Mistake apparent from the record cannot cover a fresh legal interpretation of surtax capital computation rules.

Interpretation of rule 2 in the Second Schedule to the Companies (Profits) Surtax Act was required to decide whether advance tax and tax deducted at source were to be excluded in computing capital for surtax. Although the Income-tax Officer's ultimate view was treated as legally correct, the reasoning depended on construing the scope of "reserve", "provision" and "fund", so the matter was not an obvious mistake apparent from the record. The second order therefore could not be sustained as rectification under the mistake-apparent-from-record standard.

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Issues: Whether the Income-tax Officer's second order could be sustained as a correction of a mistake apparent from the record, or whether it involved an impermissible reappraisal requiring interpretation of rule 2 in the Second Schedule to the Companies (Profits) Surtax Act.

Analysis: The computation of capital for surtax under the Second Schedule required consideration of whether advance tax and tax deducted at source were to be excluded. Although the ultimate view taken by the Income-tax Officer was treated as legally correct, reaching that view required interpretation of the relevant rules and an examination of the scope of the expressions "reserve", "provision" and "fund". Such a matter could not be characterised as an obvious mistake evident from the record, because the alleged error was not self-evident and had to be discovered through reasoning.

Conclusion: The question was answered in favour of the assessee and against the Revenue; the order could not be justified as rectification of a mistake apparent from the record.

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