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Judgment
K. Raviraja Pandian, J.—The Writ Petition is filed seeking for the relief of issuance of writ of certiorari to call for the records in M.P. No.
35/Mds/2000 in I.T.A. No. 1199 of 1989 dated 30.11.2000 of the second respondent and quash the same.
The facts of the case are as follows:
The petitioner/assessee is a Company registered under the Companies Act and derives income from various sources. In respect of the assessment
year 1985-86 relevant to the previous year ended 31st March, 1985, the petitioner filed a return of income on 22.7.1985 declaring a net loss of
Rs. 32,99,289/-, which was revised by filing a revised return on 26.2.1988 declaring a loss of Rs. 32,80,700/- subject to the adjustment of the
loss brought forward from the earlier years. The first respondent ''Assessing Officer completed the assessment on 30.3.1988 and determined the
total income at Rs. 1,27,95,570/- by making various additions and disallowing various claims made by the petitioner.
The petitioner filed an appeal before the Commissioner of Income Tax (Appeals), who by his order dated 31.1.1989 allowed the appeal in part
and rejected some of the claims made by the petitioner. The petitioner filed further appeal before the Income Tax Appellate Tribunal. The Tribunal
by its order dated 31.1.1997 allowed the appeal in part which includes the loss claimed on the following three heads, which are germane to the
case:
a) claim of loss relating to potato business;
b) claim of loss relating to the dealing in shares and securities;
c) claim relating to scrap dealings.
The revenue not satisfied with the order of the second respondent Tribunal, on 10.4.1997 filed a petition u/s 256(1) of the Income Tax Act, 1961
(hereinafter referred to as ""the Act"") requiring the Tribunal to draw up the statement of the case and refer the questions of law for determination by
the High Court, which are as follows:
Whether on the facts and in the circumstances of the case the Tribunal is justified in holding that the assessee was doing business in potatoes and
the loss of Rs. 74.65 lakhs was allowable as a business loss?
Whether the Tribunal was justified in ignoring the orders of the Settlement Commission, where the persons from whom the assessee is supposed
to have made purchases have categorically admitted that their transactions with the assessee was a bogus one?
Whether the findings and conclusions of the Tribunal on the facts and documents on record are not perverse?
Whether the Tribunal is justified in its conclusion that the loss in purchase and sale of shares and scraps was justified in law?
Whether the Tribunal had materials to come to the conclusion that the assessee''s dealings in potato sales, shares and scraps was genuine?
Whether the Tribunal is justified in its conclusion that the loss of Rs. 17.97 lakhs stated to have been incurred by the assessee in scrap dealings
is allowable as deduction?
Whether the Tribunal is justified in holding that the claim of the assessee for deduction of Rs. 20,000 as loss in investments was justified in law?
Whether the conclusions of the Tribunal on the various aspects are not perverse and opposed to the various documents that are available on
record as well as orders of the Settlement Commission? and
Whether the Tribunal on the facts and in the circumstances of the case and in view of the orders of the Settlement Commission should not have
remitted the matter for fresh consideration and decision on the basis of the evidence available on record particularly the findings of the Settlement
Commission?
While the said reference petition is pending before the Tribunal on 10.7.1997, the first respondent filed a petition u/s 254(2) of the Act in M.P.
No. 35 of 2000 in I.T.A. No. 1199 of 1989 for rectification of mistakes in the order of the Tribunal dated 31.1.1997. The petitioner filed reply
objecting to the said petition. After hearing the parties, the second respondent ''Tribunal by its order dated 30.11.2000 allowed the miscellaneous
petition in part. The correctness of that part of the order is put in issue in this writ petition.
In order to complete the narration of the facts, though it is not relevant to the present case, the following facts are to be stated:
While the appeal filed by the petitioner was pending before the Commissioner of Income Tax (Appeals), the petitioner filed a petition before the
Settlement Commission on 16.12.1988. After filing of the said petition, the Commissioner of Income Tax (Appeals) passed an order in the appeal
on 31.1.1989. The petitioner filed an appeal before the Tribunal against the order of the Commissioner of Income Tax (Appeals). When the
appeal was pending before the Tribunal, the Settlement Commission passed an order u/s 245(d)(1) admitting the petition for settlement. The
revenue carried the matter on appeal before the Supreme Court. The Apex Court by its order dated 11.1.1994 (reported in Commissioner of
Income Tax, Madras Vs. M/s. Express Newspaper Ltd., had set aside the order of the Settlement Commission. In the said order, the Apex Court
directed that it shall be open to the petitioner to file an appeal before the Income Tax Appellate Tribunal against the order dated 31.1.1989 of
Commissioner (Appeals) within one month and directed the Tribunal to treat the appeal, if any filed by the petitioner as directed as within time.
Thereupon the appeal already filed and pending before the Tribunal was heard and disposed off on 31.7.1997. In the Rectification Petition, the
Revenue has pleaded that the Tribunal''s order on already pending appeal is against the direction of the Supreme Court, which was rightly rejected
by the Tribunal.
In this writ petition, It is contended by the petitioner that in the guise of passing order u/s 254(2) of the Act, the Tribunal virtually re-heard and
reviewed the original order, which is totally without jurisdiction. The power u/s 254(2) extends only to rectification of mistake apparent on the face
of the record. The second respondent has committed error of law and of jurisdiction in exercising the power u/s 254(2) of the Act in re-calling its
earlier order passed in appeal. The Tribunal is a statutory authority and is exercising power conferred by the Act. It has no ""plenary"" power and
has no power to review its own decision. Even if the order passed by the Tribunal was incorrect or erroneous it would not fall within the
connotation ""mistake apparent on record"". The order passed by the Tribunal u/s 254 is final under Sub-section 4 of the Act. By invoking Sub-
section 2 of the said Section, the statutory finality cannot be destroyed. The Tribunal in its original order considered all the relevant materials on
record and passed a very lengthy and detailed order in respect of the three issues under consideration. That shows the Tribunal has has applied its
mind and passed the order. Such an order cannot be re-called by invoking the power u/s 254(2) of the Act.
On the other hand, the learned Counsel for the revenue supported the order passed by the Tribunal by contending that there is palpable mistake
on the part of the Tribunal in observing that the borrowals of Express Newspapers from Traders and Services and the borrowals of Trades and
Services from various creditors had not been questioned by the Department. So, is the observation of the Tribunal that the cold storages were
functioning even after November 1984 and Express had stocks worth Rs. 1.5 Crores in the cold storages between November 1984 to February
1985. The Tribunal has proceeded on the assumption that the Department has not questioned the genuineness of the transaction of the assessee
with the bankers and the shareholders, which is also factually incorrect. In respect of the transaction in scrap dealings, the Tribunal held that except
the cash book and ledger all other documents were produced and were available with the assessing officer when he made the assessment and the
Department did not find any discrepancy in the documents impounded later on. This assumption is also incorrect on facts. The mistake so
committed by the Tribunal was pointed out by the revenue in the rectification application and the Tribunal has correctly rectified the mistakes,
which are manifest on the face of the record. Hence, the order impugned requires no interference from this Court.
We heard the arguments of the learned Counsel on either side and perused the materials on record.
The scope and amplitude of Section 254(2) and the analogous provision Section 154 of the Act have been considered by catena of decisions of
the Apex Court and other High Courts. The uniform opinion of the Courts of superior jurisdiction is that a patent, manifest and self-evident error
which does not require elaborate discussion of evidence or argument to establish it, can be said to be an error apparent on the face of the record
and can be corrected u/s 254(2). An error cannot be said to be apparent on the face of the record if one has to travel beyond the record to see
whether the judgment is correct or not. An error apparent on the record means an error which strikes one on mere looking and does not need a
long drawn out process of reasoning on points on which there may be conceivably two opinions. The error should not require any extraneous
matter to show its incorrectness. To put it differently, it should be so manifest and clear that no court would permit it to remain on record. If the
view accepted by the court in the original judgment is one of possible views, the case cannot be said to be covered by an error apparent on the
face of the record. Section 254(2) specifically empowers the Tribunal to amend at any time within four years from the date of an order, any order
passed by it u/s 254(1) with a view to rectify any mistake apparent from the record either suo motu or on an application. In order to attract the
application of Section 254(2), the mistake must exist and the same must be apparent from the record. The expression ""mistake apparent from the
records"" contained in Sections 154 and 254(2) has wider content than the expression ""error apparent on the face of the record"" occurring in Order
47 Rule 1 of C.P.C. The restrictions on the power of review under Order 47 Rule 1 of C.P.C. do not hold good in the cases of Sections 254(2)
and 154 of the Act. Section 254(2) does not confer power on the Tribunal to review its earlier order. Under the grab of rectification of mistake it
is not possible for a party to take further chance of re-arguing the appeal already decided. What can be rectified u/s 254(2) is a mistake which is
apparent and patent. The mistake has to be such for which no elaborate reasons or enquiry is necessary. Where two opinions are possible then it
cannot be said to be a mistake apparent on the record. When prejudice resulting from an order is attributable to the Tribunal''s mistake, error or
omission, it is its bounden duty to set it right. The purpose behind the enactment of Section 254(2) of the Act to amend any order passed under
Sub-section (1), if any mistake apparent from the records is brought to the notice of the Tribunal, is based on the fundamental principle that no
party appearing before the Tribunal, be it an assessee or the Department, should suffer on account of any mistake committed by the Tribunal. This
fundamental principle has nothing to do with the inherent power of the Tribunal. If prejudice is resulted to the party, which prejudice is attributable
to the Tribunal''s mistake, error or omission and which error is a manifest error, then the Tribunal would be justified in rectifying its mistake.
Rectification can be made only when a glaring mistake of fact or law committed by the officer passing the order becomes apparent from the
record. The rectification is not possible if the question is debatable. A point which was not examined on facts or in law cannot be dealt with as a
mistake apparent from the record. No error can be said to be apparent on the face of the record if it is not manifest or self evident and requires an
examination or argument to establish it. Where without any elaborate argument one could point to the error and say here is a substantial point of
law which stares one in the face, and there could reasonably be no two opinions entertained about it, is a clear case of error apparent on the face
of the record. Vide Assistant Commissioner of Income Tax v. Saurashtra Kutch Stock Exchange Limited (2008) 305 ITR 227; Honda Siel Power
Products Ltd. v. CIT (2007) 295 ITR 466 (SC); Hari Vishnu Kamath Vs. Syed Ahmad Ishaque and Others, ; Commissioner of Income Tax,
Jabalpur Vs. Keshri Metal Pvt. Ltd., Raipur, ; Deva Metal Powders Pvt. Ltd. Vs. Commissioner, Trade Tax, U.P., ; Commissioner of Income
Tax (CNTL), Ludhiana Vs. Hero Cycles Pvt. Ltd., Ludhiana, ; Satyanarayan Laxminarayan Hegde and Others Vs. Millikarjun Bhavanappa
Tirumale, ; Thungabhadra Industries Ltd. v. Government of Andhra Pradesh Rep. by the Thungabhadra Industries Ltd. Vs. The Government of
Andhra Pradesh, ; Batuk K. Vyas Vs. Surat Borough Municipality and Others, ; K.T.M.S. Umma Salma Vs. Commissioner of Income Tax,
Central Madras, ; KIL KOTAGIRI TEA AND COFFEE ESTATES CO. LTD. Vs. Income Tax APPELLATE TRIBUNAL AND OTHERS., ;
Commissioner of Income Tax Vs. R. Chelladurai, ; The State of Tamil Nadu Vs. Thakorebhai and Brothers, ; JAINARAIN JEEVRAJ Vs.
COMMISSIONER OF Income Tax, RAJASTHAN II, JAIPUR (NO. 2)., ; Commissioner of Income Tax Vs. Vardhman Spinning, ; Bata India
Ltd. Vs. Deputy Commissioner of Income Tax and Others, and Commissioner of Income Tax Vs. Prahlad Rai Todi, .
From the various judgments of the Supreme Court above referred to and other High Courts, it is clear that the Tribunal''s power u/s 254(2) is
not to review its earlier order but only to amend it with a view to rectify any mistake apparent from the record. What can be termed as ""mistake
apparent"" ""Mistake"" in general means to take or understand wrongly or inaccurately; to make an error in interpreting; it is an error; a fault, a
misunderstanding, a misconception. Mistake in taxation laws has a special significance. It is mostly subjective and the dividing line is thin and
indiscernible. ""Apparent"" means visible, capable of being seen, easily seen, obvious plain, open to view, evident, appears, appearing as real and
true, conspicuous, manifest, seeming. The plain meaning of the word ""apparent"" is that it must be something which appears to be ex-facie and
incapable of argument and debate. If such a ""mistake apparent on the face of record"" is brought to the notice, Section 254(2) empowers the
Tribunal to amend the order passed u/s 254(1). Amendment of an order does not mean obliteration of the order originally passed and its
substitution by a new order. What is mistake apparent on the face of the record or where does a mistake cease to be mere mistake, and become
mistake apparent on the face of the record is rather difficult to define precisely, scientifically and with certainty. An element of indefiniteness
inherent in its very nature and it must be discernible from the facts of each case by judiciously trained mind. Mere existence of a mistake or error
would not per se render the order amenable for rectification, but such a mistake must be one which must be manifest on the face of the record.
Having in mind the enunciation of the legal principle about the scope and amplitude of Section 254(2) of the Act, let us consider the facts of the
present case. The rectification petition has been filed as if the original order of the Tribunal contains certain mistakes of fact. The first one is
regarding the loss in potato business. It is the case of the Department that the Tribunal in paragraph No. 26 of the order has stated that the
borrowals of Express Newspapers from Traders and Services and the borrowals of Traders & Services from various creditors had not been
questioned by the Department. This assumption of the Tribunal was not correct in view of the various correspondence; that the Tribunal relied on
the interim decree passed in the Civil suit filed by the petitioner in Calcutta High Court for damages from the cold storages and further relied on the
admission made before the trial Magistrate by the Director of the Cold Storage in a case filed by the Department against the petitioner, that it had
cheated Express. The Tribunal before relying upon them did not give an opportunity to the Department to examine the evidence produced first time
before the Tribunal, which factum was much disputed by the petitioner by contending that the Tribunal made available to the Department the paper
books containing those materials for its perusal and use and that no objection was raised by the Department before the Tribunal.
The other mistake of fact pointed out by the Department in the rectification application is in respect of transaction in share dealings. According
to the Department, the Tribunal proceeded on the assumption that the Department had not questioned the genuineness of the transaction of the
petitioner with bankers and other share brokers. The assumption is not correct because the assessing officer has given a finding in his assessment
order that the payments and receipts are interspersed in such a way that it is only Rs. 20 to Rs. 30 lakhs which is being rotated though the total
purchases are of the order of Rs. 1.81 Crores. It is the further submission of the Department that the other reasons given by the Tribunal that the
Bankers have acted as custodian or agent of the petitioner was also not correct in view of the letter dated 8.1.1985 of the Manager of the Lal
Bazaar Branch of the Bank. The statement of the Manager of Catholic Syrian Bank is that the Bankers had accommodated Express in their
transactions and also the statements of the share brokers admitting the transaction to be bogus; and that the Settlement Commission in the case of
Nariman Point Building Services Trading Private Limited, (a concern belonging to the Express group) has also given a clear finding that these
transactions of Express group with the share brokers in Calcutta were not genuine.
The other mistake of fact pointed out for rectification is the transaction in scrap dealings. It is the case of the Department that the Tribunal held
that except the cash book and ledger, all other documents were produced and were available with the assessing officer when he made the
assessment and the Department did not find any discrepancy in the documents impounded later on. According to the Department, this finding is
also incorrect in view of the fact that the Tribunal failed to notice that none of the alleged long term contracts on the basis of which the petitioners
were stated to be bound to sell scraps were produced; that the alleged suppliers of the scrap were not also able to produce any documents such
as godown receipts, evidence of having kept the stock in the godown, transportation charges, etc.; and that the Tribunal ignored the penalty order
for 1985-86 gives the details of the various discrepancies that were noticed by the Department in order to conclusively establish that the
transaction was bogus.
Loss in potato business:
The first issue is loss of potato business. The assessee claimed Rs. 74,65,519/- as loss in the business, which has been rejected both by the
assessing officer as well as the Commissioner of Income Tax (Appeals). The Tribunal has considered the issue in its order from paragraph No. 2
onwards. The facts leading upto the filing of appeal before the Tribunal, the reasoning of the assessing officer to reject the claim, the grounds taken
by the petitioner before Commissioner (Appeals), the reasoning of the Appellate order in confirming the order of assessment; the evidence and the
relevant material contained in the Paper Book VII and the evidence of one Gopal Agarwal at page No. 1846 of the Paper Book No. VII have
been referred in paragraph Nos. 3 to 19 of the Tribunal''s order.
In paragraph No. 20 of the Tribunal''s order, the petitioner''s contention has been summarised. The contention so summarised was to the effect
that the lower authorities have not proved that the purchases and sales and the related money transaction taken separately were bogus, that the
lower authorities have not proved first that the funds deployed by the petitioner to make purchases came back to the petitioner as expeditiously as
possible; that the lower authorities have not proved that it was the petitioner''s funds that came back to it in the guise of not sale proceeds; that the
main source of income of the petitioner is income from three properties at Madras, Bombay and Delhi and thus the petitioner is getting fixed
income; that the Department has alleged that the petitioner had generated bogus loss to reduce property income; that this allegation is totally
unfounded; that normally the practice of buying losses is resorted to only in the fag end of the accounting year or when there is a sudden spurt in
the profits or when there is a wind fall and that is not the case here; that the contracts for the purchases were entered into as early as in October
1984 and the payment for the purchases started in November 1984; that the payments have all been made by account payee cheques and thus the
transactions are contemporaneous; and that the cold storages were closed as per statutory provision during the relevant period has not been
proved by the Department.
The contention of the Department has been extracted in paragraph No. 21 of the order which reads that the assessee has failed to discharge
the primary onus in regard to purchase and sale of potatoes and the loss arising in its transaction has not been fully established; that the purchase
and sales have taken place when the cold storages ought to be closed under the relevant legislation and that the assessee''s own money was
circulated twice once at the time of purchase of potatoes and again at the time of sales of potatoes; and that the Department has established
beyond doubt that the assessee''s money has come back to it.
The explanation offered on behalf of the petitioner has been extracted in paragraph No. 22 of the order of the Tribunal and the submission
made on behalf of the Department in rejoinder has been stated in paragraph No. 24. Ultimately after analysing all the submissions, counter
submissions with reference to material and evidences available on record, the rival submissions are analysed in paragraph Nos. 25 and 26 as
follows:
We have gone through all the relevant facts and arguments of the rival parties. In regard to the loss suffered by the assessee on Potatoes
business, it is an accepted fact that for doing potato business the assessee engaged Shri Gopal Agarwal for sale and purchase of the potatoes.
Gopal Agarwal was interrogated on oath by the Department and Shri Gopal Agarwal had accepted this fact. Shri Gopal Agarwal has received
commission as well as storage charges which is not also disputed by the Department. The fact that Gopal Agarwal approached the Settlement
Commission and filed a petition is also established and the withdrawal of petition on doubtful and debatable submissions is also a fact on record.
The assessee sued Shri Gopal Agarwal in the Court of Law and obtained a decree for Rs. 80 lacs is also beyond doubt. In the prosecution
proceedings, Shri Gopal Agarwal submitted before the Magistrate that he or his institutions have tried to cheat the assessee is also borne out from
records. All sales and purchase works have been done by Gopal Agarwal. Agreements with purchasers and sellers of Potatoes have also been
made by Gopal Agarwal. It is only Shri Gopal Agarwal who can identify the respective traders to whom the amount was paid through bearer or
Account Payee cheques. The Department has not questioned Gopal Agarwal or examined the various purchasers and sellers of Potatoes in the
presence of Gopal Agarwal and, therefore, the parties examined by the Departmental Officer are not free from doubt. The signatures of the sellers
and purchasers could be tallied with the signatures available on agreements and only then the fact whether the cheques were issued to the same
parties or not could be established.
In regard to the objection of employment of funds and circulatory in nature it is observed that in the type of business and the peculiar
circumstances, this cannot be totally refuted. Besides this, the loan obtained by the assessee has not been doubted at any stage by the Department.
The loan amount has come through Account Payee Cheques and/or through Bank Drafts. The Department has failed to establish non-genuineness
of any credits obtained by the assessee whether it is from IE Newspaper (Madurai) Pvt. Ltd., - Rs. 46,50,000/-; Nariman Point B.S. and T.P.
Ltd., Rs. 31,61,000/- on Traders and Services'' Rs. 72,89,000/-. No where in the Assessment Order, it has been mentioned or proved that the
loans obtained by the assessee is not genuine or not proved, genuine, nor it is apparent from the Assessment Order that the Assessing Officer of
these parties were informed for conducting necessary enquiries on this account. Nor the Assessing Officer has enquired about the source of these
funds. Similarly in the case of K.K. Sukhani or his proprietary concern this basis issue was raised by the Assessing Officer. It is also observed that
the assessee had produced the relevant documents which were impounded by the Department as and when produced and that these documents at
no stage were objected to by the Department or proved to be wrong. Under the circumstances, we fail to understand as to how the Department
can say that the loan obtained was from Hawala conductors. If the loan is proved to be not genuine, the conclusions drawn by the assessing officer
on this account are baseless.
After analysing as above, ultimately the Tribunal in paragraph No. 27 has recorded its findings as follows:
After examining the full facts, we are of the opinion that the objections raised by the learned Standing counsel for the Department have been clearly
met by the Learned Counsel for the assessee. We are therefore, of the opinion that the disallowance of the loss suffered by the assessee on
account of business transactions on Potatoes is not proper. This loan is held as suffered in the nominal course of business activities and, therefore,
to be allowed.
Loss in Shares & Securities:
In Paragraph No. 28 of its order, the Tribunal discussed the assessment order on the issue of ""loss in shares and securities""; that the
petitioner''s statement of facts before the Commissioner of Income Tax (Appeals) and his discussion on this issue is referred to therein. The
contention of the assessee relating to both the purchases and sales of the shares has been discussed thereafter in paragraph Nos. 29 to 33 of the
order. The argument on behalf of the Department was summarised in paragraph No. 34 and the rebuttal argument of the assessee has been stated
in paragraph No. 35. The analysis of the arguments with reference to material on record is available at paragraph No. 36, in which it was held that
the fact that all the purchases and sales of shares were got done through bank channels are not doubted; that the assessee has paid custodian
charges too to the Bank who has acted as an agent of the assessee; that the Bank in turn has taken necessary permission from its Head Office for
acting as an agent of the assessee; that the source of the amount used for purchase of shares have not been doubted by the Assessing Officer; that
this, in turn, brings out the fact that the Department has accepted the genuineness of the loans raised by the assessee for the purchase of the shares;
that the arguments or objections raised by the learned Sr. Standing Counsel for the Department have been clearly met by the learned Counsel for
the assessee; that the non-making of entries (in the Souda Bahi) in the books of the brokers would not make much difference so far as the
transaction conducted by the assessee in regard to purchase and sale of the shares; that the Assessing Officer has extensively examined the
representatives of the brokers, copies of which were supplied by the assessee; that none of these have denied the transactions conducted by the
assessee and, therefore, the genuineness of these purchases and sales cannot be doubted. After so analysing the facts, the Tribunal has recorded a
finding in paragraph No. 37 to the following effect:
In view of the above discussions, we are of the opinion that the assessee genuinely suffered the loss in the trading activities of purchase and sale
of shares which cannot be disallowed nor these transactions can be held as speculative in nature. The conclusions drawn by the CIT (Appeals) on
this account are considered as unreasonable and unjustified. Hence, this ground of appeal is decided in favour of the assessee.
Loss in scrap dealings:
The next issue is ""loss of scrap dealings. The Tribunal in paragraph Nos. 38 and 39 of its order referred to the reasoning given by the assessing
officer in the assessment order and that of the Commissioner of Income Tax (Appeals). The facts of the case has been discussed in paragraph No.
The contentions advanced on behalf of the assessee before the Tribunal has been stated in extenso in paragraph Nos. 40 to 44. The
submission made on behalf of the Department has been extracted in paragraph No. 45. In paragraph No. 46, the issue has been discussed by the
Tribunal. The discussion proceeded that the assessing officer has disallowed the loss suffered by the assessee on transactions of scrap mainly on
the ground of non-production of books of accounts; that except the cash book and the ledger book all other relevant documents were produced
and available with the assessing officer; that from the documents placed on record, it was observed that the assessing officer has examined the
various scrap dealers on oath; that their statements duly recorded are available in Vol-V from page Nos. 1089 to 1134 of the Paper Book; that all
the traders examined by the assessing officer or his authorised representative have confirmed the transactions conducted with the assessee; that the
remaining books of accounts were produced before the officer (Inspection), Calcutta on 6.2.1989; that these remaining books of accounts were
impounded by the ADI (Investigation), Calcutta; the list of which is available at page 1058 and 1089 of the Paper Book Volume IV; that though
the assessments had already been completed before the date of impounding of the books of accounts, yet if no discrepancy was observed as
detected, the same could have been brought on record at the time of proceedings before the Settlement Commission; and that since none of such
defects or discrepancies were observed or reported, it is proved that whatever stated by the assessee at earlier stages are supported by the
documents seized by the Department on earlier occasions as reasonable and genuine.
After so discussing the issue, the Tribunal had recorded a finding in paragraph No. 47 as follows:
It is also observed that since all the Traders have confirmed the dealings with the assessee. The Department has not considered it reasonable
evento intimate the transactions to the respective Assessing Officers. Since the matter, in question, is quite old and almost 12 years have already
gone, no useful purpose would be served if the matter, in question, can be referred back. Since the material available on record and all the
supporting documents clearly establish the fact of scrap dealings and all transactions are through Account Payee cheques, it can be genuinely
believed that the assessee has suffered loss which should be allowed as part of normal business activities. We are, therefore, of the opinion that the
CIT (Appeals) is not justified in not allowing the loss suffered by the assessee on this account.
From the above extractions and narration, it is clear that in respect of all the three points, the Tribunal has considered and discussed all the
contentions raised and argued by both the parties and ultimately recorded a finding. A clear adjudication has been made. A mere isolated or stray
sentence ""Nowhere in the assessment order it has been mentioned or proved that the loan obtained by the assessee is not genuine or not proved
genuine; the Assessing Officer not doubted the transaction; that the books of accounts were available with the Assessing Officer"" have been
projected as a mistake apparent on the face of the record. It is pertinent to state that the Tribunal has not come to the conclusion that the petitioner
is entitled to these claims solely resting upon the above observations which is regarded as mistake of fact by the Department. The Tribunal has
given its own reasoning in the earlier and subsequent sentences of the above observations, to come to the conclusion. The issues have been
elaborately discussed and decided on merits. The order of the Tribunal may be an erroneous order with which we are not expressing any opinion,
which can only be rectified or modified or set aside in the procedure known to law, but not in a petition u/s 254(2). A patent mistake and a self
evident error, which strikes one on mere looking at it, which does not require elaborated discussion or argument to establish can only be rectified
u/s 254(2). The order passed in the rectification petition in our view is one passed in disguise of appeal. Even in the question of law framed and
sought to be referred for the determination of this Court in the reference petition filed u/s 256(1) of the Act by the Department, the so called
alleged mistake apparent on the record which is taken as a point for filing a miscellaneous petition u/s 254(2) has not been stated. One opinion
given on consideration of materials by the Tribunal is reversed by giving other opinion in the rectification order, which is impermissible and against
the legislative intent.
Learned Senior Standing Counsel appearing for the revenue relied on a judgments of the Allahabad High Court in the case of Commissioner of
Income Tax Vs. U.P. Shoe Industries, ; Rajasthan High Court in the case of Champa Lal Chopra Vs. State of Rajasthan, and Commissioner of
Income Tax Vs. S.S. Gupta, and the Supreme Court in the case of Honda Siel Power Products Ltd. v. Commissioner of Income Tax reported in
(2007) 295 ITR 466.
In the case of Commissioner of Income Tax Vs. U.P. Shoe Industries, the facts are that in an appeal before the Income Tax Appellate Tribunal
the assessee had raised a ground regarding the disallowance of development rebate and relief u/s 80J of the Income Tax Act, 1961. The Tribunal
while deciding the said appeal pertaining to the assessment year 1973-74 decided the said ground has become redundant, as the relief was granted
by the assessing officer in an application u/s 154. Subsequently, it transpired that the application u/s 154 of the Act moved by the assessee was
rejected. Pointing out this mistake, an application was filed by the assessee u/s 254(2). The Tribunal recalled its earlier order in respect of that
issue and restored the matter to decide that issue. When that order was questioned, the Division Bench of the Allahabad High Court has held that
the order of the Tribunal that the issue becomes redundant because of the Income Tax officer had already passed an order u/s 154 of the Act
giving relief to the assessee was a mistake apparent from the records.
In the case of Champa Lal Chopra Vs. State of Rajasthan, a survey was conducted at the premises of the assessee the karta of a Hindu
undivided family, u/s 133A, on August 18, 1979. The Income Tax Officer after investigation assessed the income of the assessee and made an
addition of Rs. 80,000 in the income for the assessment year 1978-79. The appeal against the order of assessment was dismissed by the Appellate
Assistant Commissioner. On further appeal, the Tribunal dismissed the same by order dated July 26, 1984. The assessee filed an application u/s
254(2) of the Income Tax Act, 1961, for rectification of the mistake. It was, inter alia, pointed out in the rectification application that the assessee
was assessed as a Hindu undivided family an entirely different entity distinct from the assessee in his individual capacity, that the Hindu undivided
family, was not the owner of the diaries and other papers even at the time of search and, therefore, the additions which were made on account of
alleged entries recorded in the said papers in the income of the Hindu undivided family, were erroneous. Many other obvious mistakes were also
detailed in the application. The Tribunal agreed with the assessee and admitted that there were certain mistakes of fact. The Tribunal was of the
view that as the judgment had proceeded on a wrong assumption of facts, it was expedient in the interest of justice to recall the order and post the
appeal for rehearing. A writ petition filed by the Department was allowed by a single judge. On appeal , the Division Bench allowing the appeal,
held that the Tribunal granted rectification and posted the case for rehearing, having admitted that its order had proceeded on the assumption of
wrong facts. Hence the exercise of jurisdiction of the Tribunal u/s 254(2) was in order to correct a mistake apparent in the record.
In the case of Commissioner of Income Tax Vs. S.S. Gupta, the assessee, an individual was a partner of seven firms. The Tribunal held that
the seven firms in which the assessee was a partner were benami for the assessee and the assessee was the real owner of such firms. On this
finding the income of all the seven firms for the assessment years 1983-84 to 1987-88 was clubbed with the income of the assessee as an
individual. The appellate order of the Tribunal was passed on February 23, 1999. In recording the aforesaid findings, the Tribunal had primarily
relied on a letter dated January 11, 1999, received from the Assessing Officer, by which it was informed that in the assessments relating to the
firms, the firms were held to be not genuine but benami of the assessee. A miscellaneous application was moved by the assessee bringing to the
notice of the Tribunal that the hearing of the appeals was completed on January 7, 1999, and the letter dated January 11, 1999, which was after
the appeals were heard, was never disclosed to the petitioner. Thereupon the Tribunal recalled its order on the point of clubbing and directed the
appeals to be placed for hearing in due course. On further appeal to the High Court, dismissing the appeal, held that a finding of fact against the
assessee had been reached on the basis of material which was conveyed to the Tribunal after the hearing was over, and thus the Tribunal
inadvertently took into consideration such information which was never disclosed to the assessee and without affording any opportunity to him to
explain the information transmitted to the Tribunal which vitiated the order founded on such information. This was a mistake obvious from the
record.
In the case of Honda Siel Power Products Ltd. v. Commissioner of Income Tax reported in (2007) 295 ITR 466 the assessee had taken a
term loan in foreign exchange for the import of machinery. On account of fluctuation in the foreign exchange rate, the liability of the assessee to
repay the loan in terms of Indian rupees went up. The assessee enhanced the figure of written down value of the block of assets and claimed
depreciation accordingly. The Assessing Officer held that revision in actual cost was not permissible but on appeal the Commissioner (Appeals)
held that the claim was admissible. On appeal, the Appellate Tribunal held that the revision was not permissible unless actual payment had been
made by the assessee, since u/s 43A actual payment was a condition precedent for availing of the benefit. The assessee moved the Appellate
Tribunal for rectification of its order, pointing out that the earlier order of a co-ordinate Bench of the Tribunal in which it was held that the
enhanced depreciation was admissible even on notional increase on the cost of the asset had been cited before the Tribunal, but the Tribunal had
inadvertently not considered the submission of the assessee to that effect. The Appellate Tribunal allowed the rectification application of the
assessee stating that the judgment of the co-ordinate Bench of the Tribunal had escaped its attention. The Department preferred an appeal to the
High Court and the High Court set aside the order of the Tribunal holding that the power to rectify any mistake was not equivalent to a power to
review or recall the order sought to be rectified. On appeal to the Supreme Court, reversing the decision of the High Court, held that in allowing
the rectification application the Tribunal gave a finding that the earlier decision of a co-ordinate Bench was cited before it but through oversight it
had missed the judgment while dismissing the appeal filed by the assessee on the question of admissibility/ allowability of the claim of the assessee
for enhanced depreciation u/s 43A. It is a mistake which could be rectified u/s 254(2).
None of the reasons stated in the above said four cases, which are mistake apparent on the face of the record is available in the facts of the
present case. It is settled law that one different or additional factor or variance in fact in the case would make ocean of difference from the
precedent cited. Therefore the said judgements do not advance the case of the Department.
For the fore-going reasons, we are of the view that the Tribunal fell in error in invoking the jurisdiction of Section 254(2) of the Act to re-write
the judgment while reviewing the issue already decided, which bears no apparent mistake on the face of the record so as to invoke the jurisdiction.
Hence, the writ petition is allowed and the rule is made absolute. However, there is no order as to costs.