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Issues: Whether the Income-tax Officer could, in rectification proceedings relating to a partner's completed assessment, withdraw earned-income treatment and levy special surcharge on the footing that the assessee was not actively engaged in the conduct of the out-station firms' business.
Analysis: Section 155(1)(a) of the Income-tax Act, 1961 applies to amendment of a partner's completed assessment when the firm's assessment shows the partner's share to have been omitted or incorrectly included, but it does not authorise a fresh, debatable determination on whether the partner was actively engaged in the business so as to convert the share income from earned to unearned income. That question depended on factual inquiry and could not be treated as a mistake apparent from the record. The earlier allowance of earned-income relief, the evidence of visits and daily reports, and the past departmental treatment all supported the view that the matter was not fit for summary rectification.
Conclusion: The rectification could not validly be used to alter the character of the assessee's share income or to impose special surcharge on that basis; the answer was in favour of the assessee and against the Revenue.
Ratio Decidendi: Rectification provisions for a partner's assessment cannot be used to decide a debatable factual issue that requires investigation beyond the record, such as whether the partner was actively engaged in the firm's business.
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