1. SAEEDUZZAMAN SIDDIQUI, J.-This order will govern the disposal of 1. T. C. Nos. 170 to 220 of 1972. In all these I. T. Cs. The following two questions have been referred to us for decision under section 66(l) of the Income-tax Act :- "(1) Whether in the facts and circumstances of the case the Tribunal was right in upholding the refusal by the Income-tax Officer to rectify the assessment for assessment year 1967-68 under section 35 of the Income-tax Act, 1922 ?
(2) Whether in the facts and circumstances of the case the divides, income derived by the applicant from tax exempt income of a Company could lawfully be subjected to income-tax ?"
2. Before considering the above questions, we would here briefly state the admitted facts which are necessary for the decision of these references. The references relate to the assessment years 1966- 67 and 1967-68. During these assessment years number of assessee who are now applicants in these references filed their returns of income under the income-tax Act, showing therein also the dividends received lay them from Companies which enjoyed tax holiday under section 15-BB of the Income-tax Act. As in their returns these assessee had not claimed any exemption in respect of dividend income received by them from Companies which enjoyed tax holiday under sec--petition 15-BB of the Act the income-tax officers concerned treated these dividends as part of their income liable to tax and assessed it accordingly. The case of the applicants is that they were Dot aware that the dividend income received by them from the Companies which enjoyed tax holiday under section 15-BB of the Act was also exempted in their hands from payment of Income-tax at the time they submitted their returns. They came to know of this legal position when they became aware of the decision of the full Board of Income-- tax Appellate Tribunal in I. T. A. No. 670 of 1968-69 dated 20-10-1969 sitting at Dacca (the erstwhile territory of East Pakistan) where it was held that the dividend income received by an assessee from Companies which enjoyed tax holiday under section 15-BB of the Income-tax Act, was exempted from income-tax in the hands of assessee as well. The applicants accordingly in the light of the above decision of the Appellate Tribunal moved the con--cerned I. T. Os. For correction of their respective assessments under section 35 of Income-tax Act and prayed for exclusion of dividend income received ;y them from the Companies which enjoyed tax holiday under section 15-BB from the taxable income shown in their respective income-tax returns. The Income-tax Officer rejected the applications of these assessee on the grounds that nether in their returns of income-tax these assessee claimed such exemption nor any such claim was raised by them in response to the notice served on them under section 23(2) of.
2. Income-tax Act. The I. T. O. Also took the view that the point whejber1the:: dividend income received by an assessee from the Company which enjoyed tax holiday under section 15-BB of the Act was taxable or not in the hand of such assessee seas a debatable point of law and therefore such error in the assessm ent order could not' be corrected under section 35 of the Income-tax Act. Two reported decisions from Indian jurisdiction Asoka Textile Lid. v. I. T. O. ((1956) 291 T R 672) and Parameswa ran Pillai v. I. T. O. ((1955) 281 T R 885), were relied by the I. T. O. In support of the above conclusion. On appeal by the applicants the Appellate Assistant Commissioner of Income-tax, agreed with the view of I. T. O. And rejected their appeals. The Income-tax Appellate Tribunal on further appeals by the applicants also took the view that no case for correction or rectification under section 35 of the Act was made out by the assessee and accordingly upheld the orders of I.
3. T. O. In all these cases. The applicants assessee in these circumstances filed the above reference under section 66(1) of the Act and referred the two questions mentioned above for our decision. We have heard Mr. A.I Athar and Mr. Haider A.I Pirzada the learned counsel for the applicants and the Department respectively. .
3. The point whether the dividend income received by an assessee from a Company which enjoyed tax holiday under section 15-BB of the Act, is exem--pted from income-tax at the hands of such assessee came up for consideration in the cases of Commissioner of Income-tax Lahore Zone v.
4. Mst. Gulzarina, Multan ((1955) 281 T R 885) and Commissioner of Income-tax (Est.) Karachi v.
5. Ehrahim D. Ahmed ((1956) 291 T R 672) and in both these cases a Bench of Lahore High Court and a Bench of this Court respectively took the view that the dividend income received by an assessee from a Company which enjoyed tax holiday under section 15-BB of the Act was not liable to income-tax even in the hands of such assessee. These decisions have since been followed in a number of other cases subsequently decided by this Court including the case of Commissioner of Income-tax v. Shafi& Co. I T R No. 322 of 1972, decided by this Bench on 9-3-1983. Mr. Hyder A.I Pirzada, the learned counsel for the Department informed us that the decision reported in 1982 PTD 130 is under appeal before the Supreme Court and leave has been granted. The learned counsel however admitted the A no stay is granted by the Supreme Court in the matter. In these circumstances we are of the view that until such time these decisions are reversed by the Supreme Court the law declared on the subject is that, the dividend income received by an assessee from a Company whose income has been exempted undo section 15-BB of the Income-tax Act, shall be exempted even in the hands of such assessee from payment of income-tax thereon. In the light of the above stated legal position we will now examine here whether in the above-stated circumstances and facts the Tribunal was justified in holding that the assessee failed to snake out a case for correction/rectification under section 35 of the Income-tax Act. For consideration of the above point we will here first refer to section (1) of section 35 of Income-tax Act, which is as follows :- 5.-(1) The Commissioner or Assistant Commissioner may, at any time within four years from the date of any order passed by him in appeal or, in revision, as the case may be, and the income-tax Officer may, at any time within four years from the date of any assessment order or refund order passed by him, on his own motion rectify any mistake apparent from the record of the appeal, revision assessm ent or refund, as the case may be, and shall within the like period rectify any such mistake which has been brought to his notice by an assessee, or, in the case of an order in appeal, by any party to such appeal."
4. It emerges from the reading of the above provision of law that an Income-tax Officer may either at his own motion or when brought to his notice by an assessee, within a period of four years from the date of an order, rectify a mistake in an assessment or a refund order provided such mistake is apparent from the record of assessment or the refund order as the case mad be. It is an admitted position in all the above cases that the applications under section 35 of the Act filed by the applicants were within time. The question, therefore, which remained to be decided it these cases is whether the mistake pointed out by the assessee was apparent from the record of assessment (no question of refund is involved in these cases). Mr. A.I Athar, the learned counsel for the applicants contended that the taxability of an income arising from a particular source in the hands of an assessee is to be judged with reference to the provision of the Income-tax Act. Therefore, when the courts declared that a dividend income received by an assessee from a Company whose income was exempted under section 15-BB of the Act, will be exempted from payment of Income-tax they merely declared the law as it stood originally and therefore if the I. T. O. Recovered income-tax on such exempted income from an assessee contrary to the law, it will amount to an error apparent from the record of assessment which could be corrected by the I. T. O. Under section 35 of the Act. The learned counsel pointed out that judgment of the High Court of Travancore- Cochin in the case of Asoka Textile Ltd. v. Income-tax Officer referred by the I.T.O. In his order dated 28-4-1970 was overruled by the Supreme Court of India in the, case of Income-tax Officer v. Asoka Textile Ltd. ((1961)41 I T R 732) while the case of Rammesh--war v. I. T. O. Was totally irrelevant to the issues raised before the Income---tax Officer. To support his contention that in a case as is before the Income---tax Officer could rectify the error in the assessment under section 35 of the Income- tax Act, the learned counsel for the applicants referred to the cases of Income-tax Officer v. Ashok Textile Ltd., Maharana Mills (Private Ltd.) v. I. T. O. (36 I T 350) and N. C. R. Raja Gopala v. IV Income- tax Officer ((1968) 67 I T R 210). The learned counsel for the Department on the other band contended that the provisions of section 35 of the Income-tax Act are analogous to the provisions of Order XLVII, rule 1, C. P. C. And, therefore, unless the error pointed out by the assessee is such which could be corrected under Order XLVII, rule 1, C. P. C. By a Civil Court it could not be corrected under section 35 of the Income-tax Act by the I. T. O. To support his contention the learned counsel relied on the following passage from the case of Nabi Sajjad & Co. v. Commissioner of Income-tax (PLD 1977 SC 437)
6. "Now, even if that be so, the concept of an order which suffers from an error apparent on the face of the record is not unknown to our jurisprudence. A decree or order of a Court can he reviewed under rule 1 of Order XLVII of the Civil Procedure Code if it suffers from a ---mistake or error apparent on the face of the record" and as observed by Mulla in his commentary on the Civil Procedure Code (12th Edition, p. 1259) a review will lie under this order "whenever the Court considers that it is necessary to correct an evident error or omission .... Thus, a review was granted where an error on a point of law was apparent on the face of the; judgment e. g. Failure to apply the law of limitation to the facts found by the Court, or failure to consider a particular section of an Act but the point of law must be indisputable". Similarly an award, which is after all a type of order, could be set aside under clause 14 (c), Schedule 2 of the Civil Procedure Cod, as it then stood, on the ground "that an object to the legality of award is apparent on the 'face of it". The Privy Council had occasion to construe these words in Champsey Bhara & Co. v Jeevraj Balioo Spinning & Weaving Co. Ltd and Lord Dunedin observed: "an error in law on tae face of the award means that you can find in the award some legal proposition which is the basis of the award and which you can then say is erroneous". Now the relevant provisions of section 30 of the said .Pct are similar to the clause construed by Lord Dunedin, except that the mistake which can be rectified under this section is not limited to a mistake of law and may be gathered from the impugned order as well as from the record, therefore the nature of the mistake in the order of 17-2- 1959 has to be ascertained from that order read with the record, and the record would necessarily include the returns submitted by the petitioner for the relevant assessment years. As the petitioner seeks special leave, it should have tiled a copy of these returns. Be that as it may, the question is of the declaration made by it about the source of the sum of Rs. 42,003 deposited by it as tax. Mr. Butt admitted that this amount had been collected by the petitioner from its customers and it was as shown by the petitioner in its returns, therefore, the order of 17-2-1959 has to be read with ibis admission. And, if the order is read with this admission, it becomes very clear that the legal proposition which is the basis of the order is the proposition that the petitioner was entitled to the tax paid by its customers because those customers were not liable for the tax. As this is an obviously erroneous proposition, the mistake in the order is a' mistake within the meaning of section 30 of the said Act, therefore, the Sales Tax Officer was entitled to reopen the case within the statutory period prescribed in section 28. As he reopened the case within the statutory period, the Appellate Assistant Commissioner and the Appellate Tribunal erred in setting aside his order which has been rightly restored by the High Court."
5. The learned counsel for the Department further contended that merely because the High Court or the Supreme Court has subsequently taken a different view of law in some other cases is no ground to reopen cases under section 35 of the Act which were transactions past and closed and were disposed of finally in accordance with the view of law prevailing at that time. In support of his contention the learned counsel referred to the case of Income---Tax Officer, Karachi v. Cement Agencies Ltd. (PLD 1969 SC 322). We have carefully con--sidered the contentions advanced by the learned counsel for the parties and are of the view that the power conferred on I. T. O. Under section 35 of the Income-tax Act is not analogous to the power conferred on the Civil Court by Order XLVII, rule 1, C. P. C. In our view the power conferred on the I. T. O. Under section 35 of the Income-tax Act to rectify an error or mistake in the assessment or refund order is much wider in scope than the power available to a civil Court under Order XLVII, rule , C. P. C. While reviewing a judgment or order. Therefore the Income-tax Officer while rectifying mistake or error in the assessm ent or refund order under section 35 of the Income-tax Act need not confine himself to the consideration of only those errors which are apparent on the face of the order but could also refer to the record of the proceedings of the assessment or the refund order as the case may he to discover the error which is noticed by him or which is pointed out to him by the assessee. No doubt in the case of Sajjad Nabi referred by the learned counsel for the Department the Supreme Court while examining the scope of power of a Sales Tax Officer under section 30 of the Sales Tax Act (which is similar to section 35 of the Income-tax Act) did refer to the provisions of Order XLVII, rule 1, C. P. C. While comparing the two provi--sions of law but after reading the same we are unable to agree with the learned counsel for the Department that the Supreme Court held that the provisions of the section 30 of the Sales Ta:, Act is similar in scope to Order XLVII, rule 1, C. P. C. In the very passage reproduced above from the said case which is relied by the learned counsel for the Department the following observations of the Supreme Court may be mentioned here once again to show that the contention of the learned counsel for the Department is not sustainable :- "Thus, a review was granted where an error on a point of law was apparent on the face of the judgment, e. g. Failure to apply the law of limitation to the facts found by the Court, or failure to consider a particular section of an Act but the point of law must be indisputable."
7. Similarly an award, which is after all a type of order, could be set aside under clause 14 (c), Schedule 1 of the Civil Procedure Code, as it then stood, on the ground "that an object to the legality of award is apparent oil the face of it". The Privy Council had occasion to construe these words in Champsey Bhara & Co. v. Jeevraj Balloo Spinning & Weaving Ca. Ltd. And Lord Dunedin observed, "an error in law or the face of the award means that you can find in the award... Some legal proposition which is the basis of the award and which you can then say is erroneous". Now the relevant provisions of section 30 of the said Act are similar to the clause construed by Lord Dunedin, except that the mistake which can be rectified under this section is not limited to a mistake of law and may be gathered from the impugned order as well as from the record, therefore, the nature of the mistake in die order of 17-2-1959 has to be ascertained from that order read with the record, and the record would necessarily; include the returns submitted by the petitioner for the relevant assessm ent years."
8. The scope of section 35 of the Income-tax Act came up for consideration directly in the uses relied by the learned counsel for applicant and which are earlier referred by us in this judgment. We would therefore, examine these cases here in detail. In the case reported as Income-tax Officer v.
9. Asoka Textile Mills Ltd. Which arose from the judgment of the High Court of Travancore-Cochin reported as Asoka Textile Mills v. Income-tax Officer the Supreme Court of India reversed the judgment of High Court of Tra--vancore-Cochin holding that the power exercisable by the I.-T. O.
10. Under section 35 of the Income-tax Act is not analogous to the power of a civil Court which it exercise: under Order XLVII, rule 1, C. P. C. The following observations of the Indian Supreme Court in the above case may be repro--duced here with advantage :- "The learned Judges of the High Court seem to have fallen into an error in equating the language and scope of section 35 of the Act with that of Order XLVII, rule 1, Civil Procedure Code. The language of the two is different because according to section 35 of the Act which provides for rectification of mistakes the power is given to the various income-tax authorities within four years from the date of any assessm ent passed by them to rectify any mistake "apparent from the record" and in the Civil Procedure Code the words are "an error apparent on the face of the record" and the two provisions do not mean the same thing. This Court, in Maharona Mills (Private) Ltd. v.
11. Income---tax Officer, Porbandar, has laid down the scope of section 35 at page 356 in the following words: "The power under section 35 is no doubt limited to rectification of mistakes which are apparent from the record. A mistake contemplated by this section is not one which is to be discovered as a result of an argument but it is open to the Income-tax Officer to examine the record including the evidence and if he discover any mistake he is entitled to rectify the error provided that if the result is enhancement of assessm ent or reducing the refund then, notice has to be given to the assessee and be should be allowed a reasonable opportunity of being heard."
12. "At the time when the Income-tax Officer applied his mind to the question of rectifying the alleged mistake, there can be no doubt that he had to read the principal Act as containing the inserted provision as from April 1, 1952."
13. Thus this court has held that discovery of an error on the basis of assessment due to an initial mistake in determining the written down value is a mistake from the record and so is a misapplication of the law even though the law came into, Operation retrospectively. The Income- tax Officer, can, under section 35 of the Act, examine the record and if he discovers that he has made a mistake, he can rectify the error and the error which can be corrected may be an error of fact or of law. The restrictive operation of the power of review under Order XLVII, rule 1, Civil Procedure Code, is not applicable in the case of section 35 of the Act and, in our opinion, it cannot be said that the order of the Income-tax Officer in regard to the assessment in dispute was without jurisdiction.
14. Similarly in the case of Maharana Mills v. I. T. U. The Supreme Court of India while dealing with the scope of section 35 of the Income-tax Act relying on previous decision of that Court in the case of Venkatachalam v. Bombay Dyeing Manufacturing Co. Ltd. ((1958) 34 I T R 143, 149) made the following observations :- "The power under section 35 is no doubt limited to rectification of mistakes which are apparent from the record. A mistake contemplated by this section is not one which is to be discovered as a result of an argument but it is open to the Income-tax Officer to examine the record including the evidence and if he discovers any mistake he is entitled to rectify the error provided that if the result is enhancement of assessm ent or reducing the refund then notice has to be given to the assesses and he should be allowed a reasonable opportunity of being heard.
15. The scope and effect of the expression "mistake apparent from the record" and the extent of the powers of the Income-tax Officer under section 35 of the Act were discussed by this Court in Venkatachalam v. Bombay Dyeing and Manufacturing Co. Ltd. Where the facts were these: A sum of Rs. 50,063 being interest on tax paid in advance was given credit for under section 18-A (5) of the Act. Subsequently, there was an amendment of the Act by which the interest became allowable only on the difference between the amount of tax paid and what was actually determined. As a consequence of this the Income---tax Officer purporting to act under section 35 of the Act rectified the mistake and reduced the amount of interest credited to Rs. 21,157 and issued a demand for the difference. The assessee obtained a writ of prohibition against the Income-tax Officer on -the ground that the mistake contemplated under that provision had to be apparent on the face of the order and it was not contemplated to cover a mistake result--ing from an amendment of the law even though it was retrospective in its effect. The Revenue appealed to this Court. Thus the question for decision in that case was whether an order proper and valid when made could be said to disclose a mistake apparent from the record merely because it became erroneous as a result of a subsequent amend--ment of the law which was retrospective in its operation, In delivering the judgment of the Court Gajandragadkar, J., said: "At the time when the Income-tax Officer applied his mind to the question of rectifying the alleged mistake, there can be no doubt that he had to read the principal as containing the inserted proviso as from April 1, 1952. If that be the true position then the order which he made giving credit to the respondent for Rs. 50,603,150 is plainly and obviously inconsistent with a specific and clear provision of the statute and that must inevitably be treated as a mistake of law apparent from the record. If a mistake of fact apparent from the record of the assessment order can be rectified under section 35 we see no reason why a mistake of law which is glaring and obvious cannot be similarly rectified."
16. We are in respectful agreement with the view taken by the Indian Supreme Court on the scope of power of Income-tax Officer under section 35 of the Indian Income-tax Act which is identical to section 35 of our Act and accordingly hold that while rectifying a mistake or an error in the assessm ent or an order of refund the Income-tax Officer need not- confine p itself only to the errors which are pointed out in the order but such errors as are pointed out from the proceeding and record of assessm ent or refund order as the case may be, may also be taken into consideration for correcting or rectifying the assessment or tae refund order. We are therefore of the view brat an error in the assessme nt order resulting from failure to apply the indisputable state of law could be corrected by the I.-T. U. Under section 35 of the Act provided the mistake or error is apparent from the record of assessm ent proceedings. It therefore, follows that if the I.-T. O. Failed to give effect to a provision of law .As interpreted by the High Court or the Supreme Court at the time of making of assessm ent or refund order and such mistake is discoverable from the record and proceeding of assessm ent or refund order then such errors could also be corrected by the I. T. O.
17. Under section 35 of the Act. This, however, does mot conclude the cases before us as the correction sought by the applicants in these cases in their assessment order was not ascertainable from the proceedings and record of the cases. It is not disputed before us by the learned counsel for the applicants that the assessee in their return for the period under consideration had not separate shown tire dividend income received by them from the Companies which enjoyed exemption under section 15-BB of the Act. The assessee had also not claimed any exemption in their respective returns for these dividends. The following observations in para. 5 of the order of Tribunal may b reproduced here in this regard :-- "We have considered the factual as well as the legal position. It was admitted in tire original returns filed that the nature of the dividends or the nature of the companies from which these were received wet, not disclosed or specified. It would thus appear from these facts the tire law was correctly applied by the Income-tax Officer."
18. From the above-quoted observations of the Appellate Tribunal it is quite -evident that it was not possible to find out from the record and proceed--ings of assessment order the amount which were claimed by the applicant as the dividend income received by them from Companies whose income was exempted front, payment of tax under section 15-138 of the Act an 6ierefore in order to make the desired correction iii the assessment order it was necessary for the Income-tax Officer to hold further enquiry into the case to find out the same. This in our view could not be done by the I.- T. O. As correction of such mistake would not fall within the scope of section 3 of the Act. Therefore in our view the Tribunal rightly refused to rectify the error in these circumstances under section 35 of the Income-tax Act. In this view of the matter, it cannot be said that the Tribunal acted illegally o against law while upholding the order of the Income-tax Officer declining to rectify the alleged error under section 35 of tire income-tax Act. We are also conscious of the fact that at the time the applicants had applied for correction of the alleged error in the assessment orders under section 35 of the Act the state of law with regard to exemption of dividend income received by an assessee from Companies enjoying tax holiday under section I5-BB of the Act was already challenged by the Department before the High Court and therefore it could not be said at that time that the state of law on this point was indisputable. In view of the above discussion our answers to the above questions are in the affirmative in the fact, and circumstances of the case but we will make no order as to costs.