Law:

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Section 280ZB of the income-tax Act, 1961 read with rule 8 of the tax credit certificates (corporation tax) scheme, 1966 Tax credit certificates Mistake apparent from record Whether ITO justified in invoking provision where classification of article manufactured for purposes of benefit under section 280ZB itself was a debatable question -Held, no Facts The assessee-company derives income from manufacture and sale of yarn cellulose film and other commercial products. For the assessment years 1967-68 and 1968-69, it applied for issue of a tax credit certificate under section 280ZB. The ITO granted the certificate by accepting the position that the income was made up from the manufacture and sale of articles listed in entry 24(4) of the First Schedule to the Industries (Development and Regulation) Act, 1951 (IDR Act). After a lapse of three years, the ITO sought to reopen the assessment under section 148 but this was dropped on the assessee's objection. Immediately thereafter, the ITO initiated action to rectify the assessment under rule 8(4) of the Tax Credit Certificates (Corporation Tax) Scheme, 1966 [reproduced in "Taxmann's Direct Tax Circulars" Vol. 1,1977 edn., pp. 768-73] to amend the mistake apparent from the records on the ground that the assessee was engaged in manufacture of articles not covered by entry 24 of the First Schedule to the IDR Act. The assessee's appeal to the Commissioner against this action was dismissed. In the writ to the High Court, the ITO's order was quashed on the ground that the articles manufactured by the assessee were duly covered by the IDR Act and that there was no mistake apparent from the records to warrant rectification. In the writ appeals filed: Held When the question whether a particular item is covered by the provisions sought to be applied itself is debatable, it cannot be said that there was any mistake apparent from the record in the original assessment. The nature of entry is different and, having regard to the terms and the contents of entry 24(4) of the First Schedule to the IDR Act, it is a still more vexed and difficult question as to whether cellophane would fall within the entry or outside it. As such, the…

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