1978 (2) TMI 121 - AT - Income Tax

Summary

Issues:
1. Validity of levy of Income-tax on interim compensation.
2. Jurisdiction of Income-tax Officer under section 154.
3. Applicability of Supreme Court decision on retrospective effect of law.
4. Interpretation of mistake apparent from records under section 154.

Analysis:

1. Validity of levy of Income-tax on interim compensation:
The appellant received interim compensation pending final determination of his abolished estate, which was initially taxed. However, a Supreme Court judgment declared this levy invalid. The Income-tax Officer revised the order under section 154, correcting the mistake due to the Supreme Court decision. Subsequently, a new order was passed bringing back the tax liability. The Appellate Assistant Commissioner (AAC) ruled in favor of the appellant, emphasizing the officer's correction as just. The AAC referred to a similar decision by the Gujarat High Court.

2. Jurisdiction of Income-tax Officer under section 154:
The Department appealed the AAC's decision, arguing that the officer had the right to rectify the mistake on 17th Feb., 1976. The Department contended that the appellant's failure to pursue legal remedies kept the matter final and justified the officer's action under section 154. The Tribunal rejected this argument, stating that the Supreme Court's decision altered the legal landscape retrospectively. The officer's correction in 1973 was valid under section 154, based on the new legal position established by the Supreme Court.

3. Applicability of Supreme Court decision on retrospective effect of law:
The Tribunal emphasized that the Supreme Court's decision had a retrospective effect, akin to legislation by a sovereign legislature. The decision in S.R.Y. Sivaram Prasad Bahadur vs. Commissioner of Income-tax, Andhra Pradesh, altered the legal scenario, justifying the officer's corrective action in 1973. The appellant's failure to pursue remedies before the decision did not impact the officer's jurisdiction under section 154.

4. Interpretation of mistake apparent from records under section 154:
The Tribunal clarified that a mistake of law, evident from the records, could be rectified under section 154. However, in this case, the officer's correction in 1973 was not erroneous, considering the change in legal position due to the Supreme Court's decision. The officer's subsequent attempt to tax the compensation in 1976 was deemed incorrect by the Tribunal. The appellant's lack of action before the Supreme Court's decision did not invalidate the officer's earlier correction under section 154.

In conclusion, the Tribunal dismissed the Department's appeals, upholding the AAC's decision in favor of the appellant.