NANDLAL MANGARAM PAMNANI Vs. LAKSHMINARASIMHAN G

JUDGEMENT

(1.) THE original petitioner along with one Balchand Menghraj, Khanchand Jiwandas, Jaikishan Balchand and one Govindibai had been carrying on business in partnership in the firm name and style of J. B. Mangaram & Co., at Gwalior. The present petitioners are the heirs and legal representatives of the original petitioner and were brought on record pursuant to the Judge's order dt., 23rd Aug.,, 1968. By this petition the petitioners seek an appropriate writ quashing and/or setting aside the order dt., 21st June, 1966, made by the 2nd respondent herein, as also for quashing and/or setting aside the order dt., 24th March, 1966, made by the 1st respondent.

(2.) THE petition relates to the asst. year 1957 -58. For the said year the said firm of J. B. Mangaram & Co. was assessed by Shri B. R. Adwalpalkar, ITO, Special Investigation Circle A, Nagpur, and the total income of the said firm was computed at Rs. 16,00,419. By an order dt., 29th March, 1966, the said firm was duly registered, and by reason of such registration the share of profit of each partner in the firm was duly apportioned to each partner, and in paragraph 4 of the petition is to be found the computation as far as the original petitioner's share is concerned. Thereafter, Shri Adwalpalkar assessed the original petitioner in respect of his share of profit in the said firm as also his other income. A copy of the order of assessment is annexed as exhibit B to the petition. Subsequently, on 26th Feb., 1966, the 1st respondent issued a notice to the original petitioner under S. 154/155 of the IT Act, 1961, a copy of the notice is annexed as exhibit C to the petition. By the said notice it was claimed that there was a mistake apparent on the record pertaining to the assessment of the original petitioner for the asst. yr.1957 -58 made on 29th March, 1962. According to the 1st respondent, the nature of the mistake proposed to be rectified was as follows :

(3.) ACCORDING to the petitioners, there are four grounds on which the aforesaid orders are bad and liable to be set aside. These grounds are summarised in paragraph 9 of the petition. In the first place, according to the petitioners, on a plain reading of S. 14(2) (aa) of the INCOME TAX ACT, 1922, it is abundantly clear that under the said provision an assessee has to be given a certain rebate in respect of the tax paid by the registered firm on the firm's income. According to the petitioners, that rebate in the hands of the partner can never be considered as unearned income. Secondly, it was submitted that notice for rectification was given under S. 154/155 of the IT Act, 1961, whereas the order was passed under S. 35 of the INCOME TAX ACT, 1922. It is submitted that inasmuch as the notice for rectification was given under the new Act, the rectification proceedings could, if at all, be completed only under the new Act. Thirdly, it is submitted that S. 14(2) of the Act only enumerates the amounts on which tax is not payable. Under S. 14(2) (aa), it is submitted, tax is not payable on the amount of a partner's share of tax payable and paid by the registered firm. It is submitted that, since no tax is payable on the said amount, no special surcharge could be levied thereon, as surcharge is and can only be an addition to tax. According to the petitioners, an amount on which no tax is payable can never be termed as income, and that there can be no question of treating such sum as unearned income. Finally it is submitted that either under S. 154 of the 1961 Act or s. 35 of the 1922 Act, only an error which is apparent on the face of the record can be rectified. It is submitted that the alleged mistake sought to be rectified by the 1st respondent was not a mistake apparent on the face of the record, being one which can be rectified by the 1st respondent under the provisions of S. 35 of the INCOME TAX ACT, 1922.