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I.T.A. No. 1696/KB of 1982-83, decided on 17th July, 1986, and 6th May, 1987.

---Ss. 18-A, 35, 29 & 30--Interpretation and application of Ss. 18-A, 35 & 29--Additional tax, nature of--Deemed to be a part and parcel of regular tax and summarily appealable-- Case of rectification of order--When arises--Powers and duties of Income-tax Officer--If an Income-tax Officer records an order regarding additional tax payable under S.18-A after lapse of considerable time and that too on the basis of Audit Inspector's report it could not be anything but rectification of the mistake and Income-tax Officer actually rectified his order under S. 35 and such order is appealable.

Perusal of sections 18-A(7) and (8) of the Income-tax Act, 1922, would show that the legislature has used the words "on making the regular assessment" in both of them. This expression would mean and imply either "at the time of making the regular assessment" or, going to the extreme "within reasonable time after making the assessment". If section 29 and section 18-A (7)(8) are read together the interpretation stands very much a fortified.

Section 29 of the 1922 Act shows that the demand notice is to include the assessed tax which means not only the additional tax under section 2(14) of the Income-tax Act but also penalty or interest. Thus if the Income-tax Officer does not proceed under section 18-A at the time of framing of the regular assessment, he cannot serve the demand notice on the assessee including additional tax, penalty or interest which he is bound to include in the notice of demand under this section. It is, therefore, clear that the law places a statutory obligation on the Income--tax Officer to add an additional tax in the manner laid down in other subsections of section 18-A to the regularly assessed tax.

If the I.T.O. failed to discharge this legal obligation it would be tantamount to an error apparent from record rectifiable under section 35 of the Act.

However one cannot close eyes to the pressure under which an income-tax Officer may sometimes work. May be that he needs sometime to find out as to whether an assessee has complied with the requirements of section 18-A of the repealed. Income-tax Act. As such the alternative interpretation could be given to the words "on making the regular assessments" which have been used in subsections (7) and (8) of the Income-tax Act. By expression "within reasonable time after making the regular assessment" means "within reasonable time and for reasonable cause but in any case before notice of demand is issued". What is reasonable in a particular case would depend on the facts and circumstances of each case.

An order under S. 18-A(8) is to be made "on regular' assessment". However, it does not mean that if an Income-tax Officer fails to levy additional tax or interest inadvertently, he would not have jurisdiction to rectify the mistake.

If an Income-tax Officer records an order regarding additional tax payable under S. 18-A after Audit Inspector's report, it could not be anything but rectification of the mistake. In the present case the income-tax Officer recorded the order for additional tax after lapse of considerable time keeping into consideration the original order of assessment recorded on 29th March, 1979, which gave credit to payments made under section 18-A. Thus, the order recorded for additional tax made on 9th August, 1980 cannot be held to be an order made within reasonable time of making the regular assessment. It is true that the revised assessment dated 29th June, 1980 has also taken note of the advance tax paid under section 18-A but even from the date of this order there is a gap of more than 40 days. On top of it, the recording of the additional assessment order was not intentionally procrastinated by the Income-tax Officer for future date because of rush of work or for some other reasonable ground. He recorded the order on Audit Inspector's report. Thus, he had committed a mistake, which he wanted to rectify. Under the facts and circumstances of case the inevitable conclusion, therefore, is that the order recorded by him on 9th August, 1980 was not an order under S. 18-A but an order read with section 35 of the Income-tax Act. The fact that the Income-tax Officer mentioned it to be an order under section 18-A(8) read with section 18(6) of the Income-tax Act, would not make it an order under those subsections if under the facts and circumstances of the case the provisions of those subsections did not apply.

Quoting of wrong provision of law does not vitiate the order of the Income-tax Officer provided he had jurisdiction and otherwise acted legally. Wrong description of section of the Act, if it is not causing any prejudice, would not make any difference. Under the facts and circumstances of the case the order recorded by the Income-tax Officer was an order under section 35 read with section 18-A of the Income-tax Act.

Here, the Income-tax Officer has actually rectified his order under section 35 of the Act and it is surely appealable.

If the Income-tax Officer records the order under section 18-A alongwith the assessment order and includes amount of additional tax in the notice of demand, the assessee undoubtedly has a right of appeal under section 30 of the Income-tax Act. However, if the Income-tax Officer frames the assessment but deliberately procrastinates his order or direction for his own convenience, the assessee would not lose his right of appeal. An Income-tax Officer is required by subsection (8) of section 18-A to add additional tax calculated in the manner laid down in subsection (6) to the tax as determined on the basis of regular assessment. Thus, it is obvious that additional tax could be added to the tax determined on the basis of regular assessment if both are made at one and the same time or, in any case, before the notice of demand is issued. The additional tax, therefore, is deemed to be part and parcel of the tax determined on the basis of regular assessment and if an appeal lies against tax mentioned in demand notice, there appears no reason why an appeal should not lie against an order recorded under section 18-A.

The Income-tax Officer is required to record an order under section 18-A either alongwith the regular assessment or within a reasonable time and for reasonable cause but, in any case, before notice of demand is issued. In such case the appeal would lie under section 30 of the Income-tax Act. However, if the Income-tax Officer records an order under section 18-A after lapse of some time and that too on discovery of mistake that would be an order under section 35 read with section 18-A of the Income-tax Act and again would be appealable.

(1970) 22 Tax 1 (Trib.); (1967) 16 Tax 11 (Trib.); 1967 PTD 225 (Trib.);. (1965) 12 Tax 32 (Trib.); 1965 PTD 146 (Trib.); (1960) 2 Tax 54 (Trib.); (1960) PTD 129 (Trib.); (1955) 27 ITR 192; 1966 PTD 586; Meka Benkatattaib v. Aito 1986 PTD 380 (Trib.); (1967) 16 Tax 119 (Trib.); I.T.O. v. Asoka Textile (1961) 3 Tax 303; Latamangeshkar v. Union of India (1959) 1 Tax 466, C.I.T. v. Madurai Knitting Company (1976) 104 ITR 36; Chogmal Agarwala v. I.T.O. (1975) 100 ITR 29; Adai Kappa Chettiar v. C.I.T. (1970) 78 ITR 235; Hazari Mal v. I.T.O. (1961) 41 ITR 12 (SC); M. Chockalingam and M. Meyyoppan v. C.I.T.(1963) 7 Tax 227 (SC); C.I.T. v. Adam Limited (1970) 21 Tax 137; Commissioner of Income-tax, Karachi v. Wiliayat Hussain & Sons 1987 P T D 249 and 1985 P T D 324 ref.

Per Ghulam Sadiq, Accountant Member, agreeing with Farhat Ali Khan, Judicial Member.--

The Income-tax Officer in this case while passing the original order had not levied additional tax under section 18-A(6) or 18-A(8). However, this was done later on by him on 9-8-1980 whereas earlier regular order had been completed on 29-3-1979. The factual position as reflected is that the latest assessment before the I.T.O. was of 1976-77 assessment year, which had been completed under section 23(3) on 3-4-1978 and the reply by the assessee was ignored. Now there were two questions i.e. (1) Whether there was any mistake apparent from record and (2) was this additional tax made payable under these subsections just like additional tax for delayed payment under section 18-A of the repealed Act. To make it more clear by an illustration if tax is outstanding against the assessee and remains unpaid for a particular period then from the date on or before which it was originally made payable to the date of its payment, the additional tax is levied. This situation would arise much later in cases of such delayed payments and charging of the additional amount of tax equal to 15% per annum would not be at all with reference to section 35 as this matter only pertains to the amount of tax due which remained unpaid. However the case of charging interest under section 18(A-6)/ 18(A-8) is totally different. The order not having been made within a reasonable time from the date of passing the regular assessment order, the I.T.O. had no authority to add additional tax on the basis of regular assessment without resorting to section 35. The I.T.O. had failed to charge such interest on making regular assessment and having failed to do so there was something on record which a duly and judiciously instructed mind could find from the record and this apparent mistake from the record was objectively demonstrable. Hence I.T.O. could have acted only under section 35 wherein he has been clothed with authority in order to ensure that injustice in any case should be avoided and is neither done to the assessee nor to the revenue. This conception is very much implicit in the nature of the power for such action of rectification and its entrustment to the authority invested with quasi-judicial functions under the repealed Act as well as the Ordinance. The statute having invested the officer with authority to rectify or act in a specified set of circumstances it becomes imperative to exercise the authority in a very proper manner. In this case after quite a lapse of time from the date of passing the regular order, the I.T.O. if resorts to calculation of such additional tax under section 18(A-6)/18(A-8) without first resorting to section 35 then it would be tantamount to depriving the assessee of the right of appeal which, had this order been made at the time of making regular assessment, the assessee would have otherwise enjoyed. In other words if the Assessing Authority deliberately does not calculate additional tax at the time of regular assessment but later on without invoking section 35 adds such additional tax to the demand payable by the assessee then thereby he deprives the assessee of the right of appeal which would be a very ridiculous situation. Hence, the Assessing Officer in spite of not incorporating in his order section 35, then in spite of absence of reference to this provision of law, the order passed by him would nonetheless be deemed to be under section 35. Just because a wrong section or provision of law is referred to, the order of rectification would not be nugatory or against the provisions of law. Hence the order passed by the Assessing Officer would be an order under section 35 read with section 18(A-6) and 18(A-8) of the Act.

---Ss. 18-A, 30 & 35--Additional tax--Appeal--Order passed by Income-tax Officer with jurisdiction quoting wrong provision of law- Effect--Quoting a wrong provision of law does not vitiate the order of Income-tax Officer provided he had jurisdiction and otherwise acted legally--Wrong description of section of the Act, if it is not causing any prejudice, would not make any difference and would not render the order nugatory.

Rustamji, C.A. for Appellant.

Muhammad Farid, D.R. for Respondent.

Date of hearing: 7th July, 1986.

.--This appeal is directed against the order of learned Commissioner of Income Tax (Appeals) recorded by him on 14th March, 1983 regarding assessment year 1978-79.

2. The facts giving rise to this appeal are quite interesting and require us to decide an important legal point. The appellant, a public limited company, filed its return on 14th September, 1978 which was the extended time for assessment year 1978-79. The assessment was framed on 29th March, 1979. The appellant felt aggrieved and went up in appeal. The learned Appellate Assistant Commissioner disposed of the appeal on 31st May, 1980. The Income Tax Officer though gave effect to the order of learned Appellate Assistant Commissioner by framing revised assessment under section 31 on 29th June, 1980, but at the same time went up in appeal to attack the order of learned Appellate Assistant Commissioner regarding his direction about levy of surcharge. This Tribunal by its order recorded in I.T.A. No.161/KB of 1980-81 dated 28th August, 1982 disposed of the appeal and the Income-Tax Officer gave appeal effect by framing yet another assessment order on 28th February, 1983. It appears from the original assessment order framed on 29th March, 1979 that the Income-tax Officer gave credit to the payments made under section 18-A of the repealed Income-tax Act. However, subsequently it was pointed out by the Audit Inspector that the appellant had not paid the Advance Tax under section 18-A on the basis of latest completed assessment, viz., assessment year 1976-77 completed under section 23 (3) dated 3rd April, 1978. The Income-Tax Officer, therefore, by his notice dated 20th January, 1980 asked the appellant to show cause as to why additional tax should not be imposed. The appellant by its letter dated 9th February, 1980 explained to the Income-Tax Officer that tax under section 18-A was correctly paid on the basis of provisional assessment under section 23 for the assessment year 1977-78 completed on 28th November, 1977. It, however, did not prevail upon the Income-Tax Officer and he by his order dated 9th August, 1980 charged additional tax @ 24 per annum, with effect from 1st April, 1978 to 14th September, 1978 amounting to Rs.9,54,796. It is important to note that the Income-Tax Officer purported to record this order under section 18-A(8) read with section 18-A(6) of the repealed Income-tax ":.:t. The appellant felt aggrieved and went up in appeal against this order before learned Commissioner of Income-tax (Appeals), but by his impugned order he dismissed it summarily on the ground that no appeal was provided against the order recorded under section 18-A. The appellant still feels aggrieved and has come up in appeal.

3. Mr. Rustamjee, the learned authorised representative for the appellant firstly pointed out that the appellant paid first instalment of Advance Tax on 15th September, 1977, -on the basis of the assessment framed for assessment year 1976-77. However, subsequently, provisional assessment for assessment year 1977-78 was completed on 28th November, 1977, and the subsequent instalments were paid on the basis of provisional assessment. The learned authorised representative then argued that the learned Commissioner of Income-Tax (Appeals) erred in rejecting the appeal on the ground that no appeal was provided against an order under section 18-A of the repealed Income-tax Act. According to Mr. Rustamjee, the order passed under section 18-A stood merged in the assessment order, hence his appeal was maintainable under section 30 of the repealed Income-tax Act. Mr. Mohammad Farid, the learned Departmental Representative on the other hand, vehemently argued that no appeal was provided against an order recorded under section 18-A of the repealed Income-tax Act. To fortify his position the learned Departmental Representative cited before us:

(1970) 22-Tax-1 (Trib.); (1967) 16-Tax-11 (Trib.), (1967) PTD-225 (Trib.), (1965) 12-Tax-32 (Trib.), (1965) P T D-146 (Trib.), (1960) 2-Tax-54 (Trib.) and (1960) P T D-129 (Trib.).

The learned Departmental Representative vehemently argued that in view of the decision of this tribunal reported as (1970) 22-Tax-1 (Trib.) which was laid down authoritatively by a Bench comprising of the then President and three learned members, was, in any case, binding on us. He further pointed out that the argument of Mr. Rustamjee that the order recorded under section 18-A(6) stood merged in the original assessment order was considered and repelled by a Division Bench of Bombay High Court in (1955) 27-ITR-192 which has been the main stay of all Tribunal decisions relied upon by him.

4. We have heard both Mr. Rustamjee and Mr. Mohammad Farid at length and have also perused not only the assessement and impugned orders ir1volved but also the case law and statutory law cited at Bar however, with due respect to both of them we feel that both Mr 1tustamjee and Mr. Mohammad Farid have based their arguments or the assumption that the order of Income-Tax Officer recorded on 9th August, 1980 was, in fact and in law, an order under section 18-A of the repealed Income-Tax Act. But in our judgment the order purported to have been recorded under section 18-A is either in fact or in law an order recorded under section 35 of the repealed Income-Tai, Act. Before we dilate upon this point in detail let us first reproduce both the provisions of section 18-A and section 35 of the repealed income-Tax Act. They read as under:

"18-A.-- Advance payment of tax. (1) In the case of income other than income to which the sixth Schedule applies and income in respect of which provision is made under subsection. (2) and (2B) of section 18 for deduction of income-tax at the time of payment, an assessee shall pay quarterly to the credit of the Central Government on the fifteenth day of September, the fifteenth day of December, the fifteenth day of March and the fifteenth day of June in each financial year, respectively, an amount equal to one quarter of the income-tax and super-tax payable on so much of such income as is included in his total income of the latest previous year in respect of which he has been assessed under section 23 or, where no assessment under Section 23 has been made under Section 23B, as case may be, if that total income exceeded twenty-five thousand rupees. Such income-tax and super-tax shall be calculated at the rates in force in respect of the year in which he is required to pay the tax; and shall bear to the total amount of income-tax and super-tax so calculated on the said total income the same proportion as the amount of such inclusions bears to his total income or, in cases where under the provisions of sub-section (1) of section 17 tax is chargeable with reference to the total world income, shall bear to the total amount of tax which would have been payable on his total world income of the said previous year had it been his total income the same proportion as the amount of such inclusions bears to his total world income. The tax so calculated shall be reduced by the amount of the tax deducted during the said year under sub-section (3), (3A), (3B), (3BB), (3C) or (3E) of section 18:

Provided that, where the previous year of the assessee in respect of any source of income ends after the thirty first day of March and before the thirty-first day at July, the payment of income-tax and super-tax on that source of income shall be made in three payments of equal amount to be made on the fifteenth day of December, the fifteenth day of March, and the fifteenth day of June, respectively:

Provided further that, if the assessee is a partner of a registered firm and an assessment of the firm has been completed for a previous year later than that for which the assessee's last assessment has been completed, his share in the profits of the firm shall, for the purposes of this sub-section, be included in his total income on the basis of the latest assessment of the firm:

Provided further that, if before the fifteenth day of. May of the year, an assessment of the assessee, or of the registered firm of which he is a partner, is completed in respect of a previous year later than that on the basis of which the tax was computed tinder this clause, the assessee shall pay in one instalment on the specified date, or in equal instalments on the specified date, if more than one falling after the date of the said assessment, the tax computed on the revised basis as reduced by the amount, if any, paid in accordance with the original computation.

(2) If any assessee who is required to pay tax under sub-section (1) estimates at any time before the last instalment is due that the part of his income to which that sub-section applies for period which would be the previous year for an assessment for the year next following is less than the income on which he is required to pay tax and accordingly wishes to pay an amount less than the amount which he is so required to pay, he may send to the Income-tax Officer an estimate of the tax payable by him calculated in the manner laid down in sub-section (1) on that part of his income for such period and shall pay such amount as accords with his estimate in equal instalments on such of the dates specified in subsection (1) as have not expired or in one sum of only the last of such dates has not expired:

Provided that the assessee may send a revised estimate of the tax payable by him before any one of the dates specified in sub-section (1) and adjust any excess or deficiency in respect of instalment already paid in a subsequent instalment or in subsequent instalments.

(3) Any person who has not hitherto been assessed shall, before the fifteenth day of June in each year, if his total income excluding income to which sixth Schedule applies of the period which would be the previous year for an assessment for the year next following is likely to exceed twenty-five thousand rupees, send to the Income-tax Officer an estimate of the tax payable by him on that part of his income to which the provisions of sub-sections (2), (2A) and (2B) of section 18 or the Sixth Schedule do not apply of the said previous year calculated in the manner laid down in sub-section (1), and shall pay the amount, on such of the dates specified in that sub-section as have not expired, by instalments which may be revised according to the proviso to sub-section (2) .

(4) Where part of the income to which subsection (1), (2) or (3) applies consists of any income of the nature of commission which is receivable periodically and is not received or adjusted by the payer in the assessee's account before any of the quarterly instalments of tax become due, he may defer payment of tax on the part of his income to the date on which such income would be normally received or adjusted and if he does so he shall communicate to the Income-Tax Officer the date to which such payment is deferred:

Provided that, if the tax of which then payment is deferred is not paid within fifteen days of the date on which such income or part thereof is received or adjusted by the payer in the assessee's account, he shall, without prejudice to any other consequences which may follow, be deemed to be as assessee in default in respect of such tax and shall pay an additional amount of tax thereon at the rate of two per cent per mensem from the date of such receipt or adjustment to the date of payment of tax.

(5) The Central Government shall pay on any amount paid under subsections (1), (2), (3) and (4) simple interest at four per cent per annum from the date of payment to the thirtieth day of June of the financial year in which the amount was paid.

(5A) The Central Government shall pay on any amount paid under subsections (1), (2), (3) and (4) which is in excess of the tax payable on provisional assessment under section 23B simple interest at four per cent per annum from the date of such provisional assessment to the date of assessment under section 23.

(6) Where in any year an assessee has paid tax under subsection (2) or subsection (3) on the basis of his own estimate and the tax so paid is less than eighty per cent of the tax determined on the basis of the assessment under section as, hereinafter called regular assessment, and calculated in the manner laid down in subsection (1) so far as such tax relates to income to which the (2), (2A) and (2B) of section 18 do not apply an additional amount of tax at the rate of two per cent per mensem from the first day of April in the year in which the tax was paid up to thirtieth day of June of the year next following or upto the date of the said regular assessment, whichever is the earlier, shall be payable by the assessee upon the amount by which the tax so paid falls short of the said eighty per cent:

Provided that:--

(a) where tax is paid under section 22A,

(b) where a provisional assessment under section 23B has been made but regular assessment has not been made, the additional amount of tax shall be calculated in accordance with the foregoing provisions:--

(i) upto the date on which tax under section 22A or as provisionally assessed was paid; and

(ii) thereafter such additional amount shall be calculated at the rate aforesaid on the amount by which the tax is to be paid, in so far as it relates to income to which the provisions of subsections (2), (2A) and (2B) of section 18 do not apply, falls short of the said eighty per cent:

Provided further that, where, as a result of an appeal under section 30 or of a revision under section 3A or of a reference to the High Court under section 66 the mount on which additional tax was payable under this subsection has been reduced the additional tax shall be reduced accordingly and the excess additional tax paid, if any, shall be refunded together with the amount of income-tax that is refundable:

Provided further that, where a business, profession or vocation is newly set up and is assessable on the income, profits and gains of its first previous year in the year following that in which it is set up, the additional tax payable shall be computed from the first day of the said year.

(7) Where, on making the regular assessment, the Income-tax Officer finds that any assessee has:--

(a) under subsection (2) or subsection (3) underestimated the tax payable by him and thereby reduced the amount payable in any of the first three instalments, or

(b) under subsection (4) wrongly deferred the payment of tax on a part of his income, he may direct that the assessee shall pay an additional amount of tax at two per cent mensem, in the case referred to in clause (a) for the period during which the payment was deficient on the difference between the amount paid in each such instalment and the amount which should have been paid having regard to the aggregate tax actually paid under this section during the year, and in the case referred to ire clause (b) for the period during which the payment of tax was wrongly deferred on the amount of which the payment was so deferred:

Provided that for the purposes of this subsection any instalment due before the expiry of six months from the commencement of the previous year in respect of which it is to be paid shall be deemed to have become due fifteen days after the expiry of the said six months.

(8) Where, on making the regular assessment, the Income-tax Officer finds that payment of tax has not seen made in accordance with the foregoing provisions of this section, additional tax calculated in the manner laid down in subsection (6) shall be added to the tax as determined on the basis of the regular assessment.

(9) (a) If any assessee does not pay on the specified date any instalment of tax that he is required to pay under subsections (1) and does not, before the date on which any such instalment as is not paid becomes due, send under subsection (2) an estimate of a revised estimate of the tax payable by him, he shall be deemed to be an assessee in default in respect of such instalment or instalments.

(b) If the assessee has sent under subsection (2) or subsection (3) an estimate or a revised estimate of the tax payable by him, but does not pay any instalment in accordance therewith on the date or dates specified in subsection (1), shall be deemed to be an assessee in respect of such instalment or instalments:

Provided that the 3ssessee shall not, under clause (a) or (b) be deemed to be in default in respect of any amount of which the payment is deferred under subsection (4) until after the date communicated by him to the Income-tax Officer under that subsection.

(10) Any sum other than a penalty or the additional amount of tax paid by or recovered from an assessee in pursuance of the provisions of subsection (1), (2), (3) and (4) shall be treated as a payment of tax in respect of the income of the period which would be the previous year for an assessment for the next following the year in which it was payable, and credit therefor shall be given to the assessee in the regular assessment.

(11) Any income chargeable under the head "Capital Gains" shall not be taken into account for any of the purposes of this section."

Section 35 is as follows:--

(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 assessment 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 an order in appeal, by any party to such appeal:

Provided that no such rectification shall be made, having the effect of enhancing an assessment or reducing a refund unless the Commissioner, the Assistant Commissioner or the Income-tax Officer, as the case may be, has given notice to the assessee of his intention to do so and has allowed him a reasonable opportunity of being heard;

(2) The provisions of subsection (1) apply also in like manner to the rectification of mistakes by the Appellate Tribunal.

(3) Where any such rectification has the effect of reducing the assessment, the Income-tax Officer shall make any refund, which may be due to such assessee.

(4) Where any such rectification has effect of enhancing the assessment or reducing a refund, the Income-tax Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be issued under section 29, and the provisions of this Act shall apply accordingly.

(5) Where in respect of any completed assessment of a partner in a firm it is found on the assessment or re-assessment of the firm or any reduction or enhancement made in the income of the firm under section 31, section 33, section 33A, section 34A, section 65 or section 66A that the share of the partner in the profit or loss of the firm has not been included in the assessment of the partner or, if included, is not correct, the inclusion of the share in the assessment or 'the correction thereof, as the case may be, shall be deemed to be a rectification of a mistake apparent from the record within the meaning of the section, and the provisions of subsection (1) shall apply thereto accordingly, the period of four years referred to in that subsection being computed from the date of the final order passed in the case of the firm.

(6) Where the excess profits tax or the business profits tax payable by an assessee has been modified in appeal, revision or any other proceeding, or where any excess profits tax has been assessed after the completion of the corresponding assessment for income-tax, and in consequence thereof it is necessary to re-compute the total income of the assessee chargeable in income-tax, such re-computation shall be deemed to be a rectification of a mistake apparent from the record within the meaning of this section, and the provisions of subsection (1) shall apply accordingly, the period of four years referred to in that subsection being computed from the date of the order making or modifying the assessment of such excess profits tax or business profits tax.

Explanation.--For the purposes of subsection (6), where the assessee is a firm, the provisions of subsection (5) shall also apply as they apply to the rectification of the assessment of the partners of the firm.

(8) Where, as a result of proceedings initiated under subsection (1) of section 34, a firm or an association of persons is assessed or re-assessed, and the Income-tax Officer concerned is of opinion that it is necessary to compute or re-compute the total income of a partner in the firm or a member of the association of persons, as the case may be, the Income-tax Officer may proceed to compute or re-compute the total income and determine the sum payable on the basis of such computation or re-computation as if the computation is a rectification of a mistake apparent from the record within the meaning of this section, and the provisions of subsection (1) shall apply accordingly, the period of four years specified therein being reckoned from the date of the final order passed in the case of the firm or association of persons, as the case may be."

Now reverting to our discussion let us start with subsections (7) and (8) of section 18-A of the repealed Income-tax Act. When we peruse both these subsections we find that the legislature has used the words "on making the regular assessment" in both of them. In our judgment thin expression would mean and Imply either "at the time of making the regular assessment" or, going to the extreme, "within reasonable time after making the assessment". If we read section 29 with these subsections, our interpretation stands very much fortified. Before proceeding further let us also reproduce section 29 here for ready reference.

It reads:--

"29. Notice of demand, when any tax penalty or interest is due in consequence of any order passed under or in pursuance of this Act, the Income-tax Officer shall serve upon the assessee or other person liable to pay such tax, penalty or interest a notice of demand in the prescribed form specifying the sum so payable. "

From bare perusal of this section it appears that the demand notice is to include the assessed tax which means not only the additional tax under section -2(14) of the repealed Income-tax Act but also penalty or interest. Thus, if the Income-tax Officer does not proceed under section 18-A at the time of framing of the regular assessment, he cannot serve the demand notice on the assessee including additional tax, penalty or interest which he is bound to include in the notice of demand under this section. It is, therefore, clear that the law places a statutory obligation on the Income-tax Officer to add an additional tax in the manner laid down in other subsections of section 18A to the regularly assessed tax. In 1966 PTD 586, Meka Benkatattaib v. AITO this legal obligation was judicially recognised and it was further held that if the I.T.O. failed to discharge this legal obligation it would be tantamount to an error apparent from record rectifiable under section 35 of the Act.

5. However, we cannot close our eyes to the pressure under which an Income-tax Officer may some times work. May be that he needs sometime to find out as to whether an assessee has complied with the requirements of section 18A of the repealed Income-tax Act. As such, we have given the alternative interpretation to the words "on making the regular assessments" which have been used in subsections (7) and (8) of the repealed Income-tax Act. By expression "within reasonable time after making the regular assessment" we mean "within reasonable time and for reasonable cause but in any case before notice of demand is issued". What is reasonable in a particular case would depend on the facts and circumstances of every case. (For definition of word "reasonable" please see (1986) PTD page 380 Trib. We are very much fortified in our interpretation by a decision of this Tribunal reported as (1967) 16 TAX 119 (Tribunal) where the true import of the words "on regular assessment" as used in section 18A (8) was significantly highlighted. The point involved in that case was as to whether in an appeal preferred against assessment proper the levy of penal interest could be assailed.

6. Thus, it has become quite obvious by now that an order under section 18A(8) is to be made "On regular assessment", which expression we have interpreted above. However, it does not mean that if an Income-tax Officer fails to levy additional tax or interest inadvertently, he would not have jurisdiction to rectify the mistake. In 1961 3-Tax-303 ITO v. Asoka Textile the Indian Supreme Court upheld such an order. In that case the assessment was completed on 2-2-1953 and first rectification was made on 25-1-1954 and second mistake of rate was corrected on 2-8-1954. Similarly, in 1959 1 Tax III 466, Latamangeshkar v. Union of India it was held that failure on the part of Income-tax Officer to add interest under section 18A (8) was mistake apparent from .the record and could be rectified under section 35 of the Act. As such, if an Income-tax Officer records an order regarding additional tax payable under section 18-A after lapse of considerable time and that too on the basis of Audit Inspector's report, it could not be anything but rectification of the mistake. We have already pointed out that the Income-tax Officer recorded the order for additional tax after lapse of considerable time. Keeping into consideration the original order of assessment recorded on 29th March, 1979, which gave credit to payments made under section 18A. Thus, the order recorded for additional tax made on 9th August 1980 cannot be held to be an order made within reasonable time of making the regular assessment. It is true that the revised assessment dated 29th June, 1980 has also taken note of the advance tax paid under section 18A but' even from the date of this order there is gap of more than 40 days. On top of it, the recording of the additional assessment order was not intentionally procrastinated by the Income-tax Officer for future date because of rush of work or for some other) reasonable ground. He recorded the order, as pointed out earlier, on Audit Inspector's report. Thus, he had committed a mistake, which he wanted to rectify. Under the facts and circumstances of this case the inevitable conclusion, therefore, is that the order recorded by him on 9th August, 1980 was not an order under section 18A but an order read with section 35 of the repealed Income-tax Act. The fact that the Income-tax Officer mentioned it to be an order under section 18A (8) read with section 18(6) of the repealed Income-tax Act, would not make it an order under those subsections if under the facts and circumstances of the case the provisions of those subsections did not apply. to (1976) 104 ITR 36 at page 38, CIT v. Madurai Knitting Company, (1975). 100 ITR 29, Chogmal Agarwala v. ITO, (1970) 78 ITR 235 Adai Kappa Chettiar v. CIT, and (1961) 41 ITRI 12 SC Hazari Mal v. ITO, it has been laid down that quoting of wrong provision of law does not vitiate the order of the Income-tax Officer provided ha had jurisdiction and otherwise acted legally. Thus it appears that it is settled law that wrong description of section of the Act, if it is not causing any prejudice, would not make any difference. We are, therefore, of the considered view that under the facts and circumstances of the case the order recorded by the Income-tax Officer was an order under section 35 read with section 18A of the repealed Income-tax Act. Now coming to the question as to whether an appeal would lie against an order of rectification, we have no hesitation in answering it in the affirmative. The Indian Supreme Court in the case reported as (1963) 7-Tax-227 (SC), M. Chockalingam and M. Meyyoppan v. C.I.T. has made the following pertinent observation:

"Addition of penal interest is enhancement of assessment within the meaning of the proviso to section 35(1) which applies whenever the effect of the -order of rectification is to touch the pocket of the assessee.- - - - - - - - - - - -"

To the same effect is the case of C.I.T. v. Adam Limited reported as (1970) 21-Tax-137. Thus, we are of the view that the learned Commissioner of Income-tax (Appeals) erred in law in summarily rejecting the appeal on the point under discussion.

7. Now coming to the case law cited at Bar by the learned Departmental Representative, let us observe, with due respect, that it is besides the point involved in this appeal. Here, the Income-tax Officer has actually rectified his order under section 35 of the repealed Act and it is surely appealable. However, let us mention here that the point involved in the case law cited by learned Departmental Representative was taken to High Court in the case of Commissioner of Income-tax, Karachi v. Malik Wiliayat Hussain & Sons which is reported as 1987 PTD 249 Karachi, in the form of following question:

"Whether in the facts and circumstances of the case the Tribunal was legally justified in entertaining the assessee's appeal against the interest charged under subsections (6) and (8) of section I -A "

However, unfortunately the learned counsel for the Department did not press it before the learned Division Bench of the Karachi High Court. It is pertinent to note that the aforesaid case cropped up before the Karachi High Court arising out of the order of the Tribunal and the Tribunal had disposed of the appeal arising out of an order recorded by the Income-tax Officer under section 18A of the repealed Income-tax Act. Thus the Department has virtually conceded the right of appeal against an order recorded under section 18A of the repealed Income-tax Act. Be it as it may, the upshot of all this discussion is that if tile Income-tax Officer records the order under section 18A along with the assessment order and includes amount of additional tax in the notice of demand, the assessee undoubtedly has a right of appeal under section 30 of the repealed Income-tax Act. However, if the Income-tax Officer frames the assessment but deliberately procrastinates his order or direction for his own convenience, the assessee would not lose his right of appeal. In our judgment an Income-tax Officer is required by subsection (8) of section 18A to add additional tax calculated in the manner laid down in subsection (6) to the tax as determined on the basis of regular assessment. Thus, it is obvious that additional tax could be added to the tax determined on the basis of regular assessment if both are made at one and the same time or, in any case, before the notice of demand is issued. The additional tax, therefore, is deemed to be part and parcel of the tax determined on the basis of regular assessment and if an appeal lies against tax mentioned in demand notice, there appears no reason why an appeal should not lie against an order recorded under section 18A. The latest decision on this point is reported as 1985 PTD 324 (HC Karachi). Now, to conclude we hold that the Income-tax Officer is required to record an order under section 18A either along with the regular assessment or within a reasonable time and for reasonable cause but, in any case, before notice of demand is issued. In such case the appeal would lie under section 30 of the repealed Income-tax Act. However, if the Income-tax Officer records an order under section 18A after lapse of some time and that too on discovery of mistake that would be an order under section 35 read with section 18A of the repealed Income-tax Act and again would be appealable. The order of learned Commissioner of Income-tax (Appeals) therefore, is not sustainable in law and we set it aside. The appeal is sent back to him with the direction to dispose it of on this issue according to merits.

8. The appeal thus stands disposed of.

- I have gone through the order of my learned brother written most elaborately. However, subscribing fully to the decision given by my learned brother I add the following few lines.

The Income-tax Officer in this case while passing the original order had not levied additional tax under section 18-A(6) or 18-A(8). However, this was done later on by him on 9-8-1980 whereas earlier regular order had been completed on 29-3-1979. The factual position as reflected is that the latest assessment before the I.T.O. was of 1976-77 assessment year, which had been completed under section 23(3) on 3-4-1978 and the reply by the assessee was ignored. Now there are two questions before us, i.e. (1) Whether there was any mistake apparent from record and (2) was this additional tax made payable under these subsections just like additional tax for delayed payment under section 35-A of the repealed Act. To make it more clear by an illustration if tax is outstanding against the assessee and remains unpaid for a particular period then from the date on or before which it was originally made payable to the date of its payment. The additional tax is levied. This situation would arise much later in cases of such delayed payments and charging of the additional amount of tax equal to 15% per annum would not be at all with reference to section 35 as this matter only pertains to the amount of tax due which remained unpaid. However, the case of charging interest a/s 18(A-6)/18(A-8) is totally different. The order not having been made within a reasonable time from the date of passing the regular assessment order, the I.T.O. had no authority to add additional tax on the basis of regular assessment without resorting to section 35. In my humble opinion the I.T.O. had failed to charge such interest on making regular assessment and having failed to do so there was something on record which a duly and judiciously instructed mind could find from the record and this apparent mistake from the record was objectively demonstrable. Hence I.T.O. could have acted only under section 35 wherein he has been clothed with authority in order to ensure that injustice in any case should be avoided and is neither done to the assessee nor to the revenue. This conception is very much implicit in the nature of the power for such action of rectification and its entrustment to the authority invested with quasi-judicial functions under the repealed Act as well as the Ordinance. The statute having invested the officer with authority to rectify or act in a specified set of circumstances it becomes imperative to exercise the authority in a very proper manner. In this case after quite a lapse of time from the date of passing the regular order, the I.T.O. if resorts to calculation of such additional tax under section 18(A-6)/18(A-8) without first resorting to section 35 then it would be tantamount to depriving the assessee of the right of appeal which had this order been made at the time of making regular assessment, the assessee would have otherwise enjoyed. In other words if the Assessing Authority deliberately does not calculate additional tax at the time of regular assessment but later on without invoking section 35 adds such additional tax to the demand payable by the assessee then thereby he deprives the assessee of the right of appeal which would be a very ridiculous situation. Hence, in my humble opinion the Assessing Officer in spite of not incorporating in his order section 35, then in spite of absence of reference to this provision of law, the order passed by him would nonetheless be deemed to be under section 35. Needless to quote the authorities who have laid down in unequivocal terms that just because a wrong section or provision of law is referred to, the order of rectification would not be nugatory or against the provisions of law. Hence the order passed by the Assessing Officer would be an order a/s 35 read with section 18(A-6) and 18(A-8) of the repealed Act and the order of the C.I.T. (Appeals) is not sustainable and has rightly been set aside for disposal according to merits by my learned brother.

M.B.A./400/T Case remanded.

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