1993 (7) TMI 30 - HC - Income Tax

Summary

Issues:
1. Whether the Income-tax Officer was competent to rectify a mistake by passing an appropriate order after granting relief under section 80L and exhausting the availability of deduction under section 86(v)?

Analysis:
The case involved a question referred to the High Court by the Income-tax Appellate Tribunal regarding the competence of the Income-tax Officer to rectify a mistake after granting relief under section 80L and exhausting the deduction under section 86(v) of the Income-tax Act, 1961. The Income-tax Officer had initially completed the assessment of the assessee for the relevant year but later rectified the order to allow a deduction under section 80L and correct a mistake in rebate calculation under section 86(v). Subsequently, the Income-tax Officer proposed to rectify the rectification order, withdrawing the deduction allowed under section 86(v). The Appellate Assistant Commissioner annulled the second rectification order, deeming the issue of deductions as highly debatable. The Tribunal upheld the Appellate Assistant Commissioner's decision, leading the Revenue to approach the High Court for clarification.

The High Court, in its judgment, considered the contention raised by the Revenue that the granting of deduction was a mistake apparent on the record, allowing the Income-tax Officer to initiate proceedings under section 154. However, the High Court referred to the Supreme Court's ruling in T. S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50, which defined a mistake apparent on the record as an obvious and patent error, not a debatable legal point. The High Court noted that the question of whether the assessee was entitled to deductions under both sections 80L and 86(v) was highly debatable, as evidenced by the conflicting actions of the Income-tax Officer. Consequently, the High Court determined that the Income-tax Officer was not justified in rectifying the rectification order, as the issue was not a clear mistake on the record. The Appellate Assistant Commissioner and the Tribunal were deemed correct in their decisions, leading the High Court to rule in favor of the assessee and against the Revenue.

In conclusion, the High Court answered the question referred to it in the affirmative, siding with the assessee and rejecting the Revenue's argument. The judgment highlighted the importance of distinguishing between clear mistakes on the record and debatable legal issues when considering rectification orders under the Income-tax Act, ultimately upholding the decisions of the lower authorities in this case.