Rectification of completed assessment cannot rest on later retrospective amendment where no error existed when the order was made.

Section 35 of the Income-tax Act, 1922 could not be used to rectify a completed assessment on the basis of a later retrospective amendment, because the power is confined to mistakes apparent from the record as it stood when the assessment order was made. The assessee was entitled to the credit allowed under section 18A(5) when the assessment was completed, and the subsequent amendment did not create a rectifiable mistake. The retrospective amendment did not itself authorise reopening of the assessment, particularly where the Amendment Act contained express reopening provisions in other respects. The notice of demand was therefore not warranted in law, and relief was granted to the assessee.

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Issues: Whether a completed assessment could be rectified under section 35 of the Income-tax Act, 1922 on the basis of a later retrospective amendment to the law.

Analysis: The assessment order was correct when made, because the assessee was then entitled to the credit allowed under section 18A(5) of the Income-tax Act, 1922. The power under section 35 extends only to a mistake apparent from the record as it stood on the date of the assessment order, and not to a situation where the assessment becomes inconsistent only because of a subsequent alteration of law. The retrospective operation of the Indian Income Tax (Amendment) Act, 1953 did not by itself authorize reopening of a completed assessment under section 35. The express provisions in the Amendment Act for reopening completed assessments in other sections showed that such power could not be implied merely from section 1(2). The cited authority on post-assessment events was distinguishable because there the basis of the assessment had later disappeared, whereas here the assessment was valid when made.

Conclusion: Section 35 could not be invoked to reduce the assessee's credit or to reopen the completed assessment on the basis of the retrospective amendment. The notice of demand was not warranted by law and the writ was issued in favour of the petitioner.

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