1. This is an appeal arising out of an order passed under Section 154 of the Income-tax Act, 1961 ('the Act') by the ITO on 31-3-1982. In order to appreciate the contentions raised by the assessee, the following facts in brief may be mentioned.
In the course of examination of accounts by the ITO for the assessment year 1971-72, he found that the assessee claimed a sum of Rs. 6,79,909 on account of foreign tour expenses. The ITO, for the reasons given by him, held that only a sum of Rs. 14,180 should be allowed. The balance was disallowed by his assessment order dated 3-2-1975.
The assessee in the appeal filed before the appellate authority claimed the entire amount. The AAC dealt with the matter exhaustively and held that a sum of Rs. 4,57,988 is allowable as revenue expenditure. This sum of Rs. 4,57,988 comprised of three items : In the sum of Rs. 71,413 is included the sum of Rs. 14,180 allowed by the ITO in the assessment itself. The order of the AAC having been passed on 31-3-1978, the ITO gave effect to that order and allowed Rs. 4,57,988. Obviously at that stage the ITO did not notice that sum of Rs. 14,180 was already allowed by him. It may be further mentioned here that the ITO started with the figure as assessed by him by his assessment order dated 3-2-1975. From this figure, he deducted those amounts which were to be allowed as per the direction of the AAC. In so doing, he took the figure of Rs. 4,57,988 which included Rs. 14,180.
This order is also dated 31-3-1978.
Subsequently, the ITO noticed that there was a mistake in the order under Section 250 of the Act dated 31-3-1978, in that there was a double deduction of Rs. 14,180 as the sum of Rs. 4,57,988 included Rs. 14,180 which was already allowed by him in the assessment order as mentioned above. The assessee raised several objections to the proposed rectification under Section 154. The ITO overruled the objections and rectified his order by an addition of Rs. 14,180 to the figure determined by him in his order dated 31-3-1978. The assessee's appeal before the Commissioner (Appeals) against this order of the ITO failed.
(i) That though there is a mistake in the computation of the income, the mistake was in the order of the AAC dated 31-3-1978 disposing of the assessee's appeal and as such the ITO has no jurisdiction to pass an order under Section 154 rectifying the computation of income.
(ii) Even if by a process of logic and reasoning it might be argued that there was a mistake in the order of ITO such a mistake is beyond the pale of rectification under Section 154.
(iii) That the order of the ITO dated 31-3-1978 passed under Section 154 is beyond the time prescribed for passing such an order as four years have lapsed.
All the aforesaid submissions have been opposed by the learned departmental representative.
3. We are unable to sustain any of the contentions raised by Mr. Unni.
From a bare perusal of the AAC's order, it is clear that he was aware of the deduction already allowed by the ITO. This has been made clear by him in para 69 of his order which reads as follows : On page 288 of the paper book the details of expenses of Rs. 71,413 in respect of employees in regular employment with the company is filed. Out of these expenses the Income-tax Officer had allowed an amount of Rs. 14,180 even the balance amount of Rs. 71,413 minus Rs. 14,180, Rs. 57,223 should be allowed. The particulars of details given by the appellant which are reproduced hereunder indicate that all the items of expenses should have been allowed Thereafter he discussed the other items and ultimately summed up by saying : To sum up an amount of Rs. 2,40.451 + Rs. 31,7064 Rs. 1,85,831 =Rs. 4,57,988 is held as allowable (revenue) expenditure.
It is, therefore, clear that he considered the entire claim as a whole and held that out of the total amount of Rs. 5,79,909 a sum of Rs. 4,57,988 is revenue expenditure. In other words, he gave a finding that the sum of Rs. 4,57,988 is revenue expenditure. It is for the ITO, therefore, to find out if out of Rs. 4,57,988 any amount has been already allowed and if so, there is no point in allowing that amount once again. The ITO has to look to the order of the AAC and find out what was the amount treated as revenue expenditure. In so doing, he noticed that Rs. 4,57,988 is held to be revenue expenditure which the assessee is entitled for deduction. This is the amount which has to be allowed but if an amount has already been allowed, to that extent the assessee is not to get the deduction. Therefore, when the ITO gave effect to the order of the AAC, he should not have deducted the entire sum of Rs. 4,47,988 since he had already deducted Rs. 14,180. There is, therefore, a clear mistake in the order of the ITO itself. The mistake did not occur in the order of the AAC. The AAC discussed the allowability of the entire expenditure and found that a sum of Rs. 4,57,988 is revenue in character which is to be allowed. We are, therefore, unable to agree that the mistake, occurred in the order of the AAC. The mistake, according to us, has been committed by the ITO in giving effect to the order of the AAC. Nor we are able to agree with the contention of Mr. Unni that there is any argument necessary for coming to this conclusion. The matter is so simple and obvious to us and just by looking to the order of the AAC in juxtaposition with the order of the ITO the mistake is obvious. We may further add that there is a mistake apparent from the record. Whether the ITO has committed it or the AAC has committed it is a matter which one has to decide. Even if there is some argument about the authority which has to rectify, that has to be decided on its own merits. Thus, we reject the first two contentions raised by Mr. Unni.
4. The third contention is that the four years period would end on 30-3-1982 as the order which is sought to be rectified is dated 31-3-1978. Mr. Unni referred to the definition of 'year' under the General Clauses Act, 1897 and urged that the four years period under Section 154(7) should commence from 31-3-1978 including and as such the period would expire by 30-3-1982 and since the order was passed on 31-3-1982, it is beyond the period prescribed. In our view, this contention is untenable 'year' has not been defined under the Act.
Therefore, there is no doubt that the definition under the General Clauses Act would apply. 'Year' means a calendar year according to the British calendar. So far there is no dispute. It is only the day of commencement of the four years period that is disputed. Mr. Unni obviously overlooked Section 9 of the General Clauses Act which deals with commencement and termination of time under any Central Act. When the word 'from' a particular day is used, that day is to be excluded.
The section is very clear and it admits of no controversy. Therefore, Section 154(7) when it mentions that the four years period would commence from the date of the order sought to be amended, the date of the order has to be excluded. If that is so, the last day for passing the impugned order, therefore, would be 31-3-1982 and on that day the order has been passed. Accordingly, we hold that the order has been passed within the prescribed time.