Kerala High Court
Kil Kotagiri Tea And Coffee Estates Co. ... vs Income-Tax Appellate Tribunal And ... on 26 March, 1988
Equivalent citations: (1988)75CTR(KER)115, [1988]174ITR579(KER)
JUDGMENT
PARIPOORNAN J. - The petitioner is a public limited company. It is an assessee on the files of the third respondent. The question raised in this original petition is whether in making the assessment for the year 1974-75, the petitioner-assessee is entitled to interest on the advance tax paid beyond the due date. It was held in the negative, by the Income-tax Officer, in exhibit P-2 order. The Commissioner of Income-tax (Appeals) upheld the plea of the assessee. In second appeal, the Appellate Tribunal, in exhibit P-4 order dated October 31, 1981, held that the belated payments are not to be taken into account as advance tax for the purpose of section 214 of the Income-tax Act, 1961, and so interest is inadmissible for such belated payments. The Tribunal held so, in view of the decision of this court in Sethumadhavan (A.) v. CIT [1980] 122 ITR 587. The appeal preferred by the assessee in Sethumadhavans case [1980] 122 ITR 587 was heard along with other cases and a Bench of this court held that payments of advance tax made within the financial year but not within specified dates should be treated as advance tax and that the assessee is entitled to interest on excess tax so paid. The decision of the Division Bench is dated January 22, 1982, and reported in Santha S. Shenoy v. Union of India [1982] 135 ITR 39. The judgment of the learned single judge in Sethumadhavans case [1980] 122 ITR 587 (Ker) was reversed. The petitioner filed exhibit P-5 before the Income-tax Appellate Tribunal on June 17, 1982, praying that in view of the Division Bench decision of this court, in Santha S. Shenoy v. Union of India [1982] 135 ITR 39, the Tribunal may be pleased to pass appropriate orders and rectify exhibit P-4 order dated October 31, 1981, and hold that interest is admissible even for belated payments of advance tax. By exhibit P-6 order dated October 14, 1982, the Appellate Tribunal dismissed the petition filed by the petitioner/assessee under section 154 of the Income-tax Act, 1961. It was held that a rectification under section 154 of the Income-tax Act must be of a mistake which is a mistake in the light of the law in force at the time when the order sought to be rectified was passed and that the subsequent decision of the High Court has no retrospective operation as in the case of subsequent legislation or the decision of the Supreme Court. In this original petition, the challenge is against exhibits P-2, P-4 and P-6 orders negativing the claim of the petitioner/assessee for interest on the advance tax paid beyond the due date.
We heard counsel for the petitioner as also counsel for the respondent/Revenue. The assessing authority in exhibit P-2, as also the Income-tax Appellate Tribunal in exhibit P-4, have held that the assessee is not entitled to interest on the advance tax paid beyond the due date. It is common ground that this view is based solely on the decision of a learned single judge of this court in A. Sethumadhavan v. CIT [1980] 122 ITR 587. It is true that when the Tribunal rendered the decision (exhibit P-4) dated October 31, 1981, the decision of the single judge in Sethumadhavans case [1980] 122 ITR 587 (Ker) was the law on the subject. Subsequently, on January 22, 1982, a Division Bench of this court reversed the said decision which is reported in Santha S. Shenoy v. Union of India [1982] 135 ITR 39 (Ker). Since the very decision relied on by. the Appellate Tribunal to hold that the assessee is not entitled to interest on the advance tax paid beyond the due date was reversed by a Bench of this court in the decision reported in Santha S. Shenoys case [1982] 135 ITR 39, the petitioner invoked the jurisdiction of the Appellate Tribunal under section 154 of the Income-tax Act and sought rectification of exhibit P-4 appellate order in that behalf. The Tribunal refused the relief prayed for, by exhibit P-6 order dated October 14, 1982. The question posed for consideration is this :
"Where an authority has decided, on the basis of a decision of the High Court which is subsequently reversed, would there be a rectifiable mistake coming within section 154 of the Income-tax Act ?"
Salmond on Jurisprudence, Tenth Edition, by Glanville L. Williams at page 189 states as follows :
"... the theory of case law is that a judge does not make law; he merely declares it; and the overruling of a previous decision is a declaration that the supposed rule never was law. Hence, any intermediate transactions made on the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regards matters that are res judicata, or accounts that have been settled in the meantime."
Salmond on Jurisprudence, Twelfth Edition, by P. J. Fitzgerald, at page 148 states as follows :
"... the theory of case law is that a judge does not make law; he merely declares it; and the overruling of a previous decision is a declaration that the supposed rule never was law. Hence, any intermediate transactions made on the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regards matters that are res judicata, or accounts that have been settled in the meantime."
An order of assessment, based upon an interpretation or application of law which is ultimately found to be wrong in the light of judicial pronouncements rendered subsequently, discloses a mistake apparent from the record. When the court decides a matter, it does not make the law in any sense but all it does is that it interprets the law and states what the law has always been and must be understood to have been. Where an order is made by an authority, on the basis of a particular decision, the reversal of such decision in further proceedings will justify a rectification of the order based on that decision. (See Bhagwandas Kevaldas v. Mehrotra N. D. [1959] 36 ITR 538 (Bom); Parshuram Pottery Works Co. Ltd. v. Trivedi D. R. [1975] 100 ITR 651 (Guj) and Bhauram Jawahirmal v. CIT [1980] 121 ITR 487, 490 (All)).
In the light of the above position in law, we are of the view that the order passed by the Appellate Tribunal (exhibit P-4) dated October 31, 1981, relying on the decision of a learned single judge of this court in Sethumadhavans case [1980] 122 ITR 587, discloses a mistake apparent from the record, in the light of the subsequent overruling of the very decision relied on by the Appellate Tribunal, by a Bench of this court in the decision reported in Santha S. Shenoys case [1982] 135 ITR 39.
When the Bench of this court overruled the decision of the single judge in Sethumadhavans case [1980] 122 ITR 587 (Ker), the said decision was never the law. The law on the point at all times was as stated by the Bench in the decision reported in Santha S. Shenoys case [1982] 135 ITR 39 (Ker). It cannot admit of any doubt that exhibit P-5 application dated June 17, 1982, is within four years from the date of exhibit P-4, and was one filed within the time allowed by law. So understood, we are of the view that exhibit P-4 order, passed by the Appellate Tribunal in the appeal, discloses a mistake apparent from the record, namely, that the assessee is not entitled to interest on the advance tax paid beyond the due date, which should be rectified. This should have been done by the Appellate Tribunal in exercise of the powers vested in it under section 254 (2) read with section 154 Of the Income-tax Act.
The decision of the Appellate Tribunal to the contrary in exhibit P-6 is unsustainable The Appellate Tribunal has, in the circumstances, refused to exercise the jurisdiction vested in it under law. Exhibit P-6, therefore, deserves to be annulled. We hereby do so. We direct the Appellate Tribunal to restore exhibit P-5 to its file and dispose of the same, in the light of section 254 (2) read with section 154 of the Income-tax Act, and in accordance with law.
We would state, that the view of the Appellate Tribunal, that rectification contemplated by section 254 (2) or section 154 of the Income-tax Act must be of a mistake which is a mistake in the light of the law in force at the time when the order sought to be rectified was passed, is a clear error. A binding decision rendered by a court is always retrospective and the decision which is overruled was never the law. The overruling decision should be deemed to have been in force even on the day when the order sought to be rectified was passed. We are further of the view that the Appellate Tribunal was in error in holding that the subsequent decision of the High Court has no retrospective operation as in the case of subsequent legislation or the decision of the Supreme Court. A subsequent binding decision of the Supreme Court or of the High Court has retrospective operation and overruling is always retrospective. We are afraid that the Appellate Tribunal misunderstood the ratio of the two decisions referred to by it in Jiyajeerao Cotton Mills Ltd. v. ITO [1981] 130 ITR 710 (Cal) and CIT v. Assam Oil Co. Ltd. [1982] 133 ITR 204, 214 (Cal). The said decisions are distinguishable. The question that arose for consideration in Jiyajeerao Cotton Mills case [1981] 130 ITR 710 (Cal) was, whether the decision of the Supreme Court resolving conflict of judicial opinion on a particular point obliterates the existence of a debatable point prior to such decision. It was held that the law laid down by the Supreme Court cannot be said to have retrospective operation in the sense that although a debate or doubt or a conflict of judicial opinion is resolved and settled by the Supreme Court, yet still that does not obliterate the existence of such debate or doubt or conflict that existed prior to the decision of the Supreme Court setting at rest such debate or doubt or conflict. CIT v. Assam Oil Co. Ltd. [1982] 133 ITR 204 (Cal) was a case of reassessment, where the decision of the High Court that a particular kind of expenditure is not deductible was stated to be "information" within the meaning of section 147 of the Act. The plea in the said case was that the subsequent reversal of the decision by the Supreme Court will render the reassessment proceedings void ab initio. It was held that the Supreme Court does not make the law from the date it is pronounced but the Supreme Court declares it. to be so from the very inception. But the knowledge about that law is not always there. The question that arose for Consideration in that case was whether the decision of the High Court will be "information" on the basis of which the reassessment proceedings were validly taken under section 147 (b) of the Act. The said question is entirely different. Even so, in CIT v. Assam Oil Co. Ltd. [1982] 133 ITR 204, the Calcutta High Court referred to the decisions in Walchand Nagar Industries Ltd. v. V. S. Gaitonde, ITO [1962] 44 ITR 260 (Bom), Parshuram Pottery Works Co. Ltd. v. D. R. Trivedi, WTO [1975] 100 ITR 651 (Guj), R. Kuppuswamy Mudaliar and Sons v. Board of Revenue (Commercial taxes) [1980] 45 STC 152 (Mad); K. M. Jamal Mydeen v. State of Madras [1968] 22 STC 45 (Mad) and Govindaraju Chetty v. CTO [1968] 22 STC 46 (Mys) and concluded that on principle it is true that the Supreme Court does not make the law from the date the decision is pronounced, but the Supreme Court declares it to be so from the very inception. The two decisions of the Calcutta High Court, referred to by the Appellate Tribunal, are not relevant for deciding the question that arose for consideration before the Tribunal, namely, that when the Tribunal decided the appeal on the basis of the decision of a learned single judge of this court in Sethumadhavans case [1980] 122 ITR 587 which was subsequently reversed by a Bench of this court in Santha S. Shenoys case [1982] 135 ITR 39, there would be a rectifiable mistake within the meaning of section 254(2) read with section 154 of the Income-tax Act. In our opinion the answer can only be in the affirmative. The decision of the Appellate Tribunal to the contrary is illegal.
Section 254(2) and section 154 of the Income-tax Act enable the concerned authorities to rectify any "mistake apparent from the record". The said expression has a wider content than the expression "error apparent on the face of the record" occurring in Order 47, rule 1 of the Civil Procedure Code. The restrictions on the power of review under Order 47, rule 1, Civil Procedure Code, do not hold good in the case of section 254 (2) and section 154 of the Income-tax Act. Even so, a subsequent binding decision taking a different view in law was held to be a good ground for review which will constitute an error apparent on the face of the record within the meaning of Order 47, rule 1, Civil Procedure Code. (See Pathrose v. Kuttan (alias) Sankaran Nair [1969] AIR 1969 Ker 186; [1969] KLT 15 and Chandrasekharan Nair v. Purushothaman Nair [1969] KLT 687). These two decisions were overruled by a Bench of this court in Board of Revenue v. P. K. Syed Ahbar Sahib [1973] AIR 1973 Ker 285; [1973] KLT 497. But, the Supreme Court reversed the Bench decision aforesaid, holding that the Bench was not justified in refusing to entertain the review petition on supertechnical considerations which were ill-founded. (See State of Kerala v. P. K. Syed Akbar Sahib [1988] 173 ITR 1 (SC)). So, it appears that even for the purpose of Order 47, rule 1, Civil Procedure Code, which is more restrictive, a subsequent binding authority taking a different view of law is a good ground for review, on the ground that the order sought to be reviewed passed on an antecedent decision, which stands overruled, constitutes an error apparent on the face of the record. So far as this case is concerned, it is unnecessary for us to base our decision on the provisions of Order 47, rule 1, Civil Procedure Code, which is more restrictive.
The original petition is allowed. Exhibit P-6 is quashed. The Appellate Tribunal is directed to restore exhibit P-5, the petition filed by the petitioner dated June 17, 1982 (M.P. No. 9 (Coch) of 1982), and dispose of the same in accordance with law and in the light of the observations contained hereinabove.