COMMISSIONER OF INCOME TAX Vs. SANDEEP BIPINCHANDRA

JUDGEMENT

(1.) THE present reference is made under S. 256(1) of the IT Act, 1961. The question that is referred for opinion is as under:

(2.) THE assessment year under reference is 1968 69, the previous year being Samvat year 2023. The assessee who is a minor was admitted to the benefits of a partnership firm in the name and style of Ojas Corporation. Besides the share income from the said firm, the assessee derived income from interest, dividends and house property. After the assessment for the asst. year 1968 69 was completed, it came to the notice of the ITO that the annuity deposit payment by the assessee has been worked out at the lower figure and additional surcharge had not been charged. The ITO, therefore, issued a notice calling upon the assessee to show cause as to why the aforesaid mistake should not be rectified under S. 154 of the IT Act, 1961. In response to the notice, the assessee submitted his reply that he had no objection if rectification regarding annuity deposit was made as proposed, but the assessee objected to the levy of additional surcharge, on the ground that it could not be the subject matter of rectification. The ITO rejected the objection raised on behalf of the assessee and rectified the assessment order as proposed by him. By the said order of rectification dated January 7, 1974, the ITO directed "Charge additional surcharge on unearned income". Being aggrieved by the said order, the assessee preferred an appeal before the AAC. The Appellate Assistant Commissioner also confirmed the order of the ITO. Being aggrieved by the order passed by the AAC, the assessee approached the Tribunal. The Tribunal by its order dated May 31, 1976, set aside the order of the ITO levying surcharge and confirmed by the AAC. Thereafter, the present reference came to be made wherein the aforesaid question came up for opinion : Shri B. R. Shah, the learned advocate appearing for the Revenue, submits that the order passed by the ITO is purely within the ambit of S. 154 of the Act, as it is rectifying the mistake apparent on the record. To appreciate the contention, it is necessary to see the definition of "earned income" given in the Finance (No. 2) Act, 1967. Sec. 2(7)(c) of the said Act defines "earned income" as under :

(3.) IT may be stated that the Tribunal has relied on Nandlal Mangaram Pamnani vs. G. L Lakshminarasimhan (1971) 82 ITR I (Bom) wherein it is observed (at page 6) that "failure to apply a section of the IT Act, permitting higher taxation, particularly where the application is itself open to argument and debate, can never be an error apparent on the face of the record one which can be rectified under S. 35 of the Act". This observation cannot be applied to a case where there is a failure to apply a section of the Act permitting higher taxation though there may not be any argument or debate for its application. Another decision which was relied on by the Tribunal is the case of T S Balaram, ITO vs. Volkart Brothers [1971] 82 ITR 50 (SC) wherein it was observed (at page 53) that it was not open to the ITO to go into the true scope of the relevant provisions of the Act in proceedings under S. 154 of the IT Act. The legal proposition propounded by the Supreme Court cannot be disputed. In the present case, there is no question of interpreting S. 154 of Act or any provision of Finance (No. 2) Act, 1967, for finding out its true scope. Hence, both the aforesaid rulings do not help the assessee in view of the facts and circumstances of the case. It is purely reading the section and applying the same to the facts of the present case. Even on reading the definitions of "earned income" and "unearned income", it is clear that there was a mistake apparent on the face of the record. In that view of the matter, the question is answered in the negative, that is, in favour of the Revenue and against the assessee. The reference is accordingly disposed of with no order as to costs.