1986 PLP 725 (PTD)

The question set out above can be aplit up as two:‑ "(1) Whether on the basis of section 67 (2) of the Act the assessee is to claim the benefit of section 80‑T of the Act? and (2) Whether the grant of relief under section 80‑T of the Act is a mistake apparent on the face of the record of the original assessment and as such it could be rectified‑under section 154 of the Act, by the assessing authority? The Tribunal on the first question has taken the view as already stated, that the reference to section 67 (2) of the Act, would not help the assessee and that on the facts of the case, that there is no computation of the income of the firm under capital gains in accordance with the provisions of Chapter IV‑A, that there was computation of business income after setting off of the capital gains against the lousiness loss and the, therefore, the loss determined in the firm's assessment should be treated as business loss in the hands of the partner in the partner's assessment.

4. The learned counsel for the assessee questions tire said view taken by the Tribunal and contends that in view of section 67 (2) of the Act, the business loss as well as the income from the capital gains should be brought into the assessee's account and the allocation of the income or loss should be made under the corresponding heads of income in the partner's assessment.

5. On a due consideration of the matter, we are of the view that the plain language of section 67 (2) of the Act is not capable of being interpreted in the manner suggested by the learned counsel. Section 67(2) is a follows:- "67(2).‑‑ The share of a partner in the income 6r loss of the firm, as computed under subsection (1) shall, for the purpose of assessment be apportioned under the various heads of income in the same manner in which the income or loss of the firm has been determined under each head of income." The apportionment contemplated under that section of either the income or the loss of the firm should no doubt be under the various heads of income in the same manner in which the income or the loss of the firm had been determined. But, this section does not enable the assessee to ignore the assessment made on the firm and insist on a fresh assessment to be made under each head of income, ignoring the assessment made on the firm. What the learned counsel for the assessee in this case says is that the share of entire business loss and the share of capital gains should be brought under the head of business and the capital gains respectively and assessed in the partner's individual capacity. If the section is interpreted in the manner suggested by the learned counsel for the assessee it will be against the language used in the section, what is contemplated is the apportionment of the loss or of the income of the firm. In this case, the firm's assessment has resulted in a loss. According to the assessee's learned counsel, since the firm's assessment which has resulted in a loss cannot be apportioned to the various heads of income, the income or loss under each year of income of the firm should be brought in as such in the assessee's individual assessment and then assessed. But what the section, according to us, contemplates is the apportionment of the income or loss of the firm as such and as in this case if the loss had occurred in the business of the firm, then that loss has to be apportioned under the head 'business' in the partner's assessment also. If in a particular year the firm has a loss under two sources of income, then on the basis of this section apportionment should be made proportionately under the two heals in the partner's: Assessment. We are not, therefore, inclined to agree with the learned counsel for the assessee that as a result of section 67(2), there should be a fresh assessment in the hands of a partner of the income or loss of the firm under various heads. We therefore, agree with the Tribunal that section 67(2) of the Act will not be of any help to the assessee to claim the benefit of section 80‑T of the Act.

6. Coming to the second question, the contention of the learned counsel for the assessee is that the mistake in granting the relief under section 80‑T of the Act is not rectifiable under section 154 of the Act, as the applicability of section 80‑T to the assessee's case is a debatable question and as such the mistake, if any, is not apparent from the record. The learned counsel points out by way of illustration that in this case, the assessing authority took a view in his rectification proceedings that relief under section 80‑T of the Act is not available to the assessee, while the Appellate Assistant Commissioner took a contrary view. This itself would show that the applicability of section 80‑T is a debatable point. It is said that in such a case where a mistake has to be detected by a process of reasoning or deliberation, it cannot be taken to be a mistake apparent on the record as contemplated by section 154 of the Act. The learned counsel also relies on the decision of the Supreme Court in T.S. Balaram v. Volkart Brothers, (1971) 82 I T R 50: (1971 Tax LR 1508) (SC) in which it has been pointed out that a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions and that a decision as a debatable point of law is not mistake apparent from the record.

7. However, we are of the view that the mistake in this case, that is, the grant of relief under section 80‑T of the Act, by the I.‑T.O. is a mistake apparent on the face of the record as contemplated by section 154 of the Act. The I.‑T.O. has applied erroneously the provision in section 80‑T of the Act to the facts which do not call for its application. If a provision which is inapplicable to the facts, has been applied, then it is a mistake apparent on the face of the record to find out whether there is a mistake which could be rectified under section 154 of the Act, one has to see whether the provision is applicable to the facts of the cases if on the face of it, it is not applicable, then the application of the provision will be a mistake. In this case, as already stated, the assessee claims the benefit of section 80‑T of the Act read with section 67(2) of the Act. If section 67(2) is not applicable then the application of section 80‑T is out of question. If the I.‑T.O_ has given the relief under section 80‑T which the assessee is not entitled on the language of the section, then it will be a mistake apparent from the record as it does not call for any detailed argument'

8. The decision in I.‑T.O. v. Ashok Textiles Ltd. (1961) 41 I T R 732: (A I R 1961 S C 699) deals with section 35 of the Income‑tax Act, 1922, which corresponds to section 154 of the Income‑tax Act 1961. The Supreme Court has pointed out in that case that section 35 of the Income‑tax Act, 1922 was not analogous to Order XLI, rule 1 C.P.C. that the expression 'apparent from the record' is quite different from 'apparent on the face of the record' occurring in Order XLI, rule 1 C . P. C . and that under section 35 of the Act, the Income‑tax Officer had power to examine the record and if on such examination he discovers that he had made a mistake, he could rectify the error which may be an error of fact or of law, provided no additional material or reasoning is necessary to detect that mistake. In that case, the I.‑T.O. while making the original assessment overlooked the provisions of Finance Act of 1982 which were applicable to the facts of that case. Subsequently, he found out the mistake and rectified the order under section 35 and brought it in accordance with the provisions of the Finance Act. That rectification was sustained by the Supreme Court, on the ground that the non‑applicability of the provisions of the Finance Act was a mistake apparent from the record.

9. In T.S. Rajam v. Controller of Estate Duty (1968) 69 I T R 342, a Division Bench of this Court, dealing with power of rectification under section 62 of the Estate Duty Act, 1953, corresponding to section 154 of the Income‑tax Act, 1961, had opined as follows:‑ "'Mistake' is an ordinary word, but in taxation law, it has a special signification. It is not an arithmetical or clerical error alone that comes within its purview. It comprehends errors which, after a judicious probe, into the records from which it is supposed to emanate, are discerned. It is difficult to axiomatise and lay down ducats for the discovery of a mistake from official records. The word 'mistake' is inherently indefinite in scope as what may be a mistake to one may not be one for another. It is mostly subjective and the dividing line in border areas is thin and discernible. Indeed, it is imponderable due to its inherent indefiniteness. It is something which a duly and judiciously instructed mind can find out from the record. It may be that sometimes an argument, though not a complex study, may be required to find it out. But that by itself is not the test to discountenance it as being not a mistake apparent from record. In the ultimate analysis, the conclusion a well‑equipped and trained judicious mind will reach after scrutinising the record, will govern and his findings whether it is a mistake or not have to be accepted." The learned Judges further expressed that the jurisdiction of the officer to rectify a mistake depended on the mistake being apparent from the record, that the power to rectify is not confined only to the rectification of some clerical or arithmetical mistakes; but at the same time, it will not cover any mistake which has to .be discovered by a complicated process of investigation, argument or proof. The Bench observed after considering the relevant decisions of this Court as well as the Supreme Court, on that point, that for a rectification of an error which is said to be apparent from the face of the record, the mere complexity of the problem or that genuine argument is necessary to discover the same may not by themselves by sufficient to oust the jurisdiction of a Tribunal to rectify such a mistake and that if, it could be discerned with some precision after a fair probe into the assessment records and a reasonable and probable conclusion can be arrived at that the Court's conscience has been shaken, in that there appears an error on record which has to be certainly corrected, then it would appear that the jurisdiction of the Tribunal vested with power to rectify such mistakes arises and that the essence of rectification is to bring the order which has expressed and intended to be in pursuance of the existing law, into harmony with such law.

10. In C.W.T. v. Kamala Ganapathi Subramaniam, (1981) 127 I T R 175, this Court has dealt with the scope of section 35 of the Wealth‑tax Act, 1957 which corresponds to section 154 of the Income‑tax Act, 1961. In that case, this Court has pointed out the distinction between an apparent error and the construction and legal effect of a statutory provision that had to be kept in mind for deciding whether the mistake is apparent from the order or not and stated that the question whether in a given case, the jurisdiction was properly exercised will depend on the application of the proper provisions of the Act. In that case, the assessee claimed exemption under section 5 (1) (viii) of the Wealth‑tax Act, 1957 in respect of certain jewellery in her wealth‑tax assessment That was accepted by the authorities. However, in view of the Finance Act No.II of 1971, which came to be enacted later, the assessee, will not be entitled to the exemption, as the Act had been given retrospective effect. After coming into force of that Act, the concerned authority proposed to rectify the order to bring it in line with the provisions of the said Act. The assessee objected that there is no rectifiable error which could be corrected under section

35. That matter ultimately came up before this Court and this Court has after referring to the earlier decisions on the point held .that the mistake is a rectifiable one so as to call for the application of section

35. Having regard to the view expressed in, the decisions referred to above, we are of the view that the mistake in this case is a rectifiable one and the authority was justified in rectifying the mistake under section 154 of the Act.

11. In this view, the question referred to this Court is answered in the affirmative and against the assessee. There will be no order as to costs. M. B . A . Reference answered in the affirmative.