Law:

Section:

Section 154 of the Income-tax Act, 1961-Rectification of mistake-In a case where a question has been settled by high court, such question ceases to be debatable in that state for purposes of rectification even though a contrary decision on the same question is given by another high court-Held, yes Facts The assessee was a registered firm comprising three partners. During the previous year ending 31-3-1969, two of the partners retired and the remaining partner along with one another formed the partnership on 20-8-1968. For the assessment year 1969-70, the assessee filed two returns claiming renewal of registration for the first period and fresh registration for the latter period. The ITO allowed the registrations as desired, but made only one assessment for the entire year in the status of a registered firm. There was no appeal against the ITO's order, but subsequently, the assessee made an application under section 154 requesting the ITO to pass an ex parte assessment orders for the two periods, viz., the period before the retirement of two partners and the period after their retirement. The ITO rejected the application, but the AAC directed the ITO to frame separate assessments for the said two periods. On second appeal, the revenue conceded before the Tribunal that in view of the Full Bench decision of this Court in Dahi Laxmi Dal Factory v. ITO [1976] 103 ITR 517which was binding in the State of UP, it may not be possible to argue that one assessment for the entire period was legally justified in the instant case. The revenue, however, contended that in view of the fact that the question was highly debatable in nature and the Punjab and Haryana High Court had taken a different view on this matter, recourse to section 154 could not be taken. This contention was accepted by the Tribunal and it took the view (i) that even though the decisions of the Allahabad High Court were binding in UP, it was not possible to hold that on order passed by an authority in the State of UP contrary to the ratio of the decision of the Allahabad High Court suffered from a glaring or obvious mistake of law; (ii) since this question relating to two assessments was highly…

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