Law:

Section:

Section 155(5) , read with section 33 of the Income-tax Act, 1961 - Rectification of mistakes - Other amendments - Assessment year 1959-60 - During relevant assessment year, assessment of assessee-company was completed under section 23(3) of 1922 Act wherein certain amount was allowed as development rebate regarding a bus - Subsequently, assessee-company sold bus before expiry of statutory period of eight years - ITO acting under section 155 of 1961 Act, withdrew development rebate - AAC as well as Tribunal, however, set aside order of rectification passed by ITO - Whether rectification in regard to order by which development rebate has been allowed wholly or partly in respect of machinery installed after 31-12-1957, can be made under section 155(5) of 1961 Act - Held, yes - Whether, therefore, order passed by ITO under section 155 withdrawing development rebate was valid - Held, yes FACTS In the relevant assessment year the assessment of the assessee-company was completed under section 23(3) of the Indian Income-tax Act, 1922 certain amount was allowed as development rebate to the assessee under clause (vi) of sub-section (2) of section 10 of 1922 Act, regarding a bus. Subsequently, the assessee sold the bus before the expiry of the statutory period of eight years. The ITO issued a notice of rectification and withdrew the development rebate under section 155 of the 1961 Act. The AAC reversed the order of the ITO holding that, since the original assessment was made under the 1922 Act, the rectification could also be made under the same Act and as an order of rectification had been made under the 1961 Act, therefore, it was bad. The Tribunal confirmed the order of the AAC. HELD The rectification which had been made by the ITO under sub-section (5) of section 155 of the 1961 Act was correct and the ITO had taken recourse to a correct provision of law. The rectifications in regard to the order by which development rebate had been allowed wholly or partly in respect of machinery installed after 31-12-1957, can be made under section 155(5) of the 1961 Act. If the authorities under the Act have the power to pass an order, it will not be bad merely because a wrong…

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