Rectification of Tribunal Order not allowed just because different view taken by same Tribunal in another case : HC

ORDER

Bechu Kurian Thomas, J. – The Income-tax Appellate Tribunal has referred to this Court the following questions of law, under section 256(1) of the Income-tax Act, 1963. (for short ‘the Act’). Adjudication relates to the assessment year 1982-83.

(1) “Whether on the facts and in the circumstances of the case the Appellate Tribunal was justified in holding that there was a mistake in the appellate order which required rectification on the ground that there was disparity on a point between the impugned order and another order of the Appellate Tribunal?

(2) Whether there were materials for the Appellate Tribunal to interfere with the order of the CIT(Appeals) and re-determine the quantum of penalty?

(3) Whether the Appellate Tribunal was right in directing the assessing officer not to follow the decision of the Indore Bench of the Tribunal in the case of Ramlal Chiranjilal v. ITO which held that the quantum of penalty is to be computed in relation to the total income as finally determined?”

2. The assessee filed the return of income for the assessment year 1982-83 only on 14-8-1986. Due to the delay in filing the return, the assessing officer, after rejecting the explanation offered by the assessee, imposed Rs. 4,78,768/- as a penalty under section 271(1) (a) of the Act. On appeal, it was held that there was delay of only five months in filing the return since the period prior to the filing of return had been properly explained. The appeal was thus partly allowed and the assessing officer was directed to determine the quantum of penalty in the light of the directions given by the Income-tax Appellate Tribunal (Indore Bench) in the case of Ramlal Chiranjilal v. ITO [1992] 107 Taxation 1 (Indore – Trib.).

3. Revenue appealed to the Appellate Tribunal. By order dated 25-11-1997 the Tribunal confirmed the order of CIT(Appeals) and dismissed the appeal and reiterated to determine the quantum of penalty leviable on the assessee in the light of the directions given in Ramlal Chiranjilal’s case (supra).

4. A petition for rectification under section 254(2) of the Act was filed by the Department contending that the decision in Ramlal Chiranjilal’s case (supra) was not applicable and the direction to follow the said decision case was incorrect, since the Tribunal had, in a case relating to a sister concern of the assessee, decided not to follow Ramlal Chiranjilal’s case (supra). On the aforesaid basis, the Tribunal allowed the petition for rectification. This reference arises under the aforesaid circumstances.

5. The primary question that requires consideration is whether, in the facts that arose before the Tribunal, the circumstances warranted a rectification under section 254(1) of the Act.

6. We have heard Sri. Bobby John Pulickaparambil learned counsel for the assessee as well as Sri. P. K. Raveendranatha Menon learned Senior Counsel for the department.

7. Section 254(1) & (2) of the Act as it then stood, is as follows:

254. Orders of Appellate Tribunal.-(1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.

(2) The Appellate Tribunal may, at any time within four years from the date of the order, with a view to rectify 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.

8. A perusal of the above extracted provision makes it explicit that the power to rectify an order can be exercised only if there is a ‘mistake apparent from the record’. The power of rectification is not akin to that of an appeal or even a review. Merely because there is a wrong or erroneous order or a wrong appreciation of facts, the same are not grounds for rectification, though the same may be grounds for appeal. An error which has to be established by a process of reasoning on points where there may conceivably be two opinions can hardly be said to be an error or mistake on the face of record as held by the Supreme Court in Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale AIR [1960] SC 137.

9. It has been held that the word mistake is an ordinary term but in taxation law, it has special significance or contextual connotation. ‘Mistake’ means to understand wrongly or inaccurately; to make an error in interpreting; it is an error; a fault. ‘Apparent’ means visible; capable of being seen; easily seen, plain. A mistake which can be rectified under section 254(2) of the Act is one which is patent, which is obvious and whose discovery is not dependent on argument or elaboration as held in CIT v. ITAT 196 ITR 590 (Orissa). The Bombay High Court had held in CIT v. Ramesh Electric and Trading Co. [1993] 203 ITR 497 that the failure of the Tribunal to consider an argument advanced by either party for arriving at a decision is not an error apparent on the face of the record, although it may be an error of judgment. An error of judgment is not the same as a mistake apparent from the record and cannot be rectified by the Tribunal under section 254(2) as held in ITAT (supra).

10. Conclusion in a judgment may be inappropriate. Conclusions may even be erroneous. Such inappropriate or erroneous conclusions per se do not constitute mistakes apparent from the record. However, non-consideration of a binding decision of the jurisdictional High Court or Supreme Court can be said to be a mistake apparent from the record as held in Asstt. CIT v. Saurashtra Kutch Stock Exchange Ltd.  [2008] 305 ITR 227.

11. A mistake apparent from the record must be a mistake visible from the very records which were available with the Tribunal at the time when the decision was rendered. A record, document, or any other evidence or material, not already made part of the record, cannot be relied upon by the Tribunal for rectifying an order under section 254(2) of the Act.

12. Even though the application for rectification filed by the department had not been placed for our perusal, it is evident from the order of rectification dated 11-8-1998 that the reason for filing the petition for rectification was that two days after rendering the main judgment in the present case, the Tribunal took a contrary stand in respect of the case of a sister concern of the assessee. It is also evident from the order of rectification that in the case of the sister concern of the assessee, the Tribunal had directed the assessing officer not to follow the decision of the Indore Bench of the Income-tax Appellate Tribunal in Ramlal Chiranjilal (supra). In short, in respect of the assessee, the Appellate Tribunal on 25-11-1997 directed the assessing officer to determine the quantum of penalty in the light of the decision mentioned above, while in the case of the sister concern of the assessee, the very same Tribunal, two days thereafter i.e., 27-11-1997, refused to direct the assessing officer to follow the directions in Ramlal Chiranjilal’s case (supra).

13. A reading of the order under rectification further shows that the Tribunal allowed the rectification on the ground that there is a contradiction in the orders of the Tribunal in respect of the case of the assessee as well as that of the sister concern in which judgments were rendered two days apart and that such a contradiction ought to be removed, so as to have clarity in the decisions. It further went on to hold that since the assessee had not filed any petition to rectify the order in respect of the sister concern, the petition for rectification filed by the department is liable to be allowed. We are afraid. We cannot agree with the reasoning of the Tribunal.

14. We are of the view that the reasoning of the Tribunal is erroneous. A decision taken subsequently in another case is not part of the record of the case. A subsequent decision, subsequent change of law, and/or subsequent wisdom dawned upon the Tribunal, are not matters that will come within the scope of ‘mistake apparent from the record’ before the Tribunal. The different view taken by the very same Tribunal in another case, on a later date, could be relied on by either of the parties while challenging the earlier decision or the subsequent decision in an appeal or revisional forum, but the same is not a ground for rectification of the order passed by the Tribunal. It could at the most be a change in opinion based upon the facts in the subsequent case. The subsequent wisdom may render the earlier decision incorrect, but not so as to render the subsequent decision as a mistake apparent from the record calling for rectification under section 254 of the Act.

15. Let us also look at the situation through another angle, viz., that Ramlal Chiranjilal’s case (supra), in fact was interfered with or reversed by High Court or Supreme Court, and the Tribunal in ignorance of a judgment of Superior Court, still directed Assessing Officer to follow Ramlal Chiranjilal’s case (supra). Then the mistakes noted above could facilitate correction under section 254 of the Act. On the other hand, as in this case, the Tribunal without a changed circumstance surrounding Ramlal Chiranjilal’s case (supra) entertained a rectification petition. This approach is more counter-productive and contrary to the three-tier mechanism provided under the Act and the subsequent tier to this Court. In view of the above, we hold that, in the circumstances of the case, the Appellate Tribunal went wrong in allowing the rectification application filed by the department on the basis of a decision rendered subsequent to the order that was sought to be rectified.

16. It is also pertinent to observe that the Tribunal has not found in the impugned order that there was any mistake in the earlier order apparent from the record warranting a rectification. The only reason mentioned is that there is a contradiction in the orders passed and no rectification petition has been filed by the assessee in the subsequent case. The satisfaction of the Tribunal about the existence of a mistake apparent on the record is glaringly absent.

17. The learned Senior Standing Counsel for the revenue further canvassed for the proposition that the reason for filing the rectification petition was on account of the omission of the Tribunal to consider the explanation to Section 271(1) of the Act (as it then stood). Even though the order of rectification issued by the Tribunal does not refer to any such contention having been raised, we are of the view that even the aforementioned contention of the revenue has no basis.

18. Section 271 of the Act deals with the penalty that can be imposed for failure to furnish returns or failure to furnish returns within the time allowed or failure to comply with the notice or for concealment of particulars of income or furnishing inaccurate particulars of income. In the instant case, the penalty is leviable on account of failure on the part of the assessee to furnish the return without reasonable cause within the time allowed in the manner required under section 139(1) of the Act. The explanation to Section 271(1) does not apply to the circumstances in the present case. Penalty is levied in the instant case under section 271(1)(i)(a) of the Act (as it then stood), while the explanation applies to the cases covered by Section 271(1)(i)(b) of the Act (as it then stood). Viewed in the above light also, we are of the view that the rectification petition could not have been allowed by the Tribunal.

19. Since we are of the view that the first question referred for consideration is answered in favour of the assessee, the remaining questions do not arise for consideration. The first question is answered in favour of the assessee and on the view we have taken, the other two questions do not survive and, hence we decline to answer the remaining two questions referred supra.

The reference is answered as above.