MEHAR SINGH, J. - This is a petition under article 226 of the Constitution and it arise out of the following facts and circumstances.
The petitioner for the assessment year 1946-47 had to make a return of his income from various sources, including income from business, and his business consisted of, so far as this petition is concerned, the share of income from Ritz Cinema in Delhi, share of income from Novelty Cinema in Kanpur, and share of income as partner of the Delhi Talkies Bureau. In the assessment of that year the petitioner showed a loss and after his loss had been set against his profits, there still remained an absorbed loss of Rs. 29,337. It is not clear, though it has been said so at the time of the hearing, that this unabsorbed loss was, the whole of it, the loss suffered by the petitioner as partner of the Delhi talkies Bureau.
In the case of the assessment year 1948-49 the Delhi Talkies Bureau on assessment was again found to have suffered a loss and the petitioners share of that loss arrived at was Rs. 77,405. In the petitioners assessment for the year 1948-49, this loss of his share from the Delhi Talkies Bureau was take into consideration and when set against his income from other sources, the result was that his assessment showed a loss of Rs. 26,592. Subsequently the 1948-49 assessment of the Delhi Talkies Bureau was revised and on revision its loss was reduced, in consequence of which the petitioners share of loss was reduced for Rs. 77,405 to Rs. 16,488. Once that was done, the Income-tax Officer gave notice to the petitioner of February 23, 1956, of his intention to rectify his assessment of the year 1948-49, under section 35 of the Indian Income-tax Act. He stated in the notice that he was according an opportunity to the petitioner to file his objections, if any, on or before February 29, 1956, at 10-30 a.m. He also stated in the notice that the petitioner was to bring receipts of payments made, if any, for the year 1946-47, so that necessary adjustments may be made in the case.
In reply to the notice the petitioner sent a letter (annexure C) on February 28, 1956, to the Income-tax Officer. In this reply the petitioner sought to adjust the unabsorbed loss of Rs. 29,337 of the year 1947-48 it reduce his taxable income for the assessment year 1948-49. He did not state the reasons or the grounds upon which he though such an adjustment. The Income-tax Officer of March 8, 1956 (annexure D) refused to allow such an adjustment on the ground that the loss from the assessment year 1947-48 was from the partnership of the Delhi talkies Bureau, which again showed loss in the assessment year 1948-49.
It is this order of the Income-tax Officer passed under section 35 of the Indian Income-tax Act of which the legality has been questioned in this petitioner. The only ground urged in the petition is that within the meaning and scope of section 24 (2) of that Act the unabsorbed loss of Rs. 29,337 was loss from the film business of the petitioner so far as the assessment year 1947-48 is concerned and as the income in the assessment year 1948-49 from Ritz Cinema of Delhi and Novelty Cinema of Kanpur was from film business, so it was a loss from the same business 1948-49 as against the income, it being a loss of the preceding year.
The short reply on behalf of the respondents, who are the Income-tax Officer and the Commissioner of Income-tax, Nos. 1 and 2 respectively, is that it was never the case of the petitioner before the Income-tax Officer that the unabsorbed loss of the preceding assessment year 1947-48 was of the same business as the income in the assessment year 1948-49 and that, in any case, the unabsorbed loss was not from the same business and, therefore, the petitioner was no entitled to adjustment according to section 24 (2) of the Act as it stood on April 1, 1948.
At the hearing of the petition the learned counsel for the petitioner has raised a new ground and that is the according to the first proviso to sub-section (1) of section 35 of the Act the petitioner has not been allowed by the Income-tax Officer a reasonable opportunity of being heard. The argument is based on the words of the notice served by the Income-tax Officer under section 35 of the Act upon the petitioner. It has already been pointed out that therein the Income-tax Officer had informed the petitioner of his intention to rectify the mistake in his assessment for the year 1948-49 and called upon the petitioner to appear on a given date and at the given time to file objections. The learned counsel says that mere opportunity to the petitioner to file objection to the notice served upon him was not giving his a reasonable opportunity of being heard. He says that the petitioner could well have sent his objections by post as was thought by the learned Judges in Shrilal Sagarmull v. Commissioner of Income-tax and that did not amount to giving a reasonable opportunity to the petitioner of being heard. What he says is that the petitioner should have had an opportunity of personally appearing before the Income-tax Officer and of leading evidence and it was only then that it could be said that he had a reasonable opportunity of having been heard. It is stated in the notice saved upon the petitioner that he was to bring with his certain receipts for certain adjustments, but the learned counsel says that that was in relation to the year 1946-47 and his presence was not required in regard to the notice served upon him in so far as the correction of the mistakes in the assessment year 1948-49 was concerned. I think this is arguing the case in any hyper-technical sense. The fact remains that the petitioner was informed of what action was being taken and under what provision of the law, of the date and time when he could appear and put in his objections, and he did not do so except by submitting written objections. In my opinion in being herd by the Income-tax Officer, but, even if I came to a conclusion otherwise, this is a question that has not been made a ground in support of the present petition, and it cannot be permitted to be taken at the stage of the arguments. This connotation therefore fails.
There is then the question whether the unabsorbed loss of the assessment year 1947-48 is from the same business of which the income has been taxed for the assessment year 1948-49. But that involves a question of fact, a question never raised before the Income-tax Officer and consequently never considered by him. Even if I wanted to go into that question I could not possibly decide it here simply for want of material. The case would then have to go back or the order would have to beset aside leaving the income-tax authorities to take whatever course they though proper. But then the question is, is it a case for interference; and this bring in the last argument on behalf of the petitioner and that is that there was no mistake apparent from the record of the assessment of the petitioner for the assessment year 1948-49 that required rectification under section 35 (1) of the Act. The learned counsel for the respondents refers to sub-section (5) of that section, and that sub-section creates a legal fiction whereunder if on assessment of re-assessment of a firm or on any reduction or enhancement made in the income of a firm under the section of the Act stated in that sub-section, the share of a partner in the profit or loss of the firm has not been included in the assessment of the partner, or, if included, is not correct, the inclusion of the share in the assessment or the correction thereof, as the case may be, shall be deemed to be a rectification of a mistake apparent from the record within the meaning of section 35, and the provisions of sub-section (1) of that section shall apply to such case accordingly. Now, if this sub-section applies to the present case, on the reduction of the loss of Delhi talkies Bureau in the assessment year 1948-49, the share of the loss of the petitioner was reduced and consequently his assessment needed correction and so by the legal fiction as created by sub-section (5) of section 35 there was a mistake apparent from there cord which could be rectified by the Income-tax Officer. If this position is correct the last contention urged on behalf of the petitioner has no substance in it.
It was by the Indian Income-tax (Amended) Act, 1953 (XXV of 1953) that this sub-section was added to section 35 and that came into force from April 1, 1952. In other words, any mistake being a mistake apparent from the record, even with the aid of new sub-section (5) of section 35 from April 1, 1952, gives power to the Income-tax Officer of rectification in the assessment of a particular person. The learned counsel for the petitioner contends that even though sub-section (5) of section 35 operates from April 1, 1952, it is not retrospective so as to affect the vested rights of the petitioner already in existence before that date. It is said that the assessment for the year 1948-49 was pending on April 1, 1952, and was not completed unit March 1, 1953. It was, therefore, completed after the enforcement of sub-section (5) of section 35 of the Act. The position taken by the learned counsel for the petitioner is that the proceedings for the assessment in the case of assessment year 1948-49 having started in that assessment years, all the rights attached to those proceedings in the shape of rights of appeal and revision continued to attach to the proceedings until they were finally disposed of and that any introduction of a new provision, unless expressly or by necessary implication taking away such rights of the petitioner, could not possibly so operate as to deprive the petitioner of those rights. It is said that before enactment of sub-section (5) of section 35 of the Act rectification of the type as in this case was not within the scope of sub-section (1) section 35 of the Act because it was not a mistake apparent from the record of the assessment itself. It can only be said to be something arising out of the assessment proceedings of another person and in this case that happened to be the Delhi talkies Bureau. There was really no mistake in the assessment of the petitioner. On the assessment of the Delhi talkies Bureau his share of loss was settled, and on revision of the assessment of the Delhi Talkies Bureau, his share of loss was reduced. There was no mistake in so far as the record of his assessment was concerned. The correction was necessitated not by mistake but by a conscious and positive act of the income-tax authorities in relation to the assessment of some other assessee, even though the petitioner was a partner of that assessee. This appear to me to be the correct position and a similar view has been expressed by the learned Judges in Kanumarlapudi Lakshminarayana Chetty v. First Additional Income-tax Officer, Nellore. It is true that sub-section (1) of section 35 of the Act, without the help of the new sub-section (5), would not have applied to the case of the petitioner, but then, as pointed out, the assessment order with regard to the assessment year 1948-49 so far as the petitioner is concerned, was made on March 1, 1953. The assessment of the Delhi Talkies Bureau for the assessment year 1948-49 was revised after that date. It was after that that the Income-tax Officer was looking at the record of the assessment of the petitioner and it was then that the had to determine whether there was any mistake apparently from the record on that date. The law said that there was such a mistake on that date having regard to sub-section (5) of section 35 of the Act. If the contention on behalf of the petitioner is accepted, it would mean this, that after April 1, 1952, when looking at the record of a particular assessee, the Income-tax Officer will, on exactly the same facts and circumstances, in some cases, see the mistake apparent from the record and in other cases he will not do so. The Legislature did not intended such an inconsistent result. The operation of the legal fiction in section 35 (5) of the Act operates from April 1, 1952, and from that date whenever the Income-tax Officer looks at the record of assessment of an assessee and finds mistake apparent from the record according to sub-section (5) of section 35, then he has power under sub-section (1) of that section to rectify that mistake. There is no vested right in the petitioner not to have a mistake corrected in his assessment which according to the law is a mistake on the date on which the correction is made and can be made under the law. So that sub-section (5) of section 35 applies to the present case because when the Income-tax Officer was looking at the record of the assessment of the petitioner some time after March 1, 1953, he found a mistake apparent from that record according to the then law applicable. This contention on behalf of the petitioner thus also fails.
In consequence the petition is dismissed, but I would leave the parties to their own costs.