TMI Blog2006 (8) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... d the parties, perused the material on record and duly considered factual matrix of the case as also the applicable legal position. The scope of our powers under section 254(2) is inherently limited to rectifying mistakes apparent from record. As to what is the scope of expression mistake apparent from the records , it is well-settled that this expression refers to an obvious and patent mistake, and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. In the landmark case of T. S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50, the hon ble Supreme Court concluded that in the process of rectifying a mistake apparent on record, it was not open to go into true scope of the relevant provisions of the Act and that a decision on a debatable point of law is not a mistake apparent from records . In the case of CIT v. Ramesh Electric and Trading Co. [1993] 203 ITR 497, the hon ble Bombay High Court has held that in the garb of rectifying a mistake apparent on record, it is not open to the Tribunal to review its orders. Their Lordships have observed that (page 501) the mistake which the Tribunal is ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en into account the ratio of binding judicial precedents, and that those Benches did not follow the binding judicial precedents. This impression could be erroneous on both the counts but then that is an error of judgment and not an error of omission. Therefore, in the given circumstances, not sending a matter to the larger Bench, howsoever erroneous as it may be, can only be an error of judgment and not something on which no two views are possible. That leaves us with the question whether misreading of the hon ble Supreme Court s judgment in the case of Western States Trading Co. P. Ltd. v. CIT [1971] 80 ITR 21 on the facts of the present case would constitute a mistake apparent from records. In the Tribunal s order, which has been called into question by way of this applicant, it has been observed that in the light of the hon ble Supreme Court s judgment in the case of Western States Trading Co. P. Ltd. [1971] 80 ITR 21 (headnote) If shares are held as part of the trading assets, dividend on those shares would form part of income from business . It was on this basis that the Tribunal came to the conclusion that dividend income is to be assessed as income from business . Ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as claimed against the loss from its business incurred during the previous years. Having so set out the principles, and coming back to the facts of the case that their Lordships were in seisin of, their Lordships, in the immediately following sentences, concluded that (page 26) : It does not appear to have been disputed at any stage that the shares formed part of the stock-in-trade of the share dealing business of the assessee. There could be no reason, therefore, for the assessee not being entitled to the set off claimed. As the above observations clearly show, the observations made by their Lordships were in the context of set off as an income from business and not in the context of taxability under the head Income from business . The distinction between these two things was duly appreciated by their Lordships in the above extracts from the judgment and their Lordships did take note of the position that one set of provisions classifies the taxability of income under several heads for the purpose of computation of net income while the other set off provisions is concerned only with the business and not with its heads (of taxability) . Their Lordships unambiguously note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion by the Tribunal, the relevant factor is the head under which an income is to be taxed and not the nature of an income. The exclusion clause in this Explanation categorically refer to a company whose gross total income consists mainly of income chargeable under the head (emphasis supplied by us now) . . . and these wordings leave no doubt that what is material is the head under which an income is to be taxed and not the nature of the income . The issue as to whether the provisions of the Explanation to section 73 will apply to the facts of a case is certainly somewhat complex an issue, but while adjudicating upon this rectification petition, we are not really influenced by complexity of the issue in appeal; we are only concerned about simplicity of the error which is said to have been committed. Once we come to the conclusion that the Tribunal did err in coming to a particular conclusion, and the error is such an error on which no two views are possible, it is irrelevant whether the error was an error on a point of law or on a point of fact, or as to what is the degree of complexity of the issue. Elaborating upon the scope of the expression mistake apparent from record and ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to be ignored by a judicial body. The question of error of judgment can only arise when two views are possible and one of the views is adopted. That is not the case before us. It is a simple case of omission to take note of the context in which the hon ble Supreme Court made certain observations and then interpreting those observations as complete exposition of law on that subject. The hon ble Supreme Court itself, in the case of CIT v. Sun Engineering Works P. Ltd. [1992] 198 ITR 297, has observed that, (page 320) : it is neither desirable nor permissible to pick out a word or a sentence from the judgment of this court, divorced from the context of the question under consideration and treat it to be the complete law declared by this court. The Tribunal has ended up doing something which, as is the law laid down by the hon ble Supreme Court, is impermissible in law. That cannot but be a glaring, obvious and patent error and, accordingly, liable to be rectified under section 254(2) of the Act. To suggest that a conscious mistake, even if that be a mistake apparent from record, cannot be rectified under section 254(2) is somewhat devoid of logic and rationale. If a conscious m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to be rectified is an obvious and patent mistake which is apparent from the record, and not a mistake which requires to be established by arguments and a long drawn process of reasoning on points on which there may conceivably be two opinions, as has been shown in the present case (before their Lordships). In our considered view, the case before us falls in the first category and there cannot conceivably be two opinions on the question as to under which dividend income can be taxed. Treating the dividend income as Income from business for the purposes of chargeability is a mistake which is not capable of two views being taken in that respect. The stand taken by the Tribunal being directly contrary to the law settled by the hon ble Supreme Court and directly opposed to the clear provisions of law, is so fundamental that it goes to the root of the matter and may directly affect the conclusions arrived at by the Tribunal. The only ground of appeal in the Tribunal s order related to this issue and, therefore, the appeal has to be recalled in entirety. We make it clear that the decision that we have arrived at is on peculiar facts of this case and it should not be construed as layi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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