# M/S. MAHARANA MILLS (PRIVATE) LTD v. THE INCOME-TAX OFFICER, PORBANDAR

- **Citation:** [1959] Supp. 2 S.C.R. 547
- **Court:** Supreme Court of India
- **Decided:** 1959-04-02
- **Case number:** Civil Appeal No. 39 of 1959
- **Bench:** B. P. Sinha, J. L. Kapur, M. HrnAYATULLAH
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-maharana-mills-private-ltd-v-the-income-tax-officer-porbandar-1700
- **Pages:** 16

## Headnote

Income Tax-Depreciation-Written Down V alue-C amputation for prior years-Whether binding for succeeding years-Fresh
calculation for written down value by Income-tax Officer-Notice
to assessee-When essential-Indian Income-tax Act, r922 (XI of
r922), ss. ro(z)(vi), 35(r), 63,
Sub-section (r) of s. 35 of the Indian Income-tax Act, 1922,
provided: " .................. the Income-tax officer may ...... on his
own motion rectify any mistake apparent from the record ......
and shall ...... rectify any such mistake which has been brought
to his notice by an assessee: Provided that no such rectificatioa
shall be made, having the effect of enhancing or reducing a
I959
April I4.
548
SUPREME COURT REPORTS [1959] Supp.
I959
refund unless ...... the Income-tax Officer. ..... has
the assessee of his intention so to do and has
M /s. _Maharana reasonable opportunity of being heard.".
given notice to
allowed him a
Mills (Private) Ltd.
The appellant, a private limited company, was assessed to
1 v.
income-tax for the assessment year 1953-54 under the provisions
The
nconi:·tax of the Indian Income-tax Act, 1922, and as per the assessment
Officer,
Porvandar
d
d t d J
h
f d
· ·
d
or er a e
une 30, 1955. t e amount o
eprec1at10n allowe
under s. 10(2)(vi) of the Act was Rs. 3-48,105~ On August 8,
1955, the appellant made an application before the Income-tax
Officer for rectification of the order under s. 35 of the Act, pointing out certain mistakes in calculation in regard to the depreciation amount. By his order of February 27, 1956, the Incometax Officer corrected the written down value of the different properties of the appellant and determined the total allowable
depreciation to be Rs. l,94,07+ The appellant challenged the
order dated February 27, 1956, on the grounds, inter alia, (1)
that he was not given a written notice of the intended rectification of the written down value, (2) that the provisious under
which the Income-tax Officer acted, i.e., s. 35 of the Act, was not
meant for the purpose of making corrections in written down
values, the correct provision being s. 34 which specifically refers
to excessive depreciation, and (3) that, in any case, he had
exceeded his jurisdiction under s. 35 of the Act in calculating the
depreciation on the written down value of the buildings and
machinery of the appellant acting suo motu, and that he could
correct only those mistakes which had been pointed out by it.
It was found that notice was given to the appellant of the intended determination of the written down value, though it was •
not a written notice, and that the matter was discussed with its
representative.
'
Held: (1) that the object of the provision as to notice under
s. 35 of the Indian Income-tax Act, 1922, is that no order should
be passed to the detriment of an assessee without affording him
an opportunity for being heard and that if, as a matter of fact,
the assessee knew of the proceedings and the matter had been
discussed with him, an adverse order would not be invalid merely
because no written no\ice was given.
(2) that the word "record " used in the phrase " mistake
apparent from the record" ins. 35(1) of the Act refers not only
to the order of assessment but comprises all proceedings on
\Vhich the assessment order is based and the Income-tax· Officer
is entitled for the purpose of exercising his jurisdiction under
s. 35 to look into the whole evidence and the law applicable to
ascertain whether there was an error.
If he doubts the written
down value of the previous year it is open to him to check up the
previous calculations and, if he finds any mistake, to make fresh
calculations in accordance with the law applicable including the
rules made thereunder.
A mistake contemplated by this section is not one which is
(2) S.C.R. SUPREME COURT REPORTS
549
to be discovered as a result of an argument but it is open to the
I959
Income-tax Officer to examine the record including the evidence
and if he discovers any mistake he is entitled to re

## Text

(2) S.C.R.
SUPREME COURT REPORTS
"54:7
Panchayat just in the same way as he had executed the
z959
school contract as the Secretary of the Vidyalaya in
b
Bhagwan Singh
question. That
eing so, s. 7(d) cannot be invoked
v.
against him. In view of this conclusion it is unnecesRameshwar
sary to decide whether the works in question had Prasad Sastri
been undertaken by the Government of Bihar or by
-
the Central Government.
.
Gajendragadkar ].
The result is that the appeal must be allowed, the
order passed by the High Court set aside arid that of
the tribunal restored ; respondent 1 shall pay the.
costs of the appellant throughout; and the Election
Commission shall bear their own.
We would like to add that, after this appeal was
argued before us on April 2, 1959, we had announced
our decis!on · that the appeal would be allowed and
that the judgment would be delivered later on in due
eourse. It is in pursuance of that order that the present judgment has been delivered.
Appeal allowed.
M/S. MAHARANA MILLS (PRIVATE) LTD.
v.
THE INCOME-TAX OFFICER, PORBANDAR
(B. P. SINHA, J. L. KAPUR and
M. HrnAYATULLAH, JJ.)
Income Tax-Depreciation-Written Down V alue-C amputation for prior years-Whether binding for succeeding years-Fresh
calculation for written down value by Income-tax Officer-Notice
to assessee-When essential-Indian Income-tax Act, r922 (XI of
r922), ss. ro(z)(vi), 35(r), 63,
Sub-section (r) of s. 35 of the Indian Income-tax Act, 1922,
provided: " .................. the Income-tax officer may ...... on his
own motion rectify any mistake apparent from the record ......
and shall ...... rectify any such mistake which has been brought
to his notice by an assessee: Provided that no such rectificatioa
shall be made, having the effect of enhancing or reducing a
I959
April I4.
548
SUPREME COURT REPORTS [1959] Supp.
I959
refund unless ...... the Income-tax Officer. ..... has
the assessee of his intention so to do and has
M /s. _Maharana reasonable opportunity of being heard.".
given notice to
allowed him a
Mills (Private) Ltd.
The appellant, a private limited company, was assessed to
1 v.
income-tax for the assessment year 1953-54 under the provisions
The
nconi:·tax of the Indian Income-tax Act, 1922, and as per the assessment
Officer,
Porvandar
d
d t d J
h
f d
· ·
d
or er a e
une 30, 1955. t e amount o
eprec1at10n allowe
under s. 10(2)(vi) of the Act was Rs. 3-48,105~ On August 8,
1955, the appellant made an application before the Income-tax
Officer for rectification of the order under s. 35 of the Act, pointing out certain mistakes in calculation in regard to the depreciation amount. By his order of February 27, 1956, the Incometax Officer corrected the written down value of the different properties of the appellant and determined the total allowable
depreciation to be Rs. l,94,07+ The appellant challenged the
order dated February 27, 1956, on the grounds, inter alia, (1)
that he was not given a written notice of the intended rectification of the written down value, (2) that the provisious under
which the Income-tax Officer acted, i.e., s. 35 of the Act, was not
meant for the purpose of making corrections in written down
values, the correct provision being s. 34 which specifically refers
to excessive depreciation, and (3) that, in any case, he had
exceeded his jurisdiction under s. 35 of the Act in calculating the
depreciation on the written down value of the buildings and
machinery of the appellant acting suo motu, and that he could
correct only those mistakes which had been pointed out by it.
It was found that notice was given to the appellant of the intended determination of the written down value, though it was •
not a written notice, and that the matter was discussed with its
representative.
'
Held: (1) that the object of the provision as to notice under
s. 35 of the Indian Income-tax Act, 1922, is that no order should
be passed to the detriment of an assessee without affording him
an opportunity for being heard and that if, as a matter of fact,
the assessee knew of the proceedings and the matter had been
discussed with him, an adverse order would not be invalid merely
because no written no\ice was given.
(2) that the word "record " used in the phrase " mistake
apparent from the record" ins. 35(1) of the Act refers not only
to the order of assessment but comprises all proceedings on
\Vhich the assessment order is based and the Income-tax· Officer
is entitled for the purpose of exercising his jurisdiction under
s. 35 to look into the whole evidence and the law applicable to
ascertain whether there was an error.
If he doubts the written
down value of the previous year it is open to him to check up the
previous calculations and, if he finds any mistake, to make fresh
calculations in accordance with the law applicable including the
rules made thereunder.
A mistake contemplated by this section is not one which is
(2) S.C.R. SUPREME COURT REPORTS
549
to be discovered as a result of an argument but it is open to the
I959
Income-tax Officer to examine the record including the evidence
and if he discovers any mistake he is entitled to rectify the M/s. Maharana
error provided that if the result is enhancement of assessment Mills (Private) Ltd.
or reducing the refund, then notice has to be given to the
v.
assessee and he should be allowed a reasonable opportunity of
The Income-tax
being heard.
Officer, Porbandar
Venkatachcdam v. Bombay Dyeing & Mfg. Co., Ltd., [r959]
S.C.R. 703, Commissioner of Income-tax v. Khemchand Ramdas,
[r938] L.R. 65 I.A. 236 and Sidhramappa Andannappa Manvi
v. Commissioner of Income-tax, [r95r] zr l.T.R. 333, relied on.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No.
39 of 1959.
Appeal by special leave from the judgment and
order dated November 26, 1957, of the Bombay
High Court at Rajkot in Special Civil Application
No. 119 of 1956.
A. V. Viswanatha Sastri, S. P. Mehta, J. B. Dadachanji, S. N. Andley and Rameshwar Nath, for the
appellants.
M. 0. Setalvad, Attorney-General for India, R. Ganapathy Iyer and-D. Gupta, for the respondent.
1959.
April 14.
The Judgment of the Court was
delivered by
KAPUR, J.-This is an appeal by special leave
J{apur J.
against the judgment and order of the High Court of
Judicature at Bombay dismissing the appellant's petition under Art. 226.
The appellant before us is a
private limited company carrying on the business of
manufacturing and selling textiles and the respondent
is the Income-tax Officer of Porbander.
Previous to the year 1949, in Porbander which became a part of the State of Saurashtra, there was no
income-tax. In 1949 the Saurashtra Income-tax Ordinance (hereinafter termed the Ordinance) was promulgated which was applicable to the State of Saurashtra.
By that Ordinance income-tax became leviable and
from 1950 onwards when Saurashtra became part of
the Union of India the Indian Income-tax Act (hereinafter referred to as the Act) became applicable by
reason of the Finance Act of 1950 (Act XXV of 1950).
550
SUPREME COURT REPORTS [1959) Supp.
r959
The appellant was taxed for the accounting year 1949,
M/
M 1
i.e., the assessment year 1950-51. In that year the
Mill;·
1 p,;·,:~;~~~d amount of depreciation allowed under s. 10(2)(vi) of
v.
·the Act was· Rs. 3,43,869 .. The appellant continued
Th, Incon1'-ta• to be assessed to income. tax in the assessment years
Offi"'· Po•banda.1951-52, 1952-53 and 1953-54 and the present appeal
relates to the assessment of year 1953-54. According
Kapi" 1 ·
to the assessment order dated June 30, 1955, the
amount.of depreciation allowed for the a~sessment year
1953-54 was Rs. 3,48,105._ On August 8, 1955, the
appellant made an application for rectification under
s. 35 of the Act. In this application he pointed out
several mistakes in calculations in regard to the depreciation amount. By his order of February 27, 1956,
the Income-tax Officer corrected the Written Down
Value of the different properties of the appellant
and determined the total allowable depreciation to be
Rs. 1,94,074. The order of the Income-tax Officer
was as follows :
"To arrive at the Written Down Value of the
assets it was necessary tu maintain depreciation record.
This being not done so far, is -Oone 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
Less depreciation :
( -
)
Less Dividend income as per original assessment order :
------
Rs.
98,909
Rs. 1,94,074
Rs.
95,165
Rs.
11,870
------
Loss.
Rs.
83,295
Loss on account of depreciation to be
carried forward.
Declared N. A."
(2) s.c.R.
SUPREME COURT REPORTS
551
And thus the unabsorbed, depreciation amount which
I959
under the assessment order of June 30, 1955, was
d
d
R
3
h.
M /s. Maharana
Rs. 2,31,944 was re uce to
s. 8 ,295 and t IS was Mills (Private) Ltd.
set off against the appellant's income 0£ the assessv.
ment year 1954-55. On February 29, 1956, the InThe Income-tax
come-tax Officer passed two provisional assessment Officer, Porbandar
orders for the years 1954-55 and 1955.56. In both
these orders he calculated the depreciation amounts
Kap"' f.
on the basis of the same Written Down Value as he
had determined for the year 1953-54. The reasons
for calculating them on the new basis were set out by
the Income-tax Officer in his order dated May 18, 1956,
and they were :-
"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 exact meaning of W. D. V. as per Income~
tax Act.
(iii) The meaning of W. D. V. as per the Saurashtra Income-tax Ordinance, 1949 and Rules (Page 20,
para. 13-5-A).
(iv) I. T. R. Volume 25, 558.
Decision of Calcutta High Court as regards C.I. T., West Bengal,-
M/s. Karnani Industrial Bank Ltd.
(v) Views expressed by Taxation Enquiry Commissioner, 1953-54, Volume II, page 84, para. 34.
(vi) Taxation Laws (Part' B' State) (Removal of
Difficulties Order, 1950.
The depreciation thus worked out as per separate
statement".
On August 8, 1955, the appellant made an application under s. 35 for certain corrections in the calculations and the order thereon was passed on :February
552
SUPREME COURT REPORTS [1959] Supp.
s959
27, 1956, but no written notice of the intended rectifiM
h
cation of the Written Down Vaiue and the deprecia-
/s. Ma arnna
.
.
b
h I
Mills (P•ivate) Ltd. t10n amount was given
y t e ncome-tax Officer to
v.
the appella11t under s. 35 read with s. 63 of the Act.
The Income-tax On March 9, 1956, the appellant wrote to the IncomeOffi"'· Porbandar tax Officer protesting against the order:-
"You have exercised powers not vested in you
Kapur j.
d
h
d S
.
d
un er t e sai
'ect10n, an you have gone beyond the
purview of the Act by preparing statements and
records which are prejudicial to the rights of the
Company".
The appellant requested the Income-tax Officer to
cancel his previous order and to pass a fresh order
correcting only those mistakes which had been pointed
out by it. On the same day the appellant sent another
letter as.king for the cancellation of the provisional
assessment order for 1954-55 and requested for a
revised assessment order on the basis of the return
filed by it.
The reply of the Income-tax Officer of the
same date was that the order was correct and a similar
order was made on the second application in regard to
the assessment of 1954-55.
On April 16, 1956, the appellant filed a petition in
the High Court of Bombay under Arts. 226 and 227 in
which it alleged that the Income-tax Officer had:
.
"exceeded the limits of .jurisdiction vested in him
and exercised illegally jurisdiction not vested in him
by law under Section 35 and passed orders, inter alia,
and suo motu and without giving any prior notice and
altered the entire procedure and basis of calculating
depreciation on the written down value of buildings
and machinery of the petitioners".
,
The appellant prayed that the order made under
s. 35 of the Act be quashed and an injunction issued
restraining the Income-tax Officer from recovering the
assessed tax. The High Court dismissed this petition
on the ground that it contained mis-statements of
fact; that
"The advantage of this jurisdiction is not available to the subject when adequate and efficacious
remedy is available to him under the ordinary law";
that the appellant could, under s. 33A of the Act,
-
(2) S.C.R.
SUPHEME COURT HEPORTS
553
have gone in revision to the Commissioner. The High
r959
Court also held against the appellant on merits. The
appellant ~as come to .this Court by speci.al leave a~d M~i;·(;:,:::i:~~~d.
three quest10ns were raised (1) that no notice as reqmrv.
ed under s. 35 was given to the appellant; (2) that The Income-tax
there was no record on the basis of which the rectifica- Officer, Porbandar
tion in the Written Down Value of the property could
be made. and (3) that there was no mistake apparent
Kapur J.
from the record.
The learned Attorney-General contended in the first
instance that the remedy available under Art. 226 is a
discretionary one and if the High Court had exercised
its discretion no appeal was competent and in support
of his contention he relied upon the judgment of this
Court in K. S. Rashid & Son v. Income-tax Investigation Commission, etc. (1), where Mukherjee, J., (as he
then was) said:-
_
... " For purpose of this case it is enough to state
that the remedy provided for in Art. 226 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 ".
-
It is not necessary to decide in this case whether the
order passed under Art. 226 is of a discretionary
nature and therefore in appeal this Court' would not
interfere with the exercise of discretion, because in our
opinion, the case can be decided on other grounds of
substance.
'fhe first question is that of notice under s. 35 of .
the Act. The affidavit of the Income-tax Officer shows
that the correctness of the figures for determining the
depreciation was discussed with the appellant's Secretary.
The Income-tax Officer stated that:
"The depreciation which was calculated in the
assessment order of 1953-54 was as per the statement
given by the petitioner. On submission of the said
application the petitioner (Shri Ganatra, the Secretary
of the Mills) was told that the depreciation will be
given after rectifying mistakes. The petitioner had
(t) (r954) S.C.R. 738, 747.
70
554
SUPREME COURT REPORTS [1959] Supp.
r959
agreed to the same. There being no record of the
h
working out from the first available record in the
M fs. Ma arana
Mills (Private) Ltd. Assessment order for the Assessment year 1943-44, the
v.
petitioner was also supplied with the copy of the
The Income-tax working of the depreciation along with the necessary
Officer,
PMbandar rules and regulation for calculating the same ".
J<apur j.
He also sta'ted that the order of rectification was passed "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" ; that the order was not
passed without giving a reasonable opportunity to the
appellant; that the matter was discussed with its
representative more than once; that the assessment
for the year 1954-55 was made final after calculating
the depreciation; that the point of depreciation wn,s
not 1 raised by the applicant at any hearing and that
even though no written notice was given, the representative of the appellant was given notice of the intended determination of the w·ritten Down Values. He
also stated :
"Thus though no written notice is given, 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 orders placed on the record show that the Incometax Officer made calculation for the purpose of determining the depreciation amount and after giving
deductions allowed by the Act and the Rules made
thereunder arrived at the corrected figure of Rs. 1,94,074
for the assessment year 1953-64.
Apart from the fact that the petition of the appellant does not set out clearly all the facts which should
have been set out, there is the affidavit of the respondent that the matter was·discussed with the representative of the appellant although no written notice was
given. In this connection the learned Attorney-General has further submitted (1) that the order determining the depreciation amount allowable was not final ;
(2) that the effect of the order making the rectification
(2) S.C.R. SUPBEME COURT REPORTS
555
was not of enhancing the assessment or reducing the
r959
refund; and (3) that the question of depreciation ,
h
ld b
· d
t h t•
f
t ·
b
df /s. Ma arana
cou
e raise a t e ime o assessmen in any su - Mills (Private) Lid.
sequent year.
v.
The object of the provision as to notice in s. 35 is The Income-tax
that no order should be passed to the detriment of an Officer, Porbandar
assessee without affording him an opportunity but it
cannot be said that the Rule is so rigid that if, as a
Kapur f.
matter of fact, the assessee knows of the proceedings
and the mattef has been discussed with him then an
adverse order would be invalid merely because no
notice under s. 63 was given.
Of course this postulates that a reasonable opportunity has been given to
show cause. Secondly this provision is applicable
only where the assessment is enhanced or refund is
reduced.
Neither of those contingencies has arisen in
the present case.
The depreciation allowed to the appellant in the
year of assessment 1943-44 when the appellant was
assessed as a non-resident, was Rs. 1,91,224. In the
year 1944-45 t.here was no asssessable income in
British India and so also in 1945-46. In the year
1946-4 7 there was a loss. In the year 194 7 -48 as in
the preceding years the sales were effected at Porbander and there was no collection made in British India.
The total tax due was calculated at Rs. 43-llAs. In
1948-49 the sales were Rs. 38,656 and they were assessed to income-tax on a total income of Rs. 9,326.
]'or the accounting year 1948, i.e., the assessment year
1949-50 when the Ordinance came into force the total
depreciation amount allowed was Rs. 3,66,925 which
was much more than what was allowable on the
Written Down Values determined in accordance with
the provisions of the Ordinance which defined Written
Down Value:
"\Vritten Down Value means-
( a) In the case of assets acquired in the previous
year, the actual cost to the assessee;
(b) In the case of assets acquired before the previous year the actual cost to the assessee less all
depreciation actually allowed to him under this Ordinance or allowed under any Act repealed hereby or
556
SUPREME COUH,T REPORTS [1959) Supp.
r959
which would have been allowed to him if the Indian
MJs. Maha•ana Income-tax Act, 1922, was in force in past".
Mills(Ptivate) Ltd. On the basis of this Ordinance and the other Statutes
v.
and Iiules mentioned in his affidavit, which have been
The Income-tax set out above, the Income-tax Officer made the ·variOific.,, Po•bonda•
1 1 t"
d d
· d th
d
· ·
_
ous ca cu a 10ns an
etermme
e
epremat10n
Kapu• 1.
amounts which have given rise to the controversy
before us. These calculations were based on the Written Down Values for the successive assessment years
up to the year of assessment 1953-54. •
But it was argued by counsel for the appellant tlia.t
according to s. 10(5)(b) of the Act the Written Down
Value in the case of assets acquired before the previous year mean the actual cost to the assessee Jess all
depreciation actually allowed to him under the Act or
under any Act repealed thereby and therefore the
provisions of the Saurashtra Ordinance which came to
an end when the Act became applicable cannot form
the basis of determining the Written Down Value for
the purposes of assessment of the years 1950-51 onwards. In reply it was submitted that the W rittcn
Down Values were calculated and depreciation determined for the year 1943-44 and should in subsequent
years ha:ve been calculated in accordance with the
provisions of the Ordinance and they could not become -
higher for purposes of s. 10(5)(b) of the Act merely
because the Ordinance was replaced by the Act. In
this connection reference was made to s. 12 of the
Finance Act, 1950, s. 12 of which empowered the Central Government to make provision for the removal of
difficulties in giving effect to the provisions of any of
the Acts, Rules or Orders extended by s. 3 or s. 11 of
that Act, i. e., Finance Act, 1950.
Under that section
(s. 12) the Taxation Laws (Part B States) Removal of
Difficulties Order, 1950, was promulgated on December
2, 1950, and by cl. 2 of this Order provision was made
for computation of aggregate depreciation allowance
and Written .Down Values.
To this Order the following explanation was added on March 9, 1953:
(Notification No. S. R. 0. 477) :-
" For the purposes of this paragraph, the expression " all depre'ciation actually allowed under any
(2) S.C.R.
SUPREME COUH.T REPORTS
557
laws or rules of a Part B State " means and shall be
r959
deemed to .ha.ve always. meant the a~gregate aII:-iwance Mfs. Maharana
for depremat10n taken mto account m computmg the .Mills (P•·ivate) Ltd.
vVritten Down Value under any laws or rules of a
v.
Part B State or carried forward under the said laws The Income-tax
or rules".
Officer, I'orbandar
But the appellant's counsel contended that this explanation is ultra vires because it was promulgated under
s. 60-A of the Act and that section was inapplicable to
the Order made under s. 12 of the Finance Act, 1950.
He relied on two cases decided by the Hyderabad
High Court in S. V. Naik v. Commissioner of Incometax (1) and Commissioner of Income-tax v. D. B. R.
JJ1 ills Ltd. (2) but we are informed that one of those
judgments is under appeal to this Court and we therefore do not wish to express any opinion upon the correctness or otherwise of this contention raised by the
appellant,
It was next argued by the learned Attorney-General that the 'Vritten Down Values determined under
s. 35 are not final and can be re-determined in the following assessment years and in support he referred to
K.arnani Industrial Bank v. Commissioner of Incomctax (3) where the original cost of the machinery purchased Rs. 3,40,000-was accepted in the successive
asRessment years till it was doubted in the assessment
order 1946-47 and was determined at H,s. 2,80,000 and
it was contended that the Income-tax Officer had to
take the Written Down Value of the previous year as
correct.
Thus the question there raised was whether
the Income-tax Officer was entitled in law to go behind
the original cost accepted by his predecessor ever
since the assessment year 1939-40. It was held that
neither the principle of res judicata nor estoppel
nor the terms of s. 10 (2) (vi) of the Act preven·-
ted the Income-tax Officer from determining for
himself what the actual cost of the machinery had
been and that depreciation had to be calculated for
every year and it was open to the Income-tax Officer
not merely to perform "a mathematical operation on
(r) [1955] 29 I.T.R. 206.
(2) [1954] 29 I.T.R. 2m
(3) [1951] 25 I.T.R. 558.
Kapur ].
558
SUPREME COURT REPORTS [1959] Supp.
·•
r959
the basis of the \Vritten Down Value of the previous
,
/
h
year, but one of determining the \Vritten Down Value
,.J s. !Ila aranu l .
If,,
Mills (l'rivate) Ltd. lllllSe
·
v.
The limit to which the Income-tax Officer can go
n, J,,come-tax back does not stop at the Written Down Value of the
Offim. P°'bandar previous year but extends up to the figure of the origiKapur ].
nal cost, and the method enjoined bys. 10(5)(b) is not
that the Income-tax Officer should merely scale down
the Written Down Value of the previous year, but
that be should take into consideration the actual cost,
determining it for himself, if necessary, take also into
consideration the allowances granted in the past and
then make his own computation as to the Written
Down Value for the assessment year with which he is
concerned. Thus it cannot be said that merely because under s. 35 some Written Down Value and the depreciation amount have been determined they are a
final determination binding for all times to come nor
does the determination operate as estoppel or rM judicata for the following years. Therefore it cannot be said
that there is no other efficacious and adequate remedy
open to the appellant to challenge the depre.ciation
amount determined under s. 35.
Counsel for the appellant contended that the provision under which the Income-tax Officer acted, i. c., 35
was not meant for the purpose of making corrections
in 'Written Down Values; and that for the purpose
the appropriate and correct provision was s. 34 which
specifically refers to excessive depreciation.
There
are two sections under which an Income-tax Officer
can act, i. e., ss. 34 and 35 and the question for decision that arises is whether s. 35 was open to him.
Section 35 provides :
"The Commissioner or Appellate Assistant Com-
'missioner 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
and the Income-tax Officer may, at any time within
four years from the date of any assessment order or
refund order passed by him on his own motion rectify
any mistake apparent from the record of the appeal,
revision, assessment or refund as the ca~c may be, and
(2) S.C.R. SUPREME COURT REPORTS
559
shall within the like period rectify any such mistake
r959
which has been brought to his notice by an assessee ". l\f
M 1
/s.
aiarana
The question therefore is was it a mistak.e apparent Mills (Private) Ltd.
from the record which the Income.tax Officer has
v.
rectified. It was submitted that recalculation is not The Income-t•x
rectifying a mistake which is apparent from the Officer,
f'orbandar
record.
The words used in the section are "apparent Ka;:; J.
from the record " and the record does not mean only
the order of assessment but it comprises all proceedings on which the assessment order is based and the
Income-tax Officer is entitled for the purpose of exercising his jurisdiction under s 35 to look into the whole
evidence and the law applicable to ascertain whether
there was an error. If he doubts the Written Down
Value of the previous year it is open to him to check
up the previous calculations and if he finds any mistake it is open to him to make fresh calculations in
accordance with the law applicable including the rules
made thereunder.
The Privy Council in Commissioner of Income-tax v.
Khem Chand Ramdas (1) held s. 35 to be applicable
where the facts were that the assessee did not produce
books of account and an assessment was made by the
Income-tax Officer to the best of his judgment.
An
application for the registration of the firm was however
allowed and it was registered on January 17, 1927.
On the same day assessment was made under s. 23(4).
As it was a registered firm no super-tax was assessed.
The Commissioner called for the record under s. 33
and cancelled the registration on January 28, and
ordered the Income-tax Officer to take necessary consequential action. The result of that was that the
assessee became liable to super-tax. Consequently an
order for s.uper-tax was made on May 4, 1929, and
three days later notice of demand was issued. The
Privy Council held that as the fresh action taken by
the Income-tax Officer was hopelessly out of time the
demand for super-tax was illegal because after the
final assessment the Income-tax Officer could not go on
making fresh computations and issuing fresh notices
of demand to the end of all time but it was held that
(r) (1938) L.R. 65 I.A. 236.
•
560
SUPREME COURT REPORTS
[1959] Supp.
z959
the provisions of ss. 34 and 35 prescribed the only
M/s. Maharana circumstances in which fresh assessment could be made
Mills (Private) Ltd. and fresh n_otice of demand could be issued.
At p. 426
v.
Lord Romer observed :
The Income-tax
"In the present case it is a i:lebatable question
Office" Porbandar whether the circumstances were such as to bring it
Kapur 1.
within the provisions of Section 34. It is not necessary to determine that question inasmuch, as, in their
lordship's opinion, the case clearly would have fallen
within the provisions of section 35 had the Income-tax
Officer exercised his powers under the section within
one year from the date on which the earlier demand
was served upon the respondents.
For, looking at the
record of the assessments made upon them as it stoorl
after the cancellation of the respondent's registrationand the order affecting the cancellation would have
formed part of that record-it would be apparent that
a mistake had been made in stating that no super-tax
was leviable ".
Thus the order effecting the cancellation of the rogi~.
tration of the assessee's firm was considered to have
formed part of the record of the case.
In Sidhramappa Andannappa Manvi v. Commissioner of Income-tax (1) the facts were that a debt
belonging to a joint family fell on partition to the
share of the assessee.
This debt was held not to be
recoverable by a judgment of the Bombay High Court
dated September 29, 1941.
Holding it to be within
the accounting year the Appellate Tribunal allowecl
this sum to be taken into consideration for the purpose
of the accounting year. It subsequently corrected the
error. It was held that under s. 33 the Tribunal was
entitled to rectify the mistake and was competent to
pass a consequential order dismissing the ,appeal instead of allowing it.
The power under s. 35 is no doubt limited to rectification of mistakes which are apparent from the record.
o
A mistake contemplated by this section is not one
which is to be discovered as a result of an argument
but it is open to the Income-tax Officer to examine the
record including the evidence and if he discovers any
(1) (1951] 21 I.T.R. 333.
(2) S.C.R. SUPREME COURT REPORTS
561
mistake he is entitled to rectify the error provided
r959
that if the result is enhancement of assessment or M
,
d
.
th
f
d h
.
h
t b
.
t
h
/s. Ma,1arana
re ucmg
e re un t en notice as o e given o t e Mills (Private) Ltd.
assessee and he should be allowed a reasonable opporv.
tunity of being heard.
The Income-tax
The scope and effect of -the expression " mistake Officer, Porbandar
apparent from the record " and the extent of the
powers of the Income-tax Officer under s. 35 of the
Kapur 1·
Act were discussed by this Court in 1ll. K. Venkatachalam v. Bombay Dyeing and Manufacturing Go.
Ltd. (1) where the facts were these: A sum of Rs. 50,063
being interest on tax paid in advance was given credit
for under s. 18A(5) of the Act..
Subsequently there
was an amendment of the Act by which the interest
became allowable only on the difference between the
amount of tax paid and what was actually determined.
As a consequence of this the Income-tax O~cer purporting to act under s. 35 of the Act rectified the mistake and reduced the amount of interest credited to
Rs. 21,157 and issued a demand for the difference. The
assessee obtained a writ of prohibition against the Income- tax Officer on the ground that the mistake contemplated under that provision had to be apparent on
the face of the Order and it was not contemplated to
cover a mistake resulting from an amendment of the
law even though it was retrospective in its effect. The
l{evenue appealed to this Court.
Thus the question
for decision in that case was whether an order proper
and valid when made could be said to disclose a mistake apparent from the record merely because it became erroneous as a result of a subsequent amendment
of the law which was retrospective in its operation.
In delivering the judgment of the Court Gajendragadkar, J., said:-
"At the time when the Income-tax Officer applied
his mind to the question of rectifying the alleged mistake, there can be no doubt that he had to read the
principal Act as containing the inserted proviso as
from April 1, 1952. If that be the true position then
the order which he made giving credit to the
(r) [1959] S.C.R. 7oi.
71
..
562
SUPREME COURT REPORTS [1959) Supp.
'959
respondent for Rs. 50,603-15-0 is plainly and obviously
inconsistent with a specific and clear provision of the
M/s. Makarana
t
d th
t .
't bl
b
t d
.
Mills (Private) Ltd. statu e an
at mus mev1 a y
e trea e as a imsv.
take of law apparent from the record. If a mistake
n., Income-tax of fact apparent from the record of the assessment
Officer, Po1bandar order can be rectified under s. 35 we see no reason why
•
•
-
a mistake of law which is glaring and obvious cannot
Kapur J.
be similarly rectified".
The decision of the Privy Council in Commissioner of
Income-tax v. Khem Chand Ram Chand (1) was referred
to.
Counsel for the appellant sought to distinguish
both these cases; Venlcatachalam' s case (') and Khem
Chand's case (1) on the ground that the record there
considered was the assessment record of that year
and the Income-tax Officer did not have to go to
the records of the previous year. That is a distinction without a difference. If, for instance, the Incometax Officer had found that in the assessment year
1952-53 there was an apparent arithmetical mistake
in the account of the Written Down Value of the properties which resulted in a corresponding mistake in
the assessment of the year in controversy could he not
take the corrected figure for the purposes of the
assessment and could it be said that the mistake was
not apparent from the record.
A fortiori if he dis1covered that the very basis of the different assessments was erroneous because of an initial mistake in
determining the Written Down Value could it be said
that this would not be a mistake apparent from the
record.
And if in order to determine the correct
Written Down Value the Income-tax Officer makes
correct calculations, can it be said that that is not
rectifying a mistake apparent from the record but is
dehors it.
In our opinion this appeal is without force and we
would therefore dismiss it with costs.
Appeal dismissed.
(1) (1938) L.R. 65 I.A. 236.
(2) [1959] s.c.R. 703,