1981 (4) TMI 37 - HC - Income Tax

High Court rules on rectification of minor's income, upholding ITO orders under Income-tax Act

The High Court held that the non-inclusion of the minor's share income in the assessee's hands was not a mistake capable of rectification under section ... Super Profits Tax Issues Involved:1. Whether the non-inclusion of the share income of the minor arising from the firm in which the assessee is a partner in the hands of the assessee is a mistake capable of being rectified u/s 154 of the Income-tax Act, 1961.2. Whether the orders passed by the Income-tax Officer (ITO) u/s 155 of the Act can be treated as orders passed u/s 154 of the Act.Summary:Issue 1: Rectification of Non-Inclusion of Minor's Share Income u/s 154The Tribunal held that the non-inclusion of the minor's share income in the assessee's hands was a mistake apparent from the record and could be rectified u/s 154. The Tribunal observed that the apportionment of the partners' shares was part of the firm's assessment order, making the mistake of not including the minor's income in the mother's share a glaring and obvious mistake of law. However, the High Court disagreed, citing Supreme Court decisions in ITO v. S. K. Habibullah and Second Addl. ITO v. Atmala Nagaraj, which established that a mistake discovered from the assessment of the firm is not a mistake apparent from the record of the individual partner. The High Court concluded that the attempt to rectify the assessments by referring to the firm's records was not justified u/s 154.Issue 2: Validity of Orders Passed u/s 155 Treated as u/s 154The Tribunal upheld the ITO's orders, treating them as valid rectifications u/s 154 despite being initially passed u/s 155. The High Court noted that the assessee's counsel conceded this point, acknowledging the settled position of law as per the Supreme Court decision in Hazari Mal Kuthiala v. ITO. Consequently, the High Court answered this question in the affirmative and against the assessee.Additional Observations:The High Court also addressed the Tribunal's observation that the assessee's lack of objection to the rectification before the ITO precluded her from challenging it in appeal. The High Court clarified that jurisdiction cannot be conferred by consent, referencing decisions in Hansraj Dhingra v. Union of India and Continental Commercial Corporation v. ITO. Therefore, the assessee was not estopped from raising the contention that the rectifications were without jurisdiction.Conclusion:- Question 1 was answered in the negative and in favor of the assessee.- Question 2 was answered in the affirmative and against the assessee.The references were disposed of accordingly, with no costs awarded to the assessee.