TMI Blog1995 (11) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... (petitioner No. 1). The Income-tax Officer, BWard, Dehra Dun, who made the assessment against the assessee for the assessment year 1960-61, discovered that the assessee had suppressed its income by a sum of ₹ 41,740 which the assessee had claimed as expenditure on account of insurance premia paid by it to various insurance companies on behalf of its numerous customers. The amount realised by the assessee from its customers towards the insurance premia was not recorded in its books of accounts. Penalty proceedings were initiated under section 28(1)(c) of the Act in respect of the said concealment and ultimately the Income-tax Officer by his order dated March 16, 1961, levied a penalty of ₹ 30,000, the maximum penalty leviable was ₹ 48,210 which was 1? times of the difference between the income returned which was ₹ 31,51,533 and the income assessed at ₹ 5,00,528. The assessee filed an appeal against the aforesaid order to the Appellate Assistant Commissioner of Income-tax, Dehra Dun. The Appellate Assistant Commissioner by his order dated September 5, 1962, confirmed the levy of penalty and dismissed the assessee's appeal. Thereupon, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be by taking into consideration this item alone. (4) That it was otherwise argued that the assessee had made expenses to the extent of this amount which could not be recorded in the books and this went to explain the non-accountability of ₹ 41,740 and further the amount was surrendered on the assurance that a very lenient view will be taken. (5) That the Tribunal after having heard the counsel for the appellant and the department, made an observation that a very nominal penalty will be levied. (6) That the Tribunal has not dealt with the above-mentioned contentions of the assessee which were specifically argued and the assessee submits that the decision of the Tribunal to impose a very nominal penalty was forgotten and by mistake the appeal of the assessee was entirely dismissed. (7) That these are the mistakes apparent on the record and the assessee prays that the findings on the above-mentioned points be recorded and the order be rectified after giving the assessee due opportunity of being heard. Thereupon, the Income-tax Appellate Tribunal passed the following order on the 14th October, 1963, purporting to be one under section 35 of the Act: We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into consideration later items only.... 29. That accordingly it was argued in appeal before the Tribunal on August 1, 1963, that a lenient view of the case should be taken. The Tribunal accepted the submission and observed that a very nominal penalty will be levied. 30. That, however, when it came to record a judgment seven days later on August 6, 1963, it appears to have forgotten its observation and stated as follows: 'Here is a case of deliberate suppression of the real particulars of an assessee's income.' 31. That the attention of the Tribunal was drawn to this fact of an application dated the 23rd August, 1963, under section 35 of the Income-tax Act, 1922, on which the order dated the 14th October, 1963, was passed and penalty was reduced from ₹ 30,000 to ₹ 10,000. To these paragraphs the rejoinder filed by the Income-tax Officer was that the counter-affidavit sets out the assessee's version of what transpired before the Tribunal at the time of the hearing of the appeal as also at the time of the hearing of the assessee's application under section 35, the correctness whereof the deponent denies for want of knowledge. It is tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration is whether the Tribunal could under the provisions of section 35 of the Act rectify a mistake, which it would appear to have committed itself, inasmuch as a very material fact which was brought to its notice in the course of arguments was lost sight of at the time when the Tribunal came to write its order? In other words, whether a Tribunal or for the matter of that the Appellate Assistant Commissioner or the Income-tax Officer could in these circumstances have rectified a mistake which had resulted from their own failure to bear in mind a fact or circumstance which would have a material bearing on the quantum of the penalty leviable? Mr. Gulati, the learned standing counsel, has relied upon a decision of the Madras High Court in Commissioner of Income-tax v. J. Sundaram [1964] 52 I.T.R. 474 for the proposition that section 35 does not empower the Appellate Tribunal to review or reverse its own orders as the section confers powers only to rectify apparent mistakes in the orders made. That case, however, is clearly distinguishable. That was not a case where certain material facts were brought to the notice of the Tribunal and the Tribunal had inadvertently failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 35 of the Act of 1922. Their Lordships pointed out that the words in the Act apparent from the record and in the Civil Procedure Code apparent on the face of the record do not mean the same thing and, therefore, the power to rectify under section 35 of the Act, though, no doubt, limited to the rectification of mistakes which are apparent from the record, would also include errors of law. To some extent, therefore, the provisions of section 35 of the Act were considered to be not as stringent or narrow as those obtaining under the Civil Procedure Code. There are decisions under the Civil Procedure Code which would go to indicate that even under the Code where the court has failed to deal with and determine important issues in the case on which depends the title of the plaintiffs and the maintainability of the suit, it would amount to an error apparent on the face of the record (M.M.B. Catholicos v. M.P. Athanasius A.I.R. 1954 S.C. 526). In Mt. Rukhmabai v. Ganpatrao***, the Nagpur High Court took the view that if an omission to notice a particular provision of law is a satisfactory ground for entertaining an application for review, much more so is the omission to conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t condition is satisfied there can be no justification for limiting the powers of the departmental officers or the Tribunal to rectify that error. The learned standing counsel contended that even if the Tribunal had lost sight of the fact that the assessable income was reduced by a sum of ₹ 51,000 in appeal, nevertheless that would not be a material fact or circumstance as the ultimate difference in the tax leviable when computed would only have been a negligible amount. That is neither here nor there for determining the question which arises in the present case and that is whether the Tribunal, having inadvertently ignored such a fact, would have the necessary jurisdiction to rectify its order under section 35 of the Act? What effect the fact that the quantum of assessment stood reduced by ₹ 51,000 on appeal ought to have had on the mind of the Tribunal is one which is not capable of being subjected to arithmetical calculation in order to see whether the quantum of penalty reduced was in direct proportion to the reduction or otherwise. The legislature has only fixed the maximum penalty leviable but not the minimum. In my judgment, where an error which has crept i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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