M/S. Maharana Mills (Private) Ltd vs The Income-Tax Officer, Porbandar

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 39 of 1959

Decision Date: 14 April 1959

Coram: J.L. Kapur, Bhuvneshwar P. Sinha, M. Hidayatullah

In this matter the petitioner, a private limited company named M S Maharana Mills (Private) Ltd, appealed against the order issued by the Income-Tax Officer of Porbandar. The appeal was decided by the Supreme Court of India on 14 April 1959. The judgment was authored by Justice J L Kapur, who sat on the bench together with Justices Bhuvneshwar P Sinha and M Hidayatullah. The case is reported as 1959 AIR 881 and also appears in the 1959 supplement to the Supreme Court Reports at paragraph 547, with subsequent citations in later reports. The legal issue concerned the interpretation of sections 10(2)(vi), 35(1) and 63 of the Indian Income-Tax Act of 1922, particularly as they relate to the computation of depreciation on a written-down value, the binding effect of such computations for subsequent years, and the procedural requirement of giving notice to the assessee before making a rectification.

The appellant company had been assessed for the assessment year 1953-54 under the provisions of the 1922 Income-Tax Act. According to the assessment order dated 30 June 1955, the depreciation allowance permitted under section 10(2)(vi) amounted to Rs 3,48,105. Dissatisfied with this figure, the company filed an application on 8 August 1955 requesting that the Income-Tax Officer rectify the order pursuant to section 35 of the Act, alleging specific miscalculations in the depreciation computation. By an order dated 27 February 1956 the officer revised the written-down values of the various assets of the company and consequently reduced the total depreciation allowance to Rs 1,94,074. The company challenged this rectifying order on several grounds. First, it contended that it had not received a written notice of the intended correction of the written-down values. Second, it argued that section 35 was not the appropriate provision for adjusting written-down values; instead, the correct provision it claimed should have been section 34, which deals specifically with excessive depreciation. Third, the company maintained that the officer had acted beyond his jurisdiction under section 35 by unilaterally correcting the depreciation on the written-down values of buildings and machinery without a request, and that the officer could only rectify mistakes that had been formally brought to his attention. The court examined the procedural history and found that, although a formal written notice had not been issued, the officer had nonetheless communicated the intended determination of the written-down values to the company and had discussed the matter with the company’s representative. Having established that the assessee had been effectively informed and given an opportunity to be heard, the court held that the rectification order was valid.

The Court explained that the purpose of the notice requirement in section 35 of the Indian Income-tax Act, 1922, is to ensure that no order detrimental to a taxpayer is made without giving the taxpayer a chance to be heard. It further held that if the taxpayer actually knew about the proceedings and the matters were discussed with him, an adverse order would not be invalid merely because a formal written notice had not been issued. The Court then turned to the expression “record” in the phrase “mistake apparent from the record” found in section 35(I). It clarified that “record” does not mean only the assessment order; it embraces all the proceedings on which the assessment order is based. Consequently, the Income-tax Officer is authorized, for the purpose of exercising his jurisdiction under section 35, to examine the entire evidence and the applicable law to determine whether an error exists. If the Officer doubts the written-down value for the previous year, he may review the earlier calculations and, upon finding any error, may recompute the depreciation in accordance with the law and the rules made thereunder. The Court emphasized that a mistake contemplated by the provision is not one that must be uncovered through a party’s argument; rather, the Officer may discover it by his own examination of the record, including the evidence. When the Officer discovers such a mistake, he is entitled to correct it, provided that if the correction results in an increased assessment or a reduced refund, the taxpayer must be given notice and a reasonable opportunity to be heard. In reaching this conclusion, the Court relied on the authorities Venkatachalam v. Bombay Dyeing & Mfg. Co., Ltd., [1959] S.C.R. 703; Commissioner of Income-tax v. Khemchand Ramdas, [1938] L.R. 65 I.A. 236; and Sidhramappa Andannappa Manviv. Commissioner of Income-tax, [1951] 2 I.T.R. 333.

The judgment was delivered in civil appellate jurisdiction in Civil Appeal No. 39 of 1959, which had been granted special leave to appeal the decision of the Bombay High Court at Rajkot dated 26 November 1957 in Special Civil Application No. 119 of 1956. The appellant, represented by counsel, was a private limited company engaged in manufacturing and selling textiles, while the respondent, represented by the Attorney-General for India and other counsel, was the Income-tax Officer of Porbander. The Court noted that before 1949 Porbander, then part of the State of Saurashtra, was not subject to income-tax. The Saurashtra Income-tax Ordinance of 1949 introduced income-tax liability in that state, and from 1950 onward, after Saurashtra merged with the Union of India, the Indian Income-tax Act became applicable by virtue of the Finance Act 1950 (Act XXV of 1950). The appellant had been assessed for the accounting year 1949 (assessment year 1950-51) and subsequent years, and the present appeal concerned the assessment for the year 1953-54. The judgment was pronounced by Justice Kapur on 14 April 1959.

When Saurashtra became a part of the Union of India, the Indian Income-tax Act (hereinafter referred to as the Act) was brought into force by the Finance Act of 1950 (Act XXV of 1950). The appellant was therefore taxed for the accounting year 1949, which corresponded to assessment year 1950-51. In that assessment the depreciation allowable under section 10(2)(vi) of the Act was fixed at Rs 3,43,869. The appellant continued to be assessed in the subsequent assessment years 1952-53 and 1953-54, and the present appeal concerns the assessment for the year 1953-54. By the assessment order dated 30 June 1965, the depreciation allowed for that year was shown as Rs 3,48,105. On 8 August 1955 the appellant filed an application for rectification under section 35 of the Act, highlighting several mistakes in the calculation of depreciation. By the order dated 27 February 1956 the Income-tax Officer revised the written-down values of the appellant’s various properties and consequently fixed the total allowable depreciation at Rs 1,94,074. The Officer’s order stated: “To arrive at the Written Down Value of the assets it was necessary to maintain depreciation record. This being not done so far, is done now and working attached. Depreciation allowance as per rules is worked out at Rs 1,94,074 as per working sheet attached. The correct computation of income is as under:- Income before allowing depreciation as per original assessment order: Rs 1,00,674. Less charity disallowed wrongly written Rs 21,889 instead of Rs 20,124: Rs 1,765. Income Rs 98,909. Less depreciation Rs 1,94,074. Rs 95,165. Less dividend income as per original assessment order: Rs 11,870. Loss Rs 83,295. Loss on account of depreciation to be carried forward. Declared N. A.” As a result, the unabsorbed depreciation that had been shown as Rs 2,31,944 in the June 30 1955 assessment order was reduced to Rs 83,295, and this reduced amount was set off against the appellant’s income for assessment year 1954-55.

Subsequently, on 29 February 1956 the Income-tax Officer issued two provisional assessment orders for the years 1954-55 and 1955-56. In both provisional orders the depreciation amounts were computed on the basis of the same written-down values that had been determined for the year 1953-54. The Officer explained the reason for using the revised basis in an order dated 18 May 1956, stating: “Less Depreciation. The depreciation of the Company has not been properly calculated by arriving at Written Down Value as per the Saurashtra Income Tax Ordinance and also as per Indian Income-tax Act. The assessee Company was being assessed regularly even as per Indian Income-tax Act. So Written Down Value of all assets are arrived at by working out the depreciation as per above Ordinance as well as Income Tax Act. The depreciation is worked out as per separate statement keeping in view the following: (i) Definition of ‘assessee’ as per Indian Income-tax Act. (ii)…”. The officer therefore recomputed depreciation on the new basis, taking into consideration the definitions and provisions of both the Saurashtra Ordinance and the Indian Act, and applied a separate statement of depreciation accordingly.

The Court observed that the determination of the Written Down Value (W.D.V.) had to be guided by several authorities. First, the exact meaning of W.D.V. as defined in the Income-Tax Act was considered. Second, the meaning of W.D.V. under the Saurashtra Income-Tax Ordinance of 1949 and the accompanying rules, specifically the passage cited on page 20, paragraph 13-5-A, was taken into account. Third, the decision reported in Taxation Review, volume 25, page 558, which recorded the Calcutta High Court’s ruling in the matter of C.I.T., West Bengal, in the case of M/s Karnani Industrial Bank Ltd., was examined. Fourth, the views expressed by the Taxation Enquiry Commissioner for the year 1953-54, found in Volume II, page 84, paragraph 34, were noted. Fifth, the provisions of the Taxation Laws (Part B-State) Removal of Difficulties Order of 1950 were also taken as a reference. The depreciation on the assets was therefore worked out on the basis of a separate statement that incorporated these various authorities. On 8 August 1955, the appellant filed an application under section 35 of the Act seeking certain corrections in the calculation of depreciation. The Income-Tax Officer thereafter issued an order on 27 February 1956 confirming the assessment, but the officer failed to serve any written notice of the intended correction of the W.D.V. or the depreciation amount, as required by section 35 read with section 63 of the Act.

Subsequently, on 9 March 1956, the appellant sent a letter to the Income-Tax Officer protesting the order and alleging that the officer had exercised powers not vested in him under the said section, preparing statements and records that were prejudicial to the rights of the company. The appellant demanded that the officer rescind the previous order and issue a fresh order correcting only the mistakes that had been identified. On the same day the appellant dispatched another letter requesting the cancellation of the provisional assessment order for the year 1954-55 and a revised assessment based on the return filed by the appellant. The officer replied on that date, stating that the order was correct and that a similar order had been made in response to the second application concerning the assessment for 1954-55. On 16 April 1956, the appellant instituted a petition before the High Court of Bombay under Articles 226 and 227 of the Constitution, alleging that the Income-Tax Officer had exceeded the jurisdiction conferred upon him, had acted illegally under section 35, had issued orders suo motu without prior notice, and had altered the entire procedure and basis for calculating depreciation on the written down value of the appellant’s buildings and machinery. The appellant prayed that the order made under section 35 be set aside and that an injunction be granted restraining the officer from recovering the assessed tax. The High Court dismissed the petition on the ground that it contained misstatements of fact, that the constitutional jurisdiction was unavailable when an adequate remedy existed under ordinary law, and that the appellant could have pursued a revision under section 33A of the Act. The High Court also rejected the appellant’s case on its merits. The appellant has therefore approached this Court by way of special leave.

In this matter, the Court identified three specific issues that had been raised. The first issue concerned the allegation that the notice required by section thirty-five of the Act had not been served on the appellant. The second issue questioned the existence of any record on the basis of which a rectification in the written down value of the property could be effected. The third issue asserted that the record did not reveal any apparent mistake that would justify such rectification.

The learned Attorney-General argued, in the first instance, that the remedy available under article two hundred twenty-six of the Constitution is discretionary. He contended that, had the High Court exercised its discretion in a different manner, no appeal could have been entertained. To support this position, he relied upon the judgment of this Court in K S Rashid & Son v. Income-tax Investigation Commission, where Justice Mukherjee, then a Judge of this Court, observed that “for the purpose of this case it is enough to state that the remedy provided for in article two hundred twenty-six of the Constitution is a discretionary remedy and the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere.” The Court noted that it was unnecessary to decide afresh whether an order made under article two hundred twenty-six is discretionary, and therefore it would not interfere with the exercise of discretion. The Court further observed that the present dispute could be resolved on substantive grounds without addressing the discretionary nature of the earlier order.

The first substantive question concerned the requirement of notice under section thirty-five of the Act. The affidavit of the Income-Tax Officer indicated that discussions regarding the correctness of the depreciation figures had been held with the appellant’s secretary. The Officer stated that the depreciation calculated in the assessment order for the year nineteen-fifty-three-fifty-four had been based on the statement provided by the petitioner. Upon submission of the application, the petitioner, identified as Shri Ganatra, the Secretary of the Mills, was informed that the depreciation would be determined after rectifying any identified errors. The petitioner agreed to this procedure. Because there was no record of the computation from the original assessment order for the year nineteen-forty-three-forty-four, the petitioner was supplied with a copy of the depreciation computation together with the applicable rules and regulations for such calculation.

The Officer further affirmed that the rectification order was issued “almost at the end of the financial year, after explaining and discussing all the above calculation along with the relevant rules and regulation of the calculated depreciation.” He emphasized that the order had not been passed without affording a reasonable opportunity to the appellant. The matter had been discussed with the appellant’s representative on more than one occasion. The assessment for the year nineteen-fifty-four-fifty-five was finalized after the depreciation had been calculated. The Officer noted that the appellant had not raised the issue of depreciation at any hearing. Although no formal written notice had been dispatched, the representative of the appellant had been informed of the intended determination of the written down values. The Officer concluded by stating, “Thus, though no written notice is …”

In this matter the respondent asserted that, despite the absence of a formal written notice under section 63, the applicant had nevertheless been informed of the intention to compute depreciation on a record basis and had been afforded a reasonable opportunity to be heard, because the depreciation calculation had been supplied to him on 21-2-1956, as captured in the statement that “applicant is given notice of the intention of calculating depreciation on record basis and is also allowed a reasonable opportunity of being heard inasmuch as he was given the calculation of depreciation on 21-2-1956”. The record of orders demonstrates that the Income-Tax Officer performed a calculation specifically for the purpose of determining the depreciation amount and, after applying the deductions permitted by the Act and the Rules made thereunder, arrived at a corrected depreciation figure of Rs 1,94,074 for the assessment year 1953-54. It was observed that the appellant’s petition did not set out clearly all the facts that should have been included; nevertheless, an affidavit filed by the respondent indicated that the matter had been discussed with the appellant’s representative, even though no written notice had been issued. In this connection the learned Attorney-General further submitted three points: first, that the order determining the allowable depreciation amount was not final; second, that the effect of the rectifying order did not result in an enhancement of the assessment or a reduction of any refund; and third, that the issue of depreciation could be raised at the time of assessment in any subsequent year. The purpose of the notice requirement contained in section 35 is to ensure that no order detrimental to an assessee is passed without affording the assessee an opportunity to be heard. However, it cannot be said that the rule is so inflexible that an adverse order becomes invalid merely because a formal notice under section 63 was not served, provided that the assessee, as a matter of fact, knew of the proceedings and the matter had been discussed with him, thereby giving a reasonable opportunity to show cause. Moreover, the provision of section 35 applies only where an assessment is enhanced or a refund is reduced, and neither of those contingencies occurred in the present case. The depreciation allowed to the appellant for the assessment year 1943-44, when he was assessed as a non-resident, amounted to Rs 1,91,224. In the assessment year 1944-45 there was no assessable income in British India, and the same held for 1945-46. The assessment year 1946-47 recorded a loss. In the assessment year 1947-48, as in the preceding years, sales were effected at Porbandar and no collection was made in British India; consequently, the total tax due was calculated at Rs 43-11As. In the assessment year 1948-49, sales amounted to Rs 38,656 and were assessed to income-tax on a total income of Rs 9,326. For the accounting year 1948, corresponding to assessment year 1949-50, when the Ordinance came into force, the total depreciation amount allowed was Rs 3,66,925, which substantially exceeded what would have been allowable on the basis of the Written Down Values determined in accordance with the provisions of the Ordinance. The Ordinance defined “Written Down Value” as follows: (a) in the case of assets acquired in the preceding year, the actual cost to the assessee; and (b) in the case of assets acquired before the preceding year, the actual cost to the assessee less …

The dispute centred on the wording that defined “all depreciation actually allowed to him under this Ordinance or allowed under any Act repealed hereby or which would have been allowed to him if the Indian Income-tax Act, 1922, was in force in the past”. Relying on that definition together with the other statutes and rules set out in the appellant’s affidavit, the Income-tax Officer performed a series of calculations and arrived at the depreciation amounts that are now the subject of this controversy. Those calculations were based on the Written Down Values (WDV) for each successive assessment year up to the assessment year 1953-54.

Counsel for the appellant argued that, pursuant to section 10(5)(b) of the Income-tax Act, the WDV for assets acquired before the preceding year must be computed as the actual cost to the assessee less all depreciation actually allowed to him under the Act or under any Act that has since been repealed. Consequently, the appellant maintained that the provisions of the Saurashtra Ordinance, which ceased to operate when the Income-tax Act became applicable, could not be used as a basis for determining the WDV for assessments beginning with the year 1950-51.

In response, the respondent submitted that the WDV and the depreciation for the year 1943-44 had been calculated according to the Ordinance, and that for the later years the same method prescribed by the Ordinance should continue to apply. They further asserted that the WDV could not be increased merely because the Ordinance was later superseded by the Act, as this would be contrary to the provisions of section 10(5)(b).

The discussion then turned to section 12 of the Finance Act, 1950, which empowered the Central Government to issue provisions to remove difficulties in giving effect to any Acts, Rules or Orders extended under sections 3 or 11 of that Finance Act. Under this authority, the Taxation Laws (Part B States) Removal of Difficulties Order, 1950, was issued on 2 December 1950. Clause 2 of that Order provided for the computation of the aggregate depreciation allowance and the WDV. An explanatory note was later added to the Order on 9 March 1953 (Notification No. S. R. 0. 477), stating that, for the purposes of the paragraph, the expression “all depreciation actually allowed under any laws or rules of a Part B State” shall be deemed to mean the aggregate allowance for depreciation taken into account when computing the WDV under any such laws or rules, or the amount carried forward under those laws or rules.

The appellant’s counsel contended that this explanation exceeded the authority of the Order, labeling it ultra vires because it was promulgated under section 60-A of the Income-tax Act, a provision they argued did not apply to an order made under section 12 of the Finance Act, 1950. To support this position, the counsel cited two decisions of the Hyderabad High Court in S. V. Naik v. Commissioner of Income-tax (1) and Commissioner of Income-tax v. D. B. R. Mills Ltd. (2).

The Court observed that one of the earlier decisions cited by the appellant, namely Income-tax v. D. B. R. Mills Ltd. (2), is presently under appeal before this Court. Consequently, the Court expressly declined to express any opinion on the correctness of the appellant’s contention that arose from that judgment. The learned Attorney-General then argued that the Written Down Values (WDVs) computed under section 35 are not final and may be revisited in subsequent assessment years. To support this contention, he referred to the decision in Karnani Industrial Bank v. Commissioner of Income-tax (3), where the original cost of machinery amounting to Rs 3,40,000 had been accepted in a series of assessments until it was questioned in the assessment order for 1946-47 and reduced to Rs 2,80,000. The point raised in that case was whether the Income-tax Officer was legally permitted to look beyond the cost that had been accepted by his predecessor dating back to the assessment year 1939-40. The Court held that neither the doctrine of res judicata nor the principle of estoppel, nor the provisions of section 10(2)(vi) of the Act, barred the Income-tax Officer from ascertaining for himself the actual cost of the machinery. The Court further held that depreciation must be computed afresh for each year and that the Officer was not limited to performing a mere mathematical operation on the basis of the previous year’s WDV; rather, he was entitled to determine the WDV himself. This conclusion was drawn from the authorities cited as (1) [1955] 29 I.T.R. 206, (2) [1954] 29 I.T.R. 210 and (3) [1951] 25 I.T.R. 558.

The Court explained that the scope of the Income-tax Officer’s power does not stop at the WDV of the immediately preceding year but extends back to the original cost figure. The method mandated by section 10(5)(b) is not a mechanical scaling down of the prior year’s WDV; instead, it requires the Officer to consider the actual cost, to determine that cost himself if necessary, to take account of any allowances previously granted, and then to compute the WDV for the assessment year that is presently before him. Accordingly, it cannot be said that a WDV and depreciation amount computed under section 35 become a final, binding determination for all future years, nor does such a determination operate as estoppel or res judicata for subsequent assessments. The Court therefore concluded that the appellant still has an effective and adequate remedy to challenge the depreciation amount determined under section 35. Counsel for the appellant maintained that the provision relied upon by the Income-tax Officer, namely section 35, was not intended for correcting WDVs and that the correct provision for such corrections was section 34, which specifically deals with excessive depreciation.

The Court explained that an Income-tax Officer may act under two provisions, namely sections 34 and 35, and examined whether section 35 was available to him in the present case. Section 35 states that the Commissioner or an Appellate Assistant Commissioner may, at any time within four years from the date of any order passed by him in appeal, or, in the case of the Commissioner, in revision under section 33A, rectify any mistake apparent from the record of the appeal, revision, assessment or refund, as the case may be. It further provides that the Income-tax Officer may, on his own motion, rectify any such mistake within four years from the date of any assessment order or refund order, and that he must also rectify any mistake brought to his notice by an assessee within the same period. The Court therefore asked whether the correction made by the Income-tax Officer amounted to rectifying a mistake that was apparent from the record. It was submitted that merely recalculating a figure does not constitute rectification of a mistake apparent from the record. The Court noted, however, that the expression “apparent from the record” does not refer only to the assessment order itself; it embraces the entire set of proceedings on which the assessment order is based. Consequently, the Income-tax Officer, while exercising his jurisdiction under section 35, is entitled to examine all the evidence and the applicable law to determine whether an error exists. If the officer doubts the written-down value calculated for the preceding year, he may review the earlier calculations and, upon finding an error, may make fresh calculations in accordance with the law and the rules made thereunder. The Court then referred to the Privy Council decision in Commissioner of Income-tax v. Khem Chand Ramdas (1), where it was held that section 35 was applicable when the assessee failed to produce books of account and the Income-tax Officer made an assessment to the best of his judgment. In that case the firm’s registration was allowed on 17 January 1927, and on the same day an assessment under section 23(4) was made, resulting in no super-tax liability. The Commissioner, invoking section 33, called for the record and cancelled the registration on 28 January, directing the Income-tax Officer to take necessary consequential action. As a result, the assessee became liable to super-tax, leading to a super-tax order dated 4 May 1929 and a notice of demand issued three days later. The Privy Council held that the Income-tax Officer’s fresh action was hopelessly out of time and that the demand for super-tax was illegal, because after a final assessment the officer could not continue to perform fresh computations and issue fresh notices indefinitely; only the circumstances prescribed by sections 34 and 35 authorized a fresh assessment and a fresh notice of demand.

The provisions of sections thirty-four and thirty-five of the Income-Tax Act specified the only situations in which a fresh assessment could be issued and a new notice of demand could be served. Lord Romer, speaking at page four hundred twenty-six of the judgment, remarked that the present case raised a debatable question whether the circumstances fell within the ambit of section thirty-four. He added that it was unnecessary to resolve that question because, in his opinion, the case would clearly have come within section thirty-five had the Income-Tax Officer acted within one year of the earlier demand. Lord Romer explained that the record of assessments, as it existed after the cancellation of the respondent's registration and the consequent order, would have formed part of that record, revealing a mistake in stating that no super-tax was leviable. Consequently, the order effecting the cancellation of the assessee's firm registration was treated as forming part of the official case record for purposes of assessment. In the case of Sidhramappa Andannappa Manvi versus Commissioner of Income-Tax (1), the facts involved a debt of a joint family that, upon partition, fell to the assessee’s share. The Bombay High Court, by its judgment dated September twenty-nine, nineteen forty-one, held that the debt could not be recovered, a decision later considered by the Tribunal. The Appellate Tribunal, holding the debt to be within the relevant accounting year, initially allowed the sum to be taken into account for that year before subsequently correcting the error. The Tribunal further held that, under section thirty-five, it was empowered to rectify the mistake and to pass a consequential order dismissing the appeal rather than allowing it. The power conferred by section thirty-five was expressly limited to the rectification of mistakes that were apparent from the record, not those discovered through argument. The statute permitted the Income-Tax Officer to examine the record, including all evidence, and if a mistake became apparent, to correct it, as explained in [1951] 2 I.T.R. 333 and S.C.R. 561, subject to procedural safeguards. When the correction resulted in an increased assessment or a reduced refund, the officer was required to give notice to the assessee and to provide a reasonable opportunity to be heard. The scope and effect of the expression ‘mistake apparent from the record’ and the extent of the officer’s powers under section thirty-five were later examined by this Court in M K Venkatachalam versus Bombay Dyeing and Manufacturing Co. Ltd. (1). In that case, the facts disclosed that an amount of fifty thousand sixty-three rupees, representing interest on tax paid in advance, had been credited under section eighteen-A paragraph five of the Act. Subsequently, the Act was amended so that interest could be allowed only on the difference between tax actually paid and tax finally determined, altering the legal position.

The Court explained that the dispute arose from a difference between the amount of tax actually paid by the assessee and the amount that had been formally determined. Acting under section 35 of the Income-Tax Act, the Income-Tax Officer therefore corrected the error by reducing the interest credit that had been shown, decreasing it to a sum of Rs 21,157, and issued a fresh demand for the balance. The assessee challenged this action by obtaining a writ of prohibition, contending that the type of mistake contemplated by section 35 must be evident on the face of the original order and that the provision does not extend to a mistake that originates from a subsequent amendment of the law, even when such amendment operates retrospectively. The Revenue appealed this decision before this Court. The principal issue for determination was whether an order that had been properly and validly issued could be said to disclose a “mistake apparent from the record” merely because it became incorrect as a result of a later, retrospective amendment of the statute. In delivering the judgment, Justice Gajendragadkar observed that at the time the Income-Tax Officer considered rectifying the alleged mistake, he necessarily had to read the principal Act as containing the newly inserted proviso effective from 1 April 1952. If that reading was correct, then the order that granted credit to the respondent for Rs 50,603-15-0 was clearly inconsistent with a specific and unambiguous provision of the law, and such inconsistency had to be treated as a mistake of law apparent from the record. He further noted that if a factual mistake apparent from the record may be corrected under section 35, there is no reason why a glaring and obvious legal mistake should not be similarly rectified. The Court also referred to the Privy Council decision in Commissioner of Income-Tax v Khem Chand Ram Chand. Counsel for the appellant attempted to differentiate that case and the earlier Venkatachalam case on the basis that the records examined were limited to the assessment year in question and did not require review of previous years’ records; the Court found this to be a distinction without a difference. It observed that, for example, if the Income-Tax Officer discovered in the assessment year 1952-53 an apparent arithmetic error in determining the Written Down Value of the property, which consequently caused a wrong assessment for the year under consideration, he could correct the figure for assessment purposes, and such a correction would still constitute a mistake apparent from the record. By the same reasoning, if it were discovered that the fundamental basis of differing assessments was erroneous because of an initial mistake in calculating the Written Down Value, that too would be a mistake apparent from the record. Accordingly, the Court concluded that the appeal lacked merit and dismissed it with costs.

The Court examined the question whether, when the Income-tax Officer determines the correct Written Down Value by performing accurate calculations, such a step could be characterised as a correction that does not arise from an error plainly visible in the existing record but rather as an act that lies outside the material contained in the record. The Court observed that the officer’s duty is to rely on the record before him and that any correction must be based on a mistake that is apparent from that record. Accordingly, the Court concluded that the argument that the officer’s recalculation was beyond the record could not be sustained. The judgment reaffirmed that any modification of the assessment must be grounded in the existing assessment record and cannot be based on a computation that the officer makes independently of that record. The Court therefore emphasized the importance of adhering strictly to the documents that form the basis of the assessment. Having considered the submissions and the authorities cited, the Court formed the view that the appeal presented no substantive ground for relief. Consequently, the Court decided to dismiss the appeal and ordered that the appellant bear the costs of the proceeding. The order therefore reads that the appeal is dismissed with costs. The Court also recorded the authorities relied upon, namely (1) (1938) L.R. 65.1.A. 236 and (2) [1959] S.C.R. 703.