Law:

Section:

Section 154 of the Income-tax Act, 1961, read with section 2(7)(c)/( f) of the Finance (No. 2) Act, 1967 - Rectification of mistakes - Apparent from record - Assessee who was a minor, was admitted to benefits of a partnership firm - Besides share income from said firm, assessee also derived income from interest, dividends and house property - Whether income earned by assessee was unearned income and, hence, non-charging of additional surcharge on unearned income of assessee in original assessment was a mistake apparent on face of record - Held, on facts, yes Facts The assessee, who was a minor, was admitted to the benefits of a partnership firm. Besides the share income from the said firm, the assessee derived income from interest, dividends and house property. By an order under section 154, the ITO levied additional surcharge on unearned income of the assessee. On appeal, the AAC confirmed the order of the ITO. On second appeal, the Tribunal set aside the order of the ITO levying surcharge, holding that the question whether surcharge was leviable or not was open to argument and, therefore, the ITO was not justified in invoking section 154. On reference : Held Without any strain or long drawn argument only on pure reading of definition of 'earned income' given in section 2(7)(g) of the Finance (No. 2) Act, 1967 it was obvious that the assessee, who was a minor, admitted to the benefits of the partnership was recipient of the income from the firm without being actively engaged in the conduct of the business of the firms and, therefore, the income from the firm received by the assessee was 'unearned income'. Similarly, the income from other sources, namely, interest, dividends and property, was also unearned income inasmuch as the assessee had derived the same without any personal exertion. Therefore, non-charging of additional surcharge in the original assessment was a mistake apparent on the record and the ITO was fully justified in passing the order for rectification directing the charging of additional surcharge on unearned income of the assessee. That apart, even on reading the definition of earned income given in section 2(7)(c) of the Finance (No. 2) Act,…

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