AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
1995 (3) TMI 65
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....sessing a sum of Rs. 1,09,950 as profits under section 41(1) in the proceedings made under section 154? 3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the Income-tax Officer was not justified in modifying the disallowance under section 40(c)(iii) of the Income-tax Act, 1961, in the rectification proceedings made under section 154 of the Income-tax Act, 1961? 4. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the Income-tax Officer was not justified in modifying the disallowance under section 40(a)(v) of the Income-tax Act, 1961, in the rectification proceedings made under section 154 of the Income-tax Act, 1961? " The assessee is a company. It submitted its income-tax returns for the years 1968-69 and 1969-70, which were, after enquiry, accepted by the Income-tax Officer and it was accordingly assessed and subjected to tax. It is not clear when and how, because all the relevant materials are not on record, but it is accepted by all concerned, that a revision of the assessment was undertaken and in the course of the proceedings for revision, the assessment....
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....sides the above mistakes the assessment also requires revision for withdrawal of development rebate in respect of the following items which were added in the accounting years 1966-67 and 1972-73 but were sold within a period of eight years : -------------------------------------------------------------------------------------------------------------------------------------------------- Account year Cost Sold in Assessment year assessment year -------------------------------------------------------------------------------------------------------------------------------------------------- Rs. (a) Steam vapour piping 1966-67 337 1970-71 1968-69 (b) Sulphur furnace 1971-72 5,116 1973-74 1973-74 ---------- 5,453 ---------- Development rebate allowed at 20 per cent. 1,091 -------------------------------------------------------------------------------------------------------------------------------------------------- This will also be withdrawn in this revision order. " Invoking thus the power under section 154 of the Act, the Income- tax Officer revised the assessment for 1968-69 for reasons as stated by him in the orders adjusting specifically to,-- (1) wrong allowanc....
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....sessee's appeal to the Commissioner of Income-tax (Appeals) was allowed in part. Both the assessee and the Department went on appeal to the Tribunal for the assessment year 1968-69, while the Department (Revenue) alone filed an appeal for the year 1969-70. The Tribunal held, (1) The Income-tax Officer was not justified in invoking the provisions of section 154 in respect of the disallowance made under section 37(3) ; (2) The Income-tax Officer was not justified in withdrawing the relief under section 80-1 and also in adjusting the disallowance under section 40(c)(iii) of the Act ; (3) Since the assessee was not allowed deduction under section 41(1) of the Act in the previous years, there was no scope for making any addition under section 41(1) of the Act ; (4) The disallowance under section 37(3) was not proper. The Tribunal, however, also observed and it has so stated in the statement of the case as follows : " According to the Tribunal, when the matter could not be reopened under section 147(b), there is no case for rectification under section 154. Regarding the withdrawal of relief under section 80-I, the Appellate Tribunal held that the issue was debatable and, therefore....
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....the assessment. The said proceeding, however, was held to be invalid by the Tribunal and the Revenue never sought for any reference on any question of law in the said reopened proceedings for assessment of tax. The Income-tax Officer, however, had ignored his earlier orders under section 147(b) of the Act and issued notice as contemplated under sub-section (3) of section 154 of the Act to the assessee for rectifying the mistakes, which, according to him, were apparent from the records. He has almost (although the order under section 147(b) of the Act and the consequent reassessment order are not available) reiterated, as the order rectifying the mistakes apparent from the record, his earlier order in the proceedings under section 147(b) of the Act. The crucial expressions for the exercise of two jurisdictions, one for the reopening of the assessment under section 147(b) of the Act and the other for rectifying any mistake apparent from the records under section 154 of the Act, are, for the former, the Income-tax Officer has in consequence of information in his possession reason to believe that the income chargeable to tax has escaped assessment, and, for the latter, any mistake app....
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....overed by a complicated process of investigation, argument or proof. " The view in this behalf in the judgments of the Supreme Court in Master Construction Co. (P.) Ltd. v. State of Orissa [1949] 17 STC 360 and ITO v. S. K. Habibullah [1962] 44 ITR 809, we shall presently see, has not suffered any change and is, even today, the correct approach for rectification of an error, which is said to be apparent from the record, the mere complexity of the problem or that genuine argument is necessary to discover the same, may not by themselves be sufficient to oust the jurisdiction of the Tribunal to rectify such a mistake. If, however, it could be discerned with some precision after a fair probe into the assessment records and a reasonable and probable conclusion can be arrived at that the court's conscience has been shaken, in that there appears an error, on record which has to be certainly corrected, then it would appear that the jurisdiction of the Tribunal vested with the power to rectify such mistakes arises. It is different from the provisions under Order XLVII, rule 1, of the Code of Civil Procedure, in the sense that rectification of any mistake in the case of the Revenue is when t....
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....ide a ground for rectification, but where it is debatable whether there was any mistake or misapplication of the law, rectification may not be permissible. Can there be a case, however, where it is apparent from the record, that some income has escaped taxation and such discovery of fact is taken as the basis for reopening the assessment under section 147(b) of the Act? A Bench of the Patna High Court in Mahasukhram Madanlal v. CIT [1955] 28 ITR 299, 305 has considered this aspect under section 34 of the Indian Income-tax Act, 1922, and observed, " the jurisdiction of the Income-tax Officer to start a proceeding under section 34 cannot obviously depend upon the ultimate result of the proceeding. Even if it is found ultimately upon enquiry that there has been no escapement of income, it is not a sound argument to advance that the Income-tax Officer had no jurisdiction to initiate the proceeding.... The Income-tax Officer has stated in the course of his order that action under section 34 was taken because it was detected in the assessment proceeding of 1944-45 that there was a difference in the capital account of the two firms between the Samvat years.... It is clear that though the....