1975 (8) TMI 43 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal erred in law in holding that the mistake sought to be rectified by the Income-tax Officer was not a mistake apparent on the record which can be rectified under section 154 of the Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Tribunal's Error in Law Regarding Mistake Apparent on the Record

Facts and Background:
The relevant assessment year is 1967-68. The assessee was liable to pay an annuity deposit before 31st March 1967 but paid it on 3rd April 1967, resulting in a three-day delay. Initially, the Income-tax Officer allowed the deduction for the annuity deposit. However, on June 17, 1969, the Income-tax Officer rectified the order under section 154, withdrawing the allowance due to non-compliance with conditions for condoning the delay. The Appellate Assistant Commissioner confirmed this rectification. The Tribunal, however, held that the Income-tax Officer had exercised discretion to condone the delay and thus, the rectification under section 154 was not justified.

Relevant Provisions:
- Section 280C of the Income-tax Act, 1961: Specifies the requirement for annuity deposits.
- Section 280D: Provides for repayment of annuity deposits.
- Section 280-O: Allows deduction of annuity deposits in computing total income.
- Section 280W: Empowers the Central Government to frame schemes for annuity deposits.
- Clause 4 of the Annuity Deposit Scheme, 1966: Details the conditions under which the Income-tax Officer can allow deposits after the expiry of the financial year, including the requirement for an application in Form A and prior approval from the Inspecting Assistant Commissioner.

Revenue's Contentions:
The revenue argued that the Income-tax Officer's discretion under section 280C(2) is not absolute and must be exercised under specified conditions. The lack of compliance with these conditions (no application in the prescribed form, no written order, and no prior approval from the Inspecting Assistant Commissioner) constituted an error apparent on the record, justifying rectification under section 154.

Assessee's Contentions:
The assessees contended that the Tribunal correctly inferred that the Income-tax Officer had condoned the delay by allowing the deduction, noting the payment date, and treating the annuity deposit in subsequent years. They argued that the discretionary order should not be interfered with.

Court's Analysis:
The court agreed with the revenue, stating that the Tribunal was not justified in inferring that the Income-tax Officer had exercised discretion to condone the delay. The court emphasized that the discretion under section 280C(2) is limited and subject to specific conditions:
1. Submission of an application in the prescribed form before the specified date.
2. Prior approval from the Inspecting Assistant Commissioner.
3. A written order by the Income-tax Officer.

Since these conditions were not met, the Tribunal's inference was incorrect. The court referenced the Supreme Court ruling in S. A. L. Narayan Row v. Ishwarlal Bhagwandas, highlighting that the discretion must be exercised within the confines of the law.

Precedent Cases:
- S. A. L. Narayan Row v. Ishwarlal Bhagwandas: The Supreme Court held that the Income-tax Officer's failure to consider retrospective laws made the assessment order defective.
- Dalwadi & Co. v. Commissioner of Income-tax: The Gujarat High Court held that omission to charge interest due to non-compliance with procedural requirements is an error apparent on the face of the record, justifying rectification under section 154.

Conclusion:
The court concluded that the Tribunal erred in law by holding that the mistake was not apparent on the record. The rectification orders by the Income-tax Officer were deemed legal and valid. The court recommended that the competent authority consider refunding the tax collected in subsequent years on respective instalments repaid under section 280D.

Final Judgment:
The question was answered in the affirmative and in favor of the revenue, validating the rectification orders. No order as to costs was made in these references.