1980 (10) TMI 40 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Income-tax Appellate Tribunal was correct in law in holding that the Appellate Assistant Commissioner (AAC) was not justified in passing rectification orders for the assessment years 1962-63 and 1963-64 under section 154 of the Income-tax Act, 1961.

Detailed Analysis:

1. Background and Context:
The revenue referred a question of law to the High Court under section 256(1) of the Income-tax Act, 1961, arising from the order of the Income-tax Appellate Tribunal, Ahmedabad Bench 'A'. The question addressed whether the Tribunal was correct in law in holding that the AAC was not justified in passing rectification orders for the assessment years 1962-63 and 1963-64 under section 154 of the Income-tax Act, 1961.

2. Facts Leading to the Reference:
The assessee, an individual, was a member of a joint Hindu family (HUF). For the assessment years 1962-63 and 1963-64, the Income Tax Officer (ITO) added 1/6th of the income from the HUF property to the assessee's total income as a protective measure. The AAC, following a Tribunal decision for the HUF's assessment years 1960-61 and 1961-62, deleted this 1/6th share from the assessee's income to avoid double taxation. Later, a different Tribunal Bench, for the HUF's assessment year 1962-63, held that the 1/3rd share of the property belonging to the deceased Dinesh devolved on his heirs and ceased to belong to the HUF.

3. Rectification Proceedings:
Upon learning of this later Tribunal decision, the AAC sought to rectify the earlier orders under section 154. The assessee opposed this, but the AAC overruled the objections and ordered rectification. The Tribunal, however, held that the AAC had no jurisdiction under section 154 as there was no apparent error from the record, citing the Supreme Court decision in T. S. Balaram v. Volkart Brothers [1971] 82 ITR 50.

4. Legal Provisions and Interpretation:
Section 154(1)(b) allows the AAC to amend any order passed by him to rectify any mistake apparent from the record. The revenue argued that the later Tribunal decision for the HUF's assessment year 1962-63 revealed an error in the AAC's earlier orders. However, the Tribunal's decision for the assessment years 1960-61 and 1961-62, which formed the basis for the AAC's original decision, remained unchanged.

5. Supreme Court Precedents:
The revenue relied on the Supreme Court decision in Mahendra Mills Ltd. v. P. B. Desai, AAC of I.T. [1975] 99 ITR 135, where the AAC rectified an order based on a Tribunal decision affecting the opening stock for a subsequent year. However, the High Court found this inapplicable as the later Tribunal decision in the present case did not form part of the record when the AAC made the original decision.

6. Conclusion and Judgment:
The High Court concluded that the AAC's rectification under section 154 was not justified as the later Tribunal decision for a different year and assessee was extraneous to the record of the original appeals. The Supreme Court's decision in T. S. Balaram v. Volkart Brothers was deemed relevant, emphasizing that a mistake apparent from the record must be obvious and not subject to long-drawn reasoning. The High Court affirmed that the Tribunal was correct in holding that the AAC had no jurisdiction to pass the rectification orders, answering the referred question in the affirmative, in favor of the assessee and against the revenue. The Commissioner was ordered to pay the costs of the reference to the assessee.