Rectification power cannot perpetuate a fundamental assessment error by consequential readjustment under dividend taxation rules.

Rectification power under the income-tax law cannot be used to preserve a fundamentally erroneous assessment by making consequential adjustments. The assessment had wrongly treated a firm as the shareholder, although the shares stood in the names of individual partners; the dividend grossing-up benefit and tax credit attached only to the registered shareholder. Because the rectification proceedings merely sought to sustain the original mistake in a modified form, rather than correct an apparent error on the record, the invocation of rectification was not sustainable.

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Issues: Whether the Income-tax Officer could invoke the rectification power to gross up dividend income and thereby sustain the tax treatment adopted in the reassessment, when the earlier assessment had proceeded on a fundamentally erroneous footing as to who was the shareholder entitled to the statutory credit and grossing-up benefit.

Analysis: The assessment had treated the firm as the shareholder, although the shares stood in the names of individual partners. The statutory benefit of grossing up and the corresponding tax credit under the dividend provisions attached only to the registered shareholder. The rectification proceedings did not seek to correct that initial and fundamental mistake, but only to preserve it in a modified form by making consequential adjustments. A rectification jurisdiction cannot be used to perpetuate an error or to make a mere readjustment which leaves the original mistake intact in substance.

Conclusion: The rectification was not sustainable under the statutory power invoked, and the challenge to the reassessment succeeded.

Final Conclusion: The statutory rectification power extends to correcting an apparent mistake, but not to reshaping an erroneous assessment so as to carry the original error to its logical consequence.

Ratio Decidendi: A rectification provision cannot be used to perpetuate or complete a fundamental assessment error by consequential readjustment; it can operate only to correct the mistake apparent from the record.

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