10. From the various judgments of the Supreme Court above referred to and other High Courts, it is clear that the Tribunal’s power under Section 254(2) is not to review its earlier order but only to amend it with a view to rectify any mistake apparent from the record.
What can be termed as “mistake apparent?”. “Mistake” in general means to take or understand wrongly or inaccurately; to make an error in interpreting; it is an error; a fault, a misunderstanding, a misconception. Mistake in taxation laws has a special significance. It is mostly subjective and the dividing line is thin and indiscernible. “Apparent” means visible, capable of being seen, easily seen, obvious plain, open to view, evident, appears, appearing as real and true, conspicuous, manifest, seeming. The plain meaning of the word “apparent” is that it must be something which appears to be ex-facie and incapable of argument and debate. If such a “mistake apparent on the face of record” is brought to the notice, Section 254(2) empowers the Tribunal to amend the order passed under Section 254(1). Amendment of an order does not mean obliteration of the order originally passed and its substitution by a new order. What is mistake apparent on the face of the record or where does a mistake cease to be mere mistake, and become mistake apparent on the face of the record is rather difficult to define precisely, scientifically and with certainty. An element of indefiniteness inherent in its very nature and it must be discernible from the facts of each case by judiciously trained mind. Mere existence of a mistake or error would not per se render the order amenable for rectification, but such a mistake must be one which must be manifest on the face of the record.
11. Having in mind the enunciation of the legal principle about the scope and amplitude of Section 254(2) of the Act, let us consider the facts of the present case. The rectification petition has been filed as if the original order of the Tribunal contains certain mistakes of fact. The first one is regarding the loss in potato business. It is the case of the Department that the Tribunal in paragraph No.26 of the order has stated that the borrowals of Express Newspapers from Traders and Services and the borrowals of Traders & Services from various creditors had not been questioned by the Department. This assumption of the Tribunal was not correct in view of the various correspondence; that the Tribunal relied on the interim decree passed in the Civil suit filed by the petitioner in Calcutta High Court for damages from the cold storages and further relied on the admission made before the trial Magistrate by the Director of the Cold Storage in a case filed by the Department against the petitioner, that it had cheated Express. The Tribunal before relying upon them did not give an opportunity to the Department to examine the evidence produced first time before the Tribunal, which factum was much disputed by the petitioner by contending that the Tribunal made available to the Department the paper books containing those materials for its perusal and use and that no objection was raised by the Department before the Tribunal.
12. The other mistake of fact pointed out by the Department in the rectification application is in respect of transaction in share dealings. According to the Department, the Tribunal proceeded on the assumption that the Department had not questioned the genuineness of the transaction of the petitioner with bankers and other share brokers. The assumption is not correct because the assessing officer has given a finding in his assessment order that the payments and receipts are interspersed in such a way that it is only Rs.20 to Rs.30 lakhs which is being rotated though the total purchases are of the order of Rs.1.81 Crores. It is the further submission of the Department that the other reasons given by the Tribunal that the Bankers have acted as custodian or agent of the petitioner was also not correct in view of the letter dated 8.1.1985 of the Manager of the Lal Bazaar Branch of the Bank. The statement of the Manager of Catholic Syrian Bank is that the Bankers had accommodated Express in their transactions and also the statements of the share brokers admitting the transaction to be bogus; and that the Settlement Commission in the case of Nariman Point Building Services Trading Private Limited, (a concern belonging to the Express group) has also given a clear finding that these transactions of Express group with the share brokers in Calcutta were not genuine.
13. The other mistake of fact pointed out for rectification is the transaction in scrap dealings. It is the case of the Department that the Tribunal held that except the cash book and ledger, all other documents were produced and were available with the assessing officer when he made the assessment and the Department did not find any discrepancy in the documents impounded later on. According to the Department, this finding is also incorrect in view of the fact that the Tribunal failed to notice that none of the alleged long term contracts on the basis of which the petitioners were stated to be bound to sell scraps were produced; that the alleged suppliers of the scrap were not also able to produce any documents such as godown receipts, evidence of having kept the stock in the godown, transportation charges, etc.; and that the Tribunal ignored the penalty order for 1985-86 gives the details of the various discrepancies that were noticed by the Department in order to conclusively establish that the transaction was bogus.
Loss in potato business:
14. The first issue is loss of potato business. The assessee claimed Rs.74,65,519/ – as loss in the business, which has been rejected both by the assessing officer as well as the Commissioner of Income-tax (Appeals). The Tribunal has considered the issue in its order from paragraph No.2 onwards. The facts leading upto the filing of appeal before the Tribunal, the reasoning of the assessing officer to reject the claim, the grounds taken by the petitioner before Commissioner (Appeals), the reasoning of the Appellate order in confirming the order of assessment; the evidence and the relevant material contained in the Paper Book VII and the evidence of one Gopal Agarwal at page No.1846 of the Paper Book No.VII have been referred in paragraph Nos.3 to 19 of the Tribunal’s order.
15. In paragraph No.20 of the Tribunal’s order, the petitioner’s contention has been summarised. The contention so summarised was to the effect that the lower authorities have not proved that the purchases and sales and the related money transaction taken separately were bogus, that the lower authorities have not proved first that the funds deployed by the petitioner to make purchases came back to the petitioner as expeditiously as possible; that the lower authorities have not proved that it was the petitioner’s funds that came back to it in the guise of not sale proceeds; that the main source of income of the petitioner is income from three properties at Madras, Bombay and Delhi and thus the petitioner is getting fixed income; that the Department has alleged that the petitioner had generated bogus loss to reduce property income; that this allegation is totally unfounded; that normally the practice of buying losses is resorted to only in the fag end of the accounting year or when there is a sudden spurt in the profits or when there is a wind fall and that is not the case here; that the contracts for the purchases were entered into as early as in October 1984 and the payment for the purchases started in November 1984; that the payments have all been made by account payee cheques and thus the transactions are contemporaneous; and that the cold storages were closed as per statutory provision during the relevant period has not been proved by the Department.
16. The contention of the Department has been extracted in paragraph No.21 of the order which reads that the assessee has failed to discharge the primary onus in regard to purchase and sale of potatoes and the loss arising in its transaction has not been fully established; that the purchase and sales have taken place when the cold storages ought to be closed under the relevant legislation and that the assessee’s own money was circulated twice once at the time of purchase of potatoes and again at the time of sales of potatoes; and that the Department has established beyond doubt that the assessee’s money has come back to it.
17. The explanation offered on behalf of the petitioner has been extracted in paragraph No.22 of the order of the Tribunal and the submission made on behalf of the Department in rejoinder has been stated in paragraph No.24. Ultimately after analysing all the submissions, counter submissions with reference to material and evidences available on record, the rival submissions are analysed in paragraph Nos.25 and 26 as follows:
“25. We have gone through all the relevant facts and arguments of the rival parties. In regard to the loss suffered by the assessee on Potatoes business, it is an accepted fact that for doing potato business the assessee engaged Shri Gopal Agarwal for sale and purchase of the potatoes. Gopal Agarwal was interrogated on oath by the Department and Shri Gopal Agarwal had accepted this fact. Shri Gopal Agarwal has received commission as well as storage charges which is not also disputed by the Department. The fact that Gopal Agarwal approached the Settlement Commission and filed a petition is also established and the withdrawal of petition on doubtful and debatable submissions is also a fact on record. The assessee sued Shri Gopal Agarwal in the Court of Law and obtained a decree for Rs.80 lacs is also beyond doubt. In the prosecution proceedings, Shri Gopal Agarwal submitted before the Magistrate that he or his institutions have tried to cheat the assessee is also borne out from records. Allsales and purchase works have been done by Gopal Agarwal. Agreements with purchasers and sellers of Potatoes have also been made by Gopal Agarwal. It is only Shri Gopal Agarwal who can identify the respective traders to whom the amount was paid through bearer or Account Payee cheques. The Department has not questioned Gopal Agarwal or examined the various purchasers and sellers of Potatoes in the presence of Gopal Agarwal and, therefore, the parties examined by the Departmental Officer are not free from doubt. The signatures of the sellers and purchasers could be tallied with the signatures available on agreements and only then the fact whether the cheques were issued to the same parties or not could be established.
26. In regard to the objection of employment of funds and circulatory in nature it is observed that in the type of business and the peculiar circumstances, this cannot be totally refuted. Besides this, the loan obtained by the assessee has not been doubted at any stage by the Department. The loan amount has come through Account Payee Cheques and/or through Bank Drafts. The Department has failed to establish non-genuineness of any credits obtained by the assessee whether it is from IE Newspaper (Madurai) Pvt.Ltd., – Rs.46,50,000/ -; Nariman Point B.S. and T.P.Ltd., Rs.31,61,000/ – on Traders and Services Rs.72,89,000/ -. No where in the Assessment Order, it has been mentioned or proved that the loans obtained by the assessee is not genuine or not proved, genuine, nor it is apparent from the Assessment Order that the Assessing Officer of these parties were informed for conducting necessary enquiries on this account. Nor the Assessing Officer has enquired about the source of these funds. Similarly in the case of K.K.Sukhani or his proprietary concern this basis issue was raised by the Assessing Officer. It is also observed that the assessee had produced the relevant documents which were impounded by the Department as and when produced and that these documents at no stage were objected to by the Department or proved to be wrong. Under the circumstances, we fail to understand as to how the Department can say that the loan obtained was from Hawala conductors. If the loan is proved to be not genuine, the conclusions drawn by the assessing officer on this account are baseless.”
18. After analysing as above, ultimately the Tribunal in paragraph No.27 has recorded its findings as follows:
“After examining the full facts, we are of the opinion that the objections raised by the learned Standing counsel for the Department have been clearly met by the Learned counsel for the assessee. We are therefore, of the opinion that the disallowance of the loss suffered by the assessee on account of business transactions on Potatoes is not proper. This loan is held as suffered in the nominal course of business activities and, therefore, to be allowed. Loss in Shares & Securities:
19. In Paragraph No.28 of its order, the Tribunal discussed the assessment order on the issue of “loss in shares and securities”; that the petitioner’s statement of facts before the Commissioner of Income-tax (Appeals) and his discussion on this issue is referred to therein. The contention of the assessee relating to both the purchases and sales of the shares has been discussed thereafter in paragraph Nos.29 to 33 of the order. The argument on behalf of the Department was summarised in paragraph No.34 and the rebuttal argument of the assessee has been stated in paragraph No.35. The analysis of the arguments with reference to material on record is available at paragraph No.36, in which it was held that the fact that all the purchases and sales of shares were got done through bank channels are not doubted; that the assessee has paid custodian charges too to the Bank who has acted as an agent of the assessee; that the Bank in turn has taken necessary permission from its Head Office for acting as an agent of the assessee; that the source of the amount used for purchase of shares have not been doubted by the Assessing Officer; that this, in turn, brings out the fact that the Department has accepted the genuineness of the loans raised by the assessee for the purchase of the shares; that the arguments or objections raised by the learned Sr.Standing Counsel for the Department have been clearly met by the learned counsel for the assessee; that the non-making of entries (in the Souda Bahi) in the books of the brokers would not make much difference so far as the transaction conducted by the assessee in regard to purchase and sale of the shares; that the Assessing Officer has extensively examined the representatives of the brokers, copies of which were supplied by the assessee; that none of these have denied the transactions conducted by the assessee and, therefore, the genuineness of these purchases and sales cannot be doubted. After so analysing the facts, the Tribunal has recorded a finding in paragraph No.37 to the following effect:
“37. In view of the above discussions, we are of the opinion that the assessee genuinely suffered the loss in the trading activities of purchase and sale of shares which cannot be disallowed nor these transactions can be held as speculative in nature. The conclusions drawn by the CIT (Appeals) on this account are considered as unreasonable and unjustified. Hence, this ground of appeal is decided in favour of the assessee.”
Loss in scrap dealings:
20. The next issue is “loss of scrap dealings. The Tribunal in paragraph Nos.38 and 39 of its order referred to the reasoning given by the assessing officer in the assessment order and that of the Commissioner of Income-tax (Appeals). The facts of the case has been discussed in paragraph No.39. The contentions advanced on behalf of the assessee before the Tribunal has been stated in extenso in paragraph Nos.40 to 44. The submission made on behalf of the Department has been extracted in paragraph No.45. In paragraph No.46, the issue has been discussed by the Tribunal. The discussion proceeded that the assessing officer has disallowed the loss suffered by the assessee on transactions of scrap mainly on the ground of non-production of books of accounts; that except the cash book and the ledger book all other relevant documents were produced and available with the assessing officer; that from the documents placed on record, it was observed that the assessing officer has examined the various scrap dealers on oath; that their statements duly recorded are available in Vol-V from page Nos.1089 to 1134 of the Paper Book; that all the traders examined by the assessing officer or his authorised representative have confirmed the transactions conducted with the assessee; that the remaining books of accounts were produced before the officer (Inspection) , Calcutta on 6.2.1989; that these remaining books of accounts were impounded by the ADI (Investigation) , Calcutta; the list of which is available at page 1058 and 1089 of the Paper Book Volume IV; that though the assessments had already been completed before the date of impounding of the books of accounts, yet if no discrepancy was observed as detected, the same could have been brought on record at the time of proceedings before the Settlement Commission; and that since none of such defects or discrepancies were observed or reported, it is proved that whatever stated by the assessee at earlier stages are supported by the documents seized by the Department on earlier occasions as reasonable and genuine.
21. After so discussing the issue, the Tribunal had recorded a finding in paragraph No.47 as follows:
“It is also observed that since all the Traders have confirmed the dealings with the assessee. The Department has not considered it reasonable even to intimate the transactions to the respective Assessing Officers. Since the matter, in question, is quite old and almost 12 years have already gone, no useful purpose would be served if the matter, in question, can be referred back. Since the material available on record and all the supporting documents clearly establish the fact of scrap dealings and all transactions are through Account Payee cheques, it can be genuinely believed that the assessee has suffered loss which should be allowed as part of normal business activities. We are, therefore, of the opinion that the CIT (Appeals) is not justified in not allowing the loss suffered by the assessee on this account.”
22. From the above extractions and narration, it is clear that in respect of all the three points, the Tribunal has considered and discussed all the contentions raised and argued by both the parties and ultimately recorded a finding. A clear adjudication has been made. A mere isolated or stray sentence “Nowhere in the assessment order it has been mentioned or proved that the loan obtained by the assessee is not genuine or not proved genuine; the Assessing Officer not doubted the transaction; that the books of accounts were available with the Assessing Officer” have been projected as a mistake apparent on the face of the record. It is pertinent to state that the Tribunal has not come to the conclusion that the petitioner is entitled to these claims solely resting upon the above observations which is regarded as mistake of fact by the Department. The Tribunal has given its own reasoning in the earlier and subsequent sentences of the above observations, to come to the conclusion. The issues have been elaborately discussed and decided on merits. The order of the Tribunal may be an erroneous order with which we are not expressing any opinion, which can only be rectified or modified or set aside in the procedure known to law, but not in a petition under section 254(2). A patent mistake and a self evident error, which strikes one on mere looking at it, which does not require elaborated discussion or argument to establish can only be rectified under Section 254(2). The order passed in the rectification petition in our view is one passed in disguise of appeal. Even in the question of law framed and sought to be referred for the determination of this Court in the reference petition filed under Section 256(1) of the Act by the Department, the so called alleged mistake apparent on the record which is taken as a point for filing a miscellaneous petition under Section 254(2) has not been stated. One opinion given on consideration of materials by the Tribunal is reversed by giving other opinion in the rectification order, which is impermissible and against the legislative intent.
23. Learned Senior Standing Counsel appearing for the revenue relied on a judgments of the Allahabad High Court in the case of COMMISSIONER OF INCOME-TAX VS. U.P.SHOE INDUSTRIES reported in (1999) 235 ITR 663; Rajasthan High Court in the case of CHAMPA LAL CHOPRA VS. STATE OF RAJASTHAN reported in (2002) 257 ITR 74 and COMMISSIONER OF INCOME-TAX VS. S.S.GUPTA reported in (2002) 257 ITR 440 and the Supreme Court in the case of HONDA SIEL POWER PRODUCTS LTD. VS. COMMISSIONER OF INCOME-TAX reported in (2007) 295 ITR 466.
24. In the case of COMMISSIONER OF INCOME-TAX VS. U.P.SHOE INDUSTRIES reported in (1999) 235 ITR 663, the facts are that in an appeal before the Income-tax Appellate Tribunal the assessee had raised a ground regarding the disallowance of development rebate and relief under section 80J of the Income-tax Act, 1961. The Tribunal while deciding the said appeal pertaining to the assessment year 1973-74 decided the said ground has become redundant, as the relief was granted by the assessing officer in an application under Section 154. Subsequently, it transpired that the application under section 154 of the Act moved by the assessee was rejected. Pointing out this mistake, an application was filed by the assessee under Section 254(2). The Tribunal recalled its earlier order in respect of that issue and restored the matter to decide that issue. When that order was questioned, the Division Bench of the Allahabad High Court has held that the order of the Tribunal that the issue becomes redundant because of the Income-tax officer had already passed an order under Section 154 of the Act giving relief to the assessee was a mistake apparent from the records.
25. In the case of CHAMPA LAL CHOPRA VS. STATE OF RAJASTHAN reported in (2002) 257 ITR 74, a survey was conducted at the premises of the assessee the karta of a Hindu undivided family, under section 133A, on August 18, 1979. The Income-tax Officer after investigation assessed the income of the assessee and made an addition of Rs.80,000 in the income for the assessment year 1978-79. The appeal against the order of assessment was dismissed by the Appellate Assistant Commissioner. On further appeal, the Tribunal dismissed the same by order dated July 26, 1984. The assessee filed an application under section 254(2) of the Income-tax Act, 1961, for rectification of the mistake. It was, inter alia, pointed out in the rectification application that the assessee was assessed as a Hindu undivided family an entirely different entity distinct from the assessee in his individual capacity, that the Hindu undivided family, was not the owner of the diaries and other papers even at the time of search and, therefore, the additions which were made on account of alleged entries recorded in the said papers in the income of the Hindu undivided family, were erroneous. Many other obvious mistakes were also detailed in the application. The Tribunal agreed with the assessee and admitted that there were certain mistakes of fact. The Tribunal was of the view that as the judgment had proceeded on a wrong assumption of facts, it was expedient in the interest of justice to recall the order and post the appeal for rehearing. A writ petition filed by the Department was allowed by a single judge. On appeal , the Division Bench allowing the appeal, held that the Tribunal granted rectification and posted the case for rehearing, having admitted that its order had proceeded on the assumption of wrong facts. Hence the exercise of jurisdiction of the Tribunal under Section 254(2) was in order to correct a mistake apparent in the record.
26. In the case of COMMISSIONER OF INCOME-TAX VS. S.S.GUPTA reported in (2002) 257 ITR 440, the assessee, an individual was a partner of seven firms. The Tribunal held that the seven firms in which the assessee was a partner were benami for the assessee and the assessee was the real owner of such firms. On this finding the income of all the seven firms for the assessment years 1983-84 to 1987-88 was clubbed with the income of the assessee as an individual. The appellate order of the Tribunal was passed on February 23, 1999. In recording the aforesaid findings, the Tribunal had primarily relied on a letter dated January 11, 1999, received from the Assessing Officer, by which it was informed that in the assessments relating to the firms, the firms were held to be not genuine but benami of the assessee. A miscellaneous application was moved by the assessee bringing to the notice of the Tribunal that the hearing of the appeals was completed on January 7, 1999, and the letter dated January 11, 1999, which was after the appeals were heard, was never disclosed to the petitioner. Thereupon the Tribunal recalled its order on the point of clubbing and directed the appeals to be placed for hearing in due course. On further appeal to the High Court, dismissing the appeal, held that a finding of fact against the assessee had been reached on the basis of material which was conveyed to the Tribunal after the hearing was over, and thus the Tribunal inadvertently took into consideration such information which was never disclosed to the assessee and without affording any opportunity to him to explain the information transmitted to the Tribunal which vitiated the order founded on such information. This was a mistake obvious from the record.
27. In the case of HONDA SIEL POWER PRODUCTS LTD. VS. COMMISSIONER OF INCOME-TAX reported in (2007) 295 ITR 466, the assessee had taken a term loan in foreign exchange for the import of machinery. On account of fluctuation in the foreign exchange rate, the liability of the assessee to repay the loan in terms of Indian rupees went up. The assessee enhanced the figure of written down value of the block of assets and claimed depreciation accordingly. The Assessing Officer held that revision in actual cost was not permissible but on appeal the Commissioner (Appeals) held that the claim was admissible. On appeal, the Appellate Tribunal held that the revision was not permissible unless actual payment had been made by the assessee, since under section 43A actual payment was a condition precedent for availing of the benefit. The assessee moved the Appellate Tribunal for rectification of its order, pointing out that the earlier order of a co-ordinate Bench of the Tribunal in which it was held that the enhanced depreciation was admissible even on notional increase on the cost of the asset had been cited before the Tribunal, but the Tribunal had inadvertently not considered the submission of the assessee to that effect. The Appellate Tribunal allowed the rectification application of the assessee stating that the judgment of the co-ordinate Bench of the Tribunal had escaped its attention. The Department preferred an appeal to the High Court and the High Court set aside the order of the Tribunal holding that the power to rectify any mistake was not equivalent to a power to review or recall the order sought to be rectified. On appeal to the Supreme Court, reversing the decision of the High Court, held that in allowing the rectification application the Tribunal gave a finding that the earlier decision of a co-ordinate Bench was cited before it but through oversight it had missed the judgment while dismissing the appeal filed by the assessee on the question of admissibility/ allowability of the claim of the assessee for enhanced depreciation under section 43A. It is a mistake which could be rectified under Section 254(2).
28. None of the reasons stated in the above said four cases, which are mistake apparent on the face of the record is available in the facts of the present case. It is settled law that one different or additional factor or variance in fact in the case would make ocean of difference from the precedent cited. Therefore the said judgements do not advance the case of the Department.
29. For the fore-going reasons, we are of the view that the Tribunal fell in error in invoking the jurisdiction of Section 254(2) of the Act to re-write the judgment while reviewing the issue already decided, which bears no apparent mistake on the face of the record so as to invoke the jurisdiction. Hence, the writ petition is allowed and the rule is made absolute. However, there is no order as to costs.