been deducted from the computation of capital." In its reply dated 13th June, 1973, and also in the reply dated 27th July, 1973, sent on behalf of the petitioner, it was pointed out that the said notice issued under s. 13 of the Surtax Act was without jurisdiction, and respondent No. 1 was requested to withdraw that notice. In the said letters, the petitioner contended (i) that there were no mistakes at all in the said assessment orders and, therefore, the question of rectifying those mistakes did not arise, and (ii) that even assuming that there were mistakes, they w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and gains of a company is not includible in its total income as computed under the Income-tax Act refers to those sums which are not includible in the total income by virtue of the provisions of Chapter III of the I.T. Act and do not refer to any of the statutory deductions claimed under other provisions of the I.T. Act. It is not necessary for the purpose of this Petition to decide as to whether the aforesaid decision lays down correct law. From a perusal of these decisions, it is quite clear that the question as to whether the expression " a part of the income, profits and gains of a company is not includible in its total income as computed under the Income-tax Act ", appearing in r. 4 of the Second Schedule to the Surtax Act, refers to statutory deductions allowed to a company under ss. 80-I and 80J of the I.T. Act is, in any event, a highly, debatable issue. The mistake sought to be rectified by respondent No. 1, assuming it to be a mistake, is not one which is patent or selfevident on the face of the record. It must, therefore, be held that respondent No. 1 has no jurisdiction under s. 13 of the Surtax Act to rectify the said mistakes. The notices (annexures B and B3) issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase is only a transfer entry from general reserve. As such there was no increase in capital. You have been allowed excessive relief in company's capital to the strength of Rs. 1,50,68,493. This mistake being apparent from record, please let me know whether you have any objection to the proposed rectification. " Similarly, notices in respect of assessment for the assessment years 1969-70 and 1971-72 were also sent to the petitioner. In cases arising out of assessments under the provisions of the Super Profits Tax Act, 1963, it has been held in CIT v. Mohan Meakin Breweries Ltd. [1974] 95 ITR 586 (H.P.) and in CIT v. Geoffrey Manners and Co. Ltd. [1978] 112 ITR 334 (Bom) that the issue of bonus shares necessarily leads to addition in the paid up share capital. In CIT v. Century Spg. Mfg. to. Ltd. [1978] 111 ITR 6 (Bom) it was, however, held that there was material difference between the provisions of r. 2 of the Second Schedule to the Super Profits Tax Act, 1963, and the provisions of r. 3 of the Second Schedule to the Surtax Act, and the decision in CIT v. Mohan Meakin Breweries Ltd. [1974] 95 ITR 586 (HP),was, therefore, held to be inapplicable in assessment proceedings arisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1964. Preference share capital is firstly included in the paid up share capital and thus the compay was already given its advantage, reserve created to meet the redemption liabilities of preference share capital, being for the specific object, its reconsideration in the capital computation would result in double benefit. I, therefore, propose to modify capital computation by withdrawing the double benefit already allowed. The reserves which are not designed to meet any liability, contingency, commitment or dimunition in value of assets known to exist as at the date of balance-sheet cannot be considered as reserve. The reserve may be a general reserve or special reserve but there must be a clear indication whether reserve was either a general reserve or a special reserve. This view has been pronounced by the Supreme Court of India in the case of CIT v. Century Spinning Mfg. Co. [1953] 24 ITR 499. The contingency reserve appearing in your balance-sheet gives no such indication, the indication in particular of the manner of its disposal and its destination. In view of the legal position explained by the Supreme Court in 1953 and there being no indication in any direction, amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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