Where Appellate Assistant Commissioner cancelled the appellate order by rectification under section 154 without considering the case law relied on by the assessee, the same was not proper.
After disposal of appeal the Appellate Assistant Commissioner discovered that the assessee had not complied with provision under section 249. The Appellate Assistant Commissioner sought rectification under section 154. The assessee made written submission that there was a case law from the jurisdictional High Court in his favour and sought further time. The Appellate Assistant Commissioner without going into the case law cancelled his appellate order.
The order of Appellate Assistant Commissioner has to be set aside and the matter resorted to his file for the simple reason that he did not look into the case law which was placed before him, particularly the judgment of their Lordships of the Allahabad High Court in Ram Sewak Hari Om v. STO (1972) UPTC page 670 which is the law applicable to both the parties because the assessee hails from U. P.Assessing officer's order under section 154 refusing to rectify his earlier order under section 132(5) is appealable treating it as an appeal against order under section 154.
The Act has vested with the assessee a right under section 154 subject to the restrictions therein to move to the Income Tax Officer for rectification of mistakes apparent from records. The rights vested by this section cannot be denied merely because an alternative remedy may be available to the assessee. Section 246(1)(f) of the Act provides for appeal against an order under section 154, therefore, the Commissioner(Appeals) was bound to entertain the appeal under section 246(1)(f), even if the application under section 154 was in respect of an order passed by the Income Tax Officer under section 132(5).
1. This appeal is by the assessee and relates to the assessment year 1982-83. Only a short point is involved in the present appeal.
2. There were certain searches at the assessee's premises and consequent to such searches, the ITO passed an order on 17-8-1982 under the provisions of Section 132(5) of the Income-tax Act, 1961 ('the Act'). In terms of this order, incomes were estimated for various assessment years commencing with 1976-77 and ending with 1982-83. The ITO thereafter worked out the tax for each of the assessment years on the basis of the incomes so estimated. The incomes estimated and the additional tax determined as payable after giving credit for the tax already paid where assessments were completed, are as under :Asst. year Income determined Tax determined as Rs. payable Rs.1976-77 27,471 6,9141977-78 45,857 11,7681978-79 59,995 20,7171979-80 48,919 15,9571980-81 1,85,701 1,11,5301981-82 1,47,388 78,8581982-83 1,71,319 90,191 In addition, in each of the assessment years, the ITO considered that penalty under section 271(1)(c) of the Act of an amount equal to the tax determined as payable would be payable. Apart from this, for the assessment year 1981-82, he considered a penalty under Section 271(1)(a) of Rs. 8,916 was payable. Thus, the aggregate demand raised of taxes and penalties came to Rs. 6,76,332. By another order of the same date, i.e., 17-3-1982, the ITO directed the seized gold, etc., to be retained since the value of the sama came to be much below the taxes, etc., determined. The assessee, on 31-3-1982, filed a petition under Section 154 of the Act before the ITO stating that there were several mistakes apparent from the record in the order passed by him on 17-3-1982. For the purposes of the present appeal, it is not necessary for us to dwell on the various objections which the assessee had put forth and which according to him required rectification as mistakes apparent from the record. Suffice it to say that the ITO wrote to the assessee on 7-4-1982 as under : In the petition cited above you have requested to rectify the order passed under Section 132(5) on two grounds : (I) The order under Section 132(5) should confine only to the seized asset. (II) The question of levy of penalties under Section 271(1)(c) arises only after the issue of notices under Section 274 read with Section 271(1)(c). The assessee's application is carefully considered. The scope of Section 132(5) is very wide and the Income-tax Officer can in a summary manner estimate the undisclosed income, calculate the amount of tax on such incomes, determine the amount of interest payable and the amount of penalties imposable in accordance with the provisions of the Income-tax Act. It is nowhere stated in the Act that the order under Section 132(5) should confine only to the seized asset. The Income-tax Officer may estimate the undisclosed income in a summary manner to the best of his judgment on the basis of any material that is available with him. The orders passed under Section 132(5) do not require any rectification under Section 154 as there are no mistakes apparent from records.
The assessee construed this as an order under Section 154 and preferred an appeal to the Commissioner (Appeals). The Commissioner (Appeals) decided the matter by his order dated 29-9-1982. In deciding the appeal, he held as under : It will be noticed that the order under Section 132(5) is not appealable before me. Under the provisions of Section 132(11) a different authority has been notified to hear appeals against orders under Section 132(5). It is, therefore, quite logical to hold that the application for rectification under Section 154 seeking to rectify orders under Section 132(5) should also be addressed to the authority mentioned under Section 132(11). 1 will, therefore, hold that the present appeal is incompetent. I will, accordingly, dismiss the appeal.
3. The learned counsel submitted before us that the findings of the Commissioner (Appeals) were erroneous. He stated that the assessee could file an application under Section 154 if there was a mistake in the order of the ITO under Section 132(5) and if he did not get a favourable decision, he could file an appeal to the Commissioner (Appeals). Therefore, he contended that dismissal of the appeal by the Commissioner (Appeals), for the reasons which we have already set out, was not in accordance with law.
4. The learned departmental representative, on the other hand, submitted that since remedy was provided under Section 132(11) for impugning the order under Section 132(5), the order passed by the Commissioner (Appeals) should be upheld.5. We have considered the rival submissions. The provisions of Section 154 state that with a view to rectifying any mistake apparent from the record on an application made by the assessee, the ITO may amend 'any order of assessment or of refund or and other order passed by him'.
When an order is made under Section 132(5), such an order clearly is an order passed by the ITO and, therefore, any mistake apparent from the record in such an order can be rectified and has to be rectified under Section 154(1)(a). For example, the provisions of Section 132(5) require an estimate to be made of the undisclosed income. This is to be made in a summary manner. Even though made in a summary manner, the ITO may make computation of income under different heads. A mistake in totalling may take place with the result that the income estimated is vitiated by a totalling mistake apparent from the records. Such a mistake would be rectifiable under the provisions of Section 154. Then again, there may be a glaring mistake apparent from records committed in computing the tax payable with reference to the income computed in a summary manner. To take an illustration, surcharge rates vary from year to year and a wrong rate of surcharge may have been applied. This again would be a mistake apparent on records. There have been a catena of judicial pronouncements according to which the ratio is that the mistakes which can be rectified are not confined to arithmetical or clerical ones of which we have given an illustrative example, but such mistakes apparent from the records may include obvious mistakes of law.
The only requirement is that the mistake should be patent, demonstrable without further evidence or argument pro and con, and without any reference outside the records. The scope of the expression 'mistake apparent from the records', it has been held, is much wider than the expression 'mistake apparent on the face of the record' and not merely mistakes of fact can be rectified but also obvious mistakes of law on which there can be no debate. The mere complexity of the problem would not shut out the right to have a mistake rectified under Section 154 if the other requirements of the mistake being apparent from the record are satisfied. The Act vests in the assessee a right under Section 154 subject to the restrictions therein to move the ITO for rectification of mistakes apparent from the records. Rights vested by this section cannot be denied merely because an alternative remedy may be available to the assessee such as that under Section 132(11) in the case of an order under Section 132(5). The assessee in the present case preferred an application under Section 154 and the ITO has negatived the request.
Section 246(1)(f) of the Act provides expressly for appeal against an order under Section 154 refusing to allow the claim made by the assessee. Therefore, the Commissioner (Appeals) is, when an appeal is preferred to him from an order under Section 154, bound to entertain the appeal under Section 246(1)(f) even if the application under Section 154 was preferred in respect of an order passed by the ITO under Section 132(5). We are unable to agree with the Commissioner (Appeals) that the assessee should have preferred the application under Section 154 to the authority mentioned in Section 132(11). The assessee rightly preferred the application under Section 154 to the ITO who passed the order under Section 132(5). Having preferred a valid application under Section 154, when an adverse order in the shape of a letter was received, it was competent for the assessee to file an appeal. The assessee having filed a valid appeal before the Commissioner (Appeals), the Commissioner (Appeals) was bound to decide the appeal on merits which has not been done in the present case. We would, accordingly, set aside the order of the Commissioner (Appeals) and restore the appeal to his file. He will decide the appeal afresh on merits.
6. Before parting with the present appeal, we may state that the learned counsel represented before us that the matter has now been pending for a long time and the assets lie seized with the revenue. We are certain that the Commissioner (Appeals) would dispose of the restored appeal as expeditiously as may be convenient.