COMMISSIONER OF INCOME TAX Vs. NEM KUMAR JAIN

JUDGEMENT

(1.) THE assessee, Sri Makhan Lal Jain, was a partner in the firm of M/s. Daulat Ram Makhan Lal. His wife, Smt. Durga Devi, too was a partner in the firm. Each had 1/4th share in the partnership business. For the assessment year 1963-64, the assessee filed the return in the status of individual on January 22. 1964, in which he disclosed his share income from the said firm at Rs. 20,500 and his income from the property at Rs. 1,163. He did not, however, include the share income of his wife in his total income, although he disclosed it in the return at the appropriate place that she too was a partner in the aforesaid firm. THE ITO accepted the return and completed the assessment on February 7, 1964, on a total income of Rs. 23,163. As a result of the reassessment proceedings-taken under Section 147/148 subsequently, the ITO passed a fresh order of assessment on March 21, 1969, in which he included the share income of the assessee's wife in the total income of the assessee. On appeal, the order was reversed by the AAC on the ground that it was not a case of escapement. THE order of the AAC was confirmed by the Tribunal on May 18, 1972. In the meantime, the assessment of the firm, M/s. Daulat Ram Makhan Lal, was completed on 28th March, 1968. THE appeal against that assessment too was decided on January 31, 1970. It may be added here that in consequence of the assessment of the firm, the share income of the assessee and his wife were separately revised in September and October, 1968, but even at that stage no steps were taken by the ITO to assess the wife's share of the income in the hands of the husband. On the other hand, following the dismissal of the revenue appeal by the Tribunal on May 18, 1972, in the reassessment proceedings under Section 147/148, the ITO sought to rectify the mistake under Sections 154 and 155 of the I.T. Act, 1961. He even passed an order on 29th December, 1972, and rectified the previous assessment order. On appeal, the AAC quashed the rectification order holding the same to be unjustified under Sections 154 and 155 of the Act. THE department went in appeal to the Tribunal. THE Tribunal held that the order dated February 7, 1964, suffered from a mistake apparent on the record, inasmuch as the share income of the wife, which she had from the firm, Daulat Ram Makhan Lal, was not included in the total income of the assessee. THE Tribunal, however, held that the rectification order was barred by limitation under Section 154, as it was passed more than 4 years after the original order of assessment dated February 7, 1964, adding that even if the limitation were reckoned on the basis of the order dated September 23, 1968, which was passed for the limited purpose of giving effect to the income resultant from the completion of the firm's assessment, still the rectification order was barred by limitation. As regards Section 155, the Tribunal held that the same was inapplicable. In this view, the Tribunal dismissed the appeal filed by the revenue. At the instance of the Commissioner, the Tribunal has referred the following question of law for our opinion :

(2.) SECTION 154 empowers the ITO to rectify an order of assessment passed by him. The power can be exercised subject to two conditions :

(3.) FOR the reasons stated above, we hold that action under Section 155(1) was incompetent and that under Section 154 was time-barred. We, therefore, answer the question referred to us in the affirmative, in favour of the assessee and against the department. The assessee shall be entitled to costs, which are assessed at Rs. 200.