Madhya Pradesh High Court
Commissioner Of Income-Tax vs Smt. Gunwanti Bai on 4 January, 1996
Equivalent citations: [1996]219ITR632(MP)
Author: A.K. Mathur
Bench: A.K. Mathur
JUDGMENT
A.K. Mathur, Actg. C.J.
1. This is a reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue and the following two questions of law have been referred for answer by this court :
" (1) Whether, on the facts and in the circumstances of the case, the Tribunal was legally competent to reverse its final decision in exercise of the powers under Section 254(2) of the Act ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was legally competent to recall its order once again and to give a finding contrary to the finding given in the earlier order of recall on the same facts and evidence ?"
2. Brief facts giving rise to this reference are that the Income-tax Officer noticed that the assessee was having credit balance of Rs. 3,94,045 on the first day of the accounting year relevant to the assessment year under consideration with the firm, Ratilal Manekji, Burhanpur. It was noticed that the assessee had not disclosed any interest income from the above credit balance. It was explained, by the assessee as to why the income of interest was not shown. It was submitted that the income has actually not accrued and it was, therefore, not shown by the assessee. It was submitted that it was for the assessee to decide whether to charge interest or not the Income-tax Officer considered the assessee's letter dated November 18, 1974, addressed to the firm for not charging interest from the firm and other evidence was also placed before him. But the Income-tax Officer found that in the immediate preceding year the assessee had charged interest from the aforesaid firm wherein she was having deposits and accordingly returned the interest income of Rs. 43,898. The Income-tax Officer noted that there was no genuine reason with the assessee for not charging the interest from the said firm and the return filed regarding not charging interest is nothing but an afterthought The Income-tax Officer referred also to his order relating to the assessment year 1973-74 and worked out interest at the rate of 12 per cent, per annum on the deposits of Rs. 3,94,045 and a sum of Rs. 47,285 was added. That was for the first year. For the second year, on the same reasoning, the Income-tax Officer added Rs. 45,913 and for the third year, he added Rs. 35,677.
3. On appeal, the Appellate Assistant Commissioner of Income-tax considered the submissions on behalf of the assessee and after noting that no interest income accrued to the assessee but on the same material which was produced before the Income-tax Officer, he reversed the finding. Then, the Revenue took up the matter in appeal before the Tribunal and the Tribunal reversed the order of the Appellate Assistant Commissioner and restored the finding of the Income-tax Officer. Thereafter an application under Section 254(2) of the Act for rectification was moved before the Tribunal which was rejected on August 16, 1982, on the ground that there was -no error and all the material was taken into consideration and, therefore, there is no occasion to recall the earlier order dated February 12, 1982. The Tribunal found that there was no error in the order dated February 12, 1983 and rejected the application for rectification, vide order dated August 16, 1982. Thereafter, the second application for rectification was moved on February 2, 1983, before the Tribunal and this application was allowed by the Tribunal by order dated December 23, 1983, and recalled the original order passed by the Tribunal dated February 12, 1982. Hence, an application was moved by the Revenue for referring the aforesaid two questions for decision of this court. We have heard learned counsel and perused the record.
4. Suffice it to say that the first rectification application was rejected by the Tribunal by order dated August 16, 1982, after taking into consideration all the material which was there. Therefore, there was no occasion to have moved a second application for rectification. There was no change of the facts except the incumbent who decided the matter changed. It is evident that all the material, like letters, hundis, affidavit, were placed before the Income-tax Officer for the purposes of showing that the assessee, Gunwantibai, did not charge any interest on the loan advanced to the firm but the Income-tax Officer took the view that she had charged interest in the earlier year and there was no justification why she would not charge interest on the same amount for the subsequent year. The Income-tax Officer did not believe the letters and other correspondence and held that the amount of interest has deliberately not been disclosed. This finding was reversed by the Appellate Assistant Commissioner of Income-tax and in further appeal, the order of the Appellate Assistant Commissioner of Income-tax, the Tribunal reversed the order of the Appellate Assistant Commissioner of Income-tax and restored the order of the Income-tax Officer.
5. Thereafter, a rectification application was moved stating that certain material facts, i.e., letters, hundis, etc., were not considered by the Tribunal. The Tribunal by order dated August 16, 1982, rejected this application for rectification and observed that all the material which was there on record was considered. Thereafter a second application was moved and in that, the Tribunal observed that in the original order passed by the Tribunal dated February 12, 1982, full material was not considered. This is absolutely an erroneous approach on the part of the Tribunal. In fact, all the material was the subject-matter of decision before the Income-tax Officer and the letter which the assessee had written that she would not charge interest, was taken into consideration by the Income-tax Officer but the Income-tax Officer disbelieved that part and held that the interest is chargeable. This finding was reversed by the Appellate Assistant Commissioner of Income-tax and the finding of the Appellate Assistant Commissioner of Incomes-tax was reversed by the Appellate Tribunal. Therefore, it is absolutely wrong to say that full material was not considered by the Tribunal in its first order dated February 12, 1982. The Tribunal again reiterated the same thing while rejecting the first rectification application on August 16, 1982. But it is unfortunate that on the second rectification application, the Tribunal observed that the letter, hundis and affidavits were not considered by the Tribunal either in the original order or in the order dated August 16, 1982, on the first rectification application. In fact, in the rectification application what can be corrected is an apparent error and not to deal with merits and to recall the order on the basis of taking a second opinion on the merits, which is not the scope of rectification.
6. Normally, rectification only means to correct an error which is apparent on the face of the record and not to decide the matter over again on the merits. In the present case, in the second application which has been allowed by the Tribunal, the Tribunal has acted on merit part which was considered by all the three authorities, i.e., the Income-tax Officer, the Appellate Assistant Commissioner of Income-tax and the Appellate Tribunal and recorded their findings. Such findings of fact cannot be rectified in a rectification application under Section 254(2) of the Act. More so, in the present case, the first rectification application was rejected. Notwithstanding that, a second application was entertained and this act of the Tribunal, in our. opinion, was absolutely not warranted and the Tribunal had no jurisdiction to interfere, under the garb of rectification, a decision on the merits could not be given. Hence, we are of the opinion that the view taken by the Tribunal in its order dated December 23, 1983, was beyond the scope of rectification under Section 254(2) of the Act. Hence, we answer both these questions in favour of the Revenue and against the assessee.