Assistant Commissioner of Income-tax Vs. Ved Prakash and anr. - Court Judgment

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direct taxation - cash credit - sections 68, 254, 254 (2) and 256 of income tax act, 1961 - assessment of assessee was in issue - income-tax appellate tribunal held that assessee had not offered any explanation nor did he produce balance-sheet or books of account which could have explained relevant cash credit entry - jurisdiction of income-tax tribunal under section 254 (2) challenged - according to section 68 where no explanation about nature and source is offered sum so credited may be charged to income of assessee of that previous year - change of opinion by tribunal consisting of same members shall not justify rectification - held, tribunal had no jurisdiction to pass impugned order which was in nature of review tribunal could not have made under section 254 (2). head note: income tax appeal (tribunal)--rectification under s. 254(2)--scope. held : there may perhaps be two alternative points of view and the tribunal accepted one of the possible alternatives in its first order. a second thought of the tribunal consisting of the same members will not justify the exercise of the power of rectification. it shall far less be when the tribunal consists of different members on the second occasion. a change of opinion by the tribunal consisting of the same members shall not justify rectification nor can the whiff of fresh thinking brought in by new members of the tribunal justify rewriting of the order under of the guise of rectification. the only fact that had the second set of members heard the appeal, they would have decided in favour of the assessee is not a reason for them to recall an order allegedly for the purpose of rectification of a mistake.cit v. itat (1994) 206 itr 126, 136 (ap) followed. conclusion : power not available to review or rewriting of the previous order either on findings of law or of facts. application : also to current assessment years. income tax act 1961 s.254(2) - - ' 15. we, therefore, hold that the impugned order is bad for error of law apparent on the face of the record.v. sivaraman nair, j. 1. this is a writ petition filed by the assistant commissioner of income-tax, investigation circle 1(1), hyderabad, seeking issuance of a writ a certiorari calling for the records relating to the order of the income-tax appellate tribunal in m. p. no. 41/hyd of 1992, dated september 29, 1992, and to quash the same. 2. a brief resume of facts is necessary to understand the controversy involved in this writ petition. the first respondent herein filed his returns of income for the assessment year ending march 31, 1985 and the assessing authority accepted the same in its order dated august 28, 1985. the assessee had filed only the income and expenditure account. he has not stated whether he had maintained books of account, not had he produced the balance-sheet or profit and loss account. there was a search of the premises of the first respondent-assessee on december 8, 1987, and gold, cash and books of account were seized. on april 7, 1988, the assessee filed a revised return disclosing and additional income of rs. 3,25,000 aggregating to rs. 4,05,341 and a taxable income of rs. 3,93,310. subsequently, he filed yet another return disclosing the taxable income to be rs. 3,11,207 on january 31, 1989. by notice dated october 3, 1989, the assessing officer required him to produce all books of account on october 18, 1989. in his note dated december 22, 1989, the assessee has stated that the return dated january 31, 1989, was full and complete, since it was supported by books, balance-sheet, profit and loss account, etc., whereas the previous return was not so supported. in the ledger page relating to the hand loan account of the previous year 1984-85 corresponding to the assessment year 1985-86, which seized in the seizure conducted on december 8, 1987, there was an entry of an opening balance of rs. 3,07,000 as on april 1, 1984. the assessment was completed treating the above entry as indicating 'cash credit' which was not properly explained by entries in the books or otherwise. the amount of rs. 3,07,000 was assessed by orders dated march 23, 1990, as unexplained income of the first respondent-assessee. 3. the taxable income was determined as rs. 9,25,252 as against the returned income of rs. 68,310. the first respondent assessee filed an appeal before the commissioner of income-tax (appeals), hyderabad, and later a second appeal before the income-tax appellate tribunal. a division bench of the tribunal dismissed the second appeal holding that the assessee had not offered any explanation, not did he produce the balance-sheet or books of account which could have explained the relevant cash credit entry. that order was passed on march 18, 1992. 4. by order dated september 29, 1992, in m. p. no. 41/hyd of 1992, the income-tax appellate tribunal, on a detailed discussion of the arguments urged by the first respondent-assessee held that the earlier bench on march 18, 1992, had not appreciated the correct legal position and decided to recall the earlier order in exercise of its power under section 254(2) of the income-tax act (43 of 1961). 5. the petitioner had filed this writ petition to call up and quash the order dated september 29, 1992, for the reason that the tribunal exceeded its jurisdiction under section 254(2) of the income-tax act in recalling the order dated march 18, 1992, and posting the appeal for fresh hearing. 6. counsel for the petitioner relies on a decision of a division bench of this court of which one of us (sivaraman nair j. ) was a member in w. p. no. 14166 of 1991, dated march 12, 1993, cit v. itat : [1994]206itr126(ap) as covering all the points arising in this writ petition. he submits further that the writ petition has to be allowed. 7. shri m suryanarayana murthy, counsel appearing for the first respondent-assessee, submits that the above decision covers only one point relating to the maintainability of the writ petition. he submits that the point decided in the judgment in w. p. no. 14166 of 1991 (see : [1994]206itr126(ap) ), to the effect that a reference application does not lie against an order passed under section 254(2) of the income-tax act recalling an order and posting the same for fresh consideration, but only against a final order rectifying the mistake and, therefore, there is no effective alternative remedy against an intermediate order, may stand in his way in urging the objections relating to maintainability of the writ petition. 8. it is, however, his submission that in view of the decision of the supreme court in balaram (t. s.), ito v. volkart brothers : [1971]82itr50(sc) that if a point of law which does not require a long drawn process of reasoning or lengthy argument is involved then the tribunal is entitled, in exercise of its power under section 254(2) of the income-tax act, to recall the order for the purpose of considering the point of law which was wrongly decided by the tribunal earlier. 9. counsel invites our attention to section 68 of the income-tax act which reads as follows : 'where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the 'assessing officer' satisfactory, the sum so credited may be charged to income of the assessee of that previous year.' 10. counsel submits that to attract this section, the sum credited in the books of the assessee maintained for any previous year must be an amount generated during that year and covered by an entry which is not explained. he submits that the tribunal on the earlier occasion overlooked this obvious interpretation of section 68 of the income-tax act, and on the latter occasion, without much argumentation, the obvious point of law was accepted. he, therefore, submits that in terms of the decision of the supreme court in t. s. balaram's case : [1971]82itr50(sc) and the judgment of this court in w. p. no. 14166 of 1991 (see : [1994]206itr126(ap) ) the impugned order dated september 29, 1992, manifest valid exercise of the powers of the tribunal under section 254(2) of the income-tax act. 11. we have seen both orders of the tribunal. we have also considered the terminology and effect of section 68 of the income-tax act. we will assume without deciding that it may perhaps be possible that the view which the petitioner urges now and which found favour with tribunal in the latter order dated september 29, 1992, is a possible view of section 68 of the income-tax act. even then, the question is : whether the possibility of a different view of law justifies the tribunal to recall the appellate order in exercise of the power under section 254(2) of the income-tax act? 12. section 254(2) of the income-tax act is in the following terms : 'the appellate tribunal may, at any time within four years from the date of the order, with a view of rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the assessing officer : provided that 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 sub-section unless the appellate tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard.' 13. we understand the section to have two parts : (1) the tribunal recalling the order; and (2) the tribunal passing a final order of rectification after hearing the parties. the division bench of this court in w. p. no. 14166 of 1991 (see : [1994]206itr126(ap) ) has held that the earlier part of the order recalling an order is not subject of a reference under section 256 of the income-tax act, and, therefore, the writ petition challenging such an order is maintainable. the division bench, following a number of supreme court judgments and judgments of various high courts in the country, held that rectification of a mistake should not amount to review or rewriting of the previous order either on findings of law or on findings of facts. the supreme court in t. s. balaram's case : [1971]82itr50(sc) had asserted that it must be an obvious and patent mistake that calls for rectification and not something where there may be two conceivable opinions or on a debatable point of law and the latter would not amount to a mistake which can be rectified. 14. on reading of the two orders of the tribunal, we are of the opinion that there may perhaps be two alternative points of view and the tribunal accepted one of the possible alternatives in its first order. a second thought of the tribunal consisting of the same members will not justify the exercise of the power of rectification. it shall far less be when the tribunal consists of different members on the second occasion. a change of opinion by the tribunal consisting of the same members shall not justify rectification, nor can the whiff of fresh thinking brought in by new members of the tribunal justify rewriting of the order under the guise of rectification. the only fact that had the second set of members heard the appeal, they would have decided in favour of the assessee is not a reason for them to recall an order allegedly for the purpose of rectification of a mistake. we are in agreement with the reasons stated in w. p. no. 14166 of 1991 (cit v. itat : [1994]206itr126(ap) ) in greater detail on this point, which we extract : '....... if two views are possible on a point of law, and one of the alternatives is accepted in its previous order, it cannot be held that the mistake is apparent from the record. unless there are manifest errors which are obvious, clear and self-evident, the tribunal cannot recall its previous order in an attempt to rewrite the order. reading the application which the respondent had filed along with the order which the tribunal made under section 254(2), we are of the opinion that the attempt of the tribunal was not to rectify any mistake apparent of self-evident, but to review or revise or rewrite its own order. rectification of mistake will not justify its anxiety to improve upon the earlier order.' 15. we, therefore, hold that the impugned order is bad for error of law apparent on the face of the record. we also hold that the tribunal had no jurisdiction to pass the impugned order which was in the nature of review the tribunal could not have made under section 254(2) of the income-tax act. 16. counsel for the first respondent-assessee submits that any view which the court may hold may not preclude the assessee from pursuing the alternative statutory remedy of reference under section 256 of the income-tax act. we make it clear that none of the observations in this judgment are meant in any manner to affect any right of the assessee to seek any other remedy which he has under the income-tax act. the assessee is free to pursue the same. the writ petition is allowed as indicated above. no order as to costs.