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Chokshi Metal Refinery Vs. Commissioner of Income-tax, Gujarat-ii - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-Tax Reference No.19 of 1974
Judge
Reported in[1977]107ITR63(Guj)
ActsIncome Tax Act, 1922 - Sections 154; Income Tax Act, 1961 - Sections 32, 32(1), 33A, 34(1), 80A, 80C, 80-I, 80J, 80J(1), 80J(3), 80J(4), 80M, 80U, 84 and 143(3)
AppellantChokshi Metal Refinery
RespondentCommissioner of Income-tax, Gujarat-ii
Appellant Advocate J.P. Singh, Adv.
Respondent Advocate K.H. Kaji, Adv.
Cases ReferredSidhramappa Andannappa Manvi v. Commissioner of Income
Excerpt:
direct taxation - error apparent - section 154 of income tax act, 1922 and sections 32, 32 (1), 33 a, 34 (1), 80 a, 80 c, 80-i, 80 j, 80 j (1), 80 j (3), 80 j (4), 80 m, 80 u, 84 and 143 (3) of income tax act, 1961 - whether tribunal's holding that there was no mistake apparent from record which income-tax officer could have rectified under section 154 justified - none of four conditions mentioned in section 80 j (4) satisfied by assessee in course of assessment proceedings under section 143 (3) - no mistake apparent from record so far as original proceedings concerned - tribunal's holding affirmed. - - the contention of the assessee in that application was that all the conditions which would justify the granting of the relief under section 84 prior to its repeal and under section.....b.j. divan, c.j.1. in this case at the instance of the assessee, the following question has been referred to us for our opinion by the income-tax appellate tribuna : 'whether, on the facts and in the circumstances of the case, the tribunal was right in holding that there was no mistake apparent from the record which the income-tax officer could have rectified under section 154 for the assessment years 1967-68 and 1968-69 ?' 2. in the instant case we are concerned with the assessment years 1967-68 and 1968-69. the assessee is a registered partnership firm and carries on the business of a refinery at surat. the business was started from february 20, 1963. the relevant years of account are samvat years 2022 and 2923, respectively, for these two assessment years. the order of assessment for.....
Judgment:

B.J. Divan, C.J.

1. In this case at the instance of the assessee, the following question has been referred to us for our opinion by the Income-tax Appellate Tribuna :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was no mistake apparent from the record which the Income-tax Officer could have rectified under section 154 for the assessment years 1967-68 and 1968-69 ?'

2. In the instant case we are concerned with the assessment years 1967-68 and 1968-69. The assessee is a registered partnership firm and carries on the business of a refinery at Surat. The business was started from February 20, 1963. The relevant years of account are Samvat years 2022 and 2923, respectively, for these two assessment years. The order of assessment for the assessment year 1967-68 was passed on March 1, 1968, and the total income computed was Rs. 1,49,863. The assessment order for the assessment year 1968-69 was passed on March 1, 1968, and the total income computed was Rs. 1,49,863. The assessment order for the assessment year 1968-69 was passed on February 14, 1969, and the total income computed was Rs. 1,57,570. On February 27, 1970, the assessee applied to the Income-tax Officer praying that the assessment year 1967-68 was concerned and under section 80J so far as the assessment year 1968-69 was concerned. The contention of the assessee in that application was that all the conditions which would justify the granting of the relief under section 84 prior to its repeal and under section 80J were satisfied in their case. The assessee-firm also contended that the relief was granted to the assessee-firm by way of depreciation allowance and development rebate and they claimed that relief under section 84 calculated at six per cent. of the capital employed would be Rs. 30,543 so far as the assessment year 1967-68 was concerned and under section 80J for the assessment year 1968-69 the relief would be Rs. 31,020. The application was, therefore, for the purpose of deduction of Rs. 30,543 and Rs. 31,020 for the two assessment years under reference, respectively, from the total incomes computed for these two assessment years.

3. The applications were filed by the Income-tax Officer by his order dated March 10, 1971, on the ground that the assessee had not claimed the deductions under section 84 or section 80J in its returns of income nor was the claim put forward at the time of the hearing before him when the original assessment were under consideration. Against these orders of the Income-tax Officer filing the two applications for the different years, the assessee took the matter in appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that till the date on which these two applications for rectification under section 154 were made by the assessee, there was not even an iota of evidence to suggest that the claim under section 84 or section 80J was made before the Income-tax Officer. In this view of the matter, the Appellate Assistant Commissioner confirmed the orders of the Income-tax Officer. Thereafter, the matter was taken in appeal to the Tribunal. Before the Tribunal it was contended on behalf of the assessee that the provisions of section 84 and section 80J were mandatory and once from the material available on the record of the Income-tax Officer, it became clear that the assessee was entitled to the relief under section 84 or section 80J, as the case himself be, it was incumbent upon the Income-tax Officer to grant the relief under the section concerned even though no specific claim for this relief was put forward either in the returns filed for these two respective assessment years or was put forward at any subsequent stage till the assessment orders were passed. The Tribunal held that they had not to consider whether the assessee was entitled to relief under section 84 and section 80J of the Act in original assessment proceedings but whether, after the completion of such assessment proceedings, under the provisions of section 154 of the Act, the Income-tax Officer had jurisdiction to pass an order so as to allow the relief under section 84 and under section 80J, respectively. The Tribunal found that it could not be said that the material which was necessary for the purpose of granting the relief under section 80J of the Act was available with the Income-tax Officer at the time of making the assessment. The Tribunal also held that none of the conditions required for granting of the relief under section 80J was specifically satisfied by the assessee in the course of the assessment proceedings under section 143(3) of the Act and the Tribunal found that the Income-tax Officer would have had to cull out all the material from the information given to him by assessee and even after gathering that material from the record, the Income-tax Officer may perhaps have to debate the matter with the assessee, with the result that it would be possible that the Income-tax Officer might ultimately not agree with the assessee that the assessee was entitled to relief under section 80J of the Act. Ultimately, the Tribunal held that no mistake apparent from the record was brought to the notice of the Income-tax Officer and hence the Income-tax Officer could not notice exercise the power given to him under section 154 of the Act. The Tribunal, therefore, dismissed the appeals of the assessee for the two assessment year and, thereafter, at the instance of the assessee, the question set out hereinabove has been referred to us for our opinion.

4. It must be pointed out that the language of section 84 of the Act as it stood up to the date of its detection by the Finance (No. 2) Act of 1967, which came into effect from April 1, 1968, was the same as the language of section 80J of the Act. Section 80J came into force with effect from April 1, 1968. Thus out of the two years under reference, one is governed by section 84 and the other by section 80J. Since the provisions of the two sections 84 and 80J are identical, it will be convenient to refer only to the provisions of section 80J. Section 80J is one of the sections in Chapter VI-A which deals with deductions to be made in computing total income. Sections 80A provides that in computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of Chapter VI-A, the deductions specified in sections 80C to 80U. Section 80J provides for deduction in respect of profits and gains from newly established industrial undertakings or ships or hotel business in certain cases. Under sub-section (1) of section 80J, where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains (reduced by the aggregate of the deductions, if any, admissible to the assessee under section 80M and section 80-I) of so much of the amount as does not exceed the amount calculated at the rate of six per cent. per annum on the capital employed in the industrial undertaking or ship or business of the hotel, as the case may be, computed in the prescribed manner in respect of the previous year relevant to the assessment year (the amount calculated as aforesaid being hereafter in this section, referred to as the relevant amount of capital employed during the previous year). It is thus clear that calculation of the capital employed in the business during the course of the previous year is the base with reference to which deduction at the rate of six per cent. is to be given to the relevant assessment year. It must be noticed that under sub-section (2) this relief is to be given in the first year of installation and each of the four assessment years immediately succeeding the initial assessment year. This is clear from sub-section (3) of section 80J which provides for carry-forward and set-off of the decisions and under sub-section (4) it has been provided that section 80J applied to any industrial undertaking which fulfills all of the following conditions, namely, (i) it is not formed by the splitting up, or the reconstruction, of a business already in existence; (ii) it is not formed by the transfer to a new business of a building (not being a building taken on rent or lease), machinery or plant previously used for any purpose; (iii) it manufactures or produced articles, or operates one or more cold storage plant or plants, in any part of India, and has begun or begins to manufacture or produce articles or to operate such plant or plants, at any time within the period of twenty-three years next following the date of April 1, 1948, or such further period as the Central Government may, by notification in the official Gazette, specify with reference to any particular industrial undertaking; and (iv) in a case where the industrial undertaking manufactures or produces articles, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs 20 or more workers in a manufacturing process carried on without the aid of power. The rest of the provisions of section 80J are not material for the purpose of this judgment.

5. Under the Income-tax Rules, 1962, by rule 19, computation of capital employed in an industrial undertaking or a hotel for the purposes of section 84 has been set out and under rule 19A computation of capital employed in an industrial undertakings or a ship or the business of a hotel for the purposes of section 80J has been set out. Mr. Shah for the assessee contends that all the information required for computation of the capital employed in an industrial undertaking in accordance with rule 19 or rule 19A was already available on the record on the Income-tax Officer. Under sub-clause (i) of rule 19(1) the written down value on the commencing date of the period of computation has to be ascertained and, according to Mr. Shah, for the purpose of depreciation allowance, the written down value as of the commencing date of the previous year, namely, Samvat years 2022 or 2023, as the case may be, was certainly available with the Income-tax Officer from his own record. Under sub-rule (5), over and above the capital ascertained under sub-rule (1), the average amount of capital employed in a business during any computation period has also to be taken into account and for that purpose the profits or losses made in that period shall, expect so far as the contrary is shown, be deemed to have accrued at an even rate throughout the said period and to have resulted, as they accrued, in a corresponding increase or decrease, as the case may be, in the capital employed in the business. According to Mr. Shah, the return filed for the the relevant assessment year would show the profit or loss earned by the business from this new industrial undertaking and, therefore, the material for making the computation under sub-rule (5) of rule 19 would also be available with the Income-tax Officer himself. He also has mentioned that under rule 19A the capital for the purpose of section 80J employed in an industrial undertaking shall be computed in accordance with sub-rules (2) to (4), and the capital employed in a ship shall be computed in accordance with sub-rule (5). Under sub-rule (2), the aggregate of the amounts representing the values of the assets as on the first day of the computation period, of the undertaking or of the business of the hotel to which the said section 80J applies shall first be ascertained in the case of assets entitled to depreciation, their written down value; in the case of assets acquired by purchase and not entitled to depreciation, their actual cost to the assessee; in the case of assets acquired otherwise than by purchase and not entitled to depreciation, the value of the assets when they became assets of the business, etc. Thus, same provision as in rule 19 has been made applicable. Provision similar to sub-rule (5) of rule 19 is not to be found in rule 19A. Mr. Shah's contention has been that all the computations required to be made for the purpose of arriving at the figure of capital employed in this particular industrial undertaking in the relevant previous years could have been made from materials available with the Income-tax Officer. The records of the Income-tax Officer would show, according to Mr. Shah, the year of installation of this machinery, namely, 1963, and, therefore, it would enable him to ascertain up to what period the relief under section 84 or section 80J was available to this particular assessee. Mr. Shah also contends that all the information available from the records of the Income-tax Officer himself would go to show that even the conditions required by section 80J, sub-section (4), namely, the four conditions which must cumulatively be present before the relief under section 80J can be given, were also present in the case of the assessee and the main contention of Mr. Shah has been that in view of all these materials available from the record of the Income-tax Officer himself, it was obligatory upon the Income-tax Officer to grant relief under section 84 or section 80J for the relevant assessment year. Mr. Shah has contended that in the context of the words 'error apparent from the record of the case', the Supreme Court has observed in Maharana Mills (Private) Ltd. v. Income-tax Officer : [1959]36ITR350(SC) that the record contemplated by section 35 of the Indian Income-tax Act, 1922, equivalent to section 154 of the Act of 1961, does not mean only the order of assessment but it comprise all proceedings on which the assessment order is based and the Income-tax Officer is entitled for the purpose of exercising his jurisdiction under section 35 to look into the whole evidence and the law applicable to ascertain whether there was an error. If he doubts the written down value of the previous calculations and if he finds any mistake it is open to him to make fresh calculations in accordance with the law applicable including the rules made thereunder. If, for instance, the Income-tax Officer finds that in an earlier assessment year there was an apparent arithmetical finds mistake in the account of the written down value of the properties of the assessee which resulted in a corresponding mistake in the assessment of the relevant assessment year, he can take the corrected figure for the purposes of the assessment and it cannot be said that mistake was not apparent from the record. A fortiori if he discovers that the very basis of the different earlier assessments was erroneous because of an initial mistake in determining the written down value, it cannot be said that this would not be a mistake apparent from the record. And if in order to determine the correct written down value the Income-tax Officer makes correct calculations, it cannot be said that is not rectifying a mistake apparent from the record but is be hors it. The limit to which the Income-tax Officer can go back does not stop at the written down value of the previous year but extends up to the figure of the original cost, and the method enjoined by section 10(5) (b) of the Indian Income-tax Act of 1922 is not that the Income-tax Officer should take into consideration the actual cost, determining it for himself, if necessary, take also into consideration the allowances granted in the past, and then make his own computation as to the written down value for the assessment year with which he is concerned. It cannot be said that merely because under section 35 some written down value and the depreciation amount have been determined they are a final determination binding for all times to come; nor does the determination operate as estoppel or res judicata for the following years.

6. Mr. Shah also contended in this connection that not to give relief under section 80J or section 84, as the case might be, when due, only because it is not claimed, is a mistake apparent on the fact of the record. Mr. Shah has relied in this connection on the following circular of the Central Board of Revenue issued in June, 1955. The circular is reproduced at page 532 of volume I of Chaturvedi and Pithisaria's Income-tax Law, second edition, and the circular is as follow :

'Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the department, for it would inspire confidence in him that he may be sure of getting a square deal from the departme nt. Although, therefore, the responsibility for claiming refunds and reliefs rests with the assessees on whom it is imposed by law, officers should -

(a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other;

(b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs. '(Circular No. 14 (XL-35) of 1955 dated 11-4-1955)

7. In connection with the effect of such circular, Mr. Shah relied upon the decision of the Supreme Court in Navnit Lal C. Javeri v. K. K Sen, Appellate Assistant Commissioner of Income-tax : [1965]56ITR198(SC) . There the majority of the learned judges hearing the appeal held that circular issued by the Central Board of Revenue, of the kind of circular mentioned therein, would be binding on all officers and persons employed in the execution of the Income-tax Act, under section 5(8) of the Act. In the light of this decision of the Supreme Court, Mr. Shah contended, that it was obligatory on the Income-tax Officer when he originally heard the assessment proceedings to draw the attention of the assessee in the instant case to any refunds or reliefs including the relief under section 84 and section 80J for the relevant assessment year to which the assessee appeared to be clearly entitled but which the assessee had omitted to claim for some reason or other. It is perfectly true, as Mr. Shah contends, that if the facts set out by the assessee in the applications to the Income-tax Officer claiming relief by way of rectification, being two applicati ons of February 20, 1970, were already on the record of the Income-tax Officer at the time of the original assessment, the assessee would be entitled to relief under section 80J and in view of this circular, it was obligatory on the part of the Income-tax Officer to draw the attention of the assessee to the relief under section 80J. The assessee-firm started its refinery in February, 1963. It was a new refinery and the business was started from February 27, 1963. Since development rebate and depreciation allowance in connection with the installation of these machinery were being granted from time to time, it is obvious that this was a new industry and it had installed new machinery for the purpose of the refinery. It is the contention of the assessee in these two applications dated February 27, 1970, that the refinery building, that is, factory, was constructed new; all the machines were installed brand new, and, therefore, development rebate therefore was allowed; electric fittings were also new; similarly, the factory building was also not formerly used for any purpose and the refinery was the first occupant in the said building. The assessee-firm also pointed out that this firm was not formed by the splitting up, or the reconstruction of the business already in existence. Some of the machineries were imported from Japan and the refinery was installed with the help of Japanese technical collaboration. The assessee also further pointed out that the industrial concern of the assessee employed ten or more workers for the manufacturing process run with electric power. Thus, in these two applications of February 27, 1970, the assessee tried to make out a case that all the conditions necessary for granting the relief under section 80J were satisfied in the case of the assessee. Mr. shah contends that, in view of the wording of section 80J, namely, that the relief under section 80J shall be granted in accordance with and subject to the provisions of sections 80J, and since all the conditions required for the granting of relief under that section were satisfied, it was obligatory on the Income-tax Officer to grant the relief even though no claim was put forward by the assessee, particularly in the light of the circular issued by the Central Board of Revenue as far back as 1965.

8. In this connection Mr. Shah has relied on the observations of the Supreme Court is S A L Narayan Row v. Ishwarlal Bhagwandas : [1965]57ITR149(SC) . At page 163 of the report, Shah J., as he then was, delivering the judgment of the majority of the learned judges, observe :

'The Attorney-General contended that in any event there was nothing to show that the Income-tax Officer had purported to exercise his discretion when be passed the order of assessment and did not impose any liability for payment of interest under section 18A(6). That may be so. But the case of the assessee did fall within the terms of rule 48(1) and the Income-tax Officer must in law be bound to consider whether he was entitled to reduction or waiver of interest under the fifth proviso. The amendment and the rules which came into operation later must, in view of the restrospective operation, be deemed to be taken extant, and the fact that the Income-tax Officer could not in making the assessment have adjusted his approach to the problem before him in the light of those provisions is irrelevant in considering the legality of his order. The order of the Income-tax Officer which did not take not of the law deemed to be in force must be regarded as defective. The matter was brought before the Commissioner in considering the matter under section 33A assumed that the amending Act 25 of 1953 had no retrospective operation and rejected the claim of the assessee on the ground that at the date when the order of assessment was made, Act 25 of 1953 had not come into operation, and that the Act became effective as from December, 1953, when the rules were framed. In so holding, the Commissioner committed an error of law apparent on the face of the record. The High Court was, therefore, right in setting aside the order which was passed by the Commissioner without considering the proviso to section 18A(6) which was clearly applicable to the case of the assessee and in the light of rule 48 which was enacted in pursuance of that proviso.'

9. The Supreme Court in this particular case was considering the provisions of section 35 of the Act of 1922 which dealt with rectification and which are reproduced in section 154 of the Act of 1961. The sentences which we have underlined clearly shows that if the Income-tax Officer passed an order without taking note of the law which is deemed to be in force the order must be regarded as defective and if there is a defective order, then there is an error apparent on the face of the record.

10. Mr. Shah contends that in the instant case since the relief under section 80J which was clearly available to the assessee on the facts of the case and available from the materials which were present on the record of the Income-tax Officer, there was an error apparent on the face of the record of the original assessment proceedings when the Income-tax Officer failed to grant this relief. Mr. Shah contended in this connection that the fact that the assessee did not specifically put forward a claim for the relief under section 84 or section 80J is totally beside the point in view of the obligatory provisions of sections 84 and 80J.

11. Mr. Kaji for the revenue is right when the contends that by the use of the word 'shall' in section 84 and section 80J, the legislature merely provided that if the conditions for the relief mentioned in the section were satisfied, it was obligatory upon the Income-tax Officer to grant the relief under section 84 or section 80J. The question as to who should satisfy the Income-tax Officer that those conditions were present is another aspect of the matter, according to Mr. Kaji. In this connection Mr. Kaji relied upon two decisions of the Allahabad High Court, namely, Anchor Pressings (P.) Ltd. v. Commissioner of Income-tax : [1975]100ITR347(All) and Sharda Prasad v. Commissioner of Income-tax : [1975]100ITR373(All) . In both the cases the assessee concerned was asking for relief under section 80J and though in the original assessment proceedings to claim for relief under this section was not put forward, relief was claimed in rectification proceedings applied for by the assessee. In Anchor Pressings (P.) Ltd., case : [1975]100ITR347(All) , Division Bench of the Allahabad High Court held that section 154 of the Income-tax Act, 1961, is not meant for preferring a claim which the assessee has omitted to prefer in the assessment proceedings. The section can operate only on the facts which are already on the record and cannot be resorted to to introduce new facts. Therefore, where an assessee had failed to claim the rebate allowed under section 84 of the Act (now section 80J) as a new undertaking, in its return or even at the appellate stage, it cannot be held that there was any mistake, much less a mistake apparent from the record, which would enable the assessee to resort to section 154 of the Act for relief under section 84. This decision in Anchor Pressings (P.) Ltd. : [1975]100ITR347(All) was followed in Sharda Prasad's case : [1975]100ITR373(All) by another Division Bench of the Allahabad High Court and it was held that in the absence of a claim under section 80J, if the Income-tax Officer does not allow the rebate, it cannot be said that he committed any mistake apparent on the fact of the record which could be rectified under section 154 of the Act. With great respect to the learned judges of the Allahabad High Court, we are unable to agree with their conclusion regarding the scope of section 154 of the Act. With great respect to the judges of the Allahabad High Court, we are unable to agree with their conclusions regarding the scope of section 154. In view of the circular of the Central Board of Revenue of 1955, which we have set out hereinabove, although the assessee-firm itself did not claim relief under section 80J and though the responsibility for claiming refund and reliefs rested with the assessee, the Income-tax Officer should have drawn the attention of the assessee to this relief under section 80J to which the assessee appeared to be clearly entitled but which the assessee had omitted to claim for some reason or the other. In view of the decision in Navnit Lal C.Javeri's case : [1965]56ITR198(SC) , it is obvious that it was the duty of the Income-tax Officer to have followed this particular circular of the Central Board of Revenue issued as far back as 1955 and in view of this circular read with Navnit Lal C. Javeri's case : [1965]56ITR198(SC) . We are, with respect, unable to agree with these two decisions of the Allahabad High Court.

12. Mr. shah for the assessee has drawn our attention to another decision of the Division Bench of the Allahabad High Court in Ascharajlal Ram Parkash v. Commissioner of Income-tax : [1973]90ITR477(All) . There it was held in the context of depreciation allowance that though the assessee in his return did not claim depreciation for a truck purchased in the previous year nor gave the necessary particulars in the form of return, the Income-tax Officer, if in the course of assessment proceedings he comes to know of the relevant particulars necessary for the grant of deduction for depreciation, was bound to give effect to it and allow depreciation, as the Income-tax Officers was bound to arrive at the true figure of profits and gains of the business of the assessee. It could not be contended that merely because of assessee did not file the necessary particulars in the return, the Income-tax Officer did not have jurisdiction of grant the depreciation allowance. We fail to see this decision helps the assessee in the instant case except to the extent of showing that depreciation allowance must be granted even though the necessary particulars have not been furnished. With respect to the learned judged of the Allahabad High Court, we are unable to agree with their conclusion, so far as depreciation allowance is concerned, because under section 34, sub-section (1), the deductions referred to in sub-section (1) of section 32, that is, depreciation allowance, shall be allowed only if the prescribed particulars have been furnished. Once it is found that those necessary particulars have not been furnished, the condition precedent to the granting of the depreciation allowance under section 34(1) read with section 32 is not satisfied and, therefore, the Income-tax officer had no jurisdiction to grant the depreciation allowance in that particular case. With respect, therefore, to the learned judges of the Allahabad High Court, we a unable to agree with their conclusions in Ascharajlal Ram Parkash's case : [1973]90ITR477(All) but, in so far as the decision lays down that whenever any relief is available to an assessee under the provisions of the Act on certain conditions being satisfied, if the Income-tax Officer finds from the materials on record that those conditions are satisfied, he is bound to grant that relief, we agree, but on a different process of reasoning from the reasoning which appealed to the learned judges of the Allahabad High Court who decided Ascharajlal Ram Parkash's case : [1973]90ITR477(All) .

13. In support of his contention regarding the scope of rectification proceedings, Mr. Shah has relied upon the decisions of the Supreme Court in Mahendra Mills Ltd. v. P. B. Desai Appellate Assistant Commissioner of Income-tax : [1975]99ITR135(SC) , L. Hirday Narain v. Income-tax Officer : [1970]78ITR26(SC) , Income-tax Officer v. Asok Textiles Ltd. : [1961]41ITR732(SC) and Venkatachalam, Income-tax Officer v. Bombay Dyeing and Mfg. Co. Ltd. : [1958]34ITR143(SC) . Now, all these different decisions no doubt turn upon one or the other aspect of rectification proceedings either under section 35 of the Indian Income-tax Act, 1922, or section 154 of the Act of 1061. However, we find that as regards the powers of the Income-tax Officer in rectification proceedings, the position has been summarized now by the Supreme Court in T S Balaram, Income-tax Officer v. Volkart Brothers : [1971]82ITR50(SC) , where Hegde J., delivering the judgment of the Supreme Court, has observed at page 5 :

'From what has been said above, it is clear that the question whether section 17(1) of the Indian Income-tax Act, 1922, was applicable to the case of the first respondent is not free from doubt. Therefore, the Income-tax Officer was not justified in thinking that on that question there can be no two opinions. It was not open to the Income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceeding under section 154 of the Income-tax Act, 1961. A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. As seen earlier, the High Court of Bombay our opinion the High Court was not justified in going into that question. In Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale of a High Court under article 226 of the Constitution, ruled that an error which has to be established by a long drawn process of reasoning on points where there way conceivably be two opinions cannot be said to be an error apparent on the fact of the record. A decision on a datable point of law is not a mistake apparent from the record - see Sidhramappa Andannappa Manvi v. Commissioner of Income-tax : [1952]21ITR333(Bom) . The power of the officers mentioned in section 154 of the Income-tax Act, 1961, to correct 'any mistake apparent from the record' is undoubtedly not more than that of the High Court to entertain a writ petition on the basis of an 'error apparent on the face of the records'. In this case it is not necessary for us to spell our the distinction between the expressions 'error apparent on the face of and record' and 'mistake apparent from the record. But suffice it to say that the Income-tax Officer was wholly in holding that there was a mistake apparent from the record of the assessment of the first respondent.'

14. Thus, this decision of the Supreme Court clearly lays down that it is only a mistake apparent from the record, in the sense of being an obvious and patent mistake and not something which can established by a long drawn process of reasoning on points on which there may conceivably be two opinions that can be corrected in rectification proceedings under section 154 of the Income-tax Act, 1961.

15. Under the circumstances, in the light of the above discussion, all that we have to ask ourselves is, whether in the original proceedings, relief under section 84 and section 80J for the relevant assessment years could have been granted to the assessee from the materials available to him. Since we are hearing this reference made under section 256 of the Income-tax Act, 1961, we have to take the findings of fact as recorded by the Tribunal unless we find that the findings are perverse or based on no evidence or such as no reasonable person could have ever arrived at. In the instant case, the Tribunal has observed in paragraph 3 of its orde :

'In the assessee's case, though it is true that the assessee had given information to the Income-tax Officer such as construction of new building, installation of new machinery, starting of business in refinery, etc., and even though this information has been used by the Income-tax Officer for the purpose of allowance of development rebate, depreciation, etc., it could not be said that material, which was necessary for the purpose of granting relief under section 80J of the Act, was available with the Income-tax at the time of making the assessment. In the first instance, the assessee has not made any claim for relief under section 80J, nor had the assessee filed particulars for the purpose of computation of capital on the basis of which the relief could be granted. Further, again, the relief could be granted only if certain conditions are satisfied. The first conditions is that the industrial undertakings should not have been formed by splitting up or reconstruction of the business already in existence. The second conditions is that it should not have been formed by transfer to a new business of a building or machinery previously used for any purpose. The next condition to be satisfied is that the undertaking employs 10 or more workers in the manufacturing process carried on with the aid of power. None of these conditions was specifically satisfied by the assessee in the course of the assessment proceedings under section 143(3) of the Act. If, therefore, the Income-tax Officer had to come to a decision as to whether the assessee was entitled to relief under the provisions of section 80J of the Act or not, the Income-tax Officer would have to cull out all the materials from the information given to him by the assessee and even after gathering that material from the record, the Income-tax Officer may perhaps have to debate the matter with the assessee, with the result that it would be possible that the Income-tax Officer may ultimately not agree with the assessee that the assessee was entitled to relief under section 80J of the Act.'

16. Thus, the finding of the Tribunal clearly shows that it could not be said that the material which was necessary for the purpose of granting relief under section 80J was available with the Income-tax Officer at the time of making the assessment. The Tribunal has also found that none of the four conditions mentioned in section 80J(4) was specifically satisfied by the assessee in the course of the assessment proceedings under section 143(3) of the Act. In view of these findings of fact by the Tribunal, it is obvious that the Income-tax Officer could not have granted the relief under section 84 or section 80J to the assessee and since this relief could not have been granted at the time of the original assessment proceedings no question of rectifying the mistake ever arose. It was for the assessee to satisfy the Income-tax Officer that the condition of section 80J, sub-section (4), each one of those four conditions, was satisfied in this particular case and, further, that the materials for granting the relief under section 80J were available on the record of the case before him. We are not deciding this case against the assessee on the ground that no claim was made by the assessee in the course of the original assessment proceedings for relief under section 84 or section 80J. We are, however, deciding this case purely on the basis of the findings of fact recorded by the Tribunal, namely, that the materials necessary for the purpose of granting the relief under section 80J of the Act were not available with the Income-tax Officer at the time of making the original assessment and the further finding of fact by the Tribunal that none of the conditions set out in section 80J(4) was specifically satisfied by the assessee in the course of the assessment proceedings under section 143(3) of the Act. It is possible that if a claim had been specifically preferred under section 84 or section 80J, as the case may be, the materials required for satisfying the relief under section 80J could have been pointed out to the Income-tax Officer at the time of the original assessment proceedings and relief under section 80J might have been granted by the Income-tax Officer. But what we are concerned with is whether there was an error apparent from the record. In view of the findings of fact of the Tribunal regarding the absence of the materials necessary for granting the relief under section 80J and in view of the finding of the Tribunal that none of the conditions laid down by section 80J(4) was satisfied in the present case, it is obvious that there was no error apparent from the record so far as the original proceedings were concerned. It is only of this limited aspect that we want to base our decision in the instant case.

17. Before parting with the case, we must point out that in the light of the decision of the Supreme Court in Navnit Lal C. Javeri's case : [1965]56ITR198(SC) , it is incumbent on the Income-tax Officers to follow the circular of the Central Board of Revenue of 1955 to which we have referred above and to draw the attention of the assessee concerned to all the reliefs and refunds to which the assessee seems to be entitled on the facts of the case even though the assessee might have omitted to claim refund or relief. In the instant case, in view of the findings of facts recorded by the Tribunal, we are helpless and even though if proper materials had been pointed out relief might have been available to the present assessee, since the materials were not pointed out and the Tribunal's findings of fact are what we have stated above, no other conclusion except that there was no error apparent from the record can be reached in the instant case.

18. We, therefore, hold that there was no scope for invoking the provisions of section 154 of the Income-tax Act, 1961, in the instant case of far as the assessee is concerned and, therefore, the Tribunal was right in holding that the provisions of section 154 of the Income-tax Act, 1961, could to be invoked in the instant case. We, therefore, answer the question referred to us in the affirmative, that is, against the assessee and in favour of the raven. The assessee will play the costs of this reference to the Commissioner.


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