2003 (2) TMI 58 - HC - Income Tax

Whether on the facts and in the circumstances of the case the learned Tribunal Calcutta was justified in allowing the miscellaneous petition and partially recalling the order of the Tribunal for the assessment years 1987-88 and 1988-89 ? - In the context of the order and the law the word reasonableness used in the order does not seem to be a mistake. It can at best be an erroneous expression. However it can be presumed to have been used to connote reasonableness of the explanation about the source of the expenditure. Such a view is quite possible. Thus it does not seem to be a mistake obvious or patent about which no two views are possible. In that view of the matter the said part of the order could not be subjected to section 254(2) of the Act for being rectified as a mistake apparent from the record since it does not seem to be a mistake nor it is so obvious clear or patent to hold that it is apparent from the record. Thus we answer the question in the negative in favour of the Revenue.

Summary

Issues:
1. Rectification under section 254(2) of the Income-tax Act.
2. Interpretation of mistake apparent from the record.
3. Application of section 69C regarding unexplained source of expenditure.

Rectification under section 254(2) of the Income-tax Act:
The case involved a search and seizure in the assessee's premises, leading to the discovery of unrecorded expenditure. The Assessing Officer and appellate authority added the amount under section 69C due to the failure of the assessee to explain the expenditure satisfactorily. The Tribunal remanded the matter for reassessment, but the assessee filed an application for review under section 254(2), which was allowed. The court analyzed the scope of rectification under section 254(2) and emphasized that it does not confer the power to review earlier orders but only rectify mistakes apparent from the record.

Interpretation of mistake apparent from the record:
The court discussed the distinction between a mistake apparent from the record and a debatable issue, stating that rectification is limited to obvious and patent mistakes. It highlighted that a mistake must be free from doubt and incapable of different interpretations to qualify for rectification under section 254(2). The judgment clarified that a mistake apparent from the record must be glaring, obvious, or self-evident, not requiring a complex process of investigation or argument.

Application of section 69C regarding unexplained source of expenditure:
The court examined the provisions of section 69C concerning unexplained sources of expenditure. It emphasized that if the source of expenditure is not satisfactorily explained, the expenditure is deemed to be the assessee's income. The judgment underscored the importance of explaining the source of expenditure rather than its reasonableness. The court concluded that the word "reasonableness" used in the context of the order did not constitute a mistake apparent from the record, as it could be an erroneous expression but not a clear mistake.

In conclusion, the court answered the reference question in the negative in favor of the Revenue, disposing of the reference without costs. The judgment provided a detailed analysis of rectification under section 254(2), the interpretation of mistakes apparent from the record, and the application of section 69C regarding unexplained sources of expenditure.