Natural justice and double assessment principles govern rectification and reassessment of share income under the Income-tax Act, 1922.

A rectification under section 35 of the Income-tax Act, 1922 requires a real and effective opportunity to show cause, and proceedings made after a stalled objection process may be vulnerable for breach of natural justice. The note also explains that a mistaken description in the assessment record can amount to a mistake apparent from the record, bringing the matter within section 35(1), and that sections 34 and 35 are not mutually exclusive remedies. It further stresses that the same share income cannot be subjected to two inconsistent assessments without disturbing the firm's assessment or following the statutory apportionment scheme for an unregistered firm.

---

---

Issues: (i) Whether the rectification order under section 35 of the Income-tax Act, 1922 was vitiated for want of an effective opportunity to show cause. (ii) Whether the case fell within section 35(1) and whether section 34 and section 35 were mutually exclusive or alternative remedies. (iii) Whether the petitioner could be assessed again on the same share income without disturbing the firm's assessment and without the statutory apportionment required for an unregistered firm.

Issue (i): Whether the rectification order under section 35 of the Income-tax Act, 1922 was vitiated for want of an effective opportunity to show cause.

Analysis: The petitioner had been given time to object to the proposed rectification, but the proceedings were effectively stalled by the interim stay and the misunderstanding as to its continuance. When the stay situation was clarified, only a short period remained, and no further effective opportunity was afforded before the rectification order was made. The earlier time granted for objections had ceased to be effective in the changed procedural circumstances. An assessee must be given a real and effective opportunity to be heard before an adverse order is passed.

Conclusion: The rectification order was invalid for breach of natural justice and was liable to be set aside in favour of the assessee.

Issue (ii): Whether the case fell within section 35(1) and whether section 34 and section 35 were mutually exclusive or alternative remedies.

Analysis: The assessment order described the petitioner's income as share income from an unregistered firm, whereas by the time rectification was initiated the firm stood registered pursuant to the appellate order. That incorrect description was a mistake apparent from the record and brought the case within section 35(1). The initiation of proceedings under section 35 was therefore valid. The statutory requirements of section 34 and section 35 may both be satisfied in a given case, and the department is not confined as of right to the more favourable course under section 34 merely because that course may offer an appeal. The provisions were not treated as mutually exclusive in the sense suggested by the petitioner.

Conclusion: The notice and initiation under section 35 were valid, and the petitioner had no statutory right to insist on proceeding only under section 34.

Issue (iii): Whether the petitioner could be assessed again on the same share income without disturbing the firm's assessment and without the statutory apportionment required for an unregistered firm.

Analysis: The firm's assessment as an unregistered firm was left untouched, while the petitioner was sought to be taxed again on the same share income. On the same income there cannot be two sets of assessment. Without setting aside the firm's assessment and without making the apportionment contemplated by the Act for an unregistered firm, the petitioner could not be separately assessed on the same income. The later order also did not clearly show the necessary credit adjustment for tax already paid by the firm.

Conclusion: The reassessment could not stand because it resulted in impermissible double assessment of the same income.

Final Conclusion: The writ was allowed and the rectification order was quashed, with parties left to bear their own costs.

Ratio Decidendi: A reassessment or rectification affecting an assessee's liability cannot be sustained unless the assessee is afforded a real opportunity of being heard, and the same income cannot be subjected to two inconsistent assessments in disregard of the statutory scheme.

---