Rectification can cure assessment of plainly exempt income when entitlement is apparent from the record, even if the claim was not raised earlier.

An omission to claim an exemption earlier does not bar rectification where the entitlement is apparent from the record and the assessment has included income that is plainly exempt. The controlling test is whether the error is obvious from the existing materials, not whether the claim requires debatable interpretation or fresh inquiry. On that basis, warehousing income found to fall within the statutory exemption could be corrected in rectification proceedings, because taxing it amounted to assessment of income not liable to tax. The relief, however, was confined to the specific warehousing receipts identified as exempt.

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Issues: Whether a claim for exemption under section 83 of the Income-tax Act, 1961, not made before the Income-tax Officer or the Appellate Assistant Commissioner, could nevertheless be entertained in rectification proceedings under section 154 of the Income-tax Act, 1961.

Analysis: The assessee was a statutory warehousing corporation and the record showed that the income in question included a specific sum derived from warehousing charges. All the materials necessary to determine the entitlement to exemption were already before the assessing authority. A mistake apparent from the record exists where the error is glaring and obvious, and not where it depends on a debatable issue or elaborate construction. As the income from warehousing was indisputably within the exemption and taxing it would amount to assessment of income not liable to tax, the omission to raise the claim earlier did not bar rectification.

Conclusion: The claim for exemption could be entertained under section 154, and the exempt warehousing income could not be assessed to tax. The question was answered in the negative and in favour of the assessee, with the exemption confined to the specified sum of Rs. 5,72,323.

Final Conclusion: Rectification was permissible because assessment of clearly exempt income constituted an obvious jurisdictional error, but the relief was limited to the warehousing income specifically found to be exempt.

Ratio Decidendi: An omission to claim a deduction or exemption earlier does not preclude rectification where the entitlement is apparent from the record and the taxable authority has assessed income that is plainly exempt.

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