My assessment was rectified once already. I want a second rectification, and four years have gone since the original assessment but not since the rectified one. Am I out of time?
No. The Supreme Court held that the word order in section 154(7) is not qualified and does not necessarily mean the original order; it can be any order, including the amended or rectified order. So where an assessment of 21 September 1979 had been rectified on 12 July 1982, an application made on 4 July 1986 was in time, being within four years of the rectified order. The Calcutta High Court, which had counted from the original assessment, was set aside and the Tribunal restored. The Court followed its own sales tax decisions in International Cotton Corporation and H.R. Sri Ramulu.
Decided by the Supreme Court (Supreme Court of India; P.B. Sawant and G.N. Ray, JJ (order by Sawant, J)) on 1995-01-20, reported as (1995) 212 ITR 639; 1995 AIR 1133; 1995 (3) SCC 136; 1995 AIR SCW 1175; (1995) 1 SCR 519; (1995) 2 JT 317 (SC). It bears on section 154(7), section 154 of the Income Tax Act 1961, in Assessment & Scrutiny and How Tax Law Is Read matters.
This is the case that settled a straight conflict among the High Courts. Calcutta, Gujarat, Madras and Orissa had held that the period runs from the original assessment order; Patna and Karnataka had held the contrary. The Supreme Court preferred the latter and did so on the plainest possible ground, that Parliament did not qualify the word order. The reasoning carries a second idea worth holding on to, drawn from the decisions the Court applied: once an assessment is reopened or amended, the initial order ceases to be operative and the fresh order takes its place, so the earlier order is no longer the order sought to be amended. That is why the Court could say that all rectifications are in time if calculated from the rectification order. For a practitioner the practical value is simple - a rectification revives the four year window, and a mistake in the rectified order can be corrected even long after the original assessment.
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The assessee was assessed by an order dated 21 September 1979. It applied under section 154 to rectify that order on the ground that the Income Tax Officer had not allowed shift allowance, and the assessment order was rectified on 12 July 1982. On 4 July 1986 the assessee applied again, this time to rectify the order of 12 July 1982, contending that depreciation on the factory building had been allowed at 5 per cent when it was entitled to 10 per cent. The Income Tax Officer dismissed the application as beyond time, and the Appellate Assistant Commissioner confirmed that. The Tribunal allowed the application, holding that 4 July 1986 was within four years of the fresh assessment order of 12 July 1982. On reference the Calcutta High Court reversed the Tribunal, holding that the four years ran from the original assessment order of 21 September 1979. It was not in dispute that the assessee was entitled to depreciation at the higher rate, and that it had to be granted if the application was within time. Section 154(7), as it then stood, provided that save as otherwise provided in section 155 or section 186(4), no amendment under the section shall be made after the expiry of four years from the date of the order sought to be amended.
The appeals were allowed, the High Court's order set aside and the Tribunal's order restored, with no order as to costs. The expression falling for construction was from the date of the order sought to be amended in section 154(7). The Court held that the word order has not been qualified in any way and does not necessarily mean the original order; it can be any order, including the amended or rectified order. The application of 4 July 1986 was therefore within four years of the rectified order of 12 July 1982 and within limitation, and the assessee's claim to depreciation at 10 per cent had to be allowed. The Court recorded the conflicting High Court authority put before it - Bharat Textile Works (Calcutta), Ahmedabad Sarangpur Mills (Gujarat), Kothari (Madras) Ltd and Kalinga Tubes (Orissa) for the view that order means the original assessment, and Bihar State Road Transport Corporation (Patna) and Mysore Iron & Steel Ltd (Karnataka) for the contrary view - and preferred the latter in the light of its own earlier decisions.
The Court began and largely ended with the statutory language: sub-section (7) speaks of the order sought to be amended without qualifying which order, so on its terms it takes in a rectified order as much as an original one. It then drew on decisions on identically worded provisions in sales tax law. In International Cotton Corporation v. C.T.O. the Court had held, on Rule 38 of the Mysore Sales Tax Rules, that what was sought to be rectified was the assessment order as already rectified; after that rectification the original assessment order was no longer in force and was not the order sought to be rectified, and Rule 38 itself spoke of any order, which a rectified order is. That reasoning was endorsed in Deputy Commissioner of Commercial Taxes v. H.R. Sri Ramulu, which explains why: once an assessment is reopened the initial order ceases to be operative, the effect being to vacate or set aside the initial order and substitute the order made on reassessment, and the initial order cannot be said to survive even partially. The Court there had relied on J. Jaganmohan Rao, where under section 34 of the 1922 Act the previous under-assessment was set aside and the whole proceedings started afresh, and on H.M. Esufali H.M. Abdulali, where reassessment was described as nothing but a fresh assessment, the former assessment being completely reopened and a fresh assessment made in its place. Applying that line, the order of 12 July 1982 was the operative order and the only one capable of being amended, so the four years ran from it.
the word 'order' has not been qualified in any way and it does not necessarily mean the original order. It can be any order including the amended or rectified order.
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Handle my notice → Ask a CA on WhatsAppNo. The Supreme Court held that the word order in section 154(7) is not qualified and does not necessarily mean the original order; it can be any order, including the amended or rectified order. So where an assessment of 21 September 1979 had been rectified on 12 July 1982, an application made on 4 July 1986 was in time, being within four years of the rectified order. The Calcutta High Court, which had counted from the original assessment, was set aside and the Tribunal restored. The Court followed its own sales tax decisions in International Cotton Corporation and H.R. Sri Ramulu. This was decided by the Supreme Court (Supreme Court of India; P.B. Sawant and G.N. Ray, JJ (order by Sawant, J)) and bears on section 154(7), section 154 of the Income Tax Act 1961. It is reported as (1995) 212 ITR 639; 1995 AIR 1133; 1995 (3) SCC 136; 1995 AIR SCW 1175; (1995) 1 SCR 519; (1995) 2 JT 317 (SC). This is the case that settled a straight conflict among the High Courts. Calcutta, Gujarat, Madras and Orissa had held that the period runs from the original assessment order; Patna and Karnataka had held the contrary. The Supreme Court preferred the latter and did so on the plainest possible ground, that Parliament did not qualify the word order. The reasoning carries a second idea worth holding on to, drawn from the decisions the Court applied: once an assessment is reopened or amended, the initial order ceases to be operative and the fresh order takes its place, so the earlier order is no longer the order sought to be amended. That is why the Court could say that all rectifications are in time if calculated from the rectification order. For a practitioner the practical value is simple - a rectification revives the four year window, and a mistake in the rectified order can be corrected even long after the original assessment. If it applies to you, the first step is this: Date your section 154 application from the latest order that actually deals with the matter, not automatically from the original assessment.
The assessee was assessed by an order dated 21 September 1979. It applied under section 154 to rectify that order on the ground that the Income Tax Officer had not allowed shift allowance, and the assessment order was rectified on 12 July 1982. On 4 July 1986 the assessee applied again, this time to rectify the order of 12 July 1982, contending that depreciation on the factory building had been allowed at 5 per cent when it was entitled to 10 per cent. The Income Tax Officer dismissed the application as beyond time, and the Appellate Assistant Commissioner confirmed that. The Tribunal allowed the application, holding that 4 July 1986 was within four years of the fresh assessment order of 12 July 1982. On reference the Calcutta High Court reversed the Tribunal, holding that the four years ran from the original assessment order of 21 September 1979. It was not in dispute that the assessee was entitled to depreciation at the higher rate, and that it had to be granted if the application was within time. Section 154(7), as it then stood, provided that save as otherwise provided in section 155 or section 186(4), no amendment under the section shall be made after the expiry of four years from the date of the order sought to be amended. The matter was decided on 1995-01-20 by the Supreme Court (Supreme Court of India; P.B. Sawant and G.N. Ray, JJ (order by Sawant, J)). On those facts the Supreme Court held as follows. The appeals were allowed, the High Court's order set aside and the Tribunal's order restored, with no order as to costs. The expression falling for construction was from the date of the order sought to be amended in section 154(7). The Court held that the word order has not been qualified in any way and does not necessarily mean the original order; it can be any order, including the amended or rectified order. The application of 4 July 1986 was therefore within four years of the rectified order of 12 July 1982 and within limitation, and the assessee's claim to depreciation at 10 per cent had to be allowed. The Court recorded the conflicting High Court authority put before it - Bharat Textile Works (Calcutta), Ahmedabad Sarangpur Mills (Gujarat), Kothari (Madras) Ltd and Kalinga Tubes (Orissa) for the view that order means the original assessment, and Bihar State Road Transport Corporation (Patna) and Mysore Iron & Steel Ltd (Karnataka) for the contrary view - and preferred the latter in the light of its own earlier decisions.
The Court began and largely ended with the statutory language: sub-section (7) speaks of the order sought to be amended without qualifying which order, so on its terms it takes in a rectified order as much as an original one. It then drew on decisions on identically worded provisions in sales tax law. In International Cotton Corporation v. C.T.O. the Court had held, on Rule 38 of the Mysore Sales Tax Rules, that what was sought to be rectified was the assessment order as already rectified; after that rectification the original assessment order was no longer in force and was not the order sought to be rectified, and Rule 38 itself spoke of any order, which a rectified order is. That reasoning was endorsed in Deputy Commissioner of Commercial Taxes v. H.R. Sri Ramulu, which explains why: once an assessment is reopened the initial order ceases to be operative, the effect being to vacate or set aside the initial order and substitute the order made on reassessment, and the initial order cannot be said to survive even partially. The Court there had relied on J. Jaganmohan Rao, where under section 34 of the 1922 Act the previous under-assessment was set aside and the whole proceedings started afresh, and on H.M. Esufali H.M. Abdulali, where reassessment was described as nothing but a fresh assessment, the former assessment being completely reopened and a fresh assessment made in its place. Applying that line, the order of 12 July 1982 was the operative order and the only one capable of being amended, so the four years ran from it. In the words reproduced by the source cited on this page: "the word 'order' has not been qualified in any way and it does not necessarily mean the original order. It can be any order including the amended or rectified order."
It was decided by the Supreme Court on 1995-01-20 and is reported as (1995) 212 ITR 639; 1995 AIR 1133; 1995 (3) SCC 136; 1995 AIR SCW 1175; (1995) 1 SCR 519; (1995) 2 JT 317 (SC). Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 154(7), section 154, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeals were allowed, the High Court's order set aside and the Tribunal's order restored, with no order as to costs. The expression falling for construction was from the date of the order sought to be amended in section 154(7). The Court held that the word order has not been qualified in any way and does not necessarily mean the original order; it can be any order, including the amended or rectified order. The application of 4 July 1986 was therefore within four years of the rectified order of 12 July 1982 and within limitation, and the assessee's claim to depreciation at 10 per cent had to be allowed. The Court recorded the conflicting High Court authority put before it - Bharat Textile Works (Calcutta), Ahmedabad Sarangpur Mills (Gujarat), Kothari (Madras) Ltd and Kalinga Tubes (Orissa) for the view that order means the original assessment, and Bihar State Road Transport Corporation (Patna) and Mysore Iron & Steel Ltd (Karnataka) for the contrary view - and preferred the latter in the light of its own earlier decisions. It arises in Assessment & Scrutiny and How Tax Law Is Read matters, on section 154(7), section 154 of the Income Tax Act 1961, and was decided by Supreme Court of India; P.B. Sawant and G.N. Ray, JJ (order by Sawant, J). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Check the present wording of section 154(7) before applying this judgment; the Court construed the provision as it stood at the time, and the limitation has since been recast. Where the officer rejects the application as time barred, take this judgment and identify the intervening rectified or amended order that restarts the period. Keep the point narrow: what is being amended is the later order, so confine the rectification to a mistake apparent from the record in that order.
Still good law. A citator search returns 91 later decisions citing the judgment, and a search on the case name with section 154 returns a further 48. It was applied by the Delhi High Court in CIT v Tony Electronics Ltd. (9 October 2009), which relied on its interpretation of the word order in sub-section (7) - that the word is not qualified and can mean any order, including the amended or rectified order - in holding that limitation runs from the later order. The Allahabad High Court took the same reading in M/s Shree New Durga Bansal Cold Storage v CIT (7 March 2017). Two benches have held it factually inapplicable where the subject matter of the second rectification differed from the first - the Madras High Court in CIT v Shriram Engineering Construction (21 December 2009) and the Mumbai Tribunal in Ultra Tech Cement Ltd. v ACIT (21 February 2023) - which is a distinction on facts, not a departure. Nothing overruling or doubting it was found. The Court construed sub-section (7) as it stood for an assessment order of 21 September 1979, and at least one later court has noted the words as they then stood, so the current text must be read before the four-year period is computed. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The harvested text is a poor transcription in places. Paragraph 4 prints 105 depreciation allowance where 10 per cent is plainly meant, the Appellate Assistant Commissioner appears as the Applicable Assistant Commissioner, and there are several typographical errors in the extracts. The figures are not affected but the reader should use a reported copy. The extracts at pages 322 to 323 of the source reproduce provisions of the Madhya Pradesh and Mysore sales tax legislation at length without the Court commenting on them, so their bearing on the reasoning is not apparent from the text. The judgment does not say whether the second application raised a matter that had been considered and decided in the first rectification, so it gives no guidance on the interaction with section 154(1A). It also does not address whether the same reasoning applies where the later order deals with a wholly different matter from the one now sought to be rectified. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeals were allowed, the High Court's order set aside and the Tribunal's order restored, with no order as to costs. The expression falling for construction was from the date of the order sought to be amended in section 154(7). The Court held that the word order has not been qualified in any way and does not necessarily mean the original order; it can be any order, including the amended or rectified order. The application of 4 July 1986 was therefore within four years of the rectified order of 12 July 1982 and within limitation, and the assessee's claim to depreciation at 10 per cent had to be allowed. The Court recorded the conflicting High Court authority put before it - Bharat Textile Works (Calcutta), Ahmedabad Sarangpur Mills (Gujarat), Kothari (Madras) Ltd and Kalinga Tubes (Orissa) for the view that order means the original assessment, and Bihar State Road Transport Corporation (Patna) and Mysore Iron & Steel Ltd (Karnataka) for the contrary view - and preferred the latter in the light of its own earlier decisions.
TaxSphere, “Hind Wire Industries Ltd v CIT”, https://taxnotice.vittsphere.com/caselaw/case/hind-wire-industries-ltd-v-cit/ (validity last checked 2026-08-29)
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