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Commissioner of Income-tax, Gujarat-ii Vs. Pushpavati Kantilal - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Judge
Reported in[1981]129ITR582(Guj)
ActsIncome Tax Act, 1961 - Sections 154, 154(1), 250 and 271
AppellantCommissioner of Income-tax, Gujarat-ii
RespondentPushpavati Kantilal
Appellant Advocate N.U. Raval, Adv.
Respondent Advocate J.P. Shah, Adv.
Cases ReferredOfficer v. Volkaart Brothers
Excerpt:
.....family in his income - appellate assistant commissioner deleted share income from her total income - assessee 1/6th share from hindu undivided family dealt by appellate assistant commissioner - another bench of tribunal was of view that 1/ 3 of share devolved on two heirs, his mother and present assessee - aac sought to rectify under section 154 original order passed by his predecessor - appeal before tribunal - tribunal held that aac had no jurisdiction to resort to section 154 for rectifying earlier appellate order as no error or mistake committed - appeal - debatable point of law is not mistake apparent from record - held, proceeding initiated under section 154 by aac was clearly without authority of law. - - the aforesaid facts clearly show that so far as the decision of..........aac under s. 154 of the act. 9. the contention put forward on behalf of the revenue is that the earlier decision of the tribunal in the case of kantilal manilal (huf) for the assessment years 1960-61 and 1961-62 took the view that 1/3rd share of the huf due to dinesh manilal could not be excluded from the computation of the total income of kantilal manilal (huf) and it is on that basis that the then aac with a view to avoiding doubt taxation, allowed the appeals of the assessee for the concerned assessment years 1962-63 and 1963-64 and deleted the share income from the total income as accruing to the assessee during the concerned assessment years. but the later decision of the tribunal in the case of the very same huf that kantilal manilal (huf) for the assessment year 1962-63 took a.....
Judgment:

Majumdar, J.

1. The revenue has got referred for the opinion of this court under s. 256(1) of the I. T. Act, 1961, a question of law arising from the order of the Income-tax Appellate Tribunal, Ahmedabad Bench ` A'. The said question reads as under :

'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the Appellate Assistant Commissioner was not justified in passing the rectification orders for the assessment years 1962-63 and 1963-64, under section 154 of the Income-tax Act, 196 ?'

2. A few facts leading to this reference may now be stated. The assessee is an individual. The relevant assessment years are 1962-63 and 1963-64. The assessee was also a member of the joint Hindu family consisting of Kantilal, his wife, Pushpavati (the present), Kantilal's son, Dinces, his daughter-in-law, Usha, and his daughter, Rupande. Dinesh died on August 15, 1958, and under s. 6 of the Hindu Successsion Act, his widow and his mother, Smt. Pushpavati, the assessee in the present case, became entitled to his 1/3rd share in the coparcenary property. In the assessment for the assessment years 1962-63 and 1963-64, the ITO added as her share (being 1/2 of 1/3rd share) 1/6th of income from the property which belonged to the HUF, as a protective measure. In the case of the HUF of Kantila, for the assessment years 1960-61 and 1961-62, the question arose in appeal before the Tribunal as to whether the HUF continued after the death of Dinesh and the status was correctly taken as an HUF. On this question, the Tribunal took the view that even on the death of Dinesh as a member of HUF, no division of the HUF was brought about and that even before the passing of the Hindu Succession Act came into force was not different. Thus, according to the Tribunal, 1/3rd share from the HUF due to Dines Mantilal cannot be excluded from the computation of total income of Kantilal Manilal (HUF).

3. In the appeal preferred by the assessee against the original assessment including 1/6th share of income from the property of the HUF, the AAC deleted the share income from her total income by his order dated 16th July, 1970, following the above decision of the Tribunal, and holding that this 1/6th shae of the income cannot be doubly taxed, once in the hands of HUF and against as the share income in the assessee's hands as individual. Thus, in the appeals pertaining to both the assessment years 1962-63 and 1963-64, so far as the assessee as individual was concerned. 1/6th share from the HUF was delted by the AAC.

4. Thereafter, for the assessment year 1962-63, pertaining to the assessment proceedings for the HUF of Kantilal Manilal, another Bench of the Tribunal took a different view and held that to the extent of 1/3rd share of the coparcenary property which originally belonged to the deceased, Dinesh, it devolved on the two heirs, that is, his mother, the present assessee, and his widow and to that extent, the property ceased to belong to the HUF. The Tribunal, therefore, held that neither the 1/3 shares of the property nor the income therefrom could be treated as belonging to the HUF. This order of the Tribunal was in Income-tax Appeal No. 4567 of 2968-69. pertaining to the HUF of Kantilal for the assessment year 1962-63, which was decided on 29th September, 1970.

5. When the AAC came to know about the later order of the Tribunal for the assessment year 1962-63, so far as the HUF was concerned, he sought to rectify under s. 154 if the I. T., the original order passed by his predecessor-in-office on 16th July, 1970, pertaining to the assessment proceedings in the case of the assessee as individual for assessment years 1962-63 and 1963-64. The said rectification proceedings were opposed by the assessee. Overruling the objections of the assessee, the AAC by his order dated 17th February, 1973, ordered that necessary rectification should be carried out in the earlier orders passed by his predecessor-in-office. The assessee carried the matter in appeal to the Tribunal and field two appeals pertaining to the assessment years 1962-63 and 1963-64. The Tribunal took the view that the AAC had no jurisdiction to resort to the provisions of s. 154 of the Act for rectifying earlier appellate orders as there was no mistake or error apparent from the face of the record so far as earlier orders were concerned. The Tribunal, following the decision of the Supreme Court in T. S. Balaram v. Volkart Brothers : [1971]82ITR50(SC) , held that rectification proceedings were without jurisdiction. The revenue thereafter requested the Tribunal to refer a question of law under s. 256(1) of the Act, and that is how a common question of law pertaining to both the appeals before the Tribunal has been referred to us for our our opinion.

6. We have already extracted in the earlier part of this judgment the question of law referred to us for our opinion. It is obvious that the AAC sought to rely on s. 154 of the Act for rectifying the earlier orders passed by his predecessor-in-office on the ground that the said orders required rectification on account of an apparent error from the record. Section 154(1)(b) of the Act provides :

'(1) With a view to rectify any mistake apparent from the record - ......

(b) the Appellate Assistant Commissioner or the Commissioner (Appeals) may amend any order passed by him under section 250 or section 271.'

7. Hence it must be established by the revenue that the earlier orders passed by the predecessor-in-office of the AAC suffered from any mistake apparent from the record.

8. So far as the facts of the present case are concerned, it appears clear that at an earlier stage, the then AAC who heard the appeals of the assessee for the assessment years 1962-63 and 1963-64, allowed the same relying on the decision of the Income-tax Appellate Tribunal in the case of Kantilal Manilal (HUF) pertaining to the assessment years 1960-61 and 1961-62. Thus, at the highest, it can be said that this order of the Tribunal was the basis of the decision rendered by the AAC so far as the present assessee was concerned. It is not the case of the revenue that the AAC never sought to rely on s. 154 of the Act on the ground that the said decision of the Tribunal as on earlier occasion on which reliance was placed by the AAC for deciding the case of the assessee, had undergone any change or that the said decision was reversed by any higher authority. The AAC invoked s. 154 of the Act only on the ground that the later appeal for the assessment year 1962-63, pertaining to the case of Kantial manilal (HUF), a different view was taken by a different Bench of the Tribnunal dealing with the said appeal. This later decision of the different Bench of the Tribunal has been made the basis for invoking the powers of the AAC under s. 154 of the Act.

9. The contention put forward on behalf of the revenue is that the earlier decision of the Tribunal in the case of Kantilal Manilal (HUF) for the assessment years 1960-61 and 1961-62 took the view that 1/3rd share of the HUF due to Dinesh Manilal could not be excluded from the computation of the total income of kantilal Manilal (HUF) and it is on that basis that the then AAC with a view to avoiding doubt taxation, allowed the appeals of the assessee for the concerned assessment years 1962-63 and 1963-64 and deleted the share income from the total income as accruing to the assessee during the concerned assessment years. But the later decision of the Tribunal in the case of the very same HUF that Kantilal Manilal (HUF) for the assessment year 1962-63 took a different view and held that 1/3rd income from the going family ought to be assessed in the bands of the heirs of the deceased, Dinesh Kantilal, and not in the hands of the HUF as that income had ceased to be HUF income. According to the revenue, this is the ground for initiating the present proceedings under s. 154 of the Act for rectifying the error which had crept in in the earlier orders of the AAC so far as the assessee is concerned. The aforesaid facts clearly show that so far as the decision of the Tribunal in the case of kantilal Manilal (HUF) for the assessment year 1962-63 is concerned, it had never formed the basis of the decision of the AAC in the case of the present assessee on the prior occasion. Thus, the later decision of the Tribunal concerning assessment year 1962-63, so far as Kantilal Manilal (HUF) is concerned, was never part of the record of the appeals concerning the present assessee for the relevant assessment years. Hence, the later decision of the Tribunal rendered in the concept of an entirely different assessment year for a different assessee, viz., Kantilal manilal (HUF) and which was never relied upon by the AAC for deciding appeals of the assessee on the prior occasion can never be pressed into service by the revenue for invoking provisions of s. 154 of the Act. It is obvious that the later decision of the Tribunal for a different year and for a different assessee and which was not before the mind's eye of the AAC while he decided at an earlier occasion the appeals of the assessee for the relevant assessment years, did not form part of his record in the concerned appeals. Consequently, the said later decision can have no effect whatsoever is deciding the question whether any error had crept in in the earlier order of the AAC. It is, therefore, clear that s. 154(1)(b) cannot be pressed into service by the revenue for reopening the appellate order for the concerned assessment years so far as the assessee is concerned.

10. Mr. Raval, learned advocate for the revenue, placed strong reliance on the decision of the Supreme Court in Mahendra Mills Ltd. v. P. B. Desai, AAC of I. T. : [1975]99ITR135(SC) . The facts of the case before the Supreme Court were that of the assessment year 1959-60, the appellant had shown its closing stock at Rs. 5,89,439. The records of the bank with which its stock had been hypotheicated showed the value of a larger figure and the appellant explained the discrepany by saying that an incorrect figure was given to the bank to obtain a larger overdraft. This explanation was rejected by the ITO and the AAC, and the value of the closing stock was taken at Rs. 8,04,121. The Tribunal thereafter accepted the appellant's explanation in its appeal for 1959-60 and directed the addition in the closing stock for that year to be deleted with the result that the value of the closing stock was determined at Rs. 5,89,439 for the assessment year 1959-60. Thereafter, at the instance of the ITO, the AAC initiated proceedings for rectification of his appellate order for the assessment year 1960-61 and passed an order under s. 35 of the Indian I. T. Act, 1922, directing that the value of the opening stock for 1960-61 should be taken at Rs. 5,89,439 in view of the Tribunal's order for 1959-60. The appellant, thereafter, filed a writ petition in the High Court contending that the AAC had no jurisdiction to rectify the earlier order. This court rejected the aforesaid contention of the assessee. On appeal, the Supreme Court held that the record appeal before the AAC so far as the assessment year 1960-61 was concerned, clearly showed that the closing stock of the assessment year 1959-60 was the basis for deciding the opening stock for the relevant assessment year 1960-61. Thus, the closing stock of 1959-60 formed part of the record of appeal within the contemplation of s. 25 and was not extraneous to it and the AAC could legitimately look into it for purpose of correcting the mistake in regard to the opening stock for 1960-61 and, to that extent, the two assessment telescoped into each other. It was further observer :

'The Tribunal's finding that the value of the closing stock for 1959-60, should be Rs. 5,89,439 had completely replaced the Income-tax Officer's finding in regard to this fact with effect from the date of the latter's order or 1959-60. The Tribunal's decision was, equally with the Officer's finding, with regard to the closing stock for 1959-60, relevant to and part of the 'record of appeal' within the contemplation of section 35 and not extraneous to it.'

11. It was, therefore, held that the AAC could legitimately look into the figure of closing stock for the year 1959-60, for the purpose of correcting the mistake in regard to the opening stock for 1960-61.

12. It is difficult to appreciate how the aforesaid decision of the Supreme Court can be pressed into service by the revenue in the present case. As we have already stated above, the earlier order of the AAC in the appeal so far as the present assessee concerned, rested on the prior order of the Tribunal for the assessment years 1960-61 and 1961-62. So far as Kantilal Manilal (HUF) was concerned. Thus, at the highest, it can be said that this prior order of the Tribunal formed the basis of the appellate decision so far as the assessee is concerned. If this prior order of the Tribunal was in any way changed, the changes in that order would have some impact on the appellate decision so far as the assessee is concerned. But, that is not so. The prior order of the Tribunal for the assessment years 1960-61 and 1961-62, in the case of Kantilal Manilal (HUF) has remained unchanged and intact. But the subsequent decision of the Tribunal rendered in some other case for the subsequent year 1962-63, of course in the case of the same HUF, is pressed into service by the AAC for invoking the powers under s. 154 of the Act. It is entirely extraneously to the record in appeal as it existed on the prior occasion so far as the assessee-appellant's appeals were concerned. Consequently, such a subsequent decision which had nothing to do with, and which never formed, even by any implication, the basis of the AAC's earlier order and which had not seen the light of the day when the earlier appeals were decided, could not have any effect on the previous decision of the appellate authority and could not be viewed in retrospect to fish out any error in the earlier order of the appellate authority which, as its record stood, was perfectly justified and in order. In that view of the matter, the decision of the Supreme Court in Maahendra Mills Ltd. : [1975]99ITR135(SC) can be of no avail to the revenue.

13. On the contrary, the decision of the Supreme Court in T. S. Balaram. Income-tax Officer v. Volkaart Brothers : [1971]82ITR50(SC) , would be relevant for deciding the present question. The Supreme Court, in that case, interpreted s. 154 of the Act and held the 'a mistake apparent on the record must be an obvious and patent mistake ant not something which can be established by a long-drawn process or reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record.' In the aforesaid case, the facts were that the assessee which was a firm duly the registered under the I. T. Act, was assessed on the slab rates prescribed under the respective Finance Acts applicable to registered firms. In the individual assessments of the partners of the firm their respective shares were included and tax was assesssed at the maximum rate since the partners were assessed at non-residents. Thereafter, initiating rectification proceedings under s. 154 of the I. T. Act, 1961, on the ground that there was a mistake apparent from the record inasmuch as the firm had not when charge at the maximum rate of tax under s. 17 (1) of the Indian I. T. Act, 1922, the ITO purported to rectify the assessments by applying the provisions of that section. The assessee approached the High Court under article 226 of the Constitution of India for quashing the rectification proceedings. The High Court held that the original assessments were prima facie in accordance with law and at any rate there was no obvious or patent mistake in those orders of assessment and, therefore, the officer was incompetent to pass the orders of rectification. On further appeal by the revenue to the Supreme Court, the decision of the High Court was confirmed. It was held by the Supreme Court that the officer was wrong in holding that there was a mistake apparent from the record of assessments of the firm. Hedge J., speaking for the Supreme Court in this connection, placed reliance on an earlier decision Satyanarayan Laxminarayan Hegde v, Mallikarjun Bhavanappa Tirumale [1960] 1 SCR 899. A debatabale point of law, in the view of the Supreme Court, is not a mistake apparent from the record. in the present case, in substance and in fact, the submission of the revenue amounts to the contention that in view of the later decision of the Appellate Tribunal in the case of a different assessee and for a different assessment year, the position of law as assumed by the AAC in the appeal at the earlier occasion, appeared to be unsustainable. This can certainly not amount to an error of law apparent from the record as there was nothing patent or obvious about. On the contrary, it would require long-drawn process of arguments to urge that there was any such error and that too on the basis of the subsequent decision of the Tribunal taking a contrary view on a legal aspect.

14. In that view of the matter, the proceedings initiated under s. 154 of the Act by the AAC in the present case were clearly without authority of law. It must, therefore, be held that the Tribunal was right in law when it held that the AAC was not justified in passing the rectification orders for the assessment years 1962-63 and 1963-64, under s. 154 of the Act, as the said provision was not available to the AAC in the present case. We, therefore, answer the question referred to us for our opinion in the affirmative, that is, in favour of the assessee and against the revenue. The Commissioner will pay the costs of this reference to the assessee. Orders accordingly.


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