Translate
Text Highlighter

Bookmark

PDF

Share

Report a problem
AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Dr. B.P Saraf
  • S.M Jhunjhunuwala, JJ.
Acts
  • section 49D of the 1922 Act or section 91(1) of the 1961 Act. Question
  • section 49D of the 1922 Act and section 91(1) of the 1961 Act.
  • section 49D of the Indian Income-tax Act, 1922 (the 1922 Act),
  • section 49D of the 1922 Act and section 91(1) of 1961 Act
  • section 49D of the 1922 Act/section 91(1) of the 1961 Act
  • section 91(1) of the Income-tax Act, 1961 (the 1961 Act).
  • section 49D of the 1922 Act or 91(1) of the 1961 Act
  • section 49D of the Indian Income-tax Act, 1922,
  • section 256(1) of the Income-tax Act, 1961,
  • section 91(1) of the Income-tax Act, 1961.
  • section 91(1) of the 1961 Act.
  • INCOME TAX ACT
Are you a practicing lawyer?
Enhance your digital presence and reach by creating a Casemine profile.
Upload pleading to use the new AI search
Click here to upload
Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Dr. B.P Saraf
  • S.M Jhunjhunuwala, JJ.
Acts
  • section 49D of the 1922 Act or section 91(1) of the 1961 Act. Question
  • section 49D of the 1922 Act and section 91(1) of the 1961 Act.
  • section 49D of the Indian Income-tax Act, 1922 (the 1922 Act),
  • section 49D of the 1922 Act and section 91(1) of 1961 Act
  • section 49D of the 1922 Act/section 91(1) of the 1961 Act
  • section 91(1) of the Income-tax Act, 1961 (the 1961 Act).
  • section 49D of the 1922 Act or 91(1) of the 1961 Act
  • section 49D of the Indian Income-tax Act, 1922,
  • section 256(1) of the Income-tax Act, 1961,
  • section 91(1) of the Income-tax Act, 1961.
  • section 91(1) of the 1961 Act.
  • INCOME TAX ACT
See more information ...
Smart Summary

Summary of the Opinion (Dr. B.P. Saraf, J.)

Factual and Procedural Background

This reference arises under section 256(1) of the Income-tax Act, 1961, made at the instance of the assessee. The reference concerns assessment years 1961-62 to 1965-66. The assessee was a company engaged in civil engineering and contracting which received dividend income, largely from United Kingdom companies. In its returns for the stated years the assessee claimed relief under section 49D of the Indian Income-tax Act, 1922, or under section 91(1) of the Income-tax Act, 1961. The Income-tax Officer (ITO), while completing assessments, omitted to consider this claim. By a letter dated 4 January 1971 the assessee drew attention to the omission and submitted a computation of relief together with what it described as proof of payment of tax in the United Kingdom.

The ITO treated the application as one under section 154(1) and rejected the claim for rectification and for allowance of relief under section 49D/section 91(1) on two main grounds: (1) there was no evidence of payment of tax by the assessee in the foreign country, and (2) in the absence of any assessment in that country the rate of tax of that country could not be determined. The assessee appealed to the Appellate Assistant Commissioner, who accepted the assessee's contention (that tax was deducted by the dividend paying companies, supported by dividend warrants) and directed the ITO to grant relief after verification.

The Revenue appealed to the Income-tax Appellate Tribunal (the Tribunal). The Tribunal allowed the appeals of the Revenue, set aside the Appellate Assistant Commissioner's order and restored the ITO's orders. The assessee sought reference of questions of law to this Court; after initial refusal by the Tribunal this Court directed the Tribunal to state the case and refer the questions to it. The Tribunal's stated case resulted in the present reference under section 256(1)/(2) of the Act.

Legal Issues Presented

  1. Whether the Tribunal was right in admitting the additional ground of appeal filed by the junior authorised representative at the time of hearing challenging the jurisdiction of the order passed by the Income-tax Officer who was the appellant before the Tribunal?
  2. Whether the Tribunal erred in law in allowing the appeal of the Income-tax Officer on the preliminary ground urged in the additional ground taken by the Departmental representative at the time of hearing and in not deciding the appeal on the merits?
  3. Whether the Tribunal erred in law and misdirected itself in holding that there was no mistake apparent from the record within the meaning of section 154 insofar as the inadvertent omission by the Income-tax Officer to consider the assessee's claim for double taxation relief in the assessment order is concerned?
  4. Whether the Tribunal ought to have held that the order purported to have been passed by the Income-tax Officer under section 154(1) of the Act was in fact and substance an order under section 49D of the Indian Income-tax Act, 1922 / section 91(1) of the Income-tax Act, 1961?
  5. Whether, having regard to the fact that the Income-tax Officer considered the omission to be a bona fide mistake and purported to correct it by passing an appropriate order as permitted by law, the Tribunal erred in holding that the Income-tax Officer was not competent to pass such an order?

Arguments of the Parties

Assessee's Arguments

  • The assessee contended that tax had been deducted by the dividend-paying companies (including companies in the United Kingdom) and that this was reflected in the dividend warrants; photostat copies of these warrants had been produced before the Income-tax Officer and before the Appellate Assistant Commissioner.
  • The assessee sought rectification under section 154(1) after assessment and submitted computation of relief and proof of payment of tax in the United Kingdom (by letter dated 4 January 1971).
  • The assessee applied to the Tribunal for reference of questions of law after the Tribunal restored the ITO's orders, and ultimately the Court directed the Tribunal to state the case for reference.

Revenue's Arguments

  • The Revenue's appeal to the Tribunal challenged (a) the power of the Appellate Assistant Commissioner to grant relief under section 49D/section 91(1) in an appeal against an order under section 154, and (b) the fulfilment of the requirements of those sections.
  • The ITO's rejection of the rectification claim was based on the absence of evidence of payment of tax in the foreign country and absence of any foreign assessment to determine tax rates; consequently, the assessee was not entitled to relief.
  • Counsel for the parties informed the Court that the controversy on the Tribunal's power to admit additional grounds was settled by the Full Bench decision in Ahmedabad Electricity Co. Ltd. v. CIT.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Ahmedabad Electricity Co. Ltd. v. CIT, [1993] 199 ITR 351 (Full Bench) Settlement of controversy regarding the powers of the Tribunal to admit additional grounds of appeal (i.e., whether additional grounds can be admitted at hearing). The Court accepted the parties' statement that this decision settles the controversy and, relying on it, answered Question No. 1 in the affirmative and in favour of the Revenue and Question No. 2 in the negative and in favour of the Revenue.
T.S. Balaram, ITO v. Volkort Brothers, [1971] 82 ITR 50 (Supreme Court) Established that the power of rectification under section 154 is limited to mistakes apparent from the record: patent, self-evident mistakes visible on the face of the record and not requiring elaborate investigation; not available for debatable points or mistakes demonstrable only by materials outside the record. The Court applied these principles to conclude that rectification under section 154 could not be used to admit or act upon evidence not on record at the time of assessment; this supported answering Question No. 3 in the negative in favour of the Revenue.
Pankaj Kumar Dasgupta v. State of Tripura, [1990] 79 STC 409 (Gauhati) Interpretation of the term "record" — it includes the entire proceedings and documents/materials produced by parties and taken on record by authorities that were available at the time of passing the order sought to be rectified; authorities cannot go beyond that record to look into fresh evidence. The Court relied on this construction of "record" to hold that the ITO could not act upon documents produced only after the assessment, reinforcing the conclusion that rectification could not be used to consider fresh material and thus supporting the ITO's refusal to grant relief under section 154.

Court's Reasoning and Analysis

The Court addressed the referred questions in sequence, applying statutory interpretation and the binding precedents cited in the opinion.

1. Questions 1 and 2 (admission of additional grounds by the Tribunal): The parties informed the Court that the issue was settled by the Full Bench decision in Ahmedabad Electricity Co. Ltd. v. CIT. Relying on that statement/authority, the Court answered Question No. 1 in the affirmative and in favour of the Revenue, and Question No. 2 in the negative and in favour of the Revenue. The opinion does not elaborate further on the legal reasoning beyond accepting the parties' representation that the precedent settles the controversy.

2. Question 3 (scope of section 154 and whether the ITO's omission to consider the claim for double taxation relief was a mistake apparent from the record): The Court analysed the factual matrix — the requisite documents proving payment of tax in the foreign country were not before the ITO at the time of assessment; the requirements of section 49D/section 91(1) were therefore not satisfied when assessments were completed. Relief was claimed only later by the assessee (application dated 4 January 1971) with supporting documents.

The Court then examined the legal scope of section 154, relying on the Supreme Court's decision in T.S. Balaram v. Volkort Brothers: rectification power is very limited and confined to mistakes apparent from the record; it cannot be used to re-open issues requiring detailed investigation or to act upon materials outside the record. The Court further construed "record" (citing Pankaj Kumar Dasgupta) as comprising the proceedings and documents that were actually on record at the time the impugned order was passed. Authorities cannot look into fresh evidence not on record at that time.

Applying these principles to the facts, the Court concluded that the ITO was justified in rejecting the rectification claim because acting on documents produced after assessment would amount to reviewing the assessment on fresh material — something not permitted under section 154. The Court therefore held that the omission to allow relief did not amount to a mistake apparent from the record within the meaning of section 154.

3. Question 4 (whether the purported section 154 order was in substance an order under section 49D/section 91(1)): The Court observed that section 91(1) does not provide for an appeal because it deals with relief in computation of income or tax; the operative order giving or refusing relief is the assessment order under section 143(3). Thus, the order sought to be rectified was an assessment order under section 143(3), not an order under section 49D/section 91(1). The Court answered Question No. 4 accordingly.

4. Question 5 (competence of the ITO to pass the corrective order given that the ITO considered the omission a bona fide mistake): The Court recorded that Question No. 5 was not pressed and therefore did not answer it.

5. Costs: The Court, having considered the facts and circumstances, directed that there shall be no order as to costs.

Holding and Implications

Core Holding:

  • Question No. 1: Answered in the affirmative and in favour of the Revenue (the Tribunal's power to admit additional grounds is governed by the cited Full Bench precedent).
  • Question No. 2: Answered in the negative and in favour of the Revenue.
  • Question No. 3: Answered in the negative and in favour of the Revenue — the ITO correctly refused rectification under section 154 because the claim relied on documents not on record at the time of assessment and therefore the omission was not a "mistake apparent from the record".
  • Question No. 4: Answered to the effect that the operative order sought to be rectified was the assessment under section 143(3) and not an order under section 49D/section 91(1); no separate appeal provision exists for an order under section 91(1).
  • Question No. 5: Not pressed and not answered.

Disposition and Immediate Consequences:

  • The reference is disposed of. The Tribunal's refusal to make a statement was directed earlier by this Court; upon the stated case the Court has answered the referred questions as above.
  • The direct effect on the parties: the ITO's rejection of the assessee's rectification application under section 154 is sustained (answer to Question No. 3 in favour of the Revenue), and the Appellate Assistant Commissioner's direction to grant relief was set aside by the Tribunal and that outcome is supported by this Court's answers.
  • No broader new precedent beyond the application of the cited authorities is announced by this opinion; the Court applied established principles (notably T.S. Balaram and the construction of "record") to the facts of this case.
  • There shall be no order as to costs.

If any section above appears brief, that reflects the contents of the provided opinion and the Court's own treatment of those points (for example, Question No. 5 was not pressed and not answered).

Show full summary ...

    Gammon India Limited v. Commissioner Of Income-Tax.

    Dr. B.P Saraf, J.:— By this reference under section 256(1) of the Income-tax Act, 1961, made at the instance of the assessee, the Income-tax Appellate Tribunal has referred the following questions of law to this court for opinion;

    “1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in admitting the additional ground of appeal filed by the junior authorised representative at the time of hearing challenging the very jurisdiction of the order passed by the Income-tax Officer himself who was the appellant before the Tribunal?

    2. Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in allowing the appeal of the Income-tax Officer on the preliminary ground urged in the additional ground taken by the Departmental representative at the time of hearing and in not deciding the appeal on the merits?

    3. Whether the Tribunal erred in law and misdirected itself in holding that there was no mistake apparent from record within the meaning of section 154 in so far as the inadvertent omission on the part of the Income-tax Officer in not considering the claim of the assessee for double taxation relief in the assessment order passed by him is concerned?

    4. Whether, on the facts and in the circumstances of the case, the Tribunal ought to have held that the order purported to have been passed by the Income-tax Officer under section 154(1) of the Act was in fact and in substance an order under section 49D of the Indian Income-tax Act, 1922.section 91(1) of the Income-tax Act, 1961?

    5. Whether, on the facts and in the circumstances of the case and having regard to the fact that the Income-tax Officer himself considered the omission to deal with the claim of the assessee-company as a bona fide mistake on his part and having made good that omission by passing appropriate correct order as permitted by law, the Tribunal erred in holding that the Income-tax Officer was not competent to pass such an order?”

    2. This reference pertains to the assessment years 1961-62 to 1965-66. The assessee is a company engaged in the business of civil engineers and contractors. During these assessment years, the assessee-company had income, inter alia, from dividends from joint stock companies situated outside India, the bulk of such income was from companies registered in the United Kingdom. In its return for the assessment years 1961-62 to 1965-66, the assessee claimed relief under section 49D of the Indian Income-tax Act, 1922 (“the 1922 Act”), or under section 91(1) of the Income-tax Act, 1961 (“the 1961 Act”). While making assessments for the above assessment years, the Income-tax Officer omitted to consider this claim of the assessee. On receipt of the orders of assessment, by a letter dated January 4, 1971, the assessee pointed out this omission to the Income-tax Officer Along with this letter, a precise computation of relief due to it in terms of section 49D of the 1922 Act/section 91(1) of the 1961 Act along with proof of payment of tax in the United Kingdom was also submitted. The Income-tax Officer treated the above application as an application under section 154(1) of the Act, and considering the facts and circumstances of the case rejected the claim of the assessee for rectification and for allowance of relief under section 49D of the 1922 Act or under section 91(1) of the 1961 Act. The rejection was made mainly on two grounds. First, that there was no evidence of “payment of tax” by the assessee in the foreign country. And second, in the absence of any assessment being made on him, the rate of tax of the said country could not be determined. It was observed that the pre-requisite of any relief under the above sections being payment of tax in the foreign country, in the absence of proof of such payment in that country the assessee was not entitled to this relief. The assessee appealed to the Appellate Assistant Commissioner. It was contended by the assessee that tax was deducted by the dividend paying companies from the dividends payable to the assessee and this fact was reflected in the dividend warrants, photostat copies of which had been produced before the Income-tax Officer. The Appellate Assistant Commissioner accepted the above contention of the assessee and held that the assessee-company had complied with all the requisite conditions for grant of relief under section 49D of the 1922 Act and section 91(1) of the 1961 Act. He, therefore, directed the Income-tax Officer to grant necessary relief to the assessee after verification. Aggrieved by this order, the Revenue appealed to the Income-tax Appellate Tribunal (“the Tribunal”). One of the grounds of challenge related to the power of the Appellate Assistant Commissioner to grant relief to the assessee under section 49D of the 1922 Act and section 91(1) of 1961 Act in an appeal against the order under section 154 of the 1961 act. The second ground pertained to fulfilment of the requirements of section 49D of the 1922 Act and section 91(1) of the 1961 Act. The Tribunal allowed the appeals of the Revenue, set aside the order of the Appellate Assistant Commissioner and restored the orders of the Income-tax Officer. The assessee thereupon applied to the Tribunal for reference of the questions of law arising out of the above order to this court. On the refusal of the Tribunal to state the case, it applied to this court and this court having been not satisfied with the correctness of the above decision of the Tribunal refusing to make a statement and refer the questions of law arising out of its order to this court, directed the Tribunal to state the case and refer the same to it. Hence, this reference under section 256(2) of the Act in pursuance of the directions of this court.

    3. The controversy in the first two questions relates to the powers of the Tribunal to admit the additional grounds of appeal. It is stated by counsel for the parties that the above controversy is now settled by the Full Bench decision of this court in Ahmedabad Electricity Co. Ltd. v. CIT, [1993] 199 ITR 351. In view of this statement, we answer question No. 1 in the affirmative and in favour of the Revenue.

    4. Consequently, question No. 2 is also answered in the negative and in favour of the Revenue.

    5. The controversy in the other questions relates mainly to the powers of the Income-tax Officer under section 154 of the Act to allow relief under section 49D of the Indian Income-tax Act, 1922, or under section 91(1) of the Income-tax Act, 1961. There is no dispute about the fact that though there was no proof as such of payment of tax in the foreign country, the requisite information and copies of documents having a bearing on this question had been filed before the Income-tax Officer along with the returns. Evidently, no evidence of payment of tax in the United Kingdom was before the Income-tax Officer at the time of assessment. The requirements of section 49D of the 1922 Act or 91(1) of the 1961 Act were thus not satisfied at the material time when the assessments were completed by the Income-tax Officer. It is only at a later stage, much after the completion of the assessment for the above assessment years, that by an application dated January 4, 1971, the assessee furnished computation of relief claimed by it under the above provisions along with proof of payment of tax in the United Kingdom. Therefore, the question that arises for consideration is whether in such a case relief can be given to the assessee in exercise of the powers under section 154 of the Act once the same has not been allowed while computing the income-tax in the assessment for the relevant assessment years. In other words, the real question is whether the Income-tax Officer, in exercise of the powers under section 154 of the Act, can reconsider the allowability of claim of relief of deduction on the basis of any fresh document or material produced by the assessee or coming into his possession.

    6. In this case, it is, however, clear that even on the basis of the docu-ments produced before the Income-tax Officer, the assessee was not entitled to any relief as claimed by it because the conditions precedent for grant of relief under the relevant section were not satisfied. Be that as it may, we are concerned in this case mainly with the limits of the powers of the Income-tax Officer under section 154 of the Act in such a situation. The scope and ambit of power of rectification came to be considered and decided by the Supreme Court in T.S Balaram, ITO v. Volkort Brothers, [1971] 82 ITR 50. It was held in that case that the power of rectification of mistakes under section 154 of the Act is a very limited power which is restricted to rectification of mistakes apparent from the record. Besides, it must be a mistake which is patent on the face of the record and does not call for detailed investigation of the facts or require an elaborate argument to establish it. It does not cover any mistake which may be discovered by a complicated process of investigation, argument or proof. The mistake sought to be rectified must be manifest and self-evident on the face of the record. It must be one which is apparent and not lurking, which is visible and not dormant, which can be seen and not hidden. It cannot be demonstrated to exist by relying upon materials outside the record. A decision on a debatable point of law or failure to apply the law to a set of facts which remain to be investigated cannot be corrected by way of rectification. The legal position is thus now settled that a mistake which is not obvious, patent and self-evident and mistake on which conceivably there can be two opinions cannot be rectified by way of rectification of mistake under section 154 of the Act. In other words, in the garb of exercise of the power of rectification under section 154 of the Act, the income-tax authorities cannot revise or review their order generally or reconsider the conclusions arrived therein on the facts before them at that time on the basis of new facts brought on record by the party seeking rectification or coming into possession otherwise, because the jurisdiction under section 154 is confined to rectification of mistakes apparent from the record.

    7. The expression “record” has not been defined in the Act. It has, therefore, to be construed and understood in the context in which it appears. Section 154 empowers the income-tax authorities to rectify mistakes which are “apparent from the record”. “Record” in such a case would mean record of the case comprising the entire proceedings including documents and materials produced by the parties and taken on record by the authorities which were available at the time of passing of the order which is the subject-matter of proceedings for rectification. They cannot go beyond the records and look into fresh evidence or materials which were not on record at the time the order sought to be rectified was passed (see Sri, Pankaj Kumar Dasgupta v. State of Tripura, [1990] 79 STC 409 (Gauhati)).

    8. In the instant case, according to the assessee itself, the material facts, evidence and/or documents which form the bed rock of the claim of the assessee for relief under the relevant sections were not before the Income-tax Officer at the time of assessment and did not form part of the records of the case. Even the evidence of payment of tax in foreign countries was not before the Income-tax Officer at the time of assessment. In such a situation, the Income-tax Officer was justified in rejecting the claim of the assessee for double taxation relief under the relevant provisions. In fact, it is only after the completion of assessment by the Income-tax Officer that some documents, whatever might be their evidentiary value, were produced in support of the claim for relief from double taxation. The Income-tax Officer was justified in not acting upon such evidence or material which was produced subsequent to the passing of the order of assessment because that would amount to review of its orders of assessment on the basis of fresh material or evidence which did not form part of the record of the case. Situated thus, in our opinion, the Income-tax Officer rightly refused to do so in the purported exercise of the power of rectification under section 154 of the Act, which, as stated above, is a very limited power restricted to rectification of patent or glaring mistakes which are “apparent from the record” of the case. In that view of the matter, we answer the third question in the negative and in favour of the Revenue.

    9. So far as question No. 4 is concerned, we do not find that any controversy as such is involved in the said question. The Income-tax Act does not provide for an appeal against an order under section 91(1) of the Act because it merely deals with the relief to which the assessee is entitled in the computation of its income or tax payable by it. The order by which the relief is given or refused is the order of assessment under section 143(3) and, therefore, it is the order of assessment which was sought to be rectified under section 154 of the Act. In that view of the matter, the order of the Income-tax Officer sought to be rectified was an order of assessment under section 143(3) of the Act and not an order under section 49D of the 1922 Act or section 91(1) of the 1961 Act. Question No. 4 is therefore answered accordingly.

    10. Question No. 5 is not pressed and hence not answered. This reference is disposed of accordingly.

    11. Under the facts and circumstances of the case, there shall be no order as to costs.

    Use AI to get other relevant cases.
    Try AI Pro free for 7 days Upgrade to AI Pro

    Comments

    Gammon India Limited v. Commissioner Of Income-Tax.
    (Nov 24, 1994)