IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 17.11.2009 CORAM: THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIAN AND THE HONOURABLE MR.JUSTICE M.M.SUNDRESH W.P.No.3919 of 2001 Express Newspapers Limited rep.by its Chairperson Mrs.Saroj Goenka Chennai-2. .. Petitioner -vs- 1.The Deputy Commissioner of Income Tax Special Range, 121, Uthamar Gandhi Salai Chennai – 34. 2.Income Tax Appellate Tribunal A-2, Rajai Bhavan, Besant Nagar Chennai – 90. .. Respondents Prayer: Writ Petition filed under Article 226 of the Constitution of India seeking for the relief of issuance of writ of certiorari to call for the records in M.P.No.35/Mds/2000 in I.T.A.No.1199 of 1989 dated 30.11.2000 of the second respondent and quash the same. For Petitioner : Mr.V.Ramachandran,Sr.Counsel for M/s.Anita Sumanth For Respondents : Mr.K.Subramanian,Sr.Standing Counsel for Income-tax. ORDER K.RAVIRAJA PANDIAN,J. The Writ Petition is filed seeking for the relief of issuance of writ of certiorari to call for the records in M.P.No.35/Mds/2000 in I.T.A.No.1199 of 1989 dated 30.11.2000 of the second respondent and quash the same. https://hcservices.ecourts.gov.in/hcservices/ 2. The facts of the case are as follows: The petitioner/assessee is a Company registered under the Companies Act and derives income from various sources. In respect of the assessment year 1985-86 relevant to the previous year ended 31st March, 1985, the petitioner filed a return of income on 22.7.1985 declaring a net loss of Rs.32,99,289/-, which was revised by filing a revised return on 26.2.1988 declaring a loss of Rs.32,80,700/- subject to the adjustment of the loss brought forward from the earlier years. The first respondent – Assessing Officer completed the assessment on 30.3.1988 and determined the total income at Rs.1,27,95,570/- by making various additions and disallowing various claims made by the petitioner. 3. The petitioner filed an appeal before the Commissioner of Income-tax (Appeals), who by his order dated 31.1.1989 allowed the appeal in part and rejected some of the claims made by the petitioner. The petitioner filed further appeal before the Income- tax Appellate Tribunal. The Tribunal by its order dated 31.1.1997 allowed the appeal in part which includes the loss claimed on the following three heads, which are germane to the case: a) claim of loss relating to potato business; b) claim of loss relating to the dealing in shares and securities; c) claim relating to scrap dealings. The revenue not satisfied with the order of the second respondent Tribunal, on 10.4.1997 filed a petition under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") requiring the Tribunal to draw up the statement of the case and refer the questions of law for determination by the High Court, which are as follows: "1. Whether on the facts and in the circumstances of the case the Tribunal is justified in holding that the assessee was doing business in potatoes and the loss of Rs.74.65 lakhs was allowable as a business loss? 2. Whether the Tribunal was justified in ignoring the orders of the Settlement Commission, where the persons from whom the assessee is supposed to have made purchases have categorically admitted that their transactions with the assessee was a bogus one? https://hcservices.ecourts.gov.in/hcservices/ 3. Whether the findings and conclusions of the Tribunal on the facts and documents on record are not perverse? 4. Whether the Tribunal is justified in its conclusion that the loss in purchase and sale of shares and scraps was justified in law? 5. Whether the Tribunal had materials to come to the conclusion that the assessee's dealings in potato sales, shares and scraps was genuine? 6. Whether the Tribunal is justified in its conclusion that the loss of Rs.17.97 lakhs stated to have been incurred by the assessee in scrap dealings is allowable as deduction? 7. Whether the Tribunal is justified in holding that the claim of the assessee for deduction of Rs.20,000 as loss in investments was justified in law? 8. Whether the conclusions of the Tribunal on the various aspects are not perverse and opposed to the various documents that are available on record as well as orders of the Settlement Commission? and 9. Whether the Tribunal on the facts and in the circumstances of the case and in view of the orders of the Settlement Commission should not have remitted the matter for fresh consideration and decision on the basis of the evidence available on record particularly the findings of the Settlement Commission? 4. While the said reference petition is pending before the Tribunal on 10.7.1997, the first respondent filed a petition under Section 254(2) of the Act in M.P.No.35 of 2000 in I.T.A.No.1199 of 1989 for rectification of mistakes in the order of the Tribunal dated 31.1.1997. The petitioner filed reply objecting to the said petition. After hearing the parties, the second respondent – Tribunal by its order dated 30.11.2000 allowed the miscellaneous petition in part. The correctness of that part of the order is put in issue in this writ petition. 5. In order to complete the narration of the facts, though it is not relevant to the present case, the following facts are to be stated: https://hcservices.ecourts.gov.in/hcservices/ While the appeal filed by the petitioner was pending before the Commissioner of Income-tax (Appeals), the petitioner filed a petition before the Settlement Commission on 16.12.1988. After filing of the said petition, the Commissioner of Income-tax (Appeals) passed an order in the appeal on 31.1.1989. The petitioner filed an appeal before the Tribunal against the order of the Commissioner of Income-tax (Appeals). When the appeal was pending before the Tribunal, the Settlement Commission passed an order under Section 245(d)(1) admitting the petition for settlement. The revenue carried the matter on appeal before the Supreme Court. The Apex Court by its order dated 11.1.1994 (reported in (1994) 206 ITR 443) had set aside the order of the Settlement Commission. In the said order, the Apex Court directed that it shall be open to the petitioner to file an appeal before the Income-tax Appellate Tribunal against the order dated 31.1.1989 of Commissioner (Appeals) within one month and directed the Tribunal to treat the appeal, if any filed by the petitioner as directed as within time. Thereupon the appeal already filed and pending before the Tribunal was heard and disposed off on 31.7.1997. In the Rectification Petition, the Revenue has pleaded that the Tribunal's order on already pending appeal is against the direction of the Supreme Court, which was rightly rejected by the Tribunal. 6. In this writ petition, It is contended by the petitioner that in the guise of passing order under Section 254(2) of the Act, the Tribunal virtually re-heard and reviewed the original order, which is totally without jurisdiction. The power under Section 254(2) extends only to rectification of mistake apparent on the face of the record. The second respondent has committed error of law and of jurisdiction in exercising the power under Section 254(2) of the Act in re-calling its earlier order passed in appeal. The Tribunal is a statutory authority and is exercising power conferred by the Act. It has no "plenary" power and has no power to review its own decision. Even if the order passed by the Tribunal was incorrect or erroneous it would not fall within the connotation "mistake apparent on record". The order passed by the Tribunal under section 254 is final under sub-section 4 of the Act. By invoking sub-section 2 of the said Section, the statutory finality cannot be destroyed. The Tribunal in its original order considered all the relevant materials on record and passed a very lengthy and detailed order in respect of the three issues under consideration. That shows the Tribunal has has applied its mind and passed the order. Such an order cannot be re-called by invoking the power under Section 254(2) of the Act. 7. On the other hand, the learned counsel for the revenue supported the order passed by the Tribunal by contending that there is palpable mistake on the part of the Tribunal in observing that the borrowals of Express Newspapers from Traders and Services and the borrowals of Trades and Services from various creditors had https://hcservices.ecourts.gov.in/hcservices/ not been questioned by the Department. So, is the observation of the Tribunal that the cold storages were functioning even after November 1984 and Express had stocks worth Rs.1.5 Crores in the cold storages between November 1984 to February 1985. The Tribunal has proceeded on the assumption that the Department has not questioned the genuineness of the transaction of the assessee with the bankers and the shareholders, which is also factually incorrect. In respect of the transaction in scrap dealings, the Tribunal held that except the cash book and ledger all other documents were produced and were available with the assessing officer when he made the assessment and the Department did not find any discrepancy in the documents impounded later on. This assumption is also incorrect on facts. The mistake so committed by the Tribunal was pointed out by the revenue in the rectification application and the Tribunal has correctly rectified the mistakes, which are manifest on the face of the record. Hence, the order impugned requires no interference from this Court. 8. We heard the arguments of the learned counsel on either side and perused the materials on record. 9. The scope and amplitude of Section 254(2) and the analogous provision Section 154 of the Act have been considered by catena of decisions of the Apex Court and other High Courts. The uniform opinion of the Courts of superior jurisdiction is that a patent, manifest and self-evident error which does not require elaborate discussion of evidence or argument to establish it, can be said to be an error apparent on the face of the record and can be corrected under Section 254(2). An error cannot be said to be apparent on the face of the record if one has to travel beyond the record to see whether the judgment is correct or not. An error apparent on the record means an error which strikes one on mere looking and does not need a long drawn out process of reasoning on points on which there may be conceivably two opinions. The error should not require any extraneous matter to show its incorrectness. To put it differently, it should be so manifest and clear that no court would permit it to remain on record. If the view accepted by the court in the original judgment is one of possible views, the case cannot be said to be covered by an error apparent on the face of the record. Section 254(2) specifically empowers the Tribunal to amend at any time within four years from the date of an order, any order passed by it under Section 254(1) with a view to rectify any mistake apparent from the record either suo motu or on an application. In order to attract the application of Section 254(2), the mistake must exist and the same must be apparent from the record. The expression "mistake apparent from the records" contained in Sections 154 and 254(2) has wider content than the expression "error apparent on the face of the record" occurring in Order 47 Rule 1 of C.P.C. The restrictions on the power of review under Order 47 Rule 1 of C.P.C. do not hold good in the cases of Sections 254(2) and 154 of the Act. Section 254(2) does not confer power on the Tribunal to review its earlier order. https://hcservices.ecourts.gov.in/hcservices/ Under the grab of rectification of mistake it is not possible for a party to take further chance of re-arguing the appeal already decided. What can be rectified under Section 254(2) is a mistake which is apparent and patent. The mistake has to be such for which no elaborate reasons or enquiry is necessary. Where two opinions are possible then it cannot be said to be a mistake apparent on the record. When prejudice resulting from an order is attributable to the Tribunal's mistake, error or omission, it is its bounden duty to set it right. The purpose behind the enactment of Section 254(2) of the Act to amend any order passed under sub-section (1), if any mistake apparent from the records is brought to the notice of the Tribunal, is based on the fundamental principle that no party appearing before the Tribunal, be it an assessee or the Department, should suffer on account of any mistake committed by the Tribunal. This fundamental principle has nothing to do with the inherent power of the Tribunal. If prejudice is resulted to the party, which prejudice is attributable to the Tribunal's mistake, error or omission and which error is a manifest error, then the Tribunal would be justified in rectifying its mistake. Rectification can be made only when a glaring mistake of fact or law committed by the officer passing the order becomes apparent from the record. The rectification is not possible if the question is debatable. A point which was not examined on facts or in law cannot be dealt with as a mistake apparent from the record. No error can be said to be apparent on the face of the record if it is not manifest or self evident and requires an examination or argument to establish it. Where without any elaborate argument one could point to the error and say here is a substantial point of law which stares one in the face, and there could reasonably be no two opinions entertained about it, is a clear case of error apparent on the face of the record. Vide ASSISTANT COMMISSIONER OF INCOME-TAX VS. SAURASHTRA KUTCH STOCK EXCHANGE LIMITED (2008) 305 ITR 227; HONDA SIEL POWER PRODUCTS LTD. VS. CIT (2007) 295 ITR 466 (SC); HARI VISHNU KAMATH VS. AHMAD ISHAQUE (1955) 1 SCR 1104; CIT Vs. KESHRI METAL PVT. (1999) 237 ITR 165 (SC); DEVA METAL POWER (P0 LTD. VS. CIT, 2008(2) SCC 439; COMMISSIONER OF INCOME TAX VS. HERO CYCLES PVT.LTD. (1997) 228 ITR 463 (SC); SATYANARAYAN LAXMINARAYAN HEGDE VS. MALLIKARJUN BHAVANAPPA TIRUMALE, (1960) 1 SCR 890; THUNGABHADRA INDUSTRIES LTD. VS. GOVERNMENT OF ANDHRA PRADESH REP.BY THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES, AIR 1964 SC 1372; BATUK K.VLYAS VS. SURAT BOROUGH MUNICIPALITY, ILR 1953 BOM 191; UMMA SALMA (MRS.K.T.M.S) VS. CIT (1983) 144 ITR 890, 895 (Mad) ; KIL. KOTAGIRI TEA AND COFFEE ESTATES CO.LTD. VS. ITAT (1988) 174 ITR 579 (Ker); CIT VS. R.CHELLADURAI (1979) 118 ITR 108 (Mad); STATE OF TAMIL NADU VS. THAKOREBHAI & BROS (1983) 52 STC 104 (Mad); JAINARAIN JEEVRAJ VS. CIT (1980) 121 ITR 358, 363 (Raj); CIT VS. VARDHAMAN SPINNING (1997) 226 ITR 296, 302 (P&H); BATA INDIA LTD. VS. DY.CIT (1996) 217 ITR 871 (Cal) and COMMISSIONER OF INCOME-TAX VS. PRAHLAD RAI TODI, (2001) 251 ITR 833 (Gauhati). 10. From the various judgments of the Supreme Court above referred to and other High Courts, it is clear that the Tribunal's power under Section 254(2) is not to review its earlier order but https://hcservices.ecourts.gov.in/hcservices/ only to amend it with a view to rectify any mistake apparent from the record. What can be termed as "mistake apparent?". "Mistake" in general means to take or understand wrongly or inaccurately; to make an error in interpreting; it is an error; a fault, a misunderstanding, a misconception. Mistake in taxation laws has a special significance. It is mostly subjective and the dividing line is thin and indiscernible. "Apparent" means visible, capable of being seen, easily seen, obvious plain, open to view, evident, appears, appearing as real and true, conspicuous, manifest, seeming. The plain meaning of the word "apparent" is that it must be something which appears to be ex-facie and incapable of argument and debate. If such a "mistake apparent on the face of record" is brought to the notice, Section 254(2) empowers the Tribunal to amend the order passed under Section 254(1). Amendment of an order does not mean obliteration of the order originally passed and its substitution by a new order. What is mistake apparent on the face of the record or where does a mistake cease to be mere mistake, and become mistake apparent on the face of the record is rather difficult to define precisely, scientifically and with certainty. An element of indefiniteness inherent in its very nature and it must be discernible from the facts of each case by judiciously trained mind. Mere existence of a mistake or error would not per se render the order amenable for rectification, but such a mistake must be one which must be manifest on the face of the record. 11. Having in mind the enunciation of the legal principle about the scope and amplitude of Section 254(2) of the Act, let us consider the facts of the present case. The rectification petition has been filed as if the original order of the Tribunal contains certain mistakes of fact. The first one is regarding the loss in potato business. It is the case of the Department that the Tribunal in paragraph No.26 of the order has stated that the borrowals of Express Newspapers from Traders and Services and the borrowals of Traders & Services from various creditors had not been questioned by the Department. This assumption of the Tribunal was not correct in view of the various correspondence; that the Tribunal relied on the interim decree passed in the Civil suit filed by the petitioner in Calcutta High Court for damages from the cold storages and further relied on the admission made before the trial Magistrate by the Director of the Cold Storage in a case filed by the Department against the petitioner, that it had cheated Express. The Tribunal before relying upon them did not give an opportunity to the Department to examine the evidence produced first time before the Tribunal, which factum was much disputed by the petitioner by contending that the Tribunal made available to the Department the paper books containing those materials for its perusal and use and that no objection was raised by the Department before the Tribunal. 12. The other mistake of fact pointed out by the Department in the rectification application is in respect of transaction in share dealings. According to the Department, the Tribunal proceeded on the assumption that the Department had not questioned the https://hcservices.ecourts.gov.in/hcservices/ genuineness of the transaction of the petitioner with bankers and other share brokers. The assumption is not correct because the assessing officer has given a finding in his assessment order that the payments and receipts are interspersed in such a way that it is only Rs.20 to Rs.30 lakhs which is being rotated though the total purchases are of the order of Rs.1.81 Crores. It is the further submission of the Department that the other reasons given by the Tribunal that the Bankers have acted as custodian or agent of the petitioner was also not correct in view of the letter dated 8.1.1985 of the Manager of the Lal Bazaar Branch of the Bank. The statement of the Manager of Catholic Syrian Bank is that the Bankers had accommodated Express in their transactions and also the statements of the share brokers admitting the transaction to be bogus; and that the Settlement Commission in the case of Nariman Point Building Services Trading Private Limited, (a concern belonging to the Express group) has also given a clear finding that these transactions of Express group with the share brokers in Calcutta were not genuine. 13. The other mistake of fact pointed out for rectification is the transaction in scrap dealings. It is the case of the Department that the Tribunal held that except the cash book and ledger, all other documents were produced and were available with the assessing officer when he made the assessment and the Department did not find any discrepancy in the documents impounded later on. According to the Department, this finding is also incorrect in view of the fact that the Tribunal failed to notice that none of the alleged long term contracts on the basis of which the petitioners were stated to be bound to sell scraps were produced; that the alleged suppliers of the scrap were not also able to produce any documents such as godown receipts, evidence of having kept the stock in the godown, transportation charges, etc.; and that the Tribunal ignored the penalty order for 1985-86 gives the details of the various discrepancies that were noticed by the Department in order to conclusively establish that the transaction was bogus. Loss in potato business: 14. The first issue is loss of potato business. The assessee claimed Rs.74,65,519/- as loss in the business, which has been rejected both by the assessing officer as well as the Commissioner of Income-tax (Appeals). The Tribunal has considered the issue in its order from paragraph No.2 onwards. The facts leading upto the filing of appeal before the Tribunal, the reasoning of the assessing officer to reject the claim, the grounds taken by the petitioner before Commissioner (Appeals), the reasoning of the Appellate order in confirming the order of assessment; the evidence and the relevant material contained in the Paper Book VII and the evidence of one Gopal Agarwal at page No.1846 of the Paper Book No.VII have been referred in paragraph Nos.3 to 19 of the Tribunal's order. https://hcservices.ecourts.gov.in/hcservices/ 15. In paragraph No.20 of the Tribunal's order, the petitioner's contention has been summarised. The contention so summarised was to the effect that the lower authorities have not proved that the purchases and sales and the related money transaction taken separately were bogus, that the lower authorities have not proved first that the funds deployed by the petitioner to make purchases came back to the petitioner as expeditiously as possible; that the lower authorities have not proved that it was the petitioner's funds that came back to it in the guise of not sale proceeds; that the main source of income of the petitioner is income from three properties at Madras, Bombay and Delhi and thus the petitioner is getting fixed income; that the Department has alleged that the petitioner had generated bogus loss to reduce property income; that this allegation is totally unfounded; that normally the practice of buying losses is resorted to only in the fag end of the accounting year or when there is a sudden spurt in the profits or when there is a wind fall and that is not the case here; that the contracts for the purchases were entered into as early as in October 1984 and the payment for the purchases started in November 1984; that the payments have all been made by account payee cheques and thus the transactions are contemporaneous; and that the cold storages were closed as per statutory provision during the relevant period has not been proved by the Department. 16. The contention of the Department has been extracted in paragraph No.21 of the order which reads that the assessee has failed to discharge the primary onus in regard to purchase and sale of potatoes and the loss arising in its transaction has not been fully established;that the purchase and sales have taken place when the cold storages ought to be closed under the relevant legislation and that the assessee's own money was circulated twice once at the time of purchase of potatoes and again at the time of sales of potatoes; and that the Department has established beyond doubt that the assessee's money has come back to it. 17. The explanation offered on behalf of the petitioner has been extracted in paragraph No.22 of the order of the Tribunal and the submission made on behalf of the Department in rejoinder has been stated in paragraph No.24. Ultimately after analysing all the submissions, counter submissions with reference to material and evidences available on record, the rival submissions are analysed in paragraph Nos.25 and 26 as follows: "25. We have gone through all the relevant facts and arguments of the rival parties. In regard to the loss suffered by the assessee on Potatoes business, it is an accepted fact that for doing potato business the assessee engaged Shri Gopal Agarwal for sale and purchase of the potatoes. Gopal Agarwal was interrogated