Commissioner of Income Tax vs K.N. Oil Industries

G.P. Singh, C.J.—This is a reference made to us by the Income Tax Appellate Tribunal at the instance of the Department referring for our answer the following question of law :

" On the facts and circumstances of the case, though the assessee had not claimed relief u/s 35B of the I.T. Act in the original assessment proceedings, if it is apparent from the record that the assessee was entitled to relief admissible u/s 35B of the I.T. Act, can the relief be granted by an order u/s 154 of the I.T. Act by rectifying the assessment?"

The facts briefly stated are that in the assessment proceedings for the assessment year 1972-73 the assessee did not claim export markets development allowance u/s 35B of the I.T. Act, 1961. The ITO started rectification proceedings u/s 154 for correcting an error in the grant of rebate u/s 80J. In those proceedings the assessee contended that there was an apparent error in not allowing to it the relief u/s 35B. The ITO refused to go into this question on the ground that no such claim was made in the return or in the assessment proceedings by the assessee. The AAC, however, held in favour of the assessee that there was an apparent error in not granting the relief u/s 35B even though it was not claimed in the return. In further appeal before the Tribunal, the argument of the department was that the assessee having omitted to claim the relief u/s 35B in the return, it was not open to it to claim that relief u/s 154 after the assessment was made. This argument was not accepted by the Tribunal. In the opinion of the Tribunal, the jurisdiction to interfere u/s 154 arose when it was found that there was a mistake apparent from the record in the relevant order and in deciding whether there was an apparent mistake the ITO was not confined to the return and he could look to the entire material available in the record of the assessment. The Tribunal, therefore, held that it was open to the ITO to assume jurisdiction u/s 154 if it was apparent from the record of assessment that there was a mistake in not granting relief u/s 35B although the said relief was not claimed in the return. It is the correctness of this view which we have to examine in this reference.

The learned standing counsel for the Department placed reliance upon Anchor Pressings (P.) Ltd. Vs. Commissioner of Income Tax and Others, , Sharda Prasad Vs. Commissioner of Income Tax, and Paramount Trading Corporation Vs. Income Tax Officer and Others, , in support of his submission that as no relief u/s 35B was claimed by the assessee in the return, the mistake in not granting the relief could not be apparent and could not be be corrected u/s 154. These cases which were decided by the Allahabad High Court do support the submission of the learned counsel. But, with great respect, we are unable to agree with the view taken in them. The record of the assessment is not confined to the return. Section 154 which confers jurisdiction for rectifying mistake enables the ITO to assume jurisdiction when he finds " any mistake apparent from the record ". The word " record " as used in Section 154 will include all that material which forms part of the assessment proceedings and not only the return. It is also not correct to say that if the assessee omits to claim a relief allowable to him under the provisions of the I.T. Act, he is not entitled to get that relief. It is the duty of the ITO and other officers administering the Act to inform the assessee that he is entitled to a particular relief if it is apparent that he is so entitled from the material available in the proceedings of assessment. This duty has been highlighted by a circular issued by the CBR. For these reasons, the Gujarat High Court in Chokshi Metal Refinery Vs. Commissioner of Income Tax, Gujarat-II, , dissented from the view taken by the Allahabad High Court in the aforesaid cases and held that if it is apparent from the record of assessment that the assessee was entitled to a particular relief, the ITO can rectify that mistake u/s 154 although the said relief was not claimed by the assessee in the return. We respectfully agree with the view taken by the Gujarat High Court.

The learned counsel for the Department submitted before us that even otherwise the conclusion that the assessee was entitled to the relief u/s 35B was not apparent from the record. We cannot examine this submission because the question referred has to be answered on the assumption that it was apparent from the record that the assessee was entitled to the relief u/s 35B.

For the reasons given above, we answer the question as follows :

"If it is apparent from the record that the assessee was entitled to relief admissible u/s 35B, that relief can be granted to him by an order u/s 154 by rectifying the assessment even though relief under that section had not been claimed by the assessee in the original assessment proceedings."

There will be no order as to costs of this reference.