Commissioner of Income Tax, Allahabad vs Chemical and Allied Products

R.K. Agrawal, J.—The income tax Appellate Tribunal, Allahabad has referred the following two questions of law u/s 256(2) of the income tax Act, 1961, hereinafter referred to as "the Act" for opinion to this Court: 1. Whether on the facts and circumstances of the case, the Tribunal was legally justified in holding that there was a mistake apparent from the record justifying rectification u/s 254(2) of the income tax Act, 1961?

Whether on the facts and circumstances of the case, the Tribunal was justified in recalling its earlier order dated 13-3-1987?

The present reference relates to the assessment year 1974-75.

Briefly stated the facts giving rise to the present reference are as follows:--

The assessee-opposite party has been assessed to income tax in the status of ''registered firm''. In the course of the assessment proceedings for the assessment year 1974-75, the Assessing Officer noticed that the assessee had shown deposits of Rs. 1,49,360 from 83 persons. It was claimed by the assessee that they were trade deposits. However, the income tax Officer treated it as undisclosed income and added to the total income of the assessee. Feeling aggrieved the assessee preferred an appeal before the Commissioner of income tax (Appeals), who deleted the addition. The revenue feeling aggrieved by the order deleting addition preferred an appeal before the Tribunal. The Tribunal had allowed the appeal filed by the revenue and had restored the assessment order. While restoring the order of the income tax Officer the Tribunal had made the following observations:

In the present case, the assessee claimed the depositors as trade depositors. The statements and the details showing deposits and supply filed by the assessee do not inspire confidence. It is surprising that some of the goods were supplied to the different parties on the same date on different rates. For example the goods supplied on 3-12-1977 to Kishori Lal Kedarnath (serial No. 14) of 75 bags at the rate of Rs. 2,000 and on the same date at the same place to Babulal & Co. (serial No. 16) i.e., in Gorakhpur 36 bags were supplied at Rs. 1,000. The deposits alleged to have been received from both of them were on 5-12-1973 and 8-12-1973 i.e., almost at the same time. On perusal of the statement, we find that the assessee had submitted a concocted story about the transactions. All the deliveries were made in 1977 at the time of original assessment proceedings, which lead us to believe that the transactions entered into the books of account were nothing, but to support the story. We, therefore, hold that the genuineness of the credits cannot be accepted.

Thereafter, the assessee had moved Miscellaneous Application No. 34/All./1989. By moving that application, it was pointed out that the observation made in the order of the Tribunal to the effect that the goods had been supplied to different parties, on the same day at the same place is factually incorrect. It was further pointed out that M/s. Kishori Lal Kedarnath is a party situated at Siswa Bazar, whereas M/s. Babulal & Co. is a firm situated at Barhalganj. It was stated in the application Siswa Bazar and Barhalganj are two different tehsils of district Gorakhpur and that the assessee-firm was located in district Deoria. The distance between the assessee''s place of business and Siswa Bazar was stated to be 60 kms., whereas the distance of Barhalganj was only 30 kms. Thus, it was contended that the inference of non-genuineness of cash credits had been drawn by the Tribunal under a misconception of fact that the goods had been supplied at the same place, while in fact the goods were supplied to the two parties at different places. Thus, the mistake was sought to be rectified.

The application was opposed by the revenue on the ground that there is no mistake apparent from record. It was also pointed out that similar application moved by the assessee already stands rejected and as such the second application is not maintainable. After considering the rival submissions, the Tribunal had recalled its order dated 13-3-1987 passed in the appeal. It had recorded the following findings on the miscellaneous application:

We have considered the rival submissions and have also looked into the record of the case as also the record of earlier miscellaneous application, being M.A. No. 100 (All.) of 1987. In the earlier application it was not pointed out that two parties namely, M/s. Kishori Lal Kedar Nath and M/s. Babulal & Co. are situated at two different places. In the circumstances, it would not be reasonable to hold that the present application is not maintainable because the earlier application already stands rejected. In the statement of parties, which have been filed by the assessee, the assessee has mentioned the address of M/s. Kishori Lal Kedar Nath at Siswa Bazar and of Babulal & Co. at Barhalganj. That being so it cannot be said that supplies to the said two parties were made at the same place. We, therefore, hold that the mistake which has been pointed out on behalf of the assessee is apparent from record and needs rectification.

We have heard Sri R.K. Upadhyay, learned standing counsel for the revenue and Sri Krishna Agrawal, learned counsel appearing for the respondent-assessee.

Sri Upadhyay, learned standing counsel, submitted that the assessee-opposite party had filed an application seeking rectification of the Tribunal''s order dated 13-3-1987 on the same grounds, which was registered as Miscellaneous Application No. 100 (All.) of 1987. The Tribunal vide order dated 16-11-1987 had rejected the said application by holding that the application filed by the assessee is on misconceived notion and there is no mistake apparent on the face of the record regarding order of the Tribunal. However, the Tribunal vide its order dated 21-6-1988 had allowed the second application which was filed on the same facts. It had, thus, exercised the power of review in the garb of power of rectification, which is not legally permissible. Even otherwise, according to him, there was no mistake apparent on the record regarding order dated 13-3-1987, which has been recalled vide order dated 21-6-1988. It was a debatable question of fact, which did not call for any exercise of power u/s 254(2) of the Act. In support of his submission, he has relied upon the following two decisions:

T.S. Balaram, Income Tax Officer, Company Circle IV, Bombay Vs. Volkart Brothers, Bombay, ,

Biswanath Prasad and Sons Vs. Commissioner of Income Tax, .

Sri Krishna Agrawal, learned counsel appearing for the respondent-assessee, on the other hand submitted that the Tribunal vide order dated 13-3-1987 had drawn an adverse inference against the assessee on the ground that the goods were supplied at the same place on different rates whereas the fact of the matter is that one party was situated at Siswa Bazar and the other party was situated at Barhalganj, which is at a considerable distance. Therefore, the adverse inference drawn was on incorrect facts, which was rightly rectified by the Tribunal vide its order dated 21-6-1988. According to him, it was an error apparent on the face of record and did not admit of any debate. The plea that the Tribunal has exercised the power of review is wholly misconceived.

We have given our anxious consideration to the various pleas raised by the learned counsel for the parties.

From the order of the Tribunal dated 13-3-1987 reproduced hereinbefore, we find that the Tribunal had drawn an adverse inference on the basis of the supplies made by the assessee-opposite party to some of the parties and giving one or two illustrations. It had rejected the application filed u/s 254(2) of the Act vide order dated 16-11-1987 on the ground that the goods mentioned at serial Nos. 14 and 16 of the statement of sales, referred to above, were transported to Gorakhpur itself and the explanation of the assessee that the goods were sent to different places and the difference in the price was on account of difference in cost of cartage etc. is misleading and false. It had further held that Misc. Application was filed by the assessee on the misconceived notion and there was no mistake apparent on the face of the record in the order of the Tribunal. Having come to the conclusion that there was no mistake apparent in the order of the Tribunal and the application was filed on misconceived notion, it was not open to the Tribunal to entertain the second application, which has been filed on the same set of facts and recalling the order dated 13-3-1987 on the alleged premises that there was an error apparent in the order dated 13-3-1987.

In the case of Volkart Bros. (supra), the Apex Court has held that 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 be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record.

In the case of Biswanath Prasad & Sons (supra), this Court has held that in the absence of any specific power conferred by the statute and/or inferred by implication the Tribunal which has been constituted under the Act cannot exercise any power of review and no such power can be inferred by implication nor there is any specific provision under the Act providing for review.

Applying the aforesaid principles to the facts of the present case, we are of the considered opinion that the Tribunal was not justified in reviewing its order in the garb of rectification proceedings as there was no error apparent on the record and it could be discovered only after a process of debate. We accordingly, answer both the questions referred to us in the negative i.e., in favour of the revenue and against the assessee. However, there shall be no order as to costs.