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TMI Blog2009 (12) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... application for rectification u/s 154 to claim deduction of Rs. 15,85,017/- as bed debt which was not claimed earlier – AO and CIT(A) held there was no error apparent on record and rejected the application u/s 154 – ITAT allowed the rectification u/s 154 – held that - The record for the purpose of section 154(1) is the record available to the authorities at the time of initiation of proceedings for rectification and not merely the record of the original proceeding sough to be rectified – decided against the revenue X X X X Extracts X X X X X X X X Extracts X X X X ..... t at a later stage when no recovery is possible. The said observation was made while rejecting the contention of the assessee that the interest kept in the suspense account cannot be bought to tax. Accordingly, the interest kept in the suspense account was bought to tax. However in view of the observation made by the First Appellate Authority, the assessee filed an application for rectification on 11.08.1989 which is after the order passed by the First Appellate Authority on 15.07.1987. Thereafter, the Revenue filed a further appeal challenging the order of the First Appellate Authority allowing the bad debts and the Tribunal also fell in line with the First Appellate Authority by dismissing the same. 3.3. The assessing officer rejected the application filed by the assessee under Section 154 of the Income Tax Act seeking rectification of the assessment order by holding that there is no mistake apparent from the record. In the further appeal filed, the First Appellate Authority has confirmed the order of the assessing officer by holding that there is no mistake apparent from the record, since the assessee had claimed allowance of bad debts for a sum of Rs.50,97,358/- only on the ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case on hand. 5. Submissions of the learned counsel appearing for the assessee: 5.1. Shri.R.Venkatanarayanan learned counsel for M/s.Subbaraya Aiyar appearing for the assessee submitted that the power under Section 154 can be exercised, when a duty is cast upon the assessing officer to rectify an mistake which is apparent on the face of the record. In this case, the order passed by the Tribunal earlier by allowing the bad debts having become final, the same will have to be applied to the accrued interest as well. Further the entire gross amount could not be claimed earlier towards bad debts, since it was agitated by the assessee that the interest kept in the suspense account was not amenable to tax. In support of his contention, the learned counsel has relied upon the judgment of the Hon'ble Apex Court reported in (1971) 82 ITR 50 (SC) [T.S.BALARAM v. VOLKART BROTHERS AND OTHERS] and submitted that the order of the Tribunal does not warrant any interference. 6. We have heard the learned counsels appearing for the Revenue as well as the assessee. 7. As submitted by the learned counsel appearing for the assessee what is sought to be rectified is the amount left out earlier which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier, the issue raised in the rectification application seeking the declaration of bad debts for the gross amount was not raised and decided earlier. 10. The expression used in Section 154 of the Income Tax Act regarding the mistake apparent from the record will have to be construed to be a mistake which is very clear, distinct and apparent. The said mistake should be manifest and could be identified by a mere look and which does not need a long drawn out process of reasoning. It is no doubt true that a mere mistake by itself cannot be a ground to invoke Section 154 of the Income Tax Act 1961. It is also true that an issue which is debatable also cannot be decided under Section 154. However when the mistake is glaring and in a case where facts are not in dispute then the said mistake being one apparent on the fact of the record will have to be rectified under Section 154. 11. The scope of Section 254(2) which is analogous to Section 154 of the Act has been considered in extenstio very recently by this Court in W.P.No.3919 of 2001 dated 17.11.2001 [EXPRESS NEWSPAPERS LIMITED v. THE DEPUTY COMMISSIONER OF INCOME TAX AND ANOTHER] (judgment delivered by K.RAVIRAJA PANDIAN, J.) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pparent on the record. When prejudice resulting from an order is attributable to the Tribunal's mistake, error or omission, it is its bounden duty to set it right. The purpose behind the enactment of Section 254(2) of the Act to amend any order passed under sub-section (1), if any mistake apparent from the records is brought to the notice of the Tribunal, is based on the fundamental principle that no party appearing before the Tribunal, be it an assessee or the Department, should suffer on account of any mistake committed by the Tribunal. This fundamental principle has nothing to do with the inherent power of the Tribunal. If prejudice is resulted to the party, which prejudice is attributable to the Tribunal's mistake, error or omission and which error is a manifest error, then the Tribunal would be justified in rectifying its mistake. Rectification can be made only when a glaring mistake of fact or law committed by the officer passing the order becomes apparent from the record. The rectification is not possible if the question is debatable. A point which was not examined on facts or in law cannot be dealt with as a mistake apparent from the record. No error can be said to be appar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other judgment in (2005) 278 ITR 392 [COMMISSIONER OF INCOME-TAX v. WAJID SONS P. LTD.] relied upon by the learned counsel appearing for the Revenue also does not come to his aid. In the said case, the application under Section 154 was filed by the assessee on the ground that for the earlier year, the assessee was treated as an industrial company and therefore the same will have to be followed for the subsequent year. The Division Bench was pleased to hold that merely because the assessee was treated as an Industrial Company for the earlier year by itself cannot be a ground to hold that the same should be made applicable by all force to the subsequent year, since the assessment for every year will have to be decided based upon the evidence available on record for that year. 15. In the judgment reported in (2008) 304 ITR 390 [COMMISSIONER OF INCOME-TAX v. Y.K.SHOJI STONE INDO P. LTD.] (in which one of us is a party K.RAVIRAJA PANDIAN, J.) it has been observed as follows: "It is well recognised law that any erroneous assessment cannot be the subject-matter for rectification under Section 154 of the Income-tax Act. The erroneous order of assessment can be rectified only under proced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer in the form of earlier proceedings and therefore the contention of the learned counsel appearing for the Revenue cannot be accepted. The judgment relied upon by the learned counsel appearing for the Revenue reported in (1999) 240 ITR 660 [COMMISSIONER OF INCOME-TAX v. M.R.M.PLANTATIONS (P.) LTD.] in fact supports the case of the assessee. In the said judgment, the Hon'ble Division Bench was pleased to observe that the word 'record' as mentioned under Section 154 will have to be given a wide meaning. The Hon'ble Division Bench has observed as follows: "Section 154 of the Act opens with the words "with a view to rectifying any mistake apparent from the record..." The term '"record" as noticed earlier is not defined in the section or in the definition section of the Act. For determining the true scope of this provision and the meaning to be properly assigned to the term "record" it is necessary to keep in view the object of the provision and the nature of the power conferred on the authorities under that provision. These are the criteria which the Supreme Court adopted while considering the scope and effect of section 263 of the Act and the meaning to be assigned to the word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igures of unabsorbed depreciation considered in the assessment for the assessment year 1974-75 were the figures which the officers were required to obtain from the assessment order of the previous year and the two assessment orders to that extent were interlinked. After the rectification of the assessment order for the assessment year 1973-74 no amount towards unabsorbed depreciation was available for being adjusted in the assessment year 1974-75. The set off allowed on the original assessment order for that year was an apparent mistake which was rectifiable under section 154. It is no doubt true as submitted by learned counsel for the assessee that even an erroneous order may be given effect to if it is not rectified within the time allowed by law. However, such order cannot be regarded as having become final until the expiry of the period available for such rectification. Learned counsel for the assessee submitted that unlike section 263, section 154 of the Act does not contain the definition of the word "record". The absence of the definition, however, cannot have the consequence of limiting its meaning to a very narrow and limited sphere of the record of the original proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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