1980 PLP 362 (PTD)

The contentions of Mr. Sen are not without substance. We have fully read the order of the Tribunal. It does not appear to ors that Tribunal has decided the matter on the ground that a wrong section been applied. The actual decision of the Tribunal rests on the finding the Tribunal as to whether there is a rectifiable mistake or not and this thing has beer] challenged by the questions in this reference. To come to the questions referred, Mr. Ray on behalf of the assessee rightly contended that question No. 2 is fully covered by the decision of the Supreme Court in case of S. A. L. Narayan Raw v. Ishwarlal Bhagwandas as (1965) 57 I T R 149, frilly discussed below. Mr. Sen on behalf of the revenue could A distinguish the facts and circumstances of this case from those before the Supreme Court. Accordingly, we answer question No, 2 in the affirmative and in favour of the assessee. On question No. 1, it was contended on behalf of the revenue that the as to the deductibility of wealth tax in the computation of income‑tax been finally settled by the Income‑tax (Amendment) Act, 1972, which came o force on the 26th Augusts 1972. Section 4 of this Amending Act reads follows:‑‑ "

4. Wealth tax not deductible in computing the total income for certain assessment years.‑Nothing contained in the Indian Income‑tax Act, 1922 (II of 1922), shall be deemed to authorise, or shall be deemed ever to have authorised, any deduction in the computation of the income of any assessee chargeable under the head `Profits and gains of business, profession or vocation' or `Income from other sources' foe the assessment year commencing on the 1st day of April, 1957, or any subsequent assessment year, or any sum paid on account of wealth tax." Mr. Sen contended that this deeming provision in the 1972 Act was retrospective and had to be given its full effect. It is to be deemed that when the original order of assessment was made a mistake was committed joy allowing deduction on account of wealth tax paid. It was also to be deemed that this mistake was a mistake apparent from the record inasmuch as the Income‑tax Officer should be deemed to have notice of the law ire retrospective when he made the order of assessment. In support of his contentions Mr: Sera cited the following decisions. The first was M. K. Venkatachalam, Income‑tax Officer x. Bombay Dyeing and Manufacturing Cc. Ltd. (1958) 34 I T R 143 (S C). The facts in this case before the Supreme Court. were that the Income‑tax Officer had assessed the assessee, which was a company, to tax for the assessment year 1952‑53 by an order dated the 9th October 1952. In this assessment order the Income‑tax Officer had given a credit to the assessee for Rs. 50,063 being interest at 2% on the tax paid in advance under section 184‑A(5) of the Income‑tax Act. Subsequently, the Indian Income‑tax (Amendment) Act, 1353 was passed. It: this Amending Act a proviso to section 18‑A(5) was added providing that an assessee was entitled to interest not on the whole of the tax pail in advance but only on the difference between the tax so paid and the tax as determined on regular assessment. This amending section was deemed to have come into force on the 1st April, 1952, i.e., prior to the date of the assessment order in the instant case. Under this amended Act the assessee was entitled to a lesser sutra than what was allowed to him originally on account of interest. After the amending Act was passed, the Income‑tax Officer exercised his power under section 35 of the Indian Income‑tax Act, 1912 and rectified the mistake in the order of assessment and demanded repayment of the sum which was allowed to the assessee in excess. It was held by the Supreme Court that the amendment of section l8‑A must be deemed to have been included in the principal Act as from 1st April, 1952 and, therefore, must be deemed to be the law on the date of the passing of the assessment order Consequently, it wag held that the assessment order was inconsis tent with the proviso to section 18‑A and must be deemed to suffer from a mistake apparent from tire record and that the income‑tax Officer was justified in 'exercising his power under section 35 and rectifying, the mistake. The Supreme Court laid down further that a goring and obvious mistake of law can be rectified under section 35 inasmuch as a mistake of fact apparent from the record. The Supreme Court also noted that the Amending Act specifically gave power to the income‑tax Officer to revise his earlier orders. The Supreme Count observed as follows‑‑‑‑see (1958) 34 I T R 143,149: - "it is in the light of this position that the extent of the Income‑tax Officer's power under section 35 to rectify mistakes apparent from the record must be determined ; and, in doing so, the scope and effect of the expression `mistake apparent from the; record' has to be ascertained. At the time when the Income‑tax Officer applied his mind to the question of rectifying the alleged mistake, there can be no doubt that he had to read the principal Act as containing the inserted April 1,

152. IC that be the true position then the order which lie made giving credit to the respondent for Ids. 50,603‑15‑0 is plainly and obviously inconsistent with a specific and clear provision of the statute and that must inevitable be treated as a mistake of law apparent from the record. If a mistake of fact apparent froze the record of the assessment order can be rectified under section 35, we see no reason why a mistake of law which is glaring and obvious cannot be similarly rectified. Prima facie it may appear somewhat strange that an order which was good and valid when it was made should be treated as patently invalid and wrong by virtue of the retrospective operation of the Amend ment Act. But such a result is necessarily involved in the legal fiction about the retrospective operation of the Amendment Act. If, as a result of the said fiction, we must read the sub sequently inserted proviso as forming part of section 18‑A (S) of the principal Act as from April I, 1952, the conclusion is inescapable that the order in question is inconsistent with the provisions of the said proviso and must be deemed to suffer from a mistake apparent from the record. That is why we think that the Income tax Officer was justified in the present case in exercising his power under section 35 and rectifying the said mistakes." Mr. Sen next cited S. A. L. Narayan Raw v. Ishwarlal Bhawandas. In this case the facts before the Supreme Court were that for the assessment year 1948‑49, a notice was served on the assessee under section 18‑A(1) of the Indian Income‑tax Act, 1922, for the payment of advance tax. The assessee first filed an estimate under section 18‑A(2) and, thereafter, a revised estimate and paid tax accordingly. In the regular assessment made on 31st March 1953, it was found that the tax paid on the basis of the estimate of the assessee was less than 80 percent of the tax actually assessed. On the unpaid tax no interest was charged. In 1956 on objections from the audit, the Income‑tax Officer proceeded under section 35 of the Indian Income‑tax Act, 1922, and passed an order charging interest on the ground that the failure to charge interest under section 18‑A((,) was a mistake apparent from the record and could be rectified. This order was confirmed by the Commissioner of income‑tax under section 33‑A of the Act. Thereafter proceedings were held under Article 226 of the Constitution at the instance of the assessee who prayed for quashing of the order of the Commissioner under a writ of certiorari. A Full Court of the High Court of Bombay quashed the orders passed by the Income‑tax Officer and the Commissioner. An appeal was preferred from the judgment of the Bombay High Court to the Supreme Court. The Supreme Court held that the High Court was right in setting aside the orders passed by the Income‑tax Officer and the Commissioner of Income‑tax. The Supreme Court found that section 18‑A.(6) had been amended retrospectively by an Amendment Act of 1953 and the retrospec tive operation commenced from the 1st April, 1922. Under this amend ment, a proviso was added to section 18‑ A(6) providing that in cases falling under the said section and under the circumstances that may be prescribed the Income‑tax Officer could reduce or waive the interest payable the Supreme Court by its majority judgment held that by virtue of this retrospective amendment the order which was made by the Income‑tax Officer on the date of the assessment and which was plainly inconsistent with the terms of the section as it then stood became an order which he was competent to pass in exercise of his powers. The Income‑tax Officer in view of the retrospective amendment was bound to consider whether the assessees was entitled to reduction or waiver of interest under the added proviso and if interest was not charged it could not be said that there was necessarily a mistake apparent from the record. Mr. Sen on the strength of this decision urged that in the instant case the law which was passed retrospectively in 1972 must be deemed to have been there at the time of the order of assessment as also at the time of the order of rectification and as such this deduction allowed on account of wealth tax paid was a mistake apparent or deemed to be apparent from the record. Lastly, Mr. Sen cited the case of Government of Andhra Pradesh v. Hindustan Machine Tools Ltd. A I R 1975 S C 2037. The facts in this case and the statutes involved are different and do not advance the case of the revenue any further. On behalf of the assessee, Mr. K. Ray, on the other hand, contended that whether a mistake was apparent on the face of the record or not seas a question of fact. The Tribunal had come to a conclusion in the instant case that this mistake was not apparent. This finding of fact was a matter of subjective determination and could not be challenged in the manner as the revenue had sought to do. Mr. Ray further contended that the 1972 Act was not before the Tribunal when the Tribunal disposed of the matter and, therefore, the finding of the Tribunal cannot be held to be erroneous taking into account subsequent legislation which the Tribunal did not have occasion to consider. In support of his contentions Mr. Ray cited two decisions. The first was Commissioner of Income‑tax v. Durga Prasad More (1971) 82 I T R 540 (S C). Mr. Ray relied on the following passage in the judgment of the Supreme Court (pages 546‑547 of the report):‑ "Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and tribunals have to judge the evidence before them by applying the test of human probabilities. Human minds may differ as to the reliability of a piece of evidence. But in that sphere the decision of the final fact‑finding authority is made conclusive by law." Mr. Ray also cited the case of K M. Shenmugam v. S. R. V. S. (P.) Ltd. A I R 1963 S C 1625 Mr. Ray relied on the following passage of the judgment of the Supreme Court (at page 1930 of the report):‑ "Das Gupta J. makes yet another attempt to define the expression when he says in Satyanarayan Laxminarayan Hedge v. Mailikerjun Bhavanappa Tirumale, A I R 1960 S C 137 at page 141 thus: `An error which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions car, hardly be said to be an error apparent on the face of the record. As the above discussion of the rival contentions show, the alleged error in the present case is far from self‑evident and if it can be established, it has to be established by lengthy and complicated arguments". The learned Judge here lays down the complex nature of the argu ments as a test of an apparent error of law. This test also may break, for what is complex to one judicial mind may be clear and obvious to another: it depends upon the equipment of a particular Judge. In the ultimate analysis the said concept is comprised of many imponderables; it is not capable of precise definition, as no objective criterion can be laid down, the apparent nature of the error, to a large extent, being dependent upon the subjective element. So too, in some cases the boundary between error of law and error of fact is rather thin. A Tribunal may hold that 500 multiplied by 10,000 is 5 lakhs (instead of 50 lakhs); another Tribunal may hold that a particular claim is barred by limitation by calcula ting the period of time from 1956 instead of 1961; and a third Tribunal may make an obvious error deciding a mixed question of fact and law. The question whether the said errors are errors of law or fact cannot be posited on a priori reasoning, but falls to be decided in each case. We do not, therefore, propose to define with any precision the concept of `error of law apparent on the face of the record; but it should be left, as it has always been done, to be decided in each case." The cases cited by Mr. Ray are not of much assistance in the instant case. We do not accept the contentions of Mr. Ray that a conclusion or finding as to whether there is a mistake apparent from the records in a particular case is a pure question of fact to be determined subjectively by the Tribunal. If there is a mistake apparent from the record it ought to be capable of being demonstrated objectively. In a given set of facts and records thereof it is to be determined first if there is a mistake and if so it is also to be determined if such mistake was apparent from the records. The question arising from such determination appear to us to be at the least a mixed question of fact and law. We also do not accept the contention of Mr. Ray that the High Court in its advisory jurisdiction under the Income‑tax Act cannot consider or take into account law which was not considered or cited before the Tribunal. The relevant and basic facts in the instant case are that the Amending Act was promulgated in 1972. The order of assessment was made on the 4th November 1960, and the order of rectification was passed on the 16th November, 1964. The law is well settled. If an Act is passed with retrospective effect the deeming provision must be given its full and logical effect. All the incidents which follow from retrospective legislation have to be given effect to. The proposition was laid down by Lord Asquith in the case of East End Dwellings Co. Ltd. v. Finsbury Borough Council 1922 A C 109=(1951) 2 All E R 587 (H L), in the following language :‑ "If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of these in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain state of affairs. It does not say that, having done so, you must cause of permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs." This passage has been quoted with approval by the Supreme Court in the case of Bombay Dyeing and Mfg. Co. Ltd. In the instant case the Amending Act has to be imagined as existing on the date of the order of assessment and on the date of the order of rectification, the amendment being retrospective, but would the records of any particular case change their character? The Amending Act no doubt would give rise to a mistake which will be deemed to have occurred in the original order of assessment and con tinued up to the time of the order of rectification. But should it be also deemed that such a mistake was apparent within the meaning of section 3 5? The apparency of a mistake has to be considered and established objectively. In the case of Bombay Dyeing, the amendment had already been promulgated when the Income‑tat Officer sought to rectify under section 35 of the 1922 Act. The records as it stood at the relevant time disclosed an apparent mistake. In the case of Naragan Row, the Amending Act with retrospective effect was also in existence at the time when the Income tax Officer proceeded to rectify the order and could determine whether the records disclosed an apparent mistake in the background of the Amended Act. In the instant case the Amending Act came into existence long after the order sought to be rectified and the order of rectification. Therefore, at the relevant time, the mistake, though deemed, could not be apparent from the records, We do not propose to include the expression "deemed to be apparent" in section 35 of the Act. We hold that though it could be deemed that there was a deemed mistake in the order of the relevant time yet there was no rectifiable mistake apparent on the face of the record. In this view we answer the question No. 1 also in the affirmative and in favour of the assessee. In the facts and circumstances, there will be no order as to costs. DEB, J.‑‑I agree. Questions answered in the affirmative.