What actually counts as a 'mistake apparent from the record' under s.154?
An obvious and patent mistake. Not one that must be established by a long drawn process of reasoning on points where two opinions are conceivable. A decision on a debatable point of law cannot be rectified.
Decided by the Supreme Court (K.S. Hegde and A.N. Grover, JJ (judgment delivered by Hegde J)) on 1971-08-05, reported as (1971) 82 ITR 50 (SC); (1971) 2 SCC 526; AIR 1971 SC 2204; [1972] 1 SCR 30; Civil Appeal No. 1170 of 1968. It bears on section 154, section 113, section 2(31) of the Income Tax Act 1961, in Revision & Rectification matters.
Section 154 runs in both directions. It is the cheap route to fixing an arithmetical or credit error in your own favour, and it is also the provision the department sometimes uses to reopen a settled legal position by the back door. This case marks the boundary.
Binding on every court and authority in India.
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A registered firm and its two partners were assessed for 1958-59 and 1960-61 to 1962-63. The firm was assessed at the slab rates applicable to registered firms under the relevant Finance Acts, while the partners, assessed in the status of non-resident, were taxed at the maximum rates on their share income. By notices dated 29 January 1965 the Income-tax Officer told the firm that its assessments contained a mistake apparent from the record because it had not been charged at the maximum rates under s.17(1) of the Indian Income-tax Act, 1922, and proposed to rectify them under s.154 of the 1961 Act. The firm denied any mistake and disputed his authority; he rectified the assessments anyway. The firm and partners moved the Bombay High Court under Article 226 (Misc. Petition No. 104 of 1968), which held the original assessments were prima facie in accordance with law and that in any event there was no obvious or patent mistake, so the officer was incompetent to rectify. The Revenue appealed by certificate.
The Revenue's appeal was dismissed with costs and the Bombay High Court's order affirmed. Whether s.17(1) of the 1922 Act applied to a firm at all was not free from doubt, since that Act defined 'person' to include only a Hindu undivided family and a local authority while the 1961 Act defines it differently, and deciding whether the later definition amended or merely declared the earlier law would require examining the scheme of the Act. The Income-tax Officer was therefore not justified in thinking there could be no two opinions on the question, and it was not open to him to determine the true scope of the provisions in a s.154 proceeding: a mistake apparent on the record must be an obvious and patent mistake, not one established by a long drawn process of reasoning on points on which two opinions are conceivable. The Court added that the High Court itself was not justified in going into whether the original assessments were in accordance with law.
The Court took the rectification power in s.154 to be confined to obvious and patent mistakes and then tested the officer's premise. Section 17(1) of the 1922 Act operated on a 'person', and s.2(9) of that Act defined 'person' as including a Hindu undivided family and a local authority; unless a firm was a 'person' the provision could not govern the firm's assessment. The 1961 Act defines 'person' in s.2(31) to include a firm, and whether that was an amendment of the law or merely declaratory of what had gone before was itself a question requiring examination of the scheme of the Act. Since the applicability of s.17(1) was open to argument, the officer could not treat his own view as the only possible one, and could not decide the point in rectification proceedings at all. The Court drew the parallel with its own decision in Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale, where an error established by a long drawn process of reasoning on points admitting of two opinions was held not to be an error apparent on the face of the record under Article 226, observing that the s.154 power is no wider than that; and it cited Sidhramappa Andannappa Manvi v. CIT for the proposition that a decision on a debatable point of law is not a mistake apparent from the record. It expressly declined to spell out any distinction between 'error apparent on the face of the record' and 'mistake apparent from the record'.
A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions.
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Handle my notice → Ask a CA on WhatsAppAn obvious and patent mistake. Not one that must be established by a long drawn process of reasoning on points where two opinions are conceivable. A decision on a debatable point of law cannot be rectified. This was decided by the Supreme Court (K.S. Hegde and A.N. Grover, JJ (judgment delivered by Hegde J)) and bears on section 154, section 113, section 2(31) of the Income Tax Act 1961. It is reported as (1971) 82 ITR 50 (SC); (1971) 2 SCC 526; AIR 1971 SC 2204; [1972] 1 SCR 30; Civil Appeal No. 1170 of 1968. Section 154 runs in both directions. It is the cheap route to fixing an arithmetical or credit error in your own favour, and it is also the provision the department sometimes uses to reopen a settled legal position by the back door. This case marks the boundary. If it applies to you, the first step is this: For a genuine arithmetical, TDS credit or carry-forward error, file the s.154 application — it is the fastest remedy available.
A registered firm and its two partners were assessed for 1958-59 and 1960-61 to 1962-63. The firm was assessed at the slab rates applicable to registered firms under the relevant Finance Acts, while the partners, assessed in the status of non-resident, were taxed at the maximum rates on their share income. By notices dated 29 January 1965 the Income-tax Officer told the firm that its assessments contained a mistake apparent from the record because it had not been charged at the maximum rates under s.17(1) of the Indian Income-tax Act, 1922, and proposed to rectify them under s.154 of the 1961 Act. The firm denied any mistake and disputed his authority; he rectified the assessments anyway. The firm and partners moved the Bombay High Court under Article 226 (Misc. Petition No. 104 of 1968), which held the original assessments were prima facie in accordance with law and that in any event there was no obvious or patent mistake, so the officer was incompetent to rectify. The Revenue appealed by certificate. The matter was decided on 1971-08-05 by the Supreme Court (K.S. Hegde and A.N. Grover, JJ (judgment delivered by Hegde J)). On those facts the Supreme Court held as follows. The Revenue's appeal was dismissed with costs and the Bombay High Court's order affirmed. Whether s.17(1) of the 1922 Act applied to a firm at all was not free from doubt, since that Act defined 'person' to include only a Hindu undivided family and a local authority while the 1961 Act defines it differently, and deciding whether the later definition amended or merely declared the earlier law would require examining the scheme of the Act. The Income-tax Officer was therefore not justified in thinking there could be no two opinions on the question, and it was not open to him to determine the true scope of the provisions in a s.154 proceeding: a mistake apparent on the record must be an obvious and patent mistake, not one established by a long drawn process of reasoning on points on which two opinions are conceivable. The Court added that the High Court itself was not justified in going into whether the original assessments were in accordance with law.
The Court took the rectification power in s.154 to be confined to obvious and patent mistakes and then tested the officer's premise. Section 17(1) of the 1922 Act operated on a 'person', and s.2(9) of that Act defined 'person' as including a Hindu undivided family and a local authority; unless a firm was a 'person' the provision could not govern the firm's assessment. The 1961 Act defines 'person' in s.2(31) to include a firm, and whether that was an amendment of the law or merely declaratory of what had gone before was itself a question requiring examination of the scheme of the Act. Since the applicability of s.17(1) was open to argument, the officer could not treat his own view as the only possible one, and could not decide the point in rectification proceedings at all. The Court drew the parallel with its own decision in Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale, where an error established by a long drawn process of reasoning on points admitting of two opinions was held not to be an error apparent on the face of the record under Article 226, observing that the s.154 power is no wider than that; and it cited Sidhramappa Andannappa Manvi v. CIT for the proposition that a decision on a debatable point of law is not a mistake apparent from the record. It expressly declined to spell out any distinction between 'error apparent on the face of the record' and 'mistake apparent from the record'. In the words reproduced by the source cited on this page: "A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions." The decision followed or applied Affirms Volkart Brothers v. ITO [1967] 65 ITR 179 (Bom.)(HC); Applies Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale [1960] 1 SCR 890; Cites Sidhramappa Andannappa Manvi v. CIT [1952] 21 ITR 333 (Bom.).
It was decided by the Supreme Court on 1971-08-05 and is reported as (1971) 82 ITR 50 (SC); (1971) 2 SCC 526; AIR 1971 SC 2204; [1972] 1 SCR 30; Civil Appeal No. 1170 of 1968. 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, section 113, section 2(31), 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 Revenue's appeal was dismissed with costs and the Bombay High Court's order affirmed. Whether s.17(1) of the 1922 Act applied to a firm at all was not free from doubt, since that Act defined 'person' to include only a Hindu undivided family and a local authority while the 1961 Act defines it differently, and deciding whether the later definition amended or merely declared the earlier law would require examining the scheme of the Act. The Income-tax Officer was therefore not justified in thinking there could be no two opinions on the question, and it was not open to him to determine the true scope of the provisions in a s.154 proceeding: a mistake apparent on the record must be an obvious and patent mistake, not one established by a long drawn process of reasoning on points on which two opinions are conceivable. The Court added that the High Court itself was not justified in going into whether the original assessments were in accordance with law. It arises in Revision & Rectification matters, on section 154, section 113, section 2(31) of the Income Tax Act 1961, and was decided by K.S. Hegde and A.N. Grover, JJ (judgment delivered by Hegde 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. If the department rectifies a legal position, ask whether the point admits of two views; if it does, s.154 is the wrong provision. Note the limitation for rectification and do not let a s.154 application substitute for a time-barred appeal.
Still good law. Relied on by the Hyderabad Bench of the ITAT on 13 May 2026 in Sydakhatoon Mahammad Karimnagar v ITO (2026 TAXSCAN (ITAT) 571), which set aside a s.154 order making a fresh Rs 13 lakh addition under s.69A, holding rectification cannot extend to issues requiring examination of facts and appreciation of evidence. No amendment to s.154 was found that disturbs the 'obvious and patent mistake' test. That finding was checked against a published source, which is linked on this page, on 2026-08-25. 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 rectification was made under s.154 of the 1961 Act but the question at issue was the applicability of s.17(1) of the Indian Income-tax Act, 1922 (whose successor, s.113, was omitted with effect from 1 April 1965), so the case is authority on the scope of the rectification power rather than on any surviving charging provision. Two limits are worth noting. The Court held the High Court should not have gone on to decide that the original assessments were in accordance with law, so the case is not authority on that. And it expressly declined to spell out the difference between 'error apparent on the face of the record' under Article 226 and 'mistake apparent from the record' under s.154, saying only that the latter power is no wider. The parallel citation (1971) 2 SCC 526 carried in this entry was not printed in the report read. The report prints the judgment as continuous text without numbered paragraphs, so quotations from it cannot be given a paragraph number. The parallel citation (1971) 2 SCC 526 was not confirmed against the report read. 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 Revenue's appeal was dismissed with costs and the Bombay High Court's order affirmed. Whether s.17(1) of the 1922 Act applied to a firm at all was not free from doubt, since that Act defined 'person' to include only a Hindu undivided family and a local authority while the 1961 Act defines it differently, and deciding whether the later definition amended or merely declared the earlier law would require examining the scheme of the Act. The Income-tax Officer was therefore not justified in thinking there could be no two opinions on the question, and it was not open to him to determine the true scope of the provisions in a s.154 proceeding: a mistake apparent on the record must be an obvious and patent mistake, not one established by a long drawn process of reasoning on points on which two opinions are conceivable. The Court added that the High Court itself was not justified in going into whether the original assessments were in accordance with law.
TaxSphere, “T. S. Balaram, ITO v Volkart Brothers”, https://taxnotice.vittsphere.com/caselaw/case/ts-balaram-v-volkart-brothers/ (validity last checked 2026-08-25)
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