Rectification of obvious legal error and mandatory advance-tax interest upheld under the income-tax framework.

Section 35 of the Indian Income-tax Act was construed to allow rectification of an assessment for an obvious mistake of law apparent from the record, including an error arising from retrospective amendment, where no debatable reasoning was required. The rectification power was treated as wider than review under Order XLVII rule 1 CPC, and failure to apply the amended law could be corrected on the record. Interest under section 18A(8) was also held mandatory on non-compliance with advance-tax requirements, so omission to levy it was rectifiable. The challenge to the rectification orders accordingly failed, and the assessment orders were upheld.

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Issues: (i) Whether section 35 of the Indian Income-tax Act permitted rectification of an assessment where the error involved a mistake of law apparent from the record, including one arising from the retrospective operation of law; (ii) Whether interest under section 18A(8) of the Indian Income-tax Act was mandatorily leviable on failure to make the required advance tax payment.

Issue (i): Whether section 35 of the Indian Income-tax Act permitted rectification of an assessment where the error involved a mistake of law apparent from the record, including one arising from the retrospective operation of law.

Analysis: The power of rectification under section 35 was treated as wider than the restrictive standard governing review under Order XLVII, rule 1, of the Code of Civil Procedure. A mistake apparent from the record was held to include not only factual mistakes but also legal mistakes, provided the error could be discovered from the record itself and did not require a debatable process of reasoning. The Court also held that where the law operated retrospectively, the assessment had to be read in the light of the amended law, and an error resulting from failure to apply that law could still be rectified under section 35.

Conclusion: Section 35 did permit rectification in the circumstances, and the Income-tax Officer acted within jurisdiction.

Issue (ii): Whether interest under section 18A(8) of the Indian Income-tax Act was mandatorily leviable on failure to make the required advance tax payment.

Analysis: The provision was construed as mandatory. Once the regular assessment disclosed that tax had not been paid in accordance with the advance-tax provisions, the Income-tax Officer was bound to compute and add interest in the manner prescribed by the statute. The omission to levy such interest was therefore capable of correction.

Conclusion: Interest under section 18A(8) was mandatorily leviable and the rectification on that count was valid.

Final Conclusion: The challenge to the rectification orders failed, and the assessment orders made by the Income-tax Officer were upheld.

Ratio Decidendi: A mistake apparent from the record under section 35 of the Indian Income-tax Act includes an obvious mistake of law discernible from the assessment record, and the rectification power extends to applying retrospective amendments and to mandatory statutory interest provisions.

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