LexM. K. VENKATACHALAM, I. T. O. AND ANOTHER versus BOMBAY DYEING AND MFG. CO., LTD.
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• • • S.C.R. SUPREME COURT REPORTS M. K. VENKATACHALAM, I. T. 0. AND ANOTHER v. BOMBAY DYEING AND MFG. CO., LTD. (VENKATARAMA AIYAR, GAJENDRAGADKAR and A. K. SARKAR JJ.) 703 Income-tax-Rectification of order of assessment--Amendment of law with retrospective enforcement-Error resulting from such enforcement, if an error apparent from the record-If such error can be rectified-Indian Income-tax Act, r922 (XI of r922), ss. r8-A and 35-Indian Income-tax (Amendment) Act, r953 (XXV of r953), SS. I and IJ. The Income-tax Officer, by his order dated October 9, 1952, assessed the respondent for the assessment year 1952-53 and gave him credit for Rs. 50,603-15-0 as representing interest on tax paid in advance under s. l8-A(5) of the Income-tax Act. On May 24, 1953, the Indian Income-tax (Amendment) Act, 1953, came into force adding a proviso to s. l8-A(5) of the Act to the effect that the assessee was entitled to interest not on the whole of the advance tax paid by him but only on the difference between the payment made and the amount a.ssessed. The Amendment Act provided that it shall be deemed to have come into force on April l, 1952. The Income-tax Officer, acting under s. 35 of the Act, rectified the assessment order holding that the assessee was entitled to a credit of only Rs. 21,157-6-0 by way of interest on tax paid in advance as a result of the retrospec- tive operation of the amendment in s. l8-A(5), and issued a notice of demand against the assessee for the balance of Rs. 29,446-9-0. The assessee filed a petition in the High Court of Bombay under Art. 226 of the Constitution praying for a writ prohibiting the appellants from enforcing the rectified order and notice of demand. The High Court issued the writ holding that s. 35 was not applicable to the case as the mistake mentioned in s. 35 had to be apparent on the face of the order and the. ques- tion could only be judged in the light of the law as it stood on the day when the order was 'passed : · Held, that the Income-tax Officer was justified in exercising his powers under s. 35 and rectifying the mistake. As .a result of the legal fiction about the retrospective operation of the Amendment Act, the subsequently inserted proviso must be read as forming part of s. 18-A(S) of the principal Act as from: April l, 1952, and consequently the order of the Income-tax Officer dated October 9, 1952, was· inconsistent with the provisions of the proviso and suffered £rom a mistake apparent from th: record. Commissioner of Income-tax, Bombay Presidency and Aden v.- z958 April a8 .. 704 SUPREME COURT REPORTS [1959] • z958 Khemchand Ramdas, (1938) L.R. 65 I.A. 236 and Moka Venkatap- paiah v. Additional Income-tax Officer, Bapatla, (1957)'32 I.T.R. 274, Venkatachalam referred to. ';:, . & The order passed by the Income-tax Officer under s. 18-A Bo~bay C ye~~ was not final i_n the literal sense of the \VOrd; it was and con- fg. o., ' · tinned to be liable to be modified under s. 35. It is also not correct to say that the retrospective operation of the amended s. 18-A(5) was not intended to affect conclnded transactions. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 122 of 1956. Appeal from the judgment and order dated March 5, 1954, of the Bombay High Court in Appeal from its Original Jurisdiction Misc. Application No. 1 of 1954. H. N. Sa.nyal, Addl. Solicitor-General, G. N. Joshi and R.H. Dhebar, for the appellants. N. A: Palkhivala, S. N. Andley, J. B. Dadackanji, P. L. Vohra and Rameshwar Nath, for the respon- dent. 1958. April 28. The Judgment of the Court was delivered by Gajend,agadkar ]. GAJENDRAGADKAR J.-This is an appeal by the Income-tax Officer, Companies Circle 1 (1), Bombay and the Union of India and it raises a short question about the construction of s. 35 of the Income-tax Act read with s. 1, sub-s. (2) and s. 13 of the Indian In- come-tax (Amendment) Act, 1953 (XXV of 1953). It arises in this way. The Income-tax Officer, by his assessment order made on October 9, 1952, for the assessment year 1952-53, assessed the respondent, the Bombay Dyeing and Manufacturing Co. Ltd., under the Act. In the said assessment order the respondent was given credit for Rs. 50,603-15-0 as representing interest at 2% on tax paid in advance under s. 18A of the Act. a'his credit was given to the respondent in pursuance of the provisions contained in s. 18A, sub-s. (5) of the Act as it then
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