1. This appeal filed by the assessee is against the order of the Commissioner (Appeals) dated 7-6-1984 for the assessment year 1978-79, for which the previous year ended on 31-3-1978.
2. The assessee is a dealer in edible oils. On 28-7-1978 the assessee filed its return of income for the assessment year 1978-79, admitting an income of Rs. 1,23,541. In the statement accompanying the return the assessee has shown the value of closing stock as on 31-3-1978 as under : Apparently the assessee did not claim the amount of Rs. 1,06,004.70 as business or trading loss. The assessment was completed under Section 143(3) of the Income-tax Act, 1961 ('the Act') on 23-10-1978 accepting the value of the closing stock as shown by the assessee. Certain disallowances and additions have been made in that assessment. An appeal was preferred by the assessee with the AAC. The AAC, by his order dated 26-10-1979, partly allowed the assessee's appeal. Against the order of the AAC the assessee preferred an appeal to the Tribunal.
On 15-12-1981 the assessee preferred an application under Section 154 of the Act and claimed that there was a mistake apparent from the record in the ITO's not allowing Rs. 1,06,004.70 as a trading loss and prayed for rectification of the same. While the said application of the assessee under Section 154 was pending before the ITO for his orders, the assessee filed an additional ground on 18-12-1981 in the appeal filed before the Tribunal. In the said additional ground raised before the Tribunal, the assessee urged that the ITO should have held that the sum of Rs. 1,06,004.70 was allowable as a trading loss in view of the fact that the ship carrying the goods- RBD Palm Olian-from Vasant Corpn., Singapore sank in high seas on 6-2-1978. But the Tribunal in its order dated 30-6-1982 did not entertain the additional ground observing as under : On behalf of the assessee, an additional ground was sought to be raised before us for the assessment year 1978-79. It was stated that the assessee had incurred a loss of goods in transit amounting to Rs. 1,60,400 due to sinking of a ship and this loss is allowable as business loss of the year. As rightly pointed out by the revenue, the ground raised for the first time before the Tribunal cannot be entertained when there is no material on record before us to dispose of the same. We, therefore, reject the additional ground raised.
(We may clarify here that in the order of the Tribunal dated 30-6-1982 the amount of loss has been wrongly shown as Rs. 1,60,400 instead of the actual amount of Rs. 1,06,004.70) 3. The ITO by his order dated 13-9-1982 rejected the assessee's petition under Section 154 observing that the fact whether the assessee had actually lost goods of the value of Rs. 1,06,004.70 in high seas on 6-2-1978 and whether the assessee had obtained any amount by way of insurance claim have to be enquired into in detail and such detailed enquiries cannot be made in a proceeding under Section 154. Aggrieved by the said order of the ITO the assessee preferred an appeal to the Commissioner (Appeals).
It appears that when the appellant filed the return and the Income-tax Officer completed the assessment the appellant was aware that the ship had sunk but they had expected to have the claim settled by the insurance company. Therefore, as on the close of the accounting year the appellant had not come to the conclusion that the value of the goods has been lost permanently. They had not written it off as a loss in their accounts. In these circumstances there is no question of the Income-tax Officer now holding that there was an error apparent from the records in the assessment order, when he completed the assessment by order dated 3-1-1980. It would seem that subsequent events have persuaded the appellant to make a claim that the loss was incurred during that year.
Determining whether the loss was incurred required investigation into the facts of the case and a finding in this regard cannot be the basis for a rectification under Section 154. The Income-tax Officer's order refusing to rectify the order is confirmed and the appeal is dismissed.
Against the order of the Commissioner (Appeals), the assessee preferred the present appeal before the Tribunal.
5. At the time of hearing the assessee's counsel filed a paper book of 39 pages. His arguments were to the following effect : The assessee brought to the notice of the ITO the fact of loss of stock-in-trade of Rs. 1,06,004.70 in transit. It is true that the assessee did not claim the same as trading loss. He showed the same in closing stock as on 31-3-1978. But the ITO should have allowed the same as trading loss by following the decision of the Supreme Court in the cases of CIT v. S.N. A. S. A. Annamalai Chettiar [1972] 86 ITR 607 and CIT v. Nainital Bank Ltd. [1965] 55 ITR 707. The officers of the department must not take advantage of the ignorance of the assessee as to his rights. It is the duty of the officer to assist the taxpayer in the matter of claiming and securing relief as pointed out by the CBDT in its Circular No. 14 of 1955 dated 11-4-1955, reproduced in Chaturvedi and Pithisaria's Income-tax Law, Third edn., Vol. 1, p. 856. When applicable provision of law or the decision of the Supreme Court was left out without being applied there is a mistake apparent from the record- D.S. Chenai v. WTO [1985] 11 ITD 9 (Hyd.), Farukh Ahmed v. WTO 21 TTJ 48, Smt. Sarda Devi Singhania v. WTO [1985] 15 ITD 129 (All.) and Sarangpur Cotton Mfg. Co. Ltd. v. CIT [1985] 152 ITR 251 (Guj.) (FB). For getting the said mistake rectified, the assessee applied to the ITO under Section 154 on 15-12-1981. The entire record of the case has to be looked into by the ITO [see Sampath Iyengar's Law of Income-tax, Seventh edn., Vol. 4, p. 3631]. The entire assessment order dated 23-10-1978 did not merge in the order of the Tribunal dated 30-6-1982 because the Tribunal refused to entertain the additional ground raised in the matter of trading loss of Rs. 1,06,004 as can be seen from paragraph 13 of the Tribunal's order-Smt. Nita Taneja v. ACED [1984] 150 ITR 668 (Pat.). Loss of stock-in-trade was allowed by the Commissioner (Appeals), Madras in his order dated 10-9-1985 in the case of George Maijo (Vizag.) as can be seen from pages 34 to 39 of the paper book.
6. The arguments of the departmental representative were to the following effect : The additional ground taken by the assessee in respect of the claim of Rs. 1,06,004.70 was rejected by the Tribunal in its order dated 30-6-1982. So rectification by the ITO under Section 154 was not permissible-Rohtak & Hissar Districts Electric Supply Co.
(P.) Ltd. v. CIT [1981] 128 ITR 52 (Delhi), Section 154(1 A) and commentary by Chaturvedi & Pithisaria's Income-tax Law, Third edn., Vol. 3, p. 3152]. Reliance is placed on the order of the ITO under Section 154.
7. We have considered the rival submissions. The additional ground raised by the assessee in respect of Rs. 1,06,004.70 was not entertained by the Tribunal as can be seen from paragraph 13 in order dated 30-6-1982. The Tribunal did not adjudicate and give a decision on the additional ground raised by the assessee. Section 154(1 A), therefore, has no application in the facts of assessee's case. The Supreme Court in the case of M.K. Venkatachalam, ITO v. Bombay Dyeing & Mfg. Co. Ltd. [1958] 34 ITR 143 held that a mistake may be either of law or of fact and that a glaring and obvious mistake of law can be rectified, as much as a mistake of fact apparent from the record. Loss of stock-in-trade is a trading loss and so is an allowable deduction as per the decision of the Supreme Court in the case of S.N.A.S.A.Annamalai Chettiar (supra). The Allahabad Bench of the Tribunal held in the case of Smt. Sarda Devi Singhania (supra) that omission to follow the law declared by the Supreme Court was a mistake of law apparent from the record and hence rectifiable under Section 35 of the Wealth-tax Act, 1957. Section 154 of the Income-tax Act is similar to Section 35 of the Wealth-tax Act. The Madhya Pradesh High Court in the case of CIT v. K.N. Oil Industries [1983] 142 ITR 13 held as under : The record of assessment is not confined to the return. Section 154 of the Income-tax Act, 1961, which confers jurisdiction for rectifying a mistake enables the ITO to assume jurisdiction when he finds 'any mistake apparent from the record'. The word 'record', as used in Section 154, will include all material which forms part of the assessment proceedings and not only the return. If an assessee omits to claim the relief allowable to him under the provisions of the Income-tax Act, 1961, it could not be said that he is not entitled to get that relief. It is the duty of the ITO and other officers administering the Act to inform the assessee that he is entitled to a particular relief if it is apparent that he is so entitled from the material available in the proceedings of assessment : (p. 13) The Supreme Court held in the case of Maharana Mills (P.) Ltd. v. ITO [1959] 36 ITR 350 that " 'the record' contemplated by Section 35 [of the Indian Income-tax Act, 1922] does not mean only the order of assessment but it comprises all proceedings on which the assessment order is based and the Income-tax Officer is entitled for the purpose of exercising his jurisdiction under Section 35 to look into the whole evidence and the law applicable to ascertain whether there was an error". So, in the instant case, though the assessee had not claimed deduction for the trading loss of Rs. 1,06,004.70 the ITO, when he made the assessment on 23-10-1978 was duty bound to inform the assessee that he was entitled to the deduction. This duty is stressed by the CBDT in its circular dated 11-4-1955 (supra). The fact of the sinking of the ship on 7-2-1978 and the loss caused to the assessee are corroborated by his correspondence with the insurance company well before the end of the accounting year as placed before us in the paper book. The ITO is entitled to, for the purpose of exercising rectification jurisdiction to look into the whole evidence. He was not justified when he stated in his order under Section 154 dated 13-9-1982 that 'the fact whether the assessee had actually lost the goods for the value of Rs. 1,06,004.70 on high seas on 6-2-1978 and whether the assessee had obtained any amount by way of insurance claim are to be enquired into in detail before allowing the assessee's claim. Such detailed enquiries cannot be made in a proceeding under Section 154'. Pendency of settlement of insurance claim is no bar to the allow-ability of loss in this year as has been held by the Punjab and Haryana High Court in the case of Laxmi Ginning & Oil Mills v. CIT [1971] 82 ITR 958. So, in the circumstances, we hold that there is a mistake of law apparent from the record and direct the ITO to look into the assessee's claim of trading loss and allow it.