TaxTMI 
TaxTMI 
2009 (11) TMI 15
X X X X Extracts X X X X
X X X X Extracts X X X X
....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. 3. 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 under Section 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 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 under Section 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 (1994) 206 ITR 443) 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 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at 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. 8. We heard the arguments of the learned counsel on either side and perused the materials on record. 9. 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 under Section 254(2). An error cannot be said to be apparent on the face of the record if....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le 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 VS. SAURASHTRA KUTCH STOCK EXCHANGE LIMITED (2008) 305 ITR 227; HONDA SIEL POWER PRODUCTS LTD. VS. CIT (2007) 295 ITR 466 (SC)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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. 11. 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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: 14. 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 (App....
X X X X Extracts X X X X
X X X X Extracts X X X X
....come back to it. 17. 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: "25. 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 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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." 18. 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: 19. 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r and that of the Commissioner of Income-tax (Appeals). The facts of the case has been discussed in paragraph No.39. 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.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng 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 under section 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 under Section 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 under Section 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 under Section 254(2) has not been stated. One opinion given on consideration of materials by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee filed an application under section 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at 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 under section 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 t....