Law:

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Section 154, read with section 81 (corresponding to section 80P), of the Income-tax Act, 1961 - Rectification of mistake - Apparent from record - Assessment year 1963-64 - Whether overlooking of mandatory provision, would amount to commission of mistake apparent on face of record - Held, yes - Whether since section 81, provided for exemption of income-tax and not exemption of additional surcharge leviable on residual income, grant of rebate to assessee-co-operative society in respect of additional surcharge was mistake apparent from record, which was rightly rectified by Income-tax Officer in proceedings under section 154 - Held, yes FACTS The assessee was a co-operative society engaged in the business of banking. Since under section 81(i)( a), a co-operative society engaged in the business of banking, was not liable to pay income-tax on its business income, the Income-tax Officer granted rebate on the business income. Amongst other rebates, one which had been granted by the Income-tax Officer was in respect off additional surcharge. Soon thereafter, the internal audit party pointed out to the Income-tax Officer that, as additional surcharge was not income within the meaning of section 81(i)(a ), the rebate allowed in respect of additional surcharge was not admissible. Thereupon, the Income-tax Officer issued a notice under section 154 to the assessee and withdrew the rebate in respect of additional surcharge. The AAC allowed the assessee's appeal, holding that, as the mistake pointed out by the Income-tax Officer did not fall within the ambit of section 154, the Income-tax Officer had no jurisdiction or power to rectify the same. The Tribunal agreed with the view of the AAC. On reference: HELD In Madurai District Central Co-operative Bank Ltd. v. Third ITO [1975] 101 ITR 24 (SC), the additional surcharge was held to be different from income-tax and that a society, would be made liable to pay additional surcharge although its income was liable to be exempt under section 81(i)(a ). This being so, no society, could be granted rebate in respect of additional surcharge paid by it on the residual income. The Income-tax Officer, therefore, committed an error in…

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