2005 (8) TMI 57 - HC - Income Tax

Action under section 154 - mistake apparent from record change of opinion - Whether Tribunal was right in holding that when the judgment of the hon ble Supreme Court was there before passing the assessment order, and despite, the Assessing Officer had made assessment without following the Supreme Court judgment and later took an action under section 154, the action is change of opinion and is not correction of mistake apparent from record and cannot be rectified by way of an action under section 154? - Tribunal was, therefore, right in holding that the action under section 154 of the Act could not be sustained in the absence of any mistake apparent from record and no rectification was permissible. The impugned order of the Tribunal is, therefore, upheld

Summary

Issues:
- Rectification of assessment order under section 154 of the Income-tax Act, 1961 based on the priority of deductions.
- Whether the action under section 154 was a change of opinion or correction of a mistake apparent from the record.

Analysis:
The High Court of Gujarat addressed the issue of rectification of an assessment order under section 154 of the Income-tax Act, 1961, concerning the priority of deductions. The case involved a dispute over the order of priority to be assigned to carry forward business loss, current development rebate, and deduction under section 80J of the Act. The Assessing Officer rectified the original assessment order based on the mistake of not following the correct priority of deductions. The court noted that the issue of priority among different items like carried forward business losses and unabsorbed development rebate was not definitively settled in law. The court highlighted that a mistake apparent on the record must be obvious and patent, not a debatable point of law. The court emphasized that a decision on a debatable point of law does not constitute a mistake apparent from the record.

Regarding the specific case, the court discussed the precedence of deductions and cited relevant legal precedents. The court referred to the decision in the case of CIT v. Mother India Refrigeration Industries P. Ltd., which clarified the order of priority for deductions. The court concluded that the order of priority among different items was not free from doubt, indicating that the legal position was not settled. Consequently, the court upheld the decision of the Tribunal that the action under section 154 could not be sustained in the absence of a mistake apparent from the record. The court determined that the rectification was not permissible as the issue involved a debatable point of law, not a clear mistake.

In conclusion, the High Court upheld the Tribunal's decision, stating that the action under section 154 was not a correction of a mistake apparent from the record but rather a change of opinion. The court emphasized that rectification under section 154 must be based on an obvious and patent mistake, not a matter subject to debate. Therefore, the court ruled in favor of the assessee, affirming the Tribunal's decision and disposing of the reference accordingly.