1. By this application under article 226 of the Constitution of India, the petitioner, Messrs. Walchand Nagar Industries Ltd., having its registered office at Bombay prays for issuance of a direction, order or writ, including a writ in the nature of certiorari, for quashing the orders made by the income-tax authorities, namely, the Income-tax authorities, namely, the income-tax Officer, the first respondent hereto, and the Commissioner of Income-tax, the second respondent hereto. It also prays for issuance of further consequential orders.
2. The facts in brief are as follows : The petitioner company was carrying on businesses including manufacturing sugar. It was assessed to income-tax by the order of the Income-tax Officer of date November 30, 1954. In the total tax levied on the petitioner, an additional income-tax was charged in respect of dividends distributed in excess of the specified limit mentioned in the Finance Act, 1950. This additional income-tax is hereinafter, for brevity's sake, referred to as 'excess dividend tax.' The matter was ultimately decided by the Income-tax Tribunal by its order dated July 27, 1955. A consequential order was then made by the Income-tax Officer on November 11, 1956, and the net result of the order was that the tax amounting to Rs. 1,58,520 was levied on the petitioner by way of excess dividend tax under the second clause of the proviso to paragraph B of Part I of the First Schedule of the Finance Act, 1950. It appears that the levy of this tax had been challenged before this court in some other case, and this court declared the levy to be invalid. Subsequent to the decision of this court, the petitioner made an application under section 35 of the Income-tax Act (hereinafter referred to as the Act) to the Income-tax Officer stating that the levy of excess dividend tax was invalid in law; the mistake was apparent from the record; that it be rectified, and the said amount of Rs. 1,58,520 be refunded to the petitioner. The Income-tax Officer took the view that there was no mistake apparent from the record within the meaning of section 35 of the Act, and in this view of the matter, rejected the application, by his order dated April 2, 1958. Against this order, the petitioner moved the Commissioner in revision under section 33A of the Act, wherein the petitioner again reiterated its stand. It may be mentioned that, by the time this revision was heard by the Commissioner, the Supreme Court had affirmed the decision of this court, holding the levy of excess dividend tax bad in law. The Commissioner took the view that the mistake pointed out by the petitioner about the invalidity of the levy of the tax was not a mistake apparent from the record, because to discover it, a process of elucidation, argument and debate was required, and in this view of the matter, the Commissioner dismissed the revision application by his order dated December 15, 1960. The petitioner has, therefore, approached this court by this petition praying for the aforesaid reliefs.
3. Mr. Palkhivala, learned counsel for the petitioner, contends that both the income-tax authorities were in error in holding that the mistake pointed out by the petitioner were in error in holding that the mistake pointed out by the petitioner was not a mistake apparent from the record within the meaning of section 35 of the Act. No process of elucidation, argument or debate was required to establish the mistake. The highest court of the land had declared the levy to be bad, and the only thing that had remained was to rectify the mistake and give effect to the decision of the Supreme Court. The petitioner had a right under section 35 of the Act to ask the department to rectify the mistake within four years from the date of the assessment order. The assessment order was made on November 30, 1954, and the application under section 35 made on March 26, 1958, was well within four years from that date. The mistake apparent from the record within the meaning of section 35 of the Act includes not only mistake of fact, but mistake of ships of the Supreme Court reported in Venkatachalam v. Bombay Dyeing & . and Maharana Mills (Private) Ltd. v. Income-tax Officer, Porbandar. The contention of Mr. Joshi, learned counsel for the Revenue, on the other hand, is that the income-tax authorities were not in error in holding that there was no mistake apparent from the record. To bring the mistake within the expression, 'mistake apparent from the record' it must be established that there was a mistake at the time of the making of the order, and not something which is discovered to be a mistake subsequently as a result of subsequent judicial pronouncement. The Income-tax Officer levied excess dividend tax on November 30, 1954. At that time no decision was given by the Supreme Court; the levy was good on that date when the tax was levied. The decision of the Supreme court did not entitle the petitioner to claim rectification of any mistake apparent from the record. Before we proceed to consider these rival contentions of the parties, it is necessary to deal with a preliminary objection raised by Mr. Joshi, and that objection is that this application has been filed after an inordinate delay, and, therefore, it should be dismissed in limine. It is his argument that the application made by the Income-tax Officer on April 2, 1958. The revision application made to the Commissioner was dismissed. Thus, the only operative order is the order of the Income-tax Officer, and that was made in April, 1958. This application was filed in this court in January, 1961, nearly after three years; the delay is inordinate. It is not possible for us to accept this contention of Mr. Joshi. It is indeed true that the order made by the Commissioner in revision being one of dismissal, the operative order is the order of the Income-tax Officer, but that does not mean that the petitioner cannot call in aid the time expended by it in prosecuting that revision. The petitioner pursued that remedy. The revision petition was dismissed by the Commissioner on December 15, 1960, and within one month of that order, the petitioner has approached this court by this application. These being the facts of the case, in our opinion, this application is not liable to be dismissed on the ground of delay. The preliminary objection raised by Mr. Joshi therefore fails.
4. It is not in dispute that the Supreme Court has declared that the levy of excess dividend tax is not a valid charge in Commissioner of Income-tax v. Khatau Makanji Spinning and Weaving Co. Ltd. That judgment was given on May 4, 1960. It is also not disputed that, as a result of that decision, the levy of excess dividend tax on the petitioner under the Finance Act, 1950, was bad in law. The only question that has to be considered is whether the petitioner is entitled to get the mistake rectified by way of an application under section 35 of the Act. In other words, in the circumstances of the case, can it be said that there is a mistake apparent from the record, entitling the petitioner to have rectification made As already stated, the argument on behalf of the Revenue is that on the date the tax was levied, there was no mistake. The levy was therefore good on November 30, 1954, the date on which the Income-tax Officer made the assessment order. It is only thereafter that the Supreme Court declared that the levy of the tax was invalid. The mistake which is discovered as a result of a subsequent judicial pronouncement cannot be a mistake apparent from the record. In our opinion, the ratio of the decision of their Lordships of the Supreme Court in Venkatachalam v. Bombay Dyeing and . is a complete answer to the contention raised. The facts of this case were that the assessee was given credit for Rs. 50,603-15-0 being interest at 2% on tax paid in advance under section 18A (5) of the Act, in the assessment order made by the Income-tax Officer on October 9, 1952. Subsequent to that date, by an amending Act of 1953, section 18A (5) of the Income-tax Act was amended, by adding a proviso thereto, and the effect of that amendment was that the assessee was entitled to interest not on the entire amount of tax paid in advance, but only on the difference between the tax so paid and the amount of tax determined on regular assessment. This amending section was deemed to have come into force on April 1, 1952. As the effect of this amendment the assessee was entitled to get credit by way of interest only to the extent of Rs. 21,157. The Income-tax Officer had already given him credit to the extent of Rs. 50,603-15-0. The Income-tax Officer, therefore, after due notice, made an order under section 35 of the Act, rectifying the mistake in the assessment, and demanded the assessee to return back Rs. 29,446, the excess amount for which he had already been given credit. The assessee moved this court, paying that the Income-tax Officer be prohibited from recovering back the amount. It was the contention of the assessee before this court that there was no mistake apparent from the record, because at the time when the original assessment order was made, and credit to the extent of Rs. 50,603 was given to him, the order was a valid order in law. This contention of the assessee was upheld by this court, and this court issued a writ of Prohibition against the department realising from the assessee the amount of Rs. 29,446. The department field an appeal before the Supreme Court against the decision of this court, and the decision of this court was reversed. The ratio of this decision is well summarised in the placitum, which is in the following terms :
'The effect of the provision that section 13 of the Amendment Act shall be deemed to have come into force on April 1, 1952, was that the amendment to section 18A must be deemed to have been included in the principal Act as from April 1, 1952, for all purposes, and therefore the proviso must be deemed to be part of section 18A on the date of the passing of the assessment order; consequently the assessment order was inconsistent with the proviso to section 18A and must be deemed to suffer from a mistake apparent from the record and the Income-tax Officer was therefore justified in exercising his power under section 35 and rectifying the mistake.
A glaring and obvious mistake of law can be rectified under section 35 as much as a mistake of fact apparent from the record.'
5. It would be seen that even though the assessment order made by the Income-tax Officer was a good order on the date it was made, the subsequent enactment rendered that order into a mistaken order, and it was held that that mistake could be ratified under section 35 of the Act. Mr. Joshi tried to distinguish this case from the Present case. It is his argument that the order made by the Income-tax Officer in that case was rendered bad by the subsequent enactment, while the order in the instant case, which was a good order, was rendered bad as a consequence of a subsequent judicial pronouncement. We find it difficult to accept this argument and the distinction. In our opinion, the present case is stronger than the other case. The effect of the decision of their Lordships of the Supreme court is that the levy of excess dividend tax was, at no time, good. The levy was invalid, and that being the true legal position, the order made by the Income-tax Officer was bad at its inception on the date it was made, and that was a mistake; to point out that mistake, no elaborate argument or debate is required, because there is the binding Supreme Court decision, clearly bringing out that mistake. The mistake, therefore, in our opinion, is a mistake apparent from the record, within the meaning of section 35 of the Act. The authorities concerned, i.e., the respondents, were therefore clearly in error in not rectifying that mistake under section 35 of the Act.
6. In the result, the application is allowed. The order of the Income-tax Officer of date April 2, 1958, rejecting the petitioner's application under section 35 of the Act and the order of the Commissioner dated December 15, 1960, dismissing the petitioner's revision application, are hereby quashed, and the Income-tax Officer, Companies Circle 11 (3), Bombay, is directed to rectify the mistake under section 35 of the Income-tax Act in the light of the observations herein made. Rule made absolute. Respondents shall pay the costs of the petitioner. Petition allowed.