TMI Blog2004 (11) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... g both the parties, we find that there is no judgment of jurisdictional High Court on the question before us i.e., "Whether an order of the Tribunal can be rectified under section 254(2) of I.T. Act, 1961 in view of subsequent judgment of jurisdictional High Court". On the other hand, there is divergence of opinion amongst other High Courts. The Hon'ble Madhya Pradesh High Court in the case of Nav Nirman (P.) Ltd. v. CIT [1988] 174 ITR 574 held that a mistake discovered on the basis of subsequent judgment of jurisdictional High Court may be a mistake apparent from the record and, therefore, there is ground for rectification. Similar view has been taken by Full Bench of Hon'ble Punjab Haryana High Court in the case of CIT v. Smt. Aruna Luthra [2001] 252 ITR 76 by observing as under: "The power given to the authority under section 154 of the Income-tax Act, 1961, is very wide. It can correct "any mistake" provided it is apparent from the record. Section 154 does not provide that the error has to be seen in the order with reference to the date on which it was passed. The mistake has to be on the record of the case. The record would include everything on the case file.... The legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debate or doubt on the interpretation of any provision of a statute requiring interpretation by the Supreme Court or when there is a conflict of judicial opinion on the provision of a statute among the different High Courts of India which is required to be resolved and settled by the Supreme Court. The law laid down by the Supreme Court cannot be said to have retrospective operation in the sense that although a debate, doubt or conflict of judicial opinion is resolved and settled by the Supreme Court it does not obliterate the existence of such debate, doubt or conflict prior to such decision." It is to be noted that SLP against this judgment was also dismissed. The Hon'ble Andhra Pradesh High Court also took the view, in the case of CIT v. K. Venkateswara Rao [1988] 169 ITR 330, that order cannot be rectified on the basis of subsequent judgment. Which of the above views is correct can be decided only by the Hon'ble Supreme Court. In the absence of such decision, can it be said that there was a mistake apparent from the record in the orders of the Tribunal sought to be rectified. The scope of the expression "mistake apparent from the record" was considered by the Apex Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that the Supreme Court had subsequently held in Sahney Steel and Press Works' case [1997] 228 ITR 253, that power subsidy was revenue in nature would not justify the Commissioner's treating the decision of the Assessing Officer as erroneous. The power of the Commissioner under section 263 had to be exercised on the basis of the material that was available to him when he exercised the power. At that time, there was no dispute that the issue whether power subsidy could be treated as a capital receipt had been concluded against the Revenue. The satisfaction of the Commissioner was, therefore, not based on material either legal or factual, which alone would give him the jurisdiction to take action under section 263." If the order of Assessing Officer could not be held to be erroneous on the basis of subsequent Supreme Court judgment, where is the question of holding that order of the Tribunal suffered from mistake apparent from the record on the basis of subsequent judgment of jurisdictional High Court. The above judgment of Supreme Court rather impliedly upholds the view taken by the Hon'ble Calcutta High Court in the case of Jiyajeerao Cotton Mills Ltd. v. ITO [1981] 130 ITR 710 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naturally it has to be exercised sparingly and with caution and only in special and extraordinary situations. Beyond that, it is not possible to fetter the exercise of this power by any set formula or rule." It is, therefore, evident that powers under Article 136 can be exercised by theApex Courtsparingly and with caution and only in special and extraordinary circumstances i.e. cases where grave and substantial injustice has been done. Therefore, the fact that SLP has been admitted by the Supreme Court itself is sufficient to hold that there was a contentious and arguable issue requiring a long drawn process of reasoning. Had it not been so, the SLP would not have been admitted. Hence, it cannot be said that order of the Tribunal suffered from a mistake apparent from record on the basis of subsequent judgment of Uttaranchal High Court. 7. In view of the above discussion, it is held that there was no mistake in the impugned order of the Tribunal. Accordingly, these miscellaneous applications are dismissed. Per T.N. Chopra, A.M. - I have gone through the proposed order of the learned Judicial Member and also discussed the matter with him particularly in the context of an unen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y expatriate employees while working in India for the period of the stay out of India during the off period. 3. The basic question which has thus arisen before us is whether on the basis of the subsequent decision of the jurisdictional High Court, the order of the Tribunal is liable to be rectified under section 254(2) of the Act. Section 254(2) and section 154 of the I.T. Act, 1961 enable the concerned authorities "to rectify any mistake apparent from the record". The said expression has a wider content than the expression "error apparent on the face of the record" occurring in Order 47 Rule 1 of the Civil Procedure-Code, 1908. The restrictions on the power of review under Order 47, rule 1, do not hold good in the case of section 254(2) and section 154 of the Income-tax Act. Even for the purpose of Order 47, rule 1 of the Civil Procedure Code, 1908, which is more restrictive, a subsequent binding authority taking a different view of law is a good ground for review, on the ground that the order sought to be reviewed contain an error apparent on the face of the record. The wider content of the rectification jurisdiction under the Income-tax Act as compared with the Code of Civil P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee requesting the assessing authority to rectify the earlier order mistakenly made. That plea was rejected by the assessing authority and also by the Commissioner of Income-tax when a revision application was filed before him. The High Court of Bombay allowed the writ petition filed by the assessee and directed the Income-tax Officer to revise the order of assessment and grant refund to the extent of the tax levied on the excess dividends. By the time the matter was carried to the Supreme Court, the decision of the Bombay High Court in Khatau Makanji Spg. Wvg. Co. Ltd. v. CIT [1956] 30 ITR 841 was affirmed in CIT v. Khatau Makanji Spg. Wvg. Co. Ltd. [1960] 40 ITR 189 (SC). The Supreme Court affirmed the view taken by the Bombay High Court that the assessee was entitled lo refund of the amount. This ruling is a clear authority for the proposition that a subsequent decision can validly form the basis for rectifying an order of assessment under section 154 of the Income-tax Act, 1961. 6. String of judicial pronouncement of different High Courts like Rajasthan,Bombay, Kerala,Madras,Calcutta,Gujarat,Punjaband Haryana and Andhra Pradesh etc. can be cited in support of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. It appears to me that the rejection of the miscellaneous application filed by the revenue as suggested by the learned Judicial Member in his proposed order would run contrary to the settled proposition of law as laid down by Allahabad High Court as well as Supreme Court regarding the binding nature of the decision of jurisdictional High Court. Apart from the binding decisions of Hon'ble Supreme Court as well as Allahabad High Court, which are directly on the point in issue before us, similar view has been reiterated by other High Courts in the following judgments: Nav Nirman (P.) Ltd. v. CIT [1988] 174 ITR 574 (MP) Kil Kotagiri Tea Coffee Estates Co. Ltd. v. ITAT [1988] 174 ITR 579 (Ker.) CIT v. Sunil Kumar [1995] 212 ITR 238 (Raj.) Mettur Chemical Industrial Corpn. Ltd. v. CIT [1977] 110 ITR 822 (Mad.) CIT v. Moghul Builders Planners [2001] 252 ITR 488 (AP) CIT v. Mohan Lal Kansal [1978] 114 ITR 583 (Punj. Har.) CIT v. Purtabpore Co. Ltd. [1986] 159 ITR 362 (Cal.) B.V.K. Seshavatram v. CIT [1994] 210 ITR 633 (AP) CIT v. K. Venkateswara Rao [1988] 169 ITR 330 (AP) CIT v. Premier Polymers (P.) Ltd. [1992] 107 CTR (Cal.) 310. A bare perusal of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord even before the decision was handed down by the Supreme Court. The validity of the rectification is to be seen on the basis of the date of assumption of rectification jurisdiction by the Assessing Officer. According to the High Court, appearancy of the mistake has to be considered on the date of the issue of the rectification notice. Since the Supreme Court decision has been rendered in 1978, it could not justify assumption of rectification jurisdiction by the Assessing Officer in 1972. It was on these grounds that the rectification notice issued by the Assessing Officer was quashed by the High Court. 9. I may point out that the aforesaid distinction has been highlighted by the Kerala High Court in Kil Kotagiri Tea Coffee Estates Co. Ltd. v. ITAT [1988] 174 ITR 579 while holding that the subsequent decision of a jurisdictional High Court justifies rectification under section 154, the Kerala High Court explained the ratio of the Calcutta decision in Jiyajeerao Cotton Mills Ltd.'s case which was cited by the Tribunal to take a contrary view. The Kerala High Court observed on page 585 of the report as under: "We are afraid that the Appellate Tribunal misunderstood the ratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a mistake apparent from the record of the assessment. The order of rectification was, therefore, valid. (2) CIT v. Premier Polymers (P.) Ltd. [1992] 107 CTR (Cal.) 310: In this case the High Court held that a subsequent decision of the jurisdictional High Court could validly form the basis of rectification under section 154. Thus both the decisions of Calcutta High Court take the same view as taken by other High Courts and the learned Judicial Member has wrongly proceeded on the assumption that Calcutta High Court has taken a divergent view. 10. The learned Judicial Member has next cited the decision of Andhra Pradesh High Court in the case of CIT v. K. Venkateswara Rao [1988] 169 ITR 330. The facts of the case before the Hon'ble Andhra Pradesh High Court are entirely distinguishable. In this case also, like theCalcuttadecision cited by the learned Judicial Member rectification proceedings were initiated not on the basis of any binding decision of the jurisdictional High Court. In this case their lordships held that the decision of High Court was rendered onMarch 6, 1979, whereas the jurisdiction to rectify the alleged mistake under section 154 was invoked as early asAugust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake apparent from the record on the basis of subsequent judgment of Uttaranchal High Court. The earlier order of the Tribunal is, therefore, liable to be rectified to the extent that off period salary of the expatriate assessee employees is liable to be treated as income under the Income-tax Act, 1961. 13. The Miscellaneous Applications are, therefore, allowed. ORDER U/S 254 OF THE INCOME TAX ACT, 1961 Since there is difference of opinion between the Members in the above miscellaneous application, the following question is referred to the Hon'ble President under section 255(4) of the Income-tax Act for third member opinion: "Whether in law, the order of the Tribunal under section 254(1) of the Income-tax Act, 1961 can be said to be suffering from mistake apparent from record on the basis of subsequent judgment of the jurisdictional High Court for the purpose of rectification under section 254(2) of Income-tax Act, 1961?" THIRD MEMBER ORDER Per Vimal Gandhi, President - This matter has been referred to me under section 255(4) of I.T. Act on account of difference between the learned Members of the Bench who heard the misc. applications. The following question has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he law or interpreting a provision in a statute. The law is laid down or a provision in a statute is interpreted by the Supreme Court only when there is a debate or doubt on the interpretation of any provision of a statute requiring interpretation by the Supreme Court or when there is a conflict of judicial opinion on the provision of a statute among the different High Courts of India which is required to be resolved and settled by the Supreme Court. The law laid down by the Supreme Court cannot be said to have retrospective operation in the sense that although a debate, doubt or conflict of judicial opinion is resolved and settled by the Supreme Court it does not obliterate the existence of such debate, doubt or conflict prior to such decision." 5. The learned Judicial Member found that SLP against the above decision was dismissed. A similar view was taken by Hon'ble Andhra Pradesh High Court in the case of CIT v. K. Venkateswara Rao [1988] 169 ITR 330 to hold that order of Tribunal cannot be rectified on the basis of a subsequent judgment. The learned Judicial Member then considered the scope of expression "mistake apparent from the record" on the basis of decision of Hon'ble S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon large number of decisions to support his view that decision of a jurisdictional High Court, even if subsequently given would constitute a mistake apparent from record. I deem it appropriate to quote the ld. Accountant Member's observations: "There is no dispute that the decision of High Court of Uttaranchal in the case of Hughes Services Pte. Ltd. was rendered after the orders were passed by the Tribunal. The proposition arising before us - whether a subsequent decision of the jurisdictional High Court can be the basis for rectifying an earlier order in exercise of the powers under section 254(2) of the Income-tax Act, is in my opinion, squarely covered by the authoritative pronouncement of the Supreme Court in the case of S.A.L. Narayana Rao, CIT v. Model Mills Nagpur Ltd. 64 ITR 67. In that case, the assessing authority subjected excess dividends to income-tax. Subsequently, the Bombay High Court in Khatau Makanji Spinning and Weaving Co. Ltd. v. CIT [1956] 30 ITR 841, held that levy of tax on excess dividends was illegal. On the basis of that decision, a claim for refund was made by the assessee requesting the assessing authority to rectify the earlier order mistak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of Omega Sports Radio Works v. CIT 134 ITR 28 wherein the High Court went to the extent of holding that if there is a decision on a particular point by the High Court of a State, it is binding on the authorities in that State and merely because there is some judicial diversion of opinion on that time between some High Courts it cannot be said that there is still scope for a debate on the points and, therefore, section 154 of the I.T. Act, 1961 is not attracted to the case. In support of its view Allahabad High Court placed reliance on the decision of Gujarat High Court in the case of CIT v. Ramjibhai Hirjibhai Sons 110 ITR 411 and decision ofPunjaband Haryana High Court in the case of CIT v. Mohan Lal Kansal 114 ITR 583. While considering the present miscellaneous application filed by the Revenue before us, the Bench is bound to follow the binding decision of Allahabad High Court which has consistently expressed the view that a subsequent decision of the jurisdictional High Court can validly form the basis for rectification under section 154 as well as 254(4) of the Act. It appears to me that the rejection of the miscellaneous application filed by the revenue as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... keAllahabad, Madhya Pradesh, Rajasthan, Kerala,Gujarat. He held that decision of Andhra Pradesh and Calcutta High Courts were distinguishable on facts. To distinguish above cases, the learned Accountant Member has observed as under: "8. In Jiyajeerao Cotton Mill's case, notice of rectification under section 154 was issued by the Assessing Officer prior to the decision of Supreme Court and, therefore, on the date of such notice there was no mistake apparent from record. The facts were that the Assessing Officer completed the assessment on27th February, 1970wherein development rebate allowed in the computation of total income was not deducted while computing the profits and gains attributable to the business of production and manufacture of soda and ash for allowing the special rebate of 35%. The Assessing Officer subsequently issued on May, 1972 a notice of rectification under section 154 for amendment of the said assessment made on27th February, 1970on the ground that development rebate has not been deducted while computing the special rebate of 35%. The assessee filed a writ petition before the Calcutta High Court. The Revenue resisted the said petition on the basis of the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the learned Judicial Member, therefore, is clearly distinguishable on facts, a crucial difference, as pointed above being the fact that in the present case before us rectification jurisdiction is being invoked on the basis of subsequent decision of the jurisdictional High Court whereas in the aforesaid case before the Calcutta High Court jurisdiction for rectification had been invoked prior to the decision of the Supreme Court. The fact that the view of the Calcutta High Court on the question arising before us is in concurrence with the view taken by the other High Courts like Kerala, Allahabad etc. is further fortified by the following two decisions of Calcutta High Court: (1) CIT v. Purtabpore Co. Ltd 159 ITR 362, wherein the Calcutta High Court held that the validity of the action of the Income-tax Officer must be judged on the facts as they were at the time when the action was taken. When the said rectification was made in March, 1969, no decision of any other High Court taking a contrary view was referred to the Income-tax Officer or for the matter to the Appellate Asstt. Commissioner or the Tribunal. All the High Courts had since held uniformly that extra shift allowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961. In support of this view the High Court has placed reliance on the direct decision of Hon'ble Supreme Court in S.A.L. Narayana Row, CIT v. Model Mills Nagpur Ltd. 64 ITR 67 which has already been referred by me above." 8. The learned Accountant Member has further observed that decisions of Jiyajeerao Cotton Mills Ltd's case and K. Venkateswara Rao's case, were given on entirely distinguishable set of facts as well as the legal question involved. All the same view taken by these High Courts was consistent with the view of other High Courts as well as ratio of Supreme Court decision in S.A.L. Narayana Row CIT v. Model Mills Nagpur Ltd. [1967] 64 ITR 67 and in State of Kerala v. P.K. Syed Akbar Sahib [l988] 173 ITR 1 (SC). In the light of above discussion, he disagreed with the view of learned Judicial Member and held that order of the Tribunal suffered from a mistake apparent from record on the basis of subsequent judgment of the Uttaranchal High Court. The earlier order of the Tribunal was liable to be rectified to the extent that "off period" salary of expatriate assessee employees was liable to be treated as income under the Income-tax Act, 1961. The learned Accountant Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 134 ITR 28 (All.), their Lordships observed as under: "A mistake apparent from the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there can be two opinions. If there is a decision on a particular point by the High Court of a State, it is binding on the I.T. authorities in that State and merely because their is some judicial divergence of opinion on that point between some High Courts, it cannot be said that there is still scope for a debate on the points and that, therefore, section 154 of the I.T. Act, 1961, is not attracted to the case." 11. The above decision is binding and is duly noted by the learned Accountant Member. He has also distinguished on facts other decisions relied upon by the learned Judicial Member to demonstratively show that subsequent binding decision would constitute a mistake apparent from record in the order of the Tribunal holding a contrary view. In the light of elaborate discussion available in the order of learned Accountant Member, I do not see any useful purpose in further repeating all the case law cited by the learned Accountant Member. I agree with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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