Technical assessment error and provisional tax refund rectification remain valid despite set-aside of the regular assessment.

An assessment made under the Income-tax Act, 1961 for an assessment year governed by the 1922 Act was treated as a technical irregularity, not a nullity, because the assessing officer had jurisdiction under the correct statutory regime. The appellate authority could therefore set aside the assessment and direct a fresh assessment, and limitation did not bar that assessment when made in consequence of the appellate direction. Provisional assessment under section 23B was described as a separate machinery for speedy tax collection and did not merge with the regular assessment. Accordingly, setting aside the regular assessment did not extinguish the provisional tax liability, and a mistaken refund of that tax could be rectified as an apparent error.

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Issues: (i) whether the Appellate Assistant Commissioner could set aside an assessment made under the wrong statute and direct a fresh assessment after the limitation period had expired; (ii) whether refund of tax paid pursuant to a provisional assessment could be rectified as a mistake apparent from the record when the regular assessment had been set aside.

Issue (i): whether the Appellate Assistant Commissioner could set aside an assessment made under the wrong statute and direct a fresh assessment after the limitation period had expired.

Analysis: The assessment made under the Income-tax Act, 1961, for an assessment year governed by the 1922 Act was treated as a technical irregularity and not a nullity, because the Income-tax Officer had jurisdiction to assess the matter under the correct statutory regime. The appellate power to set aside the assessment and direct a fresh assessment was held to exist under the relevant appellate provisions, and the bar of limitation did not apply where the fresh assessment was made in consequence of such a finding or direction.

Conclusion: The Appellate Assistant Commissioner was competent to issue the direction and the fresh assessment was not barred by limitation.

Issue (ii): whether refund of tax paid pursuant to a provisional assessment could be rectified as a mistake apparent from the record when the regular assessment had been set aside.

Analysis: Provisional assessment under section 23B was held to be a distinct machinery for speedy collection of tax and did not merge in the regular assessment. Setting aside the regular assessment did not automatically wipe out the provisional assessment or entitle the assessee to refund of the provisional tax. The mistaken refund resulted from confusing the provisional assessment with the regular assessment and was held to be an obvious and patent error, capable of rectification.

Conclusion: The refund could validly be rectified and the assessee was not entitled to retain the refunded provisional tax.

Final Conclusion: The writ petitions failed because the appellate direction for fresh assessment was valid and the rectification restoring the provisional tax refund was permissible.

Ratio Decidendi: Where an assessment suffers only from a technical error in the statutory provision invoked, the appellate authority may direct a fresh assessment notwithstanding lapse of limitation, and a refund of tax paid on a provisional assessment cannot be claimed merely because the regular assessment is set aside.

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