Brief of the case
In the case of KKJ Foundations vs. ADIT it was held by High court of Kerala that It is a settled proposition of law that rectification is a process by which a mistake is set at right. It thus means correcting an error which was apparent from record and not deciding the matter over and again on merits and that the rectified order does not supersede the original order but continues with the incorporated changes. Further, that the question raised for invoking Sec.154 of the Act was a question ought to have been raised in a regular appeal and the same has nothing to do with rectification of any mistake apparent from the record. The finding entered by the Assessing Authority was based clearly on facts which was susceptible to an appeal. Therefore, appeal filed by assessee is dismissed.
Facts of the case
1. The assessee is a Trust registered under Sec.12AA of the Income Tax Act, 1961 (hereinafter called “the Act”). Assessee filed its return of income for the assessment year 2006-07 on 31.10.2008, declaring nil return. Notice under Sec.143(2) was issued and since there was no response, notice under Sec.142 (1) of the Act was issued.
2. The Assessing Authority, after taking into account the facts and circumstances, found that the assessee Trust has no corroborative evidence to prove that the donation received by it was a capital donation and therefore the entire receipt of the Trust during the assessment year in question was treated as its income and the claim of the appellant for exemption under Sec.11 of the Act was rejected and thereupon the assessment was completed accordingly.
3. Aggrieved by the order, appellant had chosen to file an application for rectification under Sec.154 of the Act, seeking to rectify the order of assessment, contending that out of the gross income of Rs.2,66,50,000/- an amount of Rs.84,00,000/- was received during the previous year ending 31.03.2005 from Mr. K.K. Joseph as loan and Rs.1,62,50,000/- was also received as loan from K.K. Joseph during the current year. Further, it was contended that vide book entry dated 31.03.2006, Rs.1,01,00,000/-was shown as corpus donation, and that the appellant vide his letter dated 07.01.2009 had raised objection against the treatment of the same as the income of the Trust by the Assessing Officer
4. Aggrieved by the order of AO, assessee preferred an appeal before CIT(A), who has allowed the appeal partly and held that the treatment of Rs.1,00,00,000/- as corpus donation in the hands of the assessee, since the trustee has given letter of consent that the amount of loan earlier given should be treated as corpus donation, this amount that was converted from loan account to corpus donations even though by way of book entry would fall in the category of voluntary contributions as envisaged under Sec.11(1)(d) of the Income Tax Act and and hence should not be included in the total income or receipts of the assessee. Since the source of introduction of initial loan that was converted into corpus donation was also treated as explained, the addition made by the Assessing Officer by treating this receipt as income for the purpose of gross receipts was held not correct and thereby the Assessing Officer was directed to exclude the corpus donation from the total income.
5. Aggrieved by the said order, Revenue preferred appeal before the Appellate Tribunal. The Tribunal, without going into the merits of the case, entered into a finding that in case the assessee was aggrieved against the decision of the Assessing Officer, the remedy de facto did not lie before the Assessing Officer. Holding so, it was found that there was no mistake apparent from record in the order of the Assessing Officer so as to seek the rectification under Sec.154 of the Act and therefore the appeal filed by the Revenue was allowed.
Aggrieved against the said decision, the Assessee preferred an appeal before High Court
Issue under Consideration
Whether order passed by in allowing appeal of Revenue and directing that there was no mistake apparent from the record in the order of the Assessing Officer so as to seek rectification under Sec.154 of the Income Tax Act is justifiable in?
High Court decision / observations
1. It is true that the Assessing Authority as well as the Appellate Authority have considered the subject matter on merits. According to us, in a matter like this, the course open to the authorities concerned were to consider first whether such an application was maintainable in law or not. That error committed by the authorities was considered by the Tribunal and the Tribunal found that there was no mistake apparent from the record so as to invoke Sec.154 of the Act
2. Learned counsel for assessee relied on the decision in case of ‘Asian Techs Ltd. v. C.I.T., Cochin’ [2000 KHC 846] and contended that the mistake apparent from record is not a clerical or arithmetical error alone that comes within its purview but it also comprehends errors which, after judicious probe into the record from which it is supposed to emanate are discerned.
3. But, after considering the factual circumstances in the said case, this Court found that the mistake to be rectified must be one apparent from the record and a decision rendered on a debatable point of law is not a mistake apparent from the record. Further, it was held that the word “apparent” must be something which appears to be so ex facie and it is incapable of argument or debate and therefore it follows that a decision on a debatable point of law or fact or failure to apply the law to a set of facts which remains to be investigated cannot be corrected by way of rectification. Therefore, accordingly to us, this judgement will not help the assessee.
4. In our view, the power conferred under Sec.154 is something akin to the power of review conferred on a Civil Court under Sec.114 of the Code of Civil Procedure. By invoking the power of rectification, the ultimate conclusion of a decision cannot be changed. So also, the employment of the words phraseologies in Sec.154 shows that by rectification it intended only to correct any mistake and amend the same accordingly. It is a settled proposition of law that rectification is a process by which a mistake is set at right. It thus means correcting an error which was apparent from record and not deciding the matter over and again on merits and that the rectified order does not supersede the original order but continues with the incorporated changes .
5. Hon’ble Apex Court in ‘S. Nagaraj v. State of Karnataka’ [(1993) Supp. 4 SCC 595] and ‘Ammonia Supplies Corporation Pvt. Ltd. v. Modern Plastic Containers Pvt. Ltd.’ [AIR 1998 SC 3153], by which it was held in the former judgment that rectification of an order stems from fundamental principle that justice is above all. It is exercised to remove the error and not for disturbing finality. In the latter judgment, it was held that rectification connotes something what ought to have been done but by error is not done and what ought not to have been done was done requiring rectification. Therefore, it is apposite and clear that the power under Sec.154 can be invoked only to correct an error and not to disturb a concluded finding.
6. Therefore, on a perusal of the facts, the orders rendered by the statutory authorities and the Tribunal and appreciating the pleadings put forth, we are of the considered opinion that the question raised for invoking Sec.154 of the Act was a question ought to have been raised in a regular appeal and the same has nothing to do with rectification of any mistake apparent from the record. The findings entered by the Assessing Authority was based clearly on facts which was susceptible to an appeal.
Hence, appeal filed by assessee is dismissed.