Commissioner of Income Tax Vs Hussainbhai M. Badri

G.T. Nanavati, J.@mdashThe following question is referred to this court by the Income Tax Appellate Tribunal u/s 256(1) of the Income tax Act, 1961 :

"Whether, on the facts and in the circumstances of the case, the grant of relief u/s 80L having exhausted the availability of deduction u/s 86(v), the Income Tax Officer was not competent to rectify the mistake by passing an appropriate order ?"

2. The Income Tax Officer competed the assessment of the assessee for the assessment year 1971-72 on September 6, 1973, by passing an order. Thereafter, the assessee made an application for rectification of the said order on the ground that the Income Tax Officer had not allowed deduction worth Rs. 944 u/s 80L of the Act, and that there was also a mistake in calculation in regard to rebate u/s 86(v) amounting to Rs. 1,167. The Income Tax Officer accepted the contention of the assessee and granted relief by passing a rectification order u/s 154 on September 12, 1974. Possibly, the Income Tax Officer had second thoughts about the correctness of his order and, therefore, he issued a notice on May 19, 1975, proposing to rectify his rectification order passed by him on September 12, 1974. He was of the view that as deduction was allowed u/s 80L, no rebate of Rs. 1,167 was admissible u/s 86(v) of the Act. The assessee gave his written submissions and objected to the proposed action. The Income Tax Officer, however, thought it fit to rectify the said order and withdrew the deduction allowed u/s 86(v).

3. Therefore, the assessee preferred an appeal to the Appellate Assistant Commissioner. The appeal was allowed by the Appellate Assistant Commissioner on the ground that the question as to whether both the deductions are permissible or not was a highly debatable issue and, therefore, the Income Tax Officer was not justified in rectifying the rectification order which was passed by him. Accordingly, the second rectification order passed by the Income Tax Officer was annulled.

4. The Revenue, therefore, approached the Tribunal by way of an appeal. The Tribunal also agreed with the view taken by the Appellate Assistant Commissioner and dismissed the appeal. Thereupon, the Revenue moved the Tribunal for referring the abovestated question to this court.

5. Learned counsel appearing for the Revenue tried to support the second rectification order passed by the Income Tax Officer on the ground that granting of deduction being a mistake apparent on the record, it was open to the Income Tax Officer to initiate proceedings u/s 154 of the Act. In our opinion, this contention raised on behalf of the Revenue cannot be accepted. As regards what can be regarded as a mistake apparent on the record, the Supreme Court in T.S. Balaram, Income Tax Officer, Company Circle IV, Bombay Vs. Volkart Brothers, Bombay, has held that a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long-drawn process of reasoning on points on which there may be conceivably two opinions. It has held that a decision on debatable point of law is not a mistake apparent on the record. Now, the question as to whether the assessee was entitled to a deduction both under sections 80L and 86(v) was a debatable question. The Income Tax Officer, at one point of time, held that it was a grantable deduction and, therefore, he had granted that relief while granting the application made by the assessee. As that question is a highly debatable question, obviously, it could not have been regarded as a mistake apparent on the record. The Income Tax Officer was, therefore, not justified in again initiating proceedings u/s 154 and rectifying the first rectification order passed by him. The Appellate Assistant Commissioner and the Tribunal were right in taking the view that the Income Tax Officer was not justified in doing so.

6. We, therefore, answer the question referred to us in the affirmative, that is, against the Revenue and in favour of the assessee. No order as to costs.