Chandramauli Kr. Prasad and Jayanandan Singh, JJ.
1. At the instance of the Revenue the Patna Bench of the Income Tax Tribunal had drawn up the statement of case and referred the following question of law for our opinion:
1. Whether on the facts and in the circumstances of the case, the I.T.A.T. was correct in holding that there was no mistake in the order of Assessing Officer dated 16.2.1984 so as to invoke proceedings under Section 154?
2. Whether on the facts and in the circumstances of the case the Assessing Officer was correct in initiating proceeding under Section 154 of the I.T. Act?
2. The order of assessment dated 16.2.1984 was passed in respect of assessment year 1979-80 in which the sales accrued in 1978-79 but received in assessment year 1979-80 were excluded because accrual basis was adopted for assessment years 1977-78. However the income accrued in 1979-80 but received by the assessee in subsequent year was not taken into account. For assessment year 1980-81, the assessee gave details of income on accrual basis and according to it Rs. 1923425/- had accrued in assessment year 1979-80 but accounted for in the assessment year 1980-81. The Assessing Officer later on, rectified the original order to include a sum of Rs. 19,23,425/- on accrual basis for sale proceed. The assessee aggrieved by the order of the Assessing Officer dated 25.5.1985 where a sum of Rs. 19,23,425/- was included as his income preferred appeal before the Income Tax Appellate Tribunal, inter alia, contending that the aforesaid amount cannot be included as income of the assessee and the same cannot be rectified by the Assessing Officer in exercise of the power under Section 154 of the Income Tax Act, hereinafter referred to as the Act. The Tribunal on appraisal of the material came to the following conclusion:
After hearing the contentions, facts and materials on record, we are of the opinion that the impugned order Under Section 154 cannot be sustained. No rectification can be made. Whether the income should be computed on the accrual basis of the sale for the assessment year 1979-80. Therefore, there was no mistake in the order of the assessing Officer dated 16.2.1984 in including the income on accrual basis of sale. The amount of Rs. 19,23,425/- can only be considered in giving effect to the order of the Tribunal for the assessment year 1979-80 which was arrived at in 1988 and not by rectification Under Section 154 along before the order of the Tribunal as has been done in this case.
3. Mr. S.K. Sharan, appearing on behalf of Revenue submits that Section 154 of the Act gives power to the Assessing Officer to rectify the mistake.
4. Mr. Rastogi, appearing on behalf of the assessee submits that the mistake apparent on record in the category of obvious and patent mistake can be rectified but not every mistake. He submits that on detailed analysis one may come to the conclusion that the mistake has been committed but such kind of a mistake cannot be rectified in exercise of the power under Section 154 of the Act. In support of the submission, he has placed reliance on a judgment of the Supreme Court in the case of T.S. Balaram, Income Tax Officer, v. Volkart Brothers and Ors. : [1971]82ITR50(SC) in which it has been held as follows:
It was not open to the Income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceeding under Section 154 of the Income-tax Act, 1961. A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. As seen earlier, the High Court of Bombay opined that the original assessments were in accordance with law though in our opinion the High Court was not justified in going into that question.
5. Having appreciated the rival submission, we do not find any substance in the submission of Mr. Sharan. In our opinion in exercise of the power under Section 154 of the Act the mistake has to be apparent, obvious and patent. In case it is not so, power under Section 154 of the Act is not available. By a process of long drawn reasoning an order can ultimately be said to be bad but that order cannot be rectified in the light of those reasonings by exercise of power under Section 154 of the Act.
6. In view of the discussion aforesaid, we are of the opinion that in the facts of the present case the Tribunal was correct in holding that the order of the Assessing Officer, mistake was not of that nature, which was fit to be corrected in exercise of power under Section 154 of the Act.
7. In view of the aforesaid, the answer to both the question are in the affirmative against the Revenue and in favour of the assessee.
Let a copy of our opinion be forwarded to the Income Tax Appellate Tribunal, Patna Bench, Patna.