Mian Jalal-ud-Din, C.J.
1. The following two questions have been referred by the Income-tax Appellate Tribunal, Amritsar, to this court for opinion :
' 1. Whether, on the facts and in the circumstances of the case, the relief under Section 80J for the assessment year 1967-68, which was neither claimed nor the deficiency worked out for the purpose of carry forward and set off as provided in Section 80J(3) of the Income-tax Act, 1961, in that assessment year could be allowed as a mistake apparent from record under Section 154 for the assessment year-1970-71
2. Whether, on the facts and in the circumstances of the case, the right to claim deduction under Section 80J arose to the assessee in the assessment year 1970-71, when the profits were earned for the first time or in the assessment year 1967-68, to which year the claim actually related '
2. The facts leading to the reference are as follows :
' M/s. Mattoo Worsted Spinning and Weaving Mills (hereinafter called ' the assessee'). is a private company engaged in the manufacture of spinning and weaving of worsted wool. The asseesee moved an application under Section 154 of the I.T. Act on January 15, 1973, to the ITO seeking rectification of the mistake in the order of assessment in respect of the assessment year 1967-68. The assessee sought set off of allowance under Section 80J for the assessment year 1967-68. The ITO had already concluded the income of the assessee for the assessment year 1970-71. After examination of the accounts, the ITO deducted both claims, depreciation and development rebate, brought forward, from the previous assessment years and also deduction for relief under Section 80J, both for the year 1970-71, as well as sums brought forward and due for the assessment years 1968-69 and 1969-70. The figures of deductions allowed by the ITO were Rs. 46,900, Rs, 43, 140 and Rs. 59,613 for the assessment years 1968-69, 1969-70 and 1970-71, respectively. This assessment, as stated above, was made on February 17, 1971. An application under Section 154 was moved by the assessee seeking deduction in respect of the assessment. This application was rejected by the ITO observing that the claim was belated and should have been made in the year of assessment of 1967-68. As the assessee had not made any such claim either in the return filed for the year 1967-68, or during the course of assessment proceedings for the year 1970-71, but on the other hand, the assessee had written ' nil' against column No. 3 of para, (ii) of the return, therefore, the question of allowing any such claim did not arise. In the opinion of the ITO, there was no mistake apparent on the face of the record. No order of rectification could, therefore, be made. Against theorder of the ITO, an appeal was taken before the AAC, who also rejected the same. The AAC observed that there was no question of carrying forward of the claim and setting off against the income for the assessment year 1970-71. In the opinion of the AAC, the assessee was not entitled to the relief under Section 80J for the assessment year 1967-68 as it was not an easy question to be decided. It was a highly controversial matter which required deep thought and elaborate discussion. The assessee again came up in appeal before the I.T. Appellate Tribunal and the latter decided the point in favour of the assessee holding that the assessee was entitled to the relief under Section 80J in respect of the assessment year 1967-68. The Commissioner of Income-tax, Amritsar, therefore, moved an application before the I.T. Appellate Tribunal and requested it to refer the two above mentioned questions of law to the High Court for its opinion. This is how the reference has come before us. '
3. We have heard Mr. Chadha, the learned counsel for the assessee, and Shri K.N. Raina, the learned advocate for the Revenue.
4. To put in brief, the argument of the learned counsel for the assessee is that the right conferred on the assessee by Section 80J is an absolute right which is not made conditional upon any computation of income by the ITO. It is a mandatory provision of law which cast an obligation on the ITO to give the necessary relief to the assessee, notwithstanding the fact that the assessee did not claim such a relief. Omission to a claim a set off was of no consequence. Ah analdgy is sought to be drawn from the filing of the declaration of the income and it is submitted that just as the subjection of an income to income-tax is not dependent upon the declaration thereof in the return, in the same way no claim for a relief which is, otherwise, permissible under the Act, and which is not claimed, cannot disentitle a taxpayer from obtaining the relief due. All that Section 80J requires for claiming the set-off is that the business must have started functioning on or after April 1, 1961, and that the business was not formed by splitting it up or it should not be a case of reconstruction of a business already in existence by the transfer of any machinery or plant previously used for any purpose. In the present case, these conditions indisputably exist. It, is further urged that when the assessee was afforded relief in respect of the later three years, there was no point in refusing the same in respect of the assessment year 1967-68. The mandate of law required that the ITO ought to have notified this to the assessee and should have afforded the relief for the said assessment year and allowed deduction according to the provisions of the section. Our attention is also invited to the Circular issued by the Central Board of Revenue in 1955 which is binding upon the I.T. authorities and which enjoins upon them to afford the necessary relief or reliefs to the assessee under the Act, notwithstanding the fact that the relief orreliefs are not claimed by the assessee in the returns. The assessee must be informed of the right. It is further submitted that the assessment order to be rectified is not of the assessment year 1967-68, but, what is sought by the application under Section 154, is the rectification of the assessment made in respect of the assessment year 1970-71 when the right accrued to the assessee to claim a deduction and set off. In other words, the argument is that the right to claim and carry forward a relief under Section 80J arose to the assessee for the first time for the assessment year 1970-71, when it made the profits. The grant of reliefs to the assessee for the subsequent three years, i.e., 1968-69, 1969-70 and 1970-71 clearly established that all the conditions as required by the section were satisfied. The satisfaction did not require any argument and could not be made the subject of any debate. The mistake was apparent on the face of the record. In support of his arguments, the learned counsel has relied upon a decision of the Bombay High Court in All India Groundnut Syndicate Ltd. v. CIT reported in : 25ITR90(Bom) , a Supreme Court decision in T.S. Balaram v. Volkart Brothers reported in : 82ITR50(SC) and a decision of the Gujarat High Court in Chokshi Metal Refineryv. CIT reported in : 107ITR63(Guj) . For the purpose whether a mistake is apparent on the face of the record or not, the learned counsel has referred us to a decision of the Calcutta High' Court in Indra Singh & Sons P. Ltd. v. Union of India : 64ITR501(Cal) and also to a decision of the Supreme Court in Maharana Mills P. Ltd. v. ITO : 36ITR350(SC) .
5. Shri Raina has tried to counter the arguments of the learned counsel for the assessee by enunciating the view that the mistake apparent on the face of the record. The application raises a controversial matter and requires long drawn arguments to support or reject the application. He has relied upon a decision of the Supreme Court reported as T.S. Balaram, ITO v. Volkart Bros : 82ITR50(SC) , laying down the view that highly controversial decisions could not be rectified under Section 154. According to the learned counsel, no claim for deduction was made either in the assessment year 1967-68 or in the assessment year 1970-71. Without making any claim no relief under Section 80J could be afforded to the assessee. There was no obligation cast on the ITO to afford the relief to the assessee, when no such relief was claimed and the return filed did not seek any deduction. The relevant column of the return showed the word ' Nil '. As regards the circular issued by the Central Board, it is submitted that, this would not apply to those reliefs where calculations were to be made merely by a ministerial act but by the application of mind by examining whether the conditions as required by Section 80J were satisfied. Whether the conditions that entitled the assessee to carry forward the claim were satisfied or not, required a proper adjudication. Therefore, it was not a case of a mistakeapparent on the face of the record. Relying upon the two decisions of the Allahabad High Court in Anchor Pressings P. Ltd. v. CIT : 100ITR347(All) and Sharda Prasad v. CIT : 100ITR373(All) , learned counsel has submitted that Section 154 would not come to the aid of an assessee who has failed or has omitted to prefer a claim in the assessment proceedings. The section could operate only on the facts which were clearly on the record and which did not require a fresh examination. In the instant case, the assessee has failed to make the claim, and, therefore, he could not by a subsequent application under Section 154 seek readjustment of his new claim. Learned counsel has further argued that the rectification was sought of a mistake which had occurred in the assessment year 1-967-68. How could that mistake be rectified by an application made in January, 1973 The application was made beyond time, and, therefore, could not be entertained.
6. We have given our matured thought to the respective arguments advanced at the bar.
7. The admitted facts of the case as also found by the tax authorities are that the conditions as required by Section 80J were satisfied. It is not disputed that the assessee started functioning after April 1, 1961. The company was formed not by the splitting up or any reconstruction of a business already in existence or by the transfer of any machinery or plant previously used for any purpose. Section 80J sets out the conditions which should be satisfied in order to enable the assessee to claim set off and right to carry forward. Another condition as required by Sub-section (2) is that the deduction specified in Sub-section (1) the same shall be allowed in computing the total income in respect of the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce article. Now these conditions are satisfied in the present case. In fact, the right to claim deduction as set off has not been disputed on these grounds, we have, therefore, to proceed in the case on the facts proved and admitted before us.
8. The only two grounds upon which the right of the assessee to claim deduction or set off or carry forward is disputed are that no such claim was made in the assessment proceedings either in the year 1967-68 or in respect of the assessment year 1970-71. In view of this, it is urged that the application made in the year 1973 for the rectification of the mistake that had crept in 1967-68 could not be entertained, more so, when there was no mistake apparent on the face of the record; and further that the right to claim the relief under Section 80J was barred because the period of four years had already expired when the application seeking the rectification was made.
9. The moot question, therefore, to be decided is whether there was a mistake apparent on the face of the record in order to justify the invoking of Section 154 in the present case. I agree with the learned counsel for the Revenue that a mistake cannot be said to be apparent on the face of the record, if it involves going deeply into the matter or the matter is decided after a long drawn debate. A mistake must appear on the face of the document. In the present case, as stated above, the conditions as set out in Section 80J are satisfied. There is no gainsaying the fact that the assessee was afforded relief under the above-mentioned section in respect of the three Inter assessment years, viz., 1968-69, 1969-70 and 1970-71. Therefore, when the I.T. authorities themselves were satisfied that a case for claiming the deduction and the carry forward was made out in respect of the above-mentioned three assessment years, there was no point in refusing the relief in respect of the assessment year 1967-68. The argument that applies for claiming the deduction in respect of the three later assessment years would equally apply for claiming the deductions in respect of the assessment year 1967-68. It is true that the assessee had not specifically claimed the relief, for the above-mentioned assessment year. This may be an omission on his part. But the question is, whether after affording the necessary relief under Section 80J in respect of three later successive assessment years, was it not the duty of the ITO to notify this fact to the assesses in the course of the assessment proceedings for the year 1970-71, and grant the relief As observed by the learned Chief Justice of the Bombay High Court in All India Groundnut Syndicate Ltd. v. CIT : 25ITR90(Bom) , the right which the Legislature has conferred upon the assessee arises under Section 24(2) of the Indian I.T. Act, 1922, to carry forward the loss of previous years for a period of six years is an absolute unqualified right and that right is an absolute and unqualified right, and that right is not made conditional upon any computation by the ITO or any notice issued by him under Section 24(3). This right arises to an assessee when the assessee had made profits and seeks to set off the losses incurred during the previous years against the profits. The fact that the ITO had not computed the losses of earlier years can have no bearing upon the right of the assessee to claim the deduction.
10. In CIT v. Kaushal Chand Dago : 42ITR177(SC) , the Supreme Court observed that where the ITO does not notify to the assessee the amount of loss for any year under Section 24(3) of the Indian I.T. Act, 1922 (now Section 80J of the I.T. Act, 1961), the assessee is entitled to carry forward the losses and have them determined in the subsequent year. Thus, it would appear that there is no other condition attached to the right to carry forward except those as specified in Section 80J. Relief under Section 80J must be allowed, once all the conditions necessary to afford the relief have been satisfied. Not onlythis, the circular issued by the Central Board of Revenue in June, 1955. read with the decision of the Supreme Court in Navnit Lal C. Javeri v. K.K. Sen, AAC : 56ITR198(SC) , makes it incumbent upon the ITO to draw the attention of the assessee to the relief allowable under Section 80J to which the assessee appears to be entitled, but which he had omitted to specify in the returns.
11. From the above discussions, it would appear that when the assessee, in the present case, made the application under Section 154 seeking a rectification of the mistake, it did not involve the determination of any controversial matter, which required long arguments for resolving it. It was a case of a mistake, which was quite apparent on the face of the record, The ITO should have, therefore, allowed the relief by making the necessary calculations, which in the words of the Tribunal, was only a ministerial act to be performed.
12. This brings us to the question as to whether the assessee had lost the right to move the ITO under Section 154, because the matter related to the assessment year 1967-68, when the right to claim the deduction had accrued to him In my opinion, the view taken by the Tribunal appears to be quite correct. It is admitted that in the assessment year 1967-68, and also for the subsequent years, the assessee did not show any profits. It was only in the year 1970-71, that the profits were shown for the first time. Therefore, the right to claim deductions and set off could be only in this year and not in the preceding years, The assessee could, therefore, carry forward the losses which he had incurred for the year 1967-68 to the assessment year 1970-71, when profits were first made. In this year, set off was allowed for the years 1968-69, 1969-70 and 1970-71, but not for the year 1967-68. Therefore, the right to claim accrued to the assessee in 1970-71. In view of this, the application could not be said to be barred by time.
13. We, therefore, record the following answers to the two questions referred by the Tribunal for our consideration :
1. The relief under Section 80J for the assessment year 1967-68, though not claimed for the purpose of carry forward and set off as provided in Section 80J(3) of the I.T. Act in that assessment year, could on the facts established be allowed, as it was a mistake apparent from the record within the meaning of Section 154 of the I.T. Act, in the assessment for the assessment year 1970-71.
2. That, as found on the facts and in the circumstances of the case, the right to claim the deduction under Section 80J arose to the assessee only in the assessment year 1970-71, when the profits were made for the first time and not in the assessment year 1967-68, when no such right to claimdeduction had accrued to the assessee, although the claim actually related to the assessment year.
14. The reference is, accordingly, disposed of.