# THE INCOME-TAX OFFICER, ALWAYE v. THE ASOK TEXTILES LTD., ALWAYE

- **Citation:** [1961] 3 S.C.R. 236
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Case number:** Civil Appeal No. 311 of 1959
- **Bench:** J. L. Kapur, M. Hidayatullah, J. c. SHAH
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-income-tax-officer-alwaye-v-the-asok-textiles-ltd-alwaye-1972
- **Pages:** 7

## Headnote

Income-tax-Rectification, scope of-If can be equated with
review under the Code-Advance payment of tax-Penal interest due
to additional tax on rectification, if could be imposcd-~Code of Civil
Procedure (V of i908), 0. 47, r. I-Indian Income-lax Act, I922
(Ir of i922), SS. rBA (8), 35·
After the respondents 'net assessable income for the years
1952-53 was determined, it declared dividends which attracted
provisions of the Finance Act, ry52, and became liable to the
I
3 S.C.R. SUPREME COURT REPORTS
237
payment of additional income-tax, which fact was overlooked by
,yoo
the Income-tax Officer, who, after giving notice under s. 35 of
the Income-tax Act, rectified the error and imposed an additional The l11conu-tax
tax at the rate of one anna in the rupee.
He ]ater discovered
Officer, Alwayt1
that this ~·as also erroneous ancl the rate should have heen five
v.
annas in a rupee and rectified the error; by the same order the The Asok Textitt1s
omission to impose penal interest under s. 18A<8) was rectified
Ltd., Alway•
and penal interest was imposed. The respondent's case pefore
the High Court was thats. 35 of the Act did not apply and that
on the merits the additional tax could not be imposed. The High
Court held that the necessary foundation for the exercise of the
powers under s. 35 had not been laid and therefore the Incometax Officer had no jurisdiction to make the order; and also that
the penal interest under s. r8A(8) of the Act for failure to make
advance deposit was also without jurisdiction.
Held, that the language and scope of s. 35 of the Indian
Income-tax Act. r922, could not be equated with that of 0. 47,
r. r of the Code of Civil Procedure. The Income-tax Officer
could under s. 35 of the Act examine the record and if he discovered that a mistake had been made, could rectify the error both
of law and fact.
The restrictive operation of the powers of·
review under 0. 4 7, r. r of the Code of .Civil Procedure was not
applicable in the case of s. 35 of the Income-tax Act.
Held, further, that the s. r8A(8) was a mandatory one and
the Income-tax Officer was required to calculate the interest in
the manner provided under the provisions of that sub.section and
had to add it to the assessment.
Maharana Mills (P.) Ltd. v. Income-tax Officer, (1959] 36
I.T.R. 350 and M. K. V enkatachalam v. Bombay Dyeing c5- Manufacturing Co. Ltd., [1958] 34 I.T.R. r43, discussed.
Commissioner of Income-tax v. Elphinstone Spi1ming c5- IV caving Mills Co. Ltd. [1960] 40 I.T.R. r4>, Commi>sioner of Incometax, Bombay City v. ]algaon Electric Supply Co. Ltd., [1960] 40
l.T.R. 184 and Commissioner of Income-tax, Bombay City v.
Khatau Makanji Spng. c5- Weavg Co. Ltd., [1960] 40 l.T.R. r89,
not applicable.

## Text

.....
236
SUPREME COURT REPORTS
[1961]
,960
folders. That was the finding made by the authority
on an earlier occasion when Punamchand and Vishnuc
Sh•i Ambic• Mills prasad had moved the authority under s. 15 of the
<;o.~-Lld.
Act. The learned Attorney-General has strenuously
Slri s. B. Bhatt contended that it is unfair to give the same pay to the
b Anoth"
three workmen who &re doing the work of cut.lookers
. -
only for a part of the time· and were substantially
.<i•1•ndragadAa• J. doing the work of bleach-folders; that, however, has
no relevance in determining the present dispute. The
only point which calls for decision is whether or not
the work done by the three respondents takes them
within the category of cut.-lookers specified under cl. 5,
and as wc have already pointed out, on an earlier
occasion the authority has found in favour of two of
the three respondents when it held that they were folders doing cut-looking. If the said finding amounts
to res judic.ata it is in favour of the two respondents
and not in favour of the appella.nt; that is why the
learned Attorney-General did not seriously dispute the
correctness of the decision of the High Court on the
question of 'res judic.ata.
In the result the appeal fails and is dismissed with
costs.
Appeal dismissed.
THE INCOME-TAX OFFICER, ALWAYE
v.
THE ASOK TEXTILES LTD., ALWAYE
(J. L. KAPUR, M. HIDAYATULLAH and
J. c. SHAH, JJ.)
Income-tax-Rectification, scope of-If can be equated with
review under the Code-Advance payment of tax-Penal interest due
to additional tax on rectification, if could be imposcd-~Code of Civil
Procedure (V of i908), 0. 47, r. I-Indian Income-lax Act, I922
(Ir of i922), SS. rBA (8), 35·
After the respondents 'net assessable income for the years
1952-53 was determined, it declared dividends which attracted
provisions of the Finance Act, ry52, and became liable to the
I
3 S.C.R. SUPREME COURT REPORTS
237
payment of additional income-tax, which fact was overlooked by
,yoo
the Income-tax Officer, who, after giving notice under s. 35 of
the Income-tax Act, rectified the error and imposed an additional The l11conu-tax
tax at the rate of one anna in the rupee.
He ]ater discovered
Officer, Alwayt1
that this ~·as also erroneous ancl the rate should have heen five
v.
annas in a rupee and rectified the error; by the same order the The Asok Textitt1s
omission to impose penal interest under s. 18A<8) was rectified
Ltd., Alway•
and penal interest was imposed. The respondent's case pefore
the High Court was thats. 35 of the Act did not apply and that
on the merits the additional tax could not be imposed. The High
Court held that the necessary foundation for the exercise of the
powers under s. 35 had not been laid and therefore the Incometax Officer had no jurisdiction to make the order; and also that
the penal interest under s. r8A(8) of the Act for failure to make
advance deposit was also without jurisdiction.
Held, that the language and scope of s. 35 of the Indian
Income-tax Act. r922, could not be equated with that of 0. 47,
r. r of the Code of Civil Procedure. The Income-tax Officer
could under s. 35 of the Act examine the record and if he discovered that a mistake had been made, could rectify the error both
of law and fact.
The restrictive operation of the powers of·
review under 0. 4 7, r. r of the Code of .Civil Procedure was not
applicable in the case of s. 35 of the Income-tax Act.
Held, further, that the s. r8A(8) was a mandatory one and
the Income-tax Officer was required to calculate the interest in
the manner provided under the provisions of that sub.section and
had to add it to the assessment.
Maharana Mills (P.) Ltd. v. Income-tax Officer, (1959] 36
I.T.R. 350 and M. K. V enkatachalam v. Bombay Dyeing c5- Manufacturing Co. Ltd., [1958] 34 I.T.R. r43, discussed.
Commissioner of Income-tax v. Elphinstone Spi1ming c5- IV caving Mills Co. Ltd. [1960] 40 I.T.R. r4>, Commi>sioner of Incometax, Bombay City v. ]algaon Electric Supply Co. Ltd., [1960] 40
l.T.R. 184 and Commissioner of Income-tax, Bombay City v.
Khatau Makanji Spng. c5- Weavg Co. Ltd., [1960] 40 l.T.R. r89,
not applicable.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No.
311 of 1959.
Appeal from the judgment and order dated October
31, 1955, of the Travancore Cochin High Court, Ernakulam, in Original Petition No. 75 of 1955.
A. N. Kripal and D. Gupta, for the appellant.
Sardar Bahadur, for the respondent.
1960. December 13.
The Judgment of the Court
was delivered by
238
SUPREME COURT REPORTS
[1961]
KAPUR, J.-This is an appeal pursuant to a certifine Income-ta• cate of the High Court Of Kerala against the judgOfficer, Alwaye ment and order of that court and the question for
v.
. decision is the applicability of s. 35 of the Indian
The Asok Tt>t:'es Income-tax Act (hereinafter termed the 'Act').
Ltd., Alwaye
Th
r
t
I · h h
·
·
h
1
e 1ac s w uc
ave given nse to t e appea are
Kapu 1 ;.
these: The respondent is a limited company which
owns a spinning mills at Alwaye. It commenced business in January, 1951, and its first accounting year
ended on December 31, 1951, and the relevant assessment year is 1952-53. It filed its return showing an
income Rs. 3,21,284 without taking into account the
amount allowable under s. 150 of the Act. On February 2, 1953, the net assessable income of the respondent was determined at Rs. 1,47,083 after deducting
Rs. l,79,081 under s. 15C. The respondent however
declared a dividend of Rs. 4,72,415 which attracted
the application of s. 2 of the Finance Act, 1952, read
with Part 13, proviso (ii) of First Schedule and thus it
became liable to the payment of additional income tax
and this fact was overlooked by the Income-tax Officer.
After giving. notice under s. 35 of the Act, the
Income-tax Officer by an order dated January 25, 1954,
rectified this error and imposed an additional tax at
the rate of one anna in the rupee. He later discovered
that this was also erroneous and the rate should have
been 5 annas in a rupee.
By an order dated August
12, 1954, he rectified the error. Under s. 18A, advance
income tax had to be paid and the rAspondent company had deposited only Rs. 5,000 and therefore became liable to penal interest under s. 18A(8) of the
Act. By the same order this omission to impose penal
interest was corrected and this error was thus rectified.
Against this order the respondent company went in
revision under 011; 33A(2) to the Commissioner of Income-tax but the revision was dismissed. Thereupon
the respondent co>mpa.ny filed a petition in the High
Court of Kera.la. under Art. 226 of the Constitution on
the ground that s. 35 of the Act did not apply and
that on the merits additional tax could not be imposed. The High Court by its judgment dated October 31,
Tl '
3 S.C.R. SUPREME COURT REPORTS
239
1955, held that the orders made were without jurisdicI960
tion and therefore granted a writ of certiorari quashd
0
The lncomeMla~
ing the or ers and the Income. tax fficer has brought Officer, Alwaye
this appeal pursuant to a certificate of that High
•.
Court.
Th~ Asvk 1·e~tiles
According to the High Court, s. 35 of the Act was a
Ltd., Alwaye
provision for rectification of "mistakes apparent on
the record" and in the opinion of the High Court it
}(apur f.
was a mistake analogous to 0. 47, r. 1 of the Code of
Civil Procedure for grant of review on the ground of
mistake or error apparent on the face of the record
and it construed it in the following words:-
"i.e. an evident error which does not require any
extraneous matter to show its incorrectness'. The
error may be one of fact but is not limited to matters of fact and include also errors of law. But the
law must be definite and capable of ascertainment.
An erroneous view of law on a debatable point or a
wrong exposition of the law or a wrong application
of the law or a failure to apply the appropriate law
cannot be considered a mistake or error apparent on
the face of the record. See Chita.ley's C.P.C. Col. III
pp. 3549-50, 5th edition."
On the ground that the applicability of proviso (ii) of
Part B of the First Schedule of the Finance Act was
a complex question which could not be said to be
"apparent on the face of the record", the High Court
held that the necessary foundation for the exercise of
the powers under s. 35 had not been la.id and therefore the Income-tax Officer had no jurisdiction to make
the order that he did. The High Court also held that
the levy of penal interest under s. 18A(8) of the Act
for failure to make ad va.nce deposit under s. 18A(3)
was also without jurisdiction.
The learned Judges of the High Court seem to
have fallen into an error in equating the language and
scope of s. 35 of the Act with that of 0. 47, r. 1, Civil
Procedure Code. The language of the j;wo is different
because according to s. 35 of the Act which provides
for rectification of mistakes the power is given to the
various income-tax authorities within four yea.rs from
the date of any assessment passed by them to rectify
240
SUPREME COURT REPORTS
[1961]
'960
any mistake "apparent from the record" and in the
The 1,,,0 • .,.1., Civil Procedure Code the words are "an error appaOfficer. Alway• rent on the face of the record" and the two provisions
v,
do not mean the same thing. This court in Maharana
Th• Asok Te•liles MillB (Private) Ltd. v. Income-tax Officer, Porbandar (')
Ltd., Alway•
has laid down the scope of s. 35 at p. 358 in the
i<a;;; 1.
following words:-
"The power under section 35 is no doubt limited
to rectification of"mistakes which are apparent from
the record. 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 mistake he is entitled to
rectify the error provided that if the result is enhancement of assessment or reducing the refund
then notice has to be given to the assessee and he
should be allowed a reasonable opportunity of being
heard."
In that case the error arose because of an initial mistake in determining the written down value which
was subsequ,ently rectified. In ·an earlier case M. K.
Venkatachalam v. Bombay Dyeing ill Manufacturing
Co. Ltd. (') where as a consequence of a subsoquent
amendment of the law having retrospective effoct, the
Income-tax Officer reduced the amount of interest
under s. 18A(5) of the Act and the assessee obtained
from the High Court a writ of prohibition against the
Income-tax Officer on the ground that the mistake
contemplated had to be apparent on the face of the
order and not a mistake r!lsulting from an amendment
of the la. w even though it was retrospective in its
effect, it was held that it was a case of error apparent from the record. Gajendragadkar, J. in his judgment 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."
Thus this court has held that discovery of an error on
(1) [1959)36 l.T.R. 3so.
(•) [1958) 34 I.T.R. 143.
3 S.C.R. SUPREME COURT REPORTS
241
the basis of assessment due to an initial mistake in
19°0
determining the written down value is a mistake The Income-tax
from the record and su is a misapplication of the Offim, Alwaye
law even though the law came into operation rev.
trospectively.
The Income-tax Officer, can, under The Asok Textiles
s. 35 of the Act, examine the record and if he
Ltd., Alwaye
discovers that he has made a mistake he can rectify
the error and the error which can be corrected may
be an error of fact or of law. The restrictive operation of the power of review under 0. 47 R.l, Civil Procedure Code is not applicable in the case of s. 35 of
the Act and in our opinion it cannot be said that the
order of the Income-tax Officer in regard to assessment in dispute was without jurisdiction.
In regard to s. 18A (8) also the learned Judges have
misdirected themselves because that section is mandatory. It provides:-
S. 18A(8) "Where, on making the regular assessment, the Income-tax Officer finds that no payment
of tax h11os been made in accordance with the foregoing provisions of this section, interest calcula tod in
the manner laid down in sub-section ( 6) shall be addod to the tax as determined on the basis o'f the regular assessment."
Therefore the Income-tax Officer was required to calculate the interest in the manner provided under the
provisions of that sub-section and had to add it to the
assessment.
Counsel for the respondent sought to raise the question as to the applicability of proviso (ii) of Part B of
First Schedule of the Finance Act 1952 and relied
upon the judgments of this Court in Commissioner of
Income-tax v .. Elphinstone Spinning & Weaving Mills
Co. Ltd.(') and similar cases reported as Commissioner
of Incume-tax, Bombay City v. Jalgaon Electric Supply
Co. Ltd.(') and Commissioner of Income-tax, Bombay
City v. Khatau Makanji Spinning and Weaving Co.
Ltd. ('); but the facts of those cases were different. In
the first case there was no total income and the
(1) [1¢<>] 40 I.T.R. q2.
(2) [196a] 40 l.T.R. 184.
(3)[1g6a]40 I.T.R. 189.
ffapur ].
242
SUPREME COURT REPORTS
I
[1961]
1960
Finance Act was not applicable in that case. In the
The Income-ta• second there was no profit in any preceding year and
Officer, Alwaye therefore the fiction failed because it postulates that
v.
there should be undistributed profits of one or more
"' Asok Textiles years immediately preceding the previous year. In
Lid., Alway•
the third case also the Finance Act was inapplicable
Kapu. J.
because the additional tax was not properly laid upon
the total income and what was actually taxed was
never a part of the total income of the previous
year.
z960
De&ember 13.
In our opinion the order of the High Court was
erroneous. We therefore allow this appeal and set
aside the judgment and order of the High Court with
costs in this court and in the High Court.
Appeal allowed.
DIAMOND SUGAR MILLS LTD., AND
ANOTHER
v.
THE STATE OF UTTAR PRADESH AND
ANOTHER
(JA.FER IMAM, J. L. KAPUR, K. c. DAS GUPTA,
RAGllUIIAR DAYAL and N. RAJAGOPALA
AYYANGAR, JJ,)
Sugar Cane-Imposition of cess-Enactment taxing entry of
cane into factory-Constitutionality of-"LocaJ, areli', Connotati011
of-Constitution of India, Sch. VII, Lisi II, Entry 52-U. P.
Sugarcane Gess Acl, z956 (U. P. XXII of z956), s. 3.
Entry 52 of List II of the Seventh Schedule to the Constftution empowered State Legislatures to make a Jaw relating to
"taxes on the entry of goods into a local area for conswnptioa,
use or sale therein". The U. P. Legislature passed the U. P.
Sugarcane Cess Act, 1956, which authorised the State Government to impose a cess on the entry of cane into the premises of a
factory for use, consumption or sale therein. The appellant
contended that the premises of a factory was not a 'local area'
within the meaning of Entry 52 and the Act was beyond the
competence of the legislature.