1980 (5) TMI 65 - AT - Income Tax

Summary

Issues:
1. Rectification application based on change in legal position post the Supreme Court decision.
2. Whether reliance on Supreme Court decision justifies rectification of earlier tribunal order.
3. Rectification of order based on mistake apparent from record.
4. Impact of subsequent Supreme Court decision on re-opening of assessment cases.
5. Interpretation of law regarding rectificatory action under IT Act.
6. Application of Circular No. 68, 1971 issued by Central Board of Direct Taxes.

Analysis:
1. The assessee filed a rectification application concerning ITA Nos. 579 to 582 of 1977-78, citing a change in legal position post a Supreme Court decision. The application sought rectification of the tribunal's order based on the new legal interpretation provided by the Supreme Court in a specific case.

2. The authorized representative of the assessee argued that the tribunal's order, relying on a previous Supreme Court decision, needed rectification following the subsequent judgment that deemed the earlier decision as incorrect. The departmental representative opposed the rectification, asserting that the tribunal's decision was based on the law valid at the time of the order.

3. After considering the arguments, the tribunal examined the rectification application vis-a-vis its previous order. The application highlighted the mistake apparent from the record due to the change in legal interpretation by the Supreme Court, leading to the need for rectification.

4. The tribunal's order had upheld the re-opening of assessment cases based on an audit report, following the precedent set by a Supreme Court decision. However, the subsequent judgment by the Supreme Court declared the earlier decision as erroneous, leading the tribunal to rectify its order and rule in favor of the assessee.

5. The tribunal referred to Circular No. 68, 1971 issued by the Central Board of Direct Taxes, which clarified that a mistake arising from the subsequent interpretation of law by the Supreme Court could constitute a mistake apparent from records, warranting rectificatory action under the IT Act.

6. In conclusion, the tribunal allowed the rectification application under section 254(2) of the Act, rectifying its previous order in light of the changed legal position post the Supreme Court decision, emphasizing the need to adhere to the correct legal interpretation provided by the higher court.