9911796707
TMI Blog1962 (1) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... 947-48 was completed on October 31, 1950, by the Income-tax Officer, II Circle, Madras, and the proportionate share of the assessee for the losses was computed for the two years at Rs. 15,839 and Rs. 1,046 respectively. Assessment of Messrs. Palaniappa Chettiar & Co. for 1947-48 was completed by the Income-tax Officer, Special Circle, on June 30, 1951, and the share of the assessee in the loss suffered by that firm was computed at Rs. 2,000. On receipt of intimation of the orders passed in the assessment of the two firms, the Income-tax Officer, V Circle, Madras, issued on May 4, 1953, notices to show cause why the assessments of the assessee, for the years 1946-47 and 1947-48 should not be rectified under section 35 of the Income-tax Act. On March 24, 1954, the assessee wrote to the Income-tax Officer stating : " This is to inform you that I have no objection in completing the assessments of the previous years in accordance with law. " On March 27, 1954, the Income-tax Officer revised the assessment of the assessee in respect of the two years after taking into account the share of the losses as computed in the assessments of the two firms. The assessee died on April 17, 1954, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the individual partner, Subba Rao C.J., speaking for the court, observed and, in our judgment, correctly : " But it is said that section 35 of the Act even without the amendment would have enabled the income-tax authorities to reopen the assessment on the ground that there was a mistake apparent from the record. But from the record of final assessment, it is impossible to say that there was a mistake apparent from the record, for the assessing authority accepted a certain figure as representing the share of the assessees in the firm and made a final assessment. The mistake is not in the record but by a subsequent assessment of the firm, it was discovered that the earlier assessment was wrong to the extent of the assessees' share in the firm. It is not a mistake apparent from the record but a mistake discovered from the disposal of another case. " Section 35(1) of the Income-tax Act could not therefore be resorted to by the income-tax authorities for rectification of the assessments of the assessee, for there was no error apparent from the record of those assessments. The Income-tax Officer, however, sought to rely upon section 35(5) which was incorporated by section 19 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section, and sub-section (1) applies thereto accordingly--the period of four years being computed from the date of the final order passed in the case of the firm. The discrepancy disclosed as a result of assessment or reassessment of a firm between the share of a partner included in the individual assessment of that partner and his share disclosed in the assessment of the firm was not an error apparent from the record within the meaning of section 35(1) and the legislature enacted a fiction making the inclusion of the share in the assessment or correction thereof such a mistake. If the inclusion of the share or the correction of the assessment were an error apparent from the record and falling under clause (1) of section 35, the enactment of clause (5) was plainly unnecessary. When the legislature has deliberately enacted a fiction of the nature set out in clause (5), we are unable to agree with the contention raised by counsel for the Revenue that the enactment of the fiction was ex abundanti cautela. Rectification of the nature contemplated by clause (5) could not have been effected under clause (1), and to remove the lacuna the legislature declared that what was not a mistake s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the new clause (5) arose, to give a larger retrospective operation than is directed, is to ascribe to the legislature an intention different from the one expressed, and to make a larger inroad upon the finality of that assessment than is permitted by the legislature. Section 35(5) does not purport to amend clause (1) ; that clause is left untouched by the amending statute. Its application, by fiction, is extended to other classes of cases by declaring what in truth are not mistakes, as mistakes. Clause (5), therefore, confers an additional power of rectification upon the income-tax authorities and in the absence of compelling reasons we will not be justified in upholding the exercise of the power to assessments of firms which have been completed before the date on which the power was invested. Some assistance may be derived from the phraseology used by the legislature in clause (6) which was enacted simultaneously with clause (5). That clause provides (omitting parts which are not material) : " Where the excess profits tax or the business profits tax payable by an assessee has been modified... or where any excess profits tax or business profits tax has been assessed after ..... X X X X Extracts X X X X X X X X Extracts X X X X
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