Madras High Court
M.K. Kuppuraj vs Income-Tax Officer And Another on 24 March, 1994
Equivalent citations: [1995]211ITR853(MAD)
JUDGMENT
Somasundaram J.
1. For the assessment year 1974-75, the petitioner was assessed by the first respondent by his order dated August 31, 1976, on a taxable income of Rs. 2,23,068. During the course of the assessment, the petitioner had claimed that the refund of annuity deposit of Rs. 14,523 cannot be assessed in his individual assessment as it belongs to his Hindu undivided family. For the assessment year 1974-75, the Income-tax Officer included a sum of Rs. 14,523 being the annuity deposit refund in the petitioner's total assessable income following the judgment of the Income-tax Appellate Tribunal for the assessment years 1971-72 and 1972-73. Since the judgment of the Tribunal for the assessment years 1971-72 and 1972-73 was reversed by this court by the judgment dated July 4, 1980, in Tax Cases Nos. 683 and 684 of 1976, in M. K. Kuppuraj v. CIT [1981] 127 ITR 447, and since this court has held that the refund of annuity deposit was not assessable as the petitioner's income, he filed a petition before the first respondent under section 154 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), within the period of four years from the date of the first respondent's order, for rectification of the mistake apparent on the face of the record. No reply was received from the first respondent in spite of repeated reminders. M/s. Suri and Company, chartered accountants on behalf of the petitioner by their letter dated May 19, 1982, requested the second respondent to direct the first respondent to give effect to the order of this court in Tax Cases Nos. 683 and 684 of 1976 (M. K. Kuppuraj v. CIT [1981] 127 ITR 447). Thereupon the second respondent by his order dated May 28, 1982, informed M/s. Suri and Company, the chartered accountants who were representing the petitioner that the decision of this court in Tax Cases Nos. 683 and 684 of 1976 (M. K. Kuppuraj v. CIT [1981] 127 ITR 447) had not been accepted by the department and a special leave petition had been filed before the Supreme Court and in the said circumstances, the petitioners request for revision was premature. In the above circumstances, the petitioner filed the present writ petition praying for the issue of a writ of certiorarified mandamus to quash the order of the second respondent in C. No. 1424(5)/82-83, dated May 28, 1982; and to direct the respondents to deal with the application for rectification on merits.
2. Mr. R. Meenakshisundaram, learned counsel for the petitioner relying on the decision in Mettur Chemical and Industrial Corporation Limited v. CIT , submitted that the assessment contrary to a judgment subsequently rendered by this court would constitute an error on the face of the record warranting rectification under section 154 of the Act. Per contra Mr. N. V. Balasubramanian, learned counsel for the respondents, relying on the decisions, (1) State of Tamil Nadu v. KS. M. G. Meenambal and Co. [1984] 56 STC 82 (Mad), (2) State of Tamil Nadu v. Everest Trading Company [1987] 67 STC 148 (Mad), submitted that the assessment contrary to a judgment subsequently rendered would not constitute an error on the face of the record and, therefore, the petitioner is not entitled to any relief under section 154 of the Act. In the light of the rival contentions of learned counsel for the parties, the following question arises for consideration in this writ petition :
"Whether the assessment dated August 31, 1976, made in the present case contrary to a judgment subsequently rendered by this court in Tax Cases Nos. 683 and 684 of 1976 (M. K. Kuppuraj v. CIT [1981] 127 ITR 447 on July 4, 1980, would constitute an error on the face of the record and whether an application under section 154 of the Act to rectify such a mistake is maintainable ?"
3. Section 154 of the Act provides for rectification of any mistake apparent from the record by any income-tax authority. Section 154(1) of the Act reads thus :
"Section 154(1) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may, -
(a) amend any order passed by it under the provisions of this Act;
(b) amend any intimation sent by it under sub-section (1) of section 143, or enhance or reduce the amount of refund granted by it under that sub-section."
4. A similar question came up for consideration before a Division Bench of this court in Mettur Chemical and Industrial Corporation Ltd. v. CIT [1977] 110 ITR 822. In that case, in completing the income-tax assessment for the assessment years 1959-60 and 1960-61, on May 27, 1960, the Income-tax Officer allowed the wealth-tax paid as a deduction in computing the total income of the assessee. In the subsequent orders of reassessment also, this point was not touched by the officer. Subsequently, the officer initiated proceedings in respect of both the years under section 154 of the Act, evidently on the basis of the decision of this court in Kumbakonam Electric Supply Corporation Limited v. CIT [1963] 50 ITR 809, rendered on January 16, 1963, to the effect that wealth-tax paid was not deductible from the income from business for arriving at the taxable income and overruling the objections of the assessee, rectified the assessment orders by adding back the wealth-tax which was originally deducted. The assessee's appeals failed before the Appellate Assistant Commissioner and the Tribunal. On a reference to this court at the instance of the assessee, this court held that the decision of the High Court made it clear that the Income-tax Officer committed an error in deducting the wealth-tax from the income of the assessee and that error was apparent from the record and, therefore, the officer acted within his jurisdiction in proceeding under section 154 in order to rectify the mistake. The Division Bench of this court in the decision referred to above observed as follows (at page 825) :
"Section 154 of the Act enables the Income-tax Officer to rectify any mistake apparent from the record. In this case, as we already pointed out, the Income-tax Officer had deducted the wealth-tax paid by the assessee from the business income for computing the assessable income from the business. The decision of this court referred to above, viz., Kumbakonam Electric Supply Corporation Limited. v. CIT [1963] 50 ITR 809 (Mad) held that wealth-tax paid by a company under the provisions of the Wealth-tax Act, on the net wealth of the company is not an allowable expenditure in computing the taxable income of the company, either under section 10(2)(xv) or under section 10(1) of the Indian Income-tax Act, 1922. This decision of this court is an authoritative pronouncement as to the scope of section 10(2)(xv) and section 10(1) as far as the Income-tax Officer was concerned. Consequently, this decision made it clear that the Income-tax Officer has committed an error in deducting the wealth-tax paid by the assessee from the income from business and that error was apparent from the record. Consequently, the Income-tax Officer acted well within his jurisdiction in proceeding under section 154 of the Income-tax Act, 1961, in order to rectify a mistake apparent from the record by adding back the wealth-tax which he had originally deducted. We are not referring to the subsequent decisions on this question and the retrospective amendment of the law in this behalf because at the time when the Income-tax Officer took proceedings under section 154, this was the only binding decision in existence and, therefore, it was not merely the right but the duty of the Income-tax Officer to give effect to the law as declared by this court in the decision referred to above by correcting the mistake which he had already committed. Consequently, our answer to the first question referred to above is in the affirmative and against the assessee."
5. The decisions relied upon by learned counsel for the respondents were rendered interpreting the scope of section 55 of the Tamil Nadu General Sales Tax Act, 1959, whereas the decision in Mettur Chemical and Industrial Corporation Ltd. v. CIT referred to above is a direct decision on the point interpreting the scope of section 154 of the Act. Inasmuch as the ratio of the decision of the Division Bench of this court in Mettur Chemical and Industrial Corporation Ltd. v. CIT [1977] 110 ITR 822 directly applies to the facts of the present case and the said decision is binding on me, I am inclined to follow the said decision of the Division Bench of this court. Therefore, it has to be held that the assessment dated August 31, 1976, made in the present case contrary to the judgment subsequently rendered by this court on July 4, 1980, in Tax Cases Nos. 683 and 684 of 1976 (M. K. Kuppuraj v. CIT [1981] 127 ITR 447 would constitute an error on the face of the record and, therefore, an application under section 154 of the Act to rectify such a mistake is maintainable. In view of the above position of law, the petitioner is entitled to succeed in the writ petition. Accordingly, the writ petition is allowed and the order dated May 28, 1982 in C. No. 1424(5)/82-83, challenged in the writ petition is quashed and the respondents are directed to deal with the application for rectification and dispose of the same on the merits and according to law. There will be no order as to costs.