ORDER
R. JAYASIMHA BABU, J.
The principal question that arises in these references is as to the scope of the term 'record' occurring in s. 154 of the IT Act.
That section reads as under..
'154. Rectification of stake.-(1) With a view to rectifying any mistake apparent from the record:
(a) the ITO may amend any order of assessment or of refund or any other order passed by him, (b) the AAC may amend any order passed by him under s. 250 or s. 271;
(c) the CIT may amend any order passed by him in revision under s. 263 or s. 264.
(1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-s. (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided.
(2) Subject to the other provisions of this section, the authority concerned:
(a) may make an amendment under sub-s. (1) of its own motion, and
(b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee, and where the authority concerned is the AAC, by the ITO also.
(3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this section unless the authority concerned has given notice to the assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard.
(4) Where an amendment is made under this section, an order shall be passed in writing by the IT authority concerned.
(5) Subject to the provisions of s. 241, where any such amendment has the effect of reducing the assessment, the ITO shall make any refund which may be due to such assessee.
(6) Where any such amendment has the effect of enhancing the assessment or reducing a refund already made, the ITO shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be issued under s. 156 and the provisions of this Act shall apply accordingly.
(7) Save as otherwise provided in s. 155 or sub-s. (4) of s. 186 no amendment under this section shall be made after the expiry of four years from the date of the order sought to be amended.'
2. The word 'record' is not defined in s. 154 or in the definition. While the assessee contends the word 'record' as it is used in s. 154(1) means, only the record available to the AO at the time, the order sought to be rectified was passed, it is the case of the Revenue that the 'record' referred to in s. 154(1) of the Act is the record available to the officer exercising the powers under that section, at the time the proceedings for rectification are properly initiated within the period of limitation provided in s. 154(7) of the Act.
3. The assessee owns a rubber estate and for the asst. yr. 1973-74 it had a business loss, unabsorbed depreciation and also long-term capital gains. While the business loss was set off against the long-term capital gains the unabsorbed depreciation was not at all set off. The amount which was not set off was Rs. 54,156 being the amount of aggregate unabsorbed depreciation for the asst. yrs. 1971-72 and 1972-73. The assessment for the asst. yr. 1973-74 was completed by allowing the unabsorbed depreciation to be carried forward, while taxing the capital gains of that year. In the succeeding asst. yr. 1974-75 the unabsorbed depreciation for the asst. yrs. 1971-72 and 1972-73 was deducted from the total income of the assessee and as the assessee was liable to pay tax under s. 104(1) of the Act, on account of the failure to comply with its requirements, an order was passed against the assessee under that provision.
4. Thereafter, the assessment order for the asst. yr. 1973-74 was sought to be rectified for the purpose of setting off the unabsorbed depreciation for the asst. yrs. 1971-72 and 1972-73 against the capital gain. After hearing the assessee and overruling the assessee's objections, the set off was given effect to as a consequence of which the taxable income got reduced and the assessee was given a refund of Rs. 24,367. The assessee, is aggrieved by the order of the Tribunal upholding the order made by the AO and the question as to 'whether the adjustment so effected is a mistake apparent from the record within the meaning of s. 154 of the IT Act has been referred to us for our opinion, at the instance of the assessee.
5. Consequent to the adjustment of the unabsorbed depreciation against the capital gains for the asst. yr. 1973-74, in terms of that rectification order, the AO proceeded to rectify the assessment order for the succeeding year as well. After hearing the assessee and overruling the assessee's objections, the assessment order for the asst. yr. 1974-75 was rectified resulting in an additional demand for Rs. 36,964. The order made against the assessee under s. 104 of the Act also came to be revised under s. 155(7) of the Act resulting in an additional demand of Rs. 45,282.
The assessee having appealed to the Tribunal against those orders, for the asst. yr. 1974-75, the Tribunal set aside the order made by the AO, on the ground that the record before the AO in respect of the assessment of the assessee's income for the asst. yr. 1974-75 at the time, the original order of assessment was made, did not contain any error apparent from the record. The Tribunal has taken the view that the term 'record' in s. 154(1) of the Act is confined to the record that was before the AO at the time the original order of assessment was made and, therefore, it was impermissible for the authority to look into any order which came into existence subsequent to the date of the assessment order. The Tribunal has also taken the view that an order made by way of rectification, unlike an order passed in appeal does not relate back to the date of the original order. The view of the Tribunal that there was no mistake apparent from the record for the asst. yr. 1974-75 and that neither the original assessment nor the order under s. 104 of the Act could have been rectified or revised has been challenged by the Revenue at whose instance, the question as to 'whether the deduction of unabsorbed depreciation in the assessment for the year 1974-75 is a mistake apparent from the record' has been referred to us for our opinion. The Revenue has also raised question as to 'whether the Tribunal has rightly cancelled the order made under s. 155(7) revising the order under s. 104 of the Act'.
6. It is not disputed before us that if the order of rectification for the asst. yr. 1974-75 is found to be sustainable, the order under s. 155(7) of the Act would be equally sustainable. Learned counsel for the Revenue has not disputed the Tribunal's finding that an order of rectification would not have the effect of relating back to the time, the original order was passed and that its effect (sic was) only prospectively.
7. Before the Tribunal, it had been urged for the Revenue that the order made by the AO in respect of the asst. yr. 1974-75 rectifying the errors therein was an order made under s. 154 of the Act though the order itself did not mention the provision. The Tribunal accepted the case so pleaded by the Revenue and had considered the same by regarding the order made against the assessee as an order of rectification under s. 154 of the Act, in respect of the asst. yr. 1974-75 as well.
8. Sec. 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 criterias which the Supreme Court adopted while considering the scope and effect of s. 263 of the Act and the meaning to be assigned to the word 'record' used in that provision, in the case of CIT vs. Shree Manjunathesware Packing Products & Camphor Works (1997) 143 CTR (SC) 406 : (1998) 231 ITR 53 . The object with which power is conferred by s. 154 is as stated in the marginal heading 'rectification of mistake'. The principal condition for exercising the power under s. 154 of the Act is the existence of a mistake in the record. The mistake is not to be a mistake which requires in-depth probing to discover, but is a mistake which is 'apparent' from the record. The power conferred by this provision is only to enable the authorities to rectify the 'apparent' mistakes in the record. The record referred to is the record which the authorities are required to examine for the purpose of rectifying mistakes in the orders mentioned in sub-cls. (a), (b) and (c) of s. 154(1) of the Act. The section does not either expressly or implicitly require that the authorities exercising power under this provision should limit their attention only to the order sought to be rectified.
9. The requirement that the mistake in the record be 'apparent' does not imply that no other relevant document should be looked into. If in the light of other legally valid orders it is found that the original order contains mistakes which are apparent, the rectification of such mistakes is not barred under s. 154. The object of the provision is the rectification of mistakes in the record and that object is ill-served if the authorities are compelled to preserve such mistakes in the order by asking them to wear blinkers and not look into relevant unimpeachable material such as the rectified order of assessment for the period preceding assessment year in the light of which mistakes in the order sought to be rectified are apparent.
10. It is neither necessary nor possible to set out exhaustively all the material that can possibly be regarded as forming part of the 'record' for the purpose of examination under s. 154(1) of the Act. On the facts of this case, the order of assessment for the immediately preceding year which was rectified was undoubtedly a part of the record which was available for examination by the ITO for the purpose of deciding as to whether there was a mistake apparent on the face of the record in the order of assessment for the immediately succeeding year, namely, the asst. yr. 1974-75. More so was the figures of unabsorbed depreciation considered in the assessment for the asst. yr. 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 asst. yr. 197374 no amount as towards unabsorbed depreciation was available for being adjusted in the asst. yr. 1974-75. The set off allowed on the original assessment order for that year was an apparent mistake which was rectifiable under s. 154.
11. It is no doubt true as submitted by the 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.
11.1. Learned counsel for the assessee submitted that unlike s. 263, s. 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 proceedings alone.
The period of four years prescribed in the section for initiating rectification proceedings is meant to protect the assessee against unduly delayed proceedings for rectification, as also to enable the authorities to have sufficient time within which to give effect to the consequence of any orders which may be rectified or revised or modified when they have a direct bearing upon the assessment order sought to be rectified under s. 154(1) of the Act. Such orders would form part of the record which is available for scrutiny by the officers exercising power under s. 154 of the Act. The 'record' for purpose of s. 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 sought to be rectified.
12. The Supreme Court in the case of CIT vs. Shree Klanjunathesware Packing Products & Camphor Works (supra) has held that 'record' in s. 263 of the Act means the record before the CIT at the time of the exercise of the power of revision for reaching that conclusion, the Court did not rely only on definition of the word 'record' which had been introduced in s. 263 as is evident from the following observations of the Court:
It cannot be said that the correct and settled legal position, with respect to the meaning of the word 'record' till 1st June, 1988, is that it meant the record which was available to the ITO at the time of passing of the assessment order. Such a narrow interpretation of the word 'record' is not justified in view of the object of the provisions and the nature and scope of the power conferred upon the CIT. '
Those observations are equally applicable to the interpretation of the term 1 record' in s. 154 of the Act.
13. Learned counsel for the assessee contended that the authority should have initiated proceedings under s. 147(b) of the Act and not under s. 154 of the Act. There are no words by limitation in s. 154 to the effect that if the proceedings can be initiated under any other provision, s. 154 cannot be resorted to. In the case of Salem Provident Fund Society Ltd. vs. CIT (1961) 42 ITR 547 (Mad) 1, it was held by this Court that proceedings can be held under s. 34 or 35 and that the availability of the power vested with the ITO by s. 35 did not appear to bar the exercise of the jurisdiction vested in him by s. 34 of the Act. In the case of Indra Singh & Sons (P) Ltd. vs . Union of India & Anr. : [1967]64ITR501(Cal) it was held by the Calcutta High Court that the ITO can proceed under s. 35 of the 1922 Act, if he had jurisdiction to do so, even though he had jurisdiction to proceed under s. 34 of the said Act also.
14. Learned counsel for the assessee referred to the case of Seshasayee Paper & Boards Ltd. vs . L4C : [1986]157ITR342(Mad) , to support her submission that even a wrong order has a finality and unless that finality is disturbed by a process known to law or by a process authorised by law the right of the assessee and the Revenue will continue to be governed by the order. That proposition however, does not assist the assessee as it cannot be disputed that the order of assessment for the year 1974-75 could not have been regarded as having become final before the expiry of a period of four years that was available to the authorities for initiating rectification proceedings.
15. Counsel for the assessee also placed reliance on the decision of the Delhi High Court in the case of Anglo Dutch Paint, Colour & Varnish Works (P) Ltd. vs . CIT : [1986]157ITR614(Delhi) , wherein the Delhi High Court in a case arising under the IT Act, 1922 held that s. 35 of that Act did not apply to the case where in consequence of the assessment for a particular assessment year some changes had to be made in the assessment orders for some other years. That decision also does not assist the assessee as s. 154 of the Act is clearly attracted to the case of the assessee herein, and it was permissible for the ITO to rectify the mistakes apparent in the assessment order for the year 1974-75 after the assessment order for the year 1973-74 was rectified and as a consequence of which there was no unabsorbed depreciation available for being adjusted in the asst. yr. 1974-75.
16. The question referred to us at the instance of the assessee for the asst. yr. 1973-74 is, therefore answered in the affirmative, in favour of the Revenue and against the assessee. The mistake in not allowing the unabsorbed depreciation as a deduction from the capital gains in the year 1973-74 is clearly a mistake apparent from the record as under s. 71(2) of the Act, that amount was required to be set off against the capital gain and that had not been done in the original assessment order. The original assessment order also did not conform to the law laid down by the Supreme Court in the case of CIT vs . Virmani Industries (P) Ltd. & Ors. : [1995]216ITR607(SC) .
17. The questions referred to us at the instance of the Revenue for the asst. yr. 1974-75 are required to be answered in the affirmative insofar as it relates to the rectification of the mistakes in the assessment order for the year 1974-75 and in the negative in so far as the order made under s. 155(7) of the Act is concerned. The questions are answered in favour of the Revenue and against the assessee. The order of rectification revising the assessment order for the year 1974-75 is one which had been made in accordance with s. 154 of the Act and the order revising the order made under s. 104 of the Act is one which has been made in accordance with s. 155(7) of the Act. The orders so made are lawful and binding on the assessee, Revenue is entitled to costs in the sum of Rs. 1,000.