Rectification jurisdiction under section 35(1) upheld for an apparent omission; consequent penalty sustained following the rectified assessment.

Rectification jurisdiction under section 35(1) was applied to correct an omission where the assessment record itself showed the assessee's omitted share of income from a distinct firm, the court holding that such omission is a mistake apparent on the record and permissible to rectify even after an earlier rectification; outcome: second rectification upheld. The court further held that proceedings under escaped-income provisions and rectification may overlap and a prior rectification does not oust jurisdiction for a separate apparent mistake. Consequentially, a penalty imposed following the valid rectified assessment was sustained.

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Issues: (i) Whether the Income-tax Officer's order of rectification under section 35 of the Income-tax Act was legal and valid; (ii) Whether the order imposing penalty under section 46(1) of the Income-tax Act was legal.

Issue (i): Whether the second rectification of the assessee's assessment under section 35(1) was legally permissible to include the assessee's omitted share of income from a distinct firm.

Analysis: The Court examined whether the omission to include the assessee's share from firm B in his assessment constituted a mistake apparent on the record and whether such mistake could be cured by successive rectification under section 35(1). The Court held that partners and firms are assessed separately and that omission of income shown in the return rendered the omission a mistake apparent from the record. The Court further held that orders under section 34(1) (for escaped income) and section 35(1) (rectification of mistakes apparent) may overlap and do not exclude each other; a prior rectification does not preclude a subsequent rectification for a different apparent mistake. The Income-tax Officer obtained information of the assessee's share from the officer assessing firm B, discovered the omission, and thereby acquired jurisdiction under section 35(1) to rectify the assessment again.

Conclusion: The second rectification under section 35(1) was legal and valid and properly corrected the omission to include the assessee's share of income from firm B.

Issue (ii): Whether the penalty imposed under section 46(1) was legal in view of the rectification.

Analysis: The Court considered the validity of the penalty order contingent on the legality of the second rectification. Having held the rectification lawful, the Court found no illegality shown in the penalty order imposed pursuant to the rectified assessment and demand notice. The Court accordingly sustained the penalty imposed by the Income-tax Officer.

Conclusion: The order imposing penalty under section 46(1) was legal and valid.

Final Conclusion: The rectification under section 35(1) and the consequential penalty under section 46(1) are upheld; the reference is answered in favour of the revenue and the assessee is directed to pay costs.

Ratio Decidendi: Where an omission in an assessment record is shown by the record itself to be a mistake apparent, an assessing officer has jurisdiction under section 35(1) to rectify that mistake even if the same facts could alternatively give rise to proceedings under section 34(1); successive rectifications for distinct apparent mistakes are permissible and a prior rectification does not oust jurisdiction to correct a separate apparent mistake discovered later.

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