1979 (7) TMI 60 - HC - Income Tax

Summary

Issues Involved:
1. Refusal to rectify Tribunal's orders.
2. Applicability of Section 13 of the Direct Taxes (Amendment) Act, 1974.
3. Jurisdiction of the Tribunal under Section 254(2) of the Income-tax Act, 1961.
4. Retrospective effect of the amendment.
5. Interpretation of "mistake apparent from the record."

Issue-wise Detailed Analysis:

1. Refusal to Rectify Tribunal's Orders:
The primary issue was whether the Tribunal was legally correct in refusing to rectify its orders dated May 30, 1974, and May 31, 1974, under Section 254(2) of the Income-tax Act, 1961, on the ground that the point was debatable. The Tribunal had dismissed the department's appeals, relying on CIT v. Vegetable Products Ltd., and held that no penalty was imposable as there was no net tax payable after giving credits of tax paid by the assessee on the date of imposition of penalty.

2. Applicability of Section 13 of the Direct Taxes (Amendment) Act, 1974:
Section 13 of the Amendment Act amended Section 271(1)(a) and 271(1)(i) with retrospective effect. The amendment stated that the penalty is computable on the basis of assessed tax after deducting advance tax paid and tax deducted at source. The Tribunal had held that it passed the orders in accordance with the law prevalent at the time and that it was a debatable point whether the amending provisions applied to a completed assessment.

3. Jurisdiction of the Tribunal under Section 254(2) of the Income-tax Act, 1961:
The Tribunal concluded that it had the power to rectify any order under Section 254(2) of the Act within four years from the date of the order if there was any mistake apparent from the record. However, it refused to exercise this power, stating that the assessment had been completed and the applicability of the amending provision to completed assessments was debatable.

4. Retrospective Effect of the Amendment:
The court emphasized that the language of the Amendment Act clearly indicated that Section 271(1) stood substituted from the date of commencement of the Income-tax Act, 1961. The retrospective effect meant that the amendment must be deemed to have been always included in the principal Act. The court referred to the Supreme Court's decision in Venkatachalam, ITO v. Bombay Dyeing and Manufacturing Co. Ltd., which held that the principle of finality of orders cannot be invoked if rectification is made within the prescribed period based on a retrospective amendment.

5. Interpretation of "Mistake Apparent from the Record":
The court held that if the Tribunal had to read the principal Act as containing the inserted provision of Section 271(1)(a)(i) from the date of the commencement of the Act, then the orders made were inconsistent with the provisions of the statute and must be treated as mistakes of law apparent from the record. The court reiterated that a mistake of law which is glaring and obvious can be rectified under Section 254(2).

Conclusion:
The court concluded that the Tribunal had jurisdiction to exercise its power of rectification under Section 254(2) of the Income-tax Act, 1961, read with the newly added Section 271(1)(a)(i) of the Act. The Tribunal was not legally correct in refusing to rectify its orders dated May 30, 1974, and May 31, 1974, having regard to the provisions of Section 13 of the Direct Taxes (Amendment) Act, 1974, on the ground that it was a debatable point. The applications for rectification ought to have been entertained and disposed of by the Tribunal.

Separate Judgment:
N. I. Singh J. concurred with the judgment.

Reason for Delay in Pronouncing the Judgment:
The judgment was delayed because one of the judges, Lahiri J., was out on circuit court duty at Agartala and the judgment was delivered immediately upon his return.