- (1.) This is an appeal by the Income-tax Officer Companies, Circle I(1), Bombay and the Union of India and it raises a short question about the construction of S. 35 of the Income-tax Act read with S. 1, sub-s. (2) and S. 13 of the Indian Income-tax (Amendment) Act, 1953 (XXV of 1953). It arises in this way. The Income- Tax Officer, by his assessment order made on October 9, 1952, for the assessment year 1952-53, assessed the respondent, the Bombay Dyeing and Manufacturing Co. Ltd., under the Act. In the said assessment order the respondent was given credit for Rs. 50,603-15-0 as representing interest at 2 per cent on tax paid in advance under S. 18A of the Act. This credit was given to the respondent in pursuance of the provisions contained in S. 18-A, sub-s. (5) of the Act as it then stood. On May 24, 1953, the Amendment Act came into force. Section 1, sub-s. (2) of the Amendment Act provides that "subject to any special provision made in this behalf in the Amendment Act, it shall be deemed to have come into force on the first day of April, 1952". By S. 13 of the Amendment Act, a proviso was added to S. 18A(5) of the Act. The effect of the amendment made by the insertion of the said proviso to S. 18A(5) was that the assessee was entitled to get interest at 2 per cent not on the whole of the advance amount of tax paid by him as before but only on the difference between the payment made and the amount at which the assessee was assessed to tax under the regular assessment under S. 23 of the Act. After the Amendment Act was passed, the first appellant exercised his power under S. 35 of the Act and purported to rectify the mistake apparent from the record in regard to the credit for Rs. 50,603-15-0 allowed by him to the assessee. The first appellant held that the assessee was really entitled to a credit of only Rs. 21.157-6-0 by way of interest on tax paid in advance as a result of the retrospective operation of the amendment made in S. 18-A (5) by the Amendment Act. In accordance with this order a notice of demand under S. 29 of the Act was issued against the assessee for the sum of Rs. 29,446-9-0 on the ground that the assessee had been given credit for this excess amount through mistake. Aggrieved by this notice of demand, the respondent filed a petition in the High Court of Bombay on January 4, 1954, under Art. 226 of the Constitution praying for a writ against the appellants inter alia prohibiting them from enforcing the said rectified order and the said notice of demand. It appears that this petition was admitted by Tendolkar, J., on January 6, 1954, and a rule issued on it. Thereafter the said petition was referred to a Division Bench by the Hon'ble the Chief Justice for final disposal. Accordingly on March 5, 1954, the petition was heard by Chagla C. J. and Tendolkar J. and a writ was issued against the appellants. The High Court held that S. 35 of the Act had no application to the facts of the case because the mistake apparent from the record contemplated by the said Section is not a mistake which is the result of the amendment of the law even though the amending law may be retrospective in operation. In other words, in the opinion of the High Court, the mistake mentioned by S. 35 had to be apparent on the face of the order and it can only be judged in the light of the law as it stood on the day when the order was passed. The appellants then applied for and obtained a certificate from the High Court on October 8, 1954; on their behalf it is urged that the High Court of Bombay has erred in law in taking the view that the appellant No. 1 was not entitled to rectify the mistake in question under S. 35 of the Act. Thus the short question which arises before us in the present appeal is whether an order which was proper and valid when it was made can be said to the disclose a mistake apparent from the record if the said order would be erroneous in view of a subsequent amendment made by the Amendment Act when the Amendment Act is intended to operate retrospectively
(2.) It is unnecessary to refer to the provisions of S. 18-A(5) as well as the provision of the proviso which was subsequently added by S. 13 of the Amendment Act. It is common ground that, in the absence of the subsequently inserted proviso, the assessee would be entitled to obtain a credit for Rs. 50,603-15-0. It is also common ground that, if the subsequently inserted proviso covered the assessee's case, he would be entitled to a credit only of Rs. 21,156-9-0. It is thus obvious that the order giving the relevant credit to the assessee was valid when it was made and that it would be erroneous under the subsequent amendment. Under these circumstances, was the first appellant justified in exercising his power of rectification under S. 35 of the Act
(3.) In deciding this question it would be necessary to determine the true legal effect of the retrospective operation of the Amendment Act. Section 1, sub-s. (2) of the Amendment Act expressly provides that subject to the special provisions made in the said Act it shall be deemed to have come into force on the first day of April, 1952. The result of this provision is that the amendment made in the Act by S. 13 of the Amendment Act must, by legal fiction, be deemed to have been included in the principal Act as from the first of April, 1952, and this inevitably means that, at the time when the Income-Tax Officer passed his original order on October 9, 1952, allowing to the respondent credit for Rs. 50,603-15-0, the proviso added by S. 13 of the Amendment Act must be deemed to have been inserted in the Act. As observed by Lord Asquith of Bishopstone in East End Dwellings Co. Ltd. v. Finsbury Borough Council 1952 AC 109 at p. 132 (A). "if you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed must inevitably have flowed from or accompanied It. One of those in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs." Thus, there can be no doubt that the effect of the retrospective operation of the Amendment Act is that the proviso inserted by the said Section in S. 18-A (5) of the Act would, for all legal purposes, have to be deemed to have been included in the Act as from April 1, 1952.;