Section 154 rectification allowed even after a subsequent judgment if mistake is apparent from record, not a debatable question

HC held that rectification under section 154 may be invoked even when a jurisdictional or superior court delivers a judgment after the impugned income-tax order. The mistake must be apparent from the record (which includes return, evidence and order) and may be of fact or law, but must be glaring and not a debatable question. Section 154's time and other statutory limits apply, and invocation does not infringe any vested right.

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Issues Involved:
1. Can proceedings for rectification of an order u/s 154 of the Income-tax Act, 1961, be initiated based on a subsequent judgment by a jurisdictional or superior courtRs.
2. Whether the mistake apparent from the record includes subsequent judicial pronouncementsRs.
3. The impact of subsequent judicial decisions on vested rights and finality of orders.

Summary:

Issue 1: Rectification Proceedings Based on Subsequent Judgment
The primary issue was whether proceedings for rectification of an order u/s 154 of the Income-tax Act, 1961, can be initiated based on a judgment delivered by a jurisdictional or superior court after the passing of the said order. The court held that the power u/s 154 can indeed be invoked even when an issue is decided by the jurisdictional High Court or a superior court after the order has been passed. The court emphasized that the legislative intent of section 154 is to correct mistakes and not to perpetuate them, even if the mistake becomes apparent due to a subsequent judicial decision.

Issue 2: Mistake Apparent from the Record
The court examined when a mistake can be said to be apparent from the record. It was held that the mistake should be patent and ex facie from the record, not a mere possible view or debatable issue. The court rejected the argument that the error must be apparent only with reference to the date on which the order was passed. The court stated that the provision does not restrict the error to be seen only at the time of passing the order and thus, subsequent judicial pronouncements can render an earlier view erroneous.

Issue 3: Impact on Vested Rights and Finality of Orders
The court addressed the argument that a subsequent judicial decision should not affect vested rights or the finality of orders. It was held that any right under an order is subject to the provisions of the statute, including section 154, which allows for rectification within a specified time if the mistake is apparent and the issue is not debatable. The court also noted that the judicial principle of retroactive operation of judge-made law has not been negated by Parliament in the context of section 154, unlike in Order 47, rule 1 of the Civil Procedure Code.

Merits of the Case:
On the merits, the court noted that the dispute related to the assessment year 1987-88 and had been litigated for over 13 years with a limited ultimate tax effect. Despite deciding the question of law in favor of the Revenue, the court declined to interfere with the order passed by the Income-tax Appellate Tribunal, considering the prolonged litigation and trivial tax effect.

Conclusion:
The court concluded that proceedings for rectification of an order can be initiated based on a subsequent judgment by the jurisdictional High Court or the Supreme Court. However, in this particular case, the court chose not to interfere with the Tribunal's order due to the prolonged litigation and limited tax impact. No costs were awarded.

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