M.B. Farooqi, J.
1. The assessee, Sri Makhan Lal Jain, was a partner in the firm of M/s. Daulat Ram Makhan Lal. His wife, Smt. Durga Devi, too was a partner in the firm. Each had 1/4th share in the partnership business. For the assessment year 1963-64, the assessee filed the return in the status of individual on January 22. 1964, in which he disclosed his share income from the said firm at Rs. 20,500 and his income from the property at Rs. 1,163. He did not, however, include the share income of his wife in his total income, although he disclosed it in the return at the appropriate place that she too was a partner in the aforesaid firm. The ITO accepted the return and completed the assessment on February 7, 1964, on a total income of Rs. 23,163. As a result of the reassessment proceedings-taken under Section 147/148 subsequently, the ITO passed a fresh order of assessment on March 21, 1969, in which he included the share income of the assessee's wife in the total income of the assessee. On appeal, the order was reversed by the AAC on the ground that it was not a case of escapement. The order of the AAC was confirmed by the Tribunal on May 18, 1972. In the meantime, the assessment of the firm, M/s. Daulat Ram Makhan Lal, was completed on 28th March, 1968. The appeal against that assessment too was decided on January 31, 1970. It may be added here that in consequence of the assessment of the firm, the share income of the assessee and his wife were separately revised in September and October, 1968, but even at that stage no steps were taken by the ITO to assess the wife's share of the income in the hands of the husband. On the other hand, following the dismissal of the revenue appeal by the Tribunal on May 18, 1972, in the reassessment proceedings under Section 147/148, the ITO sought to rectify the mistake under Sections 154 and 155 of the I.T. Act, 1961. He even passed an order on 29th December, 1972, and rectified the previous assessment order. On appeal, the AAC quashed the rectification order holding the same to be unjustified under Sections 154 and 155 of the Act. The department went in appeal to the Tribunal. The Tribunal held that the order dated February 7, 1964, suffered from a mistake apparent on the record, inasmuch as the share income of the wife, which she had from the firm, Daulat Ram Makhan Lal, was not included in the total income of the assessee. The Tribunal, however, held that the rectification order was barred by limitation under Section 154, as it was passed more than 4 years after the original order of assessment dated February 7, 1964, adding that even if the limitation were reckoned on the basis of the order dated September 23, 1968, which was passed for the limited purpose of giving effect to the income resultant from the completion of the firm's assessment, still the rectification order was barred by limitation. As regards Section 155, the Tribunal held that the same was inapplicable. In this view, the Tribunal dismissed the appeal filed by the revenue. At the instance of the Commissioner, the Tribunal has referred the following question of law for our opinion :
' Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Income-tax Officer's order dated 29th December, 1972, under Section 154 was barred by time and that action under Section 155 was not admissible? '
2. Section 154 empowers the ITO to rectify an order of assessment passed by him. The power can be exercised subject to two conditions :
(i) that there is a mistake apparent from the record ; and
(ii) that the rectification is made within a period of four years from the date of the order sought to be rectified.
3. The mistake must, however, bo apparent from the record of the assessment of the assessee. Such assessee may be an individual, an HUF, a company, a firm, an association of persons whether incorporated or not, a local authority or any other artificial juridical person. For purposes of assessment to tax under the I.T. Act they are distinct entities. If a mistake is discovered in the assessment of one entity in consequence of the assessment or reassessment of another entity, it will not be a mistake apparent from the record. Section 155, however, provides certain exceptions to this rule. One of these exceptions has been engrafted in Clause (1) of the said section. Under Clause (1) the non-inclusion of the share of a partner in the assessment or a correction thereof is regarded, though only by fiction, as a mistake apparent from the record and Section 154 applies thereto, the period of four years being reckoned from the date of the final order passed in the case of the firm.
4. The argument of the learned counsel for the revenue is that Clause (1) would be available for rectification even where the share money of the wife taxable in the hands of the husband has been left out, wholly or in part, from the assessment of the husband, because, he said, the share money of the wife represents the artificial income of the husband from the firm under Section 64(1)(i) of the Act. It will not be necessary for us to go into this point in this case. For, Clause (1) would apply if the mistake was discovered in consequence of assessment or reassessment of the firm. On facts stated above, that is not so. The mistake was already there writ large on the assessment record. In our opinion, therefore, Section 155(1) has no application to this case. The mistake could no doubt be rectified under Section 154, provided the rectification order was passed within four years from the date of the order of assessment. That is clearly not so. The rectification order was passed on December 29, 1972, i.e., more than four years after the assessment order was passed on February 7, 1964.
5. For the reasons stated above, we hold that action under Section 155(1) was incompetent and that under Section 154 was time-barred. We, therefore, answer the question referred to us in the affirmative, in favour of the assessee and against the department. The assessee shall be entitled to costs, which are assessed at Rs. 200.