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TMI Blog1984 (9) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... s and in the circumstances of the case, the Tribunal was right in its approach to the application of section 154 of the Income-tax Act, 1961 ?" The facts of the case are that the assessee, M/s. Food Specialities Ltd., was manufacturing condensed milk till almost the end of the assessment year 1964-65 which ended on December 31, 1963. Thereafter, it also set up a plant for manufacturing " Nescafe ", which is a type of coffee. It appears that though the plant started (production) towards the end of December, 1963, the assessee claimed that manufacture up to the end of December, 1963, was on an experimental basis. The Income-tax Officer completed the assessment on May 6, 1968, and apparently, though some relief under section 84 was granted, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e whether there was a patent error. On facts, it held that though the production was large, yet there was no sale and hence there was no ground to interfere with the order of the Appellate Assistant Commissioner. On an application by the Commissioner for a reference, the above two questions have been referred to us. The question we have to decide whether there is any ground for holding that section 154 was applicable to the facts of this case. Section 154 was held to be inapplicable by the Appellate Assistant Commissioner following the judgment of the Supreme Court in T. S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50, in which the court pointed out that a mistake is apparent on the record when it is an obvious and patent mistake a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on which commercial manufacture is to start. This observation was made in the light of section 84(7) which states that the provisions of the section in relation to an industrial undertaking is to apply is from the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles. It so happened that on experimental basis, the assessee, in the present case, started manufacture in December, 1963, but on commercial basis, this started only in January, 1964, which would be in the assessment year 1965-66. The controversy that seems to have arisen was whether the experimental portion of manufacture was to be considered as a period during which " manufacture " had taken place for the purpose of appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed process of reasoning is required to find out which is the proper period during which the manufacturing process actually started. Assuming that the Income-tax Officer made a mistake initially, for one thing, it is not very apparent on the record, because a reading of the order, as initially passed in May, 1968, does not indicate any apparent mistake. For the second reason, the mistake, if any, can only be determined on an elaborate examination of the facts and circumstances relating to the manufacture of this coffee unit. The first question referred to us relates to whether the Tribunal was right in holding that the production during the previous year relating to the assessment year 1964-65 was experimental. The facts show that the manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s approach to the application of section 154 of the Income-tax Act, 1961. The answer to this question has to be in the affirmative. The Tribunal has merely followed the view of the Supreme Court in T. S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50. This is a view which is supported by a large number of authorities following the same and even is apparent from a reading of section 154. It is only a mistake apparent from the record which can be rectified and as the Supreme Court was at pains to point out, that the error must be patent and obvious and not one to be determined by an involved set of reasons. In other words, one must be able to look at the order or the record and say ; here is a mistake. If one cannot know this and one has t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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