2003 (2) TMI 38 - HC - Income Tax

The income-tax authorities contended that as per the interpretation of law made by the apex court certain deductions were not admissible and therefore there was a mistake apparent from the record and therefore rectifiable under section 154 of the Income-tax Act. Accordingly notices dated January 16 1995 for both the aforesaid assessment years under section 154 of the Income-tax Act 1961 were issued to the petitioner. - This court is of the view that the Explanation added to rule 1 of Order 47 of the Code of Civil Procedure in order to define an error or mistake apparent on the face of the record is equally applicable to section 154 of the Income-tax Act 1961. In construing section 154 of the Income-tax Act 1961 the court is justified in taking into consideration other enactments where identical provision has been defined by the same Legislature. - In the result this application succeeds. The notices dated January 16 1995 being annexure F to the petition are quashed and declared null and void.

Summary

Issues:

1. Challenge to notices issued under section 154 of the Income-tax Act, 1961 for assessment years 1988-89 and 1989-90.
2. Jurisdiction of income-tax authorities to issue notices based on a subsequent ruling of the Supreme Court.
3. Interpretation of law by the Supreme Court and its retrospective application.
4. Comparison of mistake under Order 47 of the Code of Civil Procedure with mistake under section 154 of the Income-tax Act, 1961.
5. Applicability of the Explanation in Order 47 of the Code of Civil Procedure to section 154 of the Income-tax Act, 1961.
6. Binding nature of Division Bench judgment on the court.

Analysis:

The petitioner challenged the notices issued under section 154 of the Income-tax Act, 1961 for the assessment years 1988-89 and 1989-90, contending that they were issued without jurisdiction and should be quashed. The petitioner argued that the law laid down by the Supreme Court cannot have retrospective operation, and deductions previously granted cannot be considered unwarranted based on subsequent rulings. Reference was made to a Division Bench judgment of the court which emphasized that Supreme Court decisions do not have retrospective application in a way that would invalidate previous deductions granted.

The Department, represented by a senior advocate, cited a case where it was argued that a subsequent exposition of law by the apex court could justify reopening an assessment based on a mistake apparent on the record. However, the court disagreed with this proposition, emphasizing the need for consistency in interpreting the provisions of the Income-tax Act, 1961. The court highlighted the relevance of the Explanation in Order 47 of the Code of Civil Procedure, stating that it should also be considered in cases under section 154 of the Income-tax Act, 1961.

The court ultimately held that the Explanation in Order 47 of the Code of Civil Procedure is equally applicable to section 154 of the Income-tax Act, 1961. It emphasized the binding nature of the Division Bench judgment cited by the petitioner, underscoring the importance of consistency in legal interpretations. As a result, the court allowed the application, quashed the notices issued, and declared them null and void, with no order as to costs.