Law:

Section:

section 35 of the indian income-tax act, 1922 [corresponding to section 154 of the income- tax act, 1961]-rectification of mistake-was it necessary to use the word 'satisfaction' in notice issued for rectification of mistake-held that it was not necessary but recitals made therein should lead to conclusion that satisfied himself that assessment suffered from error apparent from record and that he was not acting under instructions or directions issued by higher authorities-whether ito could rectify error committed by aac-held, no-whether ito could pass rectification order after 1961 act under section 35(9) of the 1922 act in respect of return filed prior to 1961 act though there was no corresponding provision in the 1961 act-held, yes Facts For the assessment years 1957-58 to 1960-61, the ITO did not gross-up the dividends received by the petitioners on the ground that the company in which the petitioners were shareholders, had not paid income-tax within three years after the financial year in which the dividends were declared. In an appeal filed by the first two petitioners, the AAC held that the dividends paid by the company to them ought to have been grossed up under section 16(2) of the 1922 Act and that credit for the tax ought to have been allowed under section 18(5) of the 1922 Act. The ITO accordingly gave effect to the order of the AAC and issued correction slips. In the case of other petitioners also, the ITO allowed the dividend income to be grossed up and gave credit for tax. Sometime later, the ITO issued notices to the petitioners under section 35 of the 1922 Act that the assessment orders of the petitioners required modification as they suffered from a mistake apparent from the record inasmuch as the company had not paid tax within prescribed time and the credit allowed under section 18(5) of the 1922 Act was to be withdrawn under section 35(9) of that Act. In response to the said notices the petitioners, except the first two, gave almost identical replies stating that since the company had in fact made payments in lieu of income-tax, surtax, surcharge, etc., and that there was no question of invoking the provisions of section 35(9). The first two…

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