Rectification increasing tax liability requires prior notice and hearing; amendment without it is invalid.

A rectification or amendment under section 155(1) read with section 154 of the Income-tax Act is invalid where it increases the assessee's liability without prior notice and a reasonable opportunity of being heard. Section 154(3) applies to such amendments so far as may be, and it expressly bars any change that enhances an assessment, reduces a refund, or otherwise increases liability unless the assessee is heard first. Because the amendment in question increased liability and no notice was issued, the order was vitiated and was held invalid in favour of the assessee.

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Issues: Whether an order amending a partner's assessment under section 155(1) of the Income-tax Act, 1961, read with section 154, could be made without giving the assessee notice and a reasonable opportunity of being heard.

Analysis: Section 155(1) applies the provisions of section 154 so far as may be. Section 154(3) specifically prohibits an amendment that has the effect of enhancing an assessment, reducing a refund, or otherwise increasing the liability of the assessee unless notice of the proposed action is given and a reasonable opportunity of being heard is afforded. Since the amendment in question increased the assessee's liability and no notice was given, the statutory requirement of hearing was not satisfied.

Conclusion: The order under section 155(1) was invalid for want of notice and opportunity of hearing, and the answer was returned in favour of the assessee.

Ratio Decidendi: Where a rectification or amendment under section 155(1) read with section 154 results in an enhanced assessment or increased liability, the assessee must be given prior notice and a reasonable opportunity of being heard; failure to do so vitiates the order.

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