TMI Blog1995 (3) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellate Tribunal was right in holding that the Income-tax Officer was not correct in assessing a sum of Rs. 1,09,950 as profits under section 41(1) in the proceedings made under section 154? 3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the Income-tax Officer was not justified in modifying the disallowance under section 40(c)(iii) of the Income-tax Act, 1961, in the rectification proceedings made under section 154 of the Income-tax Act, 1961? 4. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the Income-tax Officer was not justified in modifying the disallowance under section 40(a)(v) of the Income-tax Act, 1961, in the rectification proceedings made under section 154 of the Income-tax Act, 1961? " The assessee is a company. It submitted its income-tax returns for the years 1968-69 and 1969-70, which were, after enquiry, accepted by the Income-tax Officer and it was accordingly assessed and subjected to tax. It is not clear when and how, because all the relevant materials are not on record, but it is accepted by all concerned, that a revision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de in respect of the expenditure incurred on the maintenance of guest portion of accommodation. " " Besides the above mistakes the assessment also requires revision for withdrawal of development rebate in respect of the following items which were added in the accounting years 1966-67 and 1972-73 but were sold within a period of eight years : -------------------------------------------------------------------------------------------------------------------------------------------------- Account year Cost Sold in Assessment year assessment year -------------------------------------------------------------------------------------------------------------------------------------------------- Rs. (a) Steam vapour piping 1966-67 337 1970-71 1968-69 (b) Sulphur furnace 1971-72 5,116 1973-74 1973-74 ---------- 5,453 ---------- Development rebate allowed at 20 per cent. 1,091 -------------------------------------------------------------------------------------------------------------------------------------------------- This will also be withdrawn in this revision order. " Invoking thus the power under section 154 of the Act, the Income- tax Officer revis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e directed the Income-tax Officer accordingly to retain the sum of Rs. 42,341 and delete the disallowance of Rs. 1,08,550. Thus, the assessee's appeal to the Commissioner of Income-tax (Appeals) was allowed in part. Both the assessee and the Department went on appeal to the Tribunal for the assessment year 1968-69, while the Department (Revenue) alone filed an appeal for the year 1969-70. The Tribunal held, (1) The Income-tax Officer was not justified in invoking the provisions of section 154 in respect of the disallowance made under section 37(3) ; (2) The Income-tax Officer was not justified in withdrawing the relief under section 80-1 and also in adjusting the disallowance under section 40(c)(iii) of the Act ; (3) Since the assessee was not allowed deduction under section 41(1) of the Act in the previous years, there was no scope for making any addition under section 41(1) of the Act ; (4) The disallowance under section 37(3) was not proper. The Tribunal, however, also observed and it has so stated in the statement of the case as follows : " According to the Tribunal, when the matter could not be reopened under section 147(b), there is no case for rectification und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee had appeared and objected to the reassessment and the Income-tax Officer had found fault with the assessment and accordingly revised the assessment. The said proceeding, however, was held to be invalid by the Tribunal and the Revenue never sought for any reference on any question of law in the said reopened proceedings for assessment of tax. The Income-tax Officer, however, had ignored his earlier orders under section 147(b) of the Act and issued notice as contemplated under sub-section (3) of section 154 of the Act to the assessee for rectifying the mistakes, which, according to him, were apparent from the records. He has almost (although the order under section 147(b) of the Act and the consequent reassessment order are not available) reiterated, as the order rectifying the mistakes apparent from the record, his earlier order in the proceedings under section 147(b) of the Act. The crucial expressions for the exercise of two jurisdictions, one for the reopening of the assessment under section 147(b) of the Act and the other for rectifying any mistake apparent from the records under section 154 of the Act, are, for the former, the Income-tax Officer has in consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng rectified under section 35 is not confined to clerical or arithmetical mistakes. On the other hand, it does not cover any mistake which may be discovered by a complicated process of investigation, argument or proof. " The view in this behalf in the judgments of the Supreme Court in Master Construction Co. (P.) Ltd. v. State of Orissa [1949] 17 STC 360 and ITO v. S. K. Habibullah [1962] 44 ITR 809, we shall presently see, has not suffered any change and is, even today, the correct approach for rectification of an error, which is said to be apparent from the record, the mere complexity of the problem or that genuine argument is necessary to discover the same, may not by themselves be sufficient to oust the jurisdiction of the Tribunal to rectify such a mistake. If, however, it could be discerned with some precision after a fair probe into the assessment records and a reasonable and probable conclusion can be arrived at that the court's conscience has been shaken, in that there appears an error, on record which has to be certainly corrected, then it would appear that the jurisdiction of the Tribunal vested with the power to rectify such mistakes arises. It is different from the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of assessment due to initial mistake say in determining the written down value which happened on account of misapplication of the law can provide a ground for rectification, but where it is debatable whether there was any mistake or misapplication of the law, rectification may not be permissible. Can there be a case, however, where it is apparent from the record, that some income has escaped taxation and such discovery of fact is taken as the basis for reopening the assessment under section 147(b) of the Act? A Bench of the Patna High Court in Mahasukhram Madanlal v. CIT [1955] 28 ITR 299, 305 has considered this aspect under section 34 of the Indian Income-tax Act, 1922, and observed, " the jurisdiction of the Income-tax Officer to start a proceeding under section 34 cannot obviously depend upon the ultimate result of the proceeding. Even if it is found ultimately upon enquiry that there has been no escapement of income, it is not a sound argument to advance that the Income-tax Officer had no jurisdiction to initiate the proceeding.... The Income-tax Officer has stated in the course of his order that action under section 34 was taken because it was detected in the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of our own in respect of one item and the need of rectification in respect of the said item for assessment under section 37(3) of the Act. The assessee has claimed computation of income after deducting the expenses upon a guest house and claimed 100 per cent. of the annual value of the premises as allotted to the staff, i.e., the benefit or amenity provided to the employees. That it has done without any evidence, so much so, that even a statutory requirement of maintaining a register showing the particulars as required under rule 6C(iii) of the Income-tax Rules, 1962, is not observed. In the original assessment, the entire claim of the assessee was accepted. No serious effort is required to see that the entire claim of the assessee could not be allowed without evidence showing the expenditure. We are, however, not sure whether any proceeding under section 147(b) of the Act also was taken as escaped income and adjudicated after notice to the assessee in accordance with law and which proceeding ended against the Revenue. If that be so, it will be proper to hold that recourse to rectification is in fact an attempt to review the order of assessment and further that the rectification ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
