1963-VIL-35-MAD-DT

Equivalent Citation: [1964] 52 ITR 474

MADRAS HIGH COURT

Writ Petition No. 360 of 1962

Dated: 12.07.1963

COMMISSIONER OF INCOME-TAX, KERALA

Vs

J. SUNDARAM AND ANOTHER

For the Applicant: S. Ranganathan

For Respondent: S. Padmanabhan

Bench

Srinivasan And Venkatadri, JJ.

JUDGMENT

Venkatadri, J.

The only question that arises for determination in this writ petition under article 226 of the Constitution for the issue of a writ of certiorari is whether the Tribunal has got jurisdiction to revise or review its own order passed on December 22, 1960.

The facts are very simple and clear. The assessee is an exporter of coir mats and mattings at Alleppey. He returned a net income of Rs 1,827 for the period ended December 31, 1956, though his total receipts from business was to the tune of Rs 4.46 lakhs. The assessee was not maintaining regular books of account. On investigation and enquiry, the department found that several amounts were invested in the name of his wife in the Eastern Bank Ltd., Cochin. When the department called upon him to explain the source of the investment made in the name of his wife, the assessee was not able to explain it, but merely requested the department to treat the amount as undisclosed income spread over the assessed years. Thereupon, the department accepted the proposal subject to certain adjustments.

Subsequently, penalty proceedings were taken against the assessee under section 28(1)(c) of the Income-tax Act and penalties of Rs 1,000, Rs 1,000 and Rs 600 were imposed for the years 1953-54, 1954-55 and 1957-58, respectively.

The assessee preferred an appeal against the order to the Appellate Assistant Commissioner who confirmed the penalties. Against the order of the Appellate Assistant Commissioner the assessee appealed to the Income- tax Appellate Tribunal. The Tribunal pointed out that the assessee himself admitted the concealment of the income and observed:

"...We are satisfied that this is pre-eminently a case for the application of the penal provisions of section 28(1)(c). To hold that there is no mens rea in a case such as this would be to encourage every person who is asked to explain the source of his deposits in fictitious names to conveniently say 'I don't explain, do your worst', and at the same time escape penalty."

Finally, the Tribunal found that the departmental officers acted rightly in levying the penalties in question and that there were no mitigating circumstances calling for any reduction of the penalties.

The assessee pursued the matter further by filing a review petition before the same Tribunal requesting it to review its order on the ground that it did not consider the question of mens rea. The Tribunal repelled this contention but curiously passed an order in the following terms:

"...We are of opinion that the departmental officers acted rightly in holding that the penal provisions of section 28(1)(c) are attracted. There are, however, extenuating circumstances. The assessee has co-operated largely with the department and has offered, through his chartered accountant, to accept assessments by an apportionment of the cash credits over a few years. This attitude should not go unappreciated. The penalties as levied for the offences committed are, in our opinion, somewhat excessive. They are reduced to Rs 250, Rs 250 and Rs 100 for the three years under appeal."

Evidently this order was passed under section 35 of the Income-tax Act, which is as follows:

"35. (1) The Commissioner or the Appellate Assistant Commissioner may, at any time within four years from the date of any order passed by him in appeal...on his own motion rectify any mistake apparent from the record of the appeal, revision, assessment or refund as the case may be, and shall within the like period rectify any such mistake which has been brought to his notice by an assessee...

(2) The provisions of sub-section (1) apply also in like manner to the rectification of mistakes by the Appellate Tribunal."

The question that arises now for our consideration is whether the Tribunal has got jurisdiction to pass the impugned order under this provision. Reading the section as it is, it has a limited application. It enables rectification to be made of any mistake apparent from the record by the Appellate Tribunal either on its own motion or when such a mistake is brought to its notice by a party to the proceedings. But it must be a case of mistake and the mistake must be apparent from the record. A clerical or arithmetical mistake would amount to a mistake apparent from the record. But the question arises whether the income-tax authorities or the Tribunal under the guise of this section 35 can revise or review their own order. This question was answered in the negative by a Bench of this court consisting of Gentle C.J. and Yahya Ali J. in Commissioner of Income-tax v. Sevugan [1948] 16 I.T.R. 59. Gentle C.J. observed at page 66:

"Section 35 has limited application. It enables rectification to be made of any mistake, apparent from the record, either on his own motion by the Commissioner or the Appellate Assistant Commissioner or by the Appellate Tribunal on their own motion, or when such a mistake is brought to their notice by an assessee. Clearly that section does not enable an order to be reversed by revision or by review, but permits only some error, which is apparent on the face of the record, to be corrected."

This decision has been consistently followed in other High Courts. A Bench of the Bombay High Court consisting of Chagla C.J. and Tendolkar J. had to consider the scope of section 35 of the Indian Income-tax Act in Sidhramappa v. Commissioner of Income-tax [1952] 21 I.T.R. 333, 341, where the Tribunal held that a certain debt became bad on a particular date (September 29, 1941). The Commissioner of Income-tax made an application purporting to be one under section 35 inviting the attention of the Tribunal to the fact that the date mentioned by them did not fall within the accounting year. The Tribunal rectified the order. When the matter came up to the High Court the attention of the Bench was drawn to the judgment of the Madras High Court in Commissioner of Income-tax v. Sevugan [1948] 16 I.T.R. 59. While referring to that decision the Bench observed:

"In that case the Madras High Court was not considering at all what was the effect of the order under section 35. It is true that they did say that section 35 had a limited application and it does not enable an order to be reversed, revised or reviewed, but permits only such error which is on the face of the record to be corrected. With respect that position in law is undisputable."

Similarly, the Travancore-Cochin High Court in Parameswaran Pillai v. Additional Income-tax Officer [1955] 28 I.T.R. 885 observed at page 889:

"....the jurisdiction to correct by way of rectification under section 35 of the Indian Act is limited. It deals only with errors apparent on the face of the record which can be corrected at any stage. As observed by Gentle C.J. that section does not enable an order to be reversed by revision or by review, but permits only some error which is apparent on the record to be corrected."

In a similar case reported in N.V.N. Nagappa Chettiar v. Income-tax Officer, Pudukottai [1958] 34 I.T.R. 583, 585 Balakrishna Ayyar J. made the following observation:

"Before an Income-tax Officer can exercise his powers under section 35 of the Act to rectify a mistake that mistake must be apparent from the record of the assessment. This 'record of the assessment' is only that part of the record which leads to the determination and ascertainment of the tax payable and no more. Again, before it can properly be said that a mistake is apparent from the record it must be something very obvious and manifest. A mistake to establish which a very elaborate process of reasoning, and controversial reasoning at that, is called for cannot be said to be a mistake apparent from the record. An error in law or a wrong procedure adopted in the assessment proceedings would not be a mistake within the meaning of section 35...Mistakes to discover which complicated processes of investigation and argument are required are outside the scope of section 35 of the Act."

The High Court of Madhya Pradesh, while dealing with the scope of section 35 of the Income-tax Act in Commissioner of Income-tax v. Sheolal Ramlal [1958] 33 I.T.R. 47, observed thus at page 54:

"Rectification within the meaning of section 35 means the correction of an error which is apparent on the face of the record. That error must be demonstrable without the taking out of any additional evidence and without any detailed arguments pro and con."

After reviewing the case law on the subject, we are of opinion that in the instant case the Tribunal has committed an error in revising its own order under section 35 of the Income-tax Act. The Tribunal has no jurisdiction to pass such an order when there is no error apparent from the record. The Tribunal having found that the department was right in levying the penalties and that there were no mitigating circumstances calling for reduction of the penalties cannot say that, because the assessee co-operated with the department, the penalties should be reduced. We entirely agree with the learned counsel for the State that the order passed by the Tribunal is illegal, void and without jurisdiction.

This petition is accordingly allowed. There will be no order as to costs.

Petition allowed.