TMI Blog1985 (5) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case, the Tribunal was right in law in holding that notwithstanding the findings arrived at by the Income-tax Officer in the course of original assessment that the provisions of s. 13(1)(c)/13(2)(a) of the Act were applicable, the ITO's failure to deny exemption in terms of ss. 11 and 12 with respect to the assessee-trust's income was not an obvious, glaring and apparent legal mistake rectifiable under s. 154 of the I.T. Act, 1961 ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in ignoring that the matter in dispute was straightaway covered by the decision of the Supreme Court in the case of Venkatachalam v. Bombay Dyeing Mfg. Co. Ltd. [1958] 34 ITR 143, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the predecessor-ITO. He was of the opinion that there was a mistake apparent from the record when the predecessor-ITO charged to tax only the excess amount of interest and that was a mistake of law. A notice under s. 154 of the Act was issued asking the assessee to show-cause as to why the assessment be not rectified by denying the exemption allowed under ss. 11 and 12 of the Act. A reply was filed by the assessee on June 26, 1980, stating that under s. 154(1A) of the Act, the ITO can order rectification of mistake in relation to any matter other than the matter which has been considered and decided by the AAC in appeal. In this connection, it was submitted on behalf of the assessee that the AAC had considered the taxability of Rs. 13,12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13(1)( c) and 13(2)(a) of the Act. However, it is clear from the order passed under s. 154 of the Act that another item of income of Rs. 1,73,953 had been taxed. It is not clear whether the provisions of ss. 13(1)(c) and 13(2)(a) were applicable in relation to the income of Rs. 13,125 or Rs. 1,73,953 or to both. Under the above circumstances, the mistake pointed out by the ITO was neither obvious nor glaring. It was neither legal nor an arithmetical mistake. Under the above circumstances, the Commissioner of Income-tax (Appeals) was perfectly justified having in mind the decision in T. S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50 (SC), in setting aside the order of the ITO under s. 154 of the Act. " In view of the above conclusion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3) ...... (2) Without prejudice to the generality of the provisions of clause (c) and clause (d) of sub-section (1), the income or the property of the trust or institution or any part of such income or property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of a person referred to in sub-section (3), (a) if any part of the income or property of the trust or institution is, or continues to be, lent to any person referred to in subsection (3), for any period during the previous year without either adequate security or adeq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad jurisdiction to proceed under s. 35 of the Act and rectify the omission. In V. N. S. Sockalingam Chettiar v. ITO [1959] 36 ITR 451 (Mad), the Division Bench of the Madras High Court opined that if the order of assessment shows that interest in accordance with s. 18A(8) has not been added to the tax determined on the basis of the regular assessment, such omission is a mistake. It was held that s. 35 of the old Act applies and the mistake can be rectified under that section. In Wheeler Co. Pvt. Ltd. v. ITO [1964] 51 ITR 92 (All), it was opined that where the I TO had made an assessment for 1958-59 and 1959-60, without reducing the super-tax rebate as required by the Finance Acts of the respective years, that can be rectified under s. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt from the record. It was held that such mistake was liable to rectification under s. 154 of the Act and the view taken by the Tribunal was erroneous. In the case on hand, there was omission to charge tax by the ITO, for, he had no discretion to assess the excess interest only. The entire income was taxable. The assessee had lent its funds to the private limited company on an inadequate interest, and, therefore, ss. 13(1)(c) and 13(2)(a) are applicable and ss. 11 and 12 could not be attracted. In view of the decisions referred to above, we are of opinion that such a mistake is rectifiable under s. 154 of the Act. The finding of the Tribunal that no referable question of law arises and such a mistake could not be rectified under s. 154 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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