M.B. Farooqi, J.
1. For a proper appreciation of the facts it will be convenient to set out the following family pedigree :
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Murari Lal Prabhat Kumar Saroj Kumari
(Wife Sita Devi) (Wife Pushpa Devi) (minor daughter)
Brij Mohan and his sons, Murari Lal and Prabhat Kumar, constituted a partnership firm called M/s. Bhauram Jawahirmal, the assessee before us. On 22nd August, 1960, Murari Lal purported to make a gift of Rs. 10,000 to his sister, Saroj Kumari. On September 21, 1960, Brij Mohan purported to make a gift of Rs. 10,000 to his second daughter-in-law, Sita Devi. The gifts were effected by transfer entries in the books of the assessee-firm. For the assessment year 1961-62, the assessee claimed deduction of interest credited in the accounts of Saroj Kumari and Pushpa Devi by reason of the amounts gifted to them on August 23, 1960, and September 21, 1960. TheITO repelled the claim. Equally so the AAC held that these were cross-gifts. The assessee took the matter in appeal before the Income-tax Appellate Tribunal. The Tribunal did not agree with the AAC that the gifts constituted cross-gifts. However, it agreed with the case of the revenue that the same were invalid on the ground that the cash balance in the books of account of the assessee on the respective dates of the gifts were not sufficient to enable the donors to make the gifts. In that view the Tribunal upheld the disallowance of the deduction. On a reference, this court took the view that the sole consideration which prevailed with the Tribunal that the cash balance available with the assessee-firm was inadequate for covering the amounts gifted by the donors by transfer entries made in the assessee's books was insufficient to invalidate the gifts. The court held that there was no suggestion that the transactions were not bona fide nor even that the gifts were not acted upon. In conclusion, the court held that these two gifts were valid. There was a third gift also involved in the case, but we are not concerned with that gift in the present case. The decision of this court is Bhau Ram Jawaharmal v. CIT : 82ITR772(All) (see para. 6 of the Tribunal's order dated 3rd May, 1974).
2. It appears that, in the meantime, the assessments for subsequent years were completed. We are concerned in this case with the assessment years 1962-63 and 1967-68. For these years the assessee claimed deduction of interest credited in the accounts of the donees on the basis of the aforesaid two gifts as also on the basis of one made subsequently on October 22, 1960, by Brij Mohan to Smt. Sita Devi. The ITO and the AAC both disallowed the deduction on the common ground that the assessee did not pursue the matter further for these years. On August 6, 1971, the assessee filed an application for rectification under Section 154 of the I.T. Act, 1961. The assessee prayed that on the basis of the judgment of this court in the reference for the year 1961-62, the interest paid on the aforesaid gifts may be deducted from its income, inter alia, for the years 1962-63 and 1967-68. The AAC rejected the application. On appeal, the Tribunal upheld the order of the AAC. At the instance of the assessee, the Tribunal has now referred the following question of law for our opinion:
'Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the application of the assessee under Section 154 requesting for rectification of the orders of the Appellate Assistant Commissioner for the assessment years 1962-63 and 1967-68 was rightly rejected by the Appellate Assistant Commissioner? '
3. The AAC rejected the application observing :
'A subsequent decision of the High Court cannot lead to rectification of the orders of the Appellate Assistant Commissioner which were passedearlier in the light of the interpretation of law prevailing at that time when those orders were passed.
4. The Tribunal has expressed the same difficulty in these words :
'If the matter is open, the subordinate courts are bound to follow the High Court's decision under the same set of facts, but the question here is not that but whether an order already passed would become erroneous after that decision, to be corrected as a mistake apparent from the record. In such a situation it is not possible to hold that there are errors in the appellate order. What the assessee wants is not a rectification but a review of the order passed and that is not permissible in these proceedings.'
5. These observations convey that if a mistake is revealed in an order of assessment on the basis of a judgment of the High Court rendered subsequently, it will, under no circumstances, constitute a mistake apparent from the record. We are unable to subscribe to this view. It contains a statement of law which is much too wide. Although it will be difficult to lay down the circumstances under which a mistake discovered in an assessment order on the basis of a subsequent judgment of the High Court would be a mistake apparent on the record, one thing is clear to us : where an order of assessment is based upon a decision of the Tribunal which was the subject-matter of reference to the High Court, when the order was made, then any error discovered in the order, on the basis of the subsequent judgment of the High Court on that reference, would be an error apparent from the record. We say so because, in the circumstances, it will be assumed that the law declared by the High Court, even if such declaration was made subsequently, was the only correct law applicable at the time when the order was made. Therefore, if the authority making the order has not applied that law, the mistake is obvious and self-evident and does not call for any debate or discussion to discover it. Where that is so, it would constitute a mistake apparent from the record as contemplated by Section 154 of the I.T. Act, 1961. It was so held by a Division Bench of this court in CIT v. Sir Shadi Lal Sugar Mills : 114ITR729(All) . The court observed (p. 731):
'On the decided cases it seems settled that a mistake, to be apparent on the record within the meaning of Section 154 of the Act, ought to be a mistake which does not require any elucidation or debate for its discovery.'
6. In this background, let us proceed to deal with the relevant orders.
7. The appeal for the year 1962-63 was disposed of by the AAC by an order dated August 8, 1967. He dealt with the assessee's claim based on the aforesaid gifts in paras. 3 and 4 of his order and stated :
'3. The third objection relates to the disallowance of Rs. 600 for interest paid to Smt. Sita Devi on the gift of Rs. 10,000 made by Sri Brij-mohan Kejriwal on 22-10-60. The I. T. O. held that no cash balance wasavailable in the books of the firm for making this gift. In view of the Tribunal's finding relating to the assessment year 1961-62 the I. T. O. held the gift as invalid and disallowed the interest. Similar gifts were made in the preceding year by Sri Brijmohan Kejriwal and Sri Murari Lal Kejriwal. The Tribunal has held that on the date the gifts were made there was no sufficient cash balance available with the firm to enable those partners to make the gifts. The Tribunal accordingly upheld the disallowance of interest on the gifts made by Sri Brijmohan Kejriwal and Sri Murari Lal Kejriwal in favour of Smt. Pushpa Devi and Smt. Saroj Kumari for the same reasons. The I. T. O. is justified in disallowing the interest payment of Rs. 600 to Smt. Sita Devi on the gift of Rs. 10,000 made by Sri Brijmohan Kejriwal. The disallowance is upheld.
4. The 4th objection relates to the disallowance of Rs. 600 for interest paid to Smt. Pushpa Devi and Rs. 600 for interest paid to Smt. Saroj Kumari on the gifts of Rs. 10,000 made to each by Sri Brijmohan Kejriwal and Sri M.L. Kejriwal. In view of the Tribunal's finding relating to the assessment year 1961-62, the disallowance of interest paid to these two ladies is upheld.'
8. In the appeal for the year 1967-68, which was disposed ot on July 19, 1968, the AAC dealt with the claim in para. 2 of his order quoted below :
'2. The next objection relates to the disallowance of the undermentioned interest payments :
Rs. 1,238 to Smt. Sita Devi on the gift of Rs. 10,000 made by Shri Brijmohan Kejriwal on 22-10-60.
Rs. 1,362 to Smt. Sita Devi on the gift of Rs. 10,000 made by Shri B.M. Kejriwal on 20-4-59.
Rs. 1,362 to Smt. Saroj Kumari on the gift of Rs. 10,000 made by Shri M.L. Kejriwal on 21-4-59.
Rs. 1,238 to Smt. Saroj Kumari on the gift of Rs. 10,000 made by Shri M.L. Kejriwal on 23-8-60.
Rs. 1,238 to Smt. Pushpa Devi on the gift of Rs. 10,000.
It is a case of cross-gifts and the fact of the matter has been discussed at length in my order dated 8-8-67 in appeal relating to the assessment year 1962-63 and it has been held that the interest payment on the gifts made to these three ladies is not an allowable deduction. The amount of interest on the gifted amount @ 0-12-0 per cent. per mensem for the year under consideration on each gift works out to Rs. 975 as the accounting year was of 13 months. It is not clear as to how the ITO has arrived at the figure of Rs. 1,238 and 1,362 for interest on these gifts. The interest disallowable works out to Rs. 1,950 in the case of Smt. Sita Devi, Rs. 1,950 in the case of Smt. Saroj Kumari and Rs. 975 in the case of Smt. Pushpa Devi. In other words, the disallowance is reduced by Rs. 563.'
9. Thus, for the year 1962-63, the AAC invalidated the aforesaid gifts and disallowed the deduction for interest based thereon merely on the ground that on the relevant dates the assessee-firm did not have sufficient cash balance available in its books to enable the concerned partners to make these gifts. He came to this conclusion relying on the view taken by the Tribunal in the assessment year 1961-62. As already stated, the Tribunal's view did not find favour with this court. This court held that the gifts could not be invalidated merely on the ground that adequate cash balance was not available with the firm to enable the donors to make these gifts. On the principles stated above, it must be held that the order suffers from an error apparent from the record. In that view, the assessee was entitled to relief for this year under Section 154 of the I. T. Act. The Tribunal was not justified in refusing the same to it.
10. Coming to the year 1967-68, it is apparent that the AAC disallowed the claim for deduction of interest on the ground that the gifts in question were cross-gifts. The question whether these gifts could be invalidated on the ground that they were cross-gifts did not engage the attention of this court in the reference for the year 1961-62. The sole point that fell for consideration of this court was whether these gifts could be held invalid merely on the ground that the cash balance available with the assessee-firm was inadequate for covering the amounts gifted by the donors through the transfer entries made in the books of the firm. The court held that it was not enough and in conclusion declared the gifts to be valid gifts. Accordingly, the assessee could not invoke the judgment to seek rectification for the year 1967-68. The prayer for rectification for this year would really amount to seeking review which is not permissible. In that view, the Tribunal was justified in refusing the relief claimed by the assessee for this year.
11. For the reasons stated above, we hold that the Tribunal was justified in refusing the assessee's request for rectification under Section 154 for the year 1967-68, but not so in respect of the year 1962-63, for which year the prayer ought to have been allowed by it. The question referred to us is answered accordingly. In view of the divided success, parties are left to bear their own costs.