1. This appeal directed against the judgment, dated 24.6.1970, of the High Court of Gujarat raises a question in regard to the interpretation of Section 35 of the Indian Income-tax Act, 1922 (for short, called the Act).
2. The assessee is a Limited Company which manufactures textiles in its Mill. For the assessment year 1959-60, the assessee showed in its books the value of its closing stock at Rs. 5,89,439/-. The Income-tax Officer in the course of the assessment, detected that there was some discrepancy between the value of the stock of cotton shown in the books of the assessee and the records of the State Bank of India with which it had hypothecated that stock. The assessee tried to explain away this discrepancy by saying that it had given an incorrect figure of its stock to the Bank with a view to obtain higher amount of over-draft. The Income-tax Officer rejected this explanation and added Rs. 2,14,682/- to the value of the stock so that according to his assessment, the closing stock for the assessment year 1959-60 worked out to Rs. 8,04,121/-. Having failed in first appeal before the Appellate Assistant Commissioner, the assessee preferred a second appeal to the Tribunal.
3. Pending the appeal before the Tribunal, the Income-tax Officer took up the assessment of its income for the next assessment year i.e. 1960-61. The assessee contended that opening stock for the assessment year 1960-1961 should be taken as Rs. 8,04,121/-. The Income-tax Officer rejected this contention and took up the opening stock for that assessment year at Rs. 5,89,439/- without making the addition of Rs. 2,14.682/- Against this order of the Income-tax Officer, the assessee went in appeal before the Appellate Assistant Commissioner who, on 30.6.1965, accepted the same, despite opposition from the Income-tax Officer who had personally appeared there to defend his order and held that the opening stock for the assessment year 1960-1961 be taken at Rs. 8,04.121--. Neither party appealed against this order before the Tribunal.
4. On January 22, 1969, the Tribunal allowed the assessee's appeal referred to above relating to the assessment year, 1959-60, and accepted the assessee's explanation about the discrepancy relating to the value of stocks between its account-books and those of the Bank. The Tribunal directed that the addition of Rs. 2,14.682/- made by the Income-tax Officer to the closing stock relating to the assessment year 1959-60 be deleted. Thus, according to the Tribunal's decision, the closing stock for the assessment year 1959-60 (which would also be the opening stock for the succeeding year) was Rs. 5,89,439/ as shown in the books of the assessee.
5. Thereafter on March 26, 1959, the Income-tax Officer moved the Appellate Assistant Commissioner requesting that the latter's appellate order, dated 30.6.1965, relating to the assessment year 1960-61 be rectified and brought in conformity with the Tribunal's order.
6. The Appellate Assistant Commissioner then issued a notice under Section 154 of the Act to the assessee to show cause why the appellate order, dated 30.6.1965, be not rectified under Section 35 of the Act. Despite objection from the assessee, on 28.6.1969. the Appellate Assistant Commissioner passed an order for rectifying his decision dated 30.6.1965 The order of rectification runs thus :.in the instant case there is a mistake apparent from record of appeal as pointed out in the I.T.O's letter dated 26.3.69 mentioned above. The appellate order which is now sought to be rectified, was passed on 30.6.65. The rectification is therefore in time. Accordingly I direct that the value of opening stock for the A.Y. 60-61 be taken at Rs. 5,89,439/-, being equal to the value of the closing stock determined by the Tribunal for the A.Y. 1959-60. Therefore, the relief of Rs. 2,14,682/- given to the assessee in the original appellate order, dated 30.6.1965, stands cancelled. The ITO is directed to give effect to this order.
7. The assessee then impugned this order by a writ petition under Article 226 of the Constitution before the Gujarat High Court, on the ground that the Appellate Assistant Commissioner had overstepped the jurisdiction conferred on him under Section 35 of the Act. The High Court dismissed the petition. Hence this appeal.
8. Before the High Court, the assessee raised two contentions which have been re-agitated before us. They are : (i) The Appellate Assistant Commissioner had no jurisdiction to make the impugned order because there was no mistake apparent 'from the record of the appeal' within the contemplation of Section 35 of the Act. (ii) Assuming that the words 'record of the appeal' in Section 35 were comprehensive enough to include the record of other related proceedings, the Appellate Assistant Commissioner had no jurisdiction, to rectify his decision dt. 30.6.65, by referring to some thing which actually and factually took place four years after that decision.
9. Elaborating his contentions, Mr. Desai submits that in the context of the present case, the words 'record of the appeal' in Section 35 would mean the record for the assessment year 1960-61 which the Appellate Assistant Commissioner had actually before him at the time of hearing of the appeal and not the entire record of the assessee relating to the earlier years and a fortiori of later years. Such appellate record, it is mentioned, had no apparent error which could be rectified under Section 35. The argument proceeds, that the order of the Tribunal for the assessment year 1959-60, made on 22.1.1969-which gave rise to the mistake-was something subsequent and extraneous and could not, by any stretch of language, be called a part of the 'record of the appeal' relating to the assessment year 1960-61. Support for this contention has been sought from a decision of the Mysore High Court in Ganapathi Subbaraya Hegde v. State of Mysore, : [1972]84ITR523(KAR) which proceeds on an interpretation of Section 37 of the Mysore Agricultural Income-tax Act. Learned Counsel has tried to distinguish the decision of this Court in Mahrana Mills (Private) Ltd. v. The Income-tax Officer, Porbandar [1959] Supp. 2, S.C.R. 547 on the two-fold ground (i) that that was a case of depreciation in which the written-down value had to be calculated with reference to the record of past years, and (ii) unlike the present case, there, the error was in existence and apparent from the record of the appeal at the time of its decision. It is argued that maharana Mills' case (supra) was not one where the mistake was-rectified with reference to something happening subsequently to the original decision of the Appellate Assistant Commissioner. Attempt has also been made to distinguish the Privy Council decision in Commissioner of Income-tax v. Khem Chand Ramdas L.R. 65 I.A. 236 on the ground that there the mistake had become apparent as a result of the cancellation of registration of the assessee firm in revision under Section 33 of the Act.
10. As against this, Mr. Ramachandran, learned Counsel for the Revenue submits that the 'record of the appeal' spoken of in Section 35 is the entire evidence which could be looked into by the Appellate Assistant Commissioner for the purpose of the appeal. Since the closing stock of one year and the opening stock of the succeeding year must necessarily be the same, the record of the assessment year 1959-60, was also relevant and therefore, a part of the record of the appeal arising out of the assessment for 1960-61. It is further canvassed that the Tribunal had for the I.T.O's finding as to the value of the closing stock for the assessment year 1959-60 being Rs. 8,04,121/- completely substituted its own finding regarding such value being Rs. 5,89, 439/-, with effect from the date of I.T.O's order, and thus the Tribunal's order, though passed subsequently, had, with retrospective effect, become a part of the record of the appeal relating to the assessment year 1960-61, which could legitimately be looked into by the Appellate Assistant Commissioner for the purpose of ascertaining and rectifying the mistake in his appellate decision. Reliance has been placed on the decisions of this Court in Maharana Mills (P) Ltd. v. Income-tax Officer, Porbandar (supra) and that of the Privy Council in Commissioner of Income-tax v. Khemchand Ramdas (supra).
12. The material part of Section 35 is in these terms :
35(1). The Commissioner or Appellate Assistant Commissioner may, at any time within four years from the date of any order passed by him in appeal or in the case of the Commissioner in revision under Section 33A and the Income-Tax Officer may. at any time, within four years from the date of any assessment order or refund order passed by him on his own motion rectify any mistake apparent from the record of the appeal, revision, assessment or refund as the case may be, and shall within the like period rectify any such mistake which has been brought to his notice by an assessee...
13. The crucial words are those that have been underlined.
14. The interpretation of the words 'record of appeal'' is not a matter which is res Integra. It came up for consideration before this Court in Maharana Mills case (Supra). The appellant therein (hereinafter called the Mills) was assessed to income-tax for the assessment year 1953-54 and by an order of June 30, 1955, the I.T.O. allowed depreciation under Section 10(2) (vi) of the Act in the amount of Rs. 3,48,105/-. On August 8, 1955, the Mills made an application before the I.T.O. for rectification of the order under Section 35 of the Act pointing out certain mistakes in calculations of the depreciation amount. The Income-tax Officer by his order, dated February 27, 1956, corrected the 'written down value' of the different properties of the Mills and determined the total allowable depreciation to be Rs. 1.94,074/-. The Mills challenged this order of rectification on several grounds two of them, which are material for our purpose, were : (a) that the provision of Section 35 under which the Income-tax Officer had acted, was not meant for the purpose of making corrections in written down values, the correct provision being Section 34 which specifically refers to excessive depreciation, and (b) that, in any case, he had exceeded his jurisdiction under Section 35 in calculating the depreciation on the written down value of the buildings and machinery of the appellant acting suo modi and that he could correct only those mistakes which had been pointed out by the mills. The argument was the recalculation is not rectifying a mistake which is apparent from the record. This Court negatived these contentions with this observation :
The words used in the section are 'apparent from the record' and the record docs 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. If he doubts the Written Down Value of the previous year it is open to him to check up the previous calculations and if he finds any mistake it is open to him to make fresh calculations in accordance with the law applicable including the Rules made thereunder.
15. This Court then noticed Venkatachalam's case : [1958]34ITR143(SC) and Khem Chand's case (supra) in support of the view taken by it. Counsel for the then appellant sought to distinguish these cases on the ground that the record there considered was the assessment record of that year and the Income-tax Officer did not have to go to the records of the previous year. This argument was repelled in these terms :
That is a distinction without a difference. If, for instance, the Income-tax Officer had found that in the assessment year 1952-53 there was an apparent arithmetic mistake in the account of the Written Down Value of the properties which resulted in a corresponding mistake in the assessment of the year in controversy could he not take the corrected figure for the purposes of the assessment and could it be said that the mistake was not apparent from the record. A fortiori if he discovered that the very basis of the different assessments Was erroneous because of an initial mistake in determining the Written Down Value could it be said that this would not be a mistake apparent from the record. And if in order to determine the correct Written Down Value the Income-tax Officer makes correct calculations, can it be said that that is not rectifying a mistake apparent from the record but dehors it.
16. The observations of this Court, quoted above, fully apply to the facts of the case in hand. It will bear repetition that the closing stock for the assessment year 1959-60 as entered in the books of the assessee, was Rs. 5,89,439/-, and as found by the Income-tax Officer was Rs. 8,04,121/-. Since the closing stock of one assessment year furnishes the figure of the opening stock for the succeeding year, it follows that the record showing the closing stock of assessment yen 1959-60 formed a part of the evidence relevant to the assessment for the assessment year 1960-61. Thus to the extent of ascertaining the closing and opening stock positions, the two assessments telescoped into each other. Indeed, it was on this basis that the Appellate Assistant Commissioner had by his decision dated 30-6-1965 allowed the assessee's appeal regarding A.Y. 1960-61. The Tribunal's finding, that the value of the closing stock for A.Y. 1959-60 should be Rs. 5,89,439/-, had completely replaced the Income-tax Officer's finding in regard to that fact with effect from the date of the Income-tax Officer's order relating to A.Y. 1959-60. If the I.T.O.'s finding with regard to the closing stock for A.Y. 1959-60 was relevant to and part of the 'record of appeal', the Tribunal's decision which superseded that finding, was equally so within the contemplation of Section 35 of the Act. It cannot be gainsaid that the mistake in regard to the opening stock for A.Y. 1960-61 being Rs. 8,04,121/-, was quite apparent when the Appellate Assistant Commissioner undertook to rectify his appellate order dated 30-6-65, the correct figure of valuation finally determined by the Tribunal being Rs. 5,89,439/-. Thus considered, it is clear that for the purpose of ascertaining the true stock position the record of the assessment for A.Y. 1959-60, including the Tribunal's decision, was not extraneous or irrelevant to the record of the appeal and could legitimately be looked into for the purpose of correcting the mistake by the Appellate Assistant Commissioner.
17. Thus the first contention of the appellant stands overruled.
18. The second point canvassed by Shri Desai is well-nigh covered by the ratio of the privy Council decisions in Khem Chand's case (supra). The assessee in that case did not produce his account books and the Income tax Officer made an assessment on the 'best-judgment basis'. On the application of the assessee, however, he allowed registration of the assessee-firm on January 17, 1927. As it was a registered firm, he did not in the assessment order made under Section 23(4) on the same day, assess any super-tax. The Commissioner of Income-tax in exercise of his powers under Section 33 of the Act, called for the record, cancelled the registration on January 28, 1927, and directed the I.T.O. to take necessary consequential action. The result was that by an order, dated May 4, 1929, the assessee was assessed to super-tax. Three days later, a demand notice was issued. On these facts, delivering the opinion of the Judicial Committee, Lord Romer made these pertinent observations in regard to the applicability of Section 35 :
in their Lordship's opinion, the case clearly would have fallen within the provisions of Section 35 had the Income-tax Officer exercised his powers under the section within one year from the date on which the earlier demand was served upon the respondents. For, looking at the record of the assessments made upon them as it stood after the cancellation of the respondent's registration-and the order affecting the cancellation would have formed part of the record-it would be apparent that a mistake had been made in stating that no super-tax was leviable.
19. From the quotes above, it is evident that the Judicial Committee considered the order of the Commissioner cancelling the registration of the assessee's firm-although passed about 11 days after the original assessment-to have formed part of the record of the assessment, for the purpose of rectifying the mistake as a mistake apparent from the record of the case. On parity of reasoning, in the instant case, the finding of the Tribunal as to the valuation of the stock, although recorded subsequently to the appellate decision of the Appellate Assistant Commissioner, could be taken as forming part of the record of appeal and taken into account for the purpose of correcting the mistake, under Section 35, as to the value of the opening stock for A.Y. 1960-61, apparent from that record.
20. We do not want to overburden this judgment by a discussion of Ganapatho Subbaraya Hegde's case (supra) cited by Shri Desai. Suffice it to say that this was a case under Section 37 of the Mysore Agricultural Income-tax Act, 1957. The notice for rectification issued in that case and the orders of the authority were found to be defective in as much as they did not state that there was any mistake apparent on the record of the assessment proceedings for the previous three years in question. Maharana Mills' case and Khemchand's case (supra) were not noticed by the High Court in that case.
21. Lastly, Shri Desai urged that we should not lose sight of the startling results which might flow from a liberal interpretation of Section 35. It is apprehended that if the phrase 'record of the appeal' is widely interpreted so as to cover the records of all collateral proceedings and subsequent events, it would leave the door wide open to endless harassment of assessees; the income-tax authorities would under the guise of correcting mistakes, lightly reopen assessments long past and closed, and thus introduce an element of disconcerting instability in the administration of the Act.
22. In our opinion, there is no room for any such apprehension. It must be remembered that a decision is a precedent on its own facts. Each case presents its own features. The income-tax authorities and Tribunals are supposed to apply the ratio of a decision, to the facts of particular cases with due care and discernment, bearing in mind the restricted scope of their jurisdiction under Section 35 and the object for which it is conferred.
23. The appeal fails and is dismissed with costs.