Rectification jurisdiction cannot resolve debatable valuation issues; a writ may restrain proceedings on an invalid notice.
Rectification under section 154 is confined to mistakes apparent from the record and cannot be used to resolve a debatable question about the actual cost of assets acquired in exchange for fully paid shares. A disputed valuation issue of that kind is not a self-evident error, so the proposed rectification notice lacks jurisdiction. Where the jurisdictional fact is absent, the High Court may intervene under article 226 and restrain further proceedings on the invalid notice by writ of prohibition.
Issues: (i) whether the proposed rectification under section 154 could be sustained when the alleged error depended on a debatable determination of the actual cost of assets acquired in exchange for fully paid shares; (ii) whether the High Court could restrain the Income-tax Officer from proceeding on the impugned notice.
Issue (i): whether the proposed rectification under section 154 could be sustained when the alleged error depended on a debatable determination of the actual cost of assets acquired in exchange for fully paid shares.
Analysis: The power of rectification is confined to mistakes apparent from the record. A question that requires investigation, reasoning, or acceptance of one of two possible views is outside the scope of that power. The determination of the actual cost of assets acquired in consideration of shares, and whether the excess value of the assets over the par value of the shares could be treated as a "mistake" in the original assessment, was not a self-evident error but an intricate and disputable question. A rectification notice cannot be used to assume jurisdiction over such a controversy.
Conclusion: The impugned notice under section 154 was without jurisdiction and could not be sustained.
Issue (ii): whether the High Court could restrain the Income-tax Officer from proceeding on the impugned notice.
Analysis: The notice issued under section 154 was treated as a jurisdictional step in aid of an intended enhancement of assessment. Where the jurisdictional fact itself is absent, the Court can intervene under article 226 to prevent unlawful continuation of the proceedings. A writ of prohibition was therefore an appropriate remedy to restrain further action pursuant to the invalid notice.
Conclusion: The Court could issue a writ of prohibition to prevent further proceedings on the basis of the impugned notice.
Final Conclusion: The rectification proceedings could not be initiated on the footing of a mistake apparent from the record, and the assessee was entitled to protection against further action under the impugned notice.
Ratio Decidendi: Rectification jurisdiction is limited to patent errors apparent from the record, and it cannot be invoked to decide a debatable question of law or fact; where the jurisdictional fact is absent, the High Court may restrain the authority from proceeding.
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