2003 (1) TMI 27 - HC - Income Tax

Exemption under section 11 - mistake apparent from the record power of rectification of tribunal

Summary

Issues Involved:
The judgment involves issues related to the entitlement of exemption under section 11 of the Income-tax Act, 1961, rejection of the method of computing income, and the denial of exemption to the assessee-trust without affording an opportunity to respond to a new ground made suo motu by the Tribunal.

Entitlement of Exemption under Section 11:
The Prajatantra Prachar Samity, a registered society, filed an appeal challenging the denial of exemption under section 11 of the Act. The Tribunal initially dismissed the appeal but later recalled its order and allowed the appeal in favor of the assessee. The Supreme Court directed a reference to the High Court for consideration. The High Court held that the Tribunal had the statutory power to rectify mistakes apparent from the record under section 254(2) of the Act. The Tribunal's decision to allow the appeal after rectification was deemed valid as it corrected a clear mistake in the original order.

Rejection of Method of Computing Income:
The Tribunal, in its orders, considered the rejection of the method of accounting followed by the assessee for income computation. It was noted that the Tribunal applied provisions of section 11(4A) of the Act without giving the assessee an opportunity to address this aspect. The High Court emphasized that the Tribunal's application of section 11(4A) without prior notice to the assessee constituted a clear error in the order. The Tribunal's subsequent decision to grant relief to the assessee was deemed appropriate after rectifying this mistake.

Denial of Exemption without Opportunity for Response:
The Tribunal, in its substantive order, raised an additional ground for denying exemption to the assessee based on the method of accounting adopted. The High Court observed that the Tribunal's consideration of this new ground without allowing the assessee an opportunity to respond was a mistake apparent from the record. The High Court directed the Tribunal to reconsider the case in light of all relevant points and the provisions of section 11(4A) of the Act, inserted in 1983.

Separate Judgment:
Justice L. Mohapatra concurred with the decision, and the High Court answered question No. (3) in favor of the assessee and against the Revenue. The references were returned unanswered for questions (1) and (2) due to the direction given to the Tribunal to reconsider the case comprehensively.