2021 (3) TMI 435 - HC - Income Tax

Rectification of mistake u/s 254 - two days after rendering the main judgment in the present case, the Tribunal took a contrary stand in respect of the case of a sister concern of the assessee - the case of the sister concern of the assessee, the very same Tribunal, two days thereafter i.e., 27.11.1997, refused to direct the assessing officer to follow the directions in Ramlal Chiranjilal's case - Tribunal allowed the rectification on the ground that there is a contradiction in the orders of the Tribunal in respect of the case of the assessee as well as that of the sister concern in which judgments were rendered two days apart and that such a contradiction ought to be removed, so as to have clarity in the decisions - HELD THAT - We are of the view that the reasoning of the Tribunal is erroneous. A decision taken subsequently in another case is not part of the record of the case. A subsequent decision, subsequent change of law, and/or subsequent wisdom dawned upon the Tribunal, are not matters that will come within the scope of 'mistake apparent from the record' before the Tribunal. The different view taken by the very same Tribunal in another case, on a later date, could be relied on by either of the parties while challenging the earlier decision or the subsequent decision in an appeal or revisional forum, but the same is not a ground for rectification of the order passed by the Tribunal. It could at the most be a change in opinion based upon the facts in the subsequent case. The subsequent wisdom may render the earlier decision incorrect, but not so as to render the subsequent decision as a mistake apparent from the record calling for rectification under Section 254 of the Act. Ramlal Chiranjilal's case, in fact was interfered with or reversed by High Court or Supreme Court, and the Tribunal in ignorance of a judgment of Superior Court, still directed Assessing Officer to follow Ramlal Chiranjilal's case. Then the mistakes noted above could facilitate correction under Section 254 of the Act. On the other hand, as in this case, the Tribunal without a changed circumstance surrounding Ramlal Chiranjilal's case entertained a rectification petition. This approach is more counter-productive and contrary to the three-tier mechanism provided under the Act and the subsequent tier to this Court. In view of the above, we hold that, in the circumstances of the case, the Appellate Tribunal went wrong in allowing the rectification application filed by the department on the basis of a decision rendered subsequent to the order that was sought to be rectified. Tribunal has not found in the impugned order that there was any mistake in the earlier order apparent from the record warranting a rectification. The only reason mentioned is that there is a contradiction in the orders passed and no rectification petition has been filed by the assessee in the subsequent case. The satisfaction of the Tribunal about the existence of a mistake apparent on the record is glaringly absent. As revenue further canvassed for the proposition that the reason for filing the rectification petition was on account of the omission of the Tribunal to consider the explanation to Section 271(1) of the Act (as it then stood). Even though the order of rectification issued by the Tribunal does not refer to any such contention having been raised, we are of the view that even the aforementioned contention of the revenue has no basis. In the instant case, the penalty is leviable on account of failure on the part of the assessee to furnish the return without reasonable cause within the time allowed in the manner required under Section 139(1) of the Act. The explanation to Section 271(1) does not apply to the circumstances in the present case. Penalty is levied in the instant case under Section 271(1)(i)(a) of the Act (as it then stood), while the explanation applies to the cases covered by Section 271(1)(i)(b) of the Act (as it then stood). Viewed in the above light also, we are of the view that the rectification petition could not have been allowed by the Tribunal. - Decided in favour of assessee.

Summary

Issues Involved:
1) Rectification of Appellate Tribunal's order due to a mistake in disparity.
2) Interference by Appellate Tribunal with the order of CIT(Appeals) in determining penalty quantum.
3) Direction by Appellate Tribunal to not follow previous decision in penalty computation.

Analysis:

1) Rectification of Disparity:
The case involved a delay in filing the income tax return for the assessment year 1982-83, leading to a penalty imposition under Section 271(1)(a) of the Income Tax Act. The Appellate Tribunal found a mistake in the appellate order due to a disparity on a point and directed the assessing officer to re-determine the penalty quantum based on directions from a previous case. The Tribunal's decision was challenged through a rectification petition by the Department, citing a contradiction in the Tribunal's orders in a related case. However, the High Court emphasized that rectification can only be done for mistakes apparent from the record and subsequent decisions or changes in law cannot be considered grounds for rectification.

2) Interference in Penalty Determination:
The Revenue appealed to the Appellate Tribunal, which upheld the order of CIT(Appeals) and directed the determination of penalty quantum based on a specific case law. The Department filed a rectification petition contending that the case law was not applicable, leading to a reference to the High Court. The High Court clarified that rectification under Section 254(2) can only be based on errors visible from the records available at the time of the decision, and subsequent judgments or changes in opinion do not warrant rectification.

3) Direction to Not Follow Previous Decision:
The Appellate Tribunal directed the assessing officer not to follow a previous decision in penalty computation, which was challenged through a rectification petition. The High Court emphasized that rectification can only be based on mistakes apparent from the record and not on subsequent decisions or contradictions in other cases. The Court held that rectification cannot be allowed based on a change in opinion or subsequent judgments unless there is a clear mistake visible from the records of the case being rectified.

In conclusion, the High Court ruled in favor of the assessee, highlighting that rectification cannot be allowed based on subsequent decisions or contradictions in other cases. The Court emphasized that rectification under Section 254(2) can only be done for mistakes apparent from the record at the time of the decision, and subsequent changes in law or opinions do not constitute grounds for rectification.