1998 (6) TMI 35 - HC - Income Tax

Summary

Issues Involved:
1. Scope of the term "record" in section 154 of the Income-tax Act, 1961.
2. Rectification of assessment orders for the years 1973-74 and 1974-75.
3. Validity of the order made u/s 155(7) revising the order u/s 104 of the Act.

Summary:

1. Scope of the term "record" in section 154 of the Income-tax Act, 1961:
The principal question addressed is the interpretation of the term "record" in section 154 of the Income-tax Act, 1961. The court examined whether "record" refers only to the documents available at the time the original order was passed or includes documents available at the time of rectification proceedings. The court concluded that the term "record" encompasses all relevant documents available at the time of initiating rectification proceedings, not just those present during the original order. This interpretation aligns with the Supreme Court's view in CIT v. Shree Majunathesware Packing Products and Camphor Works [1998] 231 ITR 53.

2. Rectification of assessment orders for the years 1973-74 and 1974-75:
For the assessment year 1973-74, the court upheld the rectification of the assessment order to set off unabsorbed depreciation against capital gains, deeming it a "mistake apparent from the record" u/s 154. The original assessment had failed to set off Rs. 54,156 of unabsorbed depreciation, which was corrected upon rectification, resulting in a refund to the assessee.

For the assessment year 1974-75, the rectification of the assessment order was also upheld. The court found that the rectified assessment order for 1973-74, which eliminated the unabsorbed depreciation available for 1974-75, was part of the "record" and justified the rectification. The Tribunal's view that the term "record" was confined to documents available at the time of the original order was rejected.

3. Validity of the order made u/s 155(7) revising the order u/s 104 of the Act:
The court addressed the rectification of the order made u/s 104 of the Act for the assessment year 1974-75. It held that the rectification of the assessment order for 1974-75 was lawful and binding, but the order made u/s 155(7) revising the order u/s 104 was not sustainable. The court emphasized that the rectification order does not relate back to the original order but has a prospective effect.

Conclusion:
The court answered the questions referred to it in favor of the Revenue and against the assessee. The rectification of the assessment orders for the years 1973-74 and 1974-75 was upheld as lawful under section 154 of the Act. However, the order made u/s 155(7) revising the order u/s 104 was not sustained. The Revenue was awarded costs of Rs. 1,000.