Anand Prakash, A.M:— This appeal is directed against the order under s. 154 passed by the ITO and confirmed by the learned CIT(A). The relevant facts may be noted.
2. The assessee is an HUF. Its accounting period for asst. yr. 1977–78 ended on Diwali, 1976. On 25th and 27th January, 1977, a search was carried out at the residential and business premises of the assessee in the course of which Rs. 75,000 were, inter alia, seized from the assessee's residential premises.
3. The HUF was assessed on a total income of Rs. 1,89,400 vide assessment order dt. 14th July, 1982 for the asst. yr. 1977-78. In this order, as appears from the body of the assessment order, the ITO had not directed the charging of interest under s. 139(8) or s. 217.
4. Against the order of assessment passed as above, the assessee preferred appeal to the CIT(A) who, vide his order dt. 31st March, 1983, gave some relief to the assessee. Soon after the aforesaid order had been received by the assessee, he wrote a letter to the ITO on 18th April, 1983, stating, inter alia, as below:—
“In connection with the above case, it is submitted that the amount of Rs. 75,000 was seized on 15th January, 1977 from my residence. Because the above, seized cash and other items had been considered in the asst. yr. 1977–78, it is requested the above amount of Rs. 75,000 should be treated as advance tax in the same asst. yr. 1977–78.”
5. The ITO appears to have given effect to the order of the CIT(A). A copy of the said order has not been placed on record by the assessee, but a tax computation sheet has been placed before us at page 24 of the assessee's paper book, wherefrom it appears that, after relief given by the CIT (A), the total income determined was Rs. 1,83,045 which, after deduction of agricultural income and relief under s. 80C,…came to Rs. 1,77,420. Tax on the above income was worked out at Rs. 1,00,509. From the above figure, the ITO, according to the assessee's version, reduced Rs. 92,000 as advance tax, containing two items, one of Rs. 17,000 and another of Rs. 75,000. After reducing the above advance tax from the tax payable, the net tax payable came to Rs. 8,509. To this amount, the ITO added three more sums of interest as below:—
1. Interest under s. 139(8) @ 12 % for 25 months 30th June, 1977 to 23rd August, 1979
2,127
2. Interest under s. 217(1)(a) @ 12% for 63 months 1st April, 1977 to 30th June, 1982
5,355
3. Interest under s. 220.
1,750
The aggregate of the tax and the interests as worked out above came to Rs. 17,741 which was paid by the assessee as per the said statement on 7th July, 1983 and 21st July, 1983 as below:—
10th August, 1982
100
7th July, 1983
4,054
21st July, 1983
13,587
17,741
A copy of the challan, evidencing payment of Rs. 13,587 has been placed on record at page No. 25.
5A. Against this order of the ITO, the assessee did not go in appeal even though interest under ss. 139(8) and 217 were charged by the ITO as per assessee's version for the first time through, this computation sheet prepared in pursuance of the order of the ITO giving effect to the order of the CIT(A). The said order was, thus, allowed to become final, and was, in fact, complied with without demur.
6. On 11th Nov., 1983, the ITO issued a notice under s. 154 to the assessee family indicating therein that a mistake apparent from record had crept in the order of the ITO-giving effect to the order of the CIT(A) as. above.
7. The assessee replied to the aforesaid show cause notice on 26th Nov., 1983 stating, inter alia, that “there is no mistake in the calculation of interest under s. 217 much less a mistake apparent from record within the meaning of s. 154 of the IT Act, 1961. You are, therefore, requested to drop the proceedings………”
8. The ITO did not accept the above submission of the assessee and on 19th June, 1984 he passed the impugned order under s. 154 charging from the assessee not only interest under s. 217 but also interest under s. 139 as below:—
“Interest under s. 139
Rs. 18,748
Interest under s. 217
Rs. 47,250
Rs. 65,998
9. Apparently, the letter dt. 26th November, 1983 was not taken note of by the ITO while passing the impugned order on 19th June, 1984. The mistake in question had crept in on account of the fact that the ITO had taken to begin with Rs. 75,000 to be “advance tax” while making out the original com putation of interest as referred to earlier. Ac cording to the internal audit, the said amount of Rs. 75,000 which was seized from the cus to dy of the assessee during the course of search could not have been regarded as payment of advance tax by the assessee in respect of asst. yr. 1977–78, and thereby a mistake in the com putation of interest had taken place.
10. Against the aforesaid order of the ITO, the assessee went in appeal to the CIT(A) and put forward before him, the following arguments:
“(1) The notice issued by the ITO under s. 154(3) mentions only s. 217 and not s. 139 and, therefore, the rectification was not valid in as much as it related to interest under s, 139(8).
(2) The case of the appellant was not cove red under s. 217(1A) as the appellant was covered under s. 209A(1)(a) being an old assessee. In the case of the appellant, a notice under s. 210 had been issued and actually the appellant had filed an estimate which was lower than the advance tax de manded from, the s. 217(1A) were not applicable.
(3) Interest can be charged only on completion of ‘regular’ assessment. In this case, the assessment had been completed by issuing a notice under s. 148 and, there fore, this assessment was not a regular assessment. My attention was drawn to the definition of regular assessment under s. 2(40).
(4) In “the original assessment order, no direction had been given from the ITO for the charge of interest either under s. 139 or under s. 217. It is submitted that if the interest was only mentioned in either the demand notice or in the I.T.N.S 150 it does” not amount to an order and, therefore; there was no question of rectification because if there was no order there was nothing which could be rectified under s. 154; In this connection, the learned Authorised Representative has cited the cases of Commissioner Of Income-Tax v. Shri Mahinder Singh, (1984) 41 CTR (Del) 345 and CIT v. Himaliya Drug Co., (1982) 29 CTR (All) 315.
(5) If in the original assessment order there was no direction by the ITO for the charging of interest, it would be presumed that the interest had been waived under r. 40/117. This is essentially so in the present case because in this case, the return had been filed on 23rd August, 1979 whereas the assessment had been completed on 14th July, 1982 that is more than one year after the filing of the return. Thus, the condition necessary for the application of r. 40/117 were satisfied and the interest would be presumed to have been waived. As such, there was no mistake in the original order and, therefore, there was no question of a rectification.
(6) There was no dispute that in this case, a sum of Rs. 75,000 had been seized in the financial year 1976–77 and since this amount had been adjusted towards the taxes paid, it had to be regarded as advance-tax and, therefore, the interest as computed originally was correct.
(7) What can be rectified under s. 154 was a mistake which was apparent from records. A question on which there were. two opinions or which involved debate could not be a matter for rectification. In this connection, the learned Authorised Representative has cited the case of T.S Balram v. Volkart Bros., (1971) 82 ITR 50 (SC)”.
11. On behalf of the Revenue, the ITO pleaded before the CIT (A) “that the rectification order passed by the ITO is correct and valid and should be upheld. He has submitted that an amount seized during the course of search should not be regarded as advance-tax and to the extent, this had been done, there was certainly a mistake which needed rectification.”
12. The CIT (A) examined the entire matter in detail. He called for the records of the ITO also and remarked after the perusal thereof, that in the original assessment order, “there was no direction from the ITO to charge any interest either under s. 139(8) or under s. 217 (1A).” He, further conceded that “the learned Authorised Representative is right in principle when he says that in the absence of any directions from the ITO no interest could be charged.” But he pointed out that, in the present case, interest had been charged under the afore-said sections, vide order of the ITO dt. 29th “April, 1983; and that, in this order of the ITO, a mistake had definitely crept in He noted that the aforementioned order of the ITO dt. 29th April, 1983, taking Rs. 75,000 as “advance tax,” had been passed by him on the face of the assessee's application dt. 18th April, 1983, in which the assessee had prayed that the said sum be regarded as advance tax payment. In view of these facts, the learned CIT(A) observed that the arguments of the assessee based on the original assessment order dt. 14th July, 1982 were not valid, because rectification was not done to that order, what was being done was to. rectify the order. dt. 29th April, 1983, in which the alleged mistake was stated to have crept in According to him, if there was an, error in the order dt. 29th April, 1983, if could be rectified.
13. Having held as above, he rejected, the assessee's contention that interest under s. 217. (1A) could not have been charged from the assessee because the assessee was not a new assessee. He noted, in this connection, the provisions of s. 212(3A) and pointed out that the said section “covers the cases of those assessees who are required to pay advance tax by an order under s. 210 and, therefore, the learned Authorised Representative's argument that since the appellant was an old assessee and notice under s. 210 had been issued upon it, the provisions of s”. 217(1A) would not be applicable to this case, cannot be accepted.”
14. He also rejected the assessee's contention that interest could not be charged in a case completed under s. 147, and for this, his reasoning was the same as with regard to the first point namely, that what was being sought to be corrected by the ITO was not the original assessment order, but the order dt. 29th April, 1983, which had been accepted by the assessee, and in which, for the first time, interest under s. 217 had been charged. If there was any mistake in the said order, it could be corrected. He also did not accept the assessee's submission that the ITO had waived the interest for there was nothing to show in the conduct of the ITO tha the had waived the interest. Instead, he had charged interest under ss. 217 & 139(8) from the assessee and, therefore, the plea that he had waived interest could not stand scrutiny. According to the Commissioner the main question, therefore, which remained for consideration was whether there was a mistake apparent from records, which could be rectified by the ITO under s. 154. This mistake centred round the barsic issue as to whether seizure of Rs. 75,000 on 27th Jan., 1977 could be regarded as pay ment of advance tax for the financial year 1976-. 77 on the basis of the assessee's letter dt. 18th” April, 1983. According to the CIT(A), the said seizure could never be regarded as pay ment of advance tax by the assessee in accordance with the various provisions relating to payment of advance tax and therefore, in his opinion, action under s. 154 could be validly taken by the ITO.
15. Turning to the assessee's contention that there was lack of opportunity to the assessee with regard to the charging of interest under s. 139, the Commissioner pointed out that the said allegation is not borne out from record, as- “the office copy of the notice mentions both the sections”. In the event, he upheld the order under s. 154 passed by the ITO.
16. It is the above order of the learned CIT (A) which is vehementally assailed as erroneous by the learned counsel for the assessee. His reasoning before us is more or less on the same lines as before the learned CIT(A). In addition, it is pointed out to us that the ITO had, vide his letter dt. 30th Aug., 1983, replied to the audit objection raised with regard to the aforesaid subject, that in his opinion, there was no mistake apparent from record as was suggested by the audit and that, therefore, the order of the ITO was against his own judgment, and was, accordingly, vitiated and should be quashed. Our attention was also invited to the decision of the ITAT Delhi Benoh ‘D’ in the case of Bharat Commercial Corpn., New, Delhi v. ITO in ITA No. 5207.Del/85 dt. 30th Oct., 1987 wherein, according to the assessee, an amount seized in a search/was held by the Tribunal to be a payment towards advance tax and, therefore, according to him, the [view presently taken by the CIT(A) being contrary to the said judgment, should be reversed.: In any case, according to the assesseee, there were two opinions possible on the subject and, therefore, the order passed under s. 154 could not be sustained. As regards interest under s. 139(8), he repealed his plea taken before the CIT(A), namely, that it could not be charged because no show-cause notice had been issued to him by the ITO on this point.
17. On behalf of the revenue, the order of the learned CIT(A) is supported.
17A. The learned counsel for the assessee also placed reliance on Commissioner Of Income-Tax v. Shri Mahinder Singh, (1984) 41 CTR (Del) 345 : (1985) 156 ITR 882 (Del), and CIT v. Jaipur Udyog Ltd., (1987) 64 CTR (Raj) 312 : (1987) 167 ITR 306 (Raj.). In the later judgment, tax paid a year later by the assessee was held to be an advance tax and in the former judgment, it was held by the Hon'ble Delhi High Court that interest not charged originally could not be charged under s. 154.
18. We have given careful consideration to the facts of the case and the rival submissions. The finding of the learned CIT(A) that arguments raised by the assessee on the basis of the original assessment order and on the footing that interest could not be charged under s. 154, when it was not originally charged, is entirely correct, because what is sought to be rectified by the present order under s. 154 is not the original assessment order dt. 17th April, 1982, but the subsequent order dt. 29th April, 1983, in which ITO had charged interest under ss. 139(8) and 217 from the assessee for the first time. The assessee did not object to the charging of the interest as per the order dt. 29th April, 1983 and allowed the said order to become final. The assessee cannot, therefore, now go behind this order. Right or wrong, it has operational efficacy and has to be respected as an enforceable order. It is this order in which the ITO found that a mistake apparent from record had crept in and it was this mistake which he sought to rectify. The mistake in question was alleged to be there on the ground that Rs. 75,000 which had been seized from the assessee during the course of a search on 27th January, 1977 could not be treated as payment of advance tax” by the assessee at the relevant time, and that the assessee's request to treat it as advance tax payment, for the first time vide his letter dt. 18th April, 1983, could not be regarded as a payment of advance tax for asst. yr. 1977–78. Inasmuch as the ITO had treated Rs. 75,000 as advance tax payment in his order dt. 29th April, 1983, it was a mistake apparent from record, according to the ITO.
18A. The effective point for determination in the present appeal, therefore, is as to whether the aforesaid mistake could be regarded as a. mistake apparent from record. The mistake apparent from record should be one about which no debate is possible. It can be of fact as well as of law and merely because it is a mistake of law, it cannot be said that it would not be a mistake apparent from record. If interpretation of the statute is required to be done to find out as to whether or not the view taken by the ITO was correct, a debate may be possible, and, in such a case, it may not be correct to hold such a mistake as one apparent from record. But merely taking note of the provisions of the law, about which two opinions are not possible, would not give rise to a debate, and the mistake in question would be one apparent from record.
19. Let us, therefore, first determine as to what ‘advance tax’ is. This term has been defined vide s. 207 of the IT Act, 1961. The two subsections of this Section read as below:—
“207 (1) Tax shall be payable in advance in accordance with the provisions of ss. 208 to 219 in the case of income other than—
(a) income chargeable under the head ‘capital gains’; and
(b) income referred to in sub-cl. (ix) of cl. (24) of s. (2).
(2) Such income is hereinafter in this Chapter referred to as ‘income subject to advance tax’, and such tax is hereinafter in this Chapter referred to as ‘advance tax.”
20. Advance tax, as would be clear from the above definition, is tax which is payable by the assessee in accordance with the provisions of ss. 208 to 219. Sec. 208 lays down the conditions of liability to pay advance tax. Secs. 209 and 209A prescribes the mode of computation of advance tax. Sec. 211 stipulates the payment of advance tax by instalments on specified dates, namely, 15th day of June, 15th day of September, 15th day of December and 15th day of March of the financial year preceding the assessment year. Sec. 208 clearly provides that “advance tax shall be payable during the financial year”.
21. The payment which is made beyond the financial year preceding the assessment year in question would, by the definition of advance tax as given in sub-s. (2) of s. 207, read with provisions of sub-s. (1) of s. 208, would, prima facie, be not advance tax. Payment of advance tax by definition implies a voluntary action on the part of the assessee. Seizure from the assessee of a sum is not the same thing as payment of the said sum by the assessee. Seizure of the sum does not transfer the ownership in the said sum from the person from whom it is seized to the person who seizes it, unless an order of appropriation is passed validly appropriating the said amount against demand created validly in law.
22. The above are the elementary principles of law about which no debate is possible.
23. In the present case, Rs. 75,000 were seized from the assessee by the ITO and its appropriation towards tax, either advance or other-wise, did not take place on or before 31st March, 1977. The said amount, therefore, continued to belong to the assessee, though its possession was taken over by the income-tax authorities. Its appropriation towards tax was done on the application of the assessee dt. 18th April, 1983. This date is therefore, crucial, audit is certainly much beyond the end of the financial year ending 31st March, 1977.
24. In the setting of the above facts, the question for determination is whether the appropriation of the said sum of Rs. 75,000 by the ITO towards the tax on 29th April, 1983 could be regarded as payment of advance tax by the assessee within the financial year ending on 31st March, 1977. The answer to the above question is, in our opinion, self evident. It could not have been regarded as the payment of ad vance tax on or before 31st March, 1977. In fact, its appropriation towards regular tax was done only on 29th April, 1983. Only on this date, the character of this sum changed and it seized to belong to the assessee from this date onwards. Prior to this date, it was the money of the assessee in the possession of the depart ment. It was not ‘tax’-advance or otherwise.
25. The orders of the authorities below were, thus, entirely correct in holding that the seizure of Rs. 75,000 on 27th Jan., 1977 from the assessee did not amount to payment of advance tax by the assessee on or before 31st March, 1977. This was a mistake, which was apparent from record, and even if the ITO tentatively thought, to begin with, that it was not a mis take, it would not vitiate his order because what we have to see is the order of the ITO which he passed on 29th April, 1983 and not any inter-departmental correspondence on this subject. There is no bar op the audit to indicate a mistake to the ITO, and merely because the audit is instrumental in bringing to the open the mistake in question, the order under s. 154 ultimately passed by the ITO cannot be faulted. It is not a case of proceedings under s. 147 for which the ITO needed to have reasons to believe that income had escaped assess ment. It is a simple question as to whether or not there is a mistake apparent from record. The ITO himself can note this mistake or any outsider could point it out to him. Once the ITO is convinced that there is a mistake apparent from record, he would pass the order. It is the order which has to be looked at for deter mining as to whether it is valid or not and not the preceding sequence of events, which led to the passing of the order. The order bears the officer's signatures and authority, and it cannot be found fault with merely on the ground that, prior to passing such an order, the ITO had at one stage, felt that there was no mistake apparent from record. Whether or not the mistake in question is one apparent from re cord is now being adjudicated by us, and, as pointed out earlier, according to us, it was a clear mistake apparent from record that Rs. 75,000 seized from the assessee on 27th Jan., 1977 were treated by the ITO vide his order dt. 29th April, 1983 as the payment of “advance tax” for financial year 1976–77. In our opin ion, two opinions on this subject are not possi ble. The amount was not a payment of ad vance tax and nothing was done during the financial year ending on 31st March, 1977 to appropriate that sum towards tax, advance or otherwise.
26. The reliance of the assessee on the order of the ITAT in I.T.A No. 5207.Del/85 dt. 30th October, 1987 is wholly misplaced for the facts in that case were altogether different. There, a search haa taken place on the business premises of Haryana Papers Converting Industries, Chawri Bazar,. Delhi on 28th Dec, 1979 and from them an amount of Rs. 60,000 was seized by the department. On issue of a notice under s. 132(5), read with r. 112A(1) of the IT Rules calling upon the assessee to explain the source of acquisition of the aforesaid sum of Rs. 60,000, it was explained to the satisfaction of the ITO, B-Ward, Rohtak. The order of the ITO, B-Ward, Rohtak alsd incorporated the submission made by M/s. Haryana Papers that they had no objection if the amount of Rs. 60,000 to be returned to them was remitted to the ITO Delhi, to be adjusted against a demand of tax, if any, outstanding or credited against the two firms, which were allied concerns. The ITO acted accordingly, directed that the amount of Rs. 60,000 be remitted to the ITO, Delhi to be adjusted against the demand of tax outstanding or to be credited against these two firms. M/s. Bharat Commercial Corpn., which was the other allied concern, wrote a letter to the Asstt. Director of Inspection, Income-tax, New Delhi on 14th March, 1980 that the aforesaid amount of Rs. 60,000, which was lying with the ITO, B-Ward, Rohtak, may be summoned from the said ITO and adjusted against the tax liability of M/s Bharat Commercial Corpn., New Delhi. The said amount was received later on from the ITO, B-Ward, Rohtak and adjustment of Rs. 30,000 was made by the Income-tax department to the credit of the appellant on 26th March, 1980. In the setting of the aforesaid facts, it was stated by M/s Bharat Commercial Corpn., New Delhi before the ITAT that the aforesaid amount should be taken to have been duly deposited by the said assessee with the department on 14th March, 1980 in view of their communication dt. 14th March, 1980 and the order of the ITO, B-Ward, Rohtak dt. 26th March, 1980 and the actual appropriation of the said sum against the tax due from the assessee on 26th i March, 1980. The aforesaid plea of the assesseee was accepted by the Income Tax Appellate Tribunal. If the above were the facts before us, even we would return the above finding as we are in respectful agreement with the conclusion of our learned Brothers in the said appeal, but, as pointed out earlier, the facts in the present case are altogether different. Here, seizure was on 27th January, 1977 and till 31st March, 1977, i.e the end of the financial year, nothing happened by way of appropriation or otherwise. The sum, therefore, continued to be belonging to the assessee, though in the possession of the department. It was on 18th April, 1983 that the assessee wrote, for the first time, to the ITO to appropriate the said amount towards his tax liability and it was, vide order dt. 29th April, 1983, that the said sum was appropriated by the ITO against the demand for asst. yr. 1977–78. The character of the sum of Rs. 75,000, therefore, underwent transformation on 29th April, 1983, or at the best on 18th April, 1983, but not prior to that. There being no payment within the financial year by appropriation or other wise of the seized sum, there could be no question of treating it as payment of advance tax in the financial year 1977–78.
27. We have gone through the judgment of the Hon'ble Rajasthan High Court in CIT v. Jaipur Udyog Ltd., (supra). The facts of this case are also altogether different and in no way help the assessee. The payment of Rs. 11 lacs in Nov., 1965 was treated as payment of ad vance tax for asst. yr. 1965–66, not because the statute permitted this course but because there was a stay order from the Court and the Hon'ble Supreme Court directed that the assessee be permitted to pay a sum of Rs. 11 lacs towards advance tax within the time specified. There is no such stay order in the present case nor an order of the Hon'ble High Court or of the Hon'ble Supreme Court directing the departmental authorities to permit the assessee to make the payment of advance tax beyond the financial year. In view of what we have stated above, we have no hesitation in rejecting the assessee's pleadings.
28. That brings us to the question as to whether the notice under s. 154 issued by the ITO was only with regard to the interest under s. 217 or whether it was with regard to the payment of interest under s. 139(8) also. The copy of the notice, which has been” placed in the paper-book, mentions interest under s. 217 only. But the CIT(A) has stated in his order that he had called for the record and perused it him self and had found that, in the original notice there was reference both to s. 217 and s. 139(8). The original file of the ITO was not before us and, therefore, it has not been possible for us to verify as to which of the two factual situations is correct. Normally, we would have accepted the finding of fact as given by the CIT. (A) in the present case, but one thing is weighing oh our mind, i.e, the reply of the assessee. dt. 26th Nov., 1983. In it, the assessee refers only to the charging of interest under s. 217 and not to the charging of interest under s. 139(8). The assessee's version, therefore, ap pears to us to be equally plausible, namely, that he was given notice under s. 154 only with regard to the charging of interest under s. 217 and that no notice was given to him with re gard to the charging of interest under s. 139(8). The learned CIT(A) does not appear to have examined this aspect. We would, therefore, like him to summon the recoras of the ITO once again and see for himself the original copy of the notice issued by the ITO to the assessee; and the original notice in possession of the assessee. If the original notice issued to the assessee does not contain reference to interest under s. 139(8), it would not be correct to say that the assessee did have the opportunity to state his view point with regard to the charging of interest under s. 139(8). The very purpose of issuing the show cause notice is that the assessee be given an opportunity of making his view point clear to the ITO. If the notice issued to the assessee does not contain reference to a particular mistake, it would not be correct to say that the assessee has been heard with regard to that issue, even if the office copy of the notice in question contains reference to the said mistake. It would be but correct to consider in such a situation the show cause notice issued to the assessee to be the one, which is operative and the notice which is on the file may have to be ignored. The assessee in that case would be entitled to a fresh opportunity of being heard in respect of charging of interest under s. 139(8) While on this point, it may be pointed out that, at the time of hearing, the learned counsel for the assessee had stated it asafact before us that show cause notice under s. 139(8) was not issued to him. We had, there fore, expressed our opinion that, if that be so it would not be possible to. uphold that part of the order of the ITO, whereby he had charged interest under s. 139(8), but the learned counsel of the assessee had not drawn our attention at that time, to the finding of fact recorded by the CIT(A) in paragraph 9 of his order. Once that finding is noted, we cannot wish away its presence in the impugned order and we cannot hold the finding to be wrong unless we get a proper enquiry on this account made. It is in this context that we are sending back the matter to the learned CIT(A) for proper appraisal of the facts, after scrutiny of the record of the ITO and the copy of the notice given to the assessee.
29. Regarding under charging of interest under s. 217, it is in our opinion, clear from the facts stated above that there has been an under charging of interest under s. 217 and inasmuch as it is a mistake in calculation, it could be rectified under s. 154.
30. With these. observations, we send the matter back to the CIT(A). For statistical purposes, we will treat the assessee's appeal as partly allowed.