1991 (7) TMI 118 - AT - Income Tax

Summary

Issues:
1. Whether interest under section 214 should have been granted to the assessee in conformity with the decision of the Gujarat High Court.
2. Whether the mistake in not granting interest under section 214 was apparent from the record.
3. Whether the decision of the jurisdictional High Court binds the Income Tax Officer (ITO) in granting interest.

Analysis:

Issue 1:
The Income Tax Officer (ITO) did not grant interest under section 214 to the assessee, despite a refund being payable, as per the order of CIT (Appeals) and the decision of the Gujarat High Court in Bardolia Textile Mills case. The ITO cited a conflicting decision from the Kerala High Court in CIT v. G.B. Transports. The Appellate Authority Commission (AAC) held that the ITO should have followed the Gujarat High Court decision and granted interest. The Department appealed to the Tribunal, arguing that the point was debatable due to conflicting High Court decisions.

Issue 2:
The Tribunal considered whether the mistake in not granting interest under section 214 was apparent from the record. The Tribunal noted that the ITO was bound by the decision of the Gujarat High Court at the time of passing the order. The ITO's failure to grant interest in accordance with the binding decision constituted a mistake apparent on record. The Tribunal relied on the principle that the ITO must follow the decision of the jurisdictional High Court.

Issue 3:
The Tribunal discussed the relevance of subsequent decisions and the hierarchy of legal interpretations. It highlighted that the Supreme Court's decisions have retrospective effect from the inception of the statutory provision. Referring to a Departmental Circular, the Tribunal emphasized that a mistake arising from a subsequent interpretation by the Supreme Court constitutes a mistake apparent from the record. The Tribunal rejected the Department's argument that the point was debatable due to conflicting decisions, emphasizing the necessity for the ITO to follow the binding decision of the jurisdictional High Court.

In conclusion, the Tribunal dismissed the appeal, affirming that the ITO should have granted interest under section 214 in conformity with the decision of the Gujarat High Court. The Tribunal held that the mistake in not following the binding decision constituted a mistake apparent from the record, justifying rectificatory action under section 154 of the Income-tax Act.