Rectification for error apparent upheld where assessments conflicted with binding precedent on tea blending deductions.

Notices for rectification were upheld because the assessment orders allowing deductions under the Income-tax Act were contrary to a binding jurisdictional precedent holding that blending of tea is not manufacture or production for those deductions. The court treated an order inconsistent with settled law as containing an error apparent on the face of the record, making section 154 rectification permissible. The objection that the issue was still debatable was rejected since the assessments were made after the legal position had already been settled within the jurisdiction. The writ petition challenging the notices therefore failed.

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Issues: Whether notices issued under section 154 of the Income-tax Act, 1961 for rectification of assessment orders disallowing deductions under sections 80HH, 80I and 80IA were without jurisdiction because the issue of blending of tea as manufacture or production was debatable or not an error apparent on the face of the record.

Analysis: The notices were founded on a binding decision of the jurisdictional High Court in Apeejay, which had held that blending of tea does not amount to manufacture or production for the purpose of the relevant deduction provisions. The assessment orders allowing the deductions were passed after that authoritative pronouncement and were therefore inconsistent with binding law. A rectification under section 154 is permissible to bring an assessment in line with an authoritative judicial pronouncement, and an order contrary to binding precedent contains an error apparent on the face of the record. The challenge that the issue remained debatable was rejected because the later assessment orders were made after the law had been settled within the jurisdiction.

Conclusion: The notices were held to be validly issued under section 154 and not without jurisdiction. The writ petition failed.

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